82_FR_9890 82 FR 9865 - Self-Regulatory Organizations; MIAX PEARL, LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend MIAX PEARL Rules 100, 404, 519C and Adopt MIAX PEARL 1018

82 FR 9865 - Self-Regulatory Organizations; MIAX PEARL, LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend MIAX PEARL Rules 100, 404, 519C and Adopt MIAX PEARL 1018

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 82, Issue 25 (February 8, 2017)

Page Range9865-9869
FR Document2017-02552

Federal Register, Volume 82 Issue 25 (Wednesday, February 8, 2017)
[Federal Register Volume 82, Number 25 (Wednesday, February 8, 2017)]
[Notices]
[Pages 9865-9869]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2017-02552]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-79947; File No. SR-PEARL-2017-03]


Self-Regulatory Organizations; MIAX PEARL, LLC; Notice of Filing 
and Immediate Effectiveness of a Proposed Rule Change To Amend MIAX 
PEARL Rules 100, 404, 519C and Adopt MIAX PEARL 1018

February 2, 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 January 24, 2017, MIAX PEARL, LLC (``MIAX 
PEARL'' 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.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange is filing a proposal to amend MIAX PEARL Rules 100, 
404, 519C, and to adopt new MIAX PEARL Rule 1018, in order to bring 
MIAX PEARL Rules up to date with recent changes that have been made to 
the rules of the Exchange's affiliate, Miami International Securities 
Exchange, LLC (``MIAX Options'').
    The text of the proposed rule change is available on the Exchange's 
Web site at http://www.miaxoptions.com/rule-filings/pearl at MIAX 
PEARL's principal office, and at the Commission's Public Reference 
Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the

[[Page 9866]]

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 MIAX PEARL Rules 100, 404, 519C, and 
to adopt MIAX PEARL Rule 1018, in order to bring the MIAX PEARL Rules 
up to date with the changes that were made to the rules of MIAX Options 
while MIAX PEARL's Form 1 Application to register as a national 
securities exchange was pending approval.
Background
    MIAX PEARL plans to commence operations as a national securities 
exchange registered under Section 6 of the Act \3\ on February 6, 2017. 
As described more fully in MIAX PEARL's Form 1 application,\4\ the 
Exchange is an affiliate of MIAX Options. MIAX PEARL Rules, in their 
current form, were filed as Exhibit B to its Form 1 on August 12, 2016, 
and at that time, the above mentioned rules, were substantially similar 
to the rules of the MIAX Options exchange. In the time between when the 
Exchange filed its Form 1 and the time the Exchange received its 
approval order, MIAX Options made several changes to its rule book. In 
order to ensure consistent operation of both MIAX PEARL and MIAX 
Options through having consistent rules, the Exchange proposes to amend 
MIAX PEARL Rules as described below.
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    \3\ 15 U.S.C. 78f.
    \4\ See Securities Exchange Act Release No. 79543 (December 13, 
2016), 81 FR 92901 (December 20, 2016) (File No. 10-227) (order 
approving application of MIAX PEARL, LLC for registration as a 
national securities exchange.)
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Series of Option Contracts Open for Trading
    The Exchange proposes to expand the Short Term Option Series 
Program outlined in Rule 404, Interpretations and Policies .02, to 
allow the listing and trading of SPDR S&P 500 ETF Trust (``SPY'') 
options with Wednesday expirations. These changes would make MIAX PEARL 
Rule 404 consistent with MIAX Options Rule 404 and are identical to 
changes made by MIAX Options when it modified its rule.\5\ The Exchange 
further notes that the MIAX Options filing was a competitive filing 
based on a filing submitted by the BOX Options Exchange, LLC (``BOX''), 
which was approved by the Commission.\6\
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    \5\ See Securities Exchange Act Release No. 78772 (September 6, 
2016), 81 FR 62784 (September 12, 2016) (SR-MIAX-2016-31).
    \6\ See Securities Exchange Act Release No. 78668 (August 24, 
2016), 81 FR 59696 (August 30, 2016) (order approving SR-BOX-2016-
28).
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    Currently, under the Short Term Option Series Program the Exchange 
may open for trading on any Thursday or Friday that is a business day 
(``Short Term Option Opening Date'') series of options on that class 
that expire at the close of business on each of the next five Fridays 
that are business days, and are not Fridays in which monthly option 
series or Quarterly Options Series expire (``Short Term Option 
Expiration Dates''). The Exchange is now proposing to amend MIAX PEARL 
Rule 404, Interpretations and Policies .02, to permit the listing of 
SPY options expiring on Wednesdays. Specifically, the Exchange is 
proposing that it may open for trading on any Tuesday or Wednesday that 
is a business day, series of SPY options that expire on any Wednesday 
of the month that is a business day, and is not a Wednesday on which 
Quarterly Options Series expire (``Wednesday SPY Expirations''). The 
proposed Wednesday SPY Expiration series would be similar to the 
current Short Term Options Series, with certain exceptions.\7\ The 
Exchange notes that Wednesday expirations are not a novel a proposition 
as other option exchanges list and trade Wednesday SPY Expirations.\8\
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    \7\ The Commission notes that these exceptions are further 
discussed in MIAX-2016-31, supra note 5.
    \8\ See MIAX Options Rule 404; BOX Rule 5050; and ISE Rule 504.
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    The Exchange represents that is has an adequate surveillance 
program in place to detect manipulative trading in Wednesday SPY 
Expirations in the same way it monitors trading in the current Short 
Term Option Series. Additionally, the Exchange represents that it has 
the necessary system capacity to support the new options series.
Definitions
    The Exchange proposes to amend Exchange Rule 100, which sets forth 
the definition of Short Term Option Series. The definition set forth in 
Rule 100 is redundant to the terms for Short Term Option Series set 
forth in Rule 404, Interpretations and Policies .02. As a result, the 
Exchange believes that amending Rule 100 by including an internal cross 
reference to Rule 404, Interpretations and Policies .02 and by deleting 
redundant language would result in a clearer definition and would make 
the Rulebook more precise. Additionally, this change is identical to 
changes made by MIAX Options when it modified its rule.\9\
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    \9\ See Securities Exchange Act Release No. 78772 (September 6, 
2016), 81 FR 62784 (September 12, 2016) (SR-MIAX-2016-31).
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Mass Cancellation of Trading Interest
    The Exchange also proposes to amend Exchange Rule 519C, Mass 
Cancellation of Trading Interest, to align the process and procedure of 
cancelling orders and quotes from the order book to that of MIAX 
Options. The proposed rule change will amend the first paragraph for 
clarity and ease of reference and adopt new section (b) to provide that 
Exchange staff, upon request from a Member,\10\ may remove all of the 
Member's quotations \11\ and cancel all of the Member's orders \12\ in 
the System \13\ and block new incoming quotations and orders from 
entering the System. The block will remain in effect until the Member 
contacts Exchange staff \14\ to have the block removed.
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    \10\ The term ``Member'' means an individual or organization 
that is registered with the Exchange pursuant to Chapter II of MIAX 
PEARL Rules for purposes of trading on the Exchange as an 
``Electronic Exchange Member'' or ``Market Maker.'' Members are 
deemed ``members'' under the Exchange Act. See Exchange Rule 100.
    \11\ The term ``quote'' or ``quotation'' means a bid or offer 
entered by a Market Maker as a firm order that updates the Market 
Maker's previous bid or offer, if any. When the term is used in 
these Rules and a bid or offer is entered by the Market Maker in the 
option series to which such Market Maker is registered, such order 
shall, as applicable, constitute a quote or quotation for purposes 
of these Rules. See Exchange Rule 100.
    \12\ The term ``order'' means a firm commitment to buy or sell 
option contracts. See Exchange Rule 100.
    \13\ The term ``System'' means the automated trading system used 
by the Exchange for the trading of securities. See Exchange Rule 
100.
    \14\ The Exchange's Help Desk would receive such communication. 
The Help Desk is the Exchange's control room consisting of Exchange 
staff authorized to make certain trading determinations on behalf of 
the Exchange. The Help Desk shall report to and be supervised by a 
senior executive officer of the Exchange. See Exchange Rule 100.
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    The Exchange proposes to add a new heading entitled ``Cancel'' to 
the first paragraph, and proposes to identify the first paragraph with 
the letter ``(a)'' for clarity and ease of reference. Additionally, the 
Exchange proposes to make a clarifying change to the wording of the 
first paragraph. The paragraph currently states that, ``[a] Member may 
cancel all of its quotations and/or all or any subset of its orders [. 
. .].'' The Exchange proposes to replace the word ``cancel'' with 
``remove'' and to insert the word ``cancel'' after ``and/or,'' as this 
language more accurately describes

