Notice2022-02551
Self-Regulatory Organizations; Miami International Securities Exchange, LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Exchange Rule 531 To Provide for the New Liquidity Taker Event Report-Complex Orders
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
February 8, 2022
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 87 Issue 26 (Tuesday, February 8, 2022)</title>
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[Federal Register Volume 87, Number 26 (Tuesday, February 8, 2022)]
[Notices]
[Pages 7217-7223]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-02551]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-94135; File No. SR-MIAX-2022-06]
Self-Regulatory Organizations; Miami International Securities
Exchange, LLC; Notice of Filing and Immediate Effectiveness of a
Proposed Rule Change To Amend Exchange Rule 531 To Provide for the New
Liquidity Taker Event Report--Complex Orders
February 2, 2022.
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 January 28, 2022, Miami International Securities Exchange, LLC
(``MIAX Options'' or ``Exchange'') filed with the Securities and
Exchange Commission (``Commission'') a proposed rule change as
described in Items I and II below, which Items have been prepared by
the Exchange. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
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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 Exchange Rule 531(b) to
provide for the new ``Liquidity Taker Event Report--Complex Orders''.
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
[[Page 7218]]
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 currently offers the Liquidity Taker Event Report,
which is a Member \3\-specific report and helps Members to better
understand by how much time a particular order missed executing against
a specific order resting on the Exchange's Simple Order Book.\4\ The
current Liquidity Taker Event Report is described under Exchange Rule
531(a).\5\
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\3\ The term ``Member'' means an individual or organization
approved to exercise the trading rights associated with a Trading
Permit. Members are deemed ``members'' under the Exchange Act. See
Exchange Rule 100.
\4\ The term ``Simple Order Book'' means ``the Exchange's
regular electronic book of orders and quotes.'' See Exchange Rule
518(a)(15).
\5\ See Securities Exchange Act Release No. 92081 (June 1,
2021), 86 FR 30344 (June 7, 2021) (SR-MIAX-2021-21) (Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change to
Amend Rule 531, Reports and Market Data Products, to Adopt the
Liquidity Taker Event Report).
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The Exchange now proposes to amend Exchange Rule 531(b) \6\ to
provide for the new ``Liquidity Taker Event Report--Complex Orders''
(the ``Complex Order Report'') which would be substantially similar to
the existing Liquidity Taker Event Report, but would include data
concerning a Member's Complex Orders.\7\ The Exchange also proposes to
change the name of the existing Liquidity Taker Event Report to
``Liquidity Taker Event Report--Simple Orders'' and amend Exchange Rule
531(a) accordingly (the ``Liquidity Taker Event Report--Simple Orders''
shall be referred to herein as the ``Simple Order Report'').
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\6\ Currently, Exchange Rule 531(b) is titled ``Market Data
Products'' and provides the rule text for the Open-Close Report. See
Exchange Rule 531(b). With this filing, the Exchange also proposes
to move the rule text for Market Data Products to now be renumbered
as Exchange Rule 531(c). The Exchange does not propose to amend any
of the rule text for Market Data Products as currently stated in
Exchange Rule 531.
\7\ In sum, a ``Complex Order'' is ``any order involving the
concurrent purchase and/or sale of two or more different options in
the same underlying security (the `legs' or `components' of the
complex order), for the same account . . . .'' See Exchange Rule
518(a)(5).
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The Simple Order Report includes information about incoming orders
seeking to remove resting orders from the Simple Order Book. The
proposed Complex Order Report would include the same information about
incoming Complex Orders that seek to remove Complex Orders resting on
the Strategy Book.\8\ Two other differences between the proposed
Complex Order Report and the Simple Order Report are that the proposed
Complex Order Report will include the Complex MBBO \9\ in place of the
MBBO and Complex ABBO \10\ in place of the ABBO, as described further
below. These are minor differences designed to provide the MBBO and
ABBO that are relevant to trading Complex Orders. Otherwise, the
content and dissemination of the proposed Complex Order Report set
forth under amended Exchange Rule 531(b) will be identical to that of
the Simple Order Report under Exchange Rule 531(a). Other than the
difference set forth above, the Exchange represents that there are no
other differences between Simple Orders and Complex Orders that would
necessitate any other changes to the proposed Complex Order Report or
render the effects or use of the proposed Complex Order Report as
different from the Simple Order Report.
