[Federal Register: September 29, 2009 (Volume 74, Number 187)]
[Notices]
[Page 49873]
[DOCID:fr29se09-49]

-----------------------------------------------------------------------

DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

[Docket No. EL09-71-000]

Resale Power Group of Iowa; WPPI Energy; Notice of Petition for
Declaratory Order

September 14, 2009.
    Take notice that on September 3, 2009, Resale Power Group of Iowa
(``RPGI'') and WPPI Energy (``WPPI'') (collectively, ``Petitioners''),
filed a Petition For Declaratory Order, Request for Exemption In Lieu
Of the Applicable Fee, and Request for Expedited Consideration
(``Petition''), requesting a declaratory order by the Commission
determining that the transmission rate that Petitioners pay to the
Midwest Independent Transmission System Operator, Inc. (``MISO'') under
its Open Access Transmission Tariff (``OATT'') and applicable service
agreements is the only transmission service charge that Petitioners can
be required to pay for such transmission service.
    Any person desiring to participate in this filing must file a
motion to intervene or a protest in accordance with Rules 211 and 214
of the Commission's Rules of Practice and Procedure (18 CFR 385.211 and
385.214). Protests will be considered by the Commission in determining
the appropriate action to be taken, but will not serve to make
protestants parties to the proceeding. Any person wishing to become a
party must file a notice of intervention or motion to intervene, as
appropriate. Such notices, motions, or protests must be filed on or
before the date as indicated below. Anyone filing an intervention or
protest must serve a copy of that document on the Applicant. Anyone
filing an intervention or protest on or before the intervention or
protest date need not serve motions to intervene or protests on persons
other than the Applicant.
    The Commission encourages electronic submission of protests and
interventions in lieu of paper using the ``eFiling'' link at http://
www.ferc.gov. Persons unable to file electronically should submit an
original and 14 copies of the protest or intervention to the Federal
Energy Regulatory Commission, 888 First Street, NE., Washington, DC
20426.
    This filing is accessible on-line at http://www.ferc.gov, using the
``eLibrary'' link and is available for review in the Commission's
Public Reference Room in Washington, DC. There is an ``eSubscription''
link on the Web site that enables subscribers to receive e-mail
notification when a document is added to a subscribed docket(s). For
assistance with any FERC Online service, please e-mail
<EMAIL_ADDRESS>or call<PHONE_NUMBER> (toll free). For
TTY, call<PHONE_NUMBER>.
    Comment Date: 5 p.m. Eastern Time Wednesday, October 5, 2009.

Kimberly D. Bose,
Secretary.
[FR Doc. E9-22702 Filed 9-28-09; 8:45 am]

BILLING CODE 6717-01-P


[Federal Register Volume 79, Number 82 (Tuesday, April 29, 2014)]
[Notices]
[Pages 24032-24040]
[FR Doc No: 2014-09680]

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-72009; File No. SR-MIAX-2014-09]

Self-Regulatory Organizations; Miami International Securities
Exchange, LLC; Notice of Filing of Amendment No. 1 and Order Granting
Accelerated Approval of a Proposed Rule Change, as Modified by
Amendment No. 1, To Adopt the MIAX PRIME Price Improvement Mechanism
and the MIAX PRIME Solicitation Mechanism

April 23, 2014.

I. Introduction

    On February 18, 2014, Miami International Securities Exchange LLC

(``MIAX'' or ``Exchange'') filed with the Securities and Exchange
Commission (``Commission''), pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4
thereunder,\2\ a proposed rule change to adopt MIAX Rule 515A to
implement the MIAX Price Improvement Mechanism (``PRIME'') and the
PRIME Solicitation Mechanism. The proposed rule change was published
for comment in the Federal Register on March 10, 2014.\3\ On April 17,
2014, MIAX filed Amendment No. 1 to the proposal.\4\ The Commission
received no comments regarding the proposal.\5\ The Commission is
publishing this notice to solicit comment on Amendment No. 1 from
interested persons and is approving the proposed rule change, as
modified by Amendment No. 1, on an accelerated basis.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 71640 (March 10,
2014), 79 FR 13334 (``Notice'').
    \4\ See Letter from Brian O'Neill, Vice President and Senior
Counsel, MIAX, to Elizabeth M. Murphy, Secretary, Commission, dated
April 17, 2014. In Amendment No. 1, MIAX amended its filing to
clarify that its analysis of its proposed mechanisms' compliance
with Section 11(a) of the Act, which referred to both proposed
mechanisms collectively as ``PRIME,'' was applicable to both the
PRIME price improvement mechanism as well as the PRIME Solicitation
Mechanism.
    \5\ To promote the public availability and transparency of its
post-notice amendment, MIAX submitted a copy of Amendment No. 1
through the Commission's electronic public comment letter mechanism.
Accordingly, since the Commission received Amendment No. 1 from
MIAX, it has been publicly available on the Commission's Web site at
http://www.sec.gov/rules/sro/miax.shtml.
---------------------------------------------------------------------------

II. Description of the Proposal

    The Exchange proposes to adopt MIAX Rule 515A to establish the
PRIME and PRIME Solicitation Mechanism.\6\ The PRIME is a process by
which a Member (``Initiating Member'') may electronically submit for
execution an order it represents as agent (``Agency Order'') against
principal interest and/or solicited interest. The PRIME Solicitation
Mechanism is a separate process by which a Member that represents
agency orders of not less than 500 standard option contracts (or 5,000
mini-option contracts) may electronically execute such orders against
solicited orders.
---------------------------------------------------------------------------

    \6\ As MIAX explained in its Notice, because of the technology
changes associated with this rule proposal, if approved by the
Commission, MIAX noted that it would announce the implementation
date of the proposal in a Regulatory Circular to be published no
later than 90 days after the Commission's publication of an approval
order in the Federal Register. In addition, MIAX represented that
the implementation date will be no later than 90 days following
publication of the Regulatory Circular announcing publication of the
approval order in the Federal Register. See Notice, supra note 3, 79
FR at 13347.
---------------------------------------------------------------------------

A. PRIME Price Improvement Auction

    The Exchange proposes to implement an electronic auction system
called ``PRIME'' that would expose certain orders electronically in an
auction to provide such orders with the opportunity to receive an
execution at an improved price.\7\ The Commission notes that MIAX's
proposed price improvement mechanism is similar to the Automated
Improvement Mechanism (``AIM'') offered by the Chicago Board Options
Exchange, Incorporated (``CBOE'').\8\
---------------------------------------------------------------------------

    \7\ Proposed MIAX Rule 515A, Interpretations and Policy .02
provides that the PRIME and PRIME Solicitation Mechanism may only be
used to execute bona fide crossing transactions. Using the PRIME and
PRIME Solicitation Mechanism for any other means, including but not
limited to, market or price manipulation, shall be considered
conduct inconsistent with just and equitable principles of trade in
accordance with MIAX Rule 301.
    \8\ See CBOE Rule 6.74A.
---------------------------------------------------------------------------

Eligibility and Auction Process
    To be eligible, the Agency Order must be in a class designated as
eligible for PRIME as determined by the Exchange and within the
designated auction order eligibility size parameters as such size
parameters are determined by the Exchange.\9\ In addition, if the
Agency Order is for 50 standard option contracts (or 500 mini-option
contracts) or more, the Initiating Member must stop the entire Agency
Order as principal or with a solicited order at the better of the
National Best Bid or Offer (``NBBO'') or the Agency Order's limit price
(if the order is a limit order).\10\ However, if the Agency Order is
for less than 50 standard option contracts (or less than 500 mini-
option contracts), the Initiating Member must stop the entire Agency
Order as principal or with a solicited order at the better of (i) the
NBBO price improved by a $0.01 increment; or (ii) the Agency Order's
limit price (if the order is a limit order).\11\
---------------------------------------------------------------------------

