[Federal Register Volume 79, Number 165 (Tuesday, August 26, 2014)]
[Notices]
[Pages 50956-50958]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-20211]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-72885; File No. SR-MIAX-2014-44]


Self-Regulatory Organizations; Miami International Securities 
Exchange LLC; Notice of Filing and Immediate Effectiveness of a 
Proposed Rule Change To Amend Exchange Rule 404 Regarding the Short 
Term Option Series Program

August 20, 2014.
    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 August 15, 2014, Miami International 
Securities Exchange LLC (``MIAX'' 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 its rules governing the 
Short Term Option Series Program to introduce finer strike price 
intervals for standard expiration contracts in option classes that also 
have short term options listed on them (``Related non-Short Term 
Options'').
    The text of the proposed rule change is available on the Exchange's 
Web site at http://www.miaxoptions.com/filter/wotitle/rule_filing, at 
MIAX's principal office, and at the Commission's Public Reference Room.

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

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
sections A, B, and C below, of the most significant aspects of such 
statements.

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

1. Purpose
    The Exchange is proposing to amend its rules governing the Short 
Term Option Series (``STOS'') Program to introduce finer strike price 
intervals for standard expiration contracts in Related non-Short Term 
Options. In particular, the Exchange is proposing to amend its rules to 
permit the listing of Related non-Short Term Options during the month 
prior to expiration in the same strike price intervals as allowed for 
STOS.
    Under MIAX's current rules, the Exchange may list STOS in up to 
fifty option classes,\3\ in addition to option classes that are 
selected by other securities exchanges that employ a similar program 
under their respective rules. For each of these option classes, the 
Exchange may list five STOS expiration dates at any given time, not 
counting monthly or quarterly expirations.\4\ Specifically, on any 
Thursday or Friday that is a business day, the Exchange may list STOS 
in designated option classes 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 or quarterly options expire.\5\ These STOS, 
which can be several weeks or more from expiration, may be listed in 
strike price intervals of $0.50, $1, or $2.50, with the finer strike 
price intervals being offered for lower priced securities, and for 
options that trade in the Exchange's dollar strike program.\6\ More 
specifically, the Exchange may list STOS in $0.50 intervals for strike 
prices less than $75, or for option classes that trade in one dollar 
increments in the Related non-Short Term Option, $1 intervals for 
strike prices that are between $75 and $150, and $2.50 intervals for 
strike prices above $150.\7\
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    \3\ See Exchange Rule 404.02(a).
    \4\ See Exchange Rule 404.02.
    \5\ Id.
    \6\ See Exchange Rule 404.02(e).
    \7\ Id.
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    The Exchange may also list standard expiration contracts, which are 
listed in accordance with the regular monthly expiration cycle. These 
standard expiration contracts must be listed in wider strike price 
intervals of $2.50, $5, or $10,\8\ though the Exchange also operates 
strike price programs, such as the dollar strike program mentioned 
above,\9\ that allow the Exchange to list a limited number of option 
classes in finer strike price intervals. In general, the Exchange must 
list standard expiration contracts in $2.50 intervals for strike prices 
of $25 or less, $5 intervals for strike prices greater than $25, and 
$10 intervals for strike prices greater than $200.\10\ During the week 
prior to expiration only, the Exchange is permitted to list Related 
non-Short Term Option contracts in the narrower strike price intervals 
available for STOS.\11\ Since this exception to the standard strike 
price interval is available only during the week prior to expiration, 
however, standard expiration contracts regularly trade at significantly 
wider intervals than their STOS counterparts, as illustrated below.
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    \8\ See Exchange Rule 404(d).
    \9\ See Exchange Rule 404.01(a), which allows MIAX to designate 
up to 150 option classes on individual classes on individual stocks 
to be traded in $1 strike price intervals where the strike price is 
between $50 and $1. See also Exchange Rule 404.04 ($0.50 Strike 
Program).
    \10\ See Exchange Rule 404(d).
    \11\ See Exchange Rule 404.02(e).
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    For example, assume ABC is trading at $56.54 and the monthly 
expiration contract is three weeks to expiration. Assume also that MIAX 
has listed all available STOS expirations and thus has STOS listed on 
ABC for weeks one, two, four, five, and six. Each of the five weekly 
ABC expiration dates can be listed with strike prices in $0.50 
intervals, including, for example, the $56.50 at-the-money strike. 
Because the monthly expiration contract has three weeks to expiration, 
however, the near-the-money strikes must be listed in $5 intervals 
unless those options are eligible for one of the Exchange's other 
strike price programs. In this instance, that would mean that investors 
would be limited to choosing, for example, between $55 and $60 strike 
prices instead of the $56.50 at-the-money strike available for STOS. 
This is the case even though contracts on the same option class that 
expire both several weeks before and several weeks after the monthly 
expiration are eligible for finer strike price intervals. Under the 
proposed rule change, the Exchange would be permitted to list the 
Related non-Short Term Option on ABC, which is less than a month to 
expiration, in the same strike price intervals as allowed for STOS. 
Thus, the Exchange would be able to list, and investors would be able 
to trade, all expirations described above with the same uniform $0.50 
strike price interval.

