
[Federal Register Volume 88, Number 221 (Friday, November 17, 2023)]
[Notices]
[Pages 80361-80362]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-25385]


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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-98917; File No. SR-MIAX-2023-36]


Self-Regulatory Organizations; Miami International Securities 
Exchange LLC; Order Approving a Proposed Rule Change To Amend Exchange 
Rule 404, Series of Option Contracts Open for Trading

November 13, 2023.

I. Introduction

    On September 14, 2023, Miami International Securities Exchange LLC 
(``MIAX'' or ``Exchange'') filed with the Securities and Exchange 
Commission (``Commission''), pursuant to Section 19(b)(1) of the 
Securities Exchange Act of 1934 (``Act''),\1\ and Rule 19b-4 
thereunder,\2\ a proposed rule change to amend Exchange Rule 404, 
Series of Option Contracts Open for Trading. The proposed rule change 
was published for comment in the Federal Register on October 2, 
2023.\3\ This order approves the proposed rule change.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 98534 (September 26, 
2023), 88 FR 67830 (``Notice''). The Commission received no comment 
letters on the proposed rule change.
---------------------------------------------------------------------------

II. Description of the Proposed Rule Change

    The Exchange proposes to amend Exchange Rule 404, Series of Option 
Contracts Open for Trading, to adopt Interpretations and Policies .12 
to Exchange Rule 404 to implement a strike interval program for stocks 
that are priced less than $2.50 and have an average daily trading 
volume of at least 1,000,000 shares per day for the three preceding 
calendar months (the ``Low Priced Stock Strike Price Interval 
Program''). The Exchange also proposes to amend the table in Exchange 
Rule 404, Interpretations and Policies .11 to harmonize that table to 
the proposed rule change.
    The Exchange proposes to adopt the Low Priced Stock Strike Price 
Interval Program for underlying stocks that are not in the $0.50 Strike 
Program \4\ (or the Short Term Option Series Program) \5\ and that 
close below $2.50 and have an average daily trading volume of at least 
1,000,000 shares per day for the three preceding calendar months. To be 
eligible for the inclusion in the proposed 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 an 
average daily trading volume of at least 1,000,000 shares per day for 
the three (3) preceding calendar months.\6\ For stocks added to the Low 
Priced Stock Strike Price Interval Program, if the underlying stock 
closes at or above $2.50 in its primary market no additional series in 
$0.50 intervals may be listed, and additional series in $0.50 intervals 
may not be added until the underlying stock again closes below 
$2.50.\7\
---------------------------------------------------------------------------

    \4\ See Interpretations and Policies .04 of Exchange Rule 404. 
Exchange Rule 404 includes several different strike interval 
programs, including the $0.50 Strike Program, the $1 Strike Price 
Interval Program, and the $2.50 Strike Price Program. See 
Interpretations and Policies .04 of Exchange Rule 404, 
Interpretations and Policies .01 of Exchange Rule 404, and Exchange 
Rule 404(f).
    \5\ See Interpretations and Policies .02 of Exchange Rule 404.
    \6\ The Exchange notes this is the same methodology used in the 
$1 Strike Price Interval Program. See Interpretations and Policies 
.01(c)(3) of Exchange Rule 404. 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 Exchange 
Rule 404A(b)(1).
    \7\ See Notice, supra note 3, at 67831.
---------------------------------------------------------------------------

    After a stock is added to the Low Priced Stock Strike Price 
Interval Program, the Exchange proposes that it may list $0.50 strike 
price intervals from $0.50 up to $2.00.\8\ The Exchange represents that 
there will be no limit to the number of classes eligible for inclusion 
in the proposed program, so long as the underlying stock satisfies both 
the price and average daily trading volume requirements.\9\
---------------------------------------------------------------------------

    \8\ While the Exchange may list new strikes on underlying stocks 
that meet the eligibility requirements of the new program, the 
Exchange states that it will exercise its discretion and will not 
list strikes on underlying stocks the Exchange believes are subject 
to imminent delisting from their primary exchange. See Notice, supra 
note 3, at 67831 n.12.
    \9\ See Notice, supra note 3, at 67831.
---------------------------------------------------------------------------

    Additionally, the Exchange proposes to amend the table in Exchange 
Rule 404, Interpretations and Policies .11 to insert a column to 
harmonize the Exchange's proposal to the strike intervals for Short 
Term Options Series as described in Interpretations and Policies .02 of 
Exchange Rule 404. The table in Interpretations and Policies .11 is 
intended to limit the intervals between strikes for multiply listed 
equity options within the Short Term

[[Page 80362]]

Options Series program that have an expiration date more than twenty-
one days from the listing date. Specifically, the table defines the 
applicable strike intervals for options on underlying stocks given the 
closing price on the primary market on the last day of the calendar 
quarter, and a corresponding average daily volume of 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.\10\ However, the lowest share price column 
is titled ``Less than $25.'' The Exchange proposes to insert a column 
entitled ``Less than $2.50'' and to set the strike interval at $0.50 
for each average daily volume tier represented in the table. Also, the 
Exchange proposes to amend the heading of the column currently titled 
``Less than $25'' to ``$2.50 to less than $25'' as a result of the new 
column entitled, ``Less than $2.50.'' \11\
---------------------------------------------------------------------------

