82 FR 36172 - Self-Regulatory Organizations; Miami International Securities Exchange LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Adopt a New Type of MIAX Express Interface Port Known as a Purge Port, To Amend MIAX Options Rule 519C, Mass Cancellation of Trading Interest, To Adopt a New Purge Message, and To Amend Its Fee Schedule To Adopt Fees for Purge Ports
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 82, Issue 148 (August 3, 2017)
Federal Register Volume 82, Issue 148 (August 3, 2017)
| Page Range | 36172-36176 | |
| FR Document | 2017-16296 |
[Federal Register Volume 82, Number 148 (Thursday, August 3, 2017)] [Notices] [Pages 36172-36176] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2017-16296] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-81252; File No. SR-MIAX-2017-36] Self-Regulatory Organizations; Miami International Securities Exchange LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Adopt a New Type of MIAX Express Interface Port Known as a Purge Port, To Amend MIAX Options Rule 519C, Mass Cancellation of Trading Interest, To Adopt a New Purge Message, and To Amend Its Fee Schedule To Adopt Fees for Purge Ports July 28, 2017. 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 24, 2017, Miami International Securities Exchange, LLC (``MIAX Options'' 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. --------------------------------------------------------------------------- \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 519C, Mass Cancellation of Trading Interest, to adopt new rule text to reflect the proposed Purge Port functionality, as well as to make clarifying changes to existing rule text to more accurately describe current functionality, and to reorganize the rule for ease of reference. The Exchange is also proposing to amend its Fee Schedule to adopt fees for Purge Ports. The text of the proposed changes to Exchange Rule 519C is attached as Exhibit 5A. The proposed changes to the Fee Schedule are attached as Exhibit 5B. The text of the proposed rule change is available on the Exchange's Web site at http://www.miaxoptions.com/rule-filings, 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 offer Market Makers \3\ that connect to the Exchange using the MIAX Express Interface (``MEI'') \4\ a new type of connection port, named Purge Ports, to be used as dedicated ports for sending purge messages to the Exchange. The Exchange also proposes to amend its Fee Schedule to identify and adopt fees for Purge Ports. Finally, the Exchange proposes to amend Exchange Rule 519C, Mass Cancellation of Trading Interest, to adopt new rule text to reflect the proposed Purge Port functionality, as well as to make clarifying changes to existing rule text to more accurately describe current functionality, and to reorganize the rule for ease of reference. --------------------------------------------------------------------------- \3\ The term ``Market Makers'' refers to ``Lead Market Makers'', ``Primary Lead Market Makers'' and ``Registered Market Makers'' collectively. See Exchange Rule 100. \4\ MIAX Express Interface is a connection to MIAX systems that enables Market Makers to submit simple and complex electronic quotes to MIAX. See MIAX Options Fee Schedule, Section 5)d)ii), footnote 26. --------------------------------------------------------------------------- Market Makers connect to the Exchange's System \5\ via their assigned MEI ports. Currently, the Exchange offers Market Makers two different types of MEI port connections. The first is a Full Service Port \6\ which supports all message types, and the other is a Limited Service Port \7\ which provides slightly less functionality. The Exchange limits Market Makers to two (2) Full [[Page 36173]] Service Ports and allows up to eight (8) Limited Service Ports per MIAX matching engine.\8\ --------------------------------------------------------------------------- \5\ The term ``System'' means the automated trading system used by the Exchange for the trading of securities. See Exchange Rule 100. \6\ Full Service MEI Ports provide Market Makers with the ability to send Market Maker simple and complex quotes, eQuotes, and quote purge messages to the MIAX System. Full Service MEI Ports are also capable of receiving administrative information. Market Makers are limited to two Full Service MEI Ports per matching engine. See MIAX Options Fee Schedule, Section 5)d)ii), footnote 27. \7\ Limited Service MEI Ports provide Market Makers with the ability to send simple and complex eQuotes and quote purge messages only, but not Market Maker Quotes, to the MIAX System. Limited Service MEI Ports are also capable of receiving administrative information. Market Makers initially receive two Limited Service MEI Ports per matching engine. See MIAX Options Exchange Fee Schedule, Section 5)d)ii), footnote 28. \8\ A ``matching engine'' is a part of the MIAX electronic system that processes options quotes and trades on a symbol-by- symbol basis. Some matching engines will process option classes with multiple root symbols, and other matching engines will be dedicated to one single option root symbol (for example, options on SPY will be processed by one single matching engine that is dedicated only to SPY). A particular root symbol may only be assigned to a single designated matching engine. A particular root symbol may not be assigned to multiple matching engines. See MIAX Options Exchange Fee Schedule, Section 5)d)ii), footnote 29. --------------------------------------------------------------------------- The proposed Purge Ports are a new, optional, third type of MEI port dedicated solely to handling purge messages which would enable a Market Maker, by MPID, to remove all or a subset of its (i) quotations \9\ in the System and block all or a subset of new inbound quotations from being received;\10\ or (ii) Standard quotations \11\ in the System and block all or a subset of new inbound Standard quotations from being received.\12\ Sending a purge message pursuant to (ii) above will not remove or block eQuotes,\13\ which are a specific type of quotation that allows the Market Maker to continue to provide targeted liquidity to the market and to interact with Public Customer \14\ orders. When quotes have been purged pursuant to (i) or (ii) above,\15\ the block will remain in effect until the Market Maker requests that the Exchange remove the block. --------------------------------------------------------------------------- \9\ The term ``quote'' or ``quotation'' means a bid or offer entered by a Market Maker that is firm and may update the Market Maker's previous quote, if any. The Rules of the Exchange provide for the use of different types of quotes, including Standard quotes and eQuotes, as more fully described in Rule 517. A Market Maker may, at times, choose to have multiple types of quotes active in an individual option. See Exchange Rule 100. \10\ A Market Maker currently has the ability to send a purge message to remove all or a subset of its quotations and block all or a subset of its new inbound quotations via its MEI port or by request to the Exchange's Help Desk. That