[Federal Register Volume 88, Number 119 (Thursday, June 22, 2023)]
[Notices]
[Pages 40887-40890]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-13218]



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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-97733; File No. SR-MIAX-2023-22]


Self-Regulatory Organizations; Miami International Securities 
Exchange LLC; Notice of Filing of a Proposed Rule Change To Amend 
Exchange Rule 404, Series of Option Contracts Open for Trading, To 
Implement a Low Priced Stock Strike Price Interval Program

June 15, 2023.
    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 June 5, 2023, Miami International Securities Exchange LLC (``MIAX'' 
or ``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') a proposed rule change as described in Items I, II, 
and III below, which Items have been prepared by the Exchange. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange is filing a proposal to amend 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's principal 
office, and at the Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
sections A, B, and C below, of the most significant aspects of such 
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend Rule 404, Series of Option Contracts 
Open for Trading. Specifically, the Exchange proposes to adopt new 
Interpretations and Policies .12 to Rule 404 to implement a new strike 
interval program for stocks that are priced less than $2.50 and have 
open interest equal to or greater than 1,000 contracts.
Background
    Currently, Exchange Rule 404, Series of Option Contracts Open for 
Trading, describes the process and procedures for listing and trading 
series of options \3\ on the Exchange. Rule 404 provides for a $2.50 
Strike Price Program, where the Exchange may select up to 60 option 
classes \4\ on individual stocks for which the interval of strike 
prices will be $2.50 where the strike price is greater than $25.00 but 
less than $50.00.\5\ Rule 404 also provides for a $1 Strike Price 
Interval Program, where the interval between strike prices of series of 
options \6\ on individual stocks may be $1.00 or greater provided the 
strike price is $50.00 or less, but not less than $1.00.\7\ 
Additionally, Rule 404 provides for a $0.50 Strike Program.\8\ The 
interval of strike prices of series of options on individual stocks may 
be $0.50 or greater beginning at $0.50 where the strike price is $5.50 
or less, but only for options classes whose underlying security closed 
at or below $5.00 in its primary market on the previous trading day and 
which have national average daily volume that equals or exceeds 1,000 
contracts per day as determined by The Options Clearing Corporation 
during the preceding three calendar months. The listing of $0.50 strike 
prices is limited to options classes overlying no more than 20 
individual stocks (the ``$0.50 Strike Program'') as specifically 
designated by the Exchange. The Exchange may list $0.50 strike prices 
on any other option classes if those classes are specifically 
designated by other securities exchanges that employ a similar $0.50 
Strike Program under their respective rules. A stock shall remain in 
the $0.50 Strike Program until otherwise designated by the Exchange.\9\
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    \3\ The term ``option contract'' means a put or a call issued, 
or subject to issuance, by the Clearing Corporation pursuant to the 
Rules of the Clearing Corporation. See Exchange Rule 100.
    \4\ The terms ``class of options'' or ``option class'' means all 
option contracts covering the same underlying security. See Exchange 
Rule 100.
    \5\ See Exchange Rule 404(f).
    \6\ The term ``series of options'' means all option contracts of 
the same class having the same exercise price and expiration date. 
See Exchange Rule 100.
    \7\ See Interpretations and Policies .01(a) of Rule 404.
    \8\ See Interpretations and Policies .04 of Rule 404.
    \9\ Id.
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Proposal
    At this time, the Exchange proposes to adopt a new strike interval 
program for stocks that are not in the aforementioned $0.50 Strike 
Program (or the Short Term Option Series Program) \10\ and that close 
below $2.50 and have open interest equal to or greater than 1,000 
contracts. The $0.50 Strike Program considers stocks that have a 
closing price at or below $5.00 whereas the Exchange's proposal will 
consider stocks that have a closing price below $2.50. Currently, there 
is a subset of stocks that are not included in the $0.50 Strike Program 
as a result of the limitations of that program which provides that the 
listing of $0.50 strike prices shall be limited to option classes 
overlying no more than 20 individual stocks as specifically designated 
by the Exchange and requires a national average daily volume that 
equals or exceeds 1,000 contracts per day as determined by The Options 
Clearing Corporation during the preceding three calendar months.\11\ 
Therefore, the Exchange is proposing to implement a new strike interval 
program termed the ``Low Priced Stock Strike Price Interval Program.''
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    \10\ See Interpretations and Policies .02 of Rule 404.
    \11\ See Interpretations and Policies .04 of Rule 404.
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    To be eligible for the inclusion in the Low Priced Stock Strike 
Price Interval Program, an underlying stock must (i) close below $2.50 
in its primary market on the previous trading day; and (ii) have open 
interest equal to or greater than 1,000 contracts. The Exchange notes 
that there is no limit to the number of classes that will be eligible 
for inclusion in the proposed program, provided, of course, that the 
underlyings satisfy both the price and open interest requirements of 
the proposed program.
    The Exchange also proposes that after a stock is added to the Low 
Priced Stock Strike Price Interval Program, the Exchange may list $0.50 
strike price intervals from $0.50 up to $2.00. For the purpose of 
adding strikes under the Low Priced Stock Strike Price Interval 
Program, the ``price of the underlying stock'' shall be measured in the 
same way as ``the price of the underlying security'' as set forth in 
Rule