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\8\ The term ``Complex Strategy'' means ``a particular
combination of components and their ratios to one another. New
complex strategies can be created as the result of the receipt of a
complex order or by the Exchange for a complex strategy that is not
currently in the System.'' See Exchange Rule 518(a)(6). The term
``Strategy Book'' means the Exchange's electronic book of complex
orders and complex quotes. See Exchange Rule 518(a)(17). The
Strategy Book is organized by Complex Strategy in that individual
orders for a defined Complex Strategy are organized together in a
book that is separate from the orders for a different Complex
Strategy.
\9\ The term ``MBBO'' means the Exchange's best bid or offer.
See Exchange Rule 100. The Complex MBBO for a particular Complex
Strategy is calculated using the Implied Complex MIAX Emerald Best
Bid or Offer (``icMBBO'') combined with the best price currently
available for that particular Complex Strategy on the Strategy Book
to establish the Exchange's best net bid or offer for that Complex
Strategy. The icMBBO is calculated using the best price from the
Simple Order Book for each component of a Complex Strategy including
displayed and non-displayed trading interest. For stock-option
orders, the icMBBO for a Complex Strategy is calculated using the
best price (whether displayed or non-displayed) on the Simple Order
Book in the individual option component(s), and the NBBO in the
stock component. See Exchange Rule 518(a)(11).
\10\ The term ``ABBO'' or ``Away Best Bid or Offer'' means the
best bid(s) or offer(s) disseminated by other Eligible Exchanges
(defined in Exchange Rule 1400(g)) and calculated by the Exchange
based on market information received by the Exchange from the
Options Price Reporting Authority (``OPRA''). See Exchange Rule 100.
The Complex ABBO is calculated using the ABBO for each component of
a Complex Strategy to establish the away markets' best net bid or
offer for a Complex Strategy.
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Like the Simple Order Report, the proposed Complex Order Report is
an optional product \11\ available to Members. Currently, the Exchange
provides real-time prices and analytics in the marketplace. The
Exchange believes the additional data points from the matching engine
outlined below may help Members gain a better understanding about their
Complex Order interactions with the Exchange. The Exchange believes the
proposed Complex Order Report will provide Members with an opportunity
to learn more about better opportunities to access liquidity and
receive better execution rates when trading Complex Orders. The
proposed Complex Order Report will increase transparency and
democratize information so that all firms that subscribe to the
proposed Complex Order Report have access to the same information on an
equal basis, even for firms that do not have the appropriate resources
to generate a similar report regarding interactions with the Exchange.
Like the Simple Order Report, none of the components of the proposed
Complex Order Report include real-time market data.
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\11\ The Exchange intends to submit a separate filing with the
Commission pursuant to Section 19(b)(1) to propose fees for the
proposed Complex Order Report.
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Members generally would use a liquidity accessing order if there is
a high probability that it will execute against an order resting on the
Exchange's Simple Order Book. Like the Simple Order Report, the
proposed Complex Order Report would identify by how much time an order
that may have been marketable missed an execution. In the case of the
proposed Complex Order Report, the incoming order would be a Complex
Order submitted to trade against a resting order for a Complex
Strategy. The proposed Complex Order Report will provide greater
visibility into the missed trading execution, which will allow Members
to optimize their models and trading patterns to yield better execution
results when trading Complex Orders.
Like the Simple Order Report, the proposed Complex Order Report
will be a Member-specific report and will help Members to better
understand by how much time a particular order, in this case a Complex
Order, missed executing against a specific resting order, thus allowing
that Member to determine whether it wants to invest in the necessary
resources and technology to mitigate missed executions against certain
resting orders on the Exchange's Strategy Book. For example, Member A
submits a Complex Order that is posted to the Strategy Book and then,
within 200 microseconds of the entry of Member A's Complex Order,
Member B enters a marketable Complex Order to execute against Member
A's resting Complex Order. Immediately thereafter, Member C also within
200 microseconds of the entry of Member A's Complex Order, sends a
marketable
[[Page 7219]]
Complex Order to execute against Member A's resting Complex Order.