ability is not changing with this proposal. What is changing with this proposal is the ability of a Market Maker to send that purge message via the proposed Purge Ports. \11\ A Standard quote is a quote submitted by a Market Maker that cancels and replaces the Market Maker's previous Standard quote, if any. See Exchange Rule 517(a)(1). \12\ The Exchange is introducing a new purge message that will remove all or a subset of a Market Maker's Standard quotations and block all or a subset of its new inbound Standard quotations. This request may only be sent electronically via a Market Maker's existing MEI port, or via the new proposed Purge Ports. \13\ An eQuote is a quote with a specific time in force that does not automatically cancel and replace a previous Standard quote or eQuote. An eQuote can be cancelled by the Market Maker at any time, or can be replaced by another eQuote that contains specific instructions to cancel an existing eQuote. See Exchange Rule 517(a)(2). \14\ The term ``Public Customer'' means a person that is not a broker or dealer in securities. See Exchange Rule 100. \15\ The Exchange notes that there is no mass cancellation functionality available to remove eQuotes only and block new inbound eQuotes. --------------------------------------------------------------------------- The purge messages described above may be sent via any type of MEI port, however, purge messages received on the proposed Purge Ports will be handled by the System in a way that ensures minimum possible latency (as Purge Ports solely process purge messages, as opposed to Full Service MEI Ports and Limited Service MEI Ports, which also process additional message types), thereby providing Market Makers with a faster, more efficient means to have their quotes removed from the System, which will provide Market Makers with an enhanced level of risk protection. The proposed Purge Ports are designed to assist Market Makers in the management of, and risk control over, their quotes, particularly if the Market Maker is quoting a large number of options. For example, if a Market Maker detects market indications that may influence the direction or bias of its quotes, the Market Maker may use the proposed Purge Ports to reduce uncertainty and to manage risk by purging all quotes in a number of options seamlessly to avoid unintended executions, while continuing to evaluate the direction of the market. The Exchange also proposes to amend Section (5)(d)(ii) of its Fee Schedule to identify and adopt fees for Purge Ports. The Exchange currently assesses monthly MEI Port fees on Market Makers based upon the number of matching engines used by the Market Maker. Market Makers are allocated two (2) Full Service MEI Ports and two (2) Limited Service MEI Ports per matching engine to which they connect. The Exchange currently assesses the following MEI Port fees: (i) $5,000 for Market Maker Assignments in up to 5 option classes or up to 10% of option classes by volume; (ii) $10,000 for Market Maker Assignments in up to 10 option classes or up to 20% of option classes by volume; (iii) $14,000 for Market Maker Assignments in up to 40 option classes or up to 35% of option classes by volume; (iv) $17,500 for Market Maker Assignments in up to 100 option classes or up to 50% of option classes by volume; and (v) $20,500 for Market Maker Assignments in over 100 option classes or over 50% of option classes by volume up to all option classes listed on MIAX.\16\ --------------------------------------------------------------------------- \16\ See MIAX Fee Schedule, Section (5)(d)(ii). --------------------------------------------------------------------------- The Exchange also currently charges $100 per month for each additional Limited Service MEI Port per matching engine for Market Makers over and above the two (2) Limited Service MEI Ports per matching engine that are allocated with the Full Service MEI Ports.\17\ Market Makers are limited to six (6) additional Limited Service MEI Ports per matching engine, for a total of eight (8) per matching engine.\18\ The Full Service MEI Ports, Limited Service MEI Ports and the additional Limited Service MEI Ports all include access to the Exchange's primary and secondary data centers and its disaster recovery center.\19\ --------------------------------------------------------------------------- \17\ Id. \18\ See MIAX Fee Schedule, footnote 30. \19\ See MIAX Fee Schedule, Section (5)(d)(ii). --------------------------------------------------------------------------- With the introduction of Purge Ports, the Exchange proposes to amend Section (5)(d)(ii) of its Fee Schedule to provide that a Market Maker may request and be allocated two (2) Purge Ports per matching engine to which it connects via a Full Service MEI Port. (That is, a Market Maker must have a Full Service MEI Port connection to a matching engine in order to be eligible to receive Purge Ports with respect to that matching engine.) The Exchange proposes that, for each month in which the Market Maker has been credentialed to use Purge Ports in the production environment and has been assigned to quote in at least one class, the Exchange will assess the Market Maker a flat fee of $1,500 per month, regardless of the number of actual Purge Ports allocated to the Market Maker. For example, a Market Maker (that requests Purge Ports) that connects to 10 matching engines would be allocated 20 Purge Ports, and would be charged $1,500 per month for use of those Purge Ports. A Market Maker (that requests Purge Ports) that connects to two (2) matching engines would be allocated four (4) Purge Ports, and would be charged $1,500 per month for use of those Purge Ports. The Exchange believes that charging Market Makers a flat monthly fee for use of the Purge Port service (regardless of the number of matching engines to which it connects and consequently regardless of the number of Purge Ports allocated to the Market Maker) is equitable, reasonable, and competitive with the fees charged by other exchanges that offer comparable purge port services, as most such exchanges charge per port, which results in monthly fees for purge port usage that are significantly higher than $1,500 per month for users with multiple purge ports.