81 FR 87086 - Self-Regulatory Organizations; Miami International Securities Exchange LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Exchange Rule 518, Complex Orders

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 81, Issue 232 (December 2, 2016)

Page Range		87086-87089
FR Document		2016-28928
Federal Register, Volume 81 Issue 232 (Friday, December 2, 2016)
[Federal Register Volume 81, Number 232 (Friday, December 2, 2016)]
[Notices]
[Pages 87086-87089]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2016-28928]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-79405; File No. SR-MIAX-2016-44]


Self-Regulatory Organizations; Miami International Securities 
Exchange LLC; Notice of Filing and Immediate Effectiveness of a 
Proposed Rule Change To Amend Exchange Rule 518, Complex Orders

November 28, 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 November 18, 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.
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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 518, 
Complex Orders.
    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 518, Complex Orders, 
to state that (i) the System \3\ will not commence a Complex Auction 
\4\ within a defined time period prior to the end of the trading 
session as described below; and (ii) the size of an RFR Response 
(defined below) that is submitted with a size greater than the 
aggregate auctioned size (described below) will be capped for 
allocation purposes at the aggregate auctioned size (defined below).
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    \3\ The term ``System'' means the automated trading system used 
by the Exchange for the trading of securities. See Exchange Rule 
100.
    \4\ Certain option classes, as determined by the Exchange and 
communicated to Members via Regulatory Circular, will be eligible to 
participate in a Complex Auction (an ``eligible class''). Upon 
evaluation as set forth in Exchange Rule 518(c)(5), the Exchange may 
determine to automatically submit a Complex Auction-eligible order 
into a Complex Auction. Upon entry into the System or upon 
evaluation of a complex order resting at the top of the Strategy 
Book, Complex Auction-eligible orders may be subject to an automated 
request for responses (``RFR''). See Exchange Rule 518(d).
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Complex Auction Defined Time Period
    Certain option classes, as determined by the Exchange and 
communicated to Members via Regulatory Circular, are eligible to 
participate in a Complex Auction for possible price improvement.\5\ 
Members may submit Complex Auction-on-Arrival (``cAOA'') orders \6\ 
that may initiate a Complex Auction, and the Exchange may determine to 
automatically submit a Complex Auction-eligible order \7\ into a 
Complex Auction. Upon receipt of a Complex Auction-eligible order or 
upon an evaluation by the System \8\ indicating that there is a Complex 
Auction-eligible order resting on the Strategy Book,\9\ the Exchange 
may begin the Complex Auction process by sending a request for 
responses (``RFR'') message. Members may submit a response to the RFR 
message (an ``RFR Response'') during the ``Response Time Interval.'' 
\10\ At the end of the Response Time Interval, Complex Auction-eligible 
orders (and other complex orders and quotes) may be executed in whole 
or in part against the best priced contra side interest.\11\
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    \5\ See id.
    \6\ A cAOA order is a complex order designated to be placed into 
a Complex Auction upon receipt or upon evaluation. Complex orders 
that are not designated as cAOA will, by default, not initiate a 
Complex Auction upon arrival, but except as described herein will be 
eligible to participate in a Complex Auction that is in progress 
when such complex order arrives or if placed on the Strategy Book 
may participate in or may initiate a Complex Auction. See Exchange 
Rule 518(b)(2)(i).
    \7\ A ``Complex Auction-eligible order'' means a complex order 
that, as determined by the Exchange, is eligible to initiate or join 
a Complex Auction based in a variety of factors. See Exchange Rule 
518(d)(1).
    \8\ The term ``System'' means the automated trading system used 
by the Exchange for the trading of securities. See Exchange Rule 
100.
    \9\ The ``Strategy Book'' is the Exchange's electronic book of 
complex orders and complex Quotes. See Exchange Rule 518(a)(17).
    \10\ The ``Response Time Interval'' means the period of time 
during which responses to the RFR may be entered. The Exchange will 
determine the duration of the Response Time Interval, which shall 
not exceed 500 milliseconds, and will communicate it to Members via 
Regulatory Circular. See Exchange Rule 518(d)(3).
    \11\ For a complete description of the Complex Auction process, 
see Exchange Rule 518(d).
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    Exchange Rule 518(d)(2) governs the commencement of a Complex 
Auction. Upon receipt of a Complex Auction-eligible order or upon an 
evaluation by the System indicating that there is a Complex Auction-
eligible order resting on the Strategy Book, the Exchange may begin the 
Complex Auction process by sending an RFR message to all subscribers to 
the Exchange's data feeds that deliver RFR messages.
    The Exchange proposes to amend Exchange Rule 518(d)(2) by stating 
that, notwithstanding the foregoing provisions of the rule, the System 
will not commence a Complex Auction within a defined time period prior 
to the end of the trading session (the ``Defined Time Period'') 
established by the Exchange and communicated to Members via Regulatory 
Circular. The Defined Time Period shall be at least 100 milliseconds, 
and may not exceed 10 seconds. The Exchange believes that this proposed 
flexibility in the duration of the Defined Time Period is necessary 
because the duration of the Response Time Interval is flexible \12\ and 
must not be able to exceed the Defined Time Period. For example, if the 
Response Time Interval is 300 milliseconds and the Defined Time Period 
is 200 milliseconds, a Complex Auction with a 300 millisecond Response 
Time Interval could commence within 200 milliseconds of the end of the 
trading session, and the Complex Auction could therefore not be 
completed. Flexibility in the establishment of the duration of the 
Defined Time Period would enable the Exchange to make the duration of 
the Response Time Interval and the Defined Time Period consistent in 
this regard. The 10-second maximum duration for the Defined Time Period 
is intended as an outlier to address situations where the Exchange may 
need to ensure a fair and orderly marketplace during times of extreme