Because Member B's Complex Order is received by the Exchange before the
Complex Order for Member C, Member B's Complex Order executes against
Member A's resting Complex Order. If Member C were to subscribe to the
proposed Complex Order Report, it would be provided the data points
necessary for that firm to calculate by how much time they missed
executing against Member A's resting Complex Order.
Like the Simple Order Report, the Exchange proposes to provide the
proposed Complex Order Report on a T+1 basis. As further described
below, the proposed Complex Order Report will be specific and tailored
to the Member that is subscribed to the Complex Order Report and any
data included in the Complex Order Report that relates to a Member
other than the Member receiving the Complex Order Report will be
anonymized.
The Exchange proposes to provide the Complex Order Report in
response to Member demand for data concerning the timeliness of their
incoming Complex Orders and executions against resting orders. Members
have found the existing Simple Order Report helpful and have
periodically requested similar information from the Exchange regarding
their Complex Orders. This has come in the form of requests by Members
to the Exchange's trading operations personnel for information
concerning the timeliness of their incoming Complex Orders and efficacy
of their attempts to execute against resting liquidity on the
Exchange's Strategy Book. The purpose of the proposed Complex Order
Report is to provide Recipient Members the necessary data in a
standardized format on a T+1 and equal basis.
Similar to current Exchange Rule 531(a) regarding the Simple Order
Report, amended Exchange Rule 531(b) would provide that the proposed
Complex Order Report is a daily report that provides a Member
(``Recipient Member'') with its liquidity response time details for
executions of an order resting on the Strategy Book, where that
Recipient Member submitted a Complex Order that attempted to execute
against such resting Complex Order within a certain timeframe.
Report Content
The content of the proposed Complex Order Report would be identical
to the Simple Order Report, but for two minor differences discussed
below. Paragraph (b)(1) of Rule 531 would describe the content of the
proposed Complex Order Report and delineate which information would be
provided regarding the resting order,\12\ the response that
successfully executed against the resting order, and the response
submitted by the Recipient Member that missed executing against the
resting order. It is important to note that the content of the proposed
Complex Order Report will be specific to the Recipient Member and the
proposed Complex Order Report will not include any information related
to any Member other than the Recipient Member. The Exchange will
restrict all other market participants, including the Recipient Member,
from receiving another market participant's data.
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\12\ Like the Simple Order Report, only displayed orders will be
included in the proposed Complex Order Report. The Exchange notes
that it does not currently offer any non-displayed order types on
its options trading platform.
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Resting Order Information. The content of the proposed Complex
Order Report set forth under amended Exchange Rule 531(b)(1)(i) is
identical to the content of the Simple Order Report under Exchange Rule
531(a)(1)(i). However, as noted above, the content of the proposed
Complex Order Report would be limited to incoming Complex Orders that
seek to remove liquidity from the Exchange's Strategy Book.
Amended Exchange Rule 531(b)(1)(i) would provide that the following
information would be included in the proposed Complex Order Report
regarding the resting order: (A) The time the resting order was
received by the Exchange; \13\ (B) symbol; \14\ (C) order reference
number, which is a unique reference number assigned to a new Complex
Order at the time of receipt; \15\ (D) whether the Recipient Member is
an Affiliate \16\ of the Member that entered the resting order \17\;
(E) origin type (e.g., Priority Customer,\18\ Market Maker \19\); \20\
(F) side (buy or sell); \21\ and (G) displayed price and size of the
resting order.\22\
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\13\ This information is also included in the Simple Order
Report. See Exchange Rule 531(a)(1)(i)(A).
\14\ This information is also included in the Simple Order
Report. See Exchange Rule 531(a)(1)(i)(B).
\15\ This information is also included in the Simple Order
Report. See Exchange Rule 531(a)(1)(i)(C).
\16\ The term ``affiliate'' of or person ``affiliated with''
another person means a person who, directly, or indirectly,
controls, is controlled by, or is under common control with, such
other person. See Exchange Rule 100.
\17\ This information is also included in the Simple Order
Report. See Exchange Rule 531(a)(1)(i)(D). The Report will simply
indicate whether the Recipient Member is an Affiliate of the Member
that entered the resting order and not include any other information
that may indicate the identity of the Member that entered the
resting order.