\20\ --------------------------------------------------------------------------- \20\ See Bats BXZ Options Exchange Fee Schedule, Options Logical Port Fees. Bats BZX assesses its members $750 per month per purge port. See also Nasdaq GEMX Schedule of Fees, Section IV.E. Nasdaq GEMX assesses its members $1,250 per SQF Purge Port per month, subject to a monthly cap of $12,500 for SQF Purge Ports and SQF Ports, applicable to market makers. --------------------------------------------------------------------------- [[Page 36174]] The Exchange also proposes to amend Exchange Rule 519C, Mass Cancellation of Trading Interest, to clarify current functionality. Specifically, the Exchange proposes to amend 519C(a) which reads, ``[a] Member \21\ may remove all of its quotations and/or cancel all or any subset of its orders . . . .'' Accordingly, the Exchange is deleting the reference to quotations from this subsection (a) as quotations will now be addressed in subsection (b)(2). The Exchange proposes to amend the sentence to read, ``[a] Member may remove all or a subset of its orders . . . .'' The Exchange believes that, although there is no change to existing functionality addressed by subsection (a) of the rule, the proposed changes to subsection (a) provide greater clarity regarding the Exchange's risk protection functionality as it relates to the handling of orders. Additionally, the Exchange proposes to amend the rule to change the phrase, ``any subset'' to ``a subset'' to be consistent with proposed changes to section (b) of the Rule as described below. --------------------------------------------------------------------------- \21\ 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. --------------------------------------------------------------------------- The Exchange also proposes to amend Exchange Rule 519C(b) to reorganize the rule for ease of reference and to reflect the proposed Purge Port functionality. Specifically, the Exchange proposes to replace existing rule text pertaining to the removal of quotations and the cancellation of orders with a separate subsection for orders, proposed new subsection (b)(1); and a separate subsection for quotations, proposed new subsection (b)(2). The Exchange proposes to adopt new rule text under subsection (b)(1) to describe current functionality pertaining to orders which states, ``[a]n EEM may request that the Exchange cancel all or a subset of its orders in the System and block all new inbound orders.'' Under this proposal there is no change to the functionality available for Electronic Exchange Members (``EEMs'').\22\ The Exchange believes that separately describing functionality available for EEMs and Market Makers provides greater clarity and specificity in the Exchange's rule. --------------------------------------------------------------------------- \22\ The term ``Electronic Exchange Member'' means the holder of a Trading Permit who is not a Market Maker. Electronic Exchange Members are deemed ``members'' under the Exchange Act. See Exchange Rule 100. --------------------------------------------------------------------------- Additionally, the Exchange proposes to adopt new rule text under subsection (b)(2) pertaining to quotations that provides that a Market Maker may remove all or a subset of its quotations and block all or a subset of its new inbound quotations by firm name or MPID.\23\ This functionality currently exists on the Exchange and is not new, as a Market Maker may contact Exchange staff to have this action performed on their behalf or may submit a request to the Exchange's System via its MEI port. However, what is now being proposed pursuant to this filing is that this request may also be sent electronically to the Exchange's System via the new proposed Purge Ports. --------------------------------------------------------------------------- \23\ The term ``MPID'' means Market Participant Identifier. See Exchange Rule 519C. --------------------------------------------------------------------------- The Exchange also proposes to adopt new rule text for new functionality being introduced in this proposal which provides that a Market Maker may remove all or a subset of its Standard quotations and block all or a subset of its new inbound Standard quotations by MPID. A Market Maker's eQuotes that are in the System will remain and the Market Maker will retain the ability to continue to send eQuotes to the System. This request may only be submitted to the Exchange's System electronically via the Market Maker's MEI port, either via its existing MEI ports, or via the new, proposed Purge Ports. Lastly, the Exchange proposes to amend the rule text which currently states that, ``[t]he block will remain in effect until the Member requests Exchange staff to remove the block,'' by removing the word ``staff.'' To remove a block a Member may (i) send an electronic message directly into the Exchange's System; or (ii) contact Exchange staff. Additionally, a Market Maker may make a request to Exchange staff to remove quotations or may send a message directly to the Exchange's System via its MEI connection. The Exchange believes removing the word staff from the rule text more accurately encompasses the activity under both scenarios. The Exchange notes that this proposal does not preclude Members from using the existing purge messages provided by either the MEI protocol or the cancel messages provided by the FIX protocol. Under the MEI protocol, Market Makers may request that all quotations for all underlyings, or for a specific underlying, be removed, and that new inbound quotations for all underlyings, or specific underlyings, be blocked. Under the FIX protocol, EEMs may also request that all, or a subset, of orders for an MPID, or all Day or GTC orders for an MPID, on the requesting session, be canceled. The Exchange will announce the implementation date of the proposed rule change by Regulatory Circular to be published no later than 60 days following the operative date of the proposed rule. The implementation date will be no later than 60 days following the issuance of the Regulatory Circular. The Exchange currently anticipates implementing the proposed rule change on August 3, 2017, subject to announcement of the actual date via Regulatory Circular. 2. Statutory Basis The Exchange believes that its proposed rule change is consistent with Section 6(b) of the Act \24\ in general, and furthers the objectives of Section 6(b)(5) of the Act \25\ 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. --------------------------------------------------------------------------- \24\ 15 U.S.C. 78f(b). \25\ 15 U.S.C. 78f(b)(5). --------------------------------------------------------------------------- The Exchange believes that the proposed rule change is consistent with Section 6(b)(5) of the Act,\26\ in that it promotes just and equitable principles of trade and removes impediments to and perfects the mechanism of a free and open market. Offering Market Makers designated Purge Ports would enhance their ability to manage quotes, quote traffic, and their quoting obligations,\27\ which would, in turn, improve their risk controls to the benefit of all market participants. The Exchange believes that Purge Ports would foster cooperation and coordination with persons engaged in facilitating transactions in securities because designating Purge Ports for purges only may encourage better use of dedicated ports. This may, concurrent with the ports that carry quotes and other information necessary for market making activities, enable more efficient, as well as fair and reasonable, use of Market Makers' resources. As Purge Ports are only available for purging and not for activities such as order or quote entry, the Purge Ports are not designed to permit unfair discrimination but rather are designed to enable Market Makers to manage their quoting risk and meet their heightened quoting obligations that other market [[Page 36175]] participants are not subject to, which, in turn, benefits all market participants. The Exchange also notes that similar connectivity and functionality is offered by other exchanges.