Notice2022-24145
Self-Regulatory Organizations: Notice of Filing and Immediate Effectiveness of a Proposed Rule Change by Miami International Securities Exchange, LLC To Remove the Fill-Or-Kill (“FOK”) Order Type and Fill Or Kill (“FOK”) eQuotes From the Exchange
Primary source
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Published
November 7, 2022
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 87 Issue 214 (Monday, November 7, 2022)</title>
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[Federal Register Volume 87, Number 214 (Monday, November 7, 2022)]
[Notices]
[Pages 67098-67100]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-24145]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-96201; File No. SR-MIAX-2022-40]
Self-Regulatory Organizations: Notice of Filing and Immediate
Effectiveness of a Proposed Rule Change by Miami International
Securities Exchange, LLC To Remove the Fill-Or-Kill (``FOK'') Order
Type and Fill Or Kill (``FOK'') eQuotes From the Exchange
November 1, 2022.
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 October 27, 2022, Miami International
Securities Exchange, LLC (``MIAX Options'' or the ``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 remove the fill-or-kill
(``FOK'') \3\ order type and fill or kill (``FOK'') eQuotes \4\ from
the Exchange.
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\3\ See Exchange Rule 516(b)(2).
\4\ See Exchange Rule 517(a)(2)(v).
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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 offers a number of different order types for use on
the Exchange.\5\ One of the order types the Exchange offers to Members
\6\ is a fill-or-kill (``FOK'') order. A fill-or-kill order is a limit
order that is to be executed in its entirety at a single price as soon
as it is received and, if not so executed is cancelled. A fill-or-kill
order is not valid during the opening rotation process described in
Rule 503.\7\ Similarly, the Exchange offers a fill or kill (``FOK'')
eQuote which is an eQuote submitted by a Market Maker \8\ that must be
matched with another quote or order for an execution in its entirety at
a single price upon receipt into the System or will be immediately
cancelled. An FOK eQuote does not automatically cancel or replace the
Market Maker's previous Standard quote or eQuote. An FOK eQuote is not
valid during the opening rotation process described in Rule 503.\9\
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\5\ See Exchange Rule 516.
\6\ 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.
\7\ See Exchange Rule 516(b)(2).
\8\ The term ``Market-Makers'' refers to ``Lead Market Makers'',
``Primary Lead Market-Makers'' and ``Registered Market Makers''
collectively. See Exchange Rule 100.
\9\ See supra note 4.
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In Rule 516, Order Types Defined, the Exchange states it will issue
a Regulatory Circular listing which order types, among the order types
set forth in the Rule, are available.\10\ Additionally, the rule
provides that Regulatory Circulars will also be issued when an order
type that had been in usage on the Exchange will no longer be available
for use. Similarly, in Rule 517, Quote Types Defined, the Exchange
states it will issue a Regulatory Circular listing which quote types,
among those quote types set forth in the Rule, are available.\11\
Additionally, the rule provides that Regulatory Circulars will also be
issued when a quote type that had been in usage on the Exchange will no
longer be available for use. The Exchange determined that FOK orders
and FOK eQuotes were not order types or eQuote types that were being
regularly used by Members on the Exchange. In April of 2021, the
Exchange issued Regulatory Circulars to announce that FOK orders \12\
and FOK eQuotes \13\ would no longer be available for use on the
Exchange. Prior to undertaking the effort to remove FOK orders and FOK
eQuotes completely from the System,\14\ the Exchange wanted to ensure
that there were no unforeseen consequences from disabling FOK orders
and FOK eQuotes, hence the delay between disabling usage via Regulatory
Circular and formally removing the order type from use on the Exchange.
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\10\ See Exchange Rule 516.
\11\ See Exchange Rule 517.
\12\ See MIAX Regulatory Circular 2021-20, Fill-or-Kill Orders
Will No Longer Be Supported on the MIAX Options Exchange (April 8,
2021), available at <a href="https://www.miaxoptions.com/sites/default/files/circular-files/MIAX_Options_RC_2021_20.pdf">https://www.miaxoptions.com/sites/default/files/circular-files/MIAX_Options_RC_2021_20.pdf</a>.
\13\ See MIAX Regulatory Circular 2021-21, Fill-or-Kill eQuotes
Will No Longer Be Supported on the MIAX Options Exchange (April 9,
2021), available at <a href="https://www.miaxoptions.com/sites/default/files/circular-files/MIAX_Options_RC_2021_21.pdf">https://www.miaxoptions.com/sites/default/files/circular-files/MIAX_Options_RC_2021_21.pdf</a>.
\14\ The term ``System'' means the automated trading system used
by the Exchange for the trading of securities. See Exchange Rule
100.
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The Exchange now proposes to permanently remove the functionality
from the Exchange's System and to also remove references to FOK orders
and FOK eQuotes from the Exchange's Rulebook. Specifically, the
Exchange proposes to eliminate references to FOK orders and FOK eQuotes
in the following Exchange Rules: Exchange Rule 308, Exemptions from
Position Limits; Rule 515, Execution of Orders and Quotes; Rule 516,
Order Types Defined; Rule 517, Quote Types Defined; Rule 529, Order
Routing to Other Exchanges; Rule 605, Market Maker Orders; and Rule
612, Aggregate Risk Manager (ARM). In connection with the proposed
change to remove references to FOK orders and FOK eQuotes from the
Rulebook, the Exchange also proposes to amend cross-references to other
rules that need to be updated for accuracy as a result of the removal
of FOK orders and FOK eQuotes. These proposed changes are non-
substantive edits that are intended to harmonize the Rulebook with the
System functionality and provide consistency and clarity throughout the
Rulebook.
