\241\ As discussed above, supra Section III(C)(3)(b), Primary
Lead Market Makers must provide continuous two-sided quotes 99% of
the time in: (i) The lesser of 99% of the series, or 100% of the
series minus one put-call pair, in each appointed class that is
traded on at least one other exchange; and (ii) 100% of the series
in each appointed class that is singly listed on MIAX. See MIAX Rule
604(e)(1). Lead Market Makers must provide continuous two-sided
quotes 90% of the time in 90% of the series in each of its appointed
classes. See MIAX Rule 604(e)(2).
---------------------------------------------------------------------------

    In its comment letter, ISE identifies several proposed MIAX rules
that ISE believes would benefit from increased detail or description.
For example, ISE opines that certain aspects of Rule 514 (regarding
quote priority) and Rule 515 (regarding processing of orders and
quotes) may be novel.\242\ In response, MIAX states that it does not
believe that any aspects of MIAX Rules 514 or 515 raise new issues not
previously addressed by the Commission; nevertheless MIAX made
revisions to those rules to clarify their operation.\243\
---------------------------------------------------------------------------

    \242\ See ISE Letter, supra note 3, at 1.
    \243\ See MIAX Response Letter, supra note 4, at 2.
---------------------------------------------------------------------------

    In its comment letter, NASDAQ expresses concern over a few MIAX
rules that used terms such as ``from time to time'' or ``may.'' \244\
For example, NASDAQ notes MIAX Rule 514(j) that says MIAX may, from
time to time, make available to members the quantity of Priority
Customer contracts included in its best bid and offer.\245\ NASDAQ
questions when MIAX might do this and asks whether this would be a
market data feed.\246\ NASDAQ asks for a more detailed description of
this provision, and recommends that it not be adopted at this time if
MIAX is not prepared to roll it out at its commencement of
operations.\247\ In response, MIAX revised several of its proposed
rules to add further detail including changing the terms ``from time to
time'' or ``may'' to a more definitive ``will'' or a more specific time
frame.\248\ For example, MIAX revised MIAX Rule 503(b) concerning
openings to clarify that the procedure described in that rule ``will''
be used to reopen a class after a trading halt.\249\ In addition, MIAX
amended MIAX Rule 514(h) to provide that eligible order types for
Directed Lead Market Makers will only be set forth in the MIAX Rules
and not by regulatory circular.\250\ Further, MIAX deleted MIAX Rule
514(j) and instead has included text in MIAX Rule 506 to clarify that
it ``will'' make available to subscribers of its data feeds and to all
market participants through the public data feed an indication when
there is Public Customer interest included in the MBBO.\251\
---------------------------------------------------------------------------

    \244\ See NASDAQ Letter, supra note 3, at 2.
    \245\ See id.
    \246\ See id.
    \247\ See id.
    \248\ See MIAX Response Letter, supra note 4, at 12-13.
    \249\ See id.
    \250\ See id. at 13.
    \251\ See id. at 12.
---------------------------------------------------------------------------

    In addition, NASDAQ recommends that MIAX Rule 503(h) and (i), which
use the term ``may,'' should be clarified to specify how a closing
procedure would be employed after the close of the market.\252\ In
response, as noted above, MIAX revised MIAX Rule 503 to replace the
word ``may'' with the word ``will'' to clarify that the procedure
described in that rule ``will'' be used to reopen a class after a
trading halt.\253\ Further, MIAX deleted MIAX Rule 503(i) concerning
rotations in the event of a trading halt in a proprietary product
because MIAX does not have any proprietary products at the time and
that provision would be inapplicable currently.\254\
---------------------------------------------------------------------------

    \252\ See NASDAQ Letter, supra note 3, at 2.
    \253\ See MIAX Response Letter, supra note 4, at 13.
    \254\ See id. at 12.
---------------------------------------------------------------------------

    NASDAQ also requests clarification on MIAX Rule 503(e)(1)
concerning the opening process, and in particular, whether MIAX would
consider off-exchange trades or trades on markets other than the
primary market when it decides whether to open an option class for
trading.\255\ In response, MIAX revised MIAX Rule 503(e)(1) to clarify
that the opening process will begin following the dissemination of a
quote or trade in the ``market for the underlying security,'' which
MIAX previously defined in MIAX Rule 503(d) as either the primary
listing market, the primary volume market, or the first market to open
the underlying security, as determined on a class-by-class basis and
announced to members in advance.\256\
---------------------------------------------------------------------------

    \255\ See NASDAQ Letter, supra note 3, at 2.
    \256\ See MIAX Response Letter, supra note 4, at 13.
---------------------------------------------------------------------------

    Further, NASDAQ recommends that MIAX Rule 503(g) be clarified to be
more specific about when the Help Desk may deviate from the standard
manner of the opening procedure.\257\ In response, MIAX revised Rule
503 to note that the Help Desk may delay (rather than ``deviate'') the
opening procedure when necessary in the interests of maintaining a fair
and

orderly market.\258\ MIAX notes that Phlx Rule 1047(c) similarly allows
an exchange official to delay the opening procedure, and that the Phlx
rule provides the same level of detail as the revised MIAX rule.\259\
---------------------------------------------------------------------------

    \257\ See NASDAQ Letter, supra note 3, at 2.
    \258\ See MIAX Response Letter, supra note 4, at 12.
    \259\ See id. at 14.
---------------------------------------------------------------------------

    NASDAQ believes that MIAX's proposed rule text provides MIAX with
too much discretion concerning the order types that initially will be
available for use on MIAX, and argues that MIAX should be compelled to
define which order types will be available when and file new rule
changes when new order types are introduced or when order types are
processed differently.\260\
---------------------------------------------------------------------------

    \260\ See NASDAQ Letter, supra note 3, at 2-3. NASDAQ notes that
existing exchanges are required to file detailed rule changes that
describe how a proposed rule would work. See id. NASDAQ notes that
the details and specific functionality are important to users, who
need to understand how their orders will be handled in various
situations. See id. at 3.
---------------------------------------------------------------------------

    For example, NASDAQ notes MIAX Rule 516 states that ``not all order
types listed and described in this rule will be initially available for
use on the Exchange.'' \261\ NASDAQ argues that, if the functionality
related to certain order and quote types is not available on MIAX, then
MIAX should specify in its rules what is available and file proposed
rule changes when it introduces additional order or quote types and
related functionality.\262\ In response, MIAX believes it is
permissible and appropriate to list in its rules all order and quote
types that it intends to use soon after it commences operations,
provided that the applicable rules contain a sufficient level of detail
about each order and quote type.\263\ MIAX believes that MIAX Rules 516
and 517 provide adequate detail on each of the order and quote types
listed therein.\264\ MIAX further believes that it is appropriate to
use a regulatory circular to specify which order and quote types have
been activated from among those specified in its rules.\265\ MIAX
represents that it intends to activate in the foreseeable future each
of the proposed order and quote types contained in its proposed
rules.\266\
---------------------------------------------------------------------------

    \261\ See NASDAQ Letter, supra note 3, at 2.
    \262\ See id. at 3. For example, NASDAQ notes that MIAX Rule
516(d) says that Attributable Orders may not be available for all
MIAX systems and MIAX would issue a Regulatory Circular specifying
which systems and class of securities will have Attributable Orders.
See id. In response, MIAX has revised Rule 516(e) (previously Rule
516(d)) to clarify that Attributable Orders will be available in the
MIAX system on initial launch. See MIAX Response Letter, supra note
4, at 8.
    \263\ See MIAX Response Letter, supra note 4, at 14-15.
    \264\ See id. MIAX notes that other exchanges have similar
rules, for example C2 Options Exchange.
    \265\ See id.
    \266\ See id. at 14.
---------------------------------------------------------------------------

    In addition, NASDAQ notes that MIAX Rule 514(g)(2) states that MIAX
will advise membership through a Regulatory Circular when additional
order types are eligible to be directed.\267\ NASDAQ believes this
flexibility may be problematic, and notes that directed orders can
warrant additional regulatory scrutiny in light of the issues
surrounding participation guarantees that usually accompany directed
orders.\268\ In response, MIAX amended MIAX Rule 514(h)(2) to remove
its ability to specify this information in a regulatory circular and
instead represents that it will submit a rule filing with the
Commission when it proposes to extend directed order functionality to
additional order types.\269\ MIAX further represents that any order
types eligible to be directed will be set forth in the MIAX rules.\270\
---------------------------------------------------------------------------

    \267\ See NASDAQ Letter, supra note 3, at 3.
    \268\ See id.
    \269\ See MIAX Response Letter, supra note 4, at 13.
    \270\ See id.
---------------------------------------------------------------------------

