80 FR 22598 - Self-Regulatory Organizations; Miami International Securities Exchange LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Exchange Rule 500

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 80, Issue 77 (April 22, 2015)

[Federal Register Volume 80, Number 77 (Wednesday, April 22, 2015)]
[Notices]
[Pages 22598-22600]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2015-09263]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-74744; File No. SR-MIAX-2015-29]


Self-Regulatory Organizations; Miami International Securities 
Exchange LLC; Notice of Filing and Immediate Effectiveness of a 
Proposed Rule Change To Amend Exchange Rule 500

April 16, 2015.
    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 April 7, 2015, 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 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 Substance 
of the Proposed Rule Change

    The Exchange is filing a proposal to amend Exchange Rule 500. The 
text of the proposed rule change is available on the Exchange's Web 
site at http://www.miaxoptions.com/filter/wotitle/rule_filing, 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 Exchange Rule 500, Access to and 
Conduct on the Exchange, to authorize the Exchange to share any Member-
designated risk settings in the MIAX System \3\ with the Clearing 
Member \4\ that clears Exchange Transactions \5\ on behalf of the 
Member \6\ (or on behalf of any Sponsored User \7\ for which the Member 
is a Sponsoring Member \8\). Current Rule 500(a) states that ``[U]nless 
otherwise provided in the Rules, no one but a Member or a person 
associated with a Member shall effect any Exchange Transactions.'' The 
Exchange proposes to amend current Rule 500(a) to state that the 
Exchange may share any Member-designated risk settings in the MIAX 
System with the Clearing Member

[[Page 22599]]

that clears Exchange Transactions on behalf of the Member.
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    \3\ The term ``System'' means the automated trading system used 
by the Exchange for the trading of securities. See Exchange Rule 
100.
    \4\ The term ``Clearing Member'' means a Member that has been 
admitted to membership in the Options Clearing Corporation 
(``Clearing Corporation'') pursuant to the provisions of the rules 
of the Clearing Corporation. See Exchange Rule 100.
    \5\ The term ``Exchange Transaction'' means a transaction 
involving a security that is effected on the Exchange. See Exchange 
Rule 100.
    \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.
    \7\ A Sponsored User may obtain and maintain authorized access 
to the System, only if such access is authorized in advance by one 
or more Sponsoring Members. See Exchange Rule 210(b).
    \8\ Sponsored Users must enter into a sponsorship arrangement 
with a ``Sponsoring Member,'' which is defined as a Member that 
agrees to sponsor the Sponsored User's access to the System. See 
Exchange Rule 210(b)(1). The Sponsoring Member is responsible for 
any and all actions taken by such Sponsored User and any person 
acting on behalf of or in the name of such Sponsored User. See 
Exchange Rule 210(b)(1)(ii)(B)(2).
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    All Exchange Transactions must be submitted for clearance to the 
Options Clearing Corporation (the ``Clearing Corporation'') and are 
subject to the Rules of the Clearing Corporation. For each Exchange 
Transaction in which it participates, a Member must immediately give up 
the name of the Clearing Member through whom the Exchange Transaction 
will be cleared.\9\ Every Clearing Member is responsible for the 
clearance of the Exchange Transactions of such Clearing Member and of 
each Member who gives up such Clearing Member's name pursuant to a 
letter of authorization, letter of guarantee or other authorization 
given by such Clearing Member to such Member, which authorization must 
be submitted to the Exchange.\10\
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    \9\ See Exchange Rule 507.
    \10\ See Exchange Rule 513(b).
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    Thus, while not all Members are Clearing Members, all Exchange 
Members require a Clearing Member's consent to clear Exchange 
Transactions on their behalf in order to conduct business on the 
Exchange. The letter of authorization or guarantee, or other 
authorization, describes the relationship between the Member and 
Clearing Member and provides the Exchange with notice of which Clearing 
Members have relationships with which Exchange Members. The Clearing 
Member that guarantees the Member's Exchange Transactions has a 
financial interest in understanding the risk tolerance of the Member. 
The instant proposal would provide the Exchange with authority to 
provide Clearing Members directly with information that may otherwise 
be available to such Clearing Members by virtue of their relationship 
with the respective Members.
    Specifically, the proposal would permit the Exchange to share any 
Member-designated risk settings in the MIAX System with the Clearing 
Member that clears Exchange Transactions on behalf of the Member. The 
risk settings currently covered by this proposal relate to limitations 
on executions and are set forth in Exchange Rule 519,\11\ Rule 
519A,\12\ and Rule 612.\13\ The Exchange may adopt additional rules 
providing for Member-designated risk settings other than those provided 
in Exchange Rules 519, 519A, and 612 that could be shared with a 
Member's Clearing Member under the proposal, and the Exchange would 
announce these additional risk settings by issuing a Regulatory 
Circular.
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    \11\ Exchange Rule 519, Order Size Protections, states that the 
System will prevent certain orders from executing or being placed on 
the Book if the size of the order exceeds the order size protection 
designated by the Member.
    \12\ Pursuant to Exchange Rule 519A, Risk Protection Monitor 
(``RPM''), the MIAX System will count the number of orders entered 
and the number of contracts traded via an order entered by a Member 
on the Exchange within a specified time period that has been 
established by the Member and, when triggered, the RPM will (i) 
prevent the System from receiving any new orders in all series in 
all classes from the Member; or (ii) prevent the System from 
receiving any new orders in all series in all classes from the 
Member and cancel all existing Day orders in all series in all 
classes from the Member; or (iii) send a notification that the RPM 
has been triggered without any further preventative or cancellation 
action by the System.
    \13\ Pursuant to Exchange Rule 612, Aggregate Risk Manager 
(``ARM''), the MIAX System will count the number of contracts traded 
by a Market Maker in an assigned option class within a specified 
time period that has been established by the Market Maker. When the 
counting program has determined that a Market Maker has traded 
during the specified time period a number of contracts equal to or 
above an ``Allowable Engagement Percentage'' specified by the Market 
Maker, the ARM will automatically remove the Market Maker's 
quotations from the Exchange's disseminated quotation in all series 
of that particular option class until the Market Maker submits a new 
revised quotation.
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2. Statutory Basis
    MIAX believes that its proposed rule change is consistent with 
Section 6(b) of the Act \14\ in general, and furthers the objectives of 
Section 6(b)(5) of the Act \15\ 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 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.
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    \14\ 15 U.S.C. 78f(b).
    \15\ 15 U.S.C. 78f(b)(5).
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    The proposed rule change will allow the Exchange to provide a 
Member's designated risk settings directly to the Clearing Member that 
clears Exchange Transactions on behalf of the Member. Because a 
Clearing Member that executes a clearing letter of guarantee or 
authorization on behalf of a Member guarantees all Exchange 
Transactions of that Member, and therefore bears the risk associated 
with those Exchange Transactions, it is appropriate for the Clearing 
Member to have knowledge of what risk settings the Member may apply 
within the MIAX System. The proposal will permit Clearing Members who 
have a financial interest in the risk settings of Members with whom 
they have entered into a clearing letter of guarantee or agreement to 
better monitor and manage the potential risks assumed by Clearing 
Members, thereby providing Clearing Members with greater control and 
flexibility in managing their own risk tolerance and exposure and 
aiding Clearing Members in complying with the Act.
    Additionally, to the extent a Clearing Member might reasonably 
require a Member to provide access to its risk settings as a 
prerequisite to continuing to clear trades on such Member's behalf, the 
Exchange's proposal to share those risk settings directly with the 
Clearing Member reduces the administrative burden on the Member and 
ensures that Clearing Members are receiving information that is up to 
date and conforms to the settings active in the MIAX System.
    Moreover, the proposed rule change is consistent with rules that 
are currently operative on other exchanges.\16\
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    \16\ See NYSE Arca, Inc. Rule 6.2A(a); NYSE MKT LLC Rule 
902.1NY.(a); NASDAQ OMX PHLX LLC Rule 1016; and BATS Exchange, Inc. 
Rule 21.17.
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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 is 
not designed to address any competitive issues and does not pose an 
undue burden on non-Clearing Members because, unlike Clearing Members, 
non-Clearing Members do not guarantee the execution of a Member's 
Exchange Transactions. The proposal is structured to offer the same 
enhancement to all Clearing Members, regardless of size, and would not 
impose a competitive burden on any participant. Any Member that does 
not wish to share its designated risk settings with its Clearing Member 
could avoid sharing such settings by becoming a clearing member of OCC.
    The Exchange notes that the rule change is being proposed as a 
response to rules that are already operative on other exchanges.\17\
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    \17\ Id.
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    For all the reasons stated, the Exchange does not believe that the 
proposed rule change will impose any burden on competition not 
necessary or appropriate in furtherance of the purposes of the Act.