    \10\ See Securities Exchange Release Act No. 91125 (February 21, 
2021), 86 FR 10375 (February 19, 2021) (SR-BX-2020-032) (Order 
Granting Accelerated Approval of a Proposed Rule Change, as Modified 
by Amendment No. 1, To Amend Options 4, Section 5, To Limit Short 
Term Options Series Intervals Between Strikes That Are Available for 
Quoting and Trading on BX).
    \11\ See Notice, supra note 3, at 67831.
---------------------------------------------------------------------------

III. Discussion and Commission Findings

    The Commission finds that the proposed rule change is consistent 
with the Act and the rules and regulations thereunder applicable to a 
national securities exchange.\12\ In particular, the Commission finds 
that the proposed rule change is consistent with Section 6(b)(5) of the 
Act,\13\ which requires, among other things, that the Exchange's rules 
be designed to prevent fraudulent and manipulative acts and practices, 
to promote just and equitable principles of trade, 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.
---------------------------------------------------------------------------

    \12\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. See 15 U.S.C. 78c(f).
    \13\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Exchange recognizes that its proposal will increase the total 
number of option series available on the Exchange; however, it believes 
this is appropriate to address a gap in strike coverage for low priced 
stocks, and the Exchange represents that it will only add strikes where 
there is investor demand and adequate liquidity.\14\ The Exchange 
represents that as of August 9, 2023, 106 symbols met the criteria for 
inclusion in the proposed program.\15\ Of those symbols, 36 are 
currently in the $1 Strike Price Interval Program with $1.00 and $2.00 
strikes listed.\16\ If MIAX adds $0.50 and $1.50 strikes for these 
symbols for the current expiration terms, and $0.50, $1.00, $1.50 and 
$2.00 strikes to current expiration terms for the remaining 70 symbols 
eligible under the proposal, a total of approximately 3,250 options 
would be added, which represents an increase of only 0.294% in the 
number of options listed on the Exchange.\17\
---------------------------------------------------------------------------

    \14\ See Notice, supra note 3, at 67831-32.
    \15\ See Notice, supra note 3, at 67832.
    \16\ See id.
    \17\ See id.
---------------------------------------------------------------------------

    In support of its proposal, the Exchange provided examples of 
symbols that would qualify for the new program but are not currently in 
pre-existing strike price interval programs. For example, the Exchange 
states that on August 9, 2023, symbol SOND closed at $0.50 and had open 
interest of over 44,000 contracts and an average daily trading volume 
in the underlying stock of over 1,900,000 shares for the three 
preceding calendar months.\18\ In the absence of the Low Priced Stock 
Strike Price Interval Program, the lowest strike listed for the symbol 
is for $2.50, making the lowest strike 400% away from the closing stock 
price. Similarly, according to the Exchange, symbol CTXR, which closed 
at $0.92 on August 9, 2023 and had open interest of over 63,000 
contracts and an average daily trading volume in the underlying stock 
of over 1,900,000 shares for the three preceding calendar months, had a 
lowest strike listed at $2.50 which is more than 170% away from the 
closing stock price.\19\
---------------------------------------------------------------------------

    \18\ See id.
    \19\ See id.
---------------------------------------------------------------------------

    The Exchange states that for these and similar symbols that 
presently have no at-the-money options, as well as no in-the-money 
calls or out-of-the-money puts, the Low Priced Stock Strike Price 
Interval Program will provide for more effective and tailored trading 
and hedging opportunities for this subset of stocks.\20\
---------------------------------------------------------------------------

    \20\ See id.
---------------------------------------------------------------------------

    The Exchange believes that the proposed average daily trading 
volume requirement of 1,000,000 shares is a reasonable threshold to 
ensure adequate liquidity in eligible underlying stocks.\21\
---------------------------------------------------------------------------

    \21\ See Notice, supra note 3, at 67833.
---------------------------------------------------------------------------

    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; it 
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; and that Members will not 
have capacity issues as a result of the proposed rule change.
    Finally, the Exchange believes the change proposed to the table in 
Interpretations and Policies .11 to Exchange Rule 404 will remove any 
potential conflict between the strike intervals under the Short Term 
Options Series Program and those described under the proposed Low 
Priced Stock Strike Price Interval Program. The Commission believes 
that this change would add clarity to the Exchange rulebook and help 
avoid investor confusion.
    The Commission believes that the proposal to add the Low Priced 
Stock Strike Price Interval Program to Exchange Rule 404, and the 
corresponding changes to the table in Exchange Rule 404, 
Interpretations and Policies .11, strikes a reasonable balance between 
the Exchange's desire to offer a wider array of products with the need 
to avoid unnecessary proliferation of options series and the 
corresponding increase in quotes. The proposal adds a limited range of 
more granular strike intervals where they are more relevant and likely 
more in demand from customers, but only for those lower priced 
underlying stocks where there is adequate liquidity. In addition, the 
Commission believes that the proposed rule change is reasonably 
designed to effectuate the Exchange's goals of increasing liquidity, 
providing more tailored and effective trading and hedging opportunities 
for market participants, and improving market quality. Accordingly, the 
Commission finds that the proposed rule change is consistent with 
Section 6(b)(5) of the Act \22\ and the rules and regulations 
thereunder applicable to a national securities exchange.
---------------------------------------------------------------------------

    \22\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\23\ that the proposed rule change (SR-MIAX-2023-36), be and hereby 
is, approved.
---------------------------------------------------------------------------

    \23\ 15 U.S.C. 78f(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\24\
---------------------------------------------------------------------------

    \24\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-25385 Filed 11-16-23; 8:45 am]
BILLING CODE 8011-01-P