[[Page 87087]]

volatility and thus may deem it necessary not to commence Complex 
Auctions as the end of the trading session approaches.
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    \12\ See supra note 10.
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    For consistency, the Exchange is proposing a corresponding 
amendment to the definition of a cAOA order \13\ in Exchange Rule 
518(b)(2)(i) by stating that a cAOA order received during the Defined 
Time Period prior to the end of the trading session (as described in 
proposed Rule 518(d)(2)) will not initiate a new Complex Auction.
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    \13\ See supra note 6.
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    The purpose of this provision is to ensure that Complex Auctions 
that are commenced on the Exchange can be completed prior to the close 
of trading. Upon receipt of a Complex Auction-eligible order or upon an 
evaluation by the System indicating that there is a Complex Auction-
eligible order resting on the Strategy Book, the Exchange may begin the 
Complex Auction process by sending an RFR message, which then begins 
the Response Time Interval during which Complex Auction responses may 
be submitted.
    The Exchange believes it is necessary to ensure that a Complex 
Auction will not commence when the trading session would end prior to 
the end of the Response Time Interval. Thus, any Complex Auction 
commenced on the Exchange will be completed during the trading session.
Capping the RFR Response Size
    The Exchange proposes to amend rules relating to the Complex 
Auction to limit the size of RFR Responses for trade allocation 
purposes.
    Exchange Rule 518(d)(4), RFR Response, states that RFR Responses 
must be a Complex Auction-or-Cancel order (a ``cAOC order'') \14\ or a 
Complex Auction or Cancel eQuote (a ``cAOC eQuote'').\15\ RFR Responses 
must indicate their size and are firm (i.e., guaranteed at the RFR 
Response price and size) at the end of the Response Time Interval. The 
Exchange is proposing to amend Exchange Rule 518(d)(4) to cap the size 
of RFR Responses (i.e., cAOC orders and cAOC eQuotes) by stating that 
an RFR Response with a size greater than the aggregate size of interest 
at the same price on the same side of the market as the initiating 
Complex Auction-eligible order (the ``aggregate auctioned size'') \16\ 
will be capped for allocation purposes at the aggregate auctioned size. 
Thus, an RFR Response with a size greater than the aggregate auctioned 
size will be deemed to be for a size that is equal to the aggregate 
auctioned size.
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    \14\ A cAOC order is a complex limit order used to provide 
liquidity during a specific Complex Auction with a time in force 
that corresponds with that event. cAOC orders are not displayed to 
any market participant, and are not eligible for trading outside of 
the event. See Exchange Rule 518(b)(3).
    \15\ cAOC eQuote is an eQuote submitted by a Market Maker that 
is used to provide liquidity during a specific Complex Auction with 
a time in force that corresponds with the duration of the Complex 
Auction. cAOC eQuotes will not: (i) Be executed against individual 
orders and quotes resting on the Simple Order Book; (ii) be eligible 
to initiate a Complex Auction, but may join a Complex Auction in 
progress; (iii) rest on the Strategy Book; or (iv) be displayed. See 
Exchange Rule 518, Interpretations and Policies .02(c)(1).
    \16\ Incoming unrelated complex orders and quotes that are 
eligible to join a Complex Auction and are received during the 
Response Time Interval for a Complex Auction-eligible order will 
join the Complex Auction, will be ranked by price, and will be 
allocated pursuant to Rule 518(d)(7). See Exchange Rule 518(d)(8).
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    For consistency, the Exchange is proposing to amend Exchange Rule 
518(b)(3), which defines a cAOC order, to state that a cAOC order with 
a size greater than the aggregate auctioned size will be capped for 
allocation purposes at the aggregate auctioned size. Additionally, the 
Exchange is proposing to amend Rule 518, Interpretations and Policies 
.02, which defines a cAOC eQuote, to state that a cAOC eQuote with a 
size greater than the aggregate auctioned size (as defined in Rule 
518(d)(4)) will be capped for allocation purposes at the aggregate 
auctioned size.
    The purpose of capping the size of RFR Responses is to ensure that 
the System allocates contracts among participants in the Complex 
Auction based on the aggregate size of the Complex Auction-eligible 
order and interest joining the Complex Auction-eligible order being 
