81 FR 33283 - Self-Regulatory Organizations; Miami International Securities Exchange LLC; Order Granting Approval of Proposed Rule Change to Amend the Exchange's Amended and Restated By-Laws Relating to the Removal of a Board Restriction

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 81, Issue 101 (May 25, 2016)

Page Range		33283-33284
FR Document		2016-12396
Federal Register, Volume 81 Issue 101 (Wednesday, May 25, 2016)
[Federal Register Volume 81, Number 101 (Wednesday, May 25, 2016)]
[Notices]
[Pages 33283-33284]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2016-12396]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-77876; File No. SR-MIAX-2016-08]


Self-Regulatory Organizations; Miami International Securities 
Exchange LLC; Order Granting Approval of Proposed Rule Change to Amend 
the Exchange's Amended and Restated By-Laws Relating to the Removal of 
a Board Restriction

May 20, 2016.

I. Introduction

    On March 29, 2016, Miami International Securities Exchange LLC (the 
``Exchange'' or ``MIAX'') filed with the Securities and Exchange 
Commission (the ``Commission''), pursuant to Section 19(b)(1) of the 
Securities Exchange Act of 1934

[[Page 33284]]

(``Act'') \1\ and Rule 19b-4 thereunder,\2\ a proposed rule change to 
amend the Exchange's Amended and Restated By-Laws (``By-Laws'') in 
order to remove a restriction prohibiting a Director, Observer or 
committee member of the Exchange's Board of Directors (``Board'') from 
simultaneously serving as a member of the governing body of a 
competitor. The proposed rule change was published for comment in the 
Federal Register on April 8, 2016.\3\ The Commission received no 
comments on the proposed rule change. This order approves the proposed 
rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 77507 (April 4, 
2016), 81 FR 20716 (April 8, 2016) (``Notice'').
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II. Description of the Proposed Rule Change

    Currently, the By-Laws restrict an individual who is a Director,\4\ 
Observer,\5\ or committee member of the Exchange from also serving as a 
member of the board of directors or similar governing body of a 
``Specified Entity.'' The term ``Specified Entity'' generally refers to 
any U.S. securities option exchange (or facility thereof) or U.S. 
alternative trading system on which securities options are traded which 
competes with the Exchange.\6\ The By-Laws specify that upon any 
individual who is a Director, Observer, or committee member of the 
Exchange becoming a member of the board of directors or similar 
governing body of a Specified Entity, such individual immediately would 
cease being a Director, Observer or committee member, as applicable, of 
the Board (``Board Restriction'').\7\
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    \4\ The term ``Director'' means the persons elected or appointed 
to the Board from time to time in accordance with the LLC Agreement 
of the Exchange and the By-Laws in their capacity as managers of the 
Exchange. See By-Laws, Article I (j).
    \5\ The term ``Observer'' means a person invited to attend 
meetings of the Board in a nonvoting observer capacity as further 
described in Article II, Section 2.2(g)(i)-(iii) of the By-Laws. See 
By-Laws, Article II, Section 2.2(g).
    \6\ Specifically, the term ``Specified Entity'' is defined in 
the By-Laws to mean (i) any U.S. securities option exchange (or 
facility thereof) or U.S. alternative trading system on which 
securities options are traded (other than the Exchange or any of its 
affiliates) that lists for trading any option contract that competes 
with an Exchange Contract, (ii) any person that owns or controls 
such U.S. securities option exchange or U.S. alternative trading 
system, and (iii) any affiliate of a person described in clause (i) 
or (ii) above. See By-Laws, Article I (oo).
    \7\ The Board Restriction was adopted by the Exchange in 2014. 
See Securities Exchange Act Release Nos. 71172 (December 23, 2013), 
78 FR 79530 (December 30, 2013); and 71541 (February 12, 2014), 79 
FR 9572 (February 19, 2014) (SR-MIAX-2013-58).
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    The Exchange states that the Board Restriction was added to the By-
Laws in connection with the Equity Rights Program (``ERP''),\8\ and was 
intended to prevent potential conflicts of interest that might arise 
due to an Exchange Director, Observer or committee member also serving 
a similar role on the governing body of a competitor.\9\ As more fully 
described in the Notice, the Exchange now proposes to amend the By-Laws 
to eliminate the Board Restriction.\10\ The Exchange states that it has 
found the Board Restriction to be unnecessarily restrictive, that it 
unduly limits the availability of qualified candidates from serving on 
the Exchange Board (or other governing body), and that the potential 
conflicts of interest that the restriction was designed to address can 
be more effectively and more efficiently addressed by other means.\11\
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    \8\ Pursuant to the ERP, units representing the right to acquire 
equity in the Exchange's parent holding company, Miami International 
Holdings, Inc., were issued to participating Members in exchange for 
payment of an initial purchase price or the prepayment of certain 
transaction fees and the achievement of certain liquidity addition 
volume thresholds on the Exchange over a fixed period of time. The 
By-Laws were also then amended to incorporate rights granted to 
Members participating in the ERP to appoint representation on the 
MIAX Board. See Securities Exchange Act Release No. 70498 (September 
25, 2013), 78 FR 60348 (October 1, 2013) (SR-MIAX-2013-43) and 
Securities Exchange Act Release No. 71172 (December 23, 2013), 78 FR 
79530 (December 30, 2013) (SR-MIAX-2013-58).
    \9\ See Notice, supra note 3, at 20717.
    \10\ Specifically, the Exchange proposes to remove the last 
sentence of Article II, Section 2.2(d), Article II, Section 
2.2(g)(ii), and Article IV, Section 4.2(b) regarding the Board 
Restriction, and remove the defined terms ``Exchange Contract'' and 
``Specified Entity,'' set forth in Article I (p) and (oo), 
respectively, which are used only in connection with the Board 
Restriction. See Notice, supra note 3, at 20717-18.
    \11\ See Notice, supra note 3, at 20717.
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III. Discussion and Commission Findings

