Notice2021-24012
Self-Regulatory Organizations; Miami International Securities Exchange, LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Make a Minor Adjustment to the Calculation Methodology for the BRIXXTM Commercial Real Estate Indexes
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
November 4, 2021
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 86 Issue 211 (Thursday, November 4, 2021)</title>
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[Federal Register Volume 86, Number 211 (Thursday, November 4, 2021)]
[Notices]
[Pages 60923-60926]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2021-24012]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-93463; File No. SR-MIAX-2021-52]
Self-Regulatory Organizations; Miami International Securities
Exchange, LLC; Notice of Filing and Immediate Effectiveness of a
Proposed Rule Change To Make a Minor Adjustment to the Calculation
Methodology for the BRIXX\TM\ Commercial Real Estate Indexes
October 29, 2021.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on October 18, 2021, Miami International Securities Exchange, LLC
(``MIAX Options'' or ``Exchange'') filed with the Securities and
Exchange Commission (``Commission'') a proposed rule change as
described in Items I, II, and III 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 make a minor adjustment to the
calculation methodology for the BRIXX\TM\ Commercial Real Estate
Indexes (the ``BRIXX Indexes''), on which the Exchange may list and
trade options.
The text of the proposed rule change is available on the Exchange's
website at <a href="http://www.miaxoptions.com/rule-filings/">http://www.miaxoptions.com/rule-filings/</a> at MIAX Options'
principal office, and at the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to make a minor adjustment to the calculation
methodology for each of the sector BRIXX Indexes--the BRIXX Office
Index, BRIXX Retail Index, BRIXX Residential Index, and BRIXX
Hospitality Index (collectively, the ``BRIXX Sector Indexes''), on
which the Exchange may list and trade options.\3\ The Exchange does not
propose to amend the methodology for the BRIXX Composite Index at this
time.
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\3\ On April 16, 2020, the Exchange filed a Form 19b-4(e) with
the Commission pursuant to Rule 19b-4(e) of the Act to list and
trade options on the Advanced Fundamentals Commercial Real Estate
Indexes (the ``AF CRE Indexes''), which have since been rebranded as
the BRIXX Indexes. See Securities Exchange Act Release No. 91542
(April 13, 2021), 86 FR 20426 (April 19, 2021) (SR-MIAX-2021-09).
The Exchange has not yet listed options for trading on the BRIXX
Indexes for business reasons. The Exchange notes that it will file a
new Form 19b-4(e) with the Commission pursuant to Rule 19b-4(e) of
the Act to list and trade options on the BRIXX Indexes at the time
the Exchange anticipates it will begin listing options for trading.
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Background
On April 17, 2020, the Exchange filed its proposal to list and
trade options on five AF CRE Indexes (the AF CRE Residential Index, AF
CRE Retail Index, AF CRE Office Index, AF CRE Hospitality Index and AF
CRE Composite Index),\4\ all of which have since been rebranded as the
BRIXX Indexes.\5\ In the AF CRE Index Notice, the Exchange described,
among other things, the component selection criteria in order for an
equity real estate
[[Page 60924]]
investment trust (``REIT'') to be included in the calculation of each
index.
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\4\ See Securities Exchange Act Release No. 88767 (April 29,
2020), 85 FR 26743 (May 5, 2020) (SR-MIAX-2020-08) (Notice of Filing
and Immediate Effectiveness of a Proposed Rule Change to List and
Trade Options That Overlie Five Advanced Fundamentals LLC Commercial
Real Estate Indexes) (the ``AF CRE Index Notice'').
\5\ See supra note 3.
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In particular, the composition of each index is determined in a
reconstitution on a quarterly basis from audited REIT company public
filings and supplemental filings with the Commission, updated each
quarter and intra-quarter based on 8-K, 10-Q, and 10-K filings. The
components in each of the indexes are determined from the REITs that
have the largest enterprise value (``Enterprise Value'') \6\ within
each individual sector and that meet the following minimum eligibility
requirements. To be eligible for inclusion in each of the BRIXX Sector
Indexes, a REIT must: (i) Be classified as an equity REIT; (ii) be
listed on a U.S. securities exchange; (iii) have a minimum Enterprise
Value of $1 billion; (iv) have at least 85% of its revenue derived from
the associated asset class; and (v) have issued a quarterly filing or
annual report after its initial listing.
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\6\ The term ``Enterprise Value'' refers to the measure of a
company's total value, calculated by adding the company's market
capitalization, total liabilities and preferred equity, then
subtracting all cash and cash equivalents. See <a href="https://www.investopedia.com/terms/e/enterprisevalue.asp">https://www.investopedia.com/terms/e/enterprisevalue.asp</a>.