    The Commission believes that MIAX Exchange's proposed display,
execution, and priority rules discussed above in this section are
consistent with the Act. In particular, the Commission finds that the
proposed rules are consistent with Section 6(b)(5) of the Act,\271\
which, among other things, requires that the rules of a national
securities exchange be designed to promote just and equitable
principles of trade, to foster cooperation and coordination with
persons engaged in regulating transactions in securities, to remove
impediments to and perfect the mechanism of a free and open market and
a national market system and, in general, to protect investors and the
public interest, and to not permit unfair discrimination between
customers, issuers, or dealers. The Commission also finds that the
proposed rules are consistent with Section 6(b)(8) of the Act,\272\
which requires that the rules of an exchange not impose any burden on
competition that is not necessary or appropriate in furtherance of the
purposes of the Act. The trading rules of MIAX are substantially
similar to the current trading rules of other exchanges, as noted
above, which were filed with and approved by the Commission (or
otherwise became effective) pursuant to Section 19(b) of the Act.
Therefore, the Commission believes that these rules raise no new
regulatory issues and are consistent with the Act. However, certain
MIAX trading rules are, in fact, novel in some respect or unique to
MIAX and may not be similarly based on the existing rules of other
exchanges. The trading rules that are novel or unique to MIAX,
including the use of eQuotes, priority quotes, and exposure mechanisms,
are discussed separately in detail below.
---------------------------------------------------------------------------

    \271\ 15 U.S.C. 78f(b)(5).
    \272\ 15 U.S.C. 78f(b)(8).
---------------------------------------------------------------------------

5. eQuotes and Priority Quotes
    The MIAX rules provide that Market Makers will be permitted to
submit bids and offers to MIAX as orders, Standard quotes, or
``eQuotes.'' \273\ Standard quotes refer to the traditional type of
quotes that exist on other markets, and submission of a Standard quote
by a Market Maker will cancel and replace any previously submitted
Standard quote by the Market Maker.\274\ In contrast, eQuotes will be
quotes with a specific time in force, and Market Makers will be
permitted to submit multiple eQuotes to MIAX Exchange (in addition to
their single Standard quote).\275\ In other words, the submission of an
eQuote will not replace an existing Standard quote or eQuote. Thus,
while Market Makers could only have one Standard quote active at any
one time, they will be permitted to have multiple types of eQuotes
active in a single series. The types of eQuotes available on MIAX will
include Day eQuotes, Auction or Cancel (``AOC'') eQuotes, Opening Only
(``OPG'') eQuotes, Immediate or Cancel (``IOC'') eQuotes, Fill or Kill
eQuotes (``FOK''), and Intermarket Sweep eQuotes.\276\ MIAX's proposed
eQuote types are analogous to order types, often of the same name, that
could be used by members and Market Makers on MIAX, as discussed above,
except that the eQuotes would be submitted by Market Makers through
their quote handling

terminal and may receive priority over other orders and quotes, as
discussed below.\277\
---------------------------------------------------------------------------

    \273\ See MIAX Rule 517.
    \274\ See MIAX 517(a)(1).
    \275\ While Market Makers would be permitted to layer the book
with multiple types of quotes, MIAX Rule 517(a)(2)(i) provides that
one type of eQuote, the Day eQuote, will have limitations as to the
number of such quotes that a single Market Maker could place on the
same side of an individual option. This limitation is no more than
10 Day eQuotes on the same side of an individual option (as that
term is defined in MIAX Rule 100), and the specific limit within
this range would be sent to members through a Regulatory Circular.
The same limit will apply to all types of Market Makers. MIAX has
stated in its Form 1 that it does not intend to allow to the use of
Day eQuotes upon initiation of its operations. See Exhibit E of
MIAX's Form 1 Application.
    \276\ See MIAX Rule 517(a)(2) for a description of each of the
e-Quote types. MIAX notes that not all of these order types will be
available upon initiation of operations. Rather, MIAX will update
members through Regulatory Circulars as to the order types that
initially will be available and as additional order types become
available.
    \277\ NASDAQ pointed out an inconsistency between MIAX's
proposed Rule 612(a) and MIAX's technical system specifications, as
the technical specifications say that eQuotes are not considered for
purposes of the MIAX Aggregate Risk Manager. See NASDAQ Letter,
supra note 3, at 3. NASDAQ recommended that MIAX clarify this point
in its rule text. See id. In response, MIAX states that it believes
the rule and the technical specifications are both correct as
written. See MIAX Response Letter, supra note 4, at 15.
Specifically, MIAX notes that it does not plan to support Day
eQuotes at its initial launch. See id. Accordingly, the technical
specifications are accurate in that Day eQuotes would not be
considered at this time for purposes of the Aggregate Risk Manager.
See id. The subsequent introduction by MIAX of Day eQuotes would
require corresponding amendments to the technical specifications.
See id.
---------------------------------------------------------------------------

    The Commission believes that the proposed eQuotes provisions are
consistent with the Act. The Commission acknowledges that, while Market
Maker ``quotes'' traditionally provide liquidity to the market, MIAX's
proposed eQuotes will allow Market Makers to utilize various types of
``quotes'' that may instead remove liquidity from the market. However,
under MIAX's proposed rules, only certain types of quotes that provide
liquidity (i.e., only Standard quotes and Day eQuotes) will be
permitted to count toward a Market Maker's continuous quoting
obligations.\278\ In other words, Market Makers on MIAX will still be
required to post traditional, continuous two-sided quotes that provide
liquidity to the market.
---------------------------------------------------------------------------

    \278\ See MIAX Rule 604(e); see also supra Section III(C)(3)(b)
(discussing Market Maker obligations).
---------------------------------------------------------------------------

    Further, as noted above, the proposed eQuote types are largely
analogous to orders, and other markets allow Market Makers to submit
similar types of orders that also are not permitted to count towards a
Market Maker's quoting obligations.\279\
---------------------------------------------------------------------------

    \279\ See, e.g., ISE Rule 805.
---------------------------------------------------------------------------

    The Commission notes that all quote types that may be submitted by
Market Makers, whether Standard quotes or eQuotes, must be firm in
accordance with the Market Maker's obligations under the MIAX rules
\280\ and Rule 602 of Regulation NMS.\281\ However, the MIAX rules
provide that bids and offers in certain of the eQuote types will not be
disseminated to quotation vendors, including AOC eQuotes, OPG eQuotes,
IOC eQuotes, FOK eQuotes, and Immediate or Cancel Intermarket Sweep
Quotes. The Commission believes that this is consistent with the Act
and Rule 602 of Regulation NMS due to the limited time in force or
other contingencies associated with these particular eQuote types. Rule
602 of Regulation NMS generally requires exchanges to make their best
bids and offers in U.S.-listed securities available in the consolidated
quotation data that is widely disseminated to the public.\282\
Paragraph (a)(1)(i)(A) of Rule 602, however, excludes bids and offers
communicated on an exchange that either are executed immediately after
communication or cancelled or withdrawn if not executed immediately
after communication. The Commission believes that IOC eQuotes, FOK
eQuotes, and Immediate or Cancel Intermarket Sweep Quotes fall within
this exclusion under paragraph (a)(1)(i)(A) of Rule 602 and thus are
consistent with the Act. Further, paragraph (a)(1)(i)(B) of Rule 602
excludes any bid or offer communicated prior to the commencement of
trading in a security. Accordingly, the Commission notes that OPG
eQuotes, which are quotes that can be submitted by a Market Maker only
during the opening and will expire at the end of the opening process,
are excluded from the dissemination requirements of Rule 602. Finally,
as noted above with respect to AOC orders, the Commission has
previously approved similar order types as consistent with the Act that
are used in various auction mechanisms on other exchanges that are not
displayed to any market participants.\283\ The Commission believes that
AOC eQuotes are analogous to these types of orders, and as such, the
Commission believes that MIAX's proposal to not disseminate AOC eQuotes
is consistent with the Act.
---------------------------------------------------------------------------

    \280\ See MIAX Rules 604(d) and 517.
    \281\ 17 CFR 242.602.
    \282\ See id.
    \283\ See supra note 203 and accompanying text.
---------------------------------------------------------------------------

    On MIAX, all Market Maker quotes will be designated as either
``priority quotes'' or ``non-priority quotes.'' \284\ As clarified by
MIAX in Amendment No. 1, to be considered a priority quote, the
following standards must be met at the time of execution:
---------------------------------------------------------------------------

    \284\ See MIAX Rule 517(b).
---------------------------------------------------------------------------

    1. The Market Maker must have a two-sided quote pair that is valid
width (i.e., it must meet the bid/ask differential requirements in MIAX
Rule 603(b)(4) \285\ (i.e., a ``valid width quote''));
---------------------------------------------------------------------------

    \285\ MIAX Rule 603(b)(4) provides that, following the opening
rotation, Market Makers must create differences of no more than $5
between the bid and offer. Prior to the opening rotation, bid/ask
differentials shall be no more than $.25 between the bid and offer
for each option contract for which the bid is less than $2, no more
than $.40 where the bid is at least $2 but does not exceed $5, no
more than $.50 where the bid is more than $5 but does not exceed
$10, no more than $.80 where the bid is more than $10 but does not
exceed $20, and no more than $1 where the bid is more than $20,
provided that MIAX may establish differences other than the above
for one or more option.
---------------------------------------------------------------------------