auctioned. Contracts in the Complex Auction are allocated on a pro-rata 
basis pursuant to Exchange Rule 514(c)(2) \17\ among participants in 
various categories that are ranked in priority order \18\ in Rule 
518(d)(7).
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    \17\ Exchange Rule 514(c)(2), Pro-Rata Allocation, states that 
under this method, resting quotes and orders on the Book are 
prioritized according to price. If there are two or more quotes or 
orders at the best price then the contracts are allocated 
proportionally according to size (in a pro-rata fashion). If the 
executed quantity cannot be evenly allocated, the remaining 
contracts will be distributed one at a time based upon price-size-
time priority.
    \18\ Orders and quotes executed in a Complex Auction are 
allocated pursuant to Exchange Rule 518(d)(7).
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    Capping the size of RFR Responses for purposes of pro-rata 
allocation is also designed to reduce the possibility that participants 
could circumvent or ``game'' the allocation rules through the 
submission of oversized RFR Responses. In fact, for the same purpose, 
the Exchange currently caps the size of certain orders in the simple 
market for allocation purposes. For example, the System will cap 
individual responses received during a liquidity refresh pause timer on 
the opposite side from the initiating order to the size of the 
initiating order and any same side joiners received during the 
liquidity refresh pause timer for purposes of pro-rata allocation 
against the initiating order and any same side joining interest 
received during the liquidity refresh pause.\19\ Also, in the MIAX 
PRIME Auction for simple orders, an RFR response with a size greater 
than the size of the Agency Order will be capped at the size of the 
Agency Order.\20\ The Exchange believes that adding the additional 
language regarding a cap applied to the size of RFR Responses will 
clarify the manner in which the System allocates contracts at the end 
of the Complex Auction so that market participants more clearly 
understand the treatment of their orders and quotes during the Complex 
Auction process, and will also reduce the impact of potentially 
manipulative behavior by market participants to alter the pro-rata 
allocation.
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    \19\ See Exchange Rule 515, Interpretations and Policies .03.
    \20\ See Exchange Rule 515A(a)(2)(i)(G).
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2. Statutory Basis
    MIAX believes that its proposed rule change is consistent with 
Section 6(b) of the Act \21\ in general, and furthers the objectives of 
Section 6(b)(5) of the Act \22\ 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 regulating, clearing, settling, 
processing information with respect to, and 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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    \21\ 15 U.S.C. 78f(b).
    \22\ 15 U.S.C. 78f(b)(5).
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    In particular, the Exchange's proposal to set a Defined Time Period 
during which a Complex Auction will not be commenced is designed to 
remove impediments to and perfect the mechanisms of a free and open 
market and a national market system and to protect investors and the 
public interest by ensuring that the System can complete the Complex 
Auction process before the end of the trading session. This guarantees 
that investors will receive the full benefit of the Complex Auction 
process and that Complex auctions on the Exchange will be

[[Page 87088]]

completed prior to the end of the trading session.
    The proposed rule change promotes just and equitable principles of 
trade by capping the size of RFR Responses, which ensures that the 
system allocates contracts among participants in the Complex Auction 
based on the actual aggregate size of the Complex Auction-eligible 
order and interest joining the Complex Auction-eligible order being 
auctioned.
    Furthermore, capping the size of RFR Responses for purposes of pro-
rata allocation is designed to prevent fraudulent and manipulative acts 
and practices by reducing the possibility that participants could 
circumvent or ``game'' the allocation rules through the submission of 
an oversized RFR Response. Moreover, the Exchange believes that adding 
the additional language regarding a cap applied to the size of RFR 
Responses removes impediments to and perfects the mechanisms of a free 
and open market and a national market system by clarifying the manner 
in which the System allocates contracts at the end of the Complex 
Auction so that market participants more clearly understand the 
treatment of their orders and quotes during the Complex Auction 
process.