    \9\ See proposed MIAX Rule 515A(a)(1)(i). Proposed MIAX Rule
515A, Interpretation and Policy .05 provides that any determinations
made by the Exchange pursuant to this MIAX Rule 515A, such as
eligible classes and order size parameters, will be communicated in
a Regulatory Circular.
    \10\ See proposed MIAX Rule 515A(a)(1)(ii).
    \11\ See proposed MIAX Rule 515A(a)(1)(iii). The Exchange states
that since the Initiating Member is stopping the entire Agency Order
at the NBBO price or better at the beginning of the PRIME auction,
the execution at the conclusion of the PRIME auction would qualify
as an exception to the general prohibition against trade-throughs,
pursuant to MIAX Rule 1401(b)(9). See MIAX Rule 1401(b)(9)
(providing an exception from trade-through liability in the
circumstance when a transaction that constituted the trade-through
was the execution of an order that was stopped at a price that did
not trade through an Eligible Exchange at the time of the stop).
---------------------------------------------------------------------------

    To initiate the PRIME auction, the Initiating Member must mark the
Agency Order for PRIME processing, and specify either: (i) A single
price at which it seeks to cross the Agency Order (with principal
interest and/or a solicited order) (``single-price submission''),
including whether the Initiating Member elects to have last priority in
allocation, or (ii) that it is willing to automatically match (``auto-
match'') as principal the price and size of all PRIME responses up to
an optional designated limit price. If the Initiating Member chooses to
auto-match PRIME responses, the Agency Order will be stopped at the
better of the NBBO (if 50 standard option contracts (or 500 mini-option
contracts) or greater), $0.01 increment better than the NBBO (if less
than 50 standard option contracts or 500 mini-option contracts), or the
Agency Order's limit price.\12\ For both single price submissions and
auto-match, in order to protect resting interest on MIAX's system
(``Book''), whenever the disseminated best bid or offer on the Exchange
(``MBBO'') \13\ on the same side of the market as the Agency Order
represents a limit order on the Book, the stop price must be at least
$0.01 increment better than the booked order's limit price.\14\
---------------------------------------------------------------------------

    \12\ See proposed MIAX Rule 515A(a)(2)(i)(A).
    \13\ See MIAX Rule 100.
    \14\ See proposed MIAX Rule 515A(a)(2)(i)(A).
---------------------------------------------------------------------------

    For both a single price submission and auto-match, the stop price
specified by the Initiating Member on the Agency Order will be the
``initiating price'' for the PRIME auction.\15\ The Initiating Member
may not modify or cancel the submission after it has submitted an
Agency Order to the PRIME auction for processing.\16\ Only one PRIME
auction may be running at any given time in an option, and PRIME
auctions in the same option may not queue or overlap in any manner.\17\
---------------------------------------------------------------------------

    \15\ See id. See also Notice, supra note 3, 79 FR at 13336 (for
examples illustrating the initiating price for various potential
Agency Orders).
    \16\ See proposed MIAX Rule 515A(a)(2)(i)(A).
    \17\ See proposed MIAX Rule 515A(a)(2). In addition, if managed
interest exists on the Exchange's Book pursuant to MIAX Rule 515(c)
for the option on the same side of the market as the Agency Order,
the Agency Order will be rejected by the System prior to initiating
a PRIME or PRIME Solicitation Mechanism auction. See proposed MIAX
Rule 515A, Interpretation and Policy .07. If managed interest exists
on the MIAX Book pursuant to MIAX Rule 515(c) for the option on the
opposite side of the market as the Agency Order and when the MBBO is
equal to the NBBO, the Agency Order will be automatically executed
against the managed interest, if the execution would be at a price
equal to the initiating price of the Agency Order. If the Agency
Order is not fully executed after the managed interest is fully
exhausted and is no longer at a price equal to or better than the
initiating price of the Agency Order, a PRIME auction will be
initiated for the balance of the order. See proposed MIAX Rule 515A,
Interpretations and Policies .06.

---------------------------------------------------------------------------

    When the Exchange receives a properly designated Agency Order for
PRIME auction processing, a request for responses (``RFR'') detailing
the option, side, size, and initiating price will be sent to all
subscribers of the Exchange's data feeds.\18\ The RFR response period
for each PRIME auction will last for 500 milliseconds.\19\ During the
RFR response period, Members may submit responses to the RFR
(specifying prices and sizes).\20\ RFR responses must be submitted as
either an auction or cancel (``AOC'') order or an AOC eQuote.\21\
Responses cannot cross the MBBO on the opposite side of the market from
the response.\22\ RFR responses shall not be visible to other auction
participants, and MIAX will not disseminate them to the Options Price
Reporting Authority (``OPRA'').\23\ The minimum price increment for RFR
responses and for the Initiating Member's submission is a $0.01
increment, regardless of whether the class otherwise trades in a larger
price increment.\24\ MIAX will cap an RFR response with a size greater
than the size of the Agency Order at the size of the Agency Order for
allocation purposes.\25\ RFR responses may be cancelled by the Member
submitting them.\26\
---------------------------------------------------------------------------

    \18\ See proposed MIAX Rule 515A(a)(2)(i)(B). The Exchange will
include the RFR from the auction mechanisms in the Exchange's data
feeds at no incremental cost to subscribers. Thus, any subscriber
that chooses to receive options data, including any Member
subscriber, has the ability to respond to those RFRs.
    \19\ See proposed MIAX Rule 515A(a)(2)(i)(C). In February 2014,
to determine whether the proposed duration of the RFR would provide
sufficient time to enter an RFR response, the Exchange asked
Members, including Market Makers, whether their firms ``could
respond to an Auction with a duration of 500 milliseconds.'' Of the
8 Members that responded to the question, 100% indicated that their
firm could respond in this time frame. See Notice, supra note 3, 79
FR at 13337, n.19.
    \20\ See proposed MIAX Rule 515A(a)(2)(i)(D). The Exchange
states that any MIAX Member, and any MIAX Member acting as agent for
orders, may respond to an RFR in a PRIME auction.
    \21\ See id. An AOC order is a limit order used to provide
liquidity during a specific Exchange process (such as the Opening
Imbalance process described in MIAX Rule 503) with a time in force
that corresponds with that event. AOC orders are not displayed to
any market participant, are not included in the MBBO and therefore
are not eligible for trading outside of the event, may not be
routed, and may not trade at a price inferior to the away markets.
See MIAX Rule 516(b)(4). An AOC eQuote is a quote submitted by a
Market Maker to provide liquidity in a specific Exchange process
(such as the Opening Imbalance Process described in MIAX Rule 503)
with a time in force that corresponds with the duration of that
event and will automatically expire at the end of that event. AOC
eQuotes are not displayed to any market participant, are not
included in the MBBO and therefore are not eligible for trading
outside of the event. An AOC eQuote does not automatically cancel or
replace the Market Maker's previous Standard quote or eQuote. See
MIAX Rule 517(a)(2)(ii). The Exchange notes that any orders or
quotes received by the System during the Auction that are not AOC
orders or AOC eQuotes will be treated as unrelated trading interest.
In addition, the Exchange notes that an AOC order or an AOC eQuote
could trade at a price inferior to the away market if it is a part
of an exempt transaction. See MIAX Rule 1402.
    \22\ See proposed MIAX Rule 515A(a)(2)(i)(D).
    \23\ See proposed MIAX Rule 515A(a)(2)(i)(E).
    \24\ See proposed MIAX Rule 515A(a)(2)(i)(F).
    \25\ See proposed MIAX Rule 515A(a)(2)(i)(G). The Exchange
states that RFR response sizes are capped at the same size of the
Agency Order in order to prevent manipulation and gaming of the pro
rata allocation within each origin type and price point. The
Commission understands that unrelated trading interest including
unrelated orders, quotes, or orders on the Exchange's Book will not
be subject to such a cap, since they are not considered responses to
the Auction.
    \26\ See proposed MIAX Rule 515A(a)(2)(i)(H).
---------------------------------------------------------------------------