[[Page 9867]]

the actions being performed by the Exchange. Additionally, the Exchange 
is proposing to insert language indicating that a Member may effect the 
removal of its quotations and/or the cancellation of its orders, ``by 
firm name or by Market Participant Identifier (``MPID'')''.\15\
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    \15\ The term ``MPID'' means unique market participant 
identifier. See Exchange Rule 100.
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    MIAX PEARL currently offers two Membership types, Market Maker 
(``MM'') \16\ and Electronic Exchange Member (``EEM'').\17\ Market 
Makers self-assign the series for which they choose to act as a Market 
Maker \18\ and have an obligation to maintain a two-sided market, 
pursuant to Rule 605(d)(1), in those series in which they register to 
trade.\19\ Exchange Rule 605, Market Maker Quotations, details various 
requirements associated with a Market Maker's quotes, such as ``Size 
Associated with Quotes'', ``Firm Quotes'', and ``Continuous 
Quotes''.\20\ A ``quote'' on the Exchange is defined as, ``[. . .] a 
bid or offer entered by a Market Maker as a firm order that updates the 
Market Maker's previous bid or offer, if any [. . .].'' \21\ Currently, 
there is not a separate Market Maker quote transaction available on the 
Exchange. The Exchange's definition of a quote further provides that, 
``[w]hen the term order is used in these Rules and a bid or offer is 
entered by the Market Maker in the option series to which such Market 
Maker is registered, such order shall, as applicable, constitute a 
quote or quotation for purposes of these Rules.'' \22\
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    \16\ The term ``Market Maker'' or ``MM'' means a Member 
registered with the Exchange for the purpose of making markets in 
options contracts traded on the Exchange and that is vested with the 
rights and responsibilities specified in Chapter VI of MIAX PEARL 
Rules. See Exchange Rule 100.
    \17\ The term ``Electronic Exchange Member'' or ``EEM'' means 
the holder of a Trading Permit who is a Member representing as agent 
Public Customer Orders or Non-Customer Orders on the Exchange and 
those non-Market Maker Members conducting proprietary trading. 
Electronic Exchange Members are deemed ``members'' under the 
Exchange Act. See Exchange Rule 100.
    \18\ See Exchange Rule 602.
    \19\ See Exchange Rule 604(a)(1).
    \20\ See Exchange Rule 605.
    \21\ See Exchange Rule 100.
    \22\ See Exchange Rule 100.
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    The proposal would allow a Member to submit a request to remove all 
of its outstanding quotations, as described above, and cancel all of 
its open orders and block all new inbound quotations and orders by firm 
name or Market Participant Identifier (``MPID''). The form of such 
requests includes, but is not limited to, email or a phone call from 
authorized individuals. The removal of quotes and the cancellation of 
orders as described herein does not disconnect Members from the 
Exchange's System.
    The proposed changes would make MIAX PEARL Rule 519C, Mass 
Cancellation of Trading Interest, consistent with MIAX Options Rule 
519C, Mass Cancellation of Trading Interest, and are identical to 
changes made by MIAX Options when it modified its rule.\23\
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    \23\ See Securities Exchange Act Release Nos. 78023 (June 8, 
2016), 81 FR 38751 (June 14, 2016) (SR-MIAX-2016-14) (adoption of 
Rule 519C); 78974 (September 29, 2016), 81 FR 69090 (October 5, 
2016) (SR-MIAX-2016-34) (amendment of Rule 519C).
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Expedited Suspension Proceeding
    MIAX PEARL incorporates certain chapters of the MIAX Options 
Rulebook into its rulebook in their entirety by reference. 
Specifically, MIAX Options Rulebook, Chapter III, Business Conduct, is 
incorporated by reference, and contains Rule 322, Disruptive Quoting 
and Trading Activity Prohibited, which was adopted by MIAX Options to 
prohibit disruptive quoting and trading on MIAX Options.\24\ In 
connection with this rule, MIAX Options adopted new MIAX Options Rule 
1018, Expedited Suspension Proceeding, to permit MIAX Options to take 
prompt action to suspend Members or their clients that violate MIAX 
Options Rule 322.\25\ The Exchange now proposes to adopt new Rule 1018, 
Expedited Suspension Proceeding, to align the rules of MIAX Options and 
MIAX PEARL.
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    \24\ See MIAX Options Rule 322.
    \25\ See MIAX Options Rule 1018.
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    The Exchange proposes to adopt new Rule 1018, to set forth 
procedures for issuing suspension orders, immediately prohibiting a 
Member from conducting continued disruptive quoting and trading 
activity on the Exchange. Importantly, these procedures would also 
provide the Exchange the authority to order a Member to cease and 
desist from providing access to the Exchange to a client of the Member 
that is conducting disruptive quoting and trading activity in violation 
of Rule 322. The Exchange notes that the proposed change would make 
MIAX PEARL Rule 1018 consistent with MIAX Options Rule 1018 and is 
identical to the rule text adopted by MIAX Options when it adopted its 
rule.\26\
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    \26\ See Securities Exchange Act Release No. 79182 (October 28, 
2016), 81 FR 76639 (November 3, 2016) (SR-MIAX-2016-40).
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2. Statutory Basis
    MIAX PEARL believes that its proposed rule change is consistent 
with Section 6(b) of the Act \27\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act \28\ 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 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.
---------------------------------------------------------------------------

    \27\ 15 U.S.C. 78f(b).
    \28\ 15 U.S.C. 78f(b)(5).
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    The Exchange is proposing to amend Rule 404, Series of Option 
Contracts Open for Trading. The Exchange believes the Short Term Option 
Series Program has been successful to date and that Wednesday SPY 
Expirations simply expand the ability of investors to hedge risk 
against market movements stemming from economic releases or market 
events that occur throughout the month in the same way that the Short 
Term Option Series Program has expanded the landscape of hedging. 
Similarly, the Exchange believes Wednesday SPY Expirations should 
create greater trading and hedging opportunities and flexibility, and 
provide customers with the ability to more closely tailor their 
investment objectives. The Exchange believes that allowing Wednesday 
SPY Expirations and monthly SPY expirations in the same week would 
benefit investors and minimize investor confusion by providing 
Wednesday SPY Expirations in a continuous and uniform manner.
    The Exchange is also proposing to amend Rule 100, Definitions, 
which sets forth the definition of Short Term Option Series. The 
definition set forth in current Rule 100 is redundant to the terms for 
Short Term Option Series set forth in Rule 404, Interpretations and 
Policies .02. As a result, the Exchange believes that amending Rule 100 
by including an internal cross reference to Rule 404, Interpretations 
and Policies .02 and deleting redundant language would result in a 
clearer definition and would make the Rulebook more precise and user 
friendly. Clarity and transparency of the Exchange's rules benefits 
investors and the public by eliminating the potential for confusion.
    The Exchange is also proposing to amend Rule 519C, Mass 
Cancellation of Trading Interest, to add another risk protection tool 
for Members and provide that the Exchange may take action on their 
behalf. The proposed rule protects investors and the public interest by 
increasing the number of risk protection tools available to Members on 
the Exchange. The Exchange is also making