    2. The initial size of both of the Market Maker's bid and offer
must meet the minimum quote size requirements of MIAX Rule 604(b)(2);
    3. The bid/ask differential of the Market Maker's two-sided quote
pair must meet the priority width requirements specified by MIAX for
each option; \286\ and
---------------------------------------------------------------------------

    \286\ MIAX added text to MIAX Rule 517(b)(1)(ii) to clarify that
MIAX will establish priority quote widths through a proposed rule
change filed with the Commission, and the width could be as narrow
as one MVP or as wide as, but not wider than, the bid/ask
differentials in MIAX Rule 603(b)(4). See Amendment No. 1.
---------------------------------------------------------------------------

    4. Either of the following are true: (i) At the time a locking or
crossing quote or order enters the MIAX system, the Market Maker's two-
sided quote pair is a valid width quote resting on the Book; or (ii)
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.\287\
---------------------------------------------------------------------------

    \287\ See MIAX Rule 517(b)(1)(i).
---------------------------------------------------------------------------

    When determining whether a Market Maker has a valid width quote,
MIAX will consider only Standard quotes and Day eQuotes.\288\ In the
event that a Market Maker has a priority quote on MIAX Exchange, all of
that Market Maker's quotes (including all Standard quotes and eQuotes)
would be entitled to have precedence over all other ``Professional
Interest'' \289\ (i.e., non-Priority Customer orders, Market Maker
orders, and non-priority quotes) at the same price in accordance with
MIAX Rule 514(e).\290\
---------------------------------------------------------------------------

    \288\ See MIAX Rule 517(b)(2).
    \289\ See MIAX Rule 100 and supra note 208
    \290\ See MIAX Rules 517(b)(1) and 514(e).
---------------------------------------------------------------------------

    In its comment letter, ISE asks about MIAX Rule 514(e) and whether
a Market Maker priority quote has precedence over other professional
interest under both pro rata priority and price time priority, as well
as when executing against an Intermarket Sweep Order.\291\ In response,
MIAX revised MIAX Rule 514(e) to clarify that Market Maker priority
quotes will have precedence over other professional interest under the
pro rata allocation methodology but not under the price time
methodology.\292\
---------------------------------------------------------------------------

    \291\ See ISE Letter, supra note 3, at 4.
    \292\ See Amendment No. 1 and MIAX Response Letter, supra note
4, at 10. MIAX also clarified that a Market Maker will have
precedence over other professional interest when MIAX receives an
Intermarket Sweep Order at a price inferior to the NBBO. See id.
---------------------------------------------------------------------------

    Further, ISE commented on MIAX Rule 603 and the priority quote
provision. ISE believes that quote width

violations would not be ``against the rules'' on MIAX, and also
questions whether the priority quote provision is an appropriate
``heightened'' quotation requirement for a Market Maker to obtain a
``priority quote''.\293\ While stating that it would not object to this
approach, ISE requests that the Commission, if it approves MIAX's
registration, to set forth the statutory basis for allowing a Market
Maker to obtain a priority over other professional interests via a
priority quote.\294\ In response, MIAX added text to MIAX Rule 517(b)
to clarify that MIAX would establish the priority quote width
requirement through a proposed rule change filed with the Commission,
and the requirement can have bid/ask differentials as narrow as one
minimum price variation or as wide as, but never wider than, the
minimum bid/ask differentials contained in MIAX Rule 603.\295\ MIAX
represented that the priority quote width standards ``will be in
addition to and generally more stringent than the regulatory
requirements applied to Market Makers,'' and that ``the categorization
of Market Maker quotes as priority and non-priority allows the Exchange
to provide incentives to its Market Makers to provide tighter
markets.'' \296\ Until MIAX establishes narrower priority quote width
requirements, however, the priority quote width will be the standard
bid/ask differentials contained in MIAX Rule 603.\297\ In addition,
MIAX clarified that the initial size of the bid and the offer for a
priority quote must meet the minimum size requirement of MIAX Rule
604(b)(2).\298\ Further, MIAX affirms that there is, despite ISE's
assumption to the contrary, a maximum market quotation spread
requirement during regular market hours.\299\ Thus, a violation of the
quote width requirements contained in MIAX Rule 603, which is a free-
standing rule, would constitute a rule violation separate and apart
from the priority quote provisions and would subject a market maker to
disciplinary action.\300\
---------------------------------------------------------------------------

    \293\ See ISE Letter, supra note 3, at 4. MIAX responded that
ISE's assumption was incorrect, and MIAX affirmed that market makers
may be subject to disciplinary action if their quotation spread
exceeds $5. See MIAX Response Letter, supra note 4, at 11.
    \294\ See ISE Letter, supra note 3, at 5.
    \295\ See Amendment No. 1 and MIAX Response Letter, supra note
4, at 11-12.
    \296\ See MIAX Response Letter, supra note 4, at 11.
    \297\ See Amendment 1 (revising MIAX Rule 517(b)(ii)).
    \298\ See MIAX Response Letter, supra note 4, at 11.
    \299\ See id.
    \300\ See id.
---------------------------------------------------------------------------

    The Commission believes that it is appropriate and consistent with
the Act for MIAX to provide its Market Makers that are meeting their
priority quote width obligations with precedence over other
Professional interest in the manner that MIAX has proposed. MIAX's
proposed priority quote rule and the precedence afforded to Market
Makers that maintain a priority quote provides Market Makers with a
benefit in return for the obligations to the market that they have
assumed (e.g., the obligation to supply a continuous quote), while
Market Makers will have precedence at the same price over other
Professional participants that either do not have any obligations
(i.e., non-Market Maker Professional interest) or participants that are
not quoting valid width markets (i.e., other Market Makers).\301\ As
discussed in further detail above, the Commission previously has
recognized that, due to the obligations imposed on market makers, it is
appropriate and consistent with the Act to confer certain corresponding
benefits on them.\302\ In the event a professional participant wanted
to receive the benefits of becoming a market maker, it could apply to
register as a market maker, subject to the Exchange's registration
requirements and the participant's willingness to undertake the
applicable obligations.\303\ Further, at least one other exchange
affords market makers precedence over other professional interest in a
manner similar to the MIAX rules.\304\
---------------------------------------------------------------------------

    \301\ See Phlx Rule 1000(b)(14) (defining a ``professional'' to
mean any person or entity that (i) is not a broker or dealer in
securities, and (ii) places more than 390 orders in listed options
per day on average during a calendar month for its own beneficial
account(s), and providing that, subject to limited exceptions, ``[a]
professional will be treated in the same manner as an off-floor
broker-dealer for purposes of Rules 1014(g) * * *'').
    \302\ See infra Section III(C)(3)(b) (discussing Market Maker
obligations and benefits).
    \303\ In Amendment No. 1, MIAX revised the maximum number of
Market Makers allowed to quote per class up to 50 from 10. See
Amendment 1 (revising rule 602(c)(2) to increase the Class Quoting
Limit to 50 from 10). MIAX notes that a class quoting limit of 50
Market Makers is consistent with the practice at other exchanges
(see, e.g., CBOE Rule 8.3A and C2 Rule 8.11). See MIAX Response
Letter, supra note 4, at 12. In addition, the higher limit will
provide additional opportunity for interested participants to become
Market Makers on MIAX and avail themselves of the benefits afforded
to Market Makers on MIAX in return for undertaking the applicable
obligations to the MIAX market. See id.
    \304\ See Phlx Rule 1014(g)(vii). Unlike MIAX's proposed rule,
the Phlx rule provides that, for automatically executed trades, all
market makers have precedence over other market participants,
irrespective of whether such market makers are meeting their bid-ask
differential requirements. In addition, NASDAQ BX has filed a
proposed rule change to provide similar precedence for its market
makers. See Securities Exchange Act Release No. 68041 (October 11,
2012), 77 FR 63903 (October 17, 2012) (BX-2012-065).
     In addition, MIAX's priority quote proposal establishes a
framework that could readily take into account future efforts by
MIAX, which would be submitted pursuant to a proposed rule change
submitted in accordance with Section 19 of the Act, to reduce and
further narrow the maximum permitted width from the standard maximum
$5 width, which is the current standard among U.S. options
exchanges. If it does so, MIAX's system would provide an additional
incentive for Market Makers to provide these narrower valid width
quotes at all times through affording them precedence in return for
their increased obligations.
    At the same time, the Commission acknowledges that MIAX's
current proposed bid/ask differential requirement (i.e., $5
following the opening) is in line with the current industry standard
among the options exchanges. Thus, MIAX will provide precedence to
Market Makers based on a proposed quote width standard that is, at
present, no more strict than other markets. However, as noted above,
even if MIAX does not ultimately impose a narrower valid priority
quote width, MIAX's proposal is consistent with the rules of two
other exchanges, which provide such precedence to market makers
without regard to whether they are meeting their bid-ask
differential requirements.
---------------------------------------------------------------------------

6. Section 11(a) of the Act
    Section 11(a)(1) of the Act \305\ 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.
---------------------------------------------------------------------------

    \305\ 15 U.S.C. 78k(a)(1).
---------------------------------------------------------------------------

    Rule 11a2-2(T) under the Act,\306\ 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 the
transactions on the exchange. To comply with Rule 11a2-2(T)'s
conditions, a member: (1) Must transmit the order from off the exchange
floor; (2) may not participate in the execution of the transaction once
it has been transmitted to the member performing the execution; \307\
(3) may not be affiliated with the executing member; and (4) 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.
---------------------------------------------------------------------------

    \306\ 17 CFR 240.11a2-2(T).
    \307\ The member may, however, participate in clearing and
settling the transaction. See Securities Exchange Act Release No.
14563 (March 14, 1978), 43 FR 11542 (March 17, 1978) (regarding the
NYSE's Designated Order Turnaround System (``1978 Release'')).