[[Page 40888]]

404A(b)(1).\12\ Further, no additional series in $0.50 intervals may be 
listed if the underlying stock closes at or above $2.50 in its primary 
market. Additional series in $0.50 intervals may not be added until the 
underlying stock again closes below $2.50.
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    \12\ The Exchange notes this is the same methodology used in the 
$1 Strike Price Interval Program. See Interpretations and Policies 
.01(c)(3) of Rule 404.
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    The Exchange's proposal addresses a gap in strike coverage for low 
priced stocks. The $0.50 Strike Program considers stocks that close 
below $5.00 and limits the number of option classes listed to no more 
than 20 individual stocks (provided that the open interest criteria is 
also satisfied). Whereas, the Exchange's proposal has a narrower focus, 
with respect to the underlying's stock price, and is targeted on those 
stocks that close below $2.50 and does not limit the number of stocks 
that may participate in the program (provided that the open interest 
criteria is also satisfied). The Exchange does not believe that any 
market disruptions will be encountered with the addition of these new 
strikes. The Exchange represents that it has the necessary capacity and 
surveillance programs in place to support and properly monitor trading 
in the proposed Low Priced Stock Strike Price Interval Program.
Impact of Proposal
    The Exchange recognizes that its proposal will introduce new 
strikes in the marketplace and further acknowledges that there has been 
significant effort undertaken by the industry to curb strike 
proliferation. This initiative has been spearheaded by the Nasdaq BX 
who filed an initial proposal focused on the removal, and prevention of 
the listing, of strikes which are extraneous and do not add value to 
the marketplace (the ``Strike Interval Proposal'').\13\ The Strike 
Interval Proposal was intended to remove repetitive and unnecessary 
strike listings across the weekly expiries. Specifically, the Strike 
Interval Proposal aimed to reduce the density of strike intervals that 
would be listed in the later weeks, by creating limitations for 
intervals between strikes which have an expiration date more than 
twenty-one days from the listing date.\14\ The Strike Interval Proposal 
took into account OCC customer-cleared volume, using it as an 
appropriate proxy for demand. The Strike Interval Proposal was designed 
to maintain strikes where there was customer demand and eliminate 
strikes where there wasn't. At the time of its proposal Nasdaq BX 
estimated that the Strike Interval Proposal would reduce the number of 
strikes it listed by 81,000.\15\
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    \13\ See Securities Exchange Act No. 91225 (February 12, 2021), 
86 FR 10375 (February 12, 2021) (SR-BX-2020-032) (BX Strike Approval 
Order); see also BX Options Strike Proliferation Proposal (February 
25, 2021) available at: https://www.nasdaq.com/solutions/bx-options-strike-proliferation-proposal.
    \14\ See Securities Exchange Act No. 91225 (February 12, 2021), 
86 FR 10375 (February 12, 2021) (SR-BX-2020-032).
    \15\ See id.
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    The Exchange recognizes that its proposal will moderately increase 
the total number of option series available on the Exchange. However, 
the Exchange's proposal is designed to only add strikes where there is 
investor demand \16\ which will improve market quality. Under the 
requirements for the Low Priced Stock Strike Price Interval Program as 
described herein, the Exchange determined that as of March 31, 2023, 