[[Page 22600]]

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 rule 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 if consistent with the protection of investors 
and the public interest, provided that the self-regulatory organization 
has given the Commission written notice of its intent to file 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,\18\ the proposed rule change has become effective 
pursuant to Section 19(b)(3)(A) of the Act \19\ and Rule 19b-4(f)(6) 
thereunder.\20\
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    \18\ The Exchange has satisfied this requirement.
    \19\ 15 U.S.C. 78s(b)(3)(A).
    \20\ 17 CFR 240.19b-4(f)(6).
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    A proposed rule change filed under Rule 19b-4(f)(6) \21\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\22\ 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 to allow 
the Exchange to respond to current demand for the expeditious sharing 
of risk settings between Clearing Members and Members on whose behalf 
they clear Exchange Transactions. The proposal does not raise any novel 
or unique issues, and is substantially similar to rules that are 
currently operative on other options exchanges. Therefore, the 
Commission believes that waiving the 30-day operative delay is 
consistent with the protection of investors and the public interest and 
designates the proposed rule change as operative upon filing.\23\
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    \21\ Id.
    \22\ 17 CFR 240.19b-4(f)(6)(iii).
    \23\ For purposes only of waiving the 30-day operative delay, 
the Commission 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: (i) 
Necessary or appropriate in the public interest; (ii) for the 
protection of investors; or (iii) 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-2015-29 on the subject line.

Paper Comments

     Send paper comments in triplicate to Brent J. Fields, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-MIAX-2015-29. 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 Web site (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 Web site 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; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly.
    All submissions should refer to File Number SR-MIAX-2015-29 and 
should be submitted on or before May 13, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\24\
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    \24\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2015-09263 Filed 4-21-15; 8:45 am]
BILLING CODE 8011-01-P