80 FR 66100 - Self-Regulatory Organizations; Miami International Securities Exchange LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change to Extend the Pilot Period Applicable to Rule 521 and Rule 530 Relating To Limit Up/Limit Down

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 80, Issue 208 (October 28, 2015)

[Federal Register Volume 80, Number 208 (Wednesday, October 28, 2015)]
[Notices]
[Pages 66100-66102]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2015-27356]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-76237; File No. SR-MIAX-2015-60]


Self-Regulatory Organizations; Miami International Securities 
Exchange LLC; Notice of Filing and Immediate Effectiveness of a 
Proposed Rule Change to Extend the Pilot Period Applicable to Rule 521 
and Rule 530 Relating To Limit Up/Limit Down

October 22, 2015.
    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 October 20, 2015, Miami International Securities Exchange LLC 
(``MIAX'' or ``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 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 the 
Substance of the Proposed Rule Change

    The Exchange is filing a proposal to amend (i) Exchange Rule 530 
(Limit Up-Limit Down) to extend the pilot period for the treatment of 
erroneous transactions during a Limit or Straddle State and (ii) 
Interpretations and Policies .01 to Rule 521 (Nullification and 
Adjustment of Options Transactions Including Obvious Errors) to clarify 
that the pilot period during which an execution will not be subject to 
review as an Obvious Error or Catastrophic Error will coincide with the 
pilot period for the LULD Plan (as defined below).
    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 Rule 530 (Limit Up-Limit Down) in 
order to extend the pilot period for the treatment of erroneous 
transactions that occur in a Limit or Straddle State to coincide with 
the proposed extension of the pilot period for the LULD Plan (as 
defined below), including any extensions to the pilot period for the 
LULD Plan.
    Exchange Rule 530(j) provides for the treatment of erroneous 
transactions occurring during Limit and Straddle States. Specifically, 
once an NMS Stock has entered a Limit or Straddle State, the Exchange 
will nullify a transaction in an option overlying such an NMS Stock as 
provided in Rule 530(j). This provision was adopted for a one year 
pilot period beginning on the date of the implementation of the Plan to 
Address Extraordinary Market Volatility Pursuant to Rule 608 of 
Regulation NMS, April 8, 2013 (the ``LULD Plan'').\3\ The Exchange 
previously extended the pilot period for Rule 530(j) until October 23, 
2015.\4\ The Exchange now proposes to extend the pilot period for Rule 
530(j) to coincide with the proposed extension of the pilot period for 
the LULD Plan, including any extensions to the pilot

[[Page 66101]]