    After careful review, the Commission finds that the proposed rule 
change is consistent with the requirements of the Act and the rules and 
regulations thereunder applicable to a national securities exchange 
and, in particular, with Section 6(b) of the Act.\12\ In particular, 
the Commission finds that the proposal is consistent with Section 
6(b)(1) of the Act,\13\ which requires that an exchange be organized 
and have the capacity to be able to carry out the purposes of the Act 
and to comply, and to enforce compliance by its members and persons 
associated with its members, with the provisions of the Act, the rules 
and regulations thereunder, and the rules of the Exchange.
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    \12\ 15 U.S.C. 78f(b). 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)(1).
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    The Exchange represents that its proposed removal of the Board 
Restriction from the By-Laws is designed to enable MIAX to engage the 
best suited and most qualified leaders to serve in the capacity of 
Director, Observer or committee member of the Exchange and will 
facilitate a Board structure and composition that will strengthen the 
Exchange's ability to comply with the provisions of the Act and enforce 
compliance by its members with the provisions of the Act. The Exchange 
also notes that most of its competing option exchanges do not restrict 
their board members from sitting on the board of directors or other 
governing body of another options exchange.\14\ Further, the Commission 
notes that it has previously considered and approved the Exchange's 
Board structure without the Board Restriction, and determined that the 
Exchange's governance provisions were designed to enable the Exchange 
to carry out its functions and responsibilities under the Act.\15\ For 
these reasons, the Commission finds that the proposed rule change is 
consistent with the Act.
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    \14\ See Notice, supra note 3, at 20717.
    \15\ See Securities Exchange Act Release No. 68341 (December 3, 
2012), 77 FR 73065, 73070 (December 7, 2012) (File No. 10-207) 
(order approving MIAX's application for registration as a national 
securities exchange).
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IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\16\ that the proposed rule change (SR-MIAX-2016-08) be, and hereby 
is, approved.
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    \16\ 15 U.S.C. 78f(b)(2).
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    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).

Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-12396 Filed 5-24-16; 8:45 am]
BILLING CODE 8011-01-P
Federal Register / Vol. 81, No. 101 / Wednesday, May 25, 2016 / Notices 33283

