82 FR 8472 - Self-Regulatory Organizations; Miami International Securities Exchange LLC; Order Granting Approval of a Proposed Rule Change To Amend Rule 515A, MIAX Price Improvement Mechanism (“PRIME”) and PRIME Solicitation Mechanism

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 82, Issue 15 (January 25, 2017)

Page Range		8472-8474
FR Document		2017-01615

Federal Register, Volume 82 Issue 15 (Wednesday, January 25, 2017)

[Federal Register Volume 82, Number 15 (Wednesday, January 25, 2017)]
[Notices]
[Pages 8472-8474]
From the Federal Register Online [www.thefederalregister.org]
[FR Doc No: 2017-01615]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-79837; File No. SR-MIAX-2016-46]

Self-Regulatory Organizations; Miami International Securities
Exchange LLC; Order Granting Approval of a Proposed Rule Change To
Amend Rule 515A, MIAX Price Improvement Mechanism (``PRIME'') and PRIME
Solicitation Mechanism

January 18, 2017.

I. Introduction

On November 25, 2016, Miami International Securities Exchange LLC
(``MIAX'' or ``Exchange'') filed with the Securities and Exchange
Commission (``Commission''), pursuant to the provisions of Section
19(b)(1) of the Securities Exchange Act of 1934 (``Act'') \1\ and Rule
19b-4 thereunder,\2\ a proposed rule change to amend the eligibility
requirements for the MIAX Price Improvement Mechanism (``PRIME'' or
``Auction'') and make permanent a pilot program for PRIME. The proposed
rule change was published for comment in the Federal Register on
December 13, 2016.\3\ The Commission received no comments regarding the
proposal. This order approves the proposed rule change.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 79500 (December 7,
2016), 81 FR 90030 (``Notice'').
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II. Description of the Proposal

PRIME is a process by which a MIAX Member may electronically submit
for execution an order it represents as agent (``Agency Order'')
against principal interest and/or an Agency Order against solicited
interest.\4\ The Member that submits the Agency Order (the ``Initiating
Member'') must guarantee the execution of the Agency Order by
submitting a contra-side order representing principal interest or
solicited interest (``Contra-side Order'').

[[Page 8473]]

When the Exchange receives a properly designated Agency Order for
Auction processing, a Request for Responses (``RFR'') detailing the
option, side, size, and initiating price will be sent to all
subscribers of the Exchange's data feeds. Members may submit responses
to the RFR (specifying prices and sizes). RFR responses can be either
an Auction or Cancel (``AOC'') order or an AOC eQuote.\5\
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\4\ See MIAX Rule 515A(a). PRIME was introduced in 2014. See
Securities Exchange Act Release No. 72009 (April 23, 2014), 79 FR
24032 (April 29, 2014) (``PRIME Approval Order'').
\5\ See MIAX Rule 515A(a)(2)(i)(D).
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In November 2014, MIAX established a pilot program (the ``Pilot'')
to permit orders of any size to initiate a PRIME Auction at a price
that is at or better than the national best bid or offer (``NBBO'').\6\
Pursuant to Interpretations and Policies .08 to MIAX Rule 515A, the
Exchange committed to provide data to the Commission to demonstrate
that, among other things, there is meaningful competition for all size
orders within PRIME, that there is significant price improvement for
all orders executed through PRIME, and that there is an active and
liquid market functioning on the Exchange outside of PRIME. The Pilot
is currently set to expire on January 18, 2017.\7\
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\6\ See Securities Exchange Act Release No. 73590 (November 13,
2014), 79 FR 68919 (November 19, 2014) (SR-MIAX-2014-56).
\7\ See Securities Exchange Act Release No. 78265 (July 8,
2016), 81 FR 45578 (July 14, 2016) (SR-MIAX-2016-19).
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The Exchange proposes to make the Pilot permanent. The Exchange
further proposes to adopt new Rule 515A(a)(1)(iii) to state that if, at
the time of receipt of an Agency Order of fewer than 50 contracts, the
NBBO has a bid/ask differential of $0.01, the System \8\ will reject
the Agency Order.
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\8\ The term ``System'' means the automated trading system used
by the Exchange for the trading of securities. See MIAX Rule 100.
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In support of its proposal, the Exchange has provided the
Commission with data for PRIME executions from January 2015 through
January 2016.\9\ The Exchange believes that there has been meaningful
competition for all size orders within the PRIME Auction process,
regardless of the size of the order or the bid/ask differential of the
NBBO.\10\ Specifically from July 2015 through January 2016, there were
a total of 961,152 PRIME Auctions on MIAX, which included more than
2,691,000 participants, for an average of 2.8 participants per PRIME
Auction. \11\
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\9\ See Exhibit 3 to SR-MIAX-2016-46.
\10\ See Notice, supra note 3, at 90031.
\11\ See id.
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The Exchange also believes that the data show that there is an
active and liquid market functioning on the Exchange outside of the
PRIME.\12\ From July 2015 through January 2016, the Exchange executed
7,449,818 transactions for a total of 92,706,999 contracts outside of
the PRIME. \13\ According to the Exchange, competitive bidding and
offering occurs outside of the PRIME and participants can submit bids/
offers at improved prices or join a bid or offer (thus improving
liquidity at that price) regardless of the bid/ask differential of the
NBBO.\14\
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\12\ See id. at 90031-32.
\13\ See id.
\14\ See id. at 90032.
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While the Exchange continues to believe that opportunities remain
for price improvement of Agency Orders with a size of less than 50
contracts when the NBBO has a bid/ask differential of $0.01 (e.g.,
because market conditions may change during the PRIME Auction), the
data have not demonstrated significant price improvement in this narrow
circumstance, as indicated in the following table:\15\
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\15\ See id.