\18\ The term ``Priority Customer'' means a person or entity
that (i) is not a broker or dealer in securities, and (ii) does not
place more than 390 orders in listed options per day on average
during a calendar month for its own beneficial account(s). The
number of orders shall be counted in accordance with Interpretation
and Policy .01 to Exchange Rule 100. See Exchange Rule 100.
\19\ The term ``Market Maker'' refers to ``Lead Market Makers'',
``Primary Lead Market Makers'' and ``Registered Market Makers''
collectively. See Exchange Rule 100.
\20\ This information is also included in the Simple Order
Report. See Exchange Rule 531(a)(1)(i)(E).
\21\ This information is also included in the Simple Order
Report. See Exchange Rule 531(a)(1)(i)(F).
\22\ This information is also included in the Simple Order
Report. See Exchange Rule 531(a)(1)(i)(G). The Exchange notes that
the displayed price and size are also disseminated via the
Exchange's proprietary data feeds.
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Execution Information. Amended Exchange Rule 531(b)(1)(ii) would
provide that the following information would be included in the
proposed Complex Order Report regarding the execution of the resting
order: (A) The Complex MBBO at the time of execution; \23\ (B) the
Complex ABBO at the time of execution; \24\ (C) the time the first
response that executes against the resting order was received by the
Exchange and the size of the execution and type of the response; \25\
(D) the time difference between the time the resting order was received
by the Exchange and the time the first response that executes against
the resting order was received by the Exchange; \26\ and (E) whether
the
[[Page 7220]]
response was entered by the Recipient Member.\27\ If the resting order
executes against multiple contra-side responses, only the Complex MBBO
and Complex ABBO at the time of the execution against the first
response will be included.
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\23\ Similar information is included in the Simple Order Report.
Exchange Rule 531(b)(1)(ii)(A) would similarly provide that if the
resting order executes against multiple contra-side responses, only
the Complex MBBO at the time of the execution against the first
response will be included.
\24\ Similar information is included in the Simple Order Report.
See Exchange Rule 531(a)(1)(ii)(B). Exchange Rule 531(b)(1)(ii)(B)
would similarly provide that if the resting order executes against
multiple contra-side responses, only the Complex ABBO at the time of
the execution against the first response will be included.
\25\ This information is also included in the Simple Order
Report. See Exchange Rule 531(a)(1)(ii)(C). The time the Exchange
received the response order would be in nanoseconds and would be the
time the response was received by the Exchange's network, which is
before the time the response would be received by the System. The
type of responses that would be identified in the proposed Complex
Order Report are Standard Quotes and eQuotes. A ``Standard Quote''
is a quote submitted by a Market Maker that cancels and replaces the
Market Maker's previous Standard Quote, if any. See Exchange Rule
517(a)(1). An ``eQuote'' is a quote with a specific time in force
that does not automatically cancel and replace a previous Standard
quote or eQuote. An eQuote can be cancelled by the Market Maker at
any time, or can be replaced by another eQuote that contains
specific instructions to cancel an existing eQuote. See Exchange
Rule 517(a)(2).
\26\ The time difference would be provided in nanoseconds. This
information is also included in the Simple Order Report. See
Exchange Rule 531(a)(1)(ii)(D).
\27\ This information is also included in the Simple Order
Report. See Exchange Rule 531(a)(1)(ii)(E).
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The content of the proposed Complex Order Report set forth under
amended Exchange Rule 531(b)(1)(ii) is identical to the content of the
Simple Order Report under Exchange Rule 531(a)(1)(ii) with two minor
differences. The Simple Order Report includes the MBBO, which is the
Exchange's best bid or offer, and the ABBO, which is the best bid or
offer of away exchanges. In their place, the proposed Complex Order
Report would include the Complex MBBO and Complex ABBO. The Complex
MBBO is calculated using the MBBO for each component of a Complex
Strategy to establish the Exchange's best net bid or offer for a
Complex Strategy. As discussed above, the Complex MBBO is calculated
using the icMBBO combined with the best price currently available on
the Strategy Book to establish the Exchange's best net bid or offer for
a Complex Strategy.\28\ The Complex ABBO is calculated using the ABBO
for each component of a Complex Strategy to establish the away markets'
best net bid or offer for a Complex Strategy using OPRA data. The
Exchange is providing the Complex MBBO and Complex ABBO because both
are relevant and tailored to a Member that is entering a Complex Order
to remove liquidity as part of a Complex Strategy and, therefore, more
germane to the purpose of the Complex Order Report.