1. Conclusion of the PRIME Auction
    The PRIME auction will end early, before the end of the RFR
response period, under certain enumerated circumstances.\27\
Specifically, the PRIME will conclude at the sooner of the following:
(i) The end of the RFR response period; (ii) upon receipt by MIAX of an
unrelated order (in the same option as the Agency Order) on the same
side or opposite side of the market from the RFR responses, that is
marketable against either the MBBO (when such quote is the NBBO) or the
RFR responses; (iii) upon receipt by MIAX of an unrelated limit order
(in the same option as the Agency Order and on the opposite side of the
market from the Agency Order) that improves any RFR response; (iv) any
time an RFR response matches the MBBO on the opposite side of the
market from the RFR responses; (v) any time there is a quote lock in
the subject option on the Exchange pursuant to MIAX Rule 1402; or (vi)
any time there is a trading halt in the option on the Exchange.\28\
---------------------------------------------------------------------------

    \27\ The Exchange states that the PRIME is designed to maintain
priority of all resting quotes and orders and any RFR responses
received before the end of the PRIME auction. Thus the PRIME will
end early, before the end of the RFR period, as a result of certain
events that would otherwise disrupt the priority of the PRIME
auction with the Exchange's Book. See Notice, supra note 3, 79 FR at
13338.
    \28\ See proposed MIAX Rule 515A(a)(2)(ii).
---------------------------------------------------------------------------

    MIAX will consider it to be conduct inconsistent with just and
equitable principles of trade, in accordance with MIAX Rule 301, for
any Member to enter orders, quotes, Agency Orders, or other responses
for the purpose of disrupting or manipulating a PRIME auction. Such
conduct includes, but is not limited to, engaging in a pattern or
practice of submitting unrelated orders that cause a PRIME auction to
conclude before the end of the RFR period and engaging in a pattern of
conduct where the Member submitting the Agency Order into the PRIME
breaks up the Agency Order into separate orders for two (2) or fewer
contracts for the purpose of gaining a higher allocation percentage
than the Member would have otherwise received in accordance with the
allocation procedures contained in MIAX Rule 515A.\29\
---------------------------------------------------------------------------

    \29\ See proposed MIAX Rule 515A, Interpretations and Policies
.01.
---------------------------------------------------------------------------

3. Priority and Allocation of Orders and Quotes
    In its Notice, MIAX represented that the priority of allocation at
the conclusion of a PRIME auction, described below, will be similar to
the standard allocation of orders and quotes on MIAX.\30\ MIAX Rule 514
describes the priority of allocation of orders and quotes on the
Exchange. According to the Exchange, under the pro-rata allocation
method, resting quotes and orders on the Book are prioritized according
to price. If there are two or more quotes or orders at the best price,
then the contracts are allocated proportionally according to size (in a
pro-rata fashion) within each origin type. If the executed quantity
cannot be evenly allocated, the remaining contracts will be distributed
one at a time based upon size-time priority.\31\ When the Priority
Customer Overlay is in effect, the highest bid and lowest offer has
priority, except that Priority Customer Orders have priority over
Professional Interest and all Market Maker interest at the same price.
If there are two or more Priority Customer Orders for the same options
at the same price, priority is afforded to such Priority Customer
Orders in the sequence in which they are received by the System.\32\ If
there is other interest at the NBBO, after all Priority Customer Orders
(if any) at that price have been filled, executions at that price will
be first allocated to other remaining Market

Maker priority quotes,\33\ which have not received a participation
entitlement, and have precedence over Professional Interest.\34\ If,
after all Market Maker priority quotes have been filled in accordance
with MIAX Rule 514(d)(1), there remains interest at the NBBO,
executions will be allocated to all Professional Interest at that
price.\35\
---------------------------------------------------------------------------

    \30\ See Notice, supra note 3, 79 FR at 13338. According to the
Exchange, the allocation of orders and quotes at the conclusion of a
PRIME auction will be in priority ranked by price/origin type/pro-
rata/time, which is the standard allocation of orders and quotes on
MIAX when the pro-rata allocation method and the Priority Customer
Overlay is in effect. The key differences between the standard
allocation and PRIME allocation are that in PRIME: RFR responses are
capped at the total size of the Agency Order which changes the pro-
rata calculation when allocating within the same origin type; no
participation entitlement will apply to orders executed in the
PRIME; and the Initiating Member's facilitating or solicitation
order may receive a participation guarantee at the stop price.
    \31\ See MIAX Rule 514(c)(2).
    \32\ See MIAX Rule 514(d)(1).
    \33\ To be considered a priority quote, at the time of
execution, each of the following standards must be met: (i) The bid/
ask differential of a Market Maker's two-sided quote pair must be
valid width (no wider than the bid/ask differentials outlined in
MIAX Rule 603(b)(4)); (ii) the initial size of both of the Market
Maker's bid and the offer must be in compliance with the
requirements of MIAX Rule 604(b)(2); (iii) the bid/ask differential
of a Market Maker's two-sided quote pair must meet the priority
quote width requirements defined in MIAX Rule 517(b)(1)(ii) for each
option; and (iv) either of the following are true: (1) At the time a
locking or crossing quote or order enters the System, the Market
Maker's two-sided quote pair must be valid width for that option and
must have been resting on the Book; or (2) immediately prior to the
time the Market Maker enters a new quote that locks or crosses the
MBBO, the Market Maker must have had a valid width quote already
existing (i.e., exclusive of the Market Maker's new marketable quote
or update) among his two-sided quotes for that option. See MIAX Rule
517(b)(1)(i).
    \34\ See MIAX Rule 514(e)(1). The term ``Professional Interest''
means (i) an order that is for the account of a person or entity
that is not a Priority Customer, or (ii) an order or non-priority
quote for the account of a Market Maker. See MIAX Rule 100.
    \35\ See MIAX Rule 514(e)(2).
---------------------------------------------------------------------------

    At each price point, orders and quotes will be given priority by
type--first to Priority Customers, then Market Makers with priority
quotes, and then to Professional Interest. If unrelated orders are
received by the Exchange during the period when a PRIME auction is
occurring, such orders will be eligible to participate in the auction,
subject to the process above. If orders received are not executed in
the PRIME auction, the time stamps they received will be used to
determine time priority for their execution outside of the auction.
    Thus, at the conclusion of the PRIME auction, the Agency Order will
be allocated at the best price(s) pursuant to the matching algorithm in
effect for the class. Such best prices include non-auction quotes and
orders.\36\ With respect to order execution priority, Priority Customer
orders resting on the Book before the auction or that are received
during the RFR response period, as well as Priority Customer RFR
responses, will collectively have first priority to trade against the
Agency Order. The allocation of an Agency Order against any Priority
Customer orders resting in the Book, Priority Customer orders received
during the RFR response period, and Priority Customer RFR responses
shall be in the sequence in which they are received by the System.\37\
---------------------------------------------------------------------------

    \36\ See proposed MIAX Rule 515A(a)(2)(iii)(A).
    \37\ See proposed MIAX Rule 515A(a)(2)(iii)(B). The Exchange
represents that the priority allocation in PRIME is consistent with
the standard priority rules for Priority Customers in MIAX Rule
514(d)(1). The Exchange gives priority to Priority Customer orders
whether they were on the Book or received during the RFR response
period.
---------------------------------------------------------------------------