[[Page 50957]]

    As proposed, the Exchange would be permitted to begin listing the 
monthly expiration contract in these narrower intervals at any time 
during the month prior to expiration, which begins on the first trading 
day after the prior month's expiration date, subject to the provisions 
of other Exchange rules. For example, since the April 2014 monthly 
option expired on Saturday, April 19, the proposed rule change would 
allow the Exchange to list the May 2014 monthly option in STOS 
intervals starting Monday, April 21.
    MIAX believes that introducing consistent strike price intervals 
for STOS and Related non-Short Term Options during the month prior to 
expiration will benefit investors by giving them more flexibility to 
closely tailor their investment decisions. The Exchange also believes 
that the proposed rule change will provide the investing public and 
other market participants with additional opportunities to hedge their 
investments, thus allowing these investors to better manage their risk 
exposure.
 2. Statutory Basis
    The Exchange believes that its proposal is consistent with the 
Securities Exchange Act of 1934 (the ``Act'') \12\ and the rules and 
regulations thereunder applicable to the Exchange and, in particular, 
the requirements of Section 6(b) of the Act. Specifically, the Exchange 
believes the proposed rule change is consistent with the Section 
6(b)(5) \13\ requirements that the rules of an exchange be designed to 
prevent fraudulent and manipulative acts and practices, to promote just 
and equitable principles of trade, 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. 
Additionally, the Exchange believes the proposed rule change is 
consistent with the Section 6(b)(5) \14\ requirement that the rules of 
an exchange not be designed to permit unfair discrimination between 
customers, issuers, brokers, or dealers.
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    \12\ 15 U.S.C. 78f(b).
    \13\ 15 U.S.C. 78f(b)(5).
    \14\ Id.
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    As noted above, standard expiration options currently trade in 
wider intervals than their STOS counterparts, except during the week 
prior to expiration. This creates a situation where contracts on the 
same option class that expire both several weeks before and several 
weeks after the standard expiration are eligible to trade in strike 
price intervals that the standard expiration contract is not. There is 
continuing strong customer demand to have the ability to execute 
hedging and trading strategies in the finer strike price intervals 
available in STOS, and the Exchange believes that the proposed rule 
change will increase market efficiency by harmonizing strike price 
intervals for contracts that are close to expiration, whether those 
contracts happen to be listed pursuant to weekly or monthly expiration 
cycles.
    The Exchange notes that, in addition to listing standard expiration 
contracts in STOS intervals during the expiration week, it already 
operates several programs that allow for strike price intervals for 
standard expiration contracts that range from $0.50 to $2.50.\15\ The 
Exchange believes that each of these programs has been successful but 
notes that limitations on the number of option classes that may be 
selected for each of these programs means that many standard expiration 
contracts must still be listed in wider intervals than their STOS 
counterparts. For example, the $0.50 strike price program, which offers 
the narrowest strike price interval, only permits the Exchange to 
designate up to 20 option classes to trade in $0.50 intervals in 
addition to option classes selected by other exchanges that employ a 
similar program.\16\ Thus, the proposed rules are necessary to fill the 
gap between strike price intervals allowed for STOS and Related non-
Short Term Options. The Exchange believes that the proposed rule 
change, like the other strike price programs currently offered by the 
Exchange, will benefit investors by giving them more flexibility to 
closely tailor their investment and hedging decisions.
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    \15\ See supra note 9.
    \16\ See Exchange Rule 404.04.
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    With regard to the impact of this proposal on system capacity, the 
Exchange has analyzed its capacity and represents that it and the 
Options Price Reporting Authority (``OPRA'') have the necessary systems 
capacity to handle any potential additional traffic associated with the 
proposed rule change. The Exchange believes that its members will not 
have capacity issues as a result of this proposal. The Exchange also 
represents that it does not believe that this expansion will cause 
fragmentation of liquidity.

