82_FR_51127 82 FR 50916 - Self-Regulatory Organizations; Miami International Securities Exchange LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend MIAX Options Rule 518 Relating to Derived Orders

82 FR 50916 - Self-Regulatory Organizations; Miami International Securities Exchange LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend MIAX Options Rule 518 Relating to Derived Orders

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 82, Issue 211 (November 2, 2017)

Page Range50916-50921
FR Document2017-23825

Federal Register, Volume 82 Issue 211 (Thursday, November 2, 2017)
[Federal Register Volume 82, Number 211 (Thursday, November 2, 2017)]
[Notices]
[Pages 50916-50921]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2017-23825]


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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-81967; File No. SR-MIAX-2017-44]


Self-Regulatory Organizations; Miami International Securities 
Exchange LLC; Notice of Filing and Immediate Effectiveness of a 
Proposed Rule Change To Amend MIAX Options Rule 518 Relating to Derived 
Orders

October 27, 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 October 19, 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 Exchange Rule 518(a)(9) 
to: (i) Update the definition of a derived order on the Exchange, (ii) 
clarify the circumstances under which a derived order is generated by 
the Exchange's System, and the price at which a derived order may be 
generated, and (iii) expand the situations under which a derived order 
is removed from the Exchange's Simple Order Book.
    The text of the proposed rule change is available on the Exchange's 
Web site at http://www.miaxoptions.com/rule-filings/ at MIAX Options' 
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(a)(9) to: (i) 
Update the definition of a derived order on the Exchange, (ii) clarify 
the circumstances under which a derived order is generated by the 
Exchange's System,\3\ and the price at which a derived order may be 
generated, and (iii) expand the situations under which a derived order 
is removed from the Exchange's Simple Order Book.\4\
---------------------------------------------------------------------------

    \3\ The term ``System'' means the automated trading system used 
by the Exchange for the trading of securities. See Exchange Rule 
100.
    \4\ The ``Simple Order Book'' is the Exchange's regular 
electronic book of orders and quotes. See Exchange Rule 518(a)(15).
---------------------------------------------------------------------------

    A ``derived order'' is an Exchange-generated limit order on the 
Simple Order Book that represents either the bid or offer of one 
component of a complex order resting on the Strategy

[[Page 50917]]

Book \5\ that is comprised of orders to buy or sell an equal quantity 
(currently with a one-to-one ratio) of two option components.\6\ 
Derived orders will not be routed outside of the Exchange regardless of 
the price(s) disseminated by away markets. The Exchange will determine 
on a class-by-class basis to make available derived orders and 
communicate such determination to Members \7\ via a Regulatory 
Circular. Derived orders are firm orders (i.e., if executed, firm for 
the disseminated price and size) that are included in the MBBO.\8\
---------------------------------------------------------------------------

    \5\ The ``Strategy Book'' is the Exchange's electronic book of 
complex orders and complex quotes. See Exchange Rule 518(a)(17).
    \6\ See Exchange Rule 518(a)(9).
    \7\ 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.
    \8\ The term ``MBBO'' means the best bid or offer on the Simple 
Order Book (as defined below) on the Exchange. See Exchange Rule 
518(a)(13).
---------------------------------------------------------------------------

    The Exchange is proposing to amend the definition of a ``derived 
order'' in two ways. First, the Exchange is proposing to revise the 
current requirement in Rule 518(a)(9) that a derived order can only be 
generated from one component of a complex order resting on the Strategy 
Book that is comprised of orders to buy or sell an equal quantity 
(currently with a one-to-one ratio) of two option components. Under the 
proposal, a derived order may now be comprised of orders to buy or sell 
two option components, where the size of one component has a base ratio 
of ``one'' relative to the other component (1:1, 1:2, or 1:3). Thus, 
the basis for the generation of derived orders on the Exchange will not 
be restricted to complex orders of equal size with a one-to-one ratio; 
instead, a derived order may be generated by using a complex order 
resting on the Strategy Book with two components, provided that one 
component of the complex order has a base ratio of one relative to the 
other component. For example, a complex order whose components have a 
size ratio of 1:3 could be used to generate a derived order, whereas a 
complex order whose components have a size ratio of 2:3 could not.\9\ 
The Exchange notes that another options exchange permits a derived, or 
``leg'' order, to be generated using a complex order with a ratio 
greater than 1:1.\10\ The Exchange believes that the revision of the 
one-to-one ratio limitation should increase the potential number of 
derived orders that may be generated by the System, which should result 
in greater liquidity and more opportunities for participants to trade 
complex orders on the Exchange.\11\
---------------------------------------------------------------------------

    \9\ A leg order may only be generated for the legs of complex 
orders with a ratio of 1:1, 1:2, or 1:3. (A leg order will not be 
generated for the legs of a complex order with a 1:4 ratio). For 
example, if a complex order to buy 10 of series A and sell 20 of 
series B is resting on the Strategy Book, a leg order will be 
generated for the leg to buy 10 of series A (ratio of 1:2), but not 
for the leg to sell 20 of series B (ratio of 2:1). If a complex 
order to buy 20 of series A and sell 30 of series B is resting on 
the Strategy Book, no leg orders will be generated for either leg 
(ratio is 2:3 for leg 1 and 3:2 for leg 2).
    \10\ See Chicago Board Options Exchange, Inc. (``CBOE'') Rule 
6.53(x).
    \11\ The Exchange notes that other exchanges require a complex 
order used to generate a derived or ``legging'' order to be for an 
equal quantity of two options. See, e.g., NASDAQ PHLX LLC (``Phlx'') 
Rule 1098(f)(iii)(C)(1). See also, Nasdaq ISE, LLC (``ISE'') Rule 
715(k). The Exchange's proposal is distinguished in that it seeks to 
expand its current one-to-one ratio requirement to include any 
complex order with a component that has a base of one with respect 
to the other component.
---------------------------------------------------------------------------

    The Exchange is also proposing to amend Rule 518(a)(9) by adding a 
final sentence stating that derived orders are subject to the managed 
interest process described in Rule 515(c)(1)(ii).\12\ The purpose of 
this provision is to ensure that a derived order (which is firm for its 
price and size) is handled in accordance with that Rule so that it does 
not lock or cross an away market price at the NBBO.\13\ An example of a 
derived order subject to the managed interest process is provided 
below.
---------------------------------------------------------------------------

    \12\ Under the managed interest process, non-routable orders 
whose limit price locks or crosses the current opposite side 
National Best Bid or Offer (``NBBO'') are displayed one Minimum 
Price Variation (``MPV'') away from the current opposite side NBBO, 
and placed on the Simple Order Book at a price that will lock the 
current opposite side NBBO. Should the NBBO price change to an 
inferior price level, the order's price on the Simple Order Book 
will continuously re-price to lock the new NBBO and the managed 
order's displayed price will continuously re-price one MPV away from 
the new NBBO. See Exchange Rule 515(c)(1)(ii).
    \13\ The term ``NBBO'' means the national best bid or offer as 
calculated by the Exchange based on market information received from 
OPRA. See Exchange Rule 100.
---------------------------------------------------------------------------

Example 1
Option A ($.05 MPV) \14\
---------------------------------------------------------------------------

    \14\ The default Minimum Price Variation (``MPV'') of an option 
contract trading at less than $3.00 per option is $.05. See Exchange 
Rule 510.
---------------------------------------------------------------------------

    MBBO: $2.00 x $2.20
    ABBO: $2.00 x $2.10
    NBBO: $2.00 x $2.10
Option B ($.05 MPV)
    MBBO: $1.00 x $1.05
    ABBO: $1.00 x $1.05
    NBBO: $1.00 x $1.05
Strategy: Buy 1 Option A, Sell 1 Option B
    icMBBO: \15\ $.95 x $1.20
---------------------------------------------------------------------------

    \15\ The ``icMBBO'' is the Implied Complex MIAX Best Bid or 
Offer. The icMBBO is a calculation that uses the best price from the 
Simple Order Book for each component of a complex strategy including 
displayed and non-displayed trading interest. See Exchange Rule 
518(a)(11).
---------------------------------------------------------------------------

    cNBBO: \16\ $.95 x $1.10
---------------------------------------------------------------------------

    \16\ The ``cNBBO'' is the Complex National Best Bid or Offer. 
The cNBBO is calculated using the NBBO for each component of a 
complex strategy to establish the best net bid and offer for a 
complex strategy. See Exchange Rule 518(a)(2).
---------------------------------------------------------------------------

Strategy Order
    Buy 1 (+1A -1B) $1.10 net debit

    The System will create a derived order to buy Option A at a price 
of $2.10. The new MBBO would be $2.10 x $2.20. However, the $2.10 bid 
price would lock the ABBO \17\ offer for Option A, which is being 
quoted on an away exchange at $2.00 x $2.10. Therefore, the derived 
order will be managed in accordance with the Exchange's managed 
interest process. Under the Exchange's managed interest process for 
non-routable orders defined in Rule 515(c)(1)(ii)(A), if the limit 
price of an order ($2.10 bid) locks or crosses the current opposite 
side NBBO ($2.10 offer), the System will display the order one MPV 
($.05) away from the current opposite side NBBO ($2.05 bid), and book 
the order at a price that will lock the current side NBBO. Therefore, 
the derived order in Option A will have a Book \18\ price of $2.10 and 
will be displayed at $2.05, the MBBO will therefore be $2.05 x $2.20.
---------------------------------------------------------------------------

    \17\ The term ``ABBO'' means the best bid(s) or offer(s) 
disseminated by other Eligible Exchanges (defined in Exchange Rule 
1400(f)) and calculated by the Exchange based on market information 
received by the Exchange from OPRA. See Exchange Rule 100.
    \18\ The term ``Book'' means the electronic book of buy and sell 
orders and quotes maintained by the System. See Exchange Rule 100.
---------------------------------------------------------------------------

Option A
    MBBO: $2.05 x $2.20
    ABBO: $2.00 x $2.10
    NBBO: $2.05 x $2.10

    Should interest arrive on MIAX Options to sell at $2.10 or lower, 
it will trade at $2.10 against the derived order, as Rule 
515(c)(1)(ii)(A) provides that if the Exchange receives a new order or 
quote on the opposite side of the market from the managed order that 
can be executed, the System will immediately execute the remaining 
contracts from the initiating order to the extent possible at the 
order's current Book price ($2.10), provided that the execution price 
does not violate the current NBBO. The other side of the complex order 
will execute against the $1.00 bid price for Option B, effectively 
legging the complex order for a net price of $1.10.
    The Exchange believes that generating and managing a derived order 
(rather