\28\ --------------------------------------------------------------------------- \26\ Id. \27\ See Exchange Rule 604. \28\ See Securities Exchange Act Release Nos. 77613 (April 13, 2016), 81 FR 23023 (April 19, 2016) (SR-Phlx-2016-45); 79956 (February 3, 2017), 82 FR 10102 (February 9, 2017) (SR-BatsBZX-2017- 05); and 81095 (July 7, 2017), 82 FR 32409 (July 13, 2017) (SR-ISE- 2017-62). --------------------------------------------------------------------------- The Exchange notes that the proposed rule change will not relieve Market Makers of their continuous quoting obligations under Exchange Rule 604 and under Regulation NMS Rule 602.\29\ Specifically, any interest that is executable against a Market Maker's quotes that is received by the Exchange's matching engine prior to the time that the purge message is received by the Exchange's matching engine will automatically execute at that price, up to the quote's size. Market Makers that purge their quotes will not be relieved of the obligation to provide continuous two-sided quotes on a daily basis, nor will it prohibit the Exchange from taking disciplinary action against a Market Maker for failing to meet its continuous quoting obligation each trading day. --------------------------------------------------------------------------- \29\ 17 CFR 242.602. --------------------------------------------------------------------------- In addition, the Exchange believes that the proposal removes impediments to and perfects the mechanisms of a free and open market and a national market system and, in general, protects investors and the public interest by providing Market Makers with an additional purge message which allows them to remove their Standard quotes and blocks new inbound Standard quotes from being received yet preserves their ability to continue to provide liquidity to the market and interact with Public Customer orders via eQuotes. Further, the Exchange is clarifying existing rule text in Rule 519C to better describe current functionality available on the Exchange. The Exchange believes that clarifying current functionality promotes the protection of investors and the public interest by helping market participants better understand the risk protection tools available on the Exchange. The Exchange believes that the proposed rule change is consistent with Section 6(b)(4) of the Act,\30\ in that it provides for the equitable allocation of reasonable dues, fees and other charges among Members and other persons using any facility or system which the Exchange operates or controls. The Exchange believes that its proposed fees should facilitate the ability of the Exchange to recoup some costs associated with Purge Ports as well as provide, maintain, and improve Purge Ports. The Exchange operates in a highly competitive market in which exchanges offer connectivity services as a means to facilitate the trading activities of Members and other participants. Accordingly, fees charged for connectivity are constrained by the active competition for the order flow of such participants as well as demand for market data from the Exchange. If a particular exchange charges excessive fees for connectivity, affected Members will opt to terminate their connectivity arrangements with that exchange, and adopt a possible range of alternative strategies, including routing to the applicable exchange through another participant or market center or taking that exchange's data indirectly. Accordingly, the exchange charging excessive fees would stand to lose not only connectivity revenues but also revenues associated with the execution of orders routed to it by affected Members, and, to the extent applicable, market data revenues. The Exchange believes that this competitive dynamic imposes powerful restraints on the ability of any exchange to charge unreasonable fees for connectivity. The Exchange also believes the proposed fee for the Purge Ports is equitable, reasonable, and competitive with the rates charged by competitor exchanges for similar functionality.\31\ --------------------------------------------------------------------------- \30\ 15 U.S.C. 78f(b)(4). \31\ See supra note 20. --------------------------------------------------------------------------- The Exchange also believes that the proposed amendments to its fee schedule are non-discriminatory because they will apply uniformly to all Market Makers. The proposed Purge Ports are completely voluntary and no Market Maker is required or under any regulatory obligation to utilize them. All Market Makers that voluntarily request this service will be charged the same amount for the same service. All Market Makers have the option to select any connectivity option, and there is no differentiation among Market Makers with regard to the fees charged for the services offered by the Exchange. B. Self-Regulatory Organization's Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. The Exchange believes the proposed rule change will enhance competition because it will enable it to offer similar connectivity and functionality as its competitor exchanges.\32\ In addition, the proposed Purge Ports are completely voluntary and no Market Maker is required or under any regulatory obligation to utilize them. --------------------------------------------------------------------------- \32\ See supra note 28. --------------------------------------------------------------------------- The Exchange does not believe that allowing one type of Member (Market Makers) and not the other (EEMs) to utilize the proposed Purge Ports will impose any burden on competition that is not necessary or appropriate in furtherance of the Act, given the roles and responsibilities required by each type of Member. Market Makers connect to the Exchange via MEI while EEMs connect to the Exchange via FIX. Market Makers have a heightened obligation on the Exchange to maintain a continuous two-sided market, pursuant to Rule 604(e). As such, Market Makers have an obligation to provide continuous quotes for a large number of series. The volume of quotes that the Market Maker has in the market directly correlates to the Market Maker's risk exposure. EEMs, by contrast, can only send orders to the Exchange and do not have similar obligations. The Exchange believes providing Market Makers with an additional risk management tool will enhance competition as this tool is already offered by other exchanges.\33\ --------------------------------------------------------------------------- \33\ Id. --------------------------------------------------------------------------- The Exchange believes its proposed amendments to its Fee Schedule would not impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. On the contrary, the Exchange believes the proposed rule change will enhance competition because it will enable it to offer similar connectivity and functionality as its competitor exchanges.