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\28\ See also supra note 9.
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Recipient Member's Response Information. The content of the
proposed Complex Order Report set forth under amended Exchange Rule
531(b)(1)(iii) is identical to the content of the Simple Order Report
under Exchange Rule 531(a)(1)(iii). Amended Exchange Rule
531(b)(1)(iii) would provide that the following information would be
included in the Complex Order Report regarding Complex Order(s) sent by
the Recipient Member: (A) Recipient Member identifier; \29\ (B) the
time difference between the time the first response that executes
against the resting order was received by the Exchange and the time of
each Complex Order sent by the Recipient Member, regardless of whether
it executed or not; \30\ (C) size and type of each Complex Order
submitted by the Recipient Member; \31\ and (D) response reference
number, which is a unique reference number attached to the response by
the Recipient Member.\32\
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\29\ This information is also included in the Simple Order
Report. See Exchange Rule 531(a)(1)(iii)(A).
\30\ This information is also included in the Simple Order
Report. See Exchange Rule 531(a)(1)(iii)(B). For purposes of
calculating this duration of time, the Exchange will use the time
the resting order and the Recipient Member's response(s) is received
by the Exchange's network, both of which would be before the order
and response(s) would be received by the System. This time
difference would be provided in nanoseconds.
\31\ This information is also included in the Simple Order
Report. See Exchange Rule 531(a)(1)(iii)(C).
\32\ This information is also included in the Simple Order
Report. See Exchange Rule 531(a)(1)(iii)(D).
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Timeframe for Data Included in Report
The timeframe for data to be included the proposed Complex Order
Report set forth under amended Exchange Rule 531(b)(2) is identical to
the timeframe for data included in the Simple Order Report under
Exchange Rule 531(a)(2). Paragraph (b)(2) of Exchange Rule 531 would
provide that the Complex Order Report would include the data set forth
under Exchange Rule 531(b)(1) described above for executions and
contra-side responses that occurred within 200 microseconds of the time
the resting order was received by the Exchange. The Exchange believes
200 microseconds is the appropriate timeframe because it understands
most Members that would be interested in subscribing to the proposed
Complex Order Report would submit their incoming liquidity removing
Complex Orders within 200 microseconds of the time a contra-side
Complex Order is posted to the Strategy Book.
Scope of Data Included in the Report
The scope of data to be included the proposed Complex Order Report
set forth under amended Exchange Rule 531(b)(3) is identical to the
scope of data included in the Simple Order Report under Exchange Rule
531(a)(3). Paragraph (b)(3) of Exchange Rule 531 would provide that the
Complex Order Report will only include trading data related to the
Recipient Member and, subject to the proposed paragraph (4) of Exchange
Rule 531(b) described below, will not include any other Member's
trading data other than that listed in paragraphs (1)(i) and (ii) of
Exchange Rule 531(b), described above. Like the Simple Order Report,
the proposed Complex Order Report will not include information related
to any Member other than the Recipient Member.\33\
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\33\ See Exchange Rule 531(a)(3).
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Historical Data
Paragraph (b)(4) of Exchange Rule 531 would specify that the
Complex Order Report will contain historical data from the prior
trading day and will be available after the end of the trading day,
generally on a T+1 basis. This is identical to the timeframe for when
the Simple Order Report is made available.\34\
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\34\ See Exchange Rule 531(a)(4).
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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.\35\ Specifically, the Exchange believes the proposed rule change
is consistent with the Section 6(b)(5) \36\ 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.
This proposal is in keeping with those principles in that it promotes
increased transparency through the dissemination of the optional
Complex Order Report to those interested in subscribing to receive the
data. Additionally, the Exchange believes the proposed rule change is
consistent with the Section 6(b)(5) \37\ requirement that the rules of
an exchange not be designed to permit unfair discrimination between
customers, issuers, brokers, or dealers.