[[Page 50918]]

than simply preventing its generation) \19\ creates and preserves 
additional opportunities for complex orders to be executed as 
individual components against orders resting on the Simple Order Book 
as market conditions change.
---------------------------------------------------------------------------

    \19\ Other exchanges have determined not to generate derived or 
``leg'' orders that would lock or cross the NBBO. See, e.g., CBOE 
Rule 6.53C(c)(iv)(1)(A). See also, ISE Rule 715(k)(1). Despite this 
distinction, the Exchange's inclusion of derived orders in the 
managed interest process is intended to achieve the same result, 
i.e., to prevent a derived order from locking or crossing an away 
market.
---------------------------------------------------------------------------

    The Exchange is also proposing to amend Rule 518(a)(9)(i) to 
provide more detail regarding the circumstances under which a derived 
order is generated by the Exchange's System, and the price at which a 
derived order must be generated. Currently, a derived order may be 
automatically generated for one or more legs of a complex order at a 
price: (A) That matches or improves upon the best displayed bid or 
offer in the affected series on the Simple Order Book; and (B) at which 
the net price of the complex order on the Strategy Book can be achieved 
when the other component of the complex order is executed against the 
best displayed bid or offer on the Simple Order Book. Additionally, a 
derived order will not be displayed at a price that locks or crosses 
the best bid or offer of another exchange. In such a circumstance, the 
System will display the derived order on the Simple Order Book at a 
price that is one MPV away from the current opposite side best bid or 
offer of such other exchange, and rank the derived order on the Simple 
Order Book according to its actual price.\20\
---------------------------------------------------------------------------

    \20\ See Exchange Rule 518(a)(9)(ii).
---------------------------------------------------------------------------

    The Exchange is proposing to amend Rule 518(a)(9)(i) to add more 
detail to the rule stating that a derived order may be automatically 
generated if the complex order is eligible for ``Legging'' pursuant to 
Rule 518(c)(2)(iii), and meets the requirements set forth therein.\21\ 
The purpose of this proposed amendment is to establish clearly in the 
Exchange's Rules that the System will only generate derived orders for 
complex orders that are eligible for legging--that is, complex orders 
whose components can be executed as individual legs against orders 
resting on the Simple Order Book. Conversely, if a complex order is not 
eligible for legging, then the System will not generate derived orders 
with respect to that complex order.\22\
---------------------------------------------------------------------------

    \21\ Complex orders up to a maximum number of legs (determined 
by the Exchange on a class-by-class basis as either two or three 
legs and communicated to Members via Regulatory Circular) may be 
automatically executed against bids and offers on the Simple Order 
Book for the individual legs of the complex order (``Legging''), 
provided the complex order can be executed in full or in a 
permissible ratio by such bids and offers, and provided that the 
execution price of each component is not executed at a price that is 
outside of the NBBO. See Exchange Rule 518(c)(2)(iii).
    \22\ The Exchange notes that while derived order functionality 
was approved with the Exchange's filing to adopt new rules to govern 
the trading of Complex orders, the functionality has not yet been 
implemented in the System. See Exchange Act Release No. 79072 
(October 7, 2016), 81 FR 71131 (October 14, 2016) (SR-MIAX-2016-26).
---------------------------------------------------------------------------

    The Exchange is proposing to amend Rule 518(a)(9)(i)(B) to make a 
technical modification to the current rule text. Currently, the rule 
provides that a derived order may automatically be generated for one or 
more legs of a complex order at a price, ``at which the net price of 
the complex order on the Strategy Book can be achieved when the other 
component(s) of the complex order is (are) executed against the best 
displayed bid or offer on the Simple Order Book.'' The Exchange 
proposes to make the word ``components'' singular by removing the 
``(s)'' and removing the word ``(are)'' following the phrase ``complex 
order'' so that the new sentence has the proper subject-verb agreement. 
The Exchange believes this change describes System functionality with 
more accuracy and precision.
    The Exchange is proposing to amend Rule 518(a)(9)(i)(B) to state 
that a derived order may be automatically generated for one or more 
legs of a complex order at a price at which the net price of the 
complex order ``at the best price'' on the Strategy Book can be 
achieved when the other component of the complex order is executed 
against the best displayed bid or offer on the Simple Order Book. This 
requirement is intended to ensure that a complex order executed by way 
of generating and Legging a derived order for execution against an 
order on the Simple Order Book is not executed at a net price that is 
inferior to the best net price displayed on the Strategy Book. A 
derived order could not, therefore, result in a trade-through of a 
complex order resting on the Strategy Book at the Exchange's best 
displayed net price.
    The Exchange is also proposing to amend Rule 518(a)(9)(vi), which 
describes the various circumstances under which a derived order that 
has been generated is removed from the Simple Order Book. Specifically, 
the Exchange is proposing to amend Rule 518(a)(9)(vi)(B), which 
currently provides that a derived order is automatically removed from 
the Simple Order Book if the execution of the derived order would no 
longer achieve the net price of the complex order on the Strategy Book 
when the other component of the complex order is executed against the 
best bid or offer on the Simple Order Book. The Exchange is proposing 
to replace the word ``would'' with the word ``may'' in this sub-
paragraph in order to broaden the rule to reflect that the System will 
remove a derived order from the Simple Order Book any time the price of 
the best bid or offer on the Simple Order Book changes such that the 
net price of the complex order to be executed may not be achieved. A 
price change of the best bid or offer could be either: (i) Improving 
(raising the bid or lowering the offer) or, (ii) worsening (lowering 
the bid or raising the offer). In scenario (i), the derived order could 
remain on the Simple Order Book as it could still achieve the net price 
of the complex order. However, in scenario (ii), the derived order may 
not achieve the net price of the complex order depending upon how much 
the price had moved. For the sake of processing efficiency and speed, 
rather than perform the calculation to determine if the derived order 
could still achieve the net price for the complex order in scenario 
(ii), the System simply cancels any derived order in scenario (i) or 
(ii). The Exchange believes that removal of the derived order from the 
Simple Order Book when there is a possibility that the complex order 
may not be executed at its net price is prudent and is an appropriate 
safeguard against such an execution.\23\ The Exchange's System re-
evaluates each strategy on the Strategy Book on a periodic basis to 
ascertain if the creation of a derived order is warranted. If, upon re-
evaluation, the new price allows a new derived order for the strategy, 
such new derived order will then be created.\24\ As re-evaluation is a 
continual process, the Exchange believes it is more expedient to cancel 
a derived order where a change in price may no longer allow the derived 
order to achieve the net price for the complex order and rely upon the 
re-evaluation process to create a new derived order when warranted. The 
Exchange believes that changing the language in the rule from ``would'' 
to ``may'' more accurately describes the operation of Exchange 
functionality.
---------------------------------------------------------------------------

    \23\ The System continually evaluates complex orders and quotes 
on the Strategy Book to determine, among other things, whether a 
derived order should be generated or cancelled. See Exchange Rule 
518(c)(5)(ii). Thus, when the System cancels and removes a derived 
order from the Simple Order Book, the System could thereafter 
generate another derived order using the same complex order based 
upon the evaluation process if the appropriate conditions are 
present.
    \24\ Id.

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

[[Page 50919]]

    The Exchange is also proposing to amend Rules 518(a)(9)(vi)(C) and 
(D), which currently describe the automatic removal of a derived order 
from the Simple Order Book when the complex order is executed in full, 
or is cancelled. The Exchange is proposing to consolidate sub-
paragraphs (C) and (D) into one sub-paragraph (C), to delete the phrase 
``in full,'' and to broaden the rule by stating that a derived order is 
automatically removed from the Simple Order Book if the complex order 
is executed, cancelled, or modified in any way.\25\ The Exchange 
believes that any change to a complex order used to generate a derived 
order obviates the need for the derived order at its limit price and 
size on the Simple Order Book. The phrase ``modified in any way'' is 
intended to capture, without limitation, any modification to the price 
or size of the complex order. Such a modification could require a 
different limit price for the derived order to achieve the best 
execution price of the complex order, or result in a size ratio that 
does not comply with the ``base of one'' ratio in proposed Rule 
518(a)(9) discussed above, in which case the complex order could not be 
executed. The Exchange is proposing to remove the derived order from 
the Simple Order Book when the complex order is modified in any way in 
order to prevent these circumstances.
---------------------------------------------------------------------------

    \25\ This is substantially similar to rules that are currently 
operative on other exchanges. See ISE Rule 715(k)(3)(iii) and (iv). 
See also, CBOE Rule 6.53C(c)(iv)(3)(B)(II) and (III), and Phlx Rule 
1098(f)(iii)(C)(4)(iii) and (iv).
---------------------------------------------------------------------------

    The Exchange is also proposing to amend Rule 518(a)(9)(vi)(D) by 
deleting the current text (see above) and adopting new Rule 
518(a)(9)(vi)(D) to state that a derived order is automatically removed 
from the Simple Order Book if the strategy \26\ enters a cPRIME Auction 
(as described in Rule 515A, Interpretations and Policies .12) \27\ or a 
Complex Auction (pursuant to Rule 518(d)).\28\ This would include any 
strategy that has, as a component, an option that is of the same type 
as a derived order.\29\ To illustrate, using the example set forth 
above,\30\ the System would automatically remove from the Simple Order 
Book the derived order in Option A if strategy AB (or any other 
strategy having Option A as a component) enters a cPRIME Auction or a 
Complex Auction. The System would wait until a cPRIME Auction or 
Complex Auction is concluded before creating a derived order for an 
option that is subject to such an auction.\31\ A complex order that 
enters and is processed in a cPRIME Auction or a Complex Auction is 
subject to execution at improved prices against complex orders 
submitted in response to the Exchange's notification, and thus could 
cause the derived order to be priced such that it may no longer achieve 
the best net price of the complex order. In this situation, therefore, 
the System will automatically remove the derived order from the Simple 
Order Book. Finally, the Exchange proposes to amend Rule 
518(a)(9)(vi)(E) by adding a sentence stating that, if a derived order 
is removed from the Simple Order Book, the System will continually 
evaluate any remaining complex order(s) on the Strategy Book to 
determine whether a new derived order should be generated, as described 
in Rule 518(c)(5).\32\ The purpose of this provision is to ensure that 
a new derived order can and will be generated by the System under the 
proper conditions even after a previously generated derived order has 
been removed from the Simple Order Book. The Exchange believes that 
this provides additional opportunities to execute complex orders 
through Legging using derived orders as market conditions change.
---------------------------------------------------------------------------