    After the execution of Priority Customer orders and responses, if
the best price equals the Initiating Member's single-price submission,
then the Initiating Member's single-price submission will be eligible
for a ``participation guarantee'' under which the Initiating Member
will receive an allocation of the greater of one contract or a certain
percentage of the order, which percentage will be determined by the
Exchange and may not be larger than 40% of the Agency Order in
total.\38\ If only one Member's response matches the Initiating
Member's single price submission, then the Initiating Member may be
allocated up to 50% of the Agency Order.\39\ If the Initiating Member
selected the auto-match option, the Initiating Member will receive an
allocation at each auto-matched RFR response price point up to any
designated limit price, or until a price point is reached where the
balance of the order can be fully executed.\40\ At such final price
point, the Initiating Member will be entitled to a ``participation
guarantee'' that will result in the Initiating Member being allocated
the greater of one contract or a certain percentage of the remainder of
the order, which percentage will be determined by the Exchange and may
not be larger than 40% of the contracts remaining at the final price
point.\41\ However, if the Initiating Member elected to have last
priority in allocation when submitting an Agency Order to initiate a
PRIME auction against a single-price submission, the Initiating Member
will be allocated only the amount of contracts remaining, if any, after
the Agency Order is allocated to all other responses at the single
price specified by the Initiating Member.\42\
---------------------------------------------------------------------------

    \38\ See proposed MIAX Rule 515A(a)(2)(iii)(H).
    \39\ See proposed MIAX Rule 515A(a)(2)(iii)(H). It is the
Commission's understanding that the Initiating Member would retain a
50% allocation only where the Initiating Member is matched by only
one response at the best price. See also Notice, supra note 3, 79 FR
at 13340 (for examples illustrating the allocation at the end of the
PRIME).
    \40\ The Exchange notes that the auto-match functionality will
only allocate the full size of RFR responses (AOC orders and AOC
eQuotes). See proposed MIAX Rule 515A(a)(2)(iii)(I). As noted above,
any orders or quotes received by the System during the PRIME that
are not AOC orders or AOC eQuotes will be treated as unrelated
trading interest; the auto-match functionality will not allocate
against such unrelated trading interest. See proposed MIAX Rule
515A(a)(2)(i)(D).
    \41\ See proposed MIAX Rule 515A(a)(2)(iii)(I).
    \42\ See proposed MIAX Rule 515A(a)(2)(iii)(L).
---------------------------------------------------------------------------

    Following allocation to any Priority Customer interest and any
allocation to the Initiating Member pursuant to its participation
guarantee and auto-match (if applicable), Market Maker priority quotes
and RFR responses from Market Makers with priority quotes will
collectively have the next level of priority. The allocation of Agency
Orders against these contra sided quotes and RFR responses will be on a
size pro rata basis as defined in MIAX Rule 514(c)(2).\43\
---------------------------------------------------------------------------

    \43\ See proposed MIAX Rule 515A(a)(2)(iii)(C).
---------------------------------------------------------------------------

    Next, Professional Interest orders resting in the Book,
Professional Interest orders placed in the Book during the RFR response
period, Professional Interest quotes, and Professional Interest RFR
responses will collectively have last priority.\44\ The allocation of
Agency Orders against these contra sided orders and RFR responses will
be on a size pro rata basis as defined in MIAX Rule 514(c)(2).\45\
---------------------------------------------------------------------------

    \44\ See MIAX Rule 514(e)(2).
    \45\ See proposed MIAX Rule 515A(a)(2)(iii)(D).
---------------------------------------------------------------------------

    When allocating the Agency Order, the market maker ``participation
entitlements'' shall not apply to orders executed pursuant to the PRIME
rule.\46\ If an unrelated market or marketable limit order on the
opposite side of the market as the Agency Order is received during the
PRIME auction and ended the auction, such unrelated order will trade
against the Agency Order at the midpoint of the best RFR response (or
in the absence of an RFR response, the initiating price) and the NBBO
on the other side of the market from the RFR responses (rounded towards
the disseminated quote when necessary).\47\ If an unrelated non-
marketable limit order on the opposite side of the market as the Agency
Order is received during the PRIME auction and ended the auction, such
unrelated order will trade against the Agency Order at the midpoint of
the best RFR response and the unrelated order's limit price (rounded
towards the unrelated order's limit price when necessary).\48\
---------------------------------------------------------------------------

    \46\ See proposed MIAX Rule 515A(a)(2)(iii)(E). See, e.g., MIAX
Rule 514(g) (Primary Lead Market Maker Participation Entitlements),
for an example of a market maker ``participation entitlement.''
These market maker ``entitlements'' are separate and apart from, and
do not relate to, the ``participation guarantee'' that is part of
the proposed PRIME mechanism.
    \47\ See proposed MIAX Rule 515A(a)(2)(iii)(F). See also Notice,
supra note 3, 79 FR at 13341 (for examples illustrating the
allocation when the PRIME concludes early).
    \48\ See proposed MIAX Rule 515A(a)(2)(iii)(G). An unrelated
non-marketable limit order on the opposite side of the market as the
Agency Order would end the PRIME in the situation when that
unrelated non-marketable limit order improves any RFR response.

---------------------------------------------------------------------------

    If the final auction price locks a Priority Customer order on the
Book on the same side of the market as the Agency Order, then the
Agency Order will execute against the RFR responses at $0.01 increment
worse than the final PRIME auction price (towards the opposite side of
the Agency Order) against the PRIME auction participants that submitted
the final price, unless there is sufficient size in the PRIME responses
to execute both the Agency Order and the booked Priority Customer order
(in which case they will both execute at the final PRIME auction
price). Any balance shall trade against the Priority Customer order in
the Book at such order's limit price.\49\
---------------------------------------------------------------------------

    \49\ See proposed MIAX Rule 515A(a)(2)(iii)(K). Thus, the
execution price will be $0.01 increment higher than the final PRIME
auction price if the Agency Order is to buy or $0.01 increment lower
than the final PRIME auction price if the Agency Order is to sell.
---------------------------------------------------------------------------

    Notwithstanding the priority for Market Makers and Professional
Interest pursuant to proposed MIAX Rule 515A(a)(2)(iii)(C) and (D), if
the PRIME auction does not result in price improvement over the
Exchange's disseminated price at the time the PRIME auction began,
resting unchanged quotes or orders that were disseminated at the best
price before the PRIME auction began will have priority after any
Priority Customer order priority and the Initiating Member's
participation guarantee have been satisfied.\50\ Any unexecuted balance
on the Agency Order will be allocated to RFR responses, provided that
those RFR responses will be capped to the size of the original order
and that the Initiating Member may not participate on any such balance,
unless the Agency Order would otherwise go unfilled.\51\
---------------------------------------------------------------------------

    \50\ See proposed MIAX Rule 515A(a)(2)(iii)(J). The Exchange
notes that the priority of such resting unchanged quotes or orders
that were disseminated at the best price before the PRIME began will
still be subject to the standard priority allocation in effect
pursuant to MIAX Rule 514. See Notice, supra note 3, 79 FR at 13343.
    \51\ See proposed MIAX Rule 515A(a)(2)(iii)(J).
---------------------------------------------------------------------------

    If an unexecuted balance remains on the PRIME auction responses
after the Agency Order has been executed in full and such balance in
the RFR responses could trade against any unrelated order(s) that
caused the PRIME auction to conclude, then the RFR balance will trade
against the unrelated order(s) on a size pro rata basis as defined in
MIAX Rule 514(c)(2).\52\
---------------------------------------------------------------------------