413 symbols met the proposed criteria. Of those symbols 99 are 
currently in the $1 Strike Price Interval Program with $1.00 and $2.00 
strikes listed. Under the Exchange's proposal the Exchange would add 
the $0.50 and $1.50 strikes for these symbols for the current 
expiration terms. The remaining 314 symbols eligible under the 
Exchange's proposal would have $0.50, $1.00, $1.50 and $2.00 strikes 
added to their current expiration terms. Therefore, for the 413 symbols 
eligible for the Low Priced Stock Strike Price Interval Program a total 
of approximately 13,000 options would be added. As of March 31, 2023, 
the Exchange listed 1,090,896 options, therefore the additional options 
that would be listed under this proposal would represent a relatively 
minor increase of 1.19% in the number of options listed on the 
Exchange.
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    \16\ See proposed Interpretations and Policies .12(b) of Rule 
404 which requires that an underlying stock have open interest equal 
to or greater than 1,000 contracts to be eligible for inclusion in 
the Low Priced Stock Strike Price Interval Program.
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    The Exchange does not believe that its proposal contravenes the 
industry's efforts to curtail unnecessary strikes. The Exchange's 
proposal is targeted to only underlying stocks that close at less than 
$2.50 and that also meet the open interest requirement. Additionally, 
because the strike increment is $0.50 there are only a total of four 
strikes that may be listed under the program ($0.50, $1.00, $1.50, and 
$2.00) for an eligible underlying. Finally, if an eligible underlying 
is in another program (e.g., the $0.50 Strike Program or the $1 Strike 
Price Interval Program) the number of strikes that may be added is 
further reduced if there are pre-existing strikes as part of another 
strike listing program. Therefore, the Exchange does not believe that 
it will list any unnecessary or repetitive strikes as part of its 
program, and that the strikes that will be listed will improve market 
quality and satisfy investor demand.
    The Exchange further believes that the Options Price Reporting 
Authority (``OPRA''), has the necessary systems capacity to handle any 
additional messaging traffic associated with this proposed rule change. 
The Exchange also believes that Members \17\ will not have a capacity 
issue as a result of the proposed rule change. Finally, the Exchange 
believes that the additional options will serve to increase liquidity, 
provide additional trading and hedging opportunities for all market 
participants, and improve market quality.
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    \17\ 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 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,\18\ 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. Additionally, the Exchange believes the proposed rule change 
is consistent with the Section (6)(b)(5) \19\ requirement that the 
rules of an exchange not be designed to permit unfair discrimination 
between customers, issuers, brokers, or dealers.
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    \18\ 15 U.S.C. 78f(b).
    \19\ 15 U.S.C. 78(f)(b)(5).
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    The Exchange believes its proposal promotes just and equitable 
principles of trade and removes impediments to and perfects the 
mechanisms of a free and open market and a national market system as 
the Exchange has identified a subset of stocks that are trading under 
$2.50 and do not have meaningful strikes available. For example, on 
March 20, 2023, symbol SOND closed at $0.82 and had open interest of 
34,566

[[Page 40889]]