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

    In a letter to the Commission,\308\ MIAX requested that the
Commission concur with its conclusion that MIAX members that enter
orders into the MIAX trading system satisfy the requirements of Rule
11a2-2(T). For the reasons set forth below, the Commission believes
that MIAX members entering orders into the MIAX trading system will
satisfy the conditions of Rule 11a2-2(T).
---------------------------------------------------------------------------

    \308\ See Letter from Barbara J. Comly, General Counsel and
Corporate Secretary, Miami Holdings, to Richard R. Holley, III,
Assistant Director, Division of Trading and Markets, Commission,
dated November 30, 2012 (``MIAX 11(a) Request Letter'').
---------------------------------------------------------------------------

    First, Rule 11a2-2(T) requires that orders for covered accounts be
transmitted from off the exchange floor. MIAX will not have a physical
trading floor, and the MIAX trading system will receive orders from
members electronically through remote terminals or computer-to-computer
interfaces. In the context of other 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.\309\ Since the
MIAX trading system receives all orders electronically through remote
terminals or computer-to-computer interfaces, the Commission believes
that the trading system satisfies the off-floor transmission
requirement.
---------------------------------------------------------------------------

    \309\ See, e.g., Securities Exchange Act Release Nos. 59154
(December 23, 2008) 73 FR 80468 (December 31, 2008) (SR-BSE-2008-48)
(order approving proposed rules of BX); 49068, (January 13, 2004),
69 FR 2775 (January 20, 2004) (establishing, among other things, BOX
as an options trading facility of BSE); 44983, (October 25, 2001),
66 FR 55225 (November 1, 2001) (approving the PCX's use of the
Archipelago Exchange as its equity trading facility); 29237 (May 24,
1991), 56 FR 24853 (May 31, 1991) (regarding NYSE's Off-Hours
Trading Facility). See 1978 Release, supra note 307. See also
Securities Exchange Act Release No. 15533 (January 29, 1979), 44 FR
6084 (January 31, 1979) (regarding the American Stock Exchange
(``Amex'') Post Execution Reporting System, the Amex Switching
System, the Intermarket Trading System, the Multiple Dealer Trading
Facility of the Cincinnati Stock Exchange, the PCX Communications
and Execution System, and the Philadelphia Stock Exchange (``Phlx'')
Automated Communications and Execution System) (``1979 Release'').
---------------------------------------------------------------------------

    Second, Rule 11a2-2(T) requires that the member not participate in
the execution of its order once it has been transmitted to the member
performing the execution. MIAX has represented that the MIAX trading
system will at no time following the submission of an order allow a
member or an associated person of such member to acquire control or
influence over the result or timing of an order's execution.\310\
According to MIAX, the execution of a member's order is determined
solely by what orders, bids, or offers are present in the MIAX trading
system at the time the member submits the order and the order priority
based on MIAX rules.\311\ Accordingly, the Commission believes that a
MIAX member will not participate in the execution of its order
submitted into the trading system.
---------------------------------------------------------------------------

    \310\ See MIAX 11(a) Request Letter, supra note 308. Members may
change or cancel an order or quote at any time before the order is
executed on the Exchange. See MIAX Form 1 Application, Exhibit E.
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 1978
Release, supra note 307 (stating that the ``non-participation
requirement does not prevent initiating members from canceling of
modifying orders (or the instructions pursuant to which the
initiating member wishes orders 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'').
    \311\ See MIAX11(a) Request Letter, supra note 308.
---------------------------------------------------------------------------

    Rule 11a2-2(T)'s third condition is that the order be executed by
an exchange member who is unaffiliated with the member initiating the
order. The Commission has stated that the requirement is satisfied when
automated exchange facilities, such as the MIAX trading system, are
used, as long as the design of these systems ensures that members do
not possess any special or unique trading advantages over non-members
in handling their orders after transmitting them to MIAX Exchange.\312\
MIAX has represented that the design of its trading system ensures that
no member has any special or unique trading advantage over non-members
in the handling of its orders after transmitting its orders to
MIAX.\313\ Based on MIAX's representation, the Commission believes that
the MIAX trading system satisfies this requirement.
---------------------------------------------------------------------------

    \312\ In considering the operation of automated execution
systems operated by an exchange, the Commission noted that while
there is no independent executing exchange member, the execution of
an order is automatic once it has been transmitted into each 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.
    \313\ See MIAX 11(a) Request Letter, supra note 308.
---------------------------------------------------------------------------

    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).\314\ MIAX members trading for covered accounts over which they
exercise investment discretion must comply with this condition in order
to rely on the rule's exemption.\315\
---------------------------------------------------------------------------

    \314\ 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 person 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 307 (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'').
    \315\ See MIAX 11(a) Request Letter, supra note 308.
---------------------------------------------------------------------------

7. Exposure Mechanisms and Routing
    MIAX's system is designed to automatically execute incoming orders
or quotes against orders and quotes in its system, provided that such
incoming orders and quotes will not be executed at prices inferior to
the NBBO.\316\ In the event that an incoming order could not be fully
executed on MIAX because it would trade through the NBBO (see ``Route
Timer,'' below) or, in certain cases, because there is insufficient
size on MIAX to execute an incoming order in full when that order
exhausts a Market Maker quote (see ``Liquidity Refresh Pause,'' below),
its proposed execution rules provide for the use of exposure mechanisms
in certain instances.
---------------------------------------------------------------------------

    \316\ See MIAX Rule 515.
---------------------------------------------------------------------------

    Liquidity Refresh Pause. First, MIAX proposes to implement a
``Liquidity Refresh Pause'' to allow additional orders or quotes to be
received where an incoming order (``initiating order'') exhausts a
Market Maker's quote that was all or part of the MIAX BBO (``MBBO'')
and there are unexecuted contracts remaining from the initiating
order.\317\ Specifically, the Liquidity Refresh Pause would be utilized
in instances where MIAX is the only market at the NBBO, and an incoming
initiating order is a limit order that crosses the NBBO upon receipt or
is a market order and, in either case, could only be partially executed
on MIAX where it exhausted a Market Maker quote at the MBBO. In such
cases, rather than immediately executing at the next available price,
the MIAX system would

pause the market for a period of time not to exceed one second to allow
additional Marker Maker orders and quotes and other market participant
orders to be submitted.
---------------------------------------------------------------------------

    \317\ See MIAX Rule 515(c)(1)(iii).
---------------------------------------------------------------------------

    At the start of the Liquidity Refresh Pause, the MIAX system will
broadcast a message to subscribers of MIAX's data feeds, providing a
description of the option and the size and side of the order or
quote.\318\ During the pause, the system will display the remainder of
the initiating order at the original NBBO price and, on the opposite
side of the market, it will display MIAX's next bid or offer as non-
firm.\319\
---------------------------------------------------------------------------

    \318\ See MIAX Rule 515(c)(1)(iii)(A).
    \319\ See id. See also Phlx Rule 1082a(ii)(B)(3) (dissemination
of non-firm quotes on opposite side of initiating order during Quote
Exhaust timer); Securities Exchange Act Release No. 66315 (February
3, 2012), 77 FR 6828 (February 9, 2012) (Phlx-2012-12) (immediately
effective filing to display non-firm quotes in conjunction with
Quote Exhaust process).
---------------------------------------------------------------------------

    All market participants may respond to the broadcast message during
the Liquidity Refresh Pause.\320\ During the Liquidity Refresh Pause,
if MIAX receives a new order or quote on the opposite of the market
from the initiating order's remaining contracts that locks or crosses
the original NBBO, MIAX will immediately execute the remaining
contracts at the original NBBO price, provided it would not trade
through the current NBBO.\321\ If MIAX receives a new order or quote on
the same side of the market as the initiating order's remaining
contracts that locks or crosses the original NBBO, MIAX will add the
new order or quote to the MBBO size and disseminate the updated
MBBO.\322\ The initiating order and any new orders or quotes on the
same side of the market received during the Liquidity Refresh Pause
will be processed in the order in which they were received.\323\
---------------------------------------------------------------------------