PRIME Trades for Orders of Less Than 50 Contracts With NBBO Spread of $0.01
[5/1-10/25/2016]
----------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------
Total Number of Trades........................ 2,383,204 Total Number of Contracts....... 11,950,538
Trades Receiving Price Improvement............ 17,179 Contracts Receiving Price 154,338
Improvement.
Percent of Trades Receiving Improvement....... 0.72% Percent of Contracts Receiving 1.29%
Improvement.
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In addition to seeking permanent approval of the Pilot, the
Exchange proposes to adopt new Rule 515A(a)(1)(iii) to require that if,
at the time of receipt of an Agency Order of fewer than 50 contracts,
the NBBO has a bid/ask differential of $0.01,\16\ the System will
reject the Agency Order. Agency Orders with a size of under 50
contracts will be accepted and processed by the System when the NBBO
bid/ask differential is greater than $0.01, and all Agency Orders with
a size of 50 contracts or greater will be accepted and processed by the
System, regardless of the NBBO bid/ask differential.
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\16\ Currently, if the market is locked or crossed as defined in
Exchange Rule 1402 for the option, the Agency Order will be rejected
by the System prior to initiating an Auction or a Solicitation
Auction. See Exchange Rule 515A, Interpretations and Policies .09.
The Exchange will continue to reject Agency Orders, regardless of
their size, in this situation.
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The Exchange does believe, however, that based on the data there is
significant price improvement, and significant opportunity for price
improvement, for all Agency Orders submitted when the NBBO bid/ask
differential is greater than $0.01.\17\ In particular, the Exchange
believes that continuing to allow PRIME Auctions to be initiated by
Agency Orders with a size of 50 contracts or greater increases the
opportunity for executions of larger size orders.\18\ The Exchange
believes that maintaining the PRIME Auction for Agency Orders with a
size of 50 contracts or greater when the bid/ask differential at the
NBBO is $0.01 enables consolidated size discovery and provides
certainty of larger sized executions.\19\ The Exchange believes that
this represents an efficient way for market participants to access
liquidity for larger sized orders.\20\
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\17\ See Notice, supra note 3, at 90032.
\18\ See id.
\19\ See id.
\20\ See id.
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III. Discussion and Commission Findings