    \26\ The term ``complex strategy'' means a particular 
combination of components and their ratios to one another. New 
complex strategies can be created as the result of the receipt of a 
complex order or by the Exchange for a complex strategy that is not 
currently in the System. The Exchange may limit the number of new 
complex strategies that may be in the System at a particular time 
and will communicate this limitation to Members via Regulatory 
Circular. See Exchange Rule 518(a)(6).
    \27\ The Exchange recently adopted rules that permit the 
submission of complex orders for price improvement and execution in 
the MIAX Price Improvement Mechanism (``PRIME''). Complex orders 
submitted into PRIME are known as ``cPRIME Orders'' and are 
processed in a ``cPRIME Auction.'' See Securities Exchange Act 
Release No. 81131 (July 12, 2017), 82 FR 32900 (July 18, 2017) (SR-
MIAX-2017-19).
    \28\ Currently, the Exchange may determine to automatically 
submit a Complex Auction-eligible order into a Complex Auction and 
begin the Complex Auction process by sending a message to 
participants requesting responses to the Complex Auction. See 
Exchange Rule 518(d). For a complete description of the Complex 
Auction, see Securities Exchange Act Release No. 79072 (October 7, 
2016), 81 FR 71131 (October 14, 2016) (SR-MIAX-2016-26).
    \29\ An option of the same type would be either the put or call 
option in the same series as a component in the strategy. (E.g., if 
the complex strategy was a long straddle to Buy 1 JNJ Oct 141 Call 
and to Buy 1 JNJ Oct 141 Put, a derived order in either of those 
options would be considered an option of the same type, and would be 
removed if the strategy entered a cPRIME Auction or a Complex 
Auction).
    \30\ See Example 1 on page 6 [sic].
    \31\ See supra note 23.
    \32\ Id.
---------------------------------------------------------------------------

    The Exchange believes that the proposed rule change relating to 
derived orders will facilitate more interaction between the Strategy 
Book and the Simple Order Book, resulting in increased execution 
opportunities and better execution prices for complex orders and for 
orders resting on the Simple Order Book.
    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.
2. Statutory Basis
    The Exchange believes that its proposed rule change is consistent 
with section 6(b) of the Act \33\ in general, and furthers the 
objectives of section 6(b)(5) of the Act \34\ 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.
---------------------------------------------------------------------------

    \33\ 15 U.S.C. 78f(b).
    \34\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Exchange's proposal to amend Rule 518(a)(9) to remove the 
limitation on the generation of derived orders to use only complex 
orders of equal size with a one-to-one ratio, and instead to permit a 
derived order to be generated by using a complex order resting on the 
Strategy Book with a ratio of greater than one-to-one, provided that 
one component of the complex order that is used to generate the derived 
order has a base ratio of one relative to the other component, is 
designed to remove impediments to and perfect the mechanisms of a free 
and open market and a national market system. Specifically, the 
Exchange believes that this proposal will increase the number of 
derived orders that may be generated on the Exchange, thus enhancing 
liquidity and increasing the number of opportunities for the execution 
of complex orders on the Exchange.
    The Exchange's proposal to state in Rule 518(a)(9) that derived 
orders are subject to the managed interest process described in Rule 
515(c)(1)(ii) is designed protect investors and the public interest by 
ensuring that a derived order (which is firm for its price and size) 
does not lock or cross an away market price at the NBBO. If a derived 
order were to lock or cross an away market price at the NBBO, the 
Exchange would not be able to route the derived

[[Page 50920]]

order to such a market because derived orders are not routable. The 
inclusion of derived orders in the managed interest process thus 
protects investors and the public interest by removing the possibility 
that this situation could occur, while maintaining the derived order on 
the Simple Order Book.
    The proposed amendment to Exchange Rule 518(a)(9)(i), adding the 
requirement that a derived order may be automatically generated if the 
complex order is eligible for Legging pursuant to Rule 518(c)(2)(iii), 
is designed to remove impediments to and perfect the mechanisms of a 
free and open market by establishing clearly in the Exchange's Rules 
that the System will generate derived orders only for complex orders 
whose components (including the component represented by a derived 
order) can be executed as individual legs against orders on the Simple 
Order Book. In order for a component to be executed against an order on 
the Simple Order Book, the complex order must be executed by way of its 
individual legs; there is thus no need for, or purpose in, generating a 
derived order for a complex order that is not eligible for Legging.
    The Exchange's proposal to amend Rule 518(a)(9)(i)(B) to clarify 
the conditions required for the creation of derived orders would 
promote just and equitable principles of trade and remove impediments 
to a free and open market by providing greater transparency concerning 
the operation of Exchange functionality.
    The Exchange's proposal to amend Rule 518(a)(9)(i)(B), to require 
that a derived order be generated at a price at which the net price of 
the complex order at the best price on the Strategy Book can be 
achieved, is designed 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 by ensuring 
that a complex order executed by way of Legging against orders on the 
Simple Order Book could not result in a trade-through of a complex 
order at the Exchange's best displayed net price.
    The proposed amendment to Exchange Rule 518(a)(9)(vi)(B) is 
designed 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 by ensuring that a derived 
order is removed from the Simple Order Book any time the price of the 
best bid or offer on the Simple Order Book changes such that the net 
price of a complex order at the top of the Strategy Book may not be 
achieved by executing the derived order and another order at the 
changed price, thus protecting investors by ensuring a safeguard 
against such an execution.
    The proposed amendments to Rules 518(a)(9)(vi)(C) and (D), 
describing the automatic removal of derived orders from the Simple 
Order Book, are designed to protect investors and the public interest 
by ensuring that derived orders do not result in executions that trade 
through the top of the Exchange's Simple Order Book and Strategy Book, 
and that executions on the Simple Order Book and on the Strategy Book 
do not result in prices that trade through away markets.
    Amended Rule 518(a)(9)(vi)(E), stating that the System will 
continually evaluate any remaining complex order(s) on the Strategy 
Book to determine whether a new derived order should be generated, 
ensures that a new derived order can and will be generated by the 
System under the proper conditions even after a previously generated 
derived order has been removed from the Simple Order Book. This 
provision is designed to promote just and equitable principles of trade 
and also to remove impediments to and perfect the mechanisms of a free 
and open market and a national market system by providing more 
opportunities to execute complex orders through Legging using derived 
orders as market conditions change.
    The Exchange also believes that the proposed rule change removes 
impediments to and perfects the mechanisms of a free and open market 
and a national market system by attracting more order flow and by 
increasing the frequency with which MIAX Options participants are able 
to trade complex orders.

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 not necessary or appropriate in 
furtherance of the purposes of the Act. The Exchange believes that the 
proposed rule change enhances intermarket competition by providing 
market participants with additional opportunities to execute complex 
orders through the generation of a greater number of derived orders 
using an expanded permissible size ratio. The Exchange believes that 
the additional opportunities to trade complex orders will result in the 
submission of more complex orders for execution on the Exchange, thus 
enhancing the Exchange's competitive position by increasing liquidity 
and order flow on the Exchange. Moreover, the proposed rule change is 
consistent with the rules of other exchanges, as cited above.\35\
---------------------------------------------------------------------------

    \35\ See supra notes 10, 11, 19 and 25.
---------------------------------------------------------------------------

    The Exchange also believes that its proposal enhances intra-market 
competition, as all Exchange participants in the same category are able 
to participate on an equal basis with respect to the trading of complex 
orders.
    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, it has become effective pursuant to section 
19(b)(3)(A) of the Act \36\ and Rule 19b-4(f)(6) thereunder.\37\
---------------------------------------------------------------------------

    \36\ 15 U.S.C. 78s(b)(3)(A).
    \37\ 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.
---------------------------------------------------------------------------

    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 change 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.

[[Page 50921]]

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 rule-comments@sec.gov. Please include 
File Number SR-MIAX-2017-44 on the subject line.

Paper Comments

     Send paper comments in triplicate to Brent J. Fields, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-MIAX-2017-44. 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 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. Persons submitting 
comments are cautioned that we do not redact or edit personal 
identifying information from comment submissions. You should submit 
only information that you wish to make available publicly. All 
submissions should refer to File Number SR-MIAX-2017-44 and should be 
submitted on or before November 24, 2017.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\38\
---------------------------------------------------------------------------

    \38\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-23825 Filed 11-1-17; 8:45 am]
 BILLING CODE 8011-01-P