    \320\ See MIAX Rule 515(c)(1)(iii)(A)(1)(a).
    \321\ See MIAX Rule 515(c)(1)(iii)(A)(1)(b).
    \322\ See MIAX Rule 515(c)(1)(iii)(A)(1)(c). If MIAX receives an
IOC or a FOK order on the same side of the market as the initiating
order's remaining contracts, the MIAX system will immediately cancel
the IOC and FOK orders. If MIAX receives an AOC order on the same
side of the market as the initiating order's remaining contracts,
the MIAX system will immediately reject the AOC order. If MIAX
receives an ISO on the same side of the market as the initiating
order's remaining contracts, the Liquidity Refresh Pause will be
terminated early and the initiating order and any new orders
received during the pause will be processed in the order in which
they were received. See MIAX Rule 515(c)(1)(iii)(A)(1)(e)-(g).
    \323\ See MIAX Rule 515(c)(1)(iii)(A)(1)(c). If all of the
remaining contracts in the initiating order and any new orders or
quotes on the same side of the market received during the Liquidity
Refresh Pause are traded or cancelled during the Liquidity Refresh
Pause, the Liquidity Refresh Pause will be terminated early and
normal trading will resume. See MIAX Rule 515(c)(1)(iii)(A)(1)(d).
---------------------------------------------------------------------------

    At the end of the Liquidity Refresh Pause, if there are still
unexecuted contracts remaining in the initiating order or any new
interest on the same side of the market, the MIAX system will execute
the remaining contracts in accordance with MIAX's ``price protection''
process, which ensures that the execution of remaining contracts is
limited to only one minimum price variation (``MPV'') inferior to the
original NBBO price, provided it does not trade through the current
NBBO.\324\ Specifically, if the next MIAX bid or offer is only one MPV
inferior to the original NBBO, the initiating order's remaining
contracts will be immediately executed at the next MIAX bid or offer up
to the remaining contracts or the size of the MIAX bid or offer,
whichever is less, provided the execution does not trade at a price
inferior to the current NBBO.\325\ If the next MIAX bid or offer is
more than one MPV inferior to the original NBBO, then the initiating
order will be handled depending on whether the limit price of the
initiating order crosses the original NBBO by one or more MPVs. In
particular, if the initiating order is a limit order whose limit price
crosses the original NBBO by more than one MPV or if it is a market
order, the remaining unexecuted portion of the initiating order will be
cancelled.\326\ If the initiating order is a limit order whose limit
price crosses the original NBBO by one MPV, the MIAX system will
display and book the initiating order at its limit price. If the limit
price would lock or cross the NBBO, then the MIAX system will handle
the order in accordance with MIAX's ``managed interest process.'' \327\
---------------------------------------------------------------------------

    \324\ See MIAX Rule 515(c)(1)(iii)(A)(2) and MIAX Form 1
Application, Exhibit E.
    \325\ If there are still contracts remaining from the initiating
order, then the order will be handled pursuant to subparagraphs (1)
or (2) of MIAX Rule 515(c)(1)(iii)(A)(2)(a), depending on whether
the limit price of the initiating order crosses the original NBBO by
one MPV or more.
    \326\ See MIAX Rule 515(c)(1)(iii)(A)(2)(b)(2).
    \327\ See MIAX Rule 515(c)(1)(iii)(A)(2)(b)(1). The ``managed
interest process'' is set forth in MIAX Rule 515(c)(2). In addition
to its potential use at the end of the Liquidity Refresh Pause, the
``managed interest process'' would be used more broadly for orders,
such as Do Not Route orders, that could not be executed or could not
be executed in full and could not be displayed at their limit price
because that limit price would lock or cross the NBBO. See MIAX Rule
515(c)(2) (noting specifically that the ``managed interest process''
could apply pursuant to Rule 515 subparagraphs (c)(1)(i)A),
(c)(1)(ii)(A), (c)(1)(ii)(B)1.a, (c)(1)(ii)(B)2.a,
c(1)(iii)(A)2.a.1), (c)(1)(iii)(A)2.b.1), (c)(1)(iii)(B)1.a., and
(c)(1)(iii)(B)2.a.).
---------------------------------------------------------------------------

    Under the ``managed interest process,'' the initiating order will
be displayed one MPV away from the current opposite-side NBBO if
displaying the order at its limit price would lock or cross the
NBBO.\328\ Should the NBBO price change to an inferior price level, the
initiating order's displayed price will continue to re-price so that it
is displayed one MPV away from the new NBBO until the order reaches its
original limit price, is fully executed, or is cancelled.\329\ However,
while displaying the initiating order one MPV away from the opposite-
side NBBO, the initiating order will be placed on the MIAX book at a
price that locks the current opposite-side NBBO.\330\ If MIAX receives
a new order or quote on the opposite side of the market from the
initiating order that could be executed, the MIAX system will
immediately execute the remaining contracts to the extent possible at
the initiating order's current booked bid or offer price, provided that
it does not trade through the current NBBO.\331\
---------------------------------------------------------------------------

    \328\ See MIAX Rule 515(c)(2).
    \329\ See id. See also Phlx Rule 1080(m)(iv)(A) (providing a
functionally similar process of handling Do Not Route orders,
displaying the order one MPV away from the current NBBO, booking the
order internally on the Phlx book at a price that would lock the
current NBBO, and re-pricing the order until it reaches its limit
price in the event the NBBO moves to an inferior level).
    \330\ See id.
    \331\ See Phlx Rule 1080(m)(iv)(A) (providing that Do Not Route
orders that are re-priced to one MPV away from the current NBBO will
interact with incoming contra-side orders at the best away market
price); see also, e.g. Phlx Rule 1082(a)(ii)(B)(3)(d) (providing
that if Phlx receives an order or quote on the opposite side of the
market from the initiating quote or order during the Quote Exhaust
Timer that locks or crosses the reference price at any time during
the Quote Exhaust Timer, it will execute immediately against the
initiating quote or order at the reference price, which is price at
which the initiating order was initially partially executed).
---------------------------------------------------------------------------

    In its comment letter, ISE requests that MIAX clarify the operation
of MIAX Rule 515, with reference to the execution price of a resting
order that has a non-displayed execution price, including confirmation
that the order would not be executed at a price that would trade
through the NBBO.\332\ ISE further requests clarification as to how
certain orders are re-priced, including pursuant to MIAX Rule 515(c)(2)
and (d) and whether those rules contemplate that an order will be
continuously re-priced, or only re-priced once.\333\ NASDAQ asked a
question similar to ISE concerning whether the managed interest process
would result in a resting order being re-priced only once or

dynamically as the away markets move.\334\
---------------------------------------------------------------------------

    \332\ See ISE Letter, supra note 3, at n. 3. MIAX added the
phrase ``provided that the execution price does not violate the
current NBBO'' to the place in MIAX Rule 516(f) (which was
renumbered to 516(g)) where ISE noted it was missing. See MIAX
Response Letter, supra note 4, at 6.
    \333\ See ISE Letter, supra note 3, at n. 3. ISE also asks for
clarification as to whether Do Not Route orders will be continuously
re-priced, or only re-priced once. See id. at n. 2.
    \334\ See NASDAQ Letter, supra note 3, at 2.
---------------------------------------------------------------------------

    In response, MIAX revised several provisions in MIAX Rule 515 to
clarify the execution price for a resting non-displayed order and to
clarify the circumstances under which such orders are re-priced and the
circumstances in which the booked price would differ from the
NBBO.\335\ For example, MIAX amended MIAX Rule 515(c)(2) to clarify
that orders in the managed interest process are continuously re-
priced.\336\ MIAX also clarified in additional spots in MIAX Rules 515,
516, and 529 that such orders will not be executed at a price that
would trade through the NBBO.\337\
---------------------------------------------------------------------------

    \335\ See MIAX Response Letter, supra note 4, at 5-6.
    \336\ See id.
    \337\ See id.
---------------------------------------------------------------------------

    In addition, NASDAQ notes that MIAX Rule 515 contains a number of
situations where the rule provides that a posted order will immediately
execute any remaining contracts when an inbound order comes into the
MIAX system; however, MIAX's rule does not address what happens if the
inbound order does not contain sufficient size to fully execute against
the resting order.\338\ In response, MIAX revised Rules 515(c) and
515(d) as well as 529(b)(2) to clarify what happens in such situations
if an inbound order comes into the MIAX system where such inbound order
contains less than the size of the posted order.\339\ Specifically,
MIAX will disseminate a revised MBBO that reflects the incoming order's
remaining size and price.\340\ For example, when MIAX is alone at the
NBBO and utilizes the Liquidity Refresh Pause, if unexecuted contracts
remain from an initiating order, MIAX would revise its MBBO to reflect
the balance of the unexecuted order.\341\
---------------------------------------------------------------------------