After careful review, the Commission finds that the proposed rule
change is consistent with the requirements of the Act and the rules and
regulations thereunder applicable to a national securities exchange
and, in particular, with Section 6(b) of the Act.\21\ In particular,
the Commission finds that the proposed rule change is consistent with
Section 6(b)(5) of the Act,\22\ which requires, among other things,
that the rules of a national securities exchange be designed to prevent
fraudulent and manipulative acts and practices, to promote just and
equitable principles of trade, to foster cooperation and coordination
with persons engaged in regulating, clearing, settling, processing
information with respect to, and

[[Page 8474]]

facilitating transactions in securities, to remove impediments to and
perfect the mechanism of a free and open market and a national market
system, and, in general, to protect customers, issuers, brokers and
dealers.
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\21\ 15 U.S.C. 78f(b). In approving this proposed rule change,
the Commission has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
\22\ 15 U.S.C. 78f(b)(5).
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As part of its proposal, the Exchange provided summary data on
Exhibit 3 of its filing for the period January through June 2015, which
the Exchange and Commission both publicly posted on their respective
Web sites. Among other things, this data is useful in assessing the
level of price improvement in the Auction, in particular for orders for
fewer than 50 contracts; the degree of competition for order flow in
such Auctions; and a comparison of liquidity in the Auctions with
liquidity on the Exchange generally.\23\ Based on the data provided by
the Exchange, the Commission believes that the Exchange's price
improvement auction generally delivers a meaningful opportunity for
price improvement to orders, including orders for fewer than 50
contracts, when the spread in the option is $0.02 or more. At the same
time, as the Exchange has recognized, the data do not demonstrate that
such orders have realized significant price improvement when the NBBO
has a bid/ask differential of $0.01.\24\ Recognizing this, the Exchange
has proposed to amend the Auction eligibility requirements to reject an
Agency Order of less than 50 contracts where the NBBO has a bid/ask
differential of $0.01. The Exchange's proposal to modify the Auction
eligibility requirements for orders of fewer than 50 contracts and seek
permanent approval of the Pilot, as amended with the new provision,
will, in the Commission's view, promote opportunities for price
improvement.
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\23\ See Exhibit 3 to SR-MIAX-2016-46.
\24\ See Notice, supra note 3, at 90032.
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The Commission believes that, particularly for Auctions for fewer
than 50 contracts when the bid/ask differential is wider than $0.01,
the data provided by the Exchange support its proposal to make the
Pilot permanent. The data demonstrate that the Auction generally
provides price improvement opportunities to orders, including orders of
retail customers and particularly when the bid/ask differential is
wider than $0.01, that there is meaningful competition for orders on
the Exchange; and that there exists an active and liquid market
functioning on the Exchange outside of the Auction.\25\ The Commission
further believes that the proposed revisions to the eligibility
requirements for Agency Orders of fewer than 50 contracts with respect
to circumstances when the NBBO is $0.01 wide should help to enhance the
operation of the Auction by limiting its use for smaller orders to
circumstances when there are more meaningful opportunities for price
improvement, and should benefit investors and others in a manner that
is consistent with the Act. Thus, the Commission has determined to
approve the Exchange's proposed revisions to Rule 515A and to approve
the Pilot, as proposed to be modified, on a permanent basis.
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\25\ See Exhibit 3 to SR-MIAX-2016-46.
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IV. Conclusion

It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\26\ that the proposed rule change (SR-MIAX-2016-46), be and hereby
is approved.
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\26\ 15 U.S.C. 78s(b)(2).