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\35\ 15 U.S.C. 78f(b).
\36\ 15 U.S.C. 78f(b)(5).
\37\ Id.
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But for three differences, the description of the proposed Complex
Order Report under Exchange Rule 531(b) is identical to that of the
Simple Order Report under Exchange Rule 531(a).\38\ The first
difference concerns the content of the proposed Complex Order Report,
which would be limited to incoming Complex Orders that seek to remove
liquidity from the Exchange's Strategy Book. The Simple Order Report
includes information about incoming orders seeking to remove liquidity
from the Simple Order Book. This difference is immaterial because both
reports include basically the same information and seek to serve the
same purpose, to
[[Page 7221]]
provide the Recipient Member with the same type of data necessary for
them to evaluate their own trading behavior and order interactions on
the Exchange; however, the Simple Order Report contains data relevant
to the Simple Order Book while the proposed Complex Order Report
contains data relevant to the Strategy Book.
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\38\ See supra note 5.
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The other two differences are that the Simple Order Report includes
the MBBO, which is the Exchange's best bid or offer, and the ABBO,
which is the best bid or offer of away exchanges. In their place, the
proposed Complex Order Report would include the Complex MBBO and
Complex ABBO. As discussed above, the Complex MBBO is calculated using
the icMBBO combined with the best price currently available on the
Strategy Book to establish the Exchange's best net bid or offer for a
Complex Strategy.\39\ The Complex ABBO is calculated using the ABBO for
each component of a Complex Strategy to establish the away markets'
best net bid or offer for a Complex Strategy using OPRA data. The
Exchange is providing the Complex MBBO and Complex ABBO because both
are relevant and tailored to a Member that is entering a Complex Order
to remove liquidity as part of a Complex Strategy and, therefore, more
germane to the purpose of the Complex Order Report. The Exchange
believes these differences are appropriate because providing the
Complex MBBO in place of the MBBO and the Complex ABBO in place of the
ABBO are more germane to the purpose of the proposed Complex Order
Report.
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\39\ See also supra note 9.
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Like the Simple Order Report, the Exchange believes the proposed
Complex Order Report will serve to promote just and equitable
principles of trade, remove impediments to and perfect the mechanism of
a free and open market and a national market system, and, in general
protect investors and the public interest by providing Members access
to information regarding their trading activity that they may utilize
to evaluate their own Complex Order trading behavior and order
interactions. Also, like the Simple Order Report, the proposed Complex
Order Report is designed for Members that are interested in gaining
insight into latency in connection with Complex Orders that failed to
execute against an order resting on the Exchange's Strategy Book by
providing those Members data to analyze by how much time their Complex
Order may have missed an execution against a contra-side order resting
on the Strategy Book. The Exchange believes that providing this
optional latency data to interested Members is consistent with
facilitating transactions in securities, removing impediments to and
perfecting the mechanism of a free and open market and a national
market system, and, in general, protecting investors and the public
interest because it provides greater visibility into the latency of
Members' incoming orders that they may use to optimize their models and
trading patterns in an effort to yield better execution results by
calculating by how much time their order may have missed an execution.
This would, in turn, benefit other market participants who may
experience better executions on the Exchange because those that use the
proposed Complex Order Report may re-calibrate their trading models and
then increase their trading on the Exchange and volume of liquidity
removing orders. This could lead to an increase in incoming liquidity
removing orders resulting in higher execution rates for Members who
primarily place resting orders on the Strategy Book. The proposed
Complex Order Report may benefit other market participants who would
receive greater fill rates, thereby facilitating transactions in
securities and perfecting the mechanism of the national market system.
As discussed above, the Exchange currently fields ad hoc requests
from Members for information regarding the timeliness of their attempts
to execute against resting options liquidity on the Exchange's Strategy
Book. The proposal promotes just and equitable principles of trade
because it would provide latency information in a systematized way and
standardized format to any Member that chooses to subscribe to the
proposed Complex Order Report. As a result, the proposal would also
remove impediments to and perfect the mechanism of a free and open
market and a national market system by making latency information for
liquidity-seeking orders available in a more equalized manner. The
proposal further promotes just and equitable principles of trade by
increasing transparency, particularly for Recipient Members that may
not have the expertise to generate the same information on their own.