    \338\ See NASDAQ Letter, supra note 3, at 4.
    \339\ See MIAX Response Letter, supra note 4, at 6-7.
    \340\ See MIAX Rules 515(d), 515(c)(1)(iii)(A)(1)(b), and
529(b)(2)(i).
    \341\ See MIAX Rule 515(c)(1)(iii)(A)(1)(b).
---------------------------------------------------------------------------

    Route Timer. MIAX also has proposed to subject Public Customer
\342\ orders to a ``Route Timer'' when it receives a route-eligible
Public Customer order that cannot be filled on MIAX.\343\ Specifically,
if MIAX receives a Public Customer order (``initiating order'') that is
marketable against the NBBO on an away market (``ABBO'') and MIAX is
not at the NBBO, or MIAX's disseminated market is equal to the ABBO but
MIAX has insufficient size to satisfy the initiating order,\344\ the
order may be subject to a Route Timer not to exceed one second.\345\
During the Route Timer, Market Makers and other market participants may
interact with the initiating order before MIAX routes the order to an
away market or otherwise handles the order in accordance with MIAX Rule
515 or 529, as discussed below.
---------------------------------------------------------------------------

    \342\ See supra note 207.
    \343\ Orders with certain contingencies, such as IOC orders, and
orders marked with a ``do not route'' qualifier are not eligible for
routing. See also infra notes 359--363 and accompanying text
(concerning ISE's comment regarding the proposed rule's limited
applicability to Priority Customers) and Amendment No. 1 (in which
MIAX revised the rule to apply to the broader category of Public
Customers).
    \344\ The Route Timer will be utilized when MIAX is not at the
NBBO, or is at the NBBO along with other markets but does not have
sufficient size to execute a routable Public Customer initiating
order in full. In contrast, the Liquidity Refresh Pause, discussed
above, will be used when MIAX is the only market at the NBBO. See
MIAX Rule 515(c)(1)(iii). The Route Timer is applicable only for
Public Customer orders that are routable but do not meet the
criteria for immediate routing discussed below. See MIAX Rule
529(b)(2)(i).
    \345\ See MIAX Rule 529(b)(2). Orders that meet certain criteria
may be eligible for immediate routing rather than the one second
Route Timer, as discussed further below. See infra notes 356--357
and accompanying text.
---------------------------------------------------------------------------

    Like the Liquidity Refresh Pause discussed above, when the Route
Timer is activated, MIAX will broadcast a notification (``Route
Notification'') to subscribers of MIAX's data feeds, providing the size
and side of the option.\346\ During the timer, the MIAX system will
display and book the initiating order at its limit price. However, if
the limit price locks or crosses the current opposite side NBBO, the
system will display the initiating order one MPV away from the current
opposite side NBBO and book the initiating order at price that will
internally lock the current opposite side NBBO.\347\ The initiating
order will remain available for execution up to its original bid or
down to its original offer.\348\ MIAX will display its next bid or
offer on the opposite side of the market from the initiating order as
non-firm.\349\
---------------------------------------------------------------------------

    \346\ See MIAX Rule 529(b)(2)(i). See also Amendment No. 1 (in
which MIAX removed rule text from Rule 529(b)(2)(i) that also would
have provided the NBBO price on the opposite side of the market from
the order in the Route Notification).
    \347\ The internally locked price will not be visible to any
participant.
    \348\ See MIAX Rule 529(b)(2)(i).
    \349\ See id. See also supra note 319.
---------------------------------------------------------------------------

    During the Route Timer, if MIAX receives a new order or quote on
the opposite side of the market from the initiating order that can be
executed, the MIAX system will immediately execute the remaining
contracts at the initiating order's current booked bid or offer
price,\350\ provided that the execution price does not trade through
the current NBBO.\351\ If MIAX receives orders or quotes on the same
side of the market as the initiating order, such new orders or quotes
will join the initiating order in the Route Timer, and the MIAX system
will disseminate an updated MBBO that includes the new order or quote's
size.\352\ If there is a change in the ABBO during the Route Timer that
would allow the initiating order to trade on MIAX at the revised NBBO,
the Route Timer will be cancelled and regular trading will resume.\353\
---------------------------------------------------------------------------

    \350\ See supra note 331.
    \351\ See id.
    \352\ See MIAX Rule 529(b)(2)(ii).
    \353\ See MIAX Rule 529(b)(2)(ii). In addition, if, during the
Route Timer, the initiating order and all interest on the same side
of the market is traded in full or cancelled, the Route Timer will
be terminated.
---------------------------------------------------------------------------

    At the end of the Route Timer, if necessary, the MIAX system will
route ISO orders to away markets disseminating the NBBO.\354\ If, after
routing to away markets, additional contracts remain to be executed
from the initiating order, the MIAX system will handle the remaining
interest in accordance with MIAX Rule 515.\355\
---------------------------------------------------------------------------

    \354\ See MIAX Rule 529(b)(2)(iii). At the end of the Route
Timer, same side orders or quotes will be handled in the order in
which they were received by MIAX. See MIAX Rule 529(b)(2)(ii).
    \355\ See MIAX Rule 529(b)(2)(iii). MIAX Rule 515 is the general
rule governing execution of orders and quotes. It provides a number
of different provisions describing how the MIAX system will handle
orders that cannot be executed in part or in full. In accordance
with Rule 515, depending on a variety of factors, orders may be
cancelled, handled in accordance with the ``managed interest
process,'' or subject to the Liquidity Refresh Pause, among others.
See generally MIAX Rule 515.
---------------------------------------------------------------------------

    Immediate Routing. In addition, in limited circumstances where a
number of criteria are met, certain Public Customer orders that are
eligible for routing could be routed immediately without being subject
to the Route Timer (``Immediate Routing'').\356\ These criteria
generally require that a Public Customer order be significantly greater
in size than the size of the NBBO posted at away markets and must be
received by MIAX at a time when MIAX has significant interest posted at
one MPV inferior to the NBBO at away markets. Specifically, an incoming
Public Customer order (``initiating order'') will be eligible for
Immediate Routing if: (i) The initiating order's limit price crosses
the opposite side NBBO; (ii) the MBBO is inferior to the NBBO on the
opposite

side of the market by one MPV; (iii) the displayed NBBO is not crossed;
(iv) the initiating order size is equal to or greater than three times
the total size of the away markets represented in the opposite side
ABBO; (v) the size of the quotes and orders at the MBBO combined with
the total size of the ABBO on the opposite side of the market are equal
to or greater than one half the size of the initiating order; (vi)
MIAX's disseminated market includes a bid of greater than zero with a
size of greater than zero if the order is a sell order; and (vii) the
size of MIAX's disseminated market is equal to or greater than three
times the total size of the away markets represented in the opposite
side ABBO.\357\ If a Public Customer order meets the aforementioned
criteria, the MIAX system will immediately route ISO orders priced at
the ABBO to the away markets disseminating prices better than the
MBBO.\358\
---------------------------------------------------------------------------

    \356\ See MIAX Rule 529(b)(1). See also infra notes 359--363 and
accompanying text (concerning ISE's comment regarding the proposed
rule's limited applicability to Priority Customers) and Amendment
No. 1 (in which MIAX revised the rule to apply to the broader
category of Public Customers).
    \357\ See MIAX Rule 529(b)(1).
    \358\ See id. If there are still contracts remaining to be
executed from the initiating order after routing, the remaining
interest will be handled in accordance with MIAX Rule 515.
---------------------------------------------------------------------------

    In its comment letter, ISE discusses MIAX Rules 515(c) and 529 and
notes that MIAX would only route Priority Customer Orders but not other
types of public customer orders, like Professional orders.\359\ ISE
questions whether this distinction is consistent with the Intermarket
Linkage Plan and the Act.\360\ In addition, ISE requests clarification
on the use of the terms ``NBBO'' and ``ABBO'' in MIAX Rules 515 and
529, respectively.\361\ In response, MIAX revised its Route Timer
provisions in MIAX Rules 529 (Order Routing to Other Exchanges) and 503
(Openings on the Exchange) to change all references from ``Priority
Customer Order'' to ``Public Customer Order.'' \362\ The term ``Public
Customer'' is defined in MIAX Rule 100 to mean a person that is not a
broker or dealer in securities.\363\ Accordingly, MIAX has addressed
ISE's comment by broadening the types of interest that it will route,
as ISE suggested, to include all Public Customer interest, which term
includes Professional Customers, in a manner that is consistent with
the Intermarket Linkage Plan and the Act.
---------------------------------------------------------------------------