would rather harmonize the treatment of eliminating IOC and tick-sensitive Commission process and review your
Market Orders between the Exchange instructions for Market Orders, without comments more efficiently, please use
and NYSE Arca Equities and remove delay, would be consistent with the only one method. The Commission will
complex functionality and obsolete protection of investors and the public post all comments on the Commission’s
cross-references, thereby reducing interest because these instructions are Internet Web site (http://www.sec.gov/
confusion and making the Exchange’s rarely used and their elimination would rules/sro.shtml). Copies of the
rules easier to understand and navigate. simplify the Exchange’s offering of order submission, all subsequent
types. The Commission believes that the amendments, all written statements
C. Self-Regulatory Organization’s
proposed rule change is consistent with with respect to the proposed rule
Statement on Comments on the
the protection of investors and the change that are filed with the
Proposed Rule Change Received From
public interest, because the proposal Commission, and all written
Members, Participants, or Others
would diminish the likelihood of communications relating to the
No written comments were solicited Market Orders trading at prices that proposed rule change between the
or received with respect to the proposed would be disadvantageous to investors, Commission and any person, other than
rule change. and because it would simplify the those that may be withheld from the
III. Date of Effectiveness of the Exchange’s order types by eliminating public in accordance with the
Proposed Rule Change and Timing for rarely used complex order functionality. provisions of 5 U.S.C. 552, will be
Commission Action Accordingly, the Commission hereby available for Web site viewing and
waives the 30-day operative delay and printing in the Commission’s Public
The Exchange has filed the proposed Reference Room, 100 F Street NE.,
designates the proposal operative upon
rule change pursuant to Section Washington, DC 20549 on official
filing.32
19(b)(3)(A) of the Act 28 and Rule 19b– business days between the hours of
At any time within 60 days of the
4(f)(6) thereunder.29 Because the 10:00 a.m. and 3:00 p.m. Copies of the
filing of such proposed rule change, the
proposed rule change does not: (i) filing also will be available for
Commission summarily may
Significantly affect the protection of inspection and copying at the principal
temporarily suspend such rule change if
investors or the public interest; (ii) office of the Exchange. All comments
it appears to the Commission that such
impose any significant burden on received will be posted without change;
action is necessary or appropriate in the
competition; and (iii) become operative the Commission does not edit personal
public interest, for the protection of
prior to 30 days from the date on which identifying information from
investors, or otherwise in furtherance of
it was filed, or such shorter time as the submissions. You should submit only
the purposes of the Act. If the
Commission may designate, if information that you wish to make
consistent with the protection of Commission takes such action, the
Commission shall institute proceedings available publicly. All submissions
investors and the public interest, the should refer to File Number SR–NYSE–
proposed rule change has become under Section 19(b)(2)(B) 33 of the Act to
determine whether the proposed rule 2016–35 and should be submitted on or
effective pursuant to Section 19(b)(3)(A) before June 15, 2016.
of the Act and Rule 19b–4(f)(6)(iii) change should be approved or
thereunder. disapproved. For the Commission, by the Division of
A proposed rule change filed under Trading and Markets, pursuant to delegated
IV. Solicitation of Comments authority.34
Rule 19b–4(f)(6) 30 normally does not
Interested persons are invited to Robert W. Errett,
become operative prior to 30 days after
submit written data, views, and Deputy Secretary.
the date of the filing. However, pursuant
arguments concerning the foregoing, [FR Doc. 2016–12241 Filed 5–24–16; 8:45 am]
to Rule 19b–4(f)(6)(iii),31 the
including whether the proposed rule
Commission may designate a shorter BILLING CODE 8011–01–P
change is consistent with the Act.
time if such action is consistent with the
protection of investors and the public Comments may be submitted by any of
interest. The Exchange has asked the the following methods: SECURITIES AND EXCHANGE
Commission to waive the 30-day Electronic Comments COMMISSION
operative delay so that the proposal may • Use the Commission’s Internet [Release No. 34–77876; File No. SR–MIAX–
become operative immediately upon comment form (http://www.sec.gov/ 2016–08]
filing. The Exchange believes that rules/sro.shtml); or
waiving the operative delay would Self-Regulatory Organizations; Miami
• Send an email to rule-comments@
promote the protection of investors and International Securities Exchange LLC;
sec.gov. Please include File Number SR–
the public interest because the proposed Order Granting Approval of Proposed
NYSE–2016–35 on the subject line.
rule change would reduce the potential Rule Change to Amend the Exchange’s
for a Market Order to trade at prices Paper Comments Amended and Restated By-Laws
away from the prevailing quote and at • Send paper comments in triplicate Relating to the Removal of a Board
potentially worse prices for the investor. to Brent J. Fields, Secretary, Securities Restriction
Likewise, the Exchange believes that and Exchange Commission, 100 F Street May 20, 2016.
NE., Washington, DC 20549–1090.
28 15 U.S.C. 78s(b)(3)(A). All submissions should refer to File I. Introduction
29 17 CFR 240.19b–4(f)(6). In addition, Rule 19b– Number SR–NYSE–2016–35. This file On March 29, 2016, Miami
4(f)(6)(iii) requires the Exchange to give the
number should be included on the International Securities Exchange LLC
mstockstill on DSK3G9T082PROD with NOTICES