For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\27\
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\27\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-01615 Filed 1-24-17; 8:45 am]
BILLING CODE 8011-01-P

8472 Federal Register / Vol. 82, No. 15 / Wednesday, January 25, 2017 / Notices

general, to protect customers, issuers, generally provides price improvement proposed rule change (SR–ISE–2016–
brokers and dealers. opportunities to orders, including 29), be and hereby is approved.
As part of its proposal, the Exchange orders of retail customers and For the Commission, by the Division of
provided summary data on Exhibit 3 of particularly when the bid/ask Trading and Markets, pursuant to delegated
its filing for the period January through differential is wider than $0.01; that authority.40
June 2016, which the Exchange and there is meaningful competition for Eduardo A. Aleman,
Commission both publicly posted on orders on the Exchange; and that there Assistant Secretary.
their respective Web sites. Among other exists an active and liquid market [FR Doc. 2017–01608 Filed 1–24–17; 8:45 am]
things, this data is useful in assessing functioning on the Exchange outside of BILLING CODE 8011–01–P
the level of price improvement in the the Auction.36 The Commission further
Auction, in particular for orders for believes that the proposed revisions to
fewer than 50 contracts; the degree of the eligibility requirements for orders of SECURITIES AND EXCHANGE
competition for order flow in such fewer than 50 contracts with respect to COMMISSION
Auctions; and a comparison of liquidity circumstances when the NBBO is no
in the Auctions with liquidity on the more than $0.01 wide should help to [Release No. 34–79837; File No. SR–MIAX–
Exchange generally.34 Based on the data 2016–46]
enhance the operation of the Auction by
provided by the Exchange, the providing meaningful opportunities for Self-Regulatory Organizations; Miami
Commission believes that the price improvement in such International Securities Exchange LLC;
Exchange’s price improvement auction circumstances, and should benefit Order Granting Approval of a
generally delivers a meaningful investors and others in a manner that is Proposed Rule Change To Amend Rule
opportunity for price improvement to consistent with the Act. 515A, MIAX Price Improvement
orders, including orders for fewer than The Commission further notes that, as
50 contracts, when the spread in the Mechanism (‘‘PRIME’’) and PRIME
discussed more fully above, ISE is Solicitation Mechanism
option is $0.02 or more. At the same
initially proposing to implement is price
time, as the Exchange has recognized, January 18, 2017.
improvement requirement for Agency
the data do not demonstrate that such
Orders of fewer than 50 option contracts I. Introduction
orders have realized significant price
where the difference in the NBBO is
improvement when the NBBO has a bid/ On November 25, 2016, Miami
$0.01 with a member conduct
ask differential of $0.01.35 Recognizing International Securities Exchange LLC
standard.37 As described in greater
this, the Exchange has proposed to (‘‘MIAX’’ or ‘‘Exchange’’) filed with the
detail above, ISE proposes to enforce
amend the Auction eligibility Securities and Exchange Commission
this requirement under proposed ISE
requirements to require the Initiating (‘‘Commission’’), pursuant to the
Participant to guarantee at least $0.01 of Rule 1614(d)(4). The Commission
provisions of Section 19(b)(1) of the
price improvement for Agency Orders of believes that ISE’s proposed member
Securities Exchange Act of 1934
fewer than 50 contracts where the conduct standard and its Rule
(‘‘Act’’) 1 and Rule 19b–4 thereunder,2 a
NBBO has a bid/ask differential of 1614(d)(4) are reasonable means to
proposed rule change to amend the
$0.01, whether or not the Exchange BBO implement the price improvement
eligibility requirements for the MIAX
is the same as the NBBO. requirement until implementation of its
Price Improvement Mechanism
The Exchange’s proposal to modify proposed systems-based mechanism for
(‘‘PRIME’’ or ‘‘Auction’’) and make
the Auction eligibility requirements for this requirement, which will become
permanent a pilot program for PRIME.
orders of fewer than 50 contracts and effective following the migration of a
The proposed rule change was
seek permanent approval of the Pilot, as symbol to INET, the platform operated
published for comment in the Federal
amended with the new provision, will, by Nasdaq, Inc. that will also operate
Register on December 13, 2016.3 The
in the Commission’s view, promote the PIM. The Commission further notes
Commission received no comments
opportunities for price improvement for that the Exchange has represented that
regarding the proposal. This order
such orders when the NBBO is $0.01 its proposed member conduct standard
approves the proposed rule change.
wide, while continuing to provide will be effective until the migration of
opportunities for price improvement all symbols to the INET platform, which II. Description of the Proposal
when spreads are wider than $0.01. shall be no later than July 15, 2017.38 PRIME is a process by which a MIAX
In addition, the Commission has Thus, the Commission has Member may electronically submit for
carefully evaluated the Pilot data and determined to approve the Exchange’s execution an order it represents as agent
has determined that it would be proposed revisions to ISE Rule 723(b), (‘‘Agency Order’’) against principal
beneficial to customers and to the Supplementary Material .03 and .05 to interest and/or an Agency Order against
options market as a whole to approve on ISE Rule 723, and ISE Rule 1614(d), and solicited interest.4 The Member that
a permanent basis the provisions to approve the Pilot, as proposed to be submits the Agency Order (the
concerning early conclusion of the PIM. modified, on a permanent basis. ‘‘Initiating Member’’) must guarantee
The Commission notes that there have IV. Conclusion the execution of the Agency Order by
been few instances of early termination submitting a contra-side order
of the PIM. It is therefore ordered, pursuant to representing principal interest or
The Commission believes that, Section 19(b)(2) of the Act,39 that the solicited interest (‘‘Contra-side Order’’).
particularly for Auctions for fewer than
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50 contracts when the bid/ask 36 See Exhibit 3 to SR–ISE–2016–29. 40 17 CFR 200.30–3(a)(12).
differential is wider than $0.01, the data 37 The Exchange stated that it will conduct 1 15 U.S.C. 78s(b)(1).
provided by the Exchange support its electronic surveillance of the PIM to ensure that 2 17 CFR 240.19b–4.