The proposed Complex Order Report may better enable Recipient Members
to increase the fill rates for their liquidity-seeking Complex Orders.
At the same time, as is also discussed above, the Complex Order Report
promotes just and equitable principles of trade and protects investors
and the public interest because it is designed to prevent a Recipient
Member from learning other Members' sensitive trading information. The
Complex Order Report would not be a real-time market data product, as
it would provide only historical trading data for the previous trading
day, generally on a T+1 basis. In addition, the data in the Complex
Order Report regarding incoming orders that failed to execute would be
specific to the Recipient Member's Complex Orders, and other
information in the proposed Complex Order Report regarding resting
orders and executions would be anonymized if it relates to a Member
other than the Recipient Member.
The Complex Order Report generally would contain three buckets of
information. The first two buckets include information about the
resting order and the execution of the resting order. This information
is available from the Exchange's proprietary data feeds or derivable
from OPRA. For example, the Exchange offers the Complex Top of Market
(``cToM'') feed which provides real-time quote and last sale
information for all displayed orders on the Strategy Book.\40\
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\40\ See Section 6(a) of the Exchange's Fee Schedule.
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Specifically, the first bucket of information contained in the
proposed Complex Order Report for the resting order would include the
time the resting order was received by the Exchange, the symbol, unique
reference number assigned at the time of receipt, side (buy or sell),
and the displayed price and size of the resting order. The symbol,
origin type, side (buy or sell), and displayed price and size are also
available via the Exchange's proprietary data feeds. The first bucket
of information would also indicate whether the Recipient Member is an
Affiliate of the Member that entered the resting order. This data field
would not indicate the identity of the Member that entered the resting
order and would simply allow the Recipient Member to better understand
the scenarios in which it may execute against the orders of its
Affiliates.\41\
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\41\ The Exchange surveils to monitor for aberrant behavior
related to internalized trades and identify potential wash sales.
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The second bucket of information contained in the proposed Complex
Order Report pertains to the execution of the resting order and
includes the Complex MBBO and Complex ABBO at the time of execution.
These data points are also derivable from information disseminated via
OPRA or available via the Exchange's proprietary data feeds. The second
bucket of information would also indicate whether the response was
entered by the Recipient
[[Page 7222]]
Member. This data point would be simply provided as a convenience. If
not entered by the Recipient Member, this data point would be left
blank so as not to include any identifying information about other
Member activity. The second bucket of information would also include
the size, time and type of first response \42\ that executes against
the resting order; as well as the time difference between the time the
resting order and first response that executes against the resting
order are received by the Exchange. These data points would assist the
Recipient Member in analyzing by how much time their order may have
missed an execution against a contra-side order resting on the Strategy
Book.
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\42\ See supra note 25.
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The third bucket of information would be about the Recipient
Member's response(s) and the time their response(s) is received by the
Exchange. This would include the time difference between the time the
first response that executes against the resting order was received by
the Exchange and the time of each response sent by the Recipient
Member, regardless of whether it executed or not. As above, this data
point would assist the Recipient Member in analyzing by how much time
their order may have missed an execution against a contra-side order
resting on the Strategy Book. This bucket would also include the size
and type of each response submitted by the Recipient Member, the
Recipient Member identifier, and a response reference number, which is
selected by the Recipient Member. Each of these data points are unique
to the Recipient Member and should already be known by the Recipient
Member even if not included in the Complex Order Report.
The Exchange proposes to provide the Complex Order Report on a
voluntary basis and no Member will be required to subscribe to the
Complex Order Report. The Exchange notes that there is no rule or
regulation that requires the Exchange to produce, or that a Member
elect to receive, the proposed Complex Order Report. It would be
entirely a business decision of each Member to subscribe to the
proposed Complex Order Report. The Exchange proposes to offer the
Complex Order Report as a convenience to Members to provide them with
additional information regarding trading activity on the Exchange on a
delayed basis after the close of regular trading hours. A Member that
chooses to subscribe to the proposed Complex Order Report may
discontinue receiving the Complex Order Report at any time if that
Member determines that the information contained in the Complex Order
Report is no longer useful.