    \52\ See proposed MIAX Rule 515A(a)(2)(iii)(M).
---------------------------------------------------------------------------

    It shall be considered conduct inconsistent with just and equitable
principles of trade, in accordance with MIAX Rule 301, for any Member
to enter orders, quotes, Agency Orders, or other responses for the
purpose of disrupting or manipulating the auction. Such conduct
includes, but is not limited to, engaging in a pattern of conduct where
the Member submitting the Agency Order into the PRIME breaks up the
Agency Order into separate orders for two (2) or fewer contracts for
the purpose of gaining a higher allocation percentage than the Member
would have otherwise received in accordance with the allocation
procedures contained in MIAX Rule 515A(a)(2)(iii).\53\
---------------------------------------------------------------------------

    \53\ See proposed MIAX Rule 515A, Interpretations and Policies
.01.
---------------------------------------------------------------------------

    Finally, in proposed MIAX Rule 515A, Interpretation and Policy .08,
the Exchange obligates itself to submit certain data, as requested by
the Commission staff, on the operation of the PRIME auction. This data
will be used to assist the Exchange as well as the Commission in
assessing activity in PRIME auctions including, among other things, the
degree of meaningful competition for all size orders within the PRIME
auction, whether there is material price improvement for orders
executed through the PRIME mechanism, and whether there is an active
and liquid market functioning on the Exchange outside of the PRIME
mechanism.\54\
---------------------------------------------------------------------------

    \54\ See proposed MIAX Rule 515A, Interpretation and Policy .08.
For the list of the data that the Exchange agreed to provide to the
Commission relating to the PRIME, see Exhibit 3 to SR-MIAX-2014-09,
which is publicly available on the Exchange's Web site at http://www.miaxoptions.com.
---------------------------------------------------------------------------

B. PRIME Solicitation Mechanism

    MIAX also is proposing to adopt a solicitation mechanism that is
similar to CBOE's Solicitation Auction Mechanism.\55\ Through this
proposed mechanism, a Member that represents Agency Orders may
electronically execute them against solicited orders provided that it
submits both the Agency Order and solicited orders for electronic
execution into the PRIME Solicitation Mechanism pursuant to proposed
MIAX Rule 515A(b).\56\
---------------------------------------------------------------------------

    \55\ See CBOE Rule 6.74B.
    \56\ For executions pursuant to the PRIME Solicitation
Mechanism, prior to entering Agency Orders into the PRIME on behalf
of customers, Initiating Members must deliver to the customer a
written notification informing the customer that his order may be
executed using the PRIME. The written notification must disclose the
terms and conditions contained in MIAX Rule 515A and be in a form
that is approved by the Exchange. See proposed MIAX Rule 515A,
Interpretations and Policy .03. In addition, Members may not use the
PRIME Solicitation Mechanism to circumvent MIAX Rule 520 limiting
principal transactions. This may include, but is not limited to,
Members entering contra orders that are solicited from (i)
affiliated broker-dealers or (ii) broker-dealers with which the
Member has an arrangement that allows the Member to realize similar
economic benefits from the solicited transaction as it would achieve
by executing the customer order in whole or in part as principal.
Additionally, solicited contra orders entered by Members to trade
against Agency Orders may not be for the account of a MIAX Market
Maker assigned to the options class. See proposed MIAX Rule 515A,
Interpretations and Policies .04.
---------------------------------------------------------------------------

1. Eligibility and PRIME Solicitation Mechanism Process
    The Initiating Member may initiate a PRIME Solicitation Mechanism
provided that the Agency Order is in a class designated as eligible for
PRIME Solicitation Mechanisms as determined by the Exchange and within
the designated PRIME Solicitation Mechanism order eligibility size
parameters as such size parameters are determined by the Exchange. The
eligible order size may not be less than 500 standard option contracts
or 5,000 mini-option contracts.\57\ Also, each order entered into the
PRIME Solicitation Mechanism must be designated as all-or-none, and the
minimum price increment for an Initiating Member's single price
submission will be a $0.01 increment.\58\
---------------------------------------------------------------------------

    \57\ Proposed MIAX Rule 515A, Interpretation and Policy .05
provides that any determinations made by the Exchange pursuant to
MIAX Rule 515A, such as eligible classes and order size parameters,
will be communicated in a Regulatory Circular.
    \58\ See proposed MIAX Rule 515A(b)(1).
---------------------------------------------------------------------------

    To initiate the PRIME Solicitation Mechanism, the Initiating Member
must mark the Agency Order for PRIME Solicitation Mechanism processing
and specify a single price at which it seeks to cross the Agency Order
with a solicited order, which shall be the initiating price for the
PRIME Solicitation Mechanism.\59\ When the Exchange receives a properly
designated Agency Order for PRIME Solicitation Mechanism processing, an
RFR message indicating the option, side, size, and initiating price
\60\ will be sent to all subscribers of the Exchange's data feeds.\61\
Any Member may submit responses to the RFR (specifying prices and
sizes) during the RFR response period (which, like the PRIME auction,

will be 500 milliseconds).\62\ RFR responses must be either an AOC
order or an AOC eQuote.\63\ The minimum price increment for responses
will be $0.01 increment.\64\ A response with a size greater than the
size of the Agency Order will be capped at the size of the Agency
Order.\65\ Responses will not be visible to other Solicitation Auction
participants, and MIAX will not disseminate them to OPRA.\66\ Members
may cancel RFR responses.\67\
---------------------------------------------------------------------------

    \59\ See proposed MIAX Rule 515A(b)(2)(i)(A).
    \60\ The initiating price for the PRIME Solicitation Mechanism
is the single price specified by the Initiating Member at which it
seeks to cross the Agency Order with a solicited order. See proposed
MIAX Rule 515A(b)(2)(i)(A).
    \61\ See proposed MIAX Rule 515A(b)(2)(i)(B). As noted above
with respect to the PRIME, the Exchange will include the RFR from
the auction mechanisms in the Exchange's data feeds at no
incremental costs to subscribers. Thus, any subscriber that chooses
to receive options data, including any Member subscriber, has the
ability to respond to those RFRs.
    \62\ See proposed MIAX Rule 515A(b)(2)(i)(C). In February 2014,
to determine whether the proposed duration of the RFR would provide
sufficient time to enter an RFR response, the Exchange asked
Members, including Market Makers, whether their firms ``could
respond to an Auction with a duration of 500 milliseconds.'' Of the
8 Members that responded to the question, 100% indicated that their
firm could respond in this time frame. Thus, the Exchange notes its
belief that the proposed duration for the RFR of 500 milliseconds,
would provide a meaningful opportunity for participants on MIAX to
respond to an RFR while at the same time facilitating the prompt
execution of orders. See Notice, supra note 3, 79 FR at 13343, n.
62.
    \63\ See proposed MIAX Rule 515A(b)(2)(i)(C). Any MIAX Member
may respond to the RFR in the PRIME Solicitation Mechanism. See
Notice, supra note 3, 79 FR at 13344, n.63.
    \64\ See proposed MIAX Rule 515A(b)(2)(i)(E).
    \65\ See proposed MIAX Rule 515A(b)(2)(i)(F).
    \66\ See proposed MIAX Rule 515A(b)(2)(i)(D).
    \67\ See proposed MIAX Rule 515A(b)(2)(i)(G).
---------------------------------------------------------------------------