    \359\ See ISE Letter, supra note 3, at 3.
    \360\ See id.
    \361\ See id. at n. 7. MIAX notes that the NBBO is the combined
best bid and best offer from both the ABBO (all markets excluding
MIAX) and the MBBO (MIAX's best bid and best offer). See MIAX
Response Letter, supra note 4, at 8-9. MIAX believes that the terms
are used correctly in MIAX Rules 515 and 529. See MIAX Response
Letter, supra note 4, at 7.
    \362\ See MIAX Response Letter, supra note 4, at n. 35.
    \363\ See MIAX Rule 100.
---------------------------------------------------------------------------

    The Commission believes that MIAX's proposed exposure and routing
mechanisms, including the Liquidity Refresh Pause, Route Timer, and
Immediate Routing criteria, are consistent with the Act. Several
exchanges have adopted rules that provide for substantially similar
exposure functionalities \364\ that afford an opportunity for members
to electronically ``step up'' and match a better-priced bid or offer
available on another exchange, rather than immediately sending orders
to other exchanges for execution.\365\
---------------------------------------------------------------------------

    \364\ See, e.g., ISE Rule 803, Supplementary Material .02 and
Securities Exchange Act Release Nos. 57812 (May 12, 2008), 73 FR
28846 (May 19, 2008) (SR-ISE-2008-28) and 58038 (June 26, 2008), 73
FR 38261 (July 3, 2008) (SR-ISE-2008-50); and CBOE Rule 6.14A(b),
HAL.
    \365\ The Commission notes that it has proposed changes to Rule
602 of Regulation NMS that may affect these electronic ``flash''
mechanisms, if adopted. See Securities Exchange Act Release No.
60684 (September 18, 2009), 74 FR 48632, 48633 (September 23, 2009)
(File No. S7-21-09).
---------------------------------------------------------------------------

    The Commission believes that MIAX's proposed Liquidity Refresh
Pause is consistent with the Act. The rules governing MIAX's Liquidity
Refresh Pause are substantially similar to those that the Commission
approved for Phlx's ``Quote Exhaust'' process.\366\ However, unlike
MIAX, Phlx does not broadcast a message during its Quote Exhaust Timer.
The Commission has, however, approved other similar broadcast messages
for dissemination during order exposure or flash-type processes on
other exchanges.\367\ Further, MIAX's Liquidity Refresh Pause will
limit the incoming order's execution price to one MPV inferior to the
original NBBO price.\368\ The Commission believes that this ``price
protection'' functionality of MIAX's Liquidity Refresh Pause can
benefit investors by ensuring that, should the NBBO price move to an
inferior price during the one second (or less) pause, a limit will be
imposed on how far away from the original NBBO price the initiating
order may be executed; specifically, it may only be executed one MPV
from the original NBBO price. In addition, an incoming order will not
receive an execution pursuant to the Liquidity Refresh Pause process if
such order would trade through the then-current NBBO. Further, market
participants may utilize an IOC or FOK order to avoid having MIAX
potentially subject their order to the Liquidity Refresh Pause
process.\369\
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    \366\ See Phlx Rule 1082(a)(ii)(B)(3). See also Securities
Exchange Act Release No. 59995 (May 28, 2009), 74 FR 26750 (June 3,
2009) (SR-Phlx-2009-32) (approving Quote Exhaust process) and supra
note 319.
    \367\ See, e.g., CBOE Rule 6.14A, Hybrid Agency Liaison
(``HAL''). CBOE sends out an ``exposure message'' for orders
received by its HAL system to electronically expose the order at the
NBBO price.
    \368\ Phlx's rule does not include a similar provision. Phlx
Rule 1082(a)(ii)(B)(3)(f) provides that the system will conduct an
``Acceptable Price Range'' test to determine whether there is a
valid next available price at which the system may execute the
remaining unexecuted contracts. See Phlx Rule 1082(a)(ii)(B)(3)(f).
    \369\ See MIAX Rules 515(c)(1), 515(e), and 515(f).
---------------------------------------------------------------------------

    Pursuant to MIAX's Immediate Routing process, orders will have to
meet a number of criteria to be eligible for immediate routing, as
described above. As such, many, if not most, orders likely will be
subject to the one second Route Timer, rather than immediately routing
to an away exchange displaying the NBBO. MIAX, however, is not required
to route orders to away exchanges. Further, market participants may
avoid the Route Timer by utilizing an IOC or FOK Order.
    In addition, broker-dealers have a duty of best execution.\370\ A
broker-dealer must carry out a regular and rigorous review of the
quality of the options markets to evaluate its best execution policies,
including the determination as to which options market it routes
customer order flow.\371\

The protection against trade-throughs supports the broker-dealer's duty
of best execution by helping ensure that customer orders are not
executed at prices inferior to the best quotations, but it does not
supplant or diminish the broker-dealer's responsibility for achieving
best execution, including its duty to evaluate the execution quality of
markets to which it routes customer orders.\372\ Thus, to meet their
best execution obligations, broker-dealers will need to consider and
evaluate the functioning of the MIAX routing mechanisms and the quality
of any resulting executions in making their determination of whether to
route customer orders to MIAX.
---------------------------------------------------------------------------

    \370\ A broker-dealer has a legal duty to seek to obtain best
execution of customer orders. See, e.g., Newton v. Merrill, Lynch,
Pierce, Fenner & Smith, Inc., 135 F.3d 266, 269-70, 274 (3d Cir.),
cert. denied, 525 U.S. 811 (1998); Certain Market Making Activities
on Nasdaq, Securities Exchange Act Release No. 40900 (Jan. 11, 1999)
(settled case) (citing Sinclair v. SEC, 444 F.2d 399 (2d Cir. 1971);
Arleen Hughes, 27 SEC 629, 636 (1948), aff'd sub nom. Hughes v. SEC,
174 F.2d 969 (DC Cir. 1949)). See also Order Execution Obligations,
Securities Exchange Act Release No. 37619A (Sept. 6, 1996), 61 FR
48290 (Sept. 12, 1996) (``Order Handling Rules Release''). A broker-
dealer's duty of best execution derives from common law agency
principles and fiduciary obligations, and is incorporated in SRO
rules and, through judicial and Commission decisions, the antifraud
provisions of the federal securities laws. See Order Handling Rules
Release, 61 FR at 48322. See also Newton, 135 F.3d at 270. The duty
of best execution requires broker-dealers to execute customers'
trades at the most favorable terms reasonably available under the
circumstances, i.e., at the best reasonably available price. Newton,
135 F.3d at 270. Newton also noted certain factors relevant to best
execution--order size, trading characteristics of the security,
speed of execution, clearing costs, and the cost and difficulty of
executing an order in a particular market. See id. at 270 n.2
(citing Payment for Order Flow, Exchange Act Release No. 33026 (Oct.
6, 1993), 58 FR 52934, 52937-38 (Oct. 13, 1993) (Proposed Rules)).
See In re E.F. Hutton & Co., Securities Exchange Act Release No.
25887 (July 6, 1988). See also Securities Exchange Act Release No.
34902 (October 27, 1994), 59 FR 55006, 55008-55009 (November 2,
1994) (``Approval of Payment for Order Flow Final Rules'). See also
Securities Exchange Act Release No. 51808 (June 9, 2005), 70 FR
37496 (June 29, 2005) (``NMS Adopting Release''), at 37537
(discussing the duty of best execution).
    \371\ See NMS Adopting Release, supra note 370, at 37538. See
also Securities Exchange Act Release No. 49175 (February 3, 2004),
69 FR 6124, 6128 (February 9, 2004) (``Options Concept Release'').
    \372\ See NMS Adopting Release, supra note 370, at 37538.
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D. Discipline and Oversight of Members

    As noted above, one prerequisite for the Commission's grant of an
exchange's application for registration is that a proposed exchange
must be so organized and have the capacity to be able to carry out the
purposes of the Act.\373\ Specifically, an exchange must be able to
enforce compliance by its members and persons associated with its
members with federal securities laws and the rules of the
exchange.\374\
---------------------------------------------------------------------------

    \373\ See 15 U.S.C. 78f(b)(1).
    \374\ See id.
---------------------------------------------------------------------------

    MIAX rules codify MIAX's disciplinary jurisdiction over its
members, thereby facilitating its ability to enforce its members'
compliance with its rules and the federal securities laws.\375\ MIAX's
rules permit it to sanction members for violations of its rules and
violations of the federal securities laws by, among other things,
expelling or suspending members; limiting members' activities,
functions, or operations; fining or censuring members; suspending or
barring a person from being associated with a member; or any other
fitting sanction in accordance with MIAX rules.\376\
---------------------------------------------------------------------------

    \375\ See MIAX Rule 1000.
    \376\ See id. See also CBOE Rule 17.1(a) and ISE Rule 1600(a)
(containing identical provisions).
---------------------------------------------------------------------------