period for the LULD Plan, in order to allow the Exchange and the 
Commission additional time to collect and analyze data regarding the 
impact of Rule 530(j) on liquidity and market quality in the options 
markets.\5\
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    \3\ See Exchange Rule 503(j). See also Securities Exchange Act 
Release Nos. 69210 (March 22, 2013), 78 FR 18637 (March 27, 2013) 
(SR-MIAX-2013-12); 69342 (April 8, 2013), 78 FR 22017 (April 12, 
2013) (SR-MIAX-2013-12); 69234 (March 25, 2013), 78 FR 19344 (March 
29, 2013) (SR-MIAX-2013-15); 69354 (April 9, 2013), 78 FR 22357 
(April 15, 2013) (SR-MIAX-2013-15).
    \4\ See Securities Exchange Act Release No. 74307 (February 19, 
2015), 80 FR 10196 (February 25, 2015) (SR-MIAX-2015-11).
    \5\ Currently the pilot period for the LULD Plan is proposed to 
be extended until April 22, 2016. See Joint Industry Plan; Notice of 
Filing of the Ninth Amendment to the National Market System Plan to 
Address Extraordinary Market Volatility by BATS Exchange, Inc., BATS 
Y-Exchange, Inc., Chicago Board Options Exchange, Inc., Chicago 
Stock Exchange, Inc., EDGA Exchange, Inc., EDGX Exchange, Inc., 
Financial Industry Regulatory Authority, Inc., NASDAQ OMX BX, Inc., 
NASDAQ OMX PHLX LLC, The Nasdaq Stock Market LLC, National Stock 
Exchange, Inc., New York Stock Exchange LLC, NYSE MKT LLC, and NYSE 
Arca, Inc., Securities Exchange Act Release No. 75917 (September 14, 
2015), 80 FR 56515 (September 18, 2015).
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    To assist the Commission in its analysis, the Exchange will provide 
the Commission and the public with data and analysis during the 
duration of the pilot in order to evaluate the impact of Limit and 
Straddle States on liquidity and market quality in the options markets. 
Specifically, on a date not later than five (5) months prior to the 
pilot expiration date, including any extensions of the pilot period, 
the Exchange represents that it shall provide the Commission and the 
public assessments relating to the impact of the obvious error Rules 
during Limit and Straddle States that (i) evaluate the statistical and 
economic impact of Limit and Straddle States on liquidity and market 
quality in the options markets; and (ii) assess whether the lack of 
obvious error rules in effect during the Straddle and Limit States are 
problematic. If the LULD Plan extension is approved the next data 
assessment will be due no later than December 18, 2015. Additionally, 
each month during the pilot period the Exchange shall provide to the 
Commission and the public a dataset containing the data for each 
Straddle and Limit State in optionable stocks. For each stock that 
reaches a Straddle or Limit State, the number of options included in 
the dataset can be reduced by selecting options in which at least one 
(1) trade occurred on the Exchange during the Straddle or Limit State. 
For each of those options affected, each data record should contain the 
following information: (i) Stock symbol, option symbol, time at the 
start of the straddle or limit state, an indicator for whether it is a 
straddle or limit state; and (ii) for activity on the exchange--(A) 
executed volume, time-weighted quoted bid-ask spread, time-weighted 
average quoted depth at the bid, time-weighted average quoted depth at 
the offer, (B) high execution price, low execution price, (C) number of 
trades for which a request for review for error was received during 
Straddle and Limit States, (D) an indicator variable for whether those 
options outlined above have a price change exceeding 30% during the 
underlying stock's Limit or Straddle state compared to the last 
available option price as reported by OPRA before the start of the 
Limit or Straddle state (1 if observe 30% and 0 otherwise) and another 
indicator variable for whether the option price within five minutes of 
the underlying stock leaving the Limit or Straddle state (or halt if 
applicable) is 30% away from the price before the start of the Limit or 
Straddle state.
    The Exchange also proposes to amend Interpretations and Policies 
.01 to Rule 521 (Nullification and Adjustment of Options Transactions 
Including Obvious Errors) to take out the actual end date of the pilot 
period during which an execution will not be subject to review as an 
Obvious Error or Catastrophic Error pursuant to paragraph (c) or (d) of 
Rule 521 if it occurred while the underlying security was in a ``Limit 
State'' or ``Straddle State,'' as defined in the LULD Plan, and instead 
clarify that the pilot period will coincide with the pilot period for 
the LULD Plan, including any extensions to the pilot period for the 
LULD Plan.
2. Statutory Basis
    MIAX believes that its proposed rule change is consistent with 
Section 6(b) of the Act \6\ in general, and furthers the objectives of 
Section 6(b)(5) of the Act \7\ 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. Specifically, the proposal 
supports the objectives of perfecting the mechanism of a free and open 
market and the national market system because it promotes uniformity 
across markets concerning when and how to halt trading in all stock 
options as a result of extraordinary market volatility. In addition, 
the Exchange believes that the extension of the pilot to coincide with 
the pilot period for the LULD Plan will help ensure that market 
participants continue to benefit from the protections of the Limit Up-
Limit Down Rules which will protect investors and the public interest 
while allowing the Exchange and the Commission additional time to 
collect and analyze data regarding the impact of Rules on liquidity and 
market quality in the options markets.
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    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(5).
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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 changes are 
being made to extend the pilot program that provides for how the 
Exchange shall treat orders and quotes in options overlying NMS stocks 
when the Limit Up-Limit Down Plan is in effect and will not impose any 
burden on competition while providing certainty of treatment and 
execution of options orders during periods of extraordinary volatility 
in the underlying NMS stock, and facilitating appropriate liquidity 
during a Limit State or Straddle State.

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 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 if consistent with the protection of investors 
and the public interest, the proposed rule change has become effective 
pursuant to Section 19(b)(3)(A) of the Act \8\ and Rule 19b-
4(f)(6)(iii) thereunder.\9\
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    \8\ 15 U.S.C. 78s(b)(3)(A).
    \9\ 17 CFR 240.19b-4(f)(6)(iii). As required under Rule 19b-
4(f)(6)(iii), the Exchange provided the Commission with written 
notice of its intent to file the proposed rule change, along with a 
brief description and the 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.
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    The Exchange has asked the Commission to waive the 30-day operative 
delay so that the proposal may become operative immediately upon 
filing. The Commission believes that waiving the 30-day operative delay 
is consistent with the protection of investors and the public interest, 
as it will allow the obvious error pilot

[[Page 66102]]

program to continue uninterrupted while the industry gains further 
experience operating under the LULD Plan, and avoid any investor 
confusion that could result from a temporary interruption in the pilot 
program. For this reason, the Commission designates the proposed rule 
change to be operative upon filing.\10\
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    \10\ For purposes only of waiving the 30-day operative delay, 
the Commission has also 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 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-2015-60 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-2015-60. 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 such 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-2015-60, and should be 
submitted on or before November 18, 2015.
    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).

Brent J. Fields,
Secretary.
[FR Doc. 2015-27356 Filed 10-27-15; 8:45 am]
 BILLING CODE 8011-01-P