81 FR 62784 - Self-Regulatory Organizations; Miami International Securities Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Expand the Short Term Option Series Program

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 81, Issue 176 (September 12, 2016)

[Federal Register Volume 81, Number 176 (Monday, September 12, 2016)]
[Notices]
[Pages 62784-62787]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2016-21801]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-78772; File No. SR-MIAX-2016-31]


Self-Regulatory Organizations; Miami International Securities 
Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change To Expand the Short Term Option Series Program

September 6, 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 September 2, 2016, 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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange is filing a proposal to amend Rule 404, Series of 
Option Contracts Open for Trading, Interpretations and Policies .02, to 
expand the Short Term Option Series Program to allow Wednesday 
expirations for SPDR S&P 500 ETF Trust (``SPY'') options. Additionally, 
the Exchange proposes to amend the definition of Short Term Option 
Series in Rule 100.
    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.

[[Page 62785]]

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to expand the Short Term Option Series 
Program outlined in Rule 404, Interpretations and Policies .02, to 
allow the listing and trading of SPY options with Wednesday 
expirations. This is a competitive filing based on a filing submitted 
by the BOX Options Exchange, LLC (``BOX''), which the Commission 
recently approved.\3\
---------------------------------------------------------------------------

    \3\ See Securities Exchange Act Release No. 78668 (August 24, 
2016), 81 FR 59696 (August 30, 2016) (order approving SR-BOX-2016-
28).
---------------------------------------------------------------------------

    Currently, under the Short Term Option Series Program the Exchange 
may open for trading on any Thursday or Friday that is a business day 
(``Short Term Option Opening Date'') series of options on that class 
that expire at the close of business on each of the next five Fridays 
that are business days, and are not Fridays in which monthly option 
series or Quarterly Options Series expire (``Short Term Option 
Expiration Dates''). The Exchange is now proposing to amend Rule 404, 
Interpretations and Policies .02, to permit the listing of SPY options 
expiring on Wednesdays. Specifically, the Exchange is proposing that it 
may open for trading on any Tuesday or Wednesday that is a business 
day, series of SPY options that expire on any Wednesday of the month 
that is a business day, and is not a Wednesday on which Quarterly 
Options Series expire (``Wednesday SPY Expirations''). The proposed 
Wednesday SPY Expiration series would be similar to the current Short 
Term Option Series, with certain exceptions, as explained in greater 
detail below. The Exchange notes that Wednesday expirations are not a 
novel proposal. Specifically, the U.S. Securities and Exchange 
Commission (``Commission'') approved a CBOE proposal to list Wednesday 
expirations for broad-based indexes.\4\ Additionally, BOX recently 
received approval to list Wednesday SPY Expirations.\5\
---------------------------------------------------------------------------

    \4\ See Securities Exchange Act Release No. 76909 (January 14, 
2016), 81 FR 3512 (January 21, 2016) (Order approving SR-CBOE-2015-
106).
    \5\ See supra note 3.
---------------------------------------------------------------------------

    In regards to Wednesday SPY Expirations, the Exchange is proposing 
to remove the current restriction preventing MIAX from listing Short 
Term Option Series that expire in the same week in which monthly option 
series in the same class expire. Specifically, the Exchange would be 
allowed to list Wednesday SPY Expirations in the same week in which 
monthly option series in SPY expire. The current restriction to 
prohibit the expiration of monthly and Short Term Option Series from 
expiring on the same trading day is reasonable to avoid investor 
confusion. This confusion would not apply with Wednesday SPY 
Expirations and standard monthly options because they would not expire 
on the same trading day, as standard monthly options do not expire on 
Wednesdays. Additionally, it would lead to investor confusion if 
Wednesday SPY Expirations were not listed for one week every month 
because there was a monthly SPY expiration on the Friday of that week. 
The existing restriction that a Short Term Option Series may not expire 
on the same day that a Quarterly Option Series expires would apply to 
Wednesday SPY Expirations.
    Under the proposal, the Exchange may open for trading on any 
Tuesday or Wednesday that is a business day, series of SPY options that 
expire at the close of business on each of the next five Wednesdays 
that are business days and are not Wednesdays on which Quarterly 
Options Series expire. The Exchange may have no more than a total of 
five Wednesday SPY Expirations listed. This is similar to the listing 
procedures for Short Term Option Series that expire on Fridays. If the 
Exchange is not open for business on the respective Tuesday or 
Wednesday, the Wednesday SPY Expiration Opening Date will be the first 
business day immediately prior to that respective Tuesday or Wednesday. 
Similarly, if the Exchange is not open for business on a Wednesday, the 
expiration date for a Wednesday SPY Expiration will be the first 
business day immediately prior to that Wednesday. This is also similar 
to the procedures for Short Term Option Series that expire on Fridays.
    The Exchange is also proposing to clarify that the five expirations 
limit in the current Short Term Option Series Program Rule would not 
include any Wednesday SPY Expirations and vice versa.\6\ This means, 
under the proposal, the Exchange would be allowed to list five Short 
Term Option Series expirations for SPY expiring on Friday under the 
current rule and five Wednesday SPY Expirations. The interval between 
strike prices for the proposed Wednesday SPY Expirations would be the 
same as those for the current Short Term Option Series. Specifically, 
the Wednesday SPY Expirations would have $0.50 strike intervals.\7\
---------------------------------------------------------------------------