contracts.\20\ Currently the lowest strike listed is for $2.50, making 
the lowest strike 200% away from the closing stock price. Another 
symbol, POL, closed at $0.56 on March 20, 2023, and had open interest 
of 22,780 contracts.\21\ Similarly, the lowest strike listed is for 
$2.50, making the lowest strike more than 300% away from the closing 
stock price. Currently, such products have no at-the-money options, as 
well as no in-the-money calls or out-of-the-money puts. The Exchange's 
proposal will provide additional strikes in $0.50 increments from $0.50 
up to $2.00 to provide more meaningful trading and hedging 
opportunities for this subset of stocks. Given the increased 
granularity of strikes as proposed under the Exchange's proposal out-
of-the-money puts and in-the-money calls will be created. The Exchange 
believes this will allow market participants to tailor their investment 
and hedging needs more effectively.
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    \20\ See Yahoo! Finance, https://finance.yahoo.com/quote/SOND/history?p=SOND (last visited June 1, 2023).
    \21\ See Yahoo! Finance, https://finance.yahoo.com/quote/POL/history?p=POL (last visited June 1, 2023).
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    The Exchange believes its proposal promotes just and equitable 
principles of trade and 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 adding 
strikes that improves market quality and satisfies investor demand. The 
Exchange does not believe that the number of strikes that will be added 
under the program will negatively impact the market. Additionally, the 
proposal does not run counter to the efforts undertaken by the industry 
to curb strike proliferation as that effort focused on the removal and 
prevention of extraneous strikes where there was no investor demand. 
The Exchange's proposal requires the satisfaction of an open interest 
threshold in addition to the underlying closing at a price below $2.50 
to be eligible for the program. The Exchange believes that the open 
interest requirement threshold of the program ensures that only strikes 
with investor demand will be listed. Further, being that the strike 
interval is $0.50, there are only a maximum of four strikes that may be 
added ($0.50, $1.00, $1.50, and $2.00). Therefore, the Exchange does 
not believe that its proposal will undermine the industry's efforts to 
eliminate repetitive and unnecessary strikes in any fashion.
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b)(1) of the Act, which provides that the Exchange be 
organized and have the capacity to be able to carry out the purposes of 
the Act and the rules and regulations thereunder, and the rules of the 
Exchange. The proposed rule change allows the Exchange to respond to 
customer demand to provide meaningful strikes for low priced stocks. 
The Exchange does not believe that the proposed rule would create any 
capacity issue or negatively affect market functionality. Additionally, 
the Exchange represents that it has the necessary systems capacity to 
support the new options series and handle additional messaging traffic 
associated with this proposed rule change. The Exchange also believes 
that its Members will not experience any capacity issues as a result of 
this proposal. In addition, the Exchange represents that it believes 
that additional strikes for low priced stocks will serve to increase 
liquidity available as well and improve price efficiency by providing 
more trading opportunities for all market participants. The Exchange 
believes that the proposed rule change will benefit investors by giving 
them increased opportunities to execute their investment and hedging 
decisions.

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 that its proposed rule change will 
impose any burden on intra-market competition as the Rules of the 
Exchange apply equally to all Members of the Exchange and all Members 
may trade the new proposed strikes if they so choose. Specifically, the 
Exchange believes that investors and market participants will 
significantly benefit from the availability of finer strike price 
intervals for stocks priced below $2.50, which will allow them to 
tailor their investment and hedging needs more effectively.
    The Exchange does not believe that its proposed rule change will 
impose any burden on inter-market competition, as nothing prevents 
other options exchanges from proposing similar rules to list and trade 
options on low priced stocks. Rather the Exchange believes that its 
proposal will promote inter-market competition, as the Exchange's 
proposal will result in additional opportunities for investors to 
achieve their investment and trading objectives, to the benefit of 
investors, market participants, and the marketplace in general.

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

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the Exchange consents, the Commission shall: (a) by order approve 
or disapprove such proposed rule change, or (b) institute proceedings 
to determine whether the proposed rule change should be 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 (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
file number SR-MIAX-2023-22 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-2023-22. 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 (https://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

[[Page 40890]]

printing in the Commission's Public Reference Room, 100 F Street NE, 
Washington, DC 20549, on official business days between the hours of 10 
a.m. and 3 p.m. Copies of the filing also will be available for 
inspection and copying at the principal office of the Exchange. Do not 
include personal identifiable information in submissions; you should 
submit only information that you wish to make available publicly. We 
may redact in part or withhold entirely from publication submitted 
material that is obscene or subject to copyright protection. All 
submissions should refer to file number SR-MIAX-2023-22 and should be 
submitted on or before July 13, 2023.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\22\
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    \22\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2023-13218 Filed 6-21-23; 8:45 am]
BILLING CODE 8011-01-P