[[Page 9868]]

minor non-substantive amendments to the rule which organize the rule 
text for clarity and clarifies the actions being performed by the 
Exchange, and are intended to remove impediments to and perfect the 
mechanisms of a free and open market by adding precision and ease of 
reference to the Exchange's rules, thus promoting transparency and 
clarity for Exchange Members.
    The Exchange is also proposing to adopt Rule 1018, Expedited 
Suspension Proceeding, which will provide the Exchange a mechanism to 
promptly initiate expedited suspension proceedings in the event the 
Exchange believes that it has sufficient proof that a violation of Rule 
322 has occurred and is ongoing. The Exchange believes that the 
proposal is consistent with Sections 6(b)(1) and 6(b)(6) of the 
Act,\29\ which require that the rules of an exchange enforce compliance 
with, and provide appropriate discipline for, violations of the 
Commission and Exchange rules. The Exchange also believes that the 
proposal is consistent with the public interest, and the protection of 
investors, or otherwise in furtherance of the purposes of the Act 
because the proposal helps to strengthen the Exchange's ability to 
carry out its oversight and enforcement responsibilities as a self-
regulatory organization in cases where awaiting the conclusion of a 
full disciplinary proceeding is unsuitable in view of the potential 
harm to Members and their customers.
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    \29\ 15 U.S.C. 78f(b)(1) and 78f(b)(6).
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    Also, the Exchange notes that if this type of conduct is allowed to 
continue on the Exchange, the Exchange's reputation could be harmed 
because it may appear to the public that the Exchange is not acting to 
address the behavior. The expedited process would enable the Exchange 
to address the behavior with greater speed.
    The Exchange notes that is has defined the prohibited disruptive 
quoting and trading activity by modifying the traditional definitions 
of layering \30\ and spoofing \31\ to eliminate an express intent 
element that would not be proven on an expedited basis and would 
instead require a thorough investigation into the activity. As noted, 
the Exchange believes it is necessary for the protection of investors 
to make such modifications in order to adopt an expedited process 
rather than allowing disruptive quoting and trading activity to occur 
for several years.
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    \30\ ``Layering' is a form of market manipulation in which 
multiple, non-bona fide limit orders are entered on one side of the 
market at various price levels in order to create the appearance of 
a change in the levels of supply and demand, thereby artificially 
moving the price of a security. An order is then executed on the 
opposite side of the market at the artificially created price, and 
the non-bona fide orders are cancelled.
    \31\ ``Spoofing'' is a form of market manipulation that involves 
the market manipulator placing non-bona fide orders that are 
intended to trigger some type of market movement and/or response 
from other market participants, from which the market manipulator 
might benefit by trading bona fide orders.
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    The Exchange believes that this proposal will provide the Exchange 
with the necessary means to enforce against such behavior in an 
expedited manner while providing Members with the necessary due 
process. The Exchange believes that its proposal is consistent with the 
Act because it provides the Exchange with the ability to remove 
impediments to and perfect the mechanism of a free and open market and 
a national market system, and, in general to protect investors and the 
public interest from such ongoing behavior. Further, the Exchange 
believes that adopting a rule applicable to market participants is 
consistent with the Act because the Exchange believes that this type of 
behavior should be prohibited for all Members. While this behavior may 
not be as prevalent on the options markets today, the Exchange does not 
believe the possibility of such behavior in the future would not have 
the same market impact and thereby warrant an expedited process.
    The Exchange believes that the proposal is consistent Section 
6(b)(7) of the Act,\32\ which requires that the rules of an exchange 
``provide a fair procedure for the disciplining of members and persons 
associated with members . . . and the prohibition or limitation by the 
exchange of any person with respect to access to services offered by 
the exchange or a member thereof.'' Finally, the Exchange believes the 
proposal is consistent with Sections 6(d)(1) and 6(d)(2) of the 
Act,\33\ which require that the rules of an exchange with respect to a 
disciplinary proceeding or proceeding that would limit or prohibit 
access to or membership in the exchange require the exchange to: 
Provide adequate and specific notice of the charges brought against a 
member or person associated with a member, provide an opportunity to 
defend against such charges, keep a record, and provide details 
regarding the findings and applicable sanctions in the event a 
determination to impose a disciplinary sanction is made. The Exchange 
believes that each of these requirements is addressed by the notice and 
due process provisions included within Rule 1018. Importantly, the 
Exchange will use the authority only in clear and egregious cases when 
necessary to protect investors, other Members and the Exchange, and in 
such cases, the Respondent will be afforded due process in connection 
with the suspension proceedings.
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    \32\ 15 U.S.C. 78f(b)(7).
    \33\ 15 U.S.C. 78f(d)(1) and 78f(d)(2).
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    The Exchange believes the proposal removes impediments to and 
perfects the mechanisms of a free and open market. Specifically, the 
Exchange believes that although MIAX PEARL rules may, in certain 
instances, intentionally differ from MIAX Options rules, the proposed 
changes will promote uniformity with MIAX Options with respect to rules 
that are intended to be identical but which were not modified while 
MIAX PEARL's Form 1 application was pending approval. The Exchange 
believes that it will reduce the potential for confusion by its members 
that are also members of MIAX Options if it commences operations with 
only those differences between MIAX PEARL and the MIAX Options Exchange 
rules that are intentional.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    Written comments were neither solicited nor received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Because the foregoing proposed rule change does not: (i) 
Significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days after the date of the filing, or such 
shorter time as the Commission may designate, it has become effective 
pursuant to 19(b)(3)(A) of the Act \34\ and Rule 19b-4(f)(6) \35\ 
thereunder.
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    \34\ 15 U.S.C. 78s(b)(3)(A).
    \35\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file the proposed rule change at 
least five business days prior to the date of filing of the proposed 
rule change, or such shorter time as designated by the Commission. 
The Exchange has satisfied this requirement.
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    A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the 
Act \36\ normally does not become

[[Page 9869]]

operative for 30 days after the date of its filing. However, Rule 19b-
4(f)(6)(iii) \37\ permits the Commission to designate a shorter time if 
such action is consistent with the protection of investors and the 
public interest. In its filing with the Commission, the Exchange has 
asked the Commission to waive the 30-day operative delay so that the 
proposal may become operative immediately upon filing. The Commission 
believes that waiving the 30-day operative delay is consistent with the 
protection of investors and the public interest. The Commission notes 
that waiver of the operative delay will allow the proposed rules to 
become operative before the Exchange intends to commence operations as 
a national exchange on February 6, 2017. The Commission notes that the 
proposed rule change is based on substantively identical rules of MIAX 
Options and thus raises no new novel or substantive issues. 
Accordingly, the Commission hereby waives the operative delay and 
designates the proposal operative upon filing.\38\
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    \36\ 17 CFR 240.19b-4(f)(6).
    \37\ 17 CFR 240.19b-4(f)(6)(iii).
    \38\ For purposes only of waiving the 30-day operative delay, 
the Commission has also considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission shall institute proceedings to 
determine whether the proposed rule should be approved or disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-PEARL-2017-03 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-PEARL-2017-03. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE., 
Washington, DC 20549, on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available 
for inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-PEARL-2017-03 and should be 
submitted on or before March 1, 2017.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\39\
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    \39\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2017-02552 Filed 2-7-17; 8:45 am]
 BILLING CODE 8011-01-P



                                                                               Federal Register / Vol. 82, No. 25 / Wednesday, February 8, 2017 / Notices                                                  9865