In summary, the proposed Complex Order Report will help to protect
a free and open market by providing additional data (offered on an
optional basis) to the marketplace and by providing investors with
greater choices.\43\ Additionally, the proposal would not permit unfair
discrimination because the proposed Complex Order Report will be
available to all Exchange Members.
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\43\ See Sec. Indus. Fin. Mkts. Ass'n (SIFMA), Initial Decision
Release No. 1015, 2016 SEC LEXIS 2278 (ALJ June 1, 2016) (finding
the existence of vigorous competition with respect to non-core
market data).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
result in any burden on competition that is not necessary or
appropriate in furtherance of the purposes of the Act, as amended.
Inter-Market Competition
The proposed Complex Order Report will allow the Exchange to
provide a new option for Members to receive historical latency related
data. The proposed Complex Order Report will also further enhance
inter-market competition between exchanges by allowing the Exchange to
expand its product offerings. The latency information that would be
provided in the proposed Complex Order Report would enhance competition
between exchanges that offer complex order functionality because it
would allow Recipient Members to recalibrate their models and trading
strategies to improve their overall trading experience on the Exchange.
This may improve the Exchange's overall trading environment resulting
in increased liquidity and order flow on the Exchange. In response,
other exchanges may similarly seek ways to provide latency related data
in an effort to improve their own market quality.
Intra-Market Competition
The proposed rule change to offer the optional Complex Order Report
is in response to Member interest and requests for such information.
The Exchange does not believe the proposed Complex Order Report will
have an inappropriate burden on intra-market competition between
Recipient Members and other Members who choose not to receive the
Complex Order Report. As discussed above, the first two buckets of
information included in the Complex Order Report contain information
about the resting order and the execution of the resting order, both of
which are generally available to Members that choose not to receive the
Complex Order Report from other sources, such as by deriving these data
points from OPRA or obtaining them from the Exchange's proprietary data
feeds. The third bucket of information pertains to the Recipient
Member's response and the time their response is received by the
Exchange, information which latency sensitive Members that do not
subscribe to the proposed Complex Order Report could obtain on their
own based on their knowledge of when they sent their response to the
Exchange and via timestamp information provided by the acknowledgment
message received from the Exchange. However, latency sensitive Members
that do not subscribe to the proposed Complex Order Report would not be
able to obtain the time difference between the time the first response
that executes against the resting order was received by the Exchange
and the time of each response sent by the Recipient Member. Such
latency sensitive Members may not view this information as beneficial
based on their own trading models and systems. Other Members that do
not subscribe to the proposed Complex Order Report may not view the
entire proposed Complex Order Report as useful due to their own trading
behaviors and business models. Such Members may not be latency
sensitive and may be interested primarily in providing resting
liquidity on the Exchange's Strategy Book, or they may simply be
connected to the Exchange for best execution purposes or to comply with
the trade-through requirements under Chapter XIV of the Exchange's
Rules.\44\ Additionally, some Members may already be able to derive a
substantial amount of the same data that is provided by some of the
components based on their own executions and algorithms.
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\44\ See Exchange Rule 1401, Order Protection.
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In sum, if the proposed Complex Order Report is unattractive to
Members, Members will opt not to receive it. Accordingly, the Exchange
does not believe that the proposed change will impair the ability of
Members or competing order execution venues to maintain their
competitive standing in the financial markets.
[[Page 7223]]
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 \45\ and Rule 19b-4(f)(6) \46\
thereunder.
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\45\ 15 U.S.C. 78s(b)(3)(A).
\46\ 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.
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#c9bbbca5ace4aaa6a4a4aca7bdba89baacaae7aea6bf"><span class="__cf_email__" data-cfemail="ccbeb9a0a9e1afa3a1a1a9a2b8bf8cbfa9afe2aba3ba">[email protected]</span></a>. Please include
File Number SR-MIAX-2022-06 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-2022-06. 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 submissions
should refer to File Number SR-MIAX-2022-06, and should be submitted on
or before March 1, 2022.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\47\
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\47\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-02551 Filed 2-7-22; 8:45 am]
BILLING CODE 8011-01-P
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