[Federal Register Volume 87, Number 188 (Thursday, September 29, 2022)]
[Notices]
[Pages 59133-59135]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-21066]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-95899; File No. SR-MIAX-2022-30]


Self-Regulatory Organizations; Miami International Securities 
Exchange, LLC; Notice of Filing and Immediate Effectiveness of a 
Proposed Rule Change To Amend Exchange Rule 510, Minimum Price 
Variations and Minimum Trading Increments

September 23, 2022.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on September 13, 2022, 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 Exchange filed the proposal as a ``non-
controversial'' proposed rule change pursuant to Section 
19(b)(3)(A)(iii) of the Act \3\ and Rule 19b-4(f)(6) thereunder.\4\ 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.
    \3\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \4\ 17 CFR 240.19b-4(f)(6).
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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 Interpretation and 
Policy .03 to Exchange Rule 510, Minimum Price Variations and Minimum 
Trading Increments.
    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 Interpretation and Policy .03 to 
Exchange Rule 510, Minimum Price Variations and Minimum Trading 
Increments, to change the minimum increment for all series of options 
on the SPIKES[supreg] Index \5\ (``SPIKES options''). Currently, the 
minimum trading increment for SPIKES options is as follows: (1) if the 
options series is trading at less than $3.00, five (5) cents; and (2) 
if the options series is trading at $3.00 or higher, ten (10) cents.\6\ 
The Exchange now proposes to amend Interpretation and Policy .03 to 
Exchange Rule 510 to change the minimum increment for SPIKES options to 
the following: (1) if the options series

[[Page 59134]]