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.
    Specifically, the Exchange believes that its proposal to cap the 
size of RFR Responses enhances competition in the Complex Auction by 
eliminating the ability of Complex Auction participants to ``game'' the 
pro-rata allocation, thus encouraging participants to submit 
competitive RFR Responses and ensuring that the size associated with 
their RFR Response will be calculated fairly as a percentage of the 
size associated with RFR Responses submitted to the Complex Auction.
    Additionally, the Exchange's proposal to establish a Defined Time 
Period prior to the end of the trading session within which the 
Exchange will not commence a Complex Auction is not competitive in 
nature. This proposal is intended to ensure that the Complex Auction 
process can be completed once it has begun, and to safeguard the 
orderliness of the MIAX marketplace at the end of the trading session.
    For all the reasons stated, the Exchange does not believe that the 
proposed rule change will impose any burden on competition not 
necessary or appropriate in furtherance of the purposes of the Act, and 
believes the proposed change will in fact enhance competition.

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, the proposed rule change has become effective 
pursuant to Section 19(b)(3)(A) of the Act \23\ and Rule 19b-4(f)(6) 
thereunder.\24\
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    \23\ 15 U.S.C. 78s(b)(3)(A).
    \24\ 17 CFR 240.19b-4(f)(6). 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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    A proposed rule change filed under Rule 19b-4(f)(6) normally does 
not become operative prior to 30 days after the date of filing. 
However, Rule 19b-4(f)(6)(iii) \25\ 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 to allow the proposal to 
become immediately effective. As discussed above, the Exchange states 
that the proposal to set a Defined Time Period will help guarantee that 
Complex Auctions on the Exchange will be completed prior to the end of 
the trading session. The Exchange also states that its proposal to cap 
the size of RFR Responses for purposes of pro-rata allocation is 
designed to reduce the possibility that participants could circumvent 
or ``game'' the allocation rules through the submission of an oversized 
RFR Response. In addition, as discussed above, MIAX also caps the size 
of responses to its PRIME Auction and responses received during a 
liquidity refresh pause in its simple market. The Commission believes 
that waiving the 30-day operative delay is consistent with the 
protection of investors and the public interest because the proposed 
rule change will allow the Exchange to implement the Defined Time 
Period in its Complex Auction, which the Exchange states will ensure 
that Complex Auctions begun just prior to the end of the trading 
session will be completed before the end of the trading session. In 
addition, the Commission believes that waiving the 30-day operative 
delay for the Exchange's proposal to cap the size of RFR Responses is 
consistent with the protection of investors and the public interest 
because the proposed rule change is consistent with treatment of 
certain orders in the Exchange's simple market.\26\
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    \25\ 17 CFR 19b-4(f)(6)(iii).
    \26\ 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-2016-44 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-2016-44. 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

[[Page 87089]]

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-2016-44 and should be submitted on or before 
December 23, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\27\
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    \27\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-28928 Filed 12-1-16; 8:45 am]
 BILLING CODE 8011-01-P
87086 Federal Register / Vol. 81, No. 232 / Friday, December 2, 2016 / Notices