                                                    failure of an issue of Managed Fund                       B. institute proceedings to determine                 For the Commission, by the Division of
                                                    Shares to comply with Rule 16.135.                      whether the proposed rule change                      Trading and Markets, pursuant to delegated
                                                                                                            should be disapproved.                                authority.45
                                                       Prior to listing pursuant to proposed
                                                                                                                                                                  Robert W. Errett,
                                                    amended Rule 16.136(b)(1), an issuer                    IV. Solicitation of Comments
                                                    would be required to represent to the                                                                         Deputy Secretary.
                                                    Exchange that it will advise the                                                                              [FR Doc. 2017–02544 Filed 2–7–17; 8:45 am]
                                                                                                              Interested persons are invited to
                                                    Exchange of any failure by a series of                  submit written data, views and                        BILLING CODE 8011–01–P
                                                    Managed Fund Shares to comply with                      arguments concerning the foregoing,
                                                    the continued listing requirements, and,                including whether the proposed rule
                                                    pursuant to its obligations under                                                                             SECURITIES AND EXCHANGE
                                                                                                            change is consistent with the Act.
                                                    Section 19(g)(1) of the Act, the Exchange                                                                     COMMISSION
                                                                                                            Comments may be submitted by any of
                                                    will monitor for compliance with the                    the following methods:                                [Release No. 34–79947; File No. SR–
                                                    continued listing requirements. If the                                                                        PEARL–2017–03]
                                                    Fund is not in compliance with the                      Electronic Comments
                                                    applicable listing requirements, the                                                                          Self-Regulatory Organizations; MIAX
                                                    Exchange will commence delisting                          • Use the Commission’s Internet                     PEARL, LLC; Notice of Filing and
                                                    procedures under IEX Rule Series                        comment form (http://www.sec.gov/                     Immediate Effectiveness of a Proposed
                                                    14.500.                                                 rules/sro.shtml); or                                  Rule Change To Amend MIAX PEARL
                                                       Accordingly, based on the foregoing,                   • Send an email to rule-comments@                   Rules 100, 404, 519C and Adopt MIAX
                                                    the Exchange believes that the proposed                 sec.gov. Please include File Number SR–               PEARL 1018
                                                    generic listing standards for Managed                   IEX–2017–03 in the subject line.                      February 2, 2017.
                                                    Fund Shares are consistent with Section                 Paper Comments:                                          Pursuant to the provisions of Section
                                                    6(b)(5) of the Act.                                                                                           19(b)(1) of the Securities Exchange Act
                                                    B. Self-Regulatory Organization’s                         • Send paper comments in triplicate                 of 1934 (‘‘Act’’) 1 and Rule 19b–4
                                                    Statement on Burden on Competition                      to Secretary, Securities and Exchange                 thereunder,2 notice is hereby given that
                                                                                                            Commission, 100 F Street NE.,                         on January 24, 2017, MIAX PEARL, LLC
                                                       IEX does not believe that the                        Washington, DC 20549–1090.                            (‘‘MIAX PEARL’’ or ‘‘Exchange’’) filed
                                                    proposed rule change will result in any                                                                       with the Securities and Exchange
                                                    burden on competition that is not                       All submissions should refer to File
                                                                                                                                                                  Commission (‘‘Commission’’) a
                                                    necessary or appropriate in furtherance                 Number SR–IEX–2017–03. This file
                                                                                                                                                                  proposed rule change as described in
                                                    of the purposes of the Act.                             number should be included in the
                                                                                                                                                                  Items I and II below, which Items have
                                                                                                            subject line if email is used. To help the
                                                       The Exchange believes that the                                                                             been prepared by the Exchange. The
                                                                                                            Commission process and review your                    Commission is publishing this notice to
                                                    proposed change would facilitate the
                                                    listing and trading of additional types of              comments more efficiently, please use                 solicit comments on the proposed rule
                                                    Managed Fund Shares and result in a                     only one method. The Commission will                  change from interested persons.
                                                    significantly more efficient process for                post all comments on the Commission’s
                                                                                                            Internet Web site (http://www.sec.gov/                I. Self-Regulatory Organization’s
                                                    the listing and trading of Managed Fund
                                                                                                            rules/sro.shtml). Copies of the                       Statement of the Terms of Substance of
                                                    Shares, thereby enhancing competition
                                                                                                            submission, all subsequent                            the Proposed Rule Change
                                                    among market participants, including
                                                    issuers and exchanges. Further, the                     amendments, all written statements                       The Exchange is filing a proposal to
                                                    Exchange believes that applying                         with respect to the proposed rule                     amend MIAX PEARL Rules 100, 404,
                                                    uniform and transparent listing                         change that are filed with the                        519C, and to adopt new MIAX PEARL
                                                    standards would make the process for                    Commission, and all written                           Rule 1018, in order to bring MIAX
                                                    listing Managed Fund Shares more                        communications relating to the                        PEARL Rules up to date with recent
                                                    competitive.                                            proposed rule change between the                      changes that have been made to the
                                                                                                            Commission and any person, other than                 rules of the Exchange’s affiliate, Miami
                                                    C. Self-Regulatory Organization’s                       those that may be withheld from the                   International Securities Exchange, LLC
                                                    Statement on Comments on the                            public in accordance with the                         (‘‘MIAX Options’’).
                                                    Proposed Rule Change Received From                      provisions of 5 U.S.C. 552, will be                      The text of the proposed rule change
                                                    Members, Participants, or Others                        available for Web site viewing and                    is available on the Exchange’s Web site
                                                      Written comments were neither                         printing in the Commission’s Public                   at http://www.miaxoptions.com/rule-
                                                    solicited nor received.                                 Reference Room, 100 F Street NE.,                     filings/pearl at MIAX PEARL’s principal
                                                                                                            Washington, DC 20549, on official                     office, and at the Commission’s Public
                                                    III. Date of Effectiveness of the                       business days between the hours of                    Reference Room.
                                                    Proposed Rule Change and Timing for                     10:00 a.m. and 3:00 p.m. Copies of the
                                                    Commission Action                                                                                             II. Self-Regulatory Organization’s
                                                                                                            filing will also be available for                     Statement of the Purpose of, and
                                                      Within 45 days of the date of                         inspection and copying at the principal               Statutory Basis for, the Proposed Rule
                                                    publication of this notice in the Federal               office of the Exchange. All comments                  Change
                                                    Register or within such longer period                   received will be posted without change;
asabaliauskas on DSK3SPTVN1PROD with NOTICES




                                                                                                            the Commission does not edit personal                   In its filing with the Commission, the
                                                    up to 90 days (i) as the Commission may
                                                                                                            identifying information from                          Exchange included statements
                                                    designate if it finds such longer period
                                                                                                            submissions. You should submit only                   concerning the purpose of and basis for
                                                    to be appropriate and publishes its
                                                                                                                                                                  the proposed rule change and discussed
                                                    reasons for so finding or (ii) as to which              information that you wish to make
                                                                                                                                                                  any comments it received on the
                                                    the self-regulatory organization                        available publicly. All submissions
                                                    consents, the Commission will:                          should refer to File Number SR–IEX–                     45 17 CFR 200.30–3(a)(12).
                                                      A. By order approve or disapprove                     2017–03 and should be submitted on or                   1 15 U.S.C. 78s(b)(1).
                                                    such proposed rule change; or                           before March 1, 2017.                                   2 17 CFR 240.19b-4.




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                                                    9866                       Federal Register / Vol. 82, No. 25 / Wednesday, February 8, 2017 / Notices

