Notice2022-23869
Self-Regulatory Organizations; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change by Miami International Securities Exchange, LLC To Amend Exchange Rule 519C, Mass Cancellation of Trading Interest
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 3, 2022
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 87 Issue 212 (Thursday, November 3, 2022)</title>
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[Federal Register Volume 87, Number 212 (Thursday, November 3, 2022)]
[Notices]
[Pages 66340-66342]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-23869]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-96171; File No. SR-MIAX-2022-37]
Self-Regulatory Organizations; Notice of Filing and Immediate
Effectiveness of a Proposed Rule Change by Miami International
Securities Exchange, LLC To Amend Exchange Rule 519C, Mass Cancellation
of Trading Interest
October 28, 2022.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that on October 19, 2022, Miami International Securities Exchange, LLC
(``MIAX Options'' or the ``Exchange'') filed with the Securities and
Exchange Commission (``Commission'') the 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 amend Exchange Rule 519C, Mass
Cancellation of Trading Interest.
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 amend Interpretations and Policies .01 of
Exchange Rule 519C, Mass Cancellation of Trading Interest, to provide
Members \3\ the option of having the Exchange cancel all orders,
including GTC Orders,\4\ if the Exchange detects a loss of
communication on a FIX Order Interface (``FOI'') Session.
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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\ A Good `til Cancelled or ``GTC'' Order is an order to buy or
sell which remains in effect until it is either executed, cancelled
or the underlying option expires. See Exchange Rule 516(l).
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Background
Electronic Exchange Members (``EEMs'') \5\ connect to the Exchange
via the Financial Information eXchange (``FIX'') Protocol.\6\ An EEM
connects to their assigned FIX port using the MIAX FIX Order Interface
(``FOI'') which is a flexible interface that uses the FIX protocol for
both application and session level messages. The Exchange relies on
heartbeat \7\ messages to determine the status of the connection to
ensure bi-directional communication remains intact. Upon missing a
single heartbeat, FOI will send a Test Request message \8\ to the
Member to check the status of the connection. Upon missing a certain
number of heartbeats,\9\ FOI will send a logout message and terminate
the connection. The Exchange currently offers Members certain order
handling risk protection options in this scenario.
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\5\ The term ``Electronic Exchange Member'' or ``EEM'' means the
holder of a Trading Permit who is not a Market Maker. Electronic
Exchange Members are deemed ``members'' under the Exchange Act. See
Exchange Rule 100.
\6\ The Financial Information eXchange (FIX) is a vendor-neutral
electronic communications protocol for the international real-time
exchange of securities transaction information. Scott, Gordon,
Financial Information eXchange (FIX), Investopedia (June 20, 2022),
<a href="https://www.investopedia.com/terms/f/financial-information-exchange.asp">https://www.investopedia.com/terms/f/financial-information-exchange.asp</a>.
\7\ A ``Heartbeat'' message is a communication which acts as a
virtual pulse between the Exchange System and the Member's system.
The heartbeat message sent by the Member and received by the
Exchange allows the Exchange to continually monitor its connection
with the Member. See Interpretations and Policies .02(i) of Exchange
Rule 519C.
\8\ The test request message is a FIX Protocol message that
forces a heartbeat from the opposing application. The test request
message checks sequence numbers or verifies communication line
status. The opposite application responds to the Test Request with a
Heartbeat containing the Test Request ID. Financial Information
Exchange Protocol (FIX), Version 4.2 with errata. May 1, 2001.
\9\ The Exchange notes that the current System setting is two
(2) heartbeats, and that any change to this setting will be
determined by the Exchange and communicated to Members via
Regulatory Circular.
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Specifically, when a Loss of Communication is detected on a FOI
connection the System will logoff the Member's session and (i) cancel
all eligible orders for the FIX Session if instructed by the Member
upon login, or (ii) cancel all eligible orders identified by the
Member. Following a disconnection, a reconnection will not be permitted
for a certain period of time (``yy'' seconds). The Exchange shall
determine the appropriate period of (``yy'' seconds) and shall notify
Members of the value of ``yy'' seconds via Regulatory Circular. In no
event shall ``yy'' be less than one (1) second or greater than ten (10)
seconds.\10\
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\10\ See Exchange Rule 519C(c)(2).