Commission written notice of the Exchange’s intent
to file the proposed rule change, along with a brief subject line if email is used. To help the (the ‘‘Exchange’’ or ‘‘MIAX’’) filed with
description and text of the proposed rule change, the Securities and Exchange
at least five business days prior to the date of filing 32 For purposes only of accelerating the operative
Commission (the ‘‘Commission’’),
of the proposed rule change, or such shorter time date of this proposal, the Commission has
as designated by the Commission. The Exchange considered the proposed rule’s impact on
pursuant to Section 19(b)(1) of the
has satisfied this requirement. efficiency, competition, and capital formation. 15 Securities Exchange Act of 1934
30 17 CFR 240.19b–4(f)(6). U.S.C. 78c(f).
31 17 CFR 240.19b–4(f)(6)(iii). 33 15 U.S.C. 78s(b)(2)(B). 34 17 CFR 200.30–3(a)(12).

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33284 Federal Register / Vol. 81, No. 101 / Wednesday, May 25, 2016 / Notices

(‘‘Act’’) 1 and Rule 19b-4 thereunder,2 a The Exchange states that the Board members, with the provisions of the
proposed rule change to amend the Restriction was added to the By-Laws in Act, the rules and regulations
Exchange’s Amended and Restated By- connection with the Equity Rights thereunder, and the rules of the
Laws (‘‘By-Laws’’) in order to remove a Program (‘‘ERP’’),8 and was intended to Exchange.
restriction prohibiting a Director, prevent potential conflicts of interest
The Exchange represents that its
Observer or committee member of the that might arise due to an Exchange
proposed removal of the Board
Exchange’s Board of Directors (‘‘Board’’) Director, Observer or committee
from simultaneously serving as a member also serving a similar role on Restriction from the By-Laws is
member of the governing body of a the governing body of a competitor.9 As designed to enable MIAX to engage the
competitor. The proposed rule change more fully described in the Notice, the best suited and most qualified leaders to
was published for comment in the Exchange now proposes to amend the serve in the capacity of Director,
Federal Register on April 8, 2016.3 The By-Laws to eliminate the Board Observer or committee member of the
Commission received no comments on Restriction.10 The Exchange states that it Exchange and will facilitate a Board
the proposed rule change. This order has found the Board Restriction to be structure and composition that will
approves the proposed rule change. unnecessarily restrictive, that it unduly strengthen the Exchange’s ability to
limits the availability of qualified comply with the provisions of the Act
II. Description of the Proposed Rule
candidates from serving on the and enforce compliance by its members
Change
Exchange Board (or other governing with the provisions of the Act. The
Currently, the By-Laws restrict an body), and that the potential conflicts of Exchange also notes that most of its
individual who is a Director,4 interest that the restriction was designed competing option exchanges do not
Observer,5 or committee member of the to address can be more effectively and restrict their board members from sitting
Exchange from also serving as a member more efficiently addressed by other on the board of directors or other
of the board of directors or similar means.11 governing body of another options
governing body of a ‘‘Specified Entity.’’
The term ‘‘Specified Entity’’ generally III. Discussion and Commission exchange.14 Further, the Commission
refers to any U.S. securities option Findings notes that it has previously considered
exchange (or facility thereof) or U.S. After careful review, the Commission and approved the Exchange’s Board
alternative trading system on which finds that the proposed rule change is structure without the Board Restriction,
securities options are traded which consistent with the requirements of the and determined that the Exchange’s
competes with the Exchange.6 The By- Act and the rules and regulations governance provisions were designed to
Laws specify that upon any individual thereunder applicable to a national enable the Exchange to carry out its
who is a Director, Observer, or securities exchange and, in particular, functions and responsibilities under the
committee member of the Exchange with Section 6(b) of the Act.12 In Act.15 For these reasons, the
becoming a member of the board of particular, the Commission finds that Commission finds that the proposed
directors or similar governing body of a the proposal is consistent with Section rule change is consistent with the Act.
Specified Entity, such individual 6(b)(1) of the Act,13 which requires that
immediately would cease being a an exchange be organized and have the IV. Conclusion
Director, Observer or committee capacity to be able to carry out the It is therefore ordered, pursuant to
member, as applicable, of the Board purposes of the Act and to comply, and
Section 19(b)(2) of the Act,16 that the
(‘‘Board Restriction’’).7 to enforce compliance by its members
proposed rule change (SR–MIAX–2016–
and persons associated with its
1 15 U.S.C. 78s(b)(1).
08) be, and hereby is, approved.
2 17 CFR 240.19b–4. 8 Pursuant to the ERP, units representing the right For the Commission, by the Division
3 See Securities Exchange Act Release No. 77507 to acquire equity in the Exchange’s parent holding of Trading and Markets, pursuant to
(April 4, 2016), 81 FR 20716 (April 8, 2016) company, Miami International Holdings, Inc., were
(‘‘Notice’’). issued to participating Members in exchange for
delegated authority.17
4 The term ‘‘Director’’ means the persons elected payment of an initial purchase price or the
prepayment of certain transaction fees and the
Robert W. Errett,
or appointed to the Board from time to time in
accordance with the LLC Agreement of the achievement of certain liquidity addition volume Deputy Secretary.
Exchange and the By-Laws in their capacity as thresholds on the Exchange over a fixed period of [FR Doc. 2016–12396 Filed 5–24–16; 8:45 am]
managers of the Exchange. See By-Laws, Article I time. The By-Laws were also then amended to
(j). incorporate rights granted to Members participating BILLING CODE 8011–01–P
5 The term ‘‘Observer’’ means a person invited to in the ERP to appoint representation on the MIAX
attend meetings of the Board in a nonvoting Board. See Securities Exchange Act Release No.
observer capacity as further described in Article II, 70498 (September 25, 2013), 78 FR 60348 (October
Section 2.2(g)(i)–(iii) of the By-Laws. See By-Laws, 1, 2013) (SR–MIAX–2013–43) and Securities
Article II, Section 2.2(g). Exchange Act Release No. 71172 (December 23,
6 Specifically, the term ‘‘Specified Entity’’ is 2013), 78 FR 79530 (December 30, 2013) (SR–
defined in the By-Laws to mean (i) any U.S. MIAX–2013–58).
9 See Notice, supra note 3, at 20717.
securities option exchange (or facility thereof) or
10 Specifically, the Exchange proposes to remove
U.S. alternative trading system on which securities
options are traded (other than the Exchange or any the last sentence of Article II, Section 2.2(d), Article
of its affiliates) that lists for trading any option II, Section 2.2(g)(ii), and Article IV, Section 4.2(b)
contract that competes with an Exchange Contract, regarding the Board Restriction, and remove the
(ii) any person that owns or controls such U.S. defined terms ‘‘Exchange Contract’’ and ‘‘Specified
securities option exchange or U.S. alternative Entity,’’ set forth in Article I (p) and (oo),
mstockstill on DSK3G9T082PROD with NOTICES