\34\ In addition, the proposed Purge Ports are completely voluntary and no Market Maker is required or under any regulatory obligation to utilize them. The Exchange does not believe that the proposed change represents a significant departure from previous pricing offered by the Exchange or pricing offered by the Exchange's competitors. Additionally, Market Makers may opt to disfavor the Exchange's pricing if they believe that alternatives offer them better value. Accordingly, the Exchange does not believe that the proposed change will impair the ability of Market Makers or competing venues to maintain their competitive standing in the financial markets. --------------------------------------------------------------------------- \34\ Id. --------------------------------------------------------------------------- The Exchange believes that fees for the proposed Purge Ports and connectivity, in general, are constrained by the robust competition for order flow among exchanges and non-exchange markets. Further, excessive fees for [[Page 36176]] connectivity, including Purge Port fees, would serve to impair an exchange's ability to compete for order flow rather than burdening competition. The Exchange also does not believe the proposed rule change would impact intramarket competition as it would apply to all Members and non-Members equally. 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 19(b)(3)(A) of the Act \35\ and Rule 19b-4(f)(6) \36\ thereunder. --------------------------------------------------------------------------- \35\ 15 U.S.C. 78s(b)(3)(A). \36\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) requires a self-regulatory organization to give the Commission written notice of its intent to file the proposed rule change at least five business days prior to the date of filing of the proposed rule change, or such shorter time as designated by the Commission. The Exchange has satisfied this requirement. --------------------------------------------------------------------------- A proposed rule change filed under Rule 19b-4(f)(6) normally does not become operative for 30 days after the date of filing. However, Rule 19b-4(f)(6)(iii) \37\ permits the Commission to designate a shorter time if such action is consistent with the protection of investors and the public interest. In its filing with the Commission, the Exchange requests that the Commission waive the 30-day operative delay. As noted above, the Exchange has proposed to announce an implementation date by Regulatory Circular, which the Exchange anticipates will be August 3, 2017. The Commission believes that waiving the 30-day operative delay is consistent with the protection of investors and the public interest, as it will enable the Exchange to allow the enhanced risk protection for Market Makers offered by the proposed Purge Ports to go into effect without undue delay. Accordingly, the Commission hereby waives the 30-day operative delay requirement and designates the proposed rule change operative upon filing.\38\ --------------------------------------------------------------------------- \37\ 17 CFR 240.19b-4(f)(6)(iii). \38\ For purposes only of waiving the 30-day operative delay, the Commission has considered the proposed rule's impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). --------------------------------------------------------------------------- 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 CommentsUse 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-2017-36 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-2017-36. 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-2017-36 and should be submitted on or before August 24, 2017. --------------------------------------------------------------------------- \39\ 17 CFR 200.30-3(a)(12). For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\39\ Brent J. Fields, Secretary. [FR Doc. 2017-16296 Filed 8-2-17; 8:45 am] BILLING CODE 8011-01-P
![36172 Federal Register / Vol. 82, No. 148 / Thursday, August 3, 2017 / Notices
All submissions should refer to File SECURITIES AND EXCHANGE concerning the purpose of and basis for
Number SR–NASDAQ–2017–077. This COMMISSION the proposed rule change and discussed
file number should be included on the any comments it received on the
[Release No. 34–81252; File No. SR–MIAX–
subject line if email is used. To help the proposed rule change. The text of these
2017–36]
Commission process and review your statements may be examined at the
comments more efficiently, please use Self-Regulatory Organizations; Miami places specified in Item IV below. The
only one method. The Commission will International Securities Exchange LLC; Exchange has prepared summaries, set
post all comments on the Commission’s Notice of Filing and Immediate forth in sections A, B, and C below, of
Internet Web site (http://www.sec.gov/ Effectiveness of a Proposed Rule the most significant aspects of such
Change To Adopt a New Type of MIAX statements.
rules/sro.shtml). Copies of the
submission, all subsequent Express Interface Port Known as a A. Self-Regulatory Organization’s
amendments, all written statements Purge Port, To Amend MIAX Options Statement of the Purpose of, and
with respect to the proposed rule Rule 519C, Mass Cancellation of Statutory Basis for, the Proposed Rule
change that are filed with the Trading Interest, To Adopt a New Change
Commission, and all written Purge Message, and To Amend Its Fee
Schedule To Adopt Fees for Purge 1. Purpose
communications relating to the
Ports The Exchange proposes to offer
proposed rule change between the
Market Makers 3 that connect to the
Commission and any person, other than July 28, 2017. Exchange using the MIAX Express
those that may be withheld from the Pursuant to the provisions of Section Interface (‘‘MEI’’) 4 a new type of
public in accordance with the 19(b)(1) of the Securities Exchange Act connection port, named Purge Ports, to
provisions of 5 U.S.C. 552, will be of 1934 (‘‘Act’’) 1 and Rule 19b–4 be used as dedicated ports for sending
available for Web site viewing and thereunder,2 notice is hereby given that purge messages to the Exchange. The
printing in the Commission’s Public on July 24, 2017, Miami International Exchange also proposes to amend its
Reference Room, 100 F Street NE., Securities Exchange, LLC (‘‘MIAX Fee Schedule to identify and adopt fees
Washington, DC 20549 on official Options’’ or ‘‘Exchange’’) filed with the for Purge Ports. Finally, the Exchange
business days between the hours of Securities and Exchange Commission proposes to amend Exchange Rule 519C,
10:00 a.m. and 3:00 p.m. Copies of the (‘‘Commission’’) a proposed rule change Mass Cancellation of Trading Interest, to
filing also will be available for as described in Items I and II below, adopt new rule text to reflect the
inspection and copying at the principal which Items have been prepared by the proposed Purge Port functionality, as
office of the Exchange. All comments Exchange. The Commission is well as to make clarifying changes to
received will be posted without change; publishing this notice to solicit existing rule text to more accurately
the Commission does not edit personal comments on the proposed rule change describe current functionality, and to
from interested persons. reorganize the rule for ease of reference.