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At the time the Exchange adopted this functionality the Exchange
created an exception for Good `Til Cancel Orders in Interpretations and
Policies .01, which stated, Good `Til Cancelled (``GTC'') orders, as
defined in Rule 516 and PRIME Orders, as defined in Rule 515A, are not
eligible for automatic cancellation under paragraph (c) of Rule
519C.\11\
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\11\ See Securities Exchange Act Release No. 80151 (March 3,
2017), 82 FR 13146 (March 9, 2017) (SR-MIAX-2017-08).
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Proposal
The Exchange now proposes to amend Interpretations and Policies .01
to allow GTC orders to also be eligible for cancellation when the
Exchange detects a Loss of Communication.
As proposed, if the Exchange determines that there is a Loss of
Communication, the Exchange will cancel the orders as described above,
additionally, if elected, the Exchange proposes to cancel all GTC
orders submitted through that FIX Session. As proposed, Members would
need to contact the Exchange's Help Desk,\12\ in a form and manner to
be determined by the Exchange and communicated via Regulatory Circular,
to have this optional order protection (cancellation of GTC orders)
configured.
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\12\ The term ``Help Desk'' means 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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2. Statutory Basis
The Exchange believes that its proposed rule change is consistent
with Section 6(b) of the Act \13\ in general, and furthers the
objectives of Section 6(b)(5) of the Act \14\ 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
[[Page 66341]]
regulating, clearing, settling, processing information with respect to,
and 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.
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\13\ 15 U.S.C. 78f(b).
\14\ 15 U.S.C. 78f(b)(5).
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The disconnect feature of FIX connections is mandatory, however
Members have the option to enable the cancellation of all orders for an
entire session or select orders for cancellation on an order-by-order
basis, which would result in the cancellation of orders submitted over
a FIX Session when such session disconnects. The Exchange believes it
is appropriate to offer an additional option for Members to have the
Exchange cancel GTC orders from the order book when there is a
communication issue between the Member and the Exchange, as a
communication issue may or may not be quickly resolved.
Offering to cancel all orders (including GTC orders) allows the
Member to customize Exchange risk protection functionality to align to
a Member's business needs. Offering this type of order cancellation
functionality to Members is consistent with the Act because it enables
Members to have greater control over the execution of their orders in
the event there is a communication issue with the Exchange. The
proposed order cancellation functionality is designed to mitigate the
risk of a missed execution associated with a loss of communication with
the Exchange. The proposed rule change is not unfairly discriminatory
among market participants, as it is available equally to all market
participants utilizing a FOI connection to the Exchange.
The Exchange believes that the proposed rule change will assist
with the maintenance of a fair and orderly market by providing Members
with greater control over their resting orders. The Exchange's proposal
is consistent with the Act because it will mitigate the risk of
potential erroneous or unintended executions associated with a loss of
communication which protects investors and the public interest.
Additionally, the proposed rule adds another level of risk protection
for Members and protects investors and the public interest by
increasing the risk protection options available to Members of the
Exchange.
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.
The Exchange does not believe that the proposed rule change to
provide an additional risk protection imposes any burden on intra-
market competition that is not necessary or appropriate in furtherance
of the purposes of the Act. The Exchange believes that adding an
optional risk protection benefits all Members on the Exchange that use
a FOI connection as any Member with a FOI connection can elect to use
the risk protection described in the proposed rule.
The Exchange does not believe the proposed rule change will impose
any burden on inter-market competition that is not necessary or
appropriate in furtherance of the purposes of the Act. For all the
reasons stated, 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.
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 \15\ and Rule 19b-4(f)(6) \16\
thereunder.
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\15\ 15 U.S.C. 78s(b)(3)(A).
\16\ 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#9eecebf2fbb3fdf1f3f3fbf0eaeddeedfbfdb0f9f1e8"><span class="__cf_email__" data-cfemail="90e2e5fcf5bdf3fffdfdf5fee4e3d0e3f5f3bef7ffe6">[email protected]</span></a>. Please include
File Number SR-MIAX-2022-37.
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-2022-37. 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-2022-37, and should be submitted on
or before November 25, 2022.
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For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\17\
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\17\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022-23869 Filed 11-2-22; 8:45 am]
BILLING CODE 8011-01-P
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