members comply with the proposed price 3 See Securities Exchange Act Release No. 79500
proposal to make the Pilot permanent. improvement requirements for option orders of (December 7, 2016), 81 FR 90030 (‘‘Notice’’).
The data demonstrate that the Auction fewer than 50 contracts. See Notice, supra note 3, 4 See MIAX Rule 515A(a). PRIME was introduced
at 91223. in 2014. See Securities Exchange Act Release No.
34 See Exhibit 3 to SR–ISE–2016–29. 38 See Notice, supra note 3, at 91223 & n.7.
72009 (April 23, 2014), 79 FR 24032 (April 29,
35 See Notice, supra note 3 at 91976. 39 15 U.S.C. 78s(b)(2). 2014) (‘‘PRIME Approval Order’’).

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Federal Register / Vol. 82, No. 15 / Wednesday, January 25, 2017 / Notices 8473

When the Exchange receives a properly Pilot is currently set to expire on liquid market functioning on the
designated Agency Order for Auction January 18, 2017.7 Exchange outside of the PRIME.12 From
processing, a Request for Responses The Exchange proposes to make the July 2015 through January 2016, the
(‘‘RFR’’) detailing the option, side, size, Pilot permanent. The Exchange further Exchange executed 7,449,818
and initiating price will be sent to all proposes to adopt new Rule transactions for a total of 92,706,999
subscribers of the Exchange’s data feeds. 515A(a)(1)(iii) to state that if, at the time contracts outside of the PRIME. 13
Members may submit responses to the of receipt of an Agency Order of fewer According to the Exchange, competitive
RFR (specifying prices and sizes). RFR than 50 contracts, the NBBO has a bid/ bidding and offering occurs outside of
responses can be either an Auction or ask differential of $0.01, the System 8 the PRIME and participants can submit
Cancel (‘‘AOC’’) order or an AOC will reject the Agency Order. bids/offers at improved prices or join a
eQuote.5 In support of its proposal, the
In November 2014, MIAX established Exchange has provided the Commission bid or offer (thus improving liquidity at
a pilot program (the ‘‘Pilot’’) to permit with data for PRIME executions from that price) regardless of the bid/ask
orders of any size to initiate a PRIME January 2015 through January 2016.9 differential of the NBBO.14
Auction at a price that is at or better The Exchange believes that there has While the Exchange continues to
than the national best bid or offer been meaningful competition for all size believe that opportunities remain for
(‘‘NBBO’’).6 Pursuant to Interpretations orders within the PRIME Auction price improvement of Agency Orders
and Policies .08 to MIAX Rule 515A, the process, regardless of the size of the with a size of less than 50 contracts
Exchange committed to provide data to order or the bid/ask differential of the when the NBBO has a bid/ask
the Commission to demonstrate that, NBBO.10 Specifically from July 2015 differential of $0.01 (e.g., because
among other things, there is meaningful through January 2016, there were a total market conditions may change during
competition for all size orders within of 961,152 PRIME Auctions on MIAX, the PRIME Auction), the data have not
PRIME, that there is significant price which included more than 2,691,000 demonstrated significant price
improvement for all orders executed participants, for an average of 2.8 improvement in this narrow
through PRIME, and that there is an participants per PRIME Auction. 11 circumstance, as indicated in the
active and liquid market functioning on The Exchange also believes that the
following table:15
the Exchange outside of PRIME. The data show that there is an active and

