81 FR 36635 - Self-Regulatory Organizations; Miami International Securities Exchange LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Exchange Rule 506

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 81, Issue 109 (June 7, 2016)

[Federal Register Volume 81, Number 109 (Tuesday, June 7, 2016)]
[Notices]
[Pages 36635-36636]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2016-13313]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-77957; File No. SR-MIAX-2016-12]


Self-Regulatory Organizations; Miami International Securities 
Exchange LLC; Notice of Filing and Immediate Effectiveness of a 
Proposed Rule Change To Amend Exchange Rule 506

June 1, 2016.
    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 May 24, 2016, 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 506, 
Collection and Dissemination of Quotations.
    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 506, Collection and 
Dissemination of Quotations, to state that the Exchange shall 
disseminate an updated bid and offer price, together with the size 
associated with such bid and offer, when the size associated with the 
Exchange's bid (offer) increases by an amount greater than or equal to 
a designated percentage of the previously disseminated bid (offer) size 
(the ``percentage size increase'').
    Current Rule 506(b) states that the Exchange shall disseminate an 
updated bid and offer price, together with the size associated with 
such bid and offer when: (i) The Exchange's disseminated bid or offer 
price increases or decreases; (ii) the size associated with the 
Exchange's disseminated bid or offer decreases; or (iii) the size 
associated with the Exchange's bid (offer) increases by an amount 
greater than or equal to a percentage of the size associated with the 
previously disseminated bid (offer). Such percentage, which shall never 
exceed 20%, shall be determined on a class-by-class basis by the 
Exchange and announced to the Membership through a Regulatory 
Circular.\3\
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    \3\ See Exchange Rule 506(b)(1).
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    Current Rule 506(b)(1)(iii) does not include a minimum percentage 
size increase that must be equaled or exceeded before the Exchange's 
System \4\ will update the Exchange's disseminated bid and offer when 
the bid or offer price remains the same.\5\ The Exchange is proposing 
to add a minimum percentage size increase to Rule 506(b)(1)(iii) that 
must be met in order for the System to update the Exchange's 
disseminated quotation. Specifically, the Rule would state that such 
percentage shall never be less than 10% or greater than the current 
20%. Thus, under the proposed Rule, the percentage size increase must 
be at least 10% before the System will update the Exchange's 
disseminated quotation at the same price, and the Exchange may never 
establish a percentage size increase that is greater than 20%.
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    \4\ The term ``System'' means the automated trading system used 
by the Exchange for the trading of securities. See Exchange Rule 
100.
    \5\ The System automatically disseminates an updated bid and 
offer price, together with the size associated with such bid and 
offer each time the Exchange's disseminated bid or offer price 
increases or decreases, and when the size associated with the 
Exchange's disseminated bid or offer decreases. See Exchange Rules 
506(b)(1)(i) and (ii). The instant proposed rule change addresses 
only the circumstance where the Exchange's disseminated size 
increases at the same price as the prior disseminated price.
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    The Exchange will continue to determine the level of the required 
percentage size increase on a class-by-class basis and announce this to 
the Membership through a Regulatory Circular. As stated in the current 
Rule, the percentage size increase shall never exceed 20%, meaning that 
in all cases where the Exchange's disseminated size at the same price 
increases by 20% or more, the System will update the Exchange's 
disseminated bid and offer.
    The purpose of the proposed rule change is to mitigate quote 
traffic by establishing a minimum percentage size increase at the same 
price which must be met before the System will disseminate an updated 
bid and offer. In order for the System to update the size of the 
disseminated bid and offer at the previously disseminated price, the 
size of the bid or offer must increase by at least 10%, or no update 
will occur.
    The Exchange currently lists 318,280 option series overlying 2,390 
underlying securities \6\ for which it must publish the highest bid, 
lowest offer, and the aggregate quotation size available for each, 
under Rule 602 of Regulation NMS.\7\ Given the number of series and the 
number of quote updates submitted by Members on a continual basis 
throughout the trading day, the Exchange believes there is a benefit in 
establishing a minimum percentage size increase at the same price that 
must be met before the Exchange will disseminate an updated quotation. 
The minimum percentage size will ensure that only quotations at the 
same price with a meaningful percentage size increase are disseminated 
by the System.
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    \6\ Data as of May 2, 2016.
    \7\ 17 CFR 242.602.
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    The Exchange believes that the proposed minimum percentage size 
increase required for the System to update the Exchange's disseminated 
bid and offer at the previously disseminated price will reduce the 
dissemination of quotations that do not represent a material change in 
size from the previously disseminated quotation, thus making the System 
and the marketplace as a whole more efficient. Further, the Exchange 
believes the proposed rule change will alleviate the potential burden 
on quotation vendors in handling excessive quote updates that

[[Page 36636]]

provide minimal value due to relatively small incremental changes in 
the aggregate size of bids and offers available on the Exchange.
    The Exchange will announce the implementation date of the proposed 
rule change by Regulatory Circular to be published no later than 60 
days following the operative date of the proposed rule. The 
implementation date will be no later than 60 days following the 
issuance of the Regulatory Circular.
2. Statutory Basis
    MIAX believes that its proposed rule change is consistent with 
section 6(b) of the Act \8\ in general, and furthers the objectives of 
section 6(b)(5) of the Act \9\ 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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    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(5).
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    The proposed rule change is designed to remove impediments to and 
perfect the mechanisms of a free and open national market system by 
reducing the frequency and number of extraneous quotation updates 
disseminated by the System. This would enable quotation vendors to who 
the Exchange disseminates quotations to operate more efficiently, which 
in turn would allow the national market system to operate more 
efficiently.
    Further, the proposed rule change is designed to protect investors 
and the public interest and to promote just and equitable principles of 
trade by ensuring only quotation updates that represent a meaningful 
increase in the aggregate size available on the Exchange are 
disseminated, thereby reducing the frequency and number of quotation 
updates that are disseminated by the System, that quotation vendors 
must handle, making the market as a whole more efficient.

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 believes the 
proposed rule change will not impose any burden on intra-market 
competition because it applies to all MIAX participants equally, thus 
placing all MIAX participants on an equal playing field.

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 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 after the date of the filing, or such 
shorter time as the Commission may designate, it has become effective 
pursuant to 19(b)(3)(A) of the Act \10\ and Rule 19b-4(f)(6) \11\ 
thereunder.
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    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
requires a self-regulatory organization to give 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. 
The Exchange has satisfied this requirement.
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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 No. SR-MIAX-2016-12 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-2016-12. 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-2016-12 and should be 
submitted on or before June 28, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
Brent J. Fields,
Secretary.
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    \12\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 2016-13313 Filed 6-6-16; 8:45 am]
BILLING CODE 8011-01-P