[Federal Register Volume 87, Number 146 (Monday, August 1, 2022)]
[Notices]
[Pages 47020-47023]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-16353]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-95365; File No. SR-MIAX-2022-26]


Self-Regulatory Organizations; Miami International Securities 
Exchange, LLC; Notice of Filing and Immediate Effectiveness of a 
Proposed Rule Change To Amend Exchange Rule 404, Series of Option 
Contracts Open for Trading

July 26, 2022.
    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 July 13, 2022, Miami International Securities 
Exchange, LLC (``MIAX Options'' or the ``Exchange'') filed with the 
Securities and Exchange Commission (``Commission'') 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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

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 404, 
Series of Option Contracts Open for Trading.
    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 404, Series of Option 
Contracts Open for Trading. Specifically, the Exchange proposes to 
amend Interpretations and Polices .11 of Rule 404 to account for 
conflicts between different provisions within the Short Term Option 
Series Rules.
Background
    In 2021, the Exchange amended Rule 404 to limit the intervals 
between strikes in equity options listed as part of the Short Term 
Option Series Program, excluding Exchange-Traded Fund Shares and ETNs, 
that have an expiration date more than twenty-one days from the listing 
date (``Strike Interval Proposal'').\3\ The Strike Interval Proposal 
adopted new Policy .11 to Interpretations and Policies of Rule 404, 
which included a table that intended to specify the applicable strike 
intervals that would supersede Policy .02(e) \4\ of Rule 404 for Short 
Term Option Series in equity options, excluding Exchange-Traded Fund 
Shares and ETNs, which have an expiration date more than twenty-one 
days from the listing date. The Strike Interval Proposal was designed 
to reduce the density of strike intervals that would be listed in later 
weeks, within the Short Term Option Series Program, by utilizing 
limitations for intervals between strikes which have an expiration date 
more than twenty-one days from the listing date.
---------------------------------------------------------------------------

    \3\ See Securities Exchange Act Release No. 91776 (May 5, 2021), 
86 FR 25923 (May 11, 2021) (SR-MIAX-2021-12).
    \4\ The strike price interval for Short Term Option Series may 
be $0.50 or greater for option classes that trade in $1 strike price 
intervals and are in the Short Term Option Series Program. If the 
class does not trade in $1 strike price intervals, the strike price 
interval for Short Term Option Series may be $0.50 or greater where 
the strike price is less than $100 and $1.00 or greater where the 
strike price is between $100 and $150, and $2.50 or greater for 
strike prices greater than $150. See Policy .02(e) of Exchange Rule 
404.
---------------------------------------------------------------------------

    The Exchange now proposes to amend the rule text within Policy .11 
of Interpretations and Policies of Rule 404 to clarify current rule 
text and amend the application of the table to account for potential 
conflicts within the Short Term Option Series Rules. Currently, the 
table within Policy .11 of Rule 404 is as follows: \5\
---------------------------------------------------------------------------

    \5\ The Share Price is the closing price on the primary market 
on the last day of the calendar quarter. In the event of a corporate 
action, the Share Price of the surviving company is utilized. The 
Average Daily Volume is the total number of options contracts traded 
in a given security for the applicable calendar quarter divided by 
the number of trading days in the applicable calendar quarter. 
Beginning on the second trading day in the first month of each 
calendar quarter, the Average Daily Volume shall be calculated by 
utilizing data from the prior calendar quarter based on Customer-
cleared volume at The Options Clearing Corporation. For options 
listed on the first trading day of a given calendar quarter, the 
Average Daily Volume shall be calculated using the quarter prior to 
the last trading calendar quarter. See Interpretations and Policies 
.11 of Exchange Rule 404.

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                            Share price
                                                                         -------------------------------------------------------------------------------
                   Tier                         Average daily volume                        $25 to less     $75 to less    $150 to less       $500 or
                                                                           Less than $25     than $75        than $150       than $500        greater
--------------------------------------------------------------------------------------------------------------------------------------------------------
1.........................................  Greater than 5,000..........           $0.50           $1.00           $1.00           $5.00           $5.00
2.........................................  Greater than 1,000 to 5,000.            1.00            1.00            1.00            5.00           10.00
3.........................................  0 to 1,000..................            2.50            5.00            5.00            5.00           10.00
--------------------------------------------------------------------------------------------------------------------------------------------------------

    The first sentence of Policy .11 of Rule 404 provides, ``[w]ith 
respect to listing Short Term Option Series in equity options, 
excluding Exchange-Traded Fund Shares and ETNs, which have an 
expiration date more than twenty-one (21) days from the listing date, 
the following table will apply as noted within Policy .02(f).''
    First, the Exchange proposes to amend the first sentence of Policy 
.11 of

[[Page 47021]]

