81 FR 45578 - Self-Regulatory Organizations; Miami International Securities Exchange LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Exchange Rule 515A To Extend the MIAX Price Improvement Mechanism (“PRIME”) Auction Pilot Program Until January 18, 2017

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 81, Issue 135 (July 14, 2016)

[Federal Register Volume 81, Number 135 (Thursday, July 14, 2016)]
[Notices]
[Pages 45578-45580]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2016-16616]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-78265; File No. SR-MIAX-2016-19]


Self-Regulatory Organizations; Miami International Securities 
Exchange LLC; Notice of Filing and Immediate Effectiveness of a 
Proposed Rule Change To Amend Exchange Rule 515A To Extend the MIAX 
Price Improvement Mechanism (``PRIME'') Auction Pilot Program Until 
January 18, 2017

July 8, 2016.
    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 July 7, 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 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 515A, 
Interpretations and Policies .08 to extend certain aspects of the MIAX 
Price Improvement Mechanism (``PRIME'') Auction pilot program (``Pilot 
Program'').
    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 extend the pilot period applicable to 
certain aspects of the Pilot Program which is currently set to expire 
on July 18, 2016,\3\ until January 18, 2017.
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    \3\ See Exchange Act Release Nos. 73590 (November 13, 2014), 79 
FR 68919 (SR-MIAX-2014-56) (establishing the PRIME Pilot Program) 
and 75486 (July 20, 2015), 80 FR 44174 (July 24, 2015) (SR-MIAX-
2015-48) (extending certain aspects of the PRIME Pilot Program to 
July 18, 2016).
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    The current pilot allows PRIME Agency Orders of any size to 
initiate a PRIME Auction on MIAX at a price which is at or better than 
the national best bid or offer (``NBBO'').\4\ The Exchange implemented 
the pilot in order to benefit customers through the encouragement of 
the entry of more orders into the PRIME Auction, thus making it more 
likely that such orders may receive price improvement. The Exchange 
believes that the Pilot Program attracts order flow and promotes 
competition and price improvement opportunities for Agency Orders of 
fewer than 50 contracts. The Exchange believes that extending the Pilot 
Program period is appropriate because it would allow the Exchange and 
the Commission additional time to analyze data regarding the pilot that 
the Exchange has committed to provide.
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    \4\ The Exchange notes that prior to the pilot, for PRIME Agency 
Orders for less than 50 standard option contracts or 500 mini-option 
contracts, the Initiating Member must stop the entire PRIME Agency 
Order as principal or with a solicited order at the better of the 
NBBO price improved by a $0.01 increment or the PRIME Agency Order's 
limit price (if the order is a limit order). In addition, to 
initiate the PRIME Auction for auto-match submissions, the 
Initiating Member must stop the PRIME Agency Order for less than 50 
standard option contracts or 500 mini-option contracts at the better 
of the NBBO price improved by a $0.01 increment or the PRIME Agency 
Order's limit price. See Securities Exchange Act Release No. 73590 
(November 13, 2014), 79 FR 68919 (November 19, 2014) (SR-MIAX-2014-
56).
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    In its filing to adopt the MIAX PRIME Price Improvement Mechanism 
in 2014 the Exchange committed to submit reports periodically based on 
the comprehensive list of data the Exchange represented it would 
collect in order to aid the Commission in its evaluation of the PRIME 
mechanism.\5\ In November 2014 the Exchange established a Pilot Program 
to allow orders of less than 50 contracts or 500 mini-option contracts