                                                    50916                      Federal Register / Vol. 82, No. 211 / Thursday, November 2, 2017 / Notices

                                                    public Web site through which its                       Shares will be available for purchase                 solicit comments on the proposed rule
                                                    current prospectus may be                               and sale on an intraday basis, the Shares             change from interested persons.
                                                    downloaded.27 The Web site will                         will be purchased and sold at prices
                                                                                                                                                                  I. Self-Regulatory Organization’s
                                                    include additional information                          directly linked to the Fund’s next-
                                                                                                                                                                  Statement of the Terms of Substance of
                                                    concerning the Fund updated on a daily                  determined NAV. The Commission
                                                                                                                                                                  the Proposed Rule Change
                                                    basis, including the prior business day’s               notes that the Fund and the Shares must
                                                    NAV, and the following trading                          comply with the requirements of                          The Exchange is filing a proposal to
                                                    information for that business day                       Nasdaq Rule 5745 and the conditions                   amend Exchange Rule 518(a)(9) to: (i)
                                                    expressed as premiums/discounts to                      set forth in this proposed rule change to             Update the definition of a derived order
                                                    NAV: (a) Intraday high, low, average,                   be listed and traded on the Exchange on               on the Exchange, (ii) clarify the
                                                    and closing prices of Shares in                         an initial and continuing basis.                      circumstances under which a derived
                                                    Exchange trading; (b) the midpoint of                     For the foregoing reasons, the                      order is generated by the Exchange’s
                                                    the highest bid and lowest offer prices                 Commission finds that the proposed                    System, and the price at which a
                                                    as of the close of Exchange trading,                    rule change, as modified by Amendment                 derived order may be generated, and
                                                    expressed as a premium/discount to                      No. 1, is consistent with Section                     (iii) expand the situations under which
                                                    NAV (‘‘Closing Bid/Ask Midpoint’’);                     6(b)(5) 30 and Section 11A(a)(1)(C)(iii) of           a derived order is removed from the
                                                    and (c) the spread between highest bid                  the Act,31 and the rules and regulations              Exchange’s Simple Order Book.
                                                    and lowest offer prices as of the close of              thereunder applicable to a national                      The text of the proposed rule change
                                                    Exchange trading (‘‘Closing Bid/Ask                     securities exchange.                                  is available on the Exchange’s Web site
                                                    Spread.’’). The Web site will also                                                                            at http://www.miaxoptions.com/rule-
                                                    contain charts showing the frequency                    IV. Conclusion                                        filings/ at MIAX Options’ principal
                                                    distribution and range of values of                       It is therefore ordered, pursuant to                office, and at the Commission’s Public
                                                    trading prices, Closing Bid/Ask                         Section 19(b)(2) of the Act,32 that the               Reference Room.
                                                    Midpoints, and Closing Bid/Ask                          proposed rule change (SR–NASDAQ–
                                                    Spreads over time.                                                                                            II. Self-Regulatory Organization’s
                                                                                                            2017–090), as modified by Amendment
                                                       The Exchange represents that all                                                                           Statement of the Purpose of, and
                                                                                                            No. 1, be, and it hereby is, approved.
                                                    statements and representations made in                                                                        Statutory Basis for, the Proposed Rule
                                                                                                              For the Commission, by the Division of              Change
                                                    the filing regarding: (a) The description               Trading and Markets, pursuant to delegated
                                                    of the portfolio or reference assets, (b)               authority.33                                            In its filing with the Commission, the
                                                    limitations on portfolio holdings or                                                                          Exchange included statements
                                                                                                            Eduardo A. Aleman,
                                                    reference assets, (c) dissemination and                                                                       concerning the purpose of and basis for
                                                                                                            Assistant Secretary.
                                                    availability of the reference asset or IIV,                                                                   the proposed rule change and discussed
                                                    or (d) the applicability of Exchange                    [FR Doc. 2017–23830 Filed 11–1–17; 8:45 am]
                                                                                                                                                                  any comments it received on the
                                                    listing rules shall constitute continued                BILLING CODE 8011–01–P
                                                                                                                                                                  proposed rule change. The text of these
                                                    listing requirements for listing the                                                                          statements may be examined at the
                                                    Shares on the Exchange. The issuer has                                                                        places specified in Item IV below. The
                                                    represented to the Exchange that it will                SECURITIES AND EXCHANGE
                                                                                                            COMMISSION                                            Exchange has prepared summaries, set
                                                    advise the Exchange of any failure by                                                                         forth in sections A, B, and C below, of
                                                    the Fund to comply with the continued                                                                         the most significant aspects of such
                                                    listing requirements, and, pursuant to                  [Release No. 34–81967; File No. SR–MIAX–
                                                                                                            2017–44]                                              statements.
                                                    its obligations under Section 19(g)(1) of
                                                    the Act, the Exchange will monitor for                                                                        A. Self-Regulatory Organization’s
                                                                                                            Self-Regulatory Organizations; Miami                  Statement of the Purpose of, and
                                                    compliance with the continued listing                   International Securities Exchange LLC;
                                                    requirements.28 If the Fund is not in                                                                         Statutory Basis for, the Proposed Rule
                                                                                                            Notice of Filing and Immediate                        Change
                                                    compliance with the applicable listing                  Effectiveness of a Proposed Rule
                                                    requirements, the Exchange will                         Change To Amend MIAX Options Rule                     1. Purpose
                                                    commence delisting procedures for the                   518 Relating to Derived Orders
                                                    Fund under the Nasdaq 5800 Series.                                                                               The Exchange proposes to amend
                                                       This approval order is based on all of               October 27, 2017.                                     Exchange Rule 518(a)(9) to: (i) Update
                                                    the Exchange’s representations,                            Pursuant to the provisions of section              the definition of a derived order on the
                                                    including those set forth above and in                  19(b)(1) of the Securities Exchange Act               Exchange, (ii) clarify the circumstances
                                                    Amendment No. 1.29 In particular, the                   of 1934 (‘‘Act’’) 1 and Rule 19b–4                    under which a derived order is
                                                    Commission notes that, although the                     thereunder,2 notice is hereby given that              generated by the Exchange’s System,3
                                                                                                            on October 19, 2017, Miami                            and the price at which a derived order
                                                      27 The Exchange represents that the Web site
                                                                                                            International Securities Exchange, LLC                may be generated, and (iii) expand the
                                                    containing this information will be at
                                                                                                            (‘‘MIAX Options’’ or ‘‘Exchange’’) filed              situations under which a derived order
                                                    www.eatonvance.com and/or www.nextshares.com.                                                                 is removed from the Exchange’s Simple
                                                      28 The Commission notes that certain other            with the Securities and Exchange
                                                                                                            Commission (‘‘Commission’’) a                         Order Book.4
                                                    proposals for the listing and trading of Managed
                                                    Fund Shares include a representation that the           proposed rule change as described in                     A ‘‘derived order’’ is an Exchange-
                                                    exchange will ‘‘surveil’’ for compliance with the       Items I and II below, which Items have                generated limit order on the Simple
asabaliauskas on DSKBBXCHB2PROD with NOTICES




                                                    continued listing requirements. See, e.g., Securities
                                                                                                            been prepared by the Exchange. The                    Order Book that represents either the
                                                    Exchange Act Release No. 78005 (Jun. 7, 2016), 81                                                             bid or offer of one component of a
                                                    FR 38247 (Jun. 13, 2016) (SR–BATS–2015–100). In         Commission is publishing this notice to
                                                    the context of this representation, it is the                                                                 complex order resting on the Strategy
                                                    Commission’s view that ‘‘monitor’’ and ‘‘surveil’’        30 15 U.S.C. 78f(b)(5).
                                                    both mean ongoing oversight of a fund’s compliance        31 15
                                                                                                                                                                     3 The term ‘‘System’’ means the automated

                                                    with the continued listing requirements. Therefore,             U.S.C. 78k–1(a)(1)(C)(iii).                   trading system used by the Exchange for the trading
                                                                                                              32 15 U.S.C. 78s(b)(2).
                                                    the Commission does not view ‘‘monitor’’ as a more                                                            of securities. See Exchange Rule 100.
                                                                                                              33 17 CFR 200.30–3(a)(12).
                                                    or less stringent obligation than ‘‘surveil’’ with                                                               4 The ‘‘Simple Order Book’’ is the Exchange’s
                                                    respect to the continued listing requirements.            1 15 U.S.C. 78s(b)(1).
                                                                                                                                                                  regular electronic book of orders and quotes. See
                                                      29 See supra note 4.                                    2 17 CFR 240.19b–4.                                 Exchange Rule 518(a)(15).



                                               VerDate Sep<11>2014   22:28 Nov 01, 2017   Jkt 244001   PO 00000   Frm 00062   Fmt 4703   Sfmt 4703   E:\FR\FM\02NON1.SGM   02NON1


                                                                                Federal Register / Vol. 82, No. 211 / Thursday, November 2, 2017 / Notices                                                         50917