is trading at less than $3.00, one (1) cent; and (2) if the options 
series is trading at $3.00 or higher, five (5) cents.
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    \5\ The SPIKES Index measures the expected 30-day volatility of 
the SPDR[supreg] S&P 500 ETF Trust (commonly known and referred to 
by its ticker symbol, ``SPY''). See Securities Exchange Act Release 
No. 84417 (October 12, 2018), 83 FR 52865 (October 18, 2018) (SR-
MIAX-2018-14) (Order Granting Approval of a Proposed Rule Change by 
Miami International Securities Exchange, LLC to List and Trade on 
the Exchange Options on the SPIKES[supreg] Index).
    \6\ See Exchange Rule 510, Interpretation and Policy .03.
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    The Exchange believes market demand (including by retail investors, 
who generally prefer lower trading increments) supports a lower trading 
increment for these series. The Exchange expects this more granular 
pricing to lead to narrowing of the bid-ask spread for these options 
and increase the possible number of price points available to investors 
for these series. The Exchange believes tighter spreads will increase 
order flow in SPIKES options, which additional liquidity ultimately 
benefits all investors. Finer increments also permit more precise 
pricing in line with the theoretical value of these options. 
Additionally, penny pricing will be, but is not yet, available in 
options on the Cboe Volatility Index (``VIX options''), which is a 
competing product with SPIKES options trade [sic] on the Cboe Exchange, 
Inc. (``Cboe'').\7\ The Exchange notes that the proposal to list VIX 
options in penny increments was noticed by the Commission on June 14, 
2022, with the Commission granting waiver of the 30-day operative 
delay.\8\ As a result, the Exchange believes penny pricing for SPIKES 
options is necessary for competitive reasons to allow the Exchange to 
price these options at the same level of granularity as permitted for 
competitor products.\9\
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    \7\ See Securities Exchange Act Release No. 95102 (June 14, 
2022), 87 FR 36898 (June 21, 2022) (SR-CBOE-2022-027) (proposal to 
amend the minimum price increment for VIX options not listed under 
the Nonstandard Expirations Pilot Program to be $0.01 for series 
trading lower than $3.00 and $0.05 for series trading at $3.00 or 
higher) (the ``VIX Options Penny Notice''). The Exchange notes that 
series of VIX options listed under the Nonstandard Expirations Pilot 
Program (``VIXW options'') currently trade with a minimum increment 
of $0.01 for all series trading prices. See Cboe Exchange, Inc. Rule 
5.4(a).
    \8\ See id. The Exchange notes that Cboe stated in their rule 
filing that Cboe ``will issue a Notice to Trading Permit Holders . . 
. with appropriate advanced notice announcing the implementation 
date of the proposed rule change.'' See SR-CBOE-2022-027, available 
at https://www.cboe.com/us/options/regulation/rule_filings/ (last 
visited July 22, 2022). Accordingly, based on a review of Cboe's 
rulebook as well as Cboe's regulatory and trading notices to their 
members, the Exchange believes Cboe has not yet implemented penny 
pricing in VIX options.
    \9\ See id. The Exchange notes that part of the justification 
for the proposal to list VIX options in penny increments was based 
on the fact that if the Penny Interval Program (see Exchange Rule 
510(c) and MIAX Options Penny Class List, available at https://www.miaxoptions.com/options-penny-pilot) was open to singly-listed 
options (and not just multiply-listed options classes), VIX options 
would be eligible for inclusion in the Penny Interval Program. See 
VIX Options Penny Notice, supra note 5. Although volume in SPIKES 
options does not currently meet the requirements of the Penny 
Interval Program, the Commission has previously allowed singly-
listed options to be quoted in penny increments when such options, 
irrespective of volume, were designed to track the same indexes as 
multiply-listed options that were in the pilot version (at the time) 
of the Penny Interval Program. See Securities Exchange Act Release 
No. 56565 (September 27, 2007), 72 FR 56403, 56406 (October 3, 2007) 
(SR-CBOE-2007-98) (approving Cboe's proposal to list and trade XSP 
and DJX options in penny increments).
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    Further, the Exchange believes market demand supports a lower 
trading increment for series of SPIKES options, particularly demand by 
retail investors, who generally prefer lower trading increments. The 
Exchange is in the process of implementing a robust retail-oriented 
program for SPIKES options, including new educational programs and 
materials and potentially through changes to the MIAX Fee Schedule for 
transactions in SPIKES options, among other things. The proposed change 
to move to penny pricing for SPIKES options would further this goal by 
providing retail market participants the ability to trade SPIKES 
options in lower trading increments. The Exchange believes that lower 
trading increments in SPIKES options will boost retail participation on 
the Exchange, which should strengthen the market quality for SPIKES 
options for all market participants, leading to more trading 
opportunities and tighter spreads.
    With regard to the impact of this proposed rule change on system 
capacity, the Exchange has analyzed its capacity and represents that it 
and the Options Price Reporting Authority have the necessary systems 
capacity to handle any potential additional traffic associated with 
this proposal. The Exchange does not believe any potential increased 
traffic will become unmanageable since this proposed rule change with 
respect to minimum trading increments is limited to a single class of 
options. The proposed rule change does not impact the number of 
expirations or strike prices for SPIKES options the Exchange may list 
pursuant to Exchange Rule 1809(a)(3).
    The Exchange will issue a notice to Members \10\ via Regulatory 
Circular with appropriate advanced notice announcing the implementation 
date of the proposed rule change.
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    \10\ 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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2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\11\ in general, and furthers the objectives of Section 
6(b)(5) of the Act,\12\ in particular, in that it is designed to 
prevent fraudulent and manipulative 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 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) \13\ requirement that the rules of an exchange not be designed 
to permit unfair discrimination between customers, issuers, brokers, or 
dealers.
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    \11\ 15 U.S.C. 78f(b).
    \12\ 15 U.S.C. 78f(b)(5).
    \13\ 15 U.S.C. 78f(b)(5).
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    In particular, the proposed rule change will permit more granular 
pricing in SPIKES options, which may lead to narrowing of the bid-ask 
spread for these options and increase the possible number of price 
points available to investors for these series, which ultimately 
increases liquidity to the benefit of all investors. In particular, the 
Exchange believes the proposed change will further the Exchange's goal 
of providing retail market participants the ability to trade SPIKES 
options in lower trading increments, which will strengthen the market 
quality for SPIKES options for all market participants, leading to more 
trading opportunities and tighter spreads. The Exchange believes 
stronger market quality and more trading opportunities based on a lower 
trading increment for SPIKES options promotes just and equitable 
principles of trade, facilitates transactions in SPIKES options and 
removes impediments to the mechanism of a free and open market for 
SPIKES options.
    Additionally, as discussed above, at least one competing exchange, 
Cboe, has filed to allow a competitive product, VIX options, to trade 
in penny and nickel increments once Cboe implements that change. 
Therefore, the proposed change will and promote just and equitable 
principles of trade and remove impediments to and perfect the mechanism 
of a free and open market by allowing SPIKES options to trade at the 
same level of granularity as permitted for competitor products like VIX 
options. Further, the Commission has previously allowed singly-listed 
options to be quoted in penny increments when such options were 
designed to track the same indexes as multiply-listed options that were 
in the pilot version (at the time) of the Penny Interval Program.\14\
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    \14\ See supra note 7.

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[[Page 59135]]

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 
will not impose any burden on intramarket competition that is not 
necessary or appropriate, because all Exchange Members will be able to 
trade SPIKES options in the proposed minimum trading increments.
    The proposed rule change will not impose any burden on intermarket 
competition that is not necessary or appropriate, because it will 
permit SPIKES options to have pricing consistent with the pricing of a 
competitive product, VIX options, that currently trades in increments 
of $0.01 or $0.05.
    Additionally, the proposed rule change to permit SPIKES options to 
be listed in penny and nickel increments may relieve any burden on, or 
otherwise promote, competition, as it will allow market participants to 
trade these options at the same level of granularity as permitted for 
competitor products. The Exchange also expects the more granular 
pricing to lead to narrowing of the bid-ask spread for these options, 
which the Exchange believes will increase order flow and price 
competition in SPIKES options.

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

    Written comments were neither solicited nor received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Because the foregoing proposed rule change does not: (i) 
significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate, it has become 
effective pursuant to Section 19(b)(3)(A) of the Act \15\ and Rule 19b-
4(f)(6) thereunder.\16\
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    \15\ 15 U.S.C. 78s(b)(3)(A).
    \16\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(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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    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-2022-30 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-2022-30. 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-2022-30 and should be submitted on 
or before October 20, 2022.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
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    \17\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022-21066 Filed 9-28-22; 8:45 am]
BILLING CODE 8011-01-P