PRIME TRADES FOR ORDERS OF LESS THAN 50 CONTRACTS WITH NBBO SPREAD OF $0.01
[5/1–10/25/2016]

Total Number of Trades ............................................... 2,383,204 Total Number of Contracts ........................................... 11,950,538
Trades Receiving Price Improvement .......................... 17,179 Contracts Receiving Price Improvement ...................... 154,338
Percent of Trades Receiving Improvement .................. 0.72% Percent of Contracts Receiving Improvement ............. 1.29%

In addition to seeking permanent improvement, for all Agency Orders III. Discussion and Commission
approval of the Pilot, the Exchange submitted when the NBBO bid/ask Findings
proposes to adopt new Rule differential is greater than $0.01.17 In After careful review, the Commission
515A(a)(1)(iii) to require that if, at the particular, the Exchange believes that finds that the proposed rule change is
time of receipt of an Agency Order of continuing to allow PRIME Auctions to consistent with the requirements of the
fewer than 50 contracts, the NBBO has be initiated by Agency Orders with a Act and the rules and regulations
a bid/ask differential of $0.01,16 the size of 50 contracts or greater increases thereunder applicable to a national
System will reject the Agency Order. the opportunity for executions of larger securities exchange and, in particular,
Agency Orders with a size of under 50 size orders.18 The Exchange believes with Section 6(b) of the Act.21 In
contracts will be accepted and that maintaining the PRIME Auction for particular, the Commission finds that
processed by the System when the Agency Orders with a size of 50 the proposed rule change is consistent
NBBO bid/ask differential is greater contracts or greater when the bid/ask with Section 6(b)(5) of the Act,22 which
than $0.01, and all Agency Orders with differential at the NBBO is $0.01 enables requires, among other things, that the
a size of 50 contracts or greater will be rules of a national securities exchange
consolidated size discovery and
accepted and processed by the System, be designed to prevent fraudulent and
provides certainty of larger sized
regardless of the NBBO bid/ask manipulative acts and practices, to
executions.19 The Exchange believes
differential. promote just and equitable principles of
that this represents an efficient way for
The Exchange does believe, however, market participants to access liquidity trade, to foster cooperation and
that based on the data there is for larger sized orders.20 coordination with persons engaged in
significant price improvement, and regulating, clearing, settling, processing
significant opportunity for price information with respect to, and
5 See MIAX Rule 515A(a)(2)(i)(D). 11 See id. Agency Orders, regardless of their size, in this
6 See Securities Exchange Act Release No. 73590 12 See id. at 90031–32. situation.
(November 13, 2014), 79 FR 68919 (November 19, 13 See id. 17 See Notice, supra note 3, at 90032.
mstockstill on DSK3G9T082PROD with NOTICES