identifying information from
submissions. You should submit only I. Self-Regulatory Organization’s Market Makers connect to the
Statement of the Terms of Substance of Exchange’s System 5 via their assigned
information that you wish to make
the Proposed Rule Change MEI ports. Currently, the Exchange
available publicly. All submissions
offers Market Makers two different types
should refer to File Number SR– The Exchange is filing a proposal to of MEI port connections. The first is a
NASDAQ–2017–077, and should be amend Rule 519C, Mass Cancellation of Full Service Port 6 which supports all
submitted on or before August 24, 2017. Trading Interest, to adopt new rule text message types, and the other is a
For the Commission, by the Division of to reflect the proposed Purge Port Limited Service Port 7 which provides
Trading and Markets, pursuant to delegated functionality, as well as to make slightly less functionality. The Exchange
authority.20 clarifying changes to existing rule text to limits Market Makers to two (2) Full
Brent J. Fields,
more accurately describe current
functionality, and to reorganize the rule 3 The term ‘‘Market Makers’’ refers to ‘‘Lead
Secretary. for ease of reference. The Exchange is Market Makers’’, ‘‘Primary Lead Market Makers’’
[FR Doc. 2017–16298 Filed 8–2–17; 8:45 am] also proposing to amend its Fee and ‘‘Registered Market Makers’’ collectively. See
Exchange Rule 100.
BILLING CODE 8011–01–P Schedule to adopt fees for Purge Ports. 4 MIAX Express Interface is a connection to MIAX
The text of the proposed changes to systems that enables Market Makers to submit
Exchange Rule 519C is attached as simple and complex electronic quotes to MIAX. See
Exhibit 5A. The proposed changes to the MIAX Options Fee Schedule, Section 5)d)ii),
footnote 26.
Fee Schedule are attached as Exhibit 5B. 5 The term ‘‘System’’ means the automated
The text of the proposed rule change is trading system used by the Exchange for the trading
available on the Exchange’s Web site at of securities. See Exchange Rule 100.
http://www.miaxoptions.com/rule- 6 Full Service MEI Ports provide Market Makers
filings, at MIAX’s principal office, and with the ability to send Market Maker simple and
complex quotes, eQuotes, and quote purge messages
at the Commission’s Public Reference to the MIAX System. Full Service MEI Ports are also
Room. capable of receiving administrative information.
Market Makers are limited to two Full Service MEI
II. Self-Regulatory Organization’s Ports per matching engine. See MIAX Options Fee
Statement of the Purpose of, and Schedule, Section 5)d)ii), footnote 27.
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7 Limited Service MEI Ports provide Market
Statutory Basis for, the Proposed Rule
Makers with the ability to send simple and complex
Change eQuotes and quote purge messages only, but not
In its filing with the Commission, the Market Maker Quotes, to the MIAX System. Limited
Exchange included statements Service MEI Ports are also capable of receiving
administrative information. Market Makers initially
receive two Limited Service MEI Ports per matching
1 15 U.S.C. 78s(b)(1). engine. See MIAX Options Exchange Fee Schedule,
20 17 CFR 200.30–3(a)(12). 2 17 CFR 240.19b–4. Section 5)d)ii), footnote 28.
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![36174 Federal Register / Vol. 82, No. 148 / Thursday, August 3, 2017 / Notices
The Exchange also proposes to amend remove all or a subset of its quotations rule change by Regulatory Circular to be
Exchange Rule 519C, Mass Cancellation and block all or a subset of its new published no later than 60 days
of Trading Interest, to clarify current inbound quotations by firm name or following the operative date of the
functionality. Specifically, the Exchange MPID.23 This functionality currently proposed rule. The implementation date
proposes to amend 519C(a) which reads, exists on the Exchange and is not new, will be no later than 60 days following
‘‘[a] Member 21 may remove all of its as a Market Maker may contact the issuance of the Regulatory Circular.
quotations and/or cancel all or any Exchange staff to have this action The Exchange currently anticipates
subset of its orders . . . .’’ Accordingly, performed on their behalf or may submit implementing the proposed rule change
the Exchange is deleting the reference to a request to the Exchange’s System via on August 3, 2017, subject to
quotations from this subsection (a) as its MEI port. However, what is now announcement of the actual date via
quotations will now be addressed in being proposed pursuant to this filing is Regulatory Circular.