First, the Exchange proposes to amend Exchange Rule 308(c)(vi)(A),
to remove paragraph (A) which contains a reference to a fill-or-kill
instruction. The Exchange then proposes to amend subparagraph
(c)(vi)(B) to be
[[Page 67099]]
renumbered to proposed paragraph (c)(vi)(A).
Next, the Exchange proposes to amend Exchange Rule 515, Execution
of Orders and Quotes, to remove references to FOK orders in
subparagraph (c)(1) and subparagraph (c)(3)(i)(E). Additionally, the
Exchange proposes to remove the contents of paragraph (f) in its
entirety and mark the paragraph as reserved for future use. Also,
within current subparagraph 515(g) the Exchange proposes to amend the
cross-reference to Exchange Rule 517(a)(2)(vi) to Rule 517(a)(2)(v).
This proposed change reflects the proposed renumbering of Exchange Rule
517, discussed below, after the paragraph pertaining to fill or kill
eQuotes is removed.
Next, the Exchange proposes to amend Exchange Rule 516, Order Types
Defined, to eliminate subparagraph (b)(2) in its entirety. The Exchange
also proposes to adjust the hierarchical numbering order to reflect the
removal of current subparagraph (b)(2) by renumbering current
subparagraphs (b)(3) and (b)(4) to paragraphs (b)(2) and (b)(3),
respectively. The Exchange also proposes to amend Exchange Rule 510,
Minimum Price Variations and Minimum Trading Increments, to amend the
cross-reference contained in paragraph 510(b) from ``Rule 516(b)(3)''
to ``Rule 516(b)(2)'' to reflect the proposed renumbering of Exchange
Rule 516, discussed above.
The Exchange also proposes to amend Exchange Rule 517, Quote Types
Defined, to remove subparagraph (a)(2)(v) in its entirety. Also, as a
result of the removal of this paragraph, the Exchange proposes to
renumber current subparagraph (a)(2)(vi) to proposed subparagraph
(a)(2)(v). Further, the Exchange proposes to eliminate subparagraph
(d)(4) in its entirety. The Exchange then proposes to amend current
subparagraphs (d)(5) and (d)(6) to renumber as proposed paragraphs
(d)(4) and (d)(5), respectively.
The Exchange proposes to amend Exchange Rule 529, Order Routing to
Other Exchanges, to remove the references to FOK orders and FOK eQuotes
contained within subparagraph 529(b)(2)(iii).
The Exchange proposes to amend Exchange Rule 604(b)(1) by amending
a cross-reference to current Rule 516(b)(3), non-displayed penny
orders, to proposed Rule 516(b)(2). This amendment reflects the
proposed re-numbering changes to the Rulebook resulting from removal of
FOK orders as described above.
The Exchange also proposes to amend Exchange Rule 605, Market Maker
Orders, by deleting the reference to fill-or-kill orders within Rule
605(a).
Lastly, the Exchange proposes to amend Exchange Rule 612, Aggregate
Risk Manager (ARM), by removing references to FOK eQuotes within
Interpretations and Policies .02(c).
2. Statutory Basis
The Exchange believes that its proposed rule change is consistent
with Section 6(b) of the Act \15\ in general, and furthers the
objectives of Section 6(b)(5) of the Act \16\ 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 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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\15\ 15 U.S.C. 78f(b).
\16\ 15 U.S.C. 78f(b)(5).
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The Exchange believes the proposed change promotes just and
equitable principles of trade and removes impediments to and perfects
the mechanism of a free and open market and a national market system as
the proposal removes an order type and a quote type infrequently used
by the Exchange's Members. Removal of infrequently used functionality
simplifies the operation of the Exchange's System, as the Exchange does
not need to support and maintain order types and quote types that are
not regularly used. Additionally, removing the reference to FOK orders
and FOK eQuotes in the Exchange's Rulebook provides consistency and
clarity throughout the Rulebook. Clarity and precision in the
Exchange's Rulebook protects investors and the public by clearly
enumerating the order types and eQuote types available for use on the
Exchange.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule changes will
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act. Specifically, the Exchange
believes the proposed change will not impose any burden on intra-market
competition as the Exchange originally disabled FOK orders and FOK
eQuotes via a Regulatory Circular.\17\ The Exchange now proposes to
remove the functionality completely from the Exchange's System and to
update the Exchange's Rulebook accordingly. The Exchange does not
believe its proposal will impose any burden on intra-market competition
as all Members are equally affected as these order types and quote
types were infrequently used and have been unavailable for use on the
Exchange since being disabled via Regulatory Circular.
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\17\ See supra notes 12 and 13.
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The Exchange does not believe the proposal will impose any burden
on inter-market competition as not every option exchange offers FOK
orders.\18\ However, for those Members that wish to use the FOK order
type there are exchanges that will accept and process this order
type.\19\
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\18\ BOX Options Exchange offers a Fill and Kill (FAK) order
instruction but not fill-or-kill. See Box Options Exchange Rule
7110(e)(ii).
\19\ See Cboe Exchange Rule 5.6, and NYSE Arca Exchange Rule
6.91-O.
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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 \20\ and Rule 19b-4(f)(6) \21\
thereunder.
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\20\ 15 U.S.C. 78s(b)(3)(A).
\21\ 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.
[[Page 67100]]
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#addfd8c1c880cec2c0c0c8c3d9deeddec8ce83cac2db"><span class="__cf_email__" data-cfemail="3341465f561e505c5e5e565d4740734056501d545c45">[email protected]</span></a>. Please include
File Number SR-MIAX-2022-40 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-2022-40. 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-2022-40, and should be submitted on
or before November 28, 2022.
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\22\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\22\
J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022-24145 Filed 11-4-22; 8:45 am]
BILLING CODE 8011-01-P
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