                                                    Book 5 that is comprised of orders to buy                 another options exchange permits a                          cNBBO: 16 $.95 × $1.10
                                                    or sell an equal quantity (currently with                 derived, or ‘‘leg’’ order, to be generated                Strategy Order
                                                    a one-to-one ratio) of two option                         using a complex order with a ratio                          Buy 1 (+1A ¥1B) $1.10 net debit
                                                    components.6 Derived orders will not be                   greater than 1:1.10 The Exchange
                                                    routed outside of the Exchange                            believes that the revision of the one-to-                   The System will create a derived
                                                    regardless of the price(s) disseminated                   one ratio limitation should increase the                  order to buy Option A at a price of
                                                    by away markets. The Exchange will                        potential number of derived orders that                   $2.10. The new MBBO would be $2.10
                                                    determine on a class-by-class basis to                    may be generated by the System, which                     × $2.20. However, the $2.10 bid price
                                                    make available derived orders and                         should result in greater liquidity and                    would lock the ABBO 17 offer for Option
                                                    communicate such determination to                         more opportunities for participants to                    A, which is being quoted on an away
                                                    Members 7 via a Regulatory Circular.                      trade complex orders on the                               exchange at $2.00 × $2.10. Therefore,
                                                    Derived orders are firm orders (i.e., if                  Exchange.11                                               the derived order will be managed in
                                                    executed, firm for the disseminated                          The Exchange is also proposing to                      accordance with the Exchange’s
                                                    price and size) that are included in the                  amend Rule 518(a)(9) by adding a final                    managed interest process. Under the
                                                    MBBO.8                                                    sentence stating that derived orders are                  Exchange’s managed interest process for
                                                       The Exchange is proposing to amend                     subject to the managed interest process                   non-routable orders defined in Rule
                                                    the definition of a ‘‘derived order’’ in                  described in Rule 515(c)(1)(ii).12 The                    515(c)(1)(ii)(A), if the limit price of an
                                                    two ways. First, the Exchange is                          purpose of this provision is to ensure                    order ($2.10 bid) locks or crosses the
                                                    proposing to revise the current                           that a derived order (which is firm for                   current opposite side NBBO ($2.10
                                                    requirement in Rule 518(a)(9) that a                      its price and size) is handled in                         offer), the System will display the order
                                                    derived order can only be generated                       accordance with that Rule so that it does                 one MPV ($.05) away from the current
                                                    from one component of a complex order                     not lock or cross an away market price                    opposite side NBBO ($2.05 bid), and
                                                    resting on the Strategy Book that is                      at the NBBO.13 An example of a derived                    book the order at a price that will lock
                                                    comprised of orders to buy or sell an                     order subject to the managed interest                     the current side NBBO. Therefore, the
                                                    equal quantity (currently with a one-to-                  process is provided below.                                derived order in Option A will have a
                                                    one ratio) of two option components.                                                                                Book 18 price of $2.10 and will be
                                                    Under the proposal, a derived order may                   Example 1                                                 displayed at $2.05, the MBBO will
                                                    now be comprised of orders to buy or                      Option A ($.05 MPV) 14                                    therefore be $2.05 × $2.20.
                                                    sell two option components, where the                       MBBO: $2.00 × $2.20                                     Option A
                                                    size of one component has a base ratio                      ABBO: $2.00 × $2.10                                       MBBO: $2.05 × $2.20
                                                    of ‘‘one’’ relative to the other component                  NBBO: $2.00 × $2.10                                       ABBO: $2.00 × $2.10
                                                    (1:1, 1:2, or 1:3). Thus, the basis for the               Option B ($.05 MPV)
                                                    generation of derived orders on the                         MBBO: $1.00 × $1.05                                       NBBO: $2.05 × $2.10
                                                    Exchange will not be restricted to                          ABBO: $1.00 × $1.05                                        Should interest arrive on MIAX
                                                    complex orders of equal size with a one-                    NBBO: $1.00 × $1.05                                     Options to sell at $2.10 or lower, it will
                                                    to-one ratio; instead, a derived order                    Strategy: Buy 1 Option A, Sell 1 Option                   trade at $2.10 against the derived order,
                                                    may be generated by using a complex                            B                                                    as Rule 515(c)(1)(ii)(A) provides that if
                                                    order resting on the Strategy Book with                     icMBBO: 15 $.95 × $1.20                                 the Exchange receives a new order or
                                                    two components, provided that one                                                                                   quote on the opposite side of the market
                                                    component of the complex order has a                         10 See Chicago Board Options Exchange, Inc.
                                                                                                                                                                        from the managed order that can be
                                                    base ratio of one relative to the other                   (‘‘CBOE’’) Rule 6.53(x).                                  executed, the System will immediately
                                                                                                                 11 The Exchange notes that other exchanges
                                                    component. For example, a complex                                                                                   execute the remaining contracts from
                                                                                                              require a complex order used to generate a derived
                                                    order whose components have a size                        or ‘‘legging’’ order to be for an equal quantity of two   the initiating order to the extent
                                                    ratio of 1:3 could be used to generate a                  options. See, e.g., NASDAQ PHLX LLC (‘‘Phlx’’)            possible at the order’s current Book
                                                    derived order, whereas a complex order                    Rule 1098(f)(iii)(C)(1). See also, Nasdaq ISE, LLC        price ($2.10), provided that the
                                                    whose components have a size ratio of                     (‘‘ISE’’) Rule 715(k). The Exchange’s proposal is
                                                                                                              distinguished in that it seeks to expand its current
                                                                                                                                                                        execution price does not violate the
                                                    2:3 could not.9 The Exchange notes that                   one-to-one ratio requirement to include any               current NBBO. The other side of the
                                                                                                              complex order with a component that has a base of         complex order will execute against the
                                                      5 The ‘‘Strategy Book’’ is the Exchange’s               one with respect to the other component.                  $1.00 bid price for Option B, effectively
                                                    electronic book of complex orders and complex                12 Under the managed interest process, non-
                                                    quotes. See Exchange Rule 518(a)(17).
                                                                                                                                                                        legging the complex order for a net price
                                                                                                              routable orders whose limit price locks or crosses
                                                      6 See Exchange Rule 518(a)(9).                          the current opposite side National Best Bid or Offer      of $1.10.
                                                      7 The term ‘‘Member’’ means an individual or            (‘‘NBBO’’) are displayed one Minimum Price                   The Exchange believes that generating
                                                    organization approved to exercise the trading rights      Variation (‘‘MPV’’) away from the current opposite        and managing a derived order (rather
                                                    associated with a Trading Permit. Members are             side NBBO, and placed on the Simple Order Book
                                                    deemed ‘‘members’’ under the Exchange Act. See            at a price that will lock the current opposite side
                                                    Exchange Rule 100.                                        NBBO. Should the NBBO price change to an                  each component of a complex strategy including
                                                      8 The term ‘‘MBBO’’ means the best bid or offer         inferior price level, the order’s price on the Simple     displayed and non-displayed trading interest. See
                                                    on the Simple Order Book (as defined below) on the        Order Book will continuously re-price to lock the         Exchange Rule 518(a)(11).
                                                    Exchange. See Exchange Rule 518(a)(13).                   new NBBO and the managed order’s displayed                   16 The ‘‘cNBBO’’ is the Complex National Best

                                                      9 A leg order may only be generated for the legs        price will continuously re-price one MPV away             Bid or Offer. The cNBBO is calculated using the
                                                    of complex orders with a ratio of 1:1, 1:2, or 1:3.       from the new NBBO. See Exchange Rule                      NBBO for each component of a complex strategy to
                                                                                                              515(c)(1)(ii).                                            establish the best net bid and offer for a complex
asabaliauskas on DSKBBXCHB2PROD with NOTICES




                                                    (A leg order will not be generated for the legs of
                                                                                                                 13 The term ‘‘NBBO’’ means the national best bid       strategy. See Exchange Rule 518(a)(2).
                                                    a complex order with a 1:4 ratio). For example, if
                                                    a complex order to buy 10 of series A and sell 20         or offer as calculated by the Exchange based on              17 The term ‘‘ABBO’’ means the best bid(s) or

                                                    of series B is resting on the Strategy Book, a leg        market information received from OPRA. See                offer(s) disseminated by other Eligible Exchanges
                                                    order will be generated for the leg to buy 10 of          Exchange Rule 100.                                        (defined in Exchange Rule 1400(f)) and calculated
                                                                                                                 14 The default Minimum Price Variation (‘‘MPV’’)       by the Exchange based on market information
                                                    series A (ratio of 1:2), but not for the leg to sell 20
                                                    of series B (ratio of 2:1). If a complex order to buy     of an option contract trading at less than $3.00 per      received by the Exchange from OPRA. See
                                                    20 of series A and sell 30 of series B is resting on      option is $.05. See Exchange Rule 510.                    Exchange Rule 100.
                                                    the Strategy Book, no leg orders will be generated           15 The ‘‘icMBBO’’ is the Implied Complex MIAX             18 The term ‘‘Book’’ means the electronic book of

                                                    for either leg (ratio is 2:3 for leg 1 and 3:2 for leg    Best Bid or Offer. The icMBBO is a calculation that       buy and sell orders and quotes maintained by the
                                                    2).                                                       uses the best price from the Simple Order Book for        System. See Exchange Rule 100.



                                               VerDate Sep<11>2014    22:28 Nov 01, 2017   Jkt 244001   PO 00000   Frm 00063    Fmt 4703   Sfmt 4703   E:\FR\FM\02NON1.SGM      02NON1