[[Page 45579]]

to initiate a PRIME Auction,\6\ and began submitting revised periodic 
reports on August 1, 2015, based on the revised list of data detailed 
in Exhibit 3 of the Exchange's filing to extend the Pilot Program an 
additional year to July 18, 2016.\7\ Any raw data which is submitted to 
the Commission pursuant to the Pilot Program will be provided on a 
confidential basis. The Exchange continues to believe that there 
remains meaningful competition for all size orders and that there is an 
active and liquid market functioning on the Exchange outside of the 
PRIME Auction. The Exchange also continues to believe that there are 
significant opportunities for price improvement available in the PRIME 
Auction.
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    \5\ See Securities Exchange Act Release No. 72009 (April 23, 
2014) 79 FR 24032 (April 29, 2014) (SR-MIAX-2014-09) (Order 
approving adoption of the MIAX PRIME Price Improvement Mechanism).
    \6\ See Securities Exchange Act Release No. 68919 [sic] 
(November 13, 2014), 79 FR 68919 (November 19, 2014) (SR-MIAX-2014-
56) (establishing the PRIME Pilot Program).
    \7\ See Securities Exchange Act Release No. 75486 (July 20, 
2015), 80 FR 44174 (July 24, 2015) (SR-MIAX-2015-48) (extending 
certain aspects of the PRIME Pilot Program to July 18, 2016).
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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 Exchange believes that extending the Pilot Program is 
consistent with these principles because the Pilot Program is 
reasonably designed to create tighter markets and ensure that each 
order receives the best possible price, which benefits investors by 
increasing competition thereby maximizing opportunities for price 
improvement. The proposed extension would allow the pilot to continue 
uninterrupted, thereby avoiding any potential investor confusion that 
could result from a temporary interruption in the pilot. Because the 
Pilot Program is applicable to all PRIME Agency Orders for fewer than 
50 contracts, the proposal to extend the Pilot Program merely acts to 
maintain the status quo on the Exchange, which promotes just and 
equitable principles of trade and removes impediments to, and perfects 
the mechanism of, a free and open market and a national market system.
    The extension of the Pilot Program period will allow the Commission 
and the Exchange to continue to monitor the Pilot Program to ascertain 
whether there is meaningful competition for all size orders and whether 
there is an active and liquid market functioning on the Exchange 
outside of the PRIME Auction. The extension of the Pilot Program period 
would also enable market participants to continue to benefit from the 
significant opportunities for price improvement available in the PRIME 
Auction.

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 
simply extends an established pilot program for an additional period 
and would allow for further analysis of the pilot. In addition, the 
proposed extension would allow the Pilot Program to continue 
uninterrupted, thereby avoiding any potential investor confusion that 
could result from a temporary interruption in the Pilot Program. Thus, 
the proposal would also serve to promote regulatory clarity and 
consistency, thereby reducing burdens on the marketplace and 
facilitating investor protection.

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 from the date on which it was filed, or 
such shorter time as the Commission may designate, it has become 
effective pursuant to Section 19(b)(3)(A) of the Act \10\ and 
subparagraph (f)(6) of Rule 19b-4 thereunder.\11\
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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 the Exchange to give the Commission written notice of the 
Exchange's intent to file the proposed rule change along with a 
brief description and 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. The 
Exchange has satisfied this requirement.
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    A proposed rule change filed under Rule 19b-4(f)(6) \12\ normally 
does not become operative for 30 days after the date of filing. 
However, pursuant to Rule 19b-4(f)(6)(iii),\13\ the Commission may 
designate a shorter time if such action is consistent with the 
protection of investors and the public interest. The Exchange requested 
that the Commission waive the 30-day operative delay. The Exchange 
noted that waiver of the 30-day operative delay would allow for the 
Pilot Program to continue uninterrupted.
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    \12\ 17 CFR 240.19b-4(f)(6).
    \13\ 17 CFR 240.19b-4(f)(6)(iii).
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    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 Pilot Program to continue uninterrupted, thereby 
avoiding any potential investor confusion that could result from a 
temporary interruption in the Pilot Program. Therefore, the Commission 
designates the proposed rule change to be operative on July 18, 
2016.\14\
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    \14\ For purposes only of waiving the 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 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-2016-19 on the subject line.

Paper Comments

     Send paper comments in triplicate to Brent J. Fields, 
Secretary, Securities

[[Page 45580]]

and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-MIAX-2016-19. 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-2016-19 and should be 
submitted on or before August 4, 2016.
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    \15\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2016-16616 Filed 7-13-16; 8:45 am]
 BILLING CODE 8011-01-P