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

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act. To the contrary, the Exchange 
believes that the proposed rule change will result in additional 
investment options and opportunities to achieve the investment 
objectives of market participants seeking efficient trading and hedging 
vehicles, to the benefit of investors, market participants, and the 
marketplace in general. Specifically, the Exchange believes that 
investors will benefit from the availability of strike price intervals 
in standard expiration contracts that match the intervals currently 
permitted for STOS with a similar time to expiration, and from the 
clarification regarding the listing of additional series during the 
week of expiration.

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

    Written comments were neither solicited nor received.

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

    Because the proposed rule change does not (i) significantly affect 
the protection of investors or the public interest; (ii) impose any 
significant burden on competition; and (iii) become operative for 30 
days from the date on which it was filed, or such shorter time as the 
Commission may designate, the proposed rule change has become effective 
pursuant to Section 19(b)(3)(A) of the Act \17\ and Rule 19b-4(f)(6) 
thereunder.\18\
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    \17\ 15 U.S.C. 78s(b)(3)(A).
    \18\ 17 CFR 240.19b-4(f)(6). As required under Rule 19b-
4(f)(6)(iii), the Exchange provided the Commission with written 
notice of its intent to file the proposed rule change, along with a 
brief description and the text of the proposed rule change, at least 
five business days prior to the date of filing of the proposed rule 
change, or such shorter time as designated by the Commission.
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    The Exchange has asked the Commission to waive the 30-day operative 
delay so that the proposal may become operative immediately upon 
filing. The Exchange stated that waiver of this requirement would allow 
the Exchange to compete with other exchanges proposing similar changes 
without putting the Exchange at a competitive disadvantage. The 
Exchange also stated that the proposal would foster competition by 
allowing finer strike price intervals for standard expiration contracts 
in Related non-Short Term Options to occur at more than one exchange. 
For these reasons, the Commission believes that the proposed rule 
change presents no novel

[[Page 50958]]

issues and that waiver of the 30-day operative delay is consistent with 
the protection of investors and the public interest; and will allow the 
Exchange to remain competitive with other exchanges. Therefore, the 
Commission designates the proposed rule change to be operative upon 
filing.\19\
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    \19\ 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 rule-comments@sec.gov. Please include 
File Number SR-MIAX-2014-44 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-MIAX-2014-44. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE., 
Washington, DC 20549, on official business days between the hours of 10 
a.m. and 3 p.m. Copies of the filing also will be available for 
inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-MIAX-2014-44 and should be 
submitted on or before September 16, 2014.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\20\
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    \20\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-20211 Filed 8-25-14; 8:45 am]
BILLING CODE 8011-01-P