                                                    50918                      Federal Register / Vol. 82, No. 211 / Thursday, November 2, 2017 / Notices

                                                    than simply preventing its generation) 19               individual legs against orders resting on             the Strategy Book when the other
                                                    creates and preserves additional                        the Simple Order Book. Conversely, if a               component of the complex order is
                                                    opportunities for complex orders to be                  complex order is not eligible for legging,            executed against the best bid or offer on
                                                    executed as individual components                       then the System will not generate                     the Simple Order Book. The Exchange is
                                                    against orders resting on the Simple                    derived orders with respect to that                   proposing to replace the word ‘‘would’’
                                                    Order Book as market conditions                         complex order.22                                      with the word ‘‘may’’ in this sub-
                                                    change.                                                    The Exchange is proposing to amend                 paragraph in order to broaden the rule
                                                       The Exchange is also proposing to                    Rule 518(a)(9)(i)(B) to make a technical              to reflect that the System will remove a
                                                    amend Rule 518(a)(9)(i) to provide more                 modification to the current rule text.                derived order from the Simple Order
                                                    detail regarding the circumstances                      Currently, the rule provides that a                   Book any time the price of the best bid
                                                    under which a derived order is                          derived order may automatically be                    or offer on the Simple Order Book
                                                    generated by the Exchange’s System,                     generated for one or more legs of a                   changes such that the net price of the
                                                    and the price at which a derived order                  complex order at a price, ‘‘at which the              complex order to be executed may not
                                                    must be generated. Currently, a derived                 net price of the complex order on the                 be achieved. A price change of the best
                                                    order may be automatically generated                    Strategy Book can be achieved when the                bid or offer could be either: (i)
                                                    for one or more legs of a complex order                 other component(s) of the complex                     Improving (raising the bid or lowering
                                                    at a price: (A) That matches or improves                order is (are) executed against the best              the offer) or, (ii) worsening (lowering
                                                    upon the best displayed bid or offer in                 displayed bid or offer on the Simple                  the bid or raising the offer). In scenario
                                                    the affected series on the Simple Order                 Order Book.’’ The Exchange proposes to                (i), the derived order could remain on
                                                    Book; and (B) at which the net price of                 make the word ‘‘components’’ singular                 the Simple Order Book as it could still
                                                    the complex order on the Strategy Book                  by removing the ‘‘(s)’’ and removing the              achieve the net price of the complex
                                                    can be achieved when the other                          word ‘‘(are)’’ following the phrase                   order. However, in scenario (ii), the
                                                    component of the complex order is                       ‘‘complex order’’ so that the new                     derived order may not achieve the net
                                                    executed against the best displayed bid                 sentence has the proper subject-verb                  price of the complex order depending
                                                    or offer on the Simple Order Book.                      agreement. The Exchange believes this                 upon how much the price had moved.
                                                    Additionally, a derived order will not be               change describes System functionality                 For the sake of processing efficiency and
                                                    displayed at a price that locks or crosses              with more accuracy and precision.                     speed, rather than perform the
                                                    the best bid or offer of another                           The Exchange is proposing to amend                 calculation to determine if the derived
                                                    exchange. In such a circumstance, the                   Rule 518(a)(9)(i)(B) to state that a                  order could still achieve the net price
                                                    System will display the derived order                   derived order may be automatically                    for the complex order in scenario (ii),
                                                    on the Simple Order Book at a price that                generated for one or more legs of a                   the System simply cancels any derived
                                                    is one MPV away from the current                        complex order at a price at which the                 order in scenario (i) or (ii). The
                                                    opposite side best bid or offer of such                 net price of the complex order ‘‘at the
                                                                                                                                                                  Exchange believes that removal of the
                                                    other exchange, and rank the derived                    best price’’ on the Strategy Book can be
                                                                                                                                                                  derived order from the Simple Order
                                                    order on the Simple Order Book                          achieved when the other component of
                                                                                                                                                                  Book when there is a possibility that the
                                                    according to its actual price.20                        the complex order is executed against
                                                                                                                                                                  complex order may not be executed at
                                                       The Exchange is proposing to amend                   the best displayed bid or offer on the
                                                                                                                                                                  its net price is prudent and is an
                                                    Rule 518(a)(9)(i) to add more detail to                 Simple Order Book. This requirement is
                                                                                                                                                                  appropriate safeguard against such an
                                                    the rule stating that a derived order may               intended to ensure that a complex order
                                                                                                                                                                  execution.23 The Exchange’s System re-
                                                    be automatically generated if the                       executed by way of generating and
                                                                                                                                                                  evaluates each strategy on the Strategy
                                                    complex order is eligible for ‘‘Legging’’               Legging a derived order for execution
                                                                                                                                                                  Book on a periodic basis to ascertain if
                                                    pursuant to Rule 518(c)(2)(iii), and                    against an order on the Simple Order
                                                    meets the requirements set forth                                                                              the creation of a derived order is
                                                                                                            Book is not executed at a net price that
                                                    therein.21 The purpose of this proposed                                                                       warranted. If, upon re-evaluation, the
                                                                                                            is inferior to the best net price displayed
                                                    amendment is to establish clearly in the                                                                      new price allows a new derived order
                                                                                                            on the Strategy Book. A derived order
                                                    Exchange’s Rules that the System will                                                                         for the strategy, such new derived order
                                                                                                            could not, therefore, result in a trade-
                                                    only generate derived orders for                                                                              will then be created.24 As re-evaluation
                                                                                                            through of a complex order resting on
                                                    complex orders that are eligible for                                                                          is a continual process, the Exchange
                                                                                                            the Strategy Book at the Exchange’s best
                                                    legging—that is, complex orders whose                                                                         believes it is more expedient to cancel
                                                                                                            displayed net price.
                                                    components can be executed as                              The Exchange is also proposing to                  a derived order where a change in price
                                                                                                            amend Rule 518(a)(9)(vi), which                       may no longer allow the derived order
                                                      19 Other exchanges have determined not to
                                                                                                            describes the various circumstances                   to achieve the net price for the complex
                                                    generate derived or ‘‘leg’’ orders that would lock or   under which a derived order that has                  order and rely upon the re-evaluation
                                                    cross the NBBO. See, e.g., CBOE Rule
                                                                                                            been generated is removed from the                    process to create a new derived order
                                                    6.53C(c)(iv)(1)(A). See also, ISE Rule 715(k)(1).                                                             when warranted. The Exchange believes
                                                    Despite this distinction, the Exchange’s inclusion of   Simple Order Book. Specifically, the
                                                    derived orders in the managed interest process is       Exchange is proposing to amend Rule                   that changing the language in the rule
                                                    intended to achieve the same result, i.e., to prevent
                                                                                                            518(a)(9)(vi)(B), which currently                     from ‘‘would’’ to ‘‘may’’ more accurately
                                                    a derived order from locking or crossing an away                                                              describes the operation of Exchange
                                                    market.                                                 provides that a derived order is
                                                      20 See Exchange Rule 518(a)(9)(ii).                   automatically removed from the Simple                 functionality.
                                                      21 Complex orders up to a maximum number of           Order Book if the execution of the
asabaliauskas on DSKBBXCHB2PROD with NOTICES




                                                                                                                                                                     23 The System continually evaluates complex
                                                    legs (determined by the Exchange on a class-by-         derived order would no longer achieve
                                                    class basis as either two or three legs and                                                                   orders and quotes on the Strategy Book to
                                                    communicated to Members via Regulatory Circular)        the net price of the complex order on                 determine, among other things, whether a derived
                                                    may be automatically executed against bids and                                                                order should be generated or cancelled. See
                                                    offers on the Simple Order Book for the individual         22 The Exchange notes that while derived order     Exchange Rule 518(c)(5)(ii). Thus, when the System
                                                    legs of the complex order (‘‘Legging’’), provided the   functionality was approved with the Exchange’s        cancels and removes a derived order from the
                                                    complex order can be executed in full or in a           filing to adopt new rules to govern the trading of    Simple Order Book, the System could thereafter
                                                    permissible ratio by such bids and offers, and          Complex orders, the functionality has not yet been    generate another derived order using the same
                                                    provided that the execution price of each               implemented in the System. See Exchange Act           complex order based upon the evaluation process
                                                    component is not executed at a price that is outside    Release No. 79072 (October 7, 2016), 81 FR 71131      if the appropriate conditions are present.
                                                    of the NBBO. See Exchange Rule 518(c)(2)(iii).          (October 14, 2016) (SR–MIAX–2016–26).                    24 Id.




                                               VerDate Sep<11>2014   22:28 Nov 01, 2017   Jkt 244001   PO 00000   Frm 00064   Fmt 4703   Sfmt 4703   E:\FR\FM\02NON1.SGM   02NON1


                                                                               Federal Register / Vol. 82, No. 211 / Thursday, November 2, 2017 / Notices                                               50919

                                                      The Exchange is also proposing to                     any strategy that has, as a component,                  better execution prices for complex
                                                    amend Rules 518(a)(9)(vi)(C) and (D),                   an option that is of the same type as a                 orders and for orders resting on the
                                                    which currently describe the automatic                  derived order.29 To illustrate, using the               Simple Order Book.
                                                    removal of a derived order from the                     example set forth above,30 the System                     The Exchange will announce the
                                                    Simple Order Book when the complex                      would automatically remove from the                     implementation date of the proposed
                                                    order is executed in full, or is cancelled.             Simple Order Book the derived order in                  rule change by Regulatory Circular to be
                                                    The Exchange is proposing to                            Option A if strategy AB (or any other                   published no later than 60 days
                                                    consolidate sub-paragraphs (C) and (D)                  strategy having Option A as a                           following the operative date of the
                                                    into one sub-paragraph (C), to delete the               component) enters a cPRIME Auction or                   proposed rule. The implementation date
                                                    phrase ‘‘in full,’’ and to broaden the rule             a Complex Auction. The System would                     will be no later than 60 days following
                                                    by stating that a derived order is                      wait until a cPRIME Auction or                          the issuance of the Regulatory Circular.
                                                    automatically removed from the Simple                   Complex Auction is concluded before                     2. Statutory Basis
                                                    Order Book if the complex order is                      creating a derived order for an option
                                                    executed, cancelled, or modified in any                 that is subject to such an auction.31 A                    The Exchange believes that its
                                                    way.25 The Exchange believes that any                   complex order that enters and is                        proposed rule change is consistent with
                                                    change to a complex order used to                       processed in a cPRIME Auction or a                      section 6(b) of the Act 33 in general, and
                                                    generate a derived order obviates the                   Complex Auction is subject to execution                 furthers the objectives of section 6(b)(5)
                                                    need for the derived order at its limit                 at improved prices against complex                      of the Act 34 in particular, in that it is
                                                    price and size on the Simple Order                      orders submitted in response to the                     designed to prevent fraudulent and
                                                    Book. The phrase ‘‘modified in any                      Exchange’s notification, and thus could                 manipulative acts and practices, to
                                                    way’’ is intended to capture, without                   cause the derived order to be priced                    promote just and equitable principles of
                                                    limitation, any modification to the price               such that it may no longer achieve the                  trade, to foster cooperation and
                                                    or size of the complex order. Such a                    best net price of the complex order. In                 coordination with persons engaged in
                                                    modification could require a different                  this situation, therefore, the System will              regulating, clearing, settling, processing
                                                    limit price for the derived order to                    automatically remove the derived order                  information with respect to, and
                                                    achieve the best execution price of the                 from the Simple Order Book. Finally,                    facilitating transactions in, securities, to
                                                    complex order, or result in a size ratio                the Exchange proposes to amend Rule                     remove impediments to and perfect the
                                                    that does not comply with the ‘‘base of                 518(a)(9)(vi)(E) by adding a sentence                   mechanisms of a free and open market
                                                    one’’ ratio in proposed Rule 518(a)(9)                  stating that, if a derived order is                     and a national market system and, in
                                                    discussed above, in which case the                      removed from the Simple Order Book,                     general, to protect investors and the
                                                    complex order could not be executed.                    the System will continually evaluate                    public interest.
                                                    The Exchange is proposing to remove                     any remaining complex order(s) on the                      The Exchange’s proposal to amend
                                                    the derived order from the Simple Order                 Strategy Book to determine whether a                    Rule 518(a)(9) to remove the limitation
                                                    Book when the complex order is                          new derived order should be generated,                  on the generation of derived orders to
                                                    modified in any way in order to prevent                 as described in Rule 518(c)(5).32 The                   use only complex orders of equal size
                                                    these circumstances.                                    purpose of this provision is to ensure                  with a one-to-one ratio, and instead to
                                                      The Exchange is also proposing to                     that a new derived order can and will                   permit a derived order to be generated
                                                    amend Rule 518(a)(9)(vi)(D) by deleting                 be generated by the System under the                    by using a complex order resting on the
                                                    the current text (see above) and                        proper conditions even after a                          Strategy Book with a ratio of greater
                                                    adopting new Rule 518(a)(9)(vi)(D) to                   previously generated derived order has                  than one-to-one, provided that one
                                                    state that a derived order is                           been removed from the Simple Order                      component of the complex order that is
                                                    automatically removed from the Simple                   Book. The Exchange believes that this                   used to generate the derived order has
                                                    Order Book if the strategy 26 enters a                  provides additional opportunities to                    a base ratio of one relative to the other
                                                    cPRIME Auction (as described in Rule                    execute complex orders through Legging                  component, is designed to remove
                                                    515A, Interpretations and Policies                      using derived orders as market                          impediments to and perfect the
                                                    .12) 27 or a Complex Auction (pursuant                  conditions change.                                      mechanisms of a free and open market
                                                    to Rule 518(d)).28 This would include                      The Exchange believes that the                       and a national market system.
                                                                                                            proposed rule change relating to derived                Specifically, the Exchange believes that
                                                       25 This is substantially similar to rules that are
                                                                                                            orders will facilitate more interaction                 this proposal will increase the number
                                                    currently operative on other exchanges. See ISE         between the Strategy Book and the                       of derived orders that may be generated
                                                    Rule 715(k)(3)(iii) and (iv). See also, CBOE Rule
                                                    6.53C(c)(iv)(3)(B)(II) and (III), and Phlx Rule         Simple Order Book, resulting in                         on the Exchange, thus enhancing
                                                    1098(f)(iii)(C)(4)(iii) and (iv).                       increased execution opportunities and                   liquidity and increasing the number of
                                                       26 The term ‘‘complex strategy’’ means a                                                                     opportunities for the execution of
                                                    particular combination of components and their          order into a Complex Auction and begin the              complex orders on the Exchange.
                                                    ratios to one another. New complex strategies can       Complex Auction process by sending a message to
                                                    be created as the result of the receipt of a complex
                                                                                                                                                                       The Exchange’s proposal to state in
                                                                                                            participants requesting responses to the Complex
                                                    order or by the Exchange for a complex strategy that    Auction. See Exchange Rule 518(d). For a complete
                                                                                                                                                                    Rule 518(a)(9) that derived orders are
                                                    is not currently in the System. The Exchange may        description of the Complex Auction, see Securities      subject to the managed interest process
                                                    limit the number of new complex strategies that         Exchange Act Release No. 79072 (October 7, 2016),       described in Rule 515(c)(1)(ii) is
                                                    may be in the System at a particular time and will      81 FR 71131 (October 14, 2016) (SR–MIAX–2016–
                                                    communicate this limitation to Members via                                                                      designed protect investors and the
                                                                                                            26).
                                                    Regulatory Circular. See Exchange Rule 518(a)(6).          29 An option of the same type would be either the
                                                                                                                                                                    public interest by ensuring that a
asabaliauskas on DSKBBXCHB2PROD with NOTICES