    \6\ Specifically, the Exchange proposes to add the following 
text to Rule 404, Interpretations and Policies .02, in the 
appropriate paragraph, ``Wednesday SPY expirations (described in the 
paragraph below) are not included as part of this count [ ]'' and 
``Non-Wednesday SPY Expirations (described in the paragraph above) 
are not included as part of this count.''
    \7\ This is because SPY options have $1 strike price intervals 
for non-Short Term Option series. See Exchange Rule 404, 
Interpretations and Policies .10. Pursuant to Rule 404, 
Interpretations and Policies .02(e), the strike price interval for 
Short Term Option Series may be $0.50 or greater for option classes 
that trade in $1 strike price intervals and are in the Short Term 
Option Series Program.
---------------------------------------------------------------------------

    Currently, for each Short Term Option Expiration Date, the Exchange 
is limited to opening thirty (30) series for each expiration date for 
the specific class.\8\ The thirty (30) series restriction does not 
include series that are opened by other securities exchanges under 
their respective short term option rules; MIAX may list these 
additional series that are listed by other exchanges.\9\ The thirty 
(30) series restriction would apply to Wednesday SPY Expiration series 
as well. In addition, the Exchange would be able to list series that 
are listed by other exchanges, assuming they file similar rules with 
the Commission to list SPY options expiring on Wednesdays.
---------------------------------------------------------------------------

    \8\ See Exchange Rule 404, Interpretations and Policies .02(a).
    \9\ See Exchange Rule 404, Interpretations and Policies .02(a).
---------------------------------------------------------------------------

    As is the case with current Short Term Option Series, the Wednesday 
SPY Expiration series would be P.M.-settled. The Exchange does not 
believe that any market disruptions would be encountered with the 
introduction of P.M.-settled Wednesday SPY Expirations. The Exchange 
currently trades P.M.-settled Short Term Option Series that expire 
almost every Friday, which provide market participants a tool to hedge 
special events and to reduce the premium cost of buying protection. The 
Exchange seeks to introduce Wednesday SPY Expirations to, among other 
things, expand hedging tools available to market participants and to 
continue the reduction of the premium cost of buying protection. The 
Exchange believes that Wednesday expirations, similar to Friday 
expirations, would allow market participants to purchase an option 
based on their timing as needed and allow them to tailor their 
investment and hedging needs more effectively.
    The Exchange is also proposing to amend Rule 100, which sets forth 
the definition of Short Term Option Series. The definition set forth in 
Rule 100 is redundant to the terms for Short Term Option Series set 
forth in Rule 404, Interpretations and Policies .02. As a result, the 
Exchange believes that amending Rule 100 by including an

[[Page 62786]]

internal cross reference to Rule 404, Interpretations and Policies .02 
and by deleting redundant language would result in a clearer definition 
and would make the Rulebook more precise and user friendly.
    The Exchange is taking this opportunity to amend Rule 404, 
Interpretations and Policies .02 with respect to Exchange closures on 
Fridays that would otherwise be eligible as Short Term Option 
Expiration Dates. Specifically, the Exchange is cleaning up outdated 
language that previously tied listings to Fridays in the following 
business week, i.e., ``if the Exchange is not open for business on the 
Friday of the following business week. . . .'' Since Short Term Option 
Series may be listed out over five consecutive Fridays, the existing 
language is unnecessarily restrictive. Also, this proposed change 
harmonizes the Exchange's rule text with existing BOX rule text, i.e., 
``if the [Exchange] is not open for business on a Friday . . .''
    The Exchange proposes to add the new rule text language regarding 
Wednesday SPY Expirations at the beginning of Rule 404, Interpretations 
and Policies .02, before the provisions governing classes, expiration, 
initial series, additional series, and strike interval. The Exchange 
believes that placement of Wednesday SPY Expirations at the start of 
Rule 404, Interpretations and Policies .02, would make it apparent that 
the rest of Rule 404, Interpretations and Policies .02 applies to 
Wednesday SPY Expirations. To make this point clear, the Exchange 
proposes to add the sentence, ``References to `Short Term Option 
Series' below shall be read to include `Wednesday SPY Expirations,' 
except where indicated otherwise[ ]'' before the alphabetically listed 
paragraphs set forth in Rule 404, Interpretations and Policies .02.
    The Exchange believes that the introduction of Wednesday SPY 
Expirations would provide investors with a flexible and valuable tool 
to manage risk exposure, minimize capital outlays, and be more 
responsive to the timing of events affecting the industry.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the Securities Exchange Act of 1934 (the ``Act'') and the rules and 
regulations thereunder applicable to the Exchange and, in particular, 
the requirements of section 6(b) of the Act.\10\ Specifically, the 
Exchange believes the proposed rule change is consistent with the 
section 6(b)(5) \11\ requirements that the rules of an exchange be 
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 regulating, clearing, 
settling, processing information with respect to, and facilitating 
transactions in securities, to remove impediments to and perfect the 
mechanism of a free and open market and a national market system, and, 
in general, to protect investors and the public interest.
---------------------------------------------------------------------------