Rule 404 to provide, ``[w]ith respect to listing Short Term Option 
Series in equity options, excluding Exchange-Traded Fund Shares and 
ETNs, which have an expiration date more than twenty-one (21) days from 
the listing date, the following table, which specifies the applicable 
interval for listing, will apply as noted within Policy .02(f).'' The 
table within Policy .11 provides for the listing of intervals based on 
certain parameters (average daily volume and share price). The Exchange 
proposes to add the phrase, ``which specifies the applicable interval 
for listing'' to make clear that the only permitted intervals are as 
specified in the table within Interpretations and Policies .11, except 
in the case where Policy .02(e) of Rule 404 provides for a greater 
interval as described in more detail below.
    Second, the Exchange proposes to add a new sentence to Policy .11 
of Rule 404 which states, ``[t]o the extent there is a conflict between 
applying Policy .02(e) and the below table, the greater interval would 
apply.'' Today, there are instances where a conflict is presented as 
between the application of the table within Policy .11 and the rule 
text within Policy .02(e) with respect to the correct interval. Adding 
the proposed sentence would make clear to Members \6\ the applicable 
intervals where there is a conflict between the rule text within Policy 
.11 and the rule text within Policy .02(e), thereby providing certainty 
as to the outcome. The Exchange proposes to insert the words ``greater 
interval'' because it proposes to permit Policy .02(e) of Rule 404 to 
govern only in the event that the interval would be greater. The same 
analysis would not be conducted where the result would be a lesser 
interval. By way of example:
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    Example 1: Assume a Tier 1 stock that closed on the last day of Q1 
with a quarterly share price higher than $75 but less than $150. 
Therefore, utilizing the table within Policy .11 of Rule 404, the 
interval would be $1.00 for strikes added during Q2 even for strikes 
above $150. Next, assume during Q2 the share price rises above $150. 
Utilizing only the table within Policy .11, the interval would be $1.00 
even though the stock is now trading above $150 because the Share Price 
for purposes of Policy .11 was calculated utilizing data from the prior 
calendar quarter. However, a separate Policy, Policy .02(e) of Rule 
404, provides that the Exchange may list a Short Term Option Series at 
$2.50 intervals where the strike price is above $150. In other words, 
there is a potential conflict between the permitted strike intervals 
above $150. In this example, Policy .11 of Rule 404 would specify a 
$1.00 interval whereas Policy .02(e) of Rule 404 would specify a $2.50 
interval. As proposed, the Exchange proposes to apply the greater 
interval. The greater interval would then be $2.50 as per Policy .02(e) 
of Rule 404 in this scenario. Therefore, the following strikes would be 
eligible to list: $152.50 and $157.50. For strikes less than $150, the 
following strikes would be eligible to list: $149 and $148 because 
Short Term Option Series with expiration dates more than 21 days from 
the listing date as well as Short Term Option Series with expiration 
dates less than 21 days from the listing date would both be eligible to 
list $1 intervals pursuant to Policy .11 of Rule 404 and Policy .02(e) 
of Rule 404.
    Example 2: Assume a Tier 2 stock that closed on the last day of Q1 
with a quarterly share price less than $25. Therefore, utilizing the 
table within Policy.11 of Rule 404, the interval would be $1.00 for 
strikes added during Q2 even for strikes above $25. Next, assume during 
Q2 the share price rises above $100. Utilizing only the table within 
Policy .11 of Rule 404, the interval would be $1.00 even though the 
stock is now trading above $100 because the Share Price for purposes of 
Policy .11 of Rule 404 was calculated utilizing data from the prior 
calendar quarter. However, Policy .02(e) of Rule 404 provides that the 
Exchange may list a Short Term Option Series at $1.00 intervals where 
the strike price is above $100. As proposed, the Exchange would apply 
the greater interval, however, the $1.00 interval is the same in both 
cases in this scenario and, therefore, there is no conflict. Now, 
assume during Q2 the share price rises above $150. Utilizing only the 
table within Policy .11 of Rule 404, the interval would continue to be 
$1.00 because the Share Price relied on data from the prior calendar 
quarter, however, pursuant to Policy .02(e) of Rule 404, the interval 
would be $2.50 for strike prices above $150. The greater interval would 
then be $2.50 as per Policy .02(e) of Rule 404 in this scenario.
    Example 3: Assume a Tier 3 stock that closed on the last day of Q1 
with a quarterly share price less than $25. Therefore, utilizing the 
table within Policy .11 of Rule 404, the interval would be $2.50 for 
strikes added during Q2 even for strikes above $25. Next, assume during 
Q2 the share price rises above $100. Utilizing only the table within 
Policy .11 of Rule 404, the interval would be $2.50 even though the 
stock was trading above $100 because the Share Price for purposes of 
Policy .11 of Rule 404 was calculated utilizing data from the prior 
calendar quarter. However, Policy .02(e) of Rule 404 provides that the 
Exchange may list a Short Term Option Series at $1.00 intervals where 
the strike price is above $100. The greater interval would then be 
$2.50 as per the table in Policy .11 of Rule 404 in this scenario.
    Third, the Exchange proposes to delete the last sentence of the 
first paragraph of Policy .11 of Rule 404 which states, ``[t]he below 
table indicates the applicable strike intervals and supersedes Policy 
.02(d) which permits additional series to be opened for trading on the 
Exchange when the Exchange deems it necessary to maintain an orderly 
market, to meet customer demand or when the market price of the 
underlying security moves substantially from the exercise price or 
prices of the series already opened.'' The table within Policy .11 
impacts strike intervals, while Policy .02(d) describes adding series 
of options. The table within Policy .11 supersedes other rules 
pertaining to strike intervals, but the table does not supersede rules 
governing the addition of options series. Therefore, the table within 
Policy .11 of Rule 404 and the rule text of Policy .02(d) do not 
conflict with each other. Deleting the reference to Policy .02(d) will 
avoid confusion.
    Fourth, and finally, the Exchange provides within the last sentence 
of Policy .11 of Rule 404 that, ``[n]otwithstanding the limitations 
imposed by this Policy .11, this proposal does not amend the range of 
strikes that may be listed pursuant to Policy .02 above, regarding the 
Short Term Option Series Program.'' The Exchange proposes to remove 
this rule text. While the range limitations continue to be applicable 
to the table within Policy .11, the strike ranges do not conflict with 
strike intervals and therefore the sentence is not necessary. Removing 
the last sentence of Policy .11 of Rule 404 will avoid confusion. Also, 
the rule text within Policy .02(f) of Rule 404 otherwise indicates when 
Policy .11 would apply.
Implementation
    The Exchange proposes to implement this rule change on August 1, 
2022. The Exchange will issue a Trader Alert to notify Members of the 
implementation date.