                                                    proposed rule change. The text of these                 Options when it modified its rule.5 The               Interpretations and Policies .02 and by
                                                    statements may be examined at the                       Exchange further notes that the MIAX                  deleting redundant language would
                                                    places specified in Item IV below. The                  Options filing was a competitive filing               result in a clearer definition and would
                                                    Exchange has prepared summaries, set                    based on a filing submitted by the BOX                make the Rulebook more precise.
                                                    forth in sections A, B, and C below, of                 Options Exchange, LLC (‘‘BOX’’), which                Additionally, this change is identical to
                                                    the most significant aspects of such                    was approved by the Commission.6                      changes made by MIAX Options when
                                                    statements.                                                Currently, under the Short Term                    it modified its rule.9
                                                                                                            Option Series Program the Exchange
                                                    A. Self-Regulatory Organization’s                       may open for trading on any Thursday                  Mass Cancellation of Trading Interest
                                                    Statement of the Purpose of, and                        or Friday that is a business day (‘‘Short                The Exchange also proposes to amend
                                                    Statutory Basis for, the Proposed Rule                  Term Option Opening Date’’) series of                 Exchange Rule 519C, Mass Cancellation
                                                    Change                                                  options on that class that expire at the              of Trading Interest, to align the process
                                                                                                            close of business on each of the next                 and procedure of cancelling orders and
                                                    1. Purpose
                                                                                                            five Fridays that are business days, and              quotes from the order book to that of
                                                      The Exchange proposes to amend                        are not Fridays in which monthly                      MIAX Options. The proposed rule
                                                    MIAX PEARL Rules 100, 404, 519C, and                    option series or Quarterly Options                    change will amend the first paragraph
                                                    to adopt MIAX PEARL Rule 1018, in                       Series expire (‘‘Short Term Option                    for clarity and ease of reference and
                                                    order to bring the MIAX PEARL Rules                     Expiration Dates’’). The Exchange is                  adopt new section (b) to provide that
                                                    up to date with the changes that were                   now proposing to amend MIAX PEARL                     Exchange staff, upon request from a
                                                    made to the rules of MIAX Options                       Rule 404, Interpretations and Policies                Member,10 may remove all of the
                                                    while MIAX PEARL’s Form 1                               .02, to permit the listing of SPY options             Member’s quotations 11 and cancel all of
                                                    Application to register as a national                   expiring on Wednesdays. Specifically,                 the Member’s orders 12 in the System 13
                                                    securities exchange was pending                         the Exchange is proposing that it may                 and block new incoming quotations and
                                                    approval.                                               open for trading on any Tuesday or                    orders from entering the System. The
                                                                                                            Wednesday that is a business day, series              block will remain in effect until the
                                                    Background                                              of SPY options that expire on any                     Member contacts Exchange staff 14 to
                                                                                                            Wednesday of the month that is a                      have the block removed.
                                                       MIAX PEARL plans to commence                                                                                  The Exchange proposes to add a new
                                                    operations as a national securities                     business day, and is not a Wednesday
                                                                                                            on which Quarterly Options Series                     heading entitled ‘‘Cancel’’ to the first
                                                    exchange registered under Section 6 of                                                                        paragraph, and proposes to identify the
                                                                                                            expire (‘‘Wednesday SPY Expirations’’).
                                                    the Act 3 on February 6, 2017. As                                                                             first paragraph with the letter ‘‘(a)’’ for
                                                                                                            The proposed Wednesday SPY
                                                    described more fully in MIAX PEARL’s                                                                          clarity and ease of reference.
                                                                                                            Expiration series would be similar to the
                                                    Form 1 application,4 the Exchange is an                                                                       Additionally, the Exchange proposes to
                                                                                                            current Short Term Options Series, with
                                                    affiliate of MIAX Options. MIAX PEARL                                                                         make a clarifying change to the wording
                                                                                                            certain exceptions.7 The Exchange notes
                                                    Rules, in their current form, were filed                                                                      of the first paragraph. The paragraph
                                                                                                            that Wednesday expirations are not a
                                                    as Exhibit B to its Form 1 on August 12,                                                                      currently states that, ‘‘[a] Member may
                                                                                                            novel a proposition as other option
                                                    2016, and at that time, the above                                                                             cancel all of its quotations and/or all or
                                                                                                            exchanges list and trade Wednesday
                                                    mentioned rules, were substantially                                                                           any subset of its orders [. . .].’’ The
                                                                                                            SPY Expirations.8
                                                    similar to the rules of the MIAX Options                   The Exchange represents that is has                Exchange proposes to replace the word
                                                    exchange. In the time between when the                  an adequate surveillance program in                   ‘‘cancel’’ with ‘‘remove’’ and to insert
                                                    Exchange filed its Form 1 and the time                  place to detect manipulative trading in               the word ‘‘cancel’’ after ‘‘and/or,’’ as
                                                    the Exchange received its approval                      Wednesday SPY Expirations in the same                 this language more accurately describes
                                                    order, MIAX Options made several                        way it monitors trading in the current
                                                    changes to its rule book. In order to                   Short Term Option Series. Additionally,                  9 See Securities Exchange Act Release No. 78772

                                                    ensure consistent operation of both                     the Exchange represents that it has the               (September 6, 2016), 81 FR 62784 (September 12,
                                                    MIAX PEARL and MIAX Options                                                                                   2016) (SR–MIAX–2016–31).
                                                                                                            necessary system capacity to support                     10 The term ‘‘Member’’ means an individual or
                                                    through having consistent rules, the                    the new options series.                               organization that is registered with the Exchange
                                                    Exchange proposes to amend MIAX                                                                               pursuant to Chapter II of MIAX PEARL Rules for
                                                    PEARL Rules as described below.                         Definitions                                           purposes of trading on the Exchange as an
                                                                                                                                                                  ‘‘Electronic Exchange Member’’ or ‘‘Market Maker.’’
                                                    Series of Option Contracts Open for                       The Exchange proposes to amend                      Members are deemed ‘‘members’’ under the
                                                    Trading                                                 Exchange Rule 100, which sets forth the               Exchange Act. See Exchange Rule 100.
                                                                                                            definition of Short Term Option Series.                  11 The term ‘‘quote’’ or ‘‘quotation’’ means a bid

                                                       The Exchange proposes to expand the                  The definition set forth in Rule 100 is               or offer entered by a Market Maker as a firm order
                                                                                                            redundant to the terms for Short Term                 that updates the Market Maker’s previous bid or
                                                    Short Term Option Series Program                                                                              offer, if any. When the term is used in these Rules
                                                    outlined in Rule 404, Interpretations                   Option Series set forth in Rule 404,                  and a bid or offer is entered by the Market Maker
                                                    and Policies .02, to allow the listing and              Interpretations and Policies .02. As a                in the option series to which such Market Maker is
                                                    trading of SPDR S&P 500 ETF Trust                       result, the Exchange believes that                    registered, such order shall, as applicable,
                                                                                                            amending Rule 100 by including an                     constitute a quote or quotation for purposes of these
                                                    (‘‘SPY’’) options with Wednesday                                                                              Rules. See Exchange Rule 100.
                                                    expirations. These changes would make                   internal cross reference to Rule 404,                    12 The term ‘‘order’’ means a firm commitment to

                                                    MIAX PEARL Rule 404 consistent with                                                                           buy or sell option contracts. See Exchange Rule 100.
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                                                                                                              5 See Securities Exchange Act Release No. 78772
                                                    MIAX Options Rule 404 and are                                                                                    13 The term ‘‘System’’ means the automated
                                                                                                            (September 6, 2016), 81 FR 62784 (September 12,       trading system used by the Exchange for the trading
                                                    identical to changes made by MIAX                       2016) (SR–MIAX–2016–31).                              of securities. See Exchange Rule 100.
                                                                                                              6 See Securities Exchange Act Release No. 78668        14 The Exchange’s Help Desk would receive such
                                                      3 15 U.S.C. 78f.                                      (August 24, 2016), 81 FR 59696 (August 30, 2016)      communication. The Help Desk is the Exchange’s
                                                      4 See Securities Exchange Act Release No. 79543       (order approving SR–BOX–2016–28).                     control room consisting of Exchange staff
                                                                                                              7 The Commission notes that these exceptions are
                                                    (December 13, 2016), 81 FR 92901 (December 20,                                                                authorized to make certain trading determinations
                                                    2016) (File No. 10–227) (order approving                further discussed in MIAX–2016–31, supra note 5.      on behalf of the Exchange. The Help Desk shall
                                                    application of MIAX PEARL, LLC for registration as        8 See MIAX Options Rule 404; BOX Rule 5050;         report to and be supervised by a senior executive
                                                    a national securities exchange.)                        and ISE Rule 504.                                     officer of the Exchange. See Exchange Rule 100.