This notice will be published in the A. Self-Regulatory Organization’s Auction process by sending a request for
Federal Register. Statement of the Purpose of, and responses (‘‘RFR’’) message. Members
Stacy L. Ruble, Statutory Basis for, the Proposed Rule may submit a response to the RFR
Secretary. Change message (an ‘‘RFR Response’’) during
[FR Doc. 2016–28907 Filed 12–1–16; 8:45 am] 1. Purpose the ‘‘Response Time Interval.’’ 10 At the
BILLING CODE 7710–FW–P end of the Response Time Interval,
The Exchange proposes to amend Complex Auction-eligible orders (and
Exchange Rule 518, Complex Orders, to other complex orders and quotes) may
state that (i) the System 3 will not be executed in whole or in part against
SECURITIES AND EXCHANGE commence a Complex Auction 4 within the best priced contra side interest.11
COMMISSION a defined time period prior to the end Exchange Rule 518(d)(2) governs the
[Release No. 34–79405; File No. SR–MIAX– of the trading session as described commencement of a Complex Auction.
2016–44] below; and (ii) the size of an RFR Upon receipt of a Complex Auction-
Response (defined below) that is eligible order or upon an evaluation by
Self-Regulatory Organizations; Miami submitted with a size greater than the the System indicating that there is a
International Securities Exchange LLC; aggregate auctioned size (described Complex Auction-eligible order resting
Notice of Filing and Immediate below) will be capped for allocation on the Strategy Book, the Exchange may
Effectiveness of a Proposed Rule purposes at the aggregate auctioned size begin the Complex Auction process by
Change To Amend Exchange Rule 518, (defined below). sending an RFR message to all
Complex Orders Complex Auction Defined Time Period subscribers to the Exchange’s data feeds
November 28, 2016.
that deliver RFR messages.
Certain option classes, as determined The Exchange proposes to amend
Pursuant to Section 19(b)(1) of the by the Exchange and communicated to Exchange Rule 518(d)(2) by stating that,
Securities Exchange Act of 1934 Members via Regulatory Circular, are notwithstanding the foregoing
(‘‘Act’’),1 and Rule 19b–4 thereunder,2 eligible to participate in a Complex provisions of the rule, the System will
notice is hereby given that on November Auction for possible price not commence a Complex Auction
18, 2016, Miami International Securities improvement.5 Members may submit within a defined time period prior to the
Exchange LLC (‘‘MIAX’’ or ‘‘Exchange’’) Complex Auction-on-Arrival (‘‘cAOA’’)
end of the trading session (the ‘‘Defined
filed with the Securities and Exchange orders 6 that may initiate a Complex
Time Period’’) established by the
Commission (‘‘Commission’’) the Auction, and the Exchange may
Exchange and communicated to
proposed rule change as described in determine to automatically submit a
Members via Regulatory Circular. The
Items I and II below, which Items have Complex Auction-eligible order 7 into a
Defined Time Period shall be at least
been prepared by the Exchange. The Complex Auction. Upon receipt of a
100 milliseconds, and may not exceed
Commission is publishing this notice to Complex Auction-eligible order or upon
10 seconds. The Exchange believes that
solicit comments on the proposed rule an evaluation by the System 8 indicating
this proposed flexibility in the duration
change from interested persons. that there is a Complex Auction-eligible
of the Defined Time Period is necessary
order resting on the Strategy Book,9 the
I. Self-Regulatory Organization’s Exchange may begin the Complex because the duration of the Response
Statement of the Terms of Substance of Time Interval is flexible 12 and must not
the Proposed Rule Change 3 The term ‘‘System’’ means the automated be able to exceed the Defined Time
trading system used by the Exchange for the trading Period. For example, if the Response
The Exchange is filing a proposal to of securities. See Exchange Rule 100. Time Interval is 300 milliseconds and
amend Exchange Rule 518, Complex 4 Certain option classes, as determined by the
the Defined Time Period is 200
Orders. Exchange and communicated to Members via
milliseconds, a Complex Auction with a
The text of the proposed rule change Regulatory Circular, will be eligible to participate
in a Complex Auction (an ‘‘eligible class’’). Upon 300 millisecond Response Time Interval
is available on the Exchange’s Web site evaluation as set forth in Exchange Rule 518(c)(5), could commence within 200
at http://www.miaxoptions.com/filter/ the Exchange may determine to automatically milliseconds of the end of the trading
wotitle/rule_filing, at MIAX’s principal submit a Complex Auction-eligible order into a
Complex Auction. Upon entry into the System or session, and the Complex Auction could
office, and at the Commission’s Public
upon evaluation of a complex order resting at the therefore not be completed. Flexibility
Reference Room. top of the Strategy Book, Complex Auction-eligible in the establishment of the duration of
II. Self-Regulatory Organization’s orders may be subject to an automated request for the Defined Time Period would enable
responses (‘‘RFR’’). See Exchange Rule 518(d).
Statement of the Purpose of, and 5 See id. the Exchange to make the duration of
Statutory Basis for, the Proposed Rule 6 A cAOA order is a complex order designated to the Response Time Interval and the
Change be placed into a Complex Auction upon receipt or Defined Time Period consistent in this
upon evaluation. Complex orders that are not regard. The 10-second maximum
In its filing with the Commission, the designated as cAOA will, by default, not initiate a
Exchange included statements Complex Auction upon arrival, but except as
duration for the Defined Time Period is
concerning the purpose of and basis for described herein will be eligible to participate in a intended as an outlier to address
the proposed rule change and discussed Complex Auction that is in progress when such situations where the Exchange may
complex order arrives or if placed on the Strategy need to ensure a fair and orderly
any comments it received on the Book may participate in or may initiate a Complex
proposed rule change. The text of these Auction. See Exchange Rule 518(b)(2)(i).
marketplace during times of extreme
7 A ‘‘Complex Auction-eligible order’’ means a
statements may be examined at the
asabaliauskas on DSK3SPTVN1PROD with NOTICES