[[Page 47022]]

2. Statutory Basis
    The Exchange believes that its proposed rule change is consistent 
with Section 6(b) of the Act \7\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act \8\ 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.
---------------------------------------------------------------------------

    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Exchange's proposal to add clarifying language to the first 
sentence of Policy .11 of Rule 404, is consistent with the Act because 
it will make clear that the only permitted intervals are as specified 
in the table within Policy .11, except in the case where Policy .02(e) 
provides for a greater interval. This amendment will bring greater 
transparency to the rule.
    Adopting a new sentence within Policy .11 of Rule 404 to address a 
potential conflict between the Short Term Option Series Program rules, 
specifically as between the application of the table within Policy .11 
of Rule 404, and the rule text within Policy .02(e), with respect to 
the correct interval is consistent with the Act. The table within 
Policy .11 of Rule 404 supersedes other strike interval rules, but does 
not supersede the addition of option series. Therefore, these rules do 
not conflict with the table in Policy .11 of Rule 404. Deleting the 
reference to Policy .02(d) will avoid confusion. This new rule text 
will make clear to Members the applicable intervals when there is a 
conflict between the rule text within Policy .11 of Rule 404 and the 
rule text within Policy .02(e), thereby providing certainty as to the 
outcome. The proposed new rule text promotes just and equitable 
principles of trade by adding transparency to the manner in which the 
Exchange implements its listing rules, and protects investors and the 
general public by removing uncertainty.
    Removing the last sentence of the first paragraph of Policy .11 of 
Rule 404, is consistent with the Act because the table within Policy 
.11 impacts strike intervals, while Policy .02(d) of Rule 404, 
describes the addition of options series. Therefore, the tables within 
Policy .11 and Policy .02(d) do not conflict with each other. Deleting 
the reference to Policy .02(d) will avoid confusion.
    Removing the last sentence of Policy .11 is consistent with the Act 
because while the range limitations continue to be applicable, the 
strike ranges do not conflict with strike intervals, rendering the 
sentence unnecessary. Removing the last sentence of Policy .11 of Rule 
404 will avoid confusion. Also, the rule text within Policy .02(f) of 
Rule 404 otherwise indicates when Policy .11 would apply.
    The Strike Interval Proposal was designed to reduce the density of 
strike intervals that would be listed in later weeks, within the Short 
Term Option Series Program, by utilizing limitations for intervals 
between strikes which have an expiration date more than twenty-one days 
from the listing date. The Exchange's proposal intends to continue to 
remove certain strike intervals where there exist clusters of strikes 
whose characteristics closely resemble one another and, therefore, do 
not serve different trading needs,\9\ rendering these strikes less 
useful. Also, the Strike Interval Proposal continues to reduce the 
number of strikes listed on the Exchange, allowing Market Makers \10\ 
to expend their capital in the options market in a more efficient 
manner, thereby improving overall market quality on the Exchange.
---------------------------------------------------------------------------