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                                                                               Federal Register / Vol. 82, No. 25 / Wednesday, February 8, 2017 / Notices                                             9867

                                                    the actions being performed by the                      disconnect Members from the                           furthers the objectives of Section 6(b)(5)
                                                    Exchange. Additionally, the Exchange is                 Exchange’s System.                                    of the Act 28 in particular, in that it is
                                                    proposing to insert language indicating                   The proposed changes would make                     designed to prevent fraudulent and
                                                    that a Member may effect the removal of                 MIAX PEARL Rule 519C, Mass                            manipulative acts and practices, to
                                                    its quotations and/or the cancellation of               Cancellation of Trading Interest,                     promote just and equitable principles of
                                                    its orders, ‘‘by firm name or by Market                 consistent with MIAX Options Rule                     trade, to foster cooperation and
                                                    Participant Identifier (‘‘MPID’’)’’.15                  519C, Mass Cancellation of Trading                    coordination with persons engaged in
                                                       MIAX PEARL currently offers two                      Interest, and are identical to changes                facilitating transactions in securities, to
                                                    Membership types, Market Maker                          made by MIAX Options when it                          remove impediments to and perfect the
                                                    (‘‘MM’’) 16 and Electronic Exchange                     modified its rule.23                                  mechanisms of a free and open market
                                                    Member (‘‘EEM’’).17 Market Makers self-                                                                       and a national market system and, in
                                                                                                            Expedited Suspension Proceeding
                                                    assign the series for which they choose                                                                       general, to protect investors and the
                                                    to act as a Market Maker 18 and have an                    MIAX PEARL incorporates certain                    public interest.
                                                    obligation to maintain a two-sided                      chapters of the MIAX Options Rulebook                    The Exchange is proposing to amend
                                                    market, pursuant to Rule 605(d)(1), in                  into its rulebook in their entirety by                Rule 404, Series of Option Contracts
                                                    those series in which they register to                  reference. Specifically, MIAX Options                 Open for Trading. The Exchange
                                                    trade.19 Exchange Rule 605, Market                      Rulebook, Chapter III, Business                       believes the Short Term Option Series
                                                    Maker Quotations, details various                       Conduct, is incorporated by reference,                Program has been successful to date and
                                                    requirements associated with a Market                   and contains Rule 322, Disruptive                     that Wednesday SPY Expirations simply
                                                    Maker’s quotes, such as ‘‘Size                          Quoting and Trading Activity                          expand the ability of investors to hedge
                                                    Associated with Quotes’’, ‘‘Firm                        Prohibited, which was adopted by                      risk against market movements
                                                    Quotes’’, and ‘‘Continuous Quotes’’.20 A                MIAX Options to prohibit disruptive                   stemming from economic releases or
                                                    ‘‘quote’’ on the Exchange is defined as,                quoting and trading on MIAX Options.24                market events that occur throughout the
                                                    ‘‘[. . .] a bid or offer entered by a                   In connection with this rule, MIAX                    month in the same way that the Short
                                                    Market Maker as a firm order that                       Options adopted new MIAX Options                      Term Option Series Program has
                                                    updates the Market Maker’s previous                     Rule 1018, Expedited Suspension                       expanded the landscape of hedging.
                                                    bid or offer, if any [. . .].’’ 21 Currently,           Proceeding, to permit MIAX Options to                 Similarly, the Exchange believes
                                                    there is not a separate Market Maker                    take prompt action to suspend Members                 Wednesday SPY Expirations should
                                                    quote transaction available on the                      or their clients that violate MIAX                    create greater trading and hedging
                                                    Exchange. The Exchange’s definition of                  Options Rule 322.25 The Exchange now                  opportunities and flexibility, and
                                                    a quote further provides that, ‘‘[w]hen                 proposes to adopt new Rule 1018,                      provide customers with the ability to
                                                    the term order is used in these Rules                   Expedited Suspension Proceeding, to                   more closely tailor their investment
                                                    and a bid or offer is entered by the                    align the rules of MIAX Options and                   objectives. The Exchange believes that
                                                    Market Maker in the option series to                    MIAX PEARL.                                           allowing Wednesday SPY Expirations
                                                    which such Market Maker is registered,                     The Exchange proposes to adopt new                 and monthly SPY expirations in the
                                                    such order shall, as applicable,                        Rule 1018, to set forth procedures for                same week would benefit investors and
                                                    constitute a quote or quotation for                     issuing suspension orders, immediately                minimize investor confusion by
                                                    purposes of these Rules.’’ 22                           prohibiting a Member from conducting                  providing Wednesday SPY Expirations
                                                       The proposal would allow a Member                    continued disruptive quoting and                      in a continuous and uniform manner.
                                                    to submit a request to remove all of its                trading activity on the Exchange.                        The Exchange is also proposing to
                                                    outstanding quotations, as described                    Importantly, these procedures would                   amend Rule 100, Definitions, which sets
                                                    above, and cancel all of its open orders                also provide the Exchange the authority               forth the definition of Short Term
                                                    and block all new inbound quotations                    to order a Member to cease and desist                 Option Series. The definition set forth
                                                    and orders by firm name or Market                       from providing access to the Exchange                 in current Rule 100 is redundant to the
                                                    Participant Identifier (‘‘MPID’’). The                  to a client of the Member that is                     terms for Short Term Option Series set
                                                    form of such requests includes, but is                  conducting disruptive quoting and                     forth in Rule 404, Interpretations and
                                                    not limited to, email or a phone call                   trading activity in violation of Rule 322.            Policies .02. As a result, the Exchange
                                                    from authorized individuals. The                        The Exchange notes that the proposed                  believes that amending Rule 100 by
                                                    removal of quotes and the cancellation                  change would make MIAX PEARL Rule                     including an internal cross reference to
                                                    of orders as described herein does not                  1018 consistent with MIAX Options                     Rule 404, Interpretations and Policies
                                                                                                            Rule 1018 and is identical to the rule                .02 and deleting redundant language
                                                       15 The term ‘‘MPID’’ means unique market             text adopted by MIAX Options when it                  would result in a clearer definition and
                                                    participant identifier. See Exchange Rule 100.          adopted its rule.26                                   would make the Rulebook more precise
                                                       16 The term ‘‘Market Maker’’ or ‘‘MM’’ means a
                                                                                                            2. Statutory Basis                                    and user friendly. Clarity and
                                                    Member registered with the Exchange for the                                                                   transparency of the Exchange’s rules
                                                    purpose of making markets in options contracts             MIAX PEARL believes that its
                                                    traded on the Exchange and that is vested with the                                                            benefits investors and the public by
                                                    rights and responsibilities specified in Chapter VI     proposed rule change is consistent with               eliminating the potential for confusion.
                                                    of MIAX PEARL Rules. See Exchange Rule 100.             Section 6(b) of the Act 27 in general, and               The Exchange is also proposing to
                                                       17 The term ‘‘Electronic Exchange Member’’ or
                                                                                                                                                                  amend Rule 519C, Mass Cancellation of
                                                    ‘‘EEM’’ means the holder of a Trading Permit who           23 See Securities Exchange Act Release Nos.
                                                    is a Member representing as agent Public Customer
                                                                                                                                                                  Trading Interest, to add another risk
                                                                                                            78023 (June 8, 2016), 81 FR 38751 (June 14, 2016)
                                                                                                                                                                  protection tool for Members and provide
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                                                    Orders or Non-Customer Orders on the Exchange           (SR–MIAX–2016–14) (adoption of Rule 519C);
                                                    and those non-Market Maker Members conducting           78974 (September 29, 2016), 81 FR 69090 (October      that the Exchange may take action on
                                                    proprietary trading. Electronic Exchange Members        5, 2016) (SR–MIAX–2016–34) (amendment of Rule         their behalf. The proposed rule protects
                                                    are deemed ‘‘members’’ under the Exchange Act.          519C).
                                                    See Exchange Rule 100.
                                                                                                                                                                  investors and the public interest by
                                                                                                               24 See MIAX Options Rule 322.
                                                       18 See Exchange Rule 602.                               25 See MIAX Options Rule 1018.
                                                                                                                                                                  increasing the number of risk protection
                                                       19 See Exchange Rule 604(a)(1).                         26 See Securities Exchange Act Release No. 79182
                                                                                                                                                                  tools available to Members on the
                                                       20 See Exchange Rule 605.
                                                                                                            (October 28, 2016), 81 FR 76639 (November 3, 2016)    Exchange. The Exchange is also making
                                                       21 See Exchange Rule 100.                            (SR–MIAX–2016–40).
                                                       22 See Exchange Rule 100.                               27 15 U.S.C. 78f(b).                                 28 15   U.S.C. 78f(b)(5).