2. Conclusion of the PRIME Solicitation Mechanism
    The PRIME Solicitation Mechanism will end early, before the end of
the RFR response period, under certain circumstances. Specifically, the
PRIME Solicitation Mechanism will conclude at the sooner of the
following: (i) The end of the RFR response period; (ii) upon receipt by
MIAX of an unrelated order (in the same option as the Agency Order) on
the same side or opposite side of the market from the RFR responses,
that is marketable against either the MBBO (when such quote is the
NBBO) or the RFR responses; (iii) upon receipt by MIAX of an unrelated
limit order (in the same option as the Agency Order and on the opposite
side of the market as the Agency Order) that improves any RFR response;
(iv) any time an RFR response matches the MBBO on the opposite side of
the market from the RFR responses; (v) any time there is a quote lock
on the Exchange pursuant to MIAX Rule 1402; or (vi) any time there is a
trading halt in the option on the Exchange.\68\
---------------------------------------------------------------------------

    \68\ See proposed MIAX Rule 515A(b)(2)(ii).
---------------------------------------------------------------------------

3. Priority and Allocation
    At the conclusion of the Solicitation Auction, the Agency Order
will either be automatically executed in full and allocated subject to
the following provisions, or will be cancelled. The Agency Order will
be executed against the solicited order at the proposed execution
price, provided that:
     The execution price must be equal to or better than the
NBBO; \69\
---------------------------------------------------------------------------

    \69\ See proposed MIAX Rule 515A(b)(2)(iii)(A).
---------------------------------------------------------------------------

     There are no Priority Customer orders resting in the Book
on the opposite side of the Agency Order at the proposed execution
price; \70\ and
---------------------------------------------------------------------------

    \70\ See proposed MIAX Rule 515A(b)(2)(iii)(B)(1).
---------------------------------------------------------------------------

     There is insufficient size to execute the Agency Order at
an improved price.\71\
---------------------------------------------------------------------------

    \71\ See proposed MIAX Rule 515A(b)(2)(iii)(C). See also Notice,
supra note 3, 79 FR at 13344 (for examples illustrating the
allocation at the end of the PRIME Solicitation Mechanism).
---------------------------------------------------------------------------

    If the execution would otherwise take place outside the NBBO, the
Agency Order and solicited order will be cancelled.\72\
---------------------------------------------------------------------------

    \72\ See proposed MIAX Rule 515A(b)(2)(iii)(A).
---------------------------------------------------------------------------

    If there are Priority Customer orders resting in the Book on the
opposite side as the Agency Order and there is sufficient size
(considering all resting orders, quotes, and RFR responses) to execute
the Agency Order, then the Agency Order will be executed against this
interest, and the solicited order will be cancelled. In such case, the
Agency Order will be allocated at the best price(s) pursuant to the
matching algorithm in effect for the class.\73\ However, if there are
Priority Customer orders resting in the Book on the opposite side as
the Agency Order and there is not sufficient size (considering all
resting orders, quotes, and RFR responses) to fill the entire Agency
Order, then both the Agency Order and the solicited order will be
cancelled.\74\
---------------------------------------------------------------------------

    \73\ See proposed MIAX Rule 515A(b)(2)(iii)(B)(1). The Agency
Order will be allocated at the best price(s) pursuant to the
matching algorithm in effect for the class. The Exchange states that
this will ensure that the Agency Order is allocated in a manner
consistent with the standard priority of allocation of the Exchange
rules that distinguish between Priority Customers, Market Makers
with priority quotes, and Professional Interest.
    \74\ See proposed MIAX Rule 515A(b)(2)(iii)(B)(2).
---------------------------------------------------------------------------

    If there is sufficient size (considering all resting orders,
quotes, and RFR responses) to execute the Agency Order in full at an
improved price or prices that is equal or better than the NBBO, then
the Agency Order will execute at such improved price(s) and the
solicited order will be cancelled. In such case, the Agency Order will
be allocated at the best price(s) pursuant to the matching algorithm in
effect for the class.\75\
---------------------------------------------------------------------------

    \75\ See proposed MIAX Rule 515A(b)(2)(iii)(C)(1). The Exchange
proposes to specify that the Agency Order will be allocated pursuant
to the matching algorithm in effect for the class. This will ensure
that the Agency Order is allocated in a manner consistent with the
standard priority of allocation of the Exchange rules that
distinguish between Priority Customers, Market Makers with priority
quotes, and Professional Interest.
---------------------------------------------------------------------------

C. Order Exposure Rule

    MIAX Rule 520 prohibits Members from acting as principal on any
orders they represent as agent unless (i) agency orders are first
exposed on the Exchange for at least one (1) second, and (ii) the
Member has been bidding or offering on the Exchange for at least one
(1) second prior to receiving an agency order that is executable
against such bid or offer. In addition, Members may not execute orders
they represent as agent on the Exchange against orders solicited from
Members and non-member broker-dealers to transact with such orders
unless the unsolicited order is first exposed on the Exchange for at
least one (1) second.
    The Exchange proposes to amend MIAX Rule 520 to permit a Member to
execute against as principal orders it represents as agent if the
Member utilizes the PRIME price improvement mechanism. Similarly, the
Exchange proposes to amend MIAX Rule 520 to permit a Member to execute
orders it represents as agent against orders it has solicited if the
Member utilizes the PRIME price improvement mechanism or PRIME
Solicitation Mechanism. Accordingly if those mechanisms were used, such
Agency Orders submitted into them would not be subject to the one
second order exposure requirement of MIAX Rule 520.

III. Discussion and Commission Findings

    After careful review, the Commission finds that the proposed rule
change is consistent with the requirements of the Act and the rules and
regulations thereunder applicable to a national securities exchange
and, in particular, with Section 6(b) of the Act.\76\ In particular,
the Commission finds that the proposed rule change is consistent with
Section 6(b)(5) of the Act,\77\ which requires, among other things,
that the rules of a national securities 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 customers, issuers, brokers and dealers. The
Commission believes that approving the Exchange's proposal to establish
the PRIME price improvement mechanism and the PRIME Solicitation
Mechanism may increase competition among those options exchanges that
offer similar mechanisms. The Commission further believes that allowing
MIAX Members to enter orders into the PRIME price improvement mechanism
and the PRIME Solicitation Mechanism could provide additional
opportunities for such orders, notably orders from Priority Customers,
to receive price improvement over the NBBO.
---------------------------------------------------------------------------

    \76\ 15 U.S.C. 78f(b). In approving this proposed rule change,
the Commission has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
    \77\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    MIAX's proposed PRIME price improvement mechanism is similar to
existing functionality at other options exchanges and does not raise
any novel issues.\78\ In particular, for orders of fewer than 50
standard options contracts or 500 mini-option contracts, the PRIME
price improvement mechanism requires the Initiating Member to stop the
Agency Order at the better of the NBBO price improved by a $0.01
increment or the Agency Order's limit price.\79\ Once an Agency Order
has been submitted, the submission may not be modified or cancelled.
The Commission notes that such smaller orders are thus effectively
guaranteed some level of price improvement if they are submitted into
the PRIME price improvement mechanism. Orders of 50 or greater
contracts are guaranteed an execution price of at least the NBBO and,
moreover, are given the opportunity for price improvement beyond the
NBBO by being exposed to Members during the PRIME auction. In addition,
MIAX's proposal protects resting interest on its Book as the stop price
must be at least $0.01 increment better than any booked order's limit
price on the same side of the market as the Agency Order.
---------------------------------------------------------------------------

    \78\ See CBOE Rule 6.74A (CBOE's AIM).
    \79\ The Commission notes that this aspect of MIAX's proposal
(i.e., to stop an Agency Order of fewer than 50 contracts at a
price-improved price) is similar to requirements set forth in CBOE's
AIM. See CBOE Rule 6.74A(a)(3).
---------------------------------------------------------------------------