trading system, and (iii) any affiliate of a person respectively, which are used only in connection 14 See Notice, supra note 3, at 20717.
described in clause (i) or (ii) above. See By-Laws, with the Board Restriction. See Notice, supra note 15 See Securities Exchange Act Release No. 68341
Article I (oo). 3, at 20717–18.
11 See Notice, supra note 3, at 20717.
(December 3, 2012), 77 FR 73065, 73070 (December
7 The Board Restriction was adopted by the
12 15 U.S.C. 78f(b). In approving this proposed
7, 2012) (File No. 10–207) (order approving MIAX’s
Exchange in 2014. See Securities Exchange Act
rule change, the Commission has considered the application for registration as a national securities
Release Nos. 71172 (December 23, 2013), 78 FR
proposed rule’s impact on efficiency, competition, exchange).
79530 (December 30, 2013); and 71541 (February
16 15 U.S.C. 78f(b)(2).
12, 2014), 79 FR 9572 (February 19, 2014) (SR– and capital formation. See 15 U.S.C. 78c(f).
MIAX–2013–58). 13 15 U.S.C. 78f(b)(1). 17 17 CFR 200.30–3(a)(12).

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Document Created: 2018-02-07 15:03:20
Document Modified: 2018-02-07 15:03:20
Category		Regulatory Information
Collection		Federal Register
sudoc Class		AE 2.7: GS 4.107: AE 2.106:
Publisher		Office of the Federal Register, National Archives and Records Administration
Section		Notices
FR Citation		81 FR 33283