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Proposal
The Exchange now proposes to modify the condition in romanette
(iv), above, for an equity REIT to be eligible for inclusion in each of
the BRIXX Sector Indexes. With the proposed change, to be eligible for
inclusion in each of the BRIXX Sector Indexes, an equity company/REIT
must have at least 70% of its revenue derived from the associated asset
class. The Exchange does not propose to amend any other criteria for
inclusion in the BRIXX Sector Indexes. The purpose of this change is to
ensure a broad scope of REITs that may be included in the calculation
of each BRIXX Sector Index while continuing to maintain that each
component REIT derive substantial revenue from the associated asset
class. The Exchange believes that with the proposed change, there will
be a greater pool of equity REITs that may qualify for inclusion in
each of the BRIXX Sector Index calculations, while continuing to ensure
that the integrity of each BRIXX Sector Index will not be compromised.
Further, with the proposed change, each BRIXX Sector Index will
continue to be comprised of equity REITs representative of each
particular sector of commercial real estate. The Exchange also believes
that this proposal will continue to provide transparency regarding the
calculation methodology for the BRIXX Sector Indexes. The Exchange
represents that the proposed change will have no impact on the accuracy
and dissemination of the BRIXX Sector Index values, which will continue
to be disseminated and available to market participants in the same
manner and in the same intervals. The proposed change will be made
before the Exchange launches options on the BRIXX Sector Indexes.
The Exchange intends that this filing is to provide market
participants with an update regarding the proposed change to one
condition of the component selection criteria, which criteria was
included in the initial filing to list and trade options on the AF CRE
Indexes (since rebranded as the BRIXX Indexes), as described in the AF
CRE Index Notice.\7\ The Exchange notes that this filing does not
propose to amend any of the Exchange's generic initial and maintenance
listing criteria, as set forth in Exchange Rules 1802(b)-(e). Further,
the Exchange notes that with the proposed change to modify one of the
conditions to the component selection criteria, the BRIXX Sector
Indexes will continue to satisfy the Exchange's initial and maintenance
listing criteria for narrow-based indexes pursuant to the Exchange's
current rules.\8\
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\7\ See supra note 4, pages 10-11.
\8\ See Exchange Rule 1802(b)-(c).
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2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
the Act and the rules and regulations thereunder applicable to the
Exchange and, in particular, the requirements of Section 6(b) of the
Act.\9\ Specifically, the Exchange believes the proposed rule change is
consistent with the Section 6(b)(5) \10\ 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 foster
cooperation and coordination with persons engaged in regulating,
clearing, settling, processing information with respect to, and
facilitating transactions in securities, to remove impediments to and
perfect the 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) \11\ requirement that the rules of
an exchange not be designed to permit unfair discrimination between
customers, issuers, brokers, or dealers.
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\9\ 15 U.S.C. 78f(b).
\10\ 15 U.S.C. 78f(b)(5).
\11\ Id.
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The Exchange believes that the proposed rule changes remove
impediments to and perfects the mechanism of a free and open market a
national market system, and protects investors and the public interest
by updating the methodology to determine which component securities are
eligible for inclusion in each of the BRIXX Sector Indexes. The
proposed change will have no impact on the dissemination of BRIXX
Sector Index values; rather, the proposed change is intended to provide
an update to market participants regarding the wider eligibility of
certain components in the calculation of each index. The Exchange
believes that by broadening the scope of potential equity REITs that
may be included in each of the BRIXX Sector Indexes, this will ensure
that no single equity REIT dominates each index. The Exchange believes
this proposal perfects the mechanism of a free and open market a
national market system, and protects investors and the public interest
because, with the proposed change, there will be no change to the
initial or maintenance listing criteria, expiration months, settlement
or exercise style of options on the BRIXX Sector Indexes. Further, the
Exchange believes that the proposed change will have no impact on the
accuracy and dissemination of the BRIXX Sector Index values, which will
continue to be disseminated and available to market participants in the
same manner and in the same intervals. The Exchange notes that it has
not listed options on the BRIXX Indexes at this time.