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                                                    9868                         Federal Register / Vol. 82, No. 25 / Wednesday, February 8, 2017 / Notices

                                                    minor non-substantive amendments to                       not be proven on an expedited basis and                  Exchange will use the authority only in
                                                    the rule which organize the rule text for                 would instead require a thorough                         clear and egregious cases when
                                                    clarity and clarifies the actions being                   investigation into the activity. As noted,               necessary to protect investors, other
                                                    performed by the Exchange, and are                        the Exchange believes it is necessary for                Members and the Exchange, and in such
                                                    intended to remove impediments to and                     the protection of investors to make such                 cases, the Respondent will be afforded
                                                    perfect the mechanisms of a free and                      modifications in order to adopt an                       due process in connection with the
                                                    open market by adding precision and                       expedited process rather than allowing                   suspension proceedings.
                                                    ease of reference to the Exchange’s                       disruptive quoting and trading activity                     The Exchange believes the proposal
                                                    rules, thus promoting transparency and                    to occur for several years.                              removes impediments to and perfects
                                                    clarity for Exchange Members.                               The Exchange believes that this                        the mechanisms of a free and open
                                                       The Exchange is also proposing to                      proposal will provide the Exchange                       market. Specifically, the Exchange
                                                    adopt Rule 1018, Expedited Suspension                     with the necessary means to enforce                      believes that although MIAX PEARL
                                                    Proceeding, which will provide the                        against such behavior in an expedited                    rules may, in certain instances,
                                                    Exchange a mechanism to promptly                          manner while providing Members with                      intentionally differ from MIAX Options
                                                    initiate expedited suspension                             the necessary due process. The                           rules, the proposed changes will
                                                    proceedings in the event the Exchange                     Exchange believes that its proposal is                   promote uniformity with MIAX Options
                                                    believes that it has sufficient proof that                consistent with the Act because it                       with respect to rules that are intended
                                                    a violation of Rule 322 has occurred and                  provides the Exchange with the ability                   to be identical but which were not
                                                    is ongoing. The Exchange believes that                    to remove impediments to and perfect                     modified while MIAX PEARL’s Form 1
                                                    the proposal is consistent with Sections                  the mechanism of a free and open                         application was pending approval. The
                                                    6(b)(1) and 6(b)(6) of the Act,29 which                   market and a national market system,                     Exchange believes that it will reduce the
                                                    require that the rules of an exchange                     and, in general to protect investors and                 potential for confusion by its members
                                                    enforce compliance with, and provide                      the public interest from such ongoing                    that are also members of MIAX Options
                                                    appropriate discipline for, violations of                 behavior. Further, the Exchange believes                 if it commences operations with only
                                                    the Commission and Exchange rules.                        that adopting a rule applicable to market                those differences between MIAX PEARL
                                                    The Exchange also believes that the                       participants is consistent with the Act                  and the MIAX Options Exchange rules
                                                    proposal is consistent with the public                    because the Exchange believes that this                  that are intentional.
                                                    interest, and the protection of investors,                type of behavior should be prohibited
                                                                                                                                                                       B. Self-Regulatory Organization’s
                                                    or otherwise in furtherance of the                        for all Members. While this behavior
                                                                                                                                                                       Statement on Burden on Competition
                                                    purposes of the Act because the                           may not be as prevalent on the options
                                                    proposal helps to strengthen the                          markets today, the Exchange does not                       The Exchange does not believe that
                                                    Exchange’s ability to carry out its                       believe the possibility of such behavior                 the proposed rule change will impose
                                                    oversight and enforcement                                 in the future would not have the same                    any burden on competition that is not
                                                    responsibilities as a self-regulatory                     market impact and thereby warrant an                     necessary or appropriate in furtherance
                                                    organization in cases where awaiting the                  expedited process.                                       of the purposes of the Act.
                                                    conclusion of a full disciplinary                           The Exchange believes that the                         C. Self-Regulatory Organization’s
                                                    proceeding is unsuitable in view of the                   proposal is consistent Section 6(b)(7) of                Statement on Comments on the
                                                    potential harm to Members and their                       the Act,32 which requires that the rules                 Proposed Rule Change Received From
                                                    customers.                                                of an exchange ‘‘provide a fair                          Members, Participants, or Others
                                                       Also, the Exchange notes that if this                  procedure for the disciplining of
                                                    type of conduct is allowed to continue                    members and persons associated with                        Written comments were neither
                                                    on the Exchange, the Exchange’s                           members . . . and the prohibition or                     solicited nor received.
                                                    reputation could be harmed because it                     limitation by the exchange of any                        III. Date of Effectiveness of the
                                                    may appear to the public that the                         person with respect to access to services                Proposed Rule Change and Timing for
                                                    Exchange is not acting to address the                     offered by the exchange or a member                      Commission Action
                                                    behavior. The expedited process would                     thereof.’’ Finally, the Exchange believes
                                                    enable the Exchange to address the                        the proposal is consistent with Sections                    Because the foregoing proposed rule
                                                    behavior with greater speed.                              6(d)(1) and 6(d)(2) of the Act,33 which                  change does not: (i) Significantly affect
                                                       The Exchange notes that is has                         require that the rules of an exchange                    the protection of investors or the public
                                                    defined the prohibited disruptive                         with respect to a disciplinary                           interest; (ii) impose any significant
                                                    quoting and trading activity by                           proceeding or proceeding that would                      burden on competition; and (iii) become
                                                    modifying the traditional definitions of                  limit or prohibit access to or                           operative for 30 days after the date of
                                                    layering 30 and spoofing 31 to eliminate                  membership in the exchange require the                   the filing, or such shorter time as the
                                                    an express intent element that would                      exchange to: Provide adequate and                        Commission may designate, it has
                                                                                                              specific notice of the charges brought                   become effective pursuant to 19(b)(3)(A)
                                                      29 15  U.S.C. 78f(b)(1) and 78f(b)(6).                  against a member or person associated                    of the Act 34 and Rule 19b–4(f)(6) 35
                                                      30 ‘‘Layering’  is a form of market manipulation in     with a member, provide an opportunity                    thereunder.
                                                    which multiple, non-bona fide limit orders are                                                                        A proposed rule change filed
                                                    entered on one side of the market at various price        to defend against such charges, keep a
                                                                                                                                                                       pursuant to Rule 19b–4(f)(6) under the
                                                    levels in order to create the appearance of a change      record, and provide details regarding
                                                                                                                                                                       Act 36 normally does not become
                                                    in the levels of supply and demand, thereby               the findings and applicable sanctions in
                                                    artificially moving the price of a security. An order
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                                                                                                              the event a determination to impose a                      34 15  U.S.C. 78s(b)(3)(A).
                                                    is then executed on the opposite side of the market
                                                    at the artificially created price, and the non-bona       disciplinary sanction is made. The                         35 17  CFR 240.19b–4(f)(6). In addition, Rule 19b–
                                                    fide orders are cancelled.                                Exchange believes that each of these                     4(f)(6) requires a self-regulatory organization to give
                                                       31 ‘‘Spoofing’’ is a form of market manipulation       requirements is addressed by the notice                  the Commission written notice of its intent to file
                                                    that involves the market manipulator placing non-         and due process provisions included                      the proposed rule change at least five business days
                                                    bona fide orders that are intended to trigger some                                                                 prior to the date of filing of the proposed rule
                                                    type of market movement and/or response from
                                                                                                              within Rule 1018. Importantly, the                       change, or such shorter time as designated by the
                                                    other market participants, from which the market                                                                   Commission. The Exchange has satisfied this
                                                                                                                32 15   U.S.C. 78f(b)(7).                              requirement.
                                                    manipulator might benefit by trading bona fide
                                                    orders.                                                     33 15   U.S.C. 78f(d)(1) and 78f(d)(2).                  36 17 CFR 240.19b–4(f)(6).