10 The ‘‘Response Time Interval’’ means the
complex order that, as determined by the Exchange,
places specified in Item IV below. The is eligible to initiate or join a Complex Auction period of time during which responses to the RFR
Exchange has prepared summaries, set based in a variety of factors. See Exchange Rule may be entered. The Exchange will determine the
forth in sections A, B, and C below, of 518(d)(1). duration of the Response Time Interval, which shall
the most significant aspects of such 8 The term ‘‘System’’ means the automated not exceed 500 milliseconds, and will communicate
trading system used by the Exchange for the trading it to Members via Regulatory Circular. See
statements. Exchange Rule 518(d)(3).
of securities. See Exchange Rule 100.
9 The ‘‘Strategy Book’’ is the Exchange’s 11 For a complete description of the Complex
1 15 U.S.C. 78s(b)(1). Auction process, see Exchange Rule 518(d).
electronic book of complex orders and complex
2 17 CFR 240.19b–4. Quotes. See Exchange Rule 518(a)(17). 12 See supra note 10.

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87088 Federal Register / Vol. 81, No. 232 / Friday, December 2, 2016 / Notices

completed prior to the end of the appropriate in furtherance of the because the proposed rule change will
trading session. purposes of the Act, and believes the allow the Exchange to implement the
The proposed rule change promotes proposed change will in fact enhance Defined Time Period in its Complex
just and equitable principles of trade by competition. Auction, which the Exchange states will
capping the size of RFR Responses, ensure that Complex Auctions begun
which ensures that the system allocates C. Self-Regulatory Organization’s
just prior to the end of the trading
contracts among participants in the Statement on Comments on the
session will be completed before the
Complex Auction based on the actual Proposed Rule Change Received From
end of the trading session. In addition,
aggregate size of the Complex Auction- Members, Participants, or Others
the Commission believes that waiving
eligible order and interest joining the Written comments were neither the 30-day operative delay for the
Complex Auction-eligible order being solicited nor received. Exchange’s proposal to cap the size of
auctioned. III. Date of Effectiveness of the RFR Responses is consistent with the
Furthermore, capping the size of RFR protection of investors and the public
Proposed Rule Change and Timing for
Responses for purposes of pro-rata interest because the proposed rule
Commission Action
allocation is designed to prevent change is consistent with treatment of
fraudulent and manipulative acts and Because the proposed rule change certain orders in the Exchange’s simple
practices by reducing the possibility does not (i) significantly affect the market.26
that participants could circumvent or protection of investors or the public At any time within 60 days of the
‘‘game’’ the allocation rules through the interest; (ii) impose any significant filing of the proposed rule change, the
submission of an oversized RFR burden on competition; and (iii) become Commission summarily may
Response. Moreover, the Exchange operative for 30 days from the date on temporarily suspend such rule change if
believes that adding the additional which it was filed, or such shorter time it appears to the Commission that such
language regarding a cap applied to the as the Commission may designate, the action is necessary or appropriate in the
size of RFR Responses removes proposed rule change has become public interest, for the protection of
impediments to and perfects the effective pursuant to Section 19(b)(3)(A) investors, or otherwise in furtherance of
mechanisms of a free and open market of the Act 23 and Rule 19b–4(f)(6) the purposes of the Act. If the
and a national market system by thereunder.24 Commission takes such action, the
clarifying the manner in which the A proposed rule change filed under Commission shall institute proceedings
System allocates contracts at the end of Rule 19b–4(f)(6) normally does not to determine whether the proposed rule
the Complex Auction so that market become operative prior to 30 days after should be approved or disapproved.
participants more clearly understand the date of filing. However, Rule 19b–
4(f)(6)(iii) 25 permits the Commission to IV. Solicitation of Comments
the treatment of their orders and quotes
during the Complex Auction process. designate a shorter time if such action Interested persons are invited to
is consistent with the protection of submit written data, views and
B. Self-Regulatory Organization’s investors and the public interest. The arguments concerning the foregoing,
Statement on Burden on Competition Exchange has asked the Commission to including whether the proposed rule
The Exchange does not believe that waive the 30-day operative delay to change is consistent with the Act.
the proposed rule change will impose allow the proposal to become Comments may be submitted by any of
any burden on competition that is not immediately effective. As discussed the following methods:
necessary or appropriate in furtherance above, the Exchange states that the
proposal to set a Defined Time Period Electronic Comments
of the purposes of the Act.
Specifically, the Exchange believes will help guarantee that Complex • Use the Commission’s Internet
that its proposal to cap the size of RFR Auctions on the Exchange will be comment form (http://www.sec.gov/
Responses enhances competition in the completed prior to the end of the rules/sro.shtml); or
Complex Auction by eliminating the trading session. The Exchange also • Send an email to rule-comments@
ability of Complex Auction participants states that its proposal to cap the size of sec.gov. Please include File Number SR–
to ‘‘game’’ the pro-rata allocation, thus RFR Responses for purposes of pro-rata MIAX–2016–44 on the subject line.
encouraging participants to submit allocation is designed to reduce the
Paper Comments
competitive RFR Responses and possibility that participants could
ensuring that the size associated with circumvent or ‘‘game’’ the allocation • Send paper comments in triplicate
their RFR Response will be calculated rules through the submission of an to Secretary, Securities and Exchange
fairly as a percentage of the size oversized RFR Response. In addition, as Commission, 100 F Street NE.,
associated with RFR Responses discussed above, MIAX also caps the Washington, DC 20549–1090.
submitted to the Complex Auction. size of responses to its PRIME Auction All submissions should refer to File
Additionally, the Exchange’s proposal and responses received during a Number SR–MIAX–2016–44. This file
to establish a Defined Time Period prior liquidity refresh pause in its simple number should be included on the
to the end of the trading session within market. The Commission believes that subject line if email is used. To help the
which the Exchange will not commence waiving the 30-day operative delay is Commission process and review your
a Complex Auction is not competitive in consistent with the protection of comments more efficiently, please use
nature. This proposal is intended to investors and the public interest only one method. The Commission will
ensure that the Complex Auction post all comments on the Commission’s
asabaliauskas on DSK3SPTVN1PROD with NOTICES