2014) (SR–MIAX–2014–56). 14 See id. at 90032. 18 See id.
7 See Securities Exchange Act Release No. 78265
15 See id. 19 See id.
(July 8, 2016), 81 FR 45578 (July 14, 2016) (SR–
16 Currently, if the market is locked or crossed as 20 See id.
MIAX–2016–19).
21 15 U.S.C. 78f(b). In approving this proposed
8 The term ‘‘System’’ means the automated defined in Exchange Rule 1402 for the option, the
trading system used by the Exchange for the trading Agency Order will be rejected by the System prior rule change, the Commission has considered the
of securities. See MIAX Rule 100. to initiating an Auction or a Solicitation Auction. proposed rule’s impact on efficiency, competition,
9 See Exhibit 3 to SR–MIAX–2016–46. See Exchange Rule 515A, Interpretations and and capital formation. See 15 U.S.C. 78c(f).
10 See Notice, supra note 3, at 90031. Policies .09. The Exchange will continue to reject 22 15 U.S.C. 78f(b)(5).

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8474 Federal Register / Vol. 82, No. 15 / Wednesday, January 25, 2017 / Notices

facilitating transactions in securities, to Orders of fewer than 50 contracts with order approves the proposed rule
remove impediments to and perfect the respect to circumstances when the change.
mechanism of a free and open market NBBO is $0.01 wide should help to
II. Description of the Proposal
and a national market system, and, in enhance the operation of the Auction by
general, to protect customers, issuers, limiting its use for smaller orders to The Exchange adopted PIM as part of
brokers and dealers. circumstances when there are more its application to be registered as a
As part of its proposal, the Exchange meaningful opportunities for price national securities exchange under its
provided summary data on Exhibit 3 of improvement, and should benefit previous name of Topaz Exchange, LLC
its filing for the period January through investors and others in a manner that is (‘‘Topaz’’).4 Pursuant to ISE Gemini
June 2015, which the Exchange and consistent with the Act. Thus, the Rule 723, an Electronic Access Member
Commission both publicly posted on Commission has determined to approve (‘‘EAM’’) may electronically submit for
their respective Web sites. Among other the Exchange’s proposed revisions to execution an order it represents as agent
things, this data is useful in assessing Rule 515A and to approve the Pilot, as (‘‘Agency Order’’) against principal
the level of price improvement in the proposed to be modified, on a interest or against a solicited order for
Auction, in particular for orders for permanent basis. the full size of the Agency Order,
fewer than 50 contracts; the degree of provided it submits the Agency Order
competition for order flow in such IV. Conclusion for electronic execution into the PIM (a
Auctions; and a comparison of liquidity It is therefore ordered, pursuant to ‘‘Crossing Transaction’’). Parts of the
in the Auctions with liquidity on the Section 19(b)(2) of the Act,26 that the PIM are currently operating on a pilot
Exchange generally.23 Based on the data proposed rule change (SR–MIAX–2016– basis (‘‘Pilot’’),5 which is set to expire
provided by the Exchange, the 46), be and hereby is approved. on January 18, 2017.6 The Exchange
Commission believes that the proposes to make the Pilot permanent,
For the Commission, by the Division of
Exchange’s price improvement auction and also proposes to amend the Auction
Trading and Markets, pursuant to delegated
generally delivers a meaningful authority.27 eligibility requirements for certain
opportunity for price improvement to Agency Orders of less than 50 option
Eduardo A. Aleman,
orders, including orders for fewer than contracts.
Assistant Secretary.
50 contracts, when the spread in the A. PIM Eligibility Requirements for
option is $0.02 or more. At the same [FR Doc. 2017–01615 Filed 1–24–17; 8:45 am]
Agency Orders of Fewer than 50
time, as the Exchange has recognized, BILLING CODE 8011–01–P
Contracts
the data do not demonstrate that such
orders have realized significant price Currently, the PIM may be initiated if
improvement when the NBBO has a bid/ SECURITIES AND EXCHANGE certain conditions are met. The Crossing
ask differential of $0.01.24 Recognizing COMMISSION Transaction must be entered only at a
this, the Exchange has proposed to price that is equal to or better than the
amend the Auction eligibility [Release No. 34–79840; File No. SR– National Best Bid/Offer (‘‘NBBO’’) on
requirements to reject an Agency Order ISEGemini–2016–23] the opposite side of the market from the
of less than 50 contracts where the Agency Order, and better than the limit
NBBO has a bid/ask differential of Self-Regulatory Organizations; ISE order or quote on the ISE Gemini order
$0.01. The Exchange’s proposal to Gemini, LLC; Order Granting Approval book on the same side of the Agency
modify the Auction eligibility of Proposed Rule Change To Amend Order.7
requirements for orders of fewer than 50 ISE Gemini Rule 723 and To Make Pilot ISE Gemini proposes to amend ISE
contracts and seek permanent approval Program Permanent Gemini Rule 723(b) to require EAMs to
of the Pilot, as amended with the new January 18, 2017.
provide at least $0.01 price
provision, will, in the Commission’s improvement for an Agency Order if
view, promote opportunities for price I. Introduction that order is for less than 50 option
improvement. On December 12, 2016, ISE Gemini, contracts and if the difference between
The Commission believes that, LLC (the ‘‘Exchange’’ or ‘‘ISE Gemini’’) the NBBO is $0.01. For the period
particularly for Auctions for fewer than filed with the Securities and Exchange beginning January 19, 2017 until a date
50 contracts when the bid/ask Commission (‘‘Commission’’), pursuant specified by the Exchange in a
differential is wider than $0.01, the data to Section 19(b)(1) of the Securities Regulatory Information Circular, which
provided by the Exchange support its Exchange Act of 1934 (‘‘Act’’) 1, and date shall be no later than April 15,
proposal to make the Pilot permanent. Rule 19b–4 thereunder,2 a proposed rule 2017, ISE Gemini will adopt a member
The data demonstrate that the Auction change to amend the eligibility conduct standard to implement this
generally provides price improvement requirements for its Price Improvement 4 See Securities Exchange Act Release No. 70050
opportunities to orders, including Mechanism (‘‘PIM’’ or ‘‘Auction’’) and (July 26, 2013), 78 FR 46622 (August 1, 2013) (File
orders of retail customers and make permanent those aspects of the No. 10–209) (‘‘Exchange Approval Order’’). The
particularly when the bid/ask PIM that are currently operating on a Exchange’s PIM was largely based on a similar
differential is wider than $0.01, that pilot basis. The proposed rule change functionality offered by the International Securities
there is meaningful competition for Exchange, LLC (‘‘ISE’’). See id. The Exchange
was published for comment in the subsequently changed its name to ISE Gemini. See
orders on the Exchange; and that there Federal Register on December 19, Securities Exchange Act Release No. 71586
exists an active and liquid market 2016.3 The Commission received no (February 20, 2014), 79 FR 10861 (February 26,
mstockstill on DSK3G9T082PROD with NOTICES