                                                       27 The Exchange recently adopted rules that
                                                                                                            put or call option in the same series as a component    derived order (which is firm for its price
                                                    permit the submission of complex orders for price                                                               and size) does not lock or cross an away
                                                                                                            in the strategy. (E.g., if the complex strategy was a
                                                    improvement and execution in the MIAX Price
                                                    Improvement Mechanism (‘‘PRIME’’). Complex              long straddle to Buy 1 JNJ Oct 141 Call and to Buy      market price at the NBBO. If a derived
                                                    orders submitted into PRIME are known as                1 JNJ Oct 141 Put, a derived order in either of those   order were to lock or cross an away
                                                    ‘‘cPRIME Orders’’ and are processed in a ‘‘cPRIME       options would be considered an option of the same
                                                                                                            type, and would be removed if the strategy entered      market price at the NBBO, the Exchange
                                                    Auction.’’ See Securities Exchange Act Release No.
                                                    81131 (July 12, 2017), 82 FR 32900 (July 18, 2017)      a cPRIME Auction or a Complex Auction).                 would not be able to route the derived
                                                                                                               30 See Example 1 on page 6 [sic].
                                                    (SR–MIAX–2017–19).
                                                       28 Currently, the Exchange may determine to             31 See supra note 23.                                 33 15   U.S.C. 78f(b).
                                                    automatically submit a Complex Auction-eligible            32 Id.                                                34 15   U.S.C. 78f(b)(5).



                                               VerDate Sep<11>2014   22:28 Nov 01, 2017   Jkt 244001   PO 00000   Frm 00065   Fmt 4703   Sfmt 4703   E:\FR\FM\02NON1.SGM      02NON1


                                                    50920                      Federal Register / Vol. 82, No. 211 / Thursday, November 2, 2017 / Notices

                                                    order to such a market because derived                  and another order at the changed price,               rule change is consistent with the rules
                                                    orders are not routable. The inclusion of               thus protecting investors by ensuring a               of other exchanges, as cited above.35
                                                    derived orders in the managed interest                  safeguard against such an execution.                    The Exchange also believes that its
                                                    process thus protects investors and the                    The proposed amendments to Rules                   proposal enhances intra-market
                                                    public interest by removing the                         518(a)(9)(vi)(C) and (D), describing the              competition, as all Exchange
                                                    possibility that this situation could                   automatic removal of derived orders                   participants in the same category are
                                                    occur, while maintaining the derived                    from the Simple Order Book, are                       able to participate on an equal basis
                                                    order on the Simple Order Book.                         designed to protect investors and the                 with respect to the trading of complex
                                                       The proposed amendment to                            public interest by ensuring that derived              orders.
                                                    Exchange Rule 518(a)(9)(i), adding the                  orders do not result in executions that                 For all the reasons stated, the
                                                    requirement that a derived order may be                 trade through the top of the Exchange’s               Exchange does not believe that the
                                                    automatically generated if the complex                  Simple Order Book and Strategy Book,                  proposed rule change will impose any
                                                    order is eligible for Legging pursuant to               and that executions on the Simple Order               burden on competition not necessary or
                                                    Rule 518(c)(2)(iii), is designed to remove              Book and on the Strategy Book do not                  appropriate in furtherance of the
                                                    impediments to and perfect the                          result in prices that trade through away              purposes of the Act, and believes the
                                                    mechanisms of a free and open market                    markets.                                              proposed change will in fact enhance
                                                    by establishing clearly in the Exchange’s                  Amended Rule 518(a)(9)(vi)(E), stating             competition.
                                                    Rules that the System will generate                     that the System will continually
                                                                                                                                                                  C. Self-Regulatory Organization’s
                                                    derived orders only for complex orders                  evaluate any remaining complex
                                                                                                                                                                  Statement on Comments on the
                                                    whose components (including the                         order(s) on the Strategy Book to
                                                                                                                                                                  Proposed Rule Change Received From
                                                    component represented by a derived                      determine whether a new derived order
                                                                                                                                                                  Members, Participants, or Others
                                                    order) can be executed as individual                    should be generated, ensures that a new
                                                    legs against orders on the Simple Order                 derived order can and will be generated                 Written comments were neither
                                                    Book. In order for a component to be                    by the System under the proper                        solicited nor received.
                                                    executed against an order on the Simple                 conditions even after a previously                    III. Date of Effectiveness of the
                                                    Order Book, the complex order must be                   generated derived order has been                      Proposed Rule Change and Timing for
                                                    executed by way of its individual legs;                 removed from the Simple Order Book.                   Commission Action
                                                    there is thus no need for, or purpose in,               This provision is designed to promote
                                                    generating a derived order for a complex                just and equitable principles of trade                   Because the proposed rule change
                                                    order that is not eligible for Legging.                 and also to remove impediments to and                 does not (i) significantly affect the
                                                       The Exchange’s proposal to amend                     perfect the mechanisms of a free and                  protection of investors or the public
                                                    Rule 518(a)(9)(i)(B) to clarify the                     open market and a national market                     interest; (ii) impose any significant
                                                    conditions required for the creation of                 system by providing more opportunities                burden on competition; and (iii) become
                                                    derived orders would promote just and                   to execute complex orders through                     operative for 30 days from the date on
                                                    equitable principles of trade and remove                Legging using derived orders as market                which it was filed, or such shorter time
                                                    impediments to a free and open market                   conditions change.                                    as the Commission may designate, it has
                                                    by providing greater transparency                          The Exchange also believes that the                become effective pursuant to section
                                                    concerning the operation of Exchange                    proposed rule change removes                          19(b)(3)(A) of the Act 36 and Rule 19b–
                                                    functionality.                                          impediments to and perfects the                       4(f)(6) thereunder.37
                                                       The Exchange’s proposal to amend                     mechanisms of a free and open market                     At any time within 60 days of the
                                                    Rule 518(a)(9)(i)(B), to require that a                 and a national market system by                       filing of the proposed rule change, the
                                                    derived order be generated at a price at                attracting more order flow and by                     Commission summarily may
                                                    which the net price of the complex                      increasing the frequency with which                   temporarily suspend such rule change if
                                                    order at the best price on the Strategy                 MIAX Options participants are able to                 it appears to the Commission that such
                                                    Book can be achieved, is designed to                    trade complex orders.                                 action is necessary or appropriate in the
                                                    remove impediments to and perfect the                                                                         public interest, for the protection of
                                                                                                            B. Self-Regulatory Organization’s                     investors, or otherwise in furtherance of
                                                    mechanisms of a free and open market
                                                    and a national market system and, in                    Statement on Burden on Competition                    the purposes of the Act. If the
                                                    general, to protect investors and the                     The Exchange does not believe that                  Commission takes such action, the
                                                    public interest by ensuring that a                      the proposed rule change will impose                  Commission shall institute proceedings
                                                    complex order executed by way of                        any burden on competition not                         to determine whether the proposed rule
                                                    Legging against orders on the Simple                    necessary or appropriate in furtherance               change should be approved or
                                                    Order Book could not result in a trade-                 of the purposes of the Act. The                       disapproved.
                                                    through of a complex order at the                       Exchange believes that the proposed                   IV. Solicitation of Comments
                                                    Exchange’s best displayed net price.                    rule change enhances intermarket
                                                       The proposed amendment to                            competition by providing market                         Interested persons are invited to
                                                    Exchange Rule 518(a)(9)(vi)(B) is                       participants with additional                          submit written data, views, and
                                                    designed to remove impediments to and                   opportunities to execute complex orders               arguments concerning the foregoing,
                                                    perfect the mechanisms of a free and                    through the generation of a greater                   including whether the proposed rule
                                                    open market and a national market                       number of derived orders using an                     change is consistent with the Act.
asabaliauskas on DSKBBXCHB2PROD with NOTICES




                                                    system and, in general, to protect                      expanded permissible size ratio. The                    35 See  supra notes 10, 11, 19 and 25.
                                                    investors and the public interest by                    Exchange believes that the additional                   36 15  U.S.C. 78s(b)(3)(A).
                                                    ensuring that a derived order is removed                opportunities to trade complex orders                   37 17 CFR 240.19b–4(f)(6). As required under Rule
                                                    from the Simple Order Book any time                     will result in the submission of more                 19b–4(f)(6)(iii), the Exchange provided the
                                                    the price of the best bid or offer on the               complex orders for execution on the                   Commission with written notice of its intent to file
                                                    Simple Order Book changes such that                     Exchange, thus enhancing the                          the proposed rule change, along with a brief
                                                                                                                                                                  description and the text of the proposed rule
                                                    the net price of a complex order at the                 Exchange’s competitive position by                    change, at least five business days prior to the date
                                                    top of the Strategy Book may not be                     increasing liquidity and order flow on                of filing of the proposed rule change, or such
                                                    achieved by executing the derived order                 the Exchange. Moreover, the proposed                  shorter time as designated by the Commission.