process can be completed once it has
23 15 U.S.C. 78s(b)(3)(A). Internet Web site (http://www.sec.gov/
24 17 CFR 240.19b–4(f)(6). As required under Rule
begun, and to safeguard the orderliness rules/sro.shtml). Copies of the
19b–4(f)(6)(iii), the Exchange provided the
of the MIAX marketplace at the end of Commission with written notice of its intent to file submission, all subsequent
the trading session. the proposed rule change, along with a brief
For all the reasons stated, the description and the text of the proposed rule 26 For purposes only of waiving the 30-day

change, at least five business days prior to the date operative delay, the Commission has also
Exchange does not believe that the of filing of the proposed rule change, or such considered the proposed rule’s impact on
proposed rule change will impose any shorter time as designated by the Commission. efficiency, competition, and capital formation. See
burden on competition not necessary or 25 17 CFR 19b–4(f)(6)(iii). 15 U.S.C. 78c(f).

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Federal Register / Vol. 81, No. 232 / Friday, December 2, 2016 / Notices 87089

amendments, all written statements comments on the proposed rule change accordance with changes to the NBBO
with respect to the proposed rule from interested persons. or the best price on the Exchange Book,
change that are filed with the as applicable until such time as the
I. Self-Regulatory Organization’s
Commission, and all written Post-Only Order is able to be ranked and
Statement of the Terms of Substance of
communications relating to the displayed at its original entered limit
the Proposed Rule Change
proposed rule change between the price.
Commission and any person, other than The Exchange proposes to amend * * * * *
those that may be withheld from the Commentary .14 to Rule 3317
public in accordance with the (Compliance with Regulation NMS Plan II. Self-Regulatory Organization’s
provisions of 5 U.S.C. 552, will be to Implement a Tick Size Pilot) to Statement of the Purpose of, and
available for Web site viewing and provide the SEC with notice of its efforts Statutory Basis for, the Proposed Rule
printing in the Commission’s Public to re-program its systems to eliminate a Change
Reference Room, 100 F Street NE., re-pricing functionality for certain In its filing with the Commission, the
Washington, DC 20549, on official orders in Test Group Three securities in Exchange included statements
business days between the hours of connection with the Regulation NMS concerning the purpose of and basis for
10:00 a.m. and 3:00 p.m. Copies of the Plan to Implement a Tick Size Pilot the proposed rule change and discussed
filing also will be available for Program (‘‘Plan’’ or ‘‘Pilot’’).3 any comments it received on the
inspection and copying at the principal The text of the proposed rule change proposed rule change. The text of these
office of the Exchange. All comments is set forth below. Proposed new statements may be examined at the
received will be posted without change; language is italicized; deleted text is in places specified in Item IV below. The
the Commission does not edit personal brackets. Exchange has prepared summaries, set
identifying information from * * * * * forth in sections A, B, and C below, of
submissions. You should submit only the most significant aspects of such
NASDAQ PHLX Rules
information that you wish to make statements.
available publicly. All submissions * * * * *
should refer to File Number SR–MIAX– A. Self-Regulatory Organization’s
3317. Compliance With Regulation Statement of the Purpose of, and
2016–44 and should be submitted on or NMS Plan To Implement a Tick Size
before December 23, 2016. Statutory Basis for, the Proposed Rule
Pilot Change
For the Commission, by the Division of
Trading and Markets, pursuant to delegated (a) through (d) No Change. 1. Purpose
authority.27 Commentary: .01–.13 No change.