    \9\ For example, two strikes that are densely clustered may have 
the same risk properties and may also be the same percentage out-of-
the-money.
    \10\ The Term Market Makers refers to ``Lead Market Makers'', 
``Primary Lead Market Makers'' and ``Registered Market Makers'' 
collectively. See Exchange Rule 100.
---------------------------------------------------------------------------

    Additionally, by making clear that the greater interval would 
control as between the rule text with Policy .11 of Rule 404 and the 
rule text within Policy .02(e), the Exchange is reducing the number of 
strikes listed in a manner consistent with the intent of the Strike 
Interval Proposal, which was to reduce strikes which were farther out 
in time. The result of this clarification is to select wider strike 
intervals for Short Term Option Series in equity options which have an 
expiration date more than twenty-one days from the listing date. This 
rule change would harmonize strike intervals as between inner weeklies 
(those having less than twenty-one days from the listing date) and 
outer weeklies (those having more than twenty-one days from the listing 
date) so that strike intervals are not widening as the listing date 
approaches.

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 Strike Interval Proposal 
continues to limit the number of Short Term Option Series strike 
intervals available for quoting and trading on the Exchange for all 
Members.
    Adopting a new sentence to address potential conflicts between the 
rule text within Policy .11 of Rule 404 and Policy .02(e) of Rule 404, 
within the Short Term Option Series Program, will bring greater 
transparency to the manner in which the Exchange implements its listing 
rules. Adding clarifying language to the first sentence of Policy .11 
of Rule 404 to make clear which parameter the table within Policy .11 
amends within the Short Term Option Series Program will bring greater 
transparency to the rules.
    The table within Policy .11 of Rule 404 impacts strike intervals, 
while Policy .02(d) describes adding series of options. The table 
within Policy .11 supersedes other strike interval rules, but does not 
supersede the addition of series. Removing the last sentence of the 
first paragraph of Policy .11 of Rule 404, does not impose an undue 
burden on competition because the table within Policy .11 of Rule 404 
supersedes other rules pertaining to strike intervals, but the table 
does not supersede rules governing the addition of options series. 
Also, deleting the reference to Policy .02(d) of Rule 404 will avoid 
confusion. Finally, removing the last sentence of Policy .11 of Rule 
404 will remove any potential confusion. While the range limitations 
continue to be applicable, the strike ranges do not conflict with 
strike intervals and are not necessary.
    While this proposal continues to limit the intervals of strikes 
listed on the Exchange, the Exchange continues to balance the needs of 
market participants by continuing to offer a number of strikes to meet 
a market participant's investment objective. The Exchange's Strike 
Interval Proposal does not impose an undue burden on inter-market 
competition as this Strike Interval Proposal does not impact the 
listings available at another self-regulatory organization.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    Written comments were neither solicited nor received.

[[Page 47023]]

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 \11\ and Rule 19b-4(f)(6) \12\ 
thereunder.
---------------------------------------------------------------------------

    \11\ 15 U.S.C. 78s(b)(3)(A).
    \12\ 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.
---------------------------------------------------------------------------

    A proposed rule change filed under Rule 19b-4(f)(6) \13\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\14\ the Commission 
may designate a shorter time if such action is consistent with the 
protection of investors and the public interest. The Exchange has 
requested that the Commission waive the 30-day operative delay so that 
the Exchange may implement the proposed rule change on August 1, 2022--
the same time other exchanges are implementing an identical change.\15\ 
The Exchange states that implementing the proposal simultaneously with 
other option exchanges will promote the protection of investors by 
harmonizing the strike listing methodology across exchanges. 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. Accordingly, the Commission hereby waives the operative 
delay.\16\
---------------------------------------------------------------------------

    \13\ 17 CFR 240.19b-4(f)(6).
    \14\ 17 CFR 240.19b-4(f)(6)(iii).
    \15\ See Securities Exchange Act Release No. 95085 (June 10, 
2022), 87 FR 36353 (June 16, 2022) (SR-ISE-2022-10) (Order Approving 
a Proposed Rule Change, as Modified by Amendment No. 1, to Amend ISE 
Options 4, Section 5, Series of Options Contracts Open for Trading).
    \16\ 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).
---------------------------------------------------------------------------

    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-MIAX-2022-26 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-2022-26. 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-2022-26 and should be submitted on 
or before August 22, 2022.
---------------------------------------------------------------------------

    \17\ 17 CFR 200.30-3(a)(12), (59).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022-16353 Filed 7-29-22; 8:45 am]
BILLING CODE 8011-01-P


