82 FR 28369 - Self-Regulatory Organizations; Miami International Securities Exchange LLC; Order Approving a Proposed Rule Change Relating to the Exposure Periods of the MIAX Price Improvement Mechanism and Solicitation Mechanism

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 82, Issue 118 (June 21, 2017)

[Federal Register Volume 82, Number 118 (Wednesday, June 21, 2017)]
[Notices]
[Pages 28369-28370]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2017-12890]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-80940; File No. SR-MIAX-2017-16]


Self-Regulatory Organizations; Miami International Securities 
Exchange LLC; Order Approving a Proposed Rule Change Relating to the 
Exposure Periods of the MIAX Price Improvement Mechanism and 
Solicitation Mechanism

June 15, 2017.

I. Introduction

    On April 25, 2017, Miami International Securities Exchange LLC 
(``MIAX Options'' or the ``Exchange'') filed with the Securities and 
Exchange Commission (``Commission'') pursuant to Section 19(b)(1) of 
the Securities Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 
thereunder,\2\ a proposed rule change to amend MIAX Options Rule 515A 
to modify the exposure periods of the Exchange's Price Improvement 
Mechanism (``PRIME'') and PRIME Solicitation Mechanism from 500 
milliseconds to a time period designated by the Exchange of no less 
than 100 milliseconds and no more than 1 second. The proposed rule 
change was published for comment in the Federal Register on May 5, 
2017.\3\ The Commission received no comment letters on the proposed 
rule change. This order approves the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 80570 (May 1, 2017), 
82 FR 21288 (``Notice'').
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II. Description of the Proposed Rule Change

    PRIME is a process by which a Member \4\ may electronically submit 
for execution an order it represents as agent (``Agency Order'') 
against principal interest, and/or an Agency Order against solicited 
interest.\5\ When the Exchange receives a properly designated Agency 
Order for auction processing, a Request for Responses (``RFR'') 
detailing the option, side, size, and initiating price is sent to all 
subscribers of the Exchange's data feeds. Currently, the RFR period 
lasts for 500 milliseconds, unless it is concluded early.\6\ The 
Exchange proposes to revise the RFR response period to permit the 
Exchange to designate a specific time within a range of no less than 
100 milliseconds and no more than 1 second.\7\
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    \4\ The term ``Member'' means an individual or organization 
approved to exercise the trading rights associated with a Trading 
Permit. Members are deemed ``members'' under the Exchange Act. See 
Exchange Rule 100.
    \5\ See Exchange Rule 515A.
    \6\ A PRIME and PRIME Solicitation Auction will conclude at the 
sooner of: (1) Upon receipt of an unrelated order (in the same 
option as the Agency Order) on the opposite side of the market from 
the RFR responses, that is marketable against either the National 
Best Bid or Offer (``NBBO''), the initiating price, or the RFR 
responses; (2) upon receipt of an unrelated order (in the same 
option as the Agency Order) on the same side of the market as the 
RFR responses, that is marketable against the NBBO; (3) upon receipt 
of an unrelated limit order (in the same option as the Agency Order) 
on the opposite of the market from the Agency Order that improves 
any RFR response; (4) any time an RFR response matches the NBBO on 
the opposite side of the market from the RFR responses; (5) any time 
there is a quote lock in the subject option on the Exchange pursuant 
to Exchange Rule 1402; or (6) any time there is a trading halt in 
the option on the Exchange. See Exchange Rule 515A.
    \7\ The Exchange notes that its proposal is consistent with 
exposure periods permitted in similar mechanisms on other options 
exchanges. See Notice, supra note 3, at 21288 & n.6; see also 
Securities Exchange Act Release Nos. 76301 (October 29, 2015), 80 FR 
68347 (November 4, 2015) (SR-BX-2015-032) (establishing an exposure 
period for the Nasdaq BX's options price improvement mechanism 
(``PRISM'') of no less than 100 milliseconds and no more than 1 
second); 77557 (April 7, 2016), 81 FR 21935 (April 13, 2016) (SR-
Phlx-2016-40) (amending the exposure period for the Nasdaq Phlx's 
Price Improvement XL (``PIXL'') to be no less than 100 milliseconds 
and no more than 1 second); 79733 (January 4, 2017), 82 FR 3055 
(January 10, 2017) (SR-ISE-2016-26) (amending the exposure period 
for the Nasdaq ISE's Price Improvement Mechanism (``PIM'') to be no 
less than 100 milliseconds and no more than 1 second); and 80738 
(May 22, 2017), 82 FR 24417 (May 26, 2017) (SR-CBOE-2017-029) 
(amending the exposure periods for the CBOE's Automated Improvement 
Mechanism (``AIM'') and Solicitation Auction Mechanism (``SAM'') to 
be no less than 100 milliseconds and no more than 1 second).
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III. Discussion and Commission's Findings