                                               VerDate Sep<11>2014   22:28 Nov 01, 2017   Jkt 244001   PO 00000   Frm 00066   Fmt 4703   Sfmt 4703   E:\FR\FM\02NON1.SGM     02NON1


                                                                                 Federal Register / Vol. 82, No. 211 / Thursday, November 2, 2017 / Notices                                                     50921

                                                    Comments may be submitted by any of                       SECURITIES AND EXCHANGE                                 the most significant aspects of such
                                                    the following methods:                                    COMMISSION                                              statements.
                                                    Electronic Comments                                       [Release No. 34–81975; File No. SR–Phlx–                A. Self-Regulatory Organization’s
                                                                                                              2017–79]                                                Statement of the Purpose of, and the
                                                      • Use the Commission’s Internet                                                                                 Statutory Basis for, the Proposed Rule
                                                    comment form (http://www.sec.gov/                         Self-Regulatory Organizations; Nasdaq                   Change
                                                    rules/sro.shtml); or                                      PHLX LLC; Notice of Filing of
                                                                                                              Proposed Rule Change, as Modified by                    1. Purpose
                                                      • Send an email to rule-comments@
                                                    sec.gov. Please include File Number SR–                   Amendment No. 1, To Establish a                           The purpose of this rule filing is to
                                                    MIAX–2017–44 on the subject line.                         Nonstandard Expirations Pilot                           permit the listing and trading, on a pilot
                                                                                                              Program on a Pilot Basis, for an Initial                basis, of p.m.-settled options on broad-
                                                    Paper Comments                                            Period of Twelve Months From the                        based indexes with nonstandard
                                                                                                              Date of Approval of This Proposed                       expiration dates for an initial period of
                                                      • Send paper comments in triplicate                     Rule Change
                                                    to Brent J. Fields, Secretary, Securities                                                                         twelve months (the ‘‘Nonstandard
                                                    and Exchange Commission, 100 F Street                     October 27, 2017.                                       Expirations Pilot Program’’ or ‘‘Pilot
                                                    NE., Washington, DC 20549–1090.                              Pursuant to Section 19(b)(1) of the                  Program’’) from the date of approval of
                                                                                                              Securities Exchange Act of 1934                         this proposed rule change.3 The Pilot
                                                    All submissions should refer to File                                                                              Program would permit both weekly
                                                                                                              (‘‘Act’’),1 and Rule 19b–4 thereunder,2
                                                    Number SR–MIAX–2017–44. This file                                                                                 expirations (‘‘Weekly Expirations’’) and
                                                                                                              notice is hereby given that on October
                                                    number should be included on the                                                                                  end of month (‘‘EOM’’) expirations as
                                                                                                              12, 2017 Nasdaq PHLX LLC (‘‘Phlx’’ or
                                                    subject line if email is used. To help the                                                                        explained below. Contract terms for the
                                                                                                              ‘‘Exchange’’) filed with the Securities
                                                    Commission process and review your                                                                                Weekly Expirations and EOM
                                                                                                              and Exchange Commission (‘‘SEC’’ or
                                                    comments more efficiently, please use                                                                             expirations will be similar to those of
                                                                                                              ‘‘Commission’’) the proposed rule
                                                    only one method. The Commission will                                                                              the a.m. settled broad-based index
                                                                                                              change as described in Items I, II, and
                                                    post all comments on the Commission’s                                                                             options, except that the exercise
                                                                                                              III, below, which Items have been
                                                    Internet Web site (http://www.sec.gov/                                                                            settlement value will be based on the
                                                                                                              prepared by the Exchange. On October
                                                    rules/sro.shtml). Copies of the                                                                                   index value derived from the closing
                                                                                                              26, 2017, the Exchange filed
                                                    submission, all subsequent                                                                                        prices of component stocks.
                                                                                                              Amendment No.1 to the proposal to
                                                    amendments, all written statements
                                                                                                              amend and replace the original filing of                Weekly Expirations
                                                    with respect to the proposed rule
                                                                                                              SR–Phlx–2017–79 in its entirety. The
                                                    change that are filed with the                                                                                       The Exchange proposes to add new
                                                                                                              Commission is publishing this notice, as
                                                    Commission, and all written                                                                                       subsection (b)(vii)(1), Weekly
                                                                                                              modified by Amendment No. 1, to
                                                    communications relating to the                                                                                    Expirations, to Rule 1101A, Terms of
                                                                                                              solicit comments on the proposed rule
                                                    proposed rule change between the                                                                                  Options Contracts. Under the proposed
                                                                                                              change from interested persons.
                                                    Commission and any person, other than                                                                             new rule the Exchange would be
                                                    those that may be withheld from the                       I. Self-Regulatory Organization’s                       permitted to open for trading Weekly
                                                    public in accordance with the                             Statement of the Terms of Substance of                  Expirations on any broad-based index
                                                    provisions of 5 U.S.C. 552, will be                       the Proposed Rule Change                                eligible for standard options trading to
                                                    available for Web site viewing and                           The Exchange proposes to [sic] a [sic]               expire on any Monday, Wednesday, or
                                                    printing in the Commission’s Public                       proposal [sic] to establish a                           Friday (other than the third Friday-of-
                                                    Reference Room, 100 F Street NE.,                         Nonstandard Expirations Pilot Program                   the-month or days that coincide with an
                                                    Washington, DC 20549, on official                         on a pilot basis, for an initial period of              EOM expiration). Weekly Expirations
                                                    business days between the hours of                        twelve months from the date of approval                 would be subject to all provisions of
                                                    10:00 a.m. and 3:00 p.m. Copies of the                    of this proposed rule change.                           Rule 1101A and would be treated the
                                                    filing also will be available for                            The text of the proposed rule change                 same as options on the same underlying
                                                    inspection and copying at the principal                   is available on the Exchange’s Web site                 index that expire on the third Friday of
                                                    office of the Exchange. All comments                      at http://nasdaqphlx.cchwallstreet.                     the expiration month. Unlike the
                                                    received will be posted without change.                   com/, at the principal office of the                    standard monthly options, however,
                                                    Persons submitting comments are                           Exchange, and at the Commission’s                       Weekly Expirations would be p.m.-
                                                    cautioned that we do not redact or edit                   Public Reference Room.                                  settled. New series in Weekly
                                                    personal identifying information from
                                                    comment submissions. You should                           II. Self-Regulatory Organization’s                         3 P.M.-settled NASDAQ–100 index options with

                                                    submit only information that you wish                     Statement of the Purpose of, and                        standard third Friday of the month expiration dates
                                                                                                              Statutory Basis for, the Proposed Rule                  (‘‘NDXPM’’) have previously been approved for
                                                    to make available publicly. All                                                                                   listing on the Exchange on a pilot basis. NDXPM
                                                    submissions should refer to File                          Change                                                  and NDX are separate option classes. See Securities
                                                    Number SR–MIAX–2017–44 and should                            In its filing with the Commission, the               Exchange Act Release No. 81293 (August 2, 2017),
                                                                                                                                                                      82 FR 37138 (August 8, 2017) (Order Granting
                                                    be submitted on or before November 24,                    Exchange included statements                            Approval of a Proposed Rule Change, as Modified
                                                    2017.                                                     concerning the purpose of and basis for                 by Amendment Nos. 1 and 2, To Permit the Listing
                                                      For the Commission, by the Division of                  the proposed rule change and discussed                  and Trading of P.M.-Settled NASDAQ–100 Index(R)
asabaliauskas on DSKBBXCHB2PROD with NOTICES




                                                                                                              any comments it received on the                         Options on a Pilot Basis). The Exchange anticipates
                                                    Trading and Markets, pursuant to delegated                                                                        that it will file a proposed rule change in the near
                                                    authority.38                                              proposed rule change. The text of these                 future to move these NDXPM index options with
                                                    Eduardo A. Aleman,                                        statements may be examined at the                       standard third Friday of the month expiration dates
                                                                                                              places specified in Item IV below. The                  to the NDX index option class. The Exchange notes
                                                    Assistant Secretary.                                                                                              that the Chicago Board Options Exchange (‘‘CBOE’’)
                                                                                                              Exchange has prepared summaries, set
                                                    [FR Doc. 2017–23825 Filed 11–1–17; 8:45 am]                                                                       recently did likewise with its P.M.-settled S&P 500
                                                                                                              forth in sections A, B, and C below, of                 Index Options (‘‘SPXPM’’). See Securities Exchange
                                                    BILLING CODE 8011–01–P
                                                                                                                                                                      Act Release No. 80060 (February 17, 2017), 82 FR
                                                                                                                1 15   U.S.C. 78s(b)(1).                              11673 (February 24, 2017) (approving SR–CBOE–
                                                      38 17   CFR 200.30–3(a)(12).                              2 17   CFR 240.19b–4.                                 2016–091).



                                               VerDate Sep<11>2014     22:28 Nov 01, 2017   Jkt 244001   PO 00000   Frm 00067     Fmt 4703   Sfmt 4703   E:\FR\FM\02NON1.SGM   02NON1



Document Created: 2017-11-02 02:40:51
Document Modified: 2017-11-02 02:40:51
CategoryRegulatory Information
CollectionFederal Register
sudoc ClassAE 2.7:
GS 4.107:
AE 2.106:
PublisherOffice of the Federal Register, National Archives and Records Administration
SectionNotices
FR Citation82 FR 50916 

2024 Federal Register | Disclaimer | Privacy Policy
USC | CFR | eCFR