subsection (b)(2). The Exchange that this request may also be sent
2. Statutory Basis
proposes to amend the sentence to read, electronically to the Exchange’s System
‘‘[a] Member may remove all or a subset via the new proposed Purge Ports. The Exchange believes that its
of its orders . . . .’’ The Exchange The Exchange also proposes to adopt proposed rule change is consistent with
believes that, although there is no new rule text for new functionality Section 6(b) of the Act 24 in general, and
change to existing functionality being introduced in this proposal which furthers the objectives of Section 6(b)(5)
addressed by subsection (a) of the rule, provides that a Market Maker may of the Act 25 in particular, in that it is
the proposed changes to subsection (a) remove all or a subset of its Standard designed to prevent fraudulent and
provide greater clarity regarding the quotations and block all or a subset of manipulative acts and practices, to
Exchange’s risk protection functionality its new inbound Standard quotations by promote just and equitable principles of
as it relates to the handling of orders. MPID. A Market Maker’s eQuotes that trade, to foster cooperation and
Additionally, the Exchange proposes to are in the System will remain and the coordination with persons engaged in
amend the rule to change the phrase, Market Maker will retain the ability to regulating, clearing, settling, processing
‘‘any subset’’ to ‘‘a subset’’ to be continue to send eQuotes to the System. information with respect to, and
consistent with proposed changes to This request may only be submitted to facilitating transactions in securities, to
section (b) of the Rule as described the Exchange’s System electronically via remove impediments to and perfect the
below. the Market Maker’s MEI port, either via mechanisms of a free and open market
The Exchange also proposes to amend its existing MEI ports, or via the new, and a national market system and, in
Exchange Rule 519C(b) to reorganize the proposed Purge Ports. general, to protect investors and the
rule for ease of reference and to reflect Lastly, the Exchange proposes to public interest.
the proposed Purge Port functionality. amend the rule text which currently The Exchange believes that the
Specifically, the Exchange proposes to states that, ‘‘[t]he block will remain in proposed rule change is consistent with
replace existing rule text pertaining to effect until the Member requests Section 6(b)(5) of the Act,26 in that it
the removal of quotations and the Exchange staff to remove the block,’’ by promotes just and equitable principles
cancellation of orders with a separate removing the word ‘‘staff.’’ To remove a of trade and removes impediments to
subsection for orders, proposed new block a Member may (i) send an and perfects the mechanism of a free
subsection (b)(1); and a separate electronic message directly into the and open market. Offering Market
subsection for quotations, proposed new Exchange’s System; or (ii) contact Makers designated Purge Ports would
subsection (b)(2). The Exchange Exchange staff. Additionally, a Market enhance their ability to manage quotes,
proposes to adopt new rule text under Maker may make a request to Exchange quote traffic, and their quoting
subsection (b)(1) to describe current staff to remove quotations or may send obligations,27 which would, in turn,
functionality pertaining to orders which a message directly to the Exchange’s improve their risk controls to the benefit
states, ‘‘[a]n EEM may request that the System via its MEI connection. The of all market participants. The Exchange
Exchange cancel all or a subset of its Exchange believes removing the word believes that Purge Ports would foster
orders in the System and block all new staff from the rule text more accurately cooperation and coordination with
inbound orders.’’ Under this proposal encompasses the activity under both persons engaged in facilitating
there is no change to the functionality scenarios. transactions in securities because
available for Electronic Exchange The Exchange notes that this proposal designating Purge Ports for purges only
Members (‘‘EEMs’’).22 The Exchange does not preclude Members from using may encourage better use of dedicated
believes that separately describing the existing purge messages provided by ports. This may, concurrent with the
functionality available for EEMs and either the MEI protocol or the cancel ports that carry quotes and other
Market Makers provides greater clarity messages provided by the FIX protocol. information necessary for market
and specificity in the Exchange’s rule. Under the MEI protocol, Market Makers making activities, enable more efficient,
Additionally, the Exchange proposes may request that all quotations for all as well as fair and reasonable, use of
to adopt new rule text under subsection underlyings, or for a specific Market Makers’ resources. As Purge
(b)(2) pertaining to quotations that underlying, be removed, and that new Ports are only available for purging and
provides that a Market Maker may inbound quotations for all underlyings, not for activities such as order or quote
or specific underlyings, be blocked. entry, the Purge Ports are not designed
$12,500 for SQF Purge Ports and SQF Ports, Under the FIX protocol, EEMs may also to permit unfair discrimination but
applicable to market makers.
21 The term ‘‘Member’’ means an individual or request that all, or a subset, of orders for rather are designed to enable Market
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organization approved to exercise the trading rights an MPID, or all Day or GTC orders for Makers to manage their quoting risk and
associated with a Trading Permit. Members are an MPID, on the requesting session, be meet their heightened quoting
deemed ‘‘members’’ under the Exchange Act. See canceled. obligations that other market
Exchange Rule 100.
22 The term ‘‘Electronic Exchange Member’’
The Exchange will announce the
means the holder of a Trading Permit who is not implementation date of the proposed 24 15 U.S.C. 78f(b).
25 15 U.S.C. 78f(b)(5).
a Market Maker. Electronic Exchange Members are
26 Id.
deemed ‘‘members’’ under the Exchange Act. See 23 The term ‘‘MPID’’ means Market Participant
Exchange Rule 100. Identifier. See Exchange Rule 519C. 27 See Exchange Rule 604.
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![36176 Federal Register / Vol. 82, No. 148 / Thursday, August 3, 2017 / Notices
connectivity, including Purge Port fees, proposed rule change operative upon 10:00 a.m. and 3:00 p.m. Copies of the
would serve to impair an exchange’s filing.38 filing also will be available for
ability to compete for order flow rather At any time within 60 days of the inspection and copying at the principal
than burdening competition. The filing of the proposed rule change, the office of the Exchange. All comments
Exchange also does not believe the Commission summarily may received will be posted without change;
proposed rule change would impact temporarily suspend such rule change if the Commission does not edit personal
intramarket competition as it would it appears to the Commission that such identifying information from
apply to all Members and non-Members action is necessary or appropriate in the submissions. You should submit only
equally. public interest, for the protection of information that you wish to make
investors, or otherwise in furtherance of available publicly. All submissions
C. Self-Regulatory Organization’s the purposes of the Act. If the should refer to File Number SR–MIAX–
Statement on Comments on the Commission takes such action, the 2017–36 and should be submitted on or
Proposed Rule Change Received From Commission shall institute proceedings before August 24, 2017.