.14 Until [November 14, 2016] On September 7, 2016, the Exchange
Robert W. Errett, filed with the Securities and Exchange
December 12, 2016, the treatment of
Deputy Secretary. Commission (‘‘SEC’’ or ‘‘Commission’’)
Price to Comply Orders, Price to Display
[FR Doc. 2016–28928 Filed 12–1–16; 8:45 am] Orders, Non-Displayed Orders, and a proposed rule change (‘‘Proposal’’) to
BILLING CODE 8011–01–P Post-Only Orders that are entered adopt paragraph (d) and Commentary
through the OUCH or FLITE protocols .12 to Exchange Rule 3317 to describe
in Test Group Three securities shall be changes to system functionality
SECURITIES AND EXCHANGE as follows: necessary to implement the Plan. The
COMMISSION Following entry, and if market Exchange also proposed amendments to
conditions allow, a Price to Comply Rule 3317(a) and (c) to clarify how the
[Release No. 34–79407; File No. SR–Phlx– Order in a Test Group Three Pilot Trade-at exception may be satisfied. The
2016–114] Security will be adjusted repeatedly in SEC published the Proposal in the
accordance with changes to the NBBO Federal Register for notice and
Self-Regulatory Organizations; until such time as the Price to Comply comment on September 20, 2016.4 Phlx
NASDAQ PHLX LLC; Notice of Filing Order is able to be ranked and displayed subsequently filed three Partial
and Immediate Effectiveness of at its original entered limit price. Amendments to clarify aspects of the
Proposed Rule Change To Amend Following entry, and if market Proposal. The Commission approved the
Commentary .14 to Rule 3317 conditions allow, a Price to Display Proposal, as amended, on October 7,
(Compliance With Regulation NMS Order in a Test Group Three Pilot 2016.5
Plan To Implement a Tick Size Pilot) Security will be adjusted repeatedly in In SR–Phlx–2016–92, Phlx had
November 28, 2016. accordance with changes to the NBBO initially proposed a re-pricing
until such time as the Price to Display functionality for Price to Comply
Pursuant to Section 19(b)(1) of the Order is able to be ranked and displayed Orders, Non-Displayed Orders, and
Securities Exchange Act of 1934 at its original entered limit price. Post-Only Orders entered through the
(‘‘Act’’),1 and Rule 19b–4 thereunder,2 Following entry, and if market OUCH and FLITE protocols in Group
notice is hereby given that on November conditions allow, a Non-Displayed Three securities.6 Phlx subsequently
14, 2016, NASDAQ PHLX LLC (‘‘Phlx’’ Order in a Test Group Three Pilot
or ‘‘Exchange’’) filed with the Securities Security will be adjusted repeatedly in
4 See Securities Exchange Act Release No. 78835

and Exchange Commission (‘‘SEC’’ or accordance with changes to the NBBO
(September 14, 2016), 81 FR 64552 (September 20,
2016) (SR–Phlx–2016–92).
asabaliauskas on DSK3SPTVN1PROD with NOTICES

‘‘Commission’’) the proposed rule up (down) to the Order’s limit price. 5 See Securities Exchange Act Release No. 79074
change as described in Items I and II Following entry, and if market (October 7, 2016) (SR–Phlx–2016–92).
below, which Items have been prepared conditions allow, the Post-Only Order 6 As originally proposed, Rule 3317(d)(2) stated
by the Exchange. The Commission is in a Test Group Three Pilot Security that Price to Comply Orders in a Test Group Three
publishing this notice to solicit will be adjusted repeatedly in
Pilot Security will be adjusted repeatedly in
accordance with changes to the NBBO until such
time as the Price to Comply Order is able to be
27 17 CFR 200.30–3(a)(12). 3 See Securities Exchange Act Release No. 74892 ranked and displayed at its original entered limit
1 15 U.S.C. 78s(b)(1). (May 6, 2015), 80 FR 27513 (May 13, 2015) price. Rule 3317(d)(3) stated that, if market
2 17 CFR 240.19b–4. (‘‘Approval Order’’). Continued

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Document Created: 2018-02-14 09:02:08
Document Modified: 2018-02-14 09:02:08
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 87086