    After careful review, the Commission finds that the proposed rule 
change is consistent with the requirements of the Act and the rules and 
regulations thereunder applicable to a national securities exchange.\8\ 
In particular, the Commission finds that the proposed rule change is 
consistent with Section 6(b)(5) of the Act,\9\ which requires, among 
other things, that the rules of a national securities exchange be 
designed to promote just and equitable principles of trade, to foster 
cooperation and coordination with persons engaged in regulating 
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, and not be 
designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers. The Commission also finds that the proposed rule 
change is consistent with Section 6(b)(8) of the Act,\10\ which 
requires that the rules of an exchange not impose any burden on 
competition that is not necessary or appropriate in furtherance of the 
purposes of the Act.
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    \8\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. See 15 U.S.C. 78c(f).
    \9\ 15 U.S.C. 78f(b)(5).
    \10\ 15 U.S.C. 78f(b)(8).
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    The Commission believes that, given the electronic nature of the 
PRIME and PRIME Solicitation Mechanism and the ability of Members to 
respond within the proposed exposure periods, modifying each of the 
exposure periods from 500 milliseconds to a time designated by the 
Exchange of no less than 100 milliseconds and no more than 1 second 
could facilitate the prompt execution of orders, while continuing to 
provide market participants with an opportunity to compete to trade 
with the exposed order by submitting responses to the auctions. 
According to the Exchange, numerous Members have the capability to and 
do respond within a 100 millisecond exposure period or less.\11\
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    \11\ See Notice, supra note 3, at 21289.
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    To substantiate that its members can receive, process, and 
communicate a response back to the Exchange within 100 milliseconds, 
the Exchange states that it surveyed all Members that responded to an 
auction broadcast in the period beginning November 2016 and ending 
January 2017 (the ``review period'').\12\ According to the Exchange, 
each Member it surveyed indicated that they can receive, process, and 
communicate a response back to the Exchange within 100 
milliseconds.\13\ In addition, the Exchange states that it reviewed all 
responses received in PRIME and PRIME Solicitation Auctions from its 
Members for the review period, and its review indicated that 
approximately 90% of responses were submitted within 100 
milliseconds.\14\ Furthermore, with regard to the impact of the 
proposal on system capacity, the Exchange states that it has analyzed 
its capacity and represents that it has the necessary systems capacity 
to handle the potential additional traffic associated with the 
additional transactions that may occur with the

[[Page 28370]]

implementation of the proposed reduction response time duration to no 
less than 100 milliseconds.\15\ The Exchange also represents that its 
system will be able to sufficiently maintain an audit trail for order 
and trade information with the reduction in the response timer.\16\
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    \12\ See id.
    \13\ See id.
    \14\ See id.
    \15\ See id. at 21289-90.
    \16\ See id. at 21290.
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    Based on the Exchange's statements, the Commission believes that 
market participants should continue to have opportunities to compete to 
trade with the exposed order by submitting responses to the PRIME and 
PRIME Solicitation Mechanism within an exposure period of no less than 
100 milliseconds and no more than 1 second.\17\ Accordingly, for the 
reasons discussed above, the Commission believes that the Exchange's 
proposal is consistent with the Act.
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    \17\ The Commission notes that the ability to designate such an 
exposure time period is consistent with the rules of other options 
exchanges. See supra note 7. See also NASDAQ Phlx Rule 
1080(n)(ii)(A)(4), NASDAQ BX Options Rules Chapter VI, Section 
9(ii)(A)(3), Nasdaq ISE Rule 716, Supplementary Material .04, Nasdaq 
ISE Rule 723(c)(1), CBOE Rule 6.74A(b)(1)(C), and CBOE Rule 
6.74B(b)(1)(C).
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IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\18\ that the proposed rule change (SR-MIAX-2017-16) be, and hereby 
is, approved.
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    \18\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
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    \19\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-12890 Filed 6-20-17; 8:45 am]
 BILLING CODE 8011-01-P