    The PRIME price improvement mechanism also permits members to
submit responses to the RFR on behalf of all types of interest.\80\ The
Commission believes that this requirement provides the potential for an
Agency Order to be exposed to a competitive auction. Further, when the
Exchange receives a properly designated Agency Order for PRIME auction
processing, it will send to all subscribers of its data feeds an RFR
detailing the option, side, size, and initiating price. This message,
available to any subscriber, is designed to help attract responses to a
PRIME auction and may result in competitive PRIME auctions and
ultimately better prices for the Agency Order to the extent it is
successful in attracting competitive responses to a PRIME auction.
---------------------------------------------------------------------------

    \80\ Cf. CBOE Rule 6.74A(b)(1)(D)-(E) (only CBOE Market Makers
with an appointment in the relevant option class, and CBOE Members
acting as agent for orders resting at the top of the CBOE book
opposite the Agency Order, may submit responses to the AIM RFR).
---------------------------------------------------------------------------

    The RFR (for both the PRIME auction and PRIME Solicitation
Mechanism) will last for 500 milliseconds. In February 2014, to
determine whether the proposed duration of the RFR would provide
sufficient time to enter an RFR response, the Exchange asked its
Members, including Market Makers, whether their firms ``could respond
to an Auction with a duration of 500 milliseconds.'' Of the 8 Members
that responded to the question, 100% indicated that their firm could
respond in this time frame.\81\ Based on MIAX's statements, the
Commission believes that 500 milliseconds could facilitate the prompt
execution of Agency Orders in the PRIME auction (and PRIME Solicitation
Mechanism), while providing market participants with an opportunity to
compete for exposed bids and offers. The Commission notes that another
exchange's price improvement mechanism also provides a 500 millisecond
auction response period.\82\
---------------------------------------------------------------------------

    \81\ See Notice, supra note 3, 79 FR at 13337, n. 19 and 13343,
n. 62.
    \82\ See International Securities Exchange Rule 723(c)(5).
---------------------------------------------------------------------------

    At the conclusion of a PRIME auction, Priority Customer orders and
RFR responses representing Priority Customer interest have first
priority to trade against the Agency Order. After execution of Priority
Customer responses and orders, the Initiating Member may be allocated a
limited percentage of the Agency Order, not to exceed 40% of the
contracts at the applicable price point (however, if only one response
matches the Initiating Member's single price submission at the best
price, then the Initiating Member may be allocated up to 50% of the
order). Market Maker priority quotes and RFR responses from Market
Makers with priority quotes have next priority. Quotes, orders, and RFR
responses representing Professional Interest have final priority. The
Commission believes that the proposed matching algorithm set forth in
MIAX's PRIME rule is sufficiently clear regarding how orders are to be
allocated in the PRIME auction and does not raise any novel issues.
    The Exchange has represented its commitment to submit certain data
on PRIME auctions at the request of Commission staff. The Commission
expects such data to be used, by both the Exchange and the Commission
staff, to assess the performance of PRIME auctions, including, among
other things, to study whether there is meaningful competition for all
size orders with the PRIME, the degree of price improvement for all
orders executed through the PRIME mechanism, whether there is an active
and liquid market functioning on the Exchange outside of the PRIME, and
the situations in which a PRIME auction is terminated before the end of
the RFR response period. The data provided will enable the Commission,
as well as the Exchange itself, to evaluate the PRIME auction to
determine its performance and impact on options market structure and
the degree to which it is beneficial to customers and to the options
market as a whole.
    The Commission further believes that the proposal to establish the
PRIME Solicitation Mechanism may allow for greater flexibility in
executing large-sized orders, and is not novel or otherwise raise any
issues of first impression.\83\ The Commission believes that the
proposal includes appropriate conditions to assure that the Agency
Order is exposed to Members for the possibility of price improvement
over the NBBO and that Priority Customer orders on the Exchange are
protected. At the conclusion of a PRIME Solicitation Mechanism auction,
the Agency Order would either be executed in full or cancelled. The
Agency Order will be executed against the solicited order at the
proposed executed price if (i) the execution price is equal to or
better than the NBBO; (ii) there are no Priority Customer Orders
resting in the book on the opposite side of the Agency Order at the
proposed execution price; and (iii) there is insufficient size to
execute the Agency Order at an improved price. If there are Priority
Customer orders and there is sufficient size to execute the Agency
Order (considering all eligible interest), the Agency Order will be
executed against these interests and the solicited order will be
cancelled. If, however, there are Priority Customer Orders but there is
not sufficient size to execute the Agency Order in full, then both the
Agency Order and the solicited order will be cancelled. Finally, if
there is sufficient size to execute the Agency Order in full at an
improved price equal

to or better than the NBBO, the Agency Order will execute at the
improved price and the solicited order will be cancelled. The
Commission believes that the priority and allocation rules for the
PRIME Solicitation Mechanism, which are based on a similar mechanism on
another exchange, are reasonable and consistent with the Act.
---------------------------------------------------------------------------

    \83\ The Commission also notes that the proposal is similar to
requirements set forth in the CBOE Solicitation Auction Mechanism.
See CBOE Rule 6.74B.
---------------------------------------------------------------------------

IV. Section 11(a) of the Act

    Section 11(a)(1) of the Act \84\ prohibits a member of a national
securities exchange from effecting transactions on that exchange for
its own account, the account of an associated person, or an account
over which it or its associated person exercises discretion
(collectively, ``covered accounts'') unless an exception applies. Rule
11a2-2(T) under the Act,\85\ known as the ``effect versus execute''
rule, provides exchange members with an exemption from the Section
11(a)(1) prohibition. Rule 11a2-2(T) permits an exchange member,
subject to certain conditions, to effect transactions for covered
accounts by arranging for an unaffiliated member to execute
transactions on the exchange. To comply with Rule 11a2-2(T)'s
conditions, a member: (i) Must transmit the order from off the exchange
floor; (ii) may not participate in the execution of the transaction
once it has been transmitted to the member performing the
execution;\86\ (iii) may not be affiliated with the executing member;
and (iv) with respect to an account over which the member has
investment discretion, neither the member nor its associated person may
retain any compensation in connection with effecting the transaction
except as provided in the Rule. For the reasons set forth below, the
Commission believes that Exchange members entering orders into the
PRIME and PRIME Solicitation Mechanism would satisfy the requirements
of Rule 11a2-2(T).
---------------------------------------------------------------------------

    \84\ 15 U.S.C. 78k(a)(1).
    \85\ 17 CFR 240.11a2-2(T).
    \86\ The member may, however, participate in clearing and
settling the transaction.
---------------------------------------------------------------------------

    The Rule's first condition is that orders for covered accounts be
transmitted from off the exchange floor. In the context of automated
trading systems, the Commission has found that the off-floor
transmission requirement is met if a covered account order is
transmitted from a remote location directly to an exchange's floor by
electronic means.\87\ MIAX has represented that the MIAX trading system
and the proposed PRIME and PRIME Solicitation Mechanism receive all
orders electronically through remote terminals or computer-to-computer
interfaces. The Exchange also represents that orders for covered
accounts from Members will be transmitted from a remote location
directly to the proposed PRIME and PRIME Solicitation Mechanism by
electronic means. Because no Exchange members may submit orders into
the PRIME and PRIME Solicitation Mechanism from on the floor of the
Exchange, the Commission believes that the PRIME and PRIME Solicitation
Mechanism satisfy the off-floor transmission requirement.
---------------------------------------------------------------------------