    \10\ 15 U.S.C. 78f(b).
    \11\ 16 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    In particular, the Exchange believes the Short Term Option Series 
Program has been successful to date and that Wednesday SPY Expirations 
simply expand the ability of investors to hedge risk against market 
movements stemming from economic releases or market events that occur 
throughout the month in the same way that the Short Term Option Series 
Program has expanded the landscape of hedging. Similarly, the Exchange 
believes Wednesday SPY Expirations should create greater trading and 
hedging opportunities and flexibility, and provide customers with the 
ability to more closely tailor their investment objectives. The 
Exchange believes that allowing Wednesday SPY Expirations and monthly 
SPY expirations in the same week would benefit investors and minimize 
investor confusion by providing Wednesday SPY Expirations in a 
continuous and uniform manner.
    In addition to the substantive proposal to permit Wednesday SPY 
Expirations, the Exchange is proposing to make a minor change to the 
text of Rule 404, Interpretations and Policies .02, that would benefit 
investors and the public by providing clarity and accuracy in the 
Exchange's Rules. It is in the public interest for rules to be accurate 
and concise so as to eliminate the potential for confusion.
    The Exchange represents that it has an adequate surveillance 
program in place to detect manipulative trading in Wednesday SPY 
Expirations in the same way it monitors trading in the current Short 
Term Option Series. Finally, the Exchange also represents that it has 
the necessary systems capacity to support the new options series.

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 notes that 
having Wednesday expirations is not a novel proposal.\12\ The Exchange 
does not believe the proposal will impose any burden on intramarket 
competition, as all market participants will be treated in the same 
manner as they are with respect to existing Short Term Option Series. 
Additionally, the Exchange does not believe the proposal will impose 
any burden on intermarket competition, as nothing prevents the other 
options exchanges from proposing similar rules to those that the 
Exchange is currently proposing.
---------------------------------------------------------------------------

    \12\ See supra note 4.
---------------------------------------------------------------------------

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, the proposed rule 
change has become effective pursuant to section 19(b)(3)(A) of the Act 
\13\ and Rule 19b-4(f)(6) thereunder.\14\
---------------------------------------------------------------------------

    \13\ 15 U.S.C. 78s(b)(3)(A).
    \14\ 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 intention 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.
---------------------------------------------------------------------------

    A proposed rule change filed under Rule 19b-4(f)(6) normally does 
not become operative for 30 days from the date of filing. However, Rule 
19b-4(f)(6)(iii) \15\ permits the Commission to designate a shorter 
time if such action is consistent with the protection of investors and 
the public interest. 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 notes that it recently approved 
BOX's substantially similar proposal to list and trade Wednesday SPY 
Expirations.\16\ The Exchange has stated that waiver of the operative 
delay will allow the Exchange to list and trade Wednesday SPY 
Expirations as soon as possible, and therefore, promote competition 
among the option

[[Page 62787]]

exchanges. For these reasons, the Commission believes that the proposed 
rule change presents no novel issues and that waiver of the 30-day 
operative delay is consistent with the protection of investors and the 
public interest, and will allow the Exchange to remain competitive with 
other exchanges. Therefore, the Commission hereby waives the 30-day 
operative delay and designates the proposal effective upon filing.\17\ 
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.
---------------------------------------------------------------------------

    \15\ 17 CFR 240.19b-4(f)(6)(iii).
    \16\ See supra note 3.
    \17\ 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).
---------------------------------------------------------------------------

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-2016-31 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-2016-31. 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-2016-31 and should be 
submitted on or before October 3, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
---------------------------------------------------------------------------

    \18\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-21801 Filed 9-9-16; 8:45 am]
 BILLING CODE 8011-01-P