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                                                                               Federal Register / Vol. 82, No. 25 / Wednesday, February 8, 2017 / Notices                                                   9869

                                                    operative for 30 days after the date of its             Commission, 100 F Street NE.,                          CONTACT PERSON FOR MORE INFORMATION:
                                                    filing. However, Rule 19b–4(f)(6)(iii) 37               Washington, DC 20549–1090.                             For further information and to ascertain
                                                    permits the Commission to designate a                   All submissions should refer to File                   what, if any, matters have been added,
                                                    shorter time if such action is consistent               Number SR–PEARL–2017–03. This file                     deleted or postponed, please contact the
                                                    with the protection of investors and the                number should be included on the                       Office of the Secretary at (202) 551–
                                                    public interest. In its filing with the                 subject line if email is used. To help the             5400.
                                                    Commission, the Exchange has asked                      Commission process and review your                       Dated: February 3, 2017.
                                                    the Commission to waive the 30-day                      comments more efficiently, please use                  Lynn M. Powalski,
                                                    operative delay so that the proposal may                only one method. The Commission will                   Deputy Secretary.
                                                    become operative immediately upon                       post all comments on the Commission’s                  [FR Doc. 2017–02636 Filed 2–6–17; 11:15 am]
                                                    filing. The Commission believes that                    Internet Web site (http://www.sec.gov/                 BILLING CODE 8011–01–P
                                                    waiving the 30-day operative delay is                   rules/sro.shtml). Copies of the
                                                    consistent with the protection of                       submission, all subsequent
                                                    investors and the public interest. The                  amendments, all written statements                     SECURITIES AND EXCHANGE
                                                    Commission notes that waiver of the                     with respect to the proposed rule                      COMMISSION
                                                    operative delay will allow the proposed                 change that are filed with the
                                                    rules to become operative before the                                                                           [Release No. 34–79946; File No. SR–
                                                                                                            Commission, and all written                            PEARL–2017–05]
                                                    Exchange intends to commence                            communications relating to the
                                                    operations as a national exchange on                    proposed rule change between the                       Self-Regulatory Organizations; MIAX
                                                    February 6, 2017. The Commission                        Commission and any person, other than                  PEARL, LLC; Notice of Filing and
                                                    notes that the proposed rule change is                  those that may be withheld from the                    Immediate Effectiveness of a Proposed
                                                    based on substantively identical rules of               public in accordance with the                          Rule Change To Amend Exchange
                                                    MIAX Options and thus raises no new                     provisions of 5 U.S.C. 552, will be                    Rule 515, Execution of Orders and
                                                    novel or substantive issues.                            available for Web site viewing and                     Quotes
                                                    Accordingly, the Commission hereby                      printing in the Commission’s Public
                                                    waives the operative delay and                          Reference Room, 100 F Street NE.,                      February 2, 2017.
                                                    designates the proposal operative upon                  Washington, DC 20549, on official                         Pursuant to the provisions of Section
                                                    filing.38                                               business days between the hours of                     19(b)(1) of the Securities Exchange Act
                                                       At any time within 60 days of the                    10:00 a.m. and 3:00 p.m. Copies of the                 of 1934 (‘‘Act’’) 1 and Rule 19b–4
                                                    filing of the proposed rule change, the                 filing also will be available for                      thereunder,2 notice is hereby given that
                                                    Commission summarily may                                inspection and copying at the principal                on January 31, 2017, MIAX PEARL, LLC
                                                    temporarily suspend such rule change if                 office of the Exchange. All comments                   (‘‘MIAX PEARL’’ or ‘‘Exchange’’) filed
                                                    it appears to the Commission that such                  received will be posted without change;                with the Securities and Exchange
                                                    action is necessary or appropriate in the               the Commission does not edit personal                  Commission (‘‘Commission’’) a
                                                    public interest, for the protection of                  identifying information from                           proposed rule change as described in
                                                    investors, or otherwise in furtherance of               submissions. You should submit only                    Items I and II below, which Items have
                                                    the purposes of the Act. If the                         information that you wish to make                      been prepared by the Exchange. The
                                                    Commission takes such action, the                       available publicly. All submissions                    Commission is publishing this notice to
                                                    Commission shall institute proceedings                  should refer to File Number SR–                        solicit comments on the proposed rule
                                                    to determine whether the proposed rule                                                                         change from interested persons.
                                                                                                            PEARL–2017–03 and should be
                                                    should be approved or disapproved.                      submitted on or before March 1, 2017.                  I. Self-Regulatory Organization’s
                                                    IV. Solicitation of Comments                              For the Commission, by the Division of               Statement of the Terms of Substance of
                                                                                                            Trading and Markets, pursuant to delegated             the Proposed Rule Change
                                                      Interested persons are invited to                     authority.39
                                                    submit written data, views, and                                                                                   The Exchange is filing a proposal rule
                                                                                                            Robert W. Errett,                                      change to amend Exchange Rule 515,
                                                    arguments concerning the foregoing,
                                                    including whether the proposed rule                     Deputy Secretary.                                      Execution of Orders and Quotes.
                                                    change is consistent with the Act.                      [FR Doc. 2017–02552 Filed 2–7–17; 8:45 am]                The text of the proposed rule change
                                                                                                                                                                   is available on the Exchange’s Web site
                                                    Comments may be submitted by any of                     BILLING CODE 8011–01–P
                                                                                                                                                                   at http://www.miaxoptions.com/filter/
                                                    the following methods:
                                                                                                                                                                   wotitle/rule_filing, at MIAX’s principal
                                                    Electronic Comments                                     SECURITIES AND EXCHANGE                                office, and at the Commission’s Public
                                                      • Use the Commission’s Internet                       COMMISSION                                             Reference Room.
                                                    comment form (http://www.sec.gov/                                                                              II. Self-Regulatory Organization’s
                                                                                                            Sunshine Act Meeting; Additional Item
                                                    rules/sro.shtml); or                                                                                           Statement of the Purpose of, and
                                                      • Send an email to rule-comments@                     FEDERAL REGISTER CITATION OF PREVIOUS
                                                                                                                                                                   Statutory Basis for, the Proposed Rule
                                                    sec.gov. Please include File Number SR–                 ANNOUNCEMENT: To be published.
                                                                                                                                                                   Change
                                                    PEARL–2017–03 on the subject line.                                                                                In its filing with the Commission, the
                                                                                                            PREVIOUSLY ANNOUNCED TIME AND DATE OF
                                                    Paper Comments                                          THE MEETING: Thursday, February 9,
                                                                                                                                                                   Exchange included statements
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                                                                                                                                                                   concerning the purpose of and basis for
                                                      • Send paper comments in triplicate                   2017.
                                                                                                                                                                   the proposed rule change and discussed
                                                    to Secretary, Securities and Exchange                   CHANGES IN THE MEETING:  The following                 any comments it received on the
                                                                                                            matter will also be considered during                  proposed rule change. The text of these
                                                      37 17 CFR 240.19b–4(f)(6)(iii).                       the 2 p.m. Closed Meeting scheduled for                statements may be examined at the
                                                      38 For purposes only of waiving the 30-day            Thursday, February 9, 2017: Exemption                  places specified in Item IV below. The
                                                    operative delay, the Commission has also                Relief Order.
                                                    considered the proposed rule’s impact on
                                                                                                                                                                     1 15   U.S.C. 78s(b)(1).
                                                    efficiency, competition, and capital formation. See
                                                    15 U.S.C. 78c(f).                                         39 17   CFR 200.30–3(a)(12).                           2 17   CFR 240.19b–4.



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Document Created: 2017-02-08 02:59:17
Document Modified: 2017-02-08 02:59:17
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 9865 

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