functioning on the Exchange outside of comments regarding the proposal. This 2014) (SR–Topaz–2014–06).
the Auction.25 The Commission further 5 Two components of PIM were approved by the

believes that the proposed revisions to Commission on a pilot basis: (1) the early
26 15 U.S.C. 78s(b)(2). conclusion of the PIM; and (2) no minimum size
the eligibility requirements for Agency 27 17 CFR 200.30–3(a)(12). requirement of orders.
1 15 U.S.C. 78s(b)(1). 6 See Securities Exchange Act Release No. 78343
23 See Exhibit 3 to SR–MIAX–2016–46. 2 17 CFR 240.19b–4. (July 15, 2016), 81 FR 47483 (July 21, 2016) (SR–
24 See Notice, supra note 3, at 90032. 3 See Securities Exchange Act Release No. 79541 ISEGemini–2016–07) (‘‘PIM July 2016 Extension’’).
25 See Exhibit 3 to SR–MIAX–2016–46. (December 13, 2016), 81 FR 91974 (‘‘Notice’’). 7 See ISE Gemini Rule 723(b)(1).

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Document Created: 2017-01-25 00:09:12
Document Modified: 2017-01-25 00:09:12

Category		Regulatory Information
Collection		Federal Register
sudoc Class		AE 2.7: GS 4.107: AE 2.106:
Publisher		Office of the Federal Register, National Archives and Records Administration
Section		Notices
FR Citation		82 FR 8472