Members, Participants, or Others to determine whether the proposed rule For the Commission, by the Division of
should be approved or disapproved. Trading and Markets, pursuant to delegated
Written comments were neither
authority.39
solicited nor received. IV. Solicitation of Comments
Brent J. Fields,
III. Date of Effectiveness of the Interested persons are invited to Secretary.
Proposed Rule Change and Timing for submit written data, views, and [FR Doc. 2017–16296 Filed 8–2–17; 8:45 am]
Commission Action arguments concerning the foregoing, BILLING CODE 8011–01–P
including whether the proposed rule
Because the foregoing proposed rule change is consistent with the Act.
change does not: (i) Significantly affect Comments may be submitted by any of SECURITIES AND EXCHANGE
the protection of investors or the public the following methods: COMMISSION
interest; (ii) impose any significant
Electronic Comments [Release No. 34–81261; File No. SR–C2–
burden on competition; and (iii) become
operative for 30 days from the date on • Use the Commission’s Internet 2017–022]
which it was filed, or such shorter time comment form (http://www.sec.gov/
Self-Regulatory Organizations; C2
as the Commission may designate, it has rules/sro.shtml); or
Options Exchange, Incorporated;
become effective pursuant to 19(b)(3)(A) • Send an email to rule-comments@
Notice of Filing and Immediate
of the Act 35 and Rule 19b–4(f)(6) 36 sec.gov. Please include File Number SR–
Effectiveness of a Proposed Rule
thereunder. MIAX–2017–36 on the subject line.
Change To Amend Rule 6.1, Days and
A proposed rule change filed under Paper Comments Hours of Business, To Clarify the
Rule 19b–4(f)(6) normally does not Trading Hours for Options on Index-
• Send paper comments in triplicate
become operative for 30 days after the Linked Exchangeable Notes
to Secretary, Securities and Exchange
date of filing. However, Rule 19b– Commission, 100 F Street NE., July 31, 2017.
4(f)(6)(iii) 37 permits the Commission to Washington, DC 20549–1090. Pursuant to Section 19(b)(1) of the
designate a shorter time if such action All submissions should refer to File Securities Exchange Act of 1934 (the
is consistent with the protection of Number SR–MIAX–2017–36. This file ‘‘Act’’),1 and Rule 19b–4 thereunder,2
investors and the public interest. In its number should be included on the notice is hereby given that on July 18,
filing with the Commission, the subject line if email is used. To help the 2017, C2 Options Exchange,
Exchange requests that the Commission Commission process and review your Incorporated (the ‘‘Exchange’’ or ‘‘C2’’)
waive the 30-day operative delay. As comments more efficiently, please use filed with the Securities and Exchange
noted above, the Exchange has proposed only one method. The Commission will Commission (the ‘‘Commission’’) the
to announce an implementation date by post all comments on the Commission’s proposed rule change as described in
Regulatory Circular, which the Internet Web site (http://www.sec.gov/ Items I and II, below, which Items have
Exchange anticipates will be August 3, rules/sro.shtml). Copies of the been prepared by the Exchange. The
2017. The Commission believes that submission, all subsequent Exchange filed the proposal as a ‘‘non-
waiving the 30-day operative delay is amendments, all written statements controversial’’ proposed rule change
consistent with the protection of with respect to the proposed rule pursuant to Section 19(b)(3)(A)(iii) of
investors and the public interest, as it change that are filed with the the Act 3 and Rule 19b–4(f)(6)
will enable the Exchange to allow the Commission, and all written thereunder.4 The Commission is
enhanced risk protection for Market communications relating to the publishing this notice to solicit
Makers offered by the proposed Purge proposed rule change between the comments on the proposed rule change
Ports to go into effect without undue Commission and any person, other than from interested persons.
delay. Accordingly, the Commission those that may be withheld from the
hereby waives the 30-day operative I. Self-Regulatory Organization’s
public in accordance with the Statement of the Terms of Substance of
delay requirement and designates the provisions of 5 U.S.C. 552, will be the Proposed Rule Change
available for Web site viewing and
35 15 U.S.C. 78s(b)(3)(A). printing in the Commission’s Public The purpose of this filing is to amend
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36 17 CFR 240.19b–4(f)(6). In addition, Rule 19b– Reference Room, 100 F Street NE., C2 Rule 6.1 to clarify the trading hours
4(f)(6) requires a self-regulatory organization to give for options on Index-Linked
the Commission written notice of its intent to file
Washington, DC 20549, on official
the proposed rule change at least five business days business days between the hours of
39 17 CFR 200.30–3(a)(12).
prior to the date of filing of the proposed rule
1 15 U.S.C. 78s(b)(1).
change, or such shorter time as designated by the 38 Forpurposes only of waiving the 30-day
2 17 CFR 240.19b–4.
Commission. The Exchange has satisfied this operative delay, the Commission has considered the
requirement. proposed rule’s impact on efficiency, competition, 3 15 U.S.C. 78s(b)(3)(A)(iii).
37 17 CFR 240.19b–4(f)(6)(iii). and capital formation. See 15 U.S.C. 78c(f). 4 17 CFR 240.19b–4(f)(6).
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Document Created: 2017-08-03 07:24:30
Document Modified: 2017-08-03 07:24:30
| 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 | 82 FR 36172 |
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