    \87\ See, e.g., Securities Exchange Act Release Nos. 61419
(January 26, 2010), 75 FR 5157 (February 1, 2010) (SR-BATS-2009-031)
(approving BATS options trading); 59154 (December 23, 2008), 73 FR
80468 (December 31, 2008) (SR-BSE-2008-48) (approving equity
securities listing and trading on BSE); 57478 (March 12, 2008), 73
FR 14521 (March 18, 2008) (SR-NASDAQ-2007-004 and SR-NASDAQ-2007-
080) (approving NOM options trading); 53128 (January 13, 2006), 71
FR 3550 (January 23, 2006) (File No. 10-131) (approving The Nasdaq
Stock Market LLC); 44983 (October 25, 2001), 66 FR 55225 (November
1, 2001) (SR-PCX-00-25) (approving Archipelago Exchange); 29237 (May
24, 1991), 56 FR 24853 (May 31, 1991) (SR-NYSE-90-52 and SR-NYSE-90-
53) (approving NYSE's Off-Hours Trading Facility); and 15533
(January 29, 1979), 44 FR 6084 (January 31, 1979) (``1979
Release'').
---------------------------------------------------------------------------

    Second, the Rule requires that the member not participate in the
execution of its order. The Exchange represents that at no time
following the submission of an order is a member organization able to
acquire control or influence over the result or timing of an order's
execution.\88\ According to the Exchange, the execution of an order is
determined by what other orders are present and the priority of those
orders.\89\ Accordingly, the Commission believes that a member does not
participate in the execution of an order submitted to the PRIME and
PRIME Solicitation Mechanism.
---------------------------------------------------------------------------

    \88\ See Notice, supra note 3, 79 FR at 13347. See also
Amendment No. 1, supra note 4 and accompanying text.
    \89\ See id. The Exchange notes that a Member may cancel or
modify the order, or modify the instructions for executing the
order, but that such instructions would be transmitted from off the
floor of the Exchange. The Commission has stated that the non-
participation requirement is satisfied under such circumstances so
long as such modifications or cancellations are also transmitted
from off the floor. See Securities Exchange Act Release No. 14563
(March 14, 1978), 43 FR 11542 (March 17, 1978) (``1978 Release'')
(stating that the ``non-participation requirement does not prevent
initiating members from canceling or modifying orders (or the
instructions pursuant to which the initiating member wishes to be
executed) after the orders have been transmitted to the executing
member, provided that any such instructions are also transmitted
from off the floor'').
---------------------------------------------------------------------------

    Third, Rule 11a2-2(T) requires that the order be executed by an
exchange member who is unaffiliated with the member initiating the
order. The Commission has stated that this requirement is satisfied
when automated systems, such as the PRIME and PRIME Solicitation
Mechanism, are used, as long as the design of these systems ensures
that members do not possess any special or unique trading advantages in
handling their orders after transmitting them to the exchange.\90\ MIAX
has represented that the PRIME and PRIME Solicitation Mechanism are
designed so that no Member has any special or unique trading advantage
in the handling of its orders after transmitting its orders to the
mechanisms.\91\ Based on the Exchange's representation, the Commission
believes that PRIME and PRIME Solicitation Mechanism satisfy this
requirement.
---------------------------------------------------------------------------

    \90\ In considering the operation of automated execution systems
operated by an exchange, the Commission noted that, while there is
not an independent executing exchange member, the execution of an
order is automatic once it has been transmitted into the system.
Because the design of these systems ensures that members do not
possess any special or unique trading advantages in handling their
orders after transmitting them to the exchange, the Commission has
stated that executions obtained through these systems satisfy the
independent execution requirement of Rule 11a2-2(T). See 1979
Release, supra note 87.
    \91\ See Notice, supra note 3, 79 FR at 13347. See also
Amendment No. 1, supra note 4 and accompanying text.
---------------------------------------------------------------------------

    Fourth, in the case of a transaction effected for an account with
respect to which the initiating member or an associated person thereof
exercises investment discretion, neither the initiating member nor any
associated person thereof may retain any compensation in connection
with effecting the transaction, unless the person authorized to
transact business for the account has expressly provided otherwise by
written contract referring to Section 11(a) of the Act and Rule 11a2-
2(T) thereunder.\92\ MIAX represents that Members relying on Rule 11a2-
2(T) for transactions effected through the PRIME and PRIME Solicitation
Mechanism must comply with this condition of the Rule.\93\
---------------------------------------------------------------------------

    \92\ See 17 CFR 240.11a2-2(T)(a)(2)(iv). In addition, Rule 11a2-
2(T)(d) requires a member or associated person authorized by written
contract to retain compensation, in connection with effecting
transactions for covered accounts over which such member or
associated persons thereof exercises investment discretion, to
furnish at least annually to the person authorized to transact
business for the account a statement setting forth the total amount
of compensation retained by the member in connection with effecting
transactions for the account during the period covered by the
statement. See 17 CFR 240.11a2-2(T)(d). See also 1978 Release, supra
note 89 (stating ``[t]he contractual and disclosure requirements are
designed to assure that accounts electing to permit transaction-
related compensation do so only after deciding that such
arrangements are suitable to their interests'').
    \93\ See Notice, supra note 3, 79 FR at 13347. See also
Amendment No. 1, supra note 4 and accompanying text.

---------------------------------------------------------------------------

V. Solicitation of Comments

    Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether Amendment No. 1
is consistent with the Act. Comments may be submitted by any of the
following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to<EMAIL_ADDRESS>Please include
File Number SR-MIAX-2014-09 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-MIAX-2014-09. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml).
    Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for Web site viewing and printing in
the Commission's Public Reference Room, 100 F Street NE., Washington,
DC 20549-1090, 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; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-MIAX-2014-09 and should be
submitted on or before May 20, 2014.

VI. Accelerated Approval of Proposed Rule Change, as Modified by
Amendment No. 1

    As discussed above, the Exchange submitted Amendment No. 1 to
clarify representations it made in its original filing concerning the
applicability of and compliance of its proposed PRIME mechanisms with
Section 11(a) of the Act.\94\ Specifically, MIAX clarified that it
intended its references to ``PRIME'' in its Section 11(a) analysis to
apply to both the PRIME price improvement mechanism as well as the
PRIME Solicitation Mechanism. Thus, the content of Amendment No. 1,
which merely clarifies a potential ambiguity in the filing, does not
raise any novel issues and instead provides additional clarifying
information to support MIAX's analysis of how its proposal is
consistent with the Act and thus facilitates the Commission's ability
to make the requisite findings set forth above and ultimately approve
the proposal. In addition, the Commission notes that it published the
original proposal in the Federal Register and did not receive any
comments on MIAX's Section 11(a) analysis or any other parts of the
proposal.\95\ Accordingly, the Commission finds good cause, pursuant to
Section 19(b)(2) of the Act,\96\ to approve the filing, as modified by
Amendment No. 1, on an accelerated basis prior to the 30th day after
the date of the publication in the Federal Register of notice of
Amendment No. 1 to the filing.
---------------------------------------------------------------------------

    \94\ See Amendment No. 1, supra note 4.
    \95\ The Commission also notes that, in order to promote the
public availability and transparency of MIAX's post-notice
amendment, MIAX submitted a copy of Amendment No. 1 through the
Commission's electronic public comment letter mechanism on the same
day that it filed Amendment No. 1 with the Commission. See supra
note 5.
    \96\ 15 U.S.C. 78s(b)(2).
---------------------------------------------------------------------------

VII. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\97\ that the proposed rule change (SR-MIAX-2014-09), as modified
by Amendment No. 1, be and hereby is approved on an accelerated basis.
---------------------------------------------------------------------------

    \97\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\98\
---------------------------------------------------------------------------

    \98\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-09680 Filed 4-28-14; 8:45 am]
BILLING CODE 8011-01-P