The Exchange believes that the proposal satisfies the requirements
of Section 6(b)(5) \12\ of the Act because, with the proposed change,
each of the BRIXX Sector Indexes will continue to satisfy the initial
listing criteria for narrow-based indexes pursuant to the Exchange's
current rules.\13\ The Exchange notes that the initial listing criteria
in Exchange Rule 1802(b) covers the following categories of
requirements, in general, for each of the BRIXX Sector Indexes: That
options are A.M-settled; each index is modified-market capitalization
weighted; specified minimum market capitalizations for each component
security; specified minimum trading volumes over certain time periods
for each component security; specified maximum weighting for the
combined weight of the five highest weighted component securities in
each index;
[[Page 60925]]
specified maximum weights for each individual component security; that
each component security is an ``NMS stock'' as defined in Rule 600 of
Regulation NMS under the Act; and, that each index is widely
disseminated at least once every 15 seconds by OPRA, CTA/CQ, NIDS or
one or more major market data vendors.\14\ The Exchange also believes
that, with the proposed modified eligibility criteria, that each of the
BRIXX Sector Indexes will continue to satisfy the maintenance listing
standards set forth in Exchange Rule 1802(c). The Exchange notes that
the maintenance listing criteria in Exchange Rule 1802(c) covers the
following categories of requirements, in general, for each of the BRIXX
Sector Indexes: That the initial listing criteria set forth in Exchange
Rule 1802(b)(1), (3), (6)-(12) continue to be satisfied; specified
percentages that the total number of component securities may increase
or decrease by from the time of initial listing; and specified trading
volumes over six months.\15\ Notwithstanding the proposed change in
component selection criteria, there will be no change to the current
generic initial and maintenance listing criteria. This proposed change
will have no impact on, or effect application and interpretation of,
the initial and maintenance listing criteria in Exchange Rules 1802(b)-
(c). The purpose of this prosed change is to update potential market
participants regarding the component selection criteria used for each
of the BRIXX Sector Indexes.
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\12\ 15 U.S.C. 78f(b)(5).
\13\ See Exchange Rule 1802(b).
\14\ See id.
\15\ See Exchange Rule 1802(c).
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The Exchange represents that it will continue to have the necessary
systems capacity to support the new option series for each of the BRIXX
Sector Indexes given the proposed modification once the Exchange
determines to list options on the BRIXX Sector Indexes.
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.
Intra-Market Competition
The Exchange does not believe that the proposed change will impose
any burden on intra-market that is not necessary or appropriate in
furtherance of the purposes of the Act because the proposed change is
not intended to address a competitive issue. Rather, the proposed
change is to update one piece of the calculation methodology for the
BRIXX Sector Indexes, on which the Exchange is authorized to list
options. The proposed rule change has no impact on the dissemination of
index values for the BRIXX Indexes. Further, the Exchange has not yet
listed options for trading on the BRIXX Indexes at this time.
Inter-Market Competition
The Exchange does not believe the propose change will impose any
burden on inter-market competition because the proposed rule change
will continue to facilitate the listing and trading of novel options
products that will enhance competition for commercial real estate
securities among market participants, to the benefit of investors and
the marketplace. This proposal furthers the Exchange's goal of listing
options on the BRIXX Indexes, which will enhance competition by
providing investors with an additional investment vehicle, in a fully-
electronic trading environment, through which investors can gain and
hedge exposure to various sectors of the commercial real estate market.
Further, these products could offer a competitive alternative to other
existing investment products that seek to allow investors to gain broad
market exposure via equity REITs in the same individual sectors as the
BRIXX Indexes.
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 \16\ and Rule 19b-4(f)(6) \17\
thereunder.
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\16\ 15 U.S.C. 78s(b)(3)(A).
\17\ 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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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
<bullet> Use the Commission's internet comment form (<a href="http://www.sec.gov/rules/sro.shtml">http://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#354740595018565a5858505b4146754650561b525a43"><span class="__cf_email__" data-cfemail="aad8dfc6cf87c9c5c7c7cfc4ded9ead9cfc984cdc5dc">[email protected]</span></a>. Please include
File Number SR-MIAX-2021-52 on the subject line.
Paper Comments
<bullet> 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-2021-52. 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 website (<a href="http://www.sec.gov/rules/sro.shtml">http://www.sec.gov/rules/sro.shtml</a>).
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 website viewing and printing in
the Commission's Public Reference Room, 100 F Street NE, Washington, DC
20549, on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of the filing also will be available for inspection
and copying at the principal office of the Exchange. All comments
received will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All
[[Page 60926]]
submissions should refer to File Number SR-MIAX-2021-52 and should be
submitted on or before November 26, 2021.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\18\
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\18\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-24012 Filed 11-3-21; 8:45 am]
BILLING CODE 8011-01-P
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