    MIAX's disciplinary and oversight functions will be administered in
accordance with Chapter X of the MIAX rules, which governs disciplinary
actions. Unless delegated to another SRO pursuant to the terms of an
effective 17d-2 plan,\377\ MIAX regulatory staff (including regulatory
staff of another SRO that may be acting on MIAX Exchange's behalf
pursuant to a regulatory services agreement) will, among other things,
investigate potential securities laws violations and initiate charges
pursuant to MIAX rules.\378\
---------------------------------------------------------------------------

    \377\ See supra note 112 (concerning the 17d-2 plans to which
MIAX has committed to join).
    \378\ See MIAX Rules 1002 and 1004. As noted above, MIAX has
entered into a RSA with CBOE under which CBOE will perform certain
regulatory functions on behalf of MIAX. MIAX may perform some or all
of the functions specified in the Chapter X of the MIAX Rules. See
also MIAX Rule 1015. CBOE will: assist MIAX in conducting market
surveillance and investigations of potential violations of MIAX
rules and/or federal securities laws related to activity on MIAX ;
conduct examinations related to MIAX members' conduct on MIAX;
assist MIAX with disciplinary proceedings pursuant to MIAX rules,
including issuing charges and conducting hearings; and provide
dispute resolution services to MIAX members on behalf of MIAX,
including operation of MIAX's arbitration program. See supra notes
113--114 and accompanying text.
---------------------------------------------------------------------------

    Upon a finding of probable cause of a violation within the
disciplinary jurisdiction of MIAX Exchange and where further
proceedings are warranted,\379\ MIAX will conduct a hearing on
disciplinary matters before a professional hearing officer \380\ and
two members of the Business Conduct Committee \381\ (the
``Panel'').\382\ The MIAX member (or their associated person) or the
MIAX Exchange regulatory staff may petition for review of the decision
of the Panel by the MIAX Exchange Board.\383\ Any review would be
conducted by the MIAX Exchange Board or a committee thereof composed of
at least three Directors of the MIAX Exchange Board \384\ (whose
decision must be ratified by a majority of the MIAX Exchange Board) and
such decision will be final.\385\ In addition, the MIAX Exchange Board
on its own motion may order review of a disciplinary decision.\386\
---------------------------------------------------------------------------

    \379\ See MIAX Rule 1004. If there is probable cause for finding
a violation, MIAX Exchange regulatory staff will prepare a statement
of charges including the allegations and specifying the provisions
of the Act and/or MIAX Exchange rules, regulations or policies
thereunder alleged to have been violated by the MIAX member or
associated person. The CRO must approve the statement of charges.
    \380\ See MIAX Rule 1015, Interpretation and Policy .01. As
noted above, MIAX has entered into a RSA with CBOE to provide
certain regulatory functions, including providing professional
hearing officers. Under MIAX Rule 1006(a), the professional hearing
officer is designated as the Chairman of the Panel. Under MIAX Rule
1006(e), the Panel Chairman has the sole responsibility to determine
the time and place of all meetings of the Panel, and make all
determinations with regard to procedural or evidentiary matters, as
well as prescribe the time within which all documents, exhibits,
briefs, stipulations, notices or other written materials must be
filed where such is not specified in MIAX rules.
    \381\ In Amendment No. 1, MIAX proposed new By-Law 4.7 to
include additional specifics of the Business Conduct Committee,
which shall be appointed by the Chairman of the Exchange Board.
Specifically, the Committee, which will not be a Board Committee,
will have a minimum of three members and will be composed of a
number of individuals as determined by the MIAX Chairman, none of
whom shall be Directors of MIAX. In addition, at least one member of
the Business Conduct Committee and any panel thereof must be an
officer, director or employee of a MIAX member. See Amendment No. 1;
see also MIAX Exchange By-Laws Sections 4.1 and 4.7. See also BOX
Bylaw 6.08(a) (containing an identical composition for the BOX
Hearing Committee).
    \382\ See MIAX Rule 1006. A Panel may make a determination
without a hearing and may impose a penalty as to violations that the
Member or associated person has admitted or has failed to answer or
that otherwise do not appear to be in dispute. See MIAX Rule 1008. A
Member or associated person alleged to have committed a disciplinary
violation may submit a written offer of settlement to the Panel, or
CRO if a Panel is not yet been appointed, which the Panel or CRO may
accept or reject. If the second offer of settlement is rejected
(such decision is not subject to review), a hearing will proceed in
accordance with MIAX Rule 1006. See MIAX Rule 1009.
    \383\ See MIAX Rule 1010.
    \384\ Specifically, the Chairman of the MIAX Board, with the
approval of the Board, shall appoint an Appeals Committee to preside
over all appeals related to disciplinary and adverse action
determinations. See note 49 and accompanying text (detailing the
composition of the Appeals Committee). If the Independent Director
serving on the Appeals Committee recuses himself or herself from an
appeal, due to conflict of interest or otherwise, the Independent
Director may be replaced by a Non-Industry Director for purposes of
the applicable appeal if there is no other Independent Director able
to serve as the replacement. See MIAX Exchange By-Laws Section
4.5(d). See also Amended and Restated By-Laws of BATS Exchange,
Inc., Section V, Article 6 (specifying a similar Appeals Committee).
    \385\ See MIAX Rule 1010.
    \386\ See id.
---------------------------------------------------------------------------

    Appeals from any determination that impacts access to MIAX, such as
termination or suspension of membership, will be instituted under, and
governed by, the provisions in the Chapter XI of the MIAX Rules. MIAX's
Chapter XI applies to persons economically aggrieved by any of the
following actions of MIAX including, but not limited to: (a) Denial of
an application to become a Member; (b) barring a person from becoming
associated with a Member; (c) limiting or prohibiting services provided
by the MIAX or services of any exchange member.\387\
---------------------------------------------------------------------------

    \387\ See MIAX Rule 1100. As noted above, MIAX has entered into
a RSA with CBOE under which CBOE will perform certain regulatory
functions on behalf of MIAX. CBOE may perform some or all of the
functions specified in the Chapter XI of the MIAX Rules. See supra
note 114. See also MIAX Rule 1106.
---------------------------------------------------------------------------

    Any person aggrieved by an action of MIAX within the scope of the
Chapter XI may file a written application to be heard within thirty
days \388\ after such

action has been taken.\389\ Applications for hearing and review will be
referred to the Business Conduct Committee, which will appoint a
hearing panel of no less than three members of such Committee.\390\ The
decision of the hearing panel made pursuant to Chapter XI of the MIAX
rules is subject to review by the MIAX Exchange Board, either on its
own motion within 30 days after issuance of the decision, or upon
written request submitted by the applicant or the President of MIAX
Exchange within 15 days after issuance of the decision.\391\ The review
would be conducted by the MIAX Exchange Board or a committee of the
MIAX Exchange Board composed of at least three directors.\392\
---------------------------------------------------------------------------

    \388\ An applicant may file for an extension of time as allowed
by the Chairman of the Business Conduct Committee within thirty days
of the MIAX Exchange's action. An application for an extension will
be ruled upon by the Chairman of the Business Conduct Committee, and
his ruling will be given in writing. Rulings on applications for
extensions of time are not subject to appeal. See MIAX Rule 1101.
    \389\ The application must include: (1) The action for which
review is sought; (2) the specific reasons for the applicant's
exception to such action; (3) the relief sought; and (4) whether the
applicant intends to submit any documents, statements, arguments or
other material in support of the application, with a description of
any such materials. See MIAX Rule 1101(a).
    \390\ See MIAX Rule 1102. The decision of the hearing panel will
be made in writing and sent to the parties to the proceedings. See
MIAX Rule 1103.
    \391\ See MIAX Rule 1104. The MIAX Exchange Board, or a
committee of the MIAX Exchange Board, will have sole discretion to
grant or deny either request. See id.
    \392\ See MIAX Rule 1104(b). The MIAX Exchange Board or its
designated committee may affirm, reverse, or modify in whole or in
part, the decision of the hearing panel. The decision of the MIAX
Exchange Board or its designated committee would be final, and must
be in writing and would be sent to the parties to the proceeding.
See MIAX Rule 1104(c).
---------------------------------------------------------------------------

    The Commission finds that MIAX's proposed disciplinary and
oversight rules and structure, as well as its proposed process for
persons economically aggrieved by certain MIAX actions, are consistent
with the requirements of Sections 6(b)(6) and 6(b)(7) of the Act \393\
in that they provide fair procedures for the disciplining of members
and persons associated with members. The Commission further finds that
the proposed MIAX rules are designed to provide MIAX Exchange with the
ability to comply, and with the authority to enforce compliance by its
members and persons associated with its members, with the provisions of
the Act, the rules and regulations thereunder, and the rules of
MIAX.\394\
---------------------------------------------------------------------------

    \393\ 15 U.S.C. 78f(b)(6) and (b)(7), respectively.
    \394\ See Section 6(b)(1) of the Act, 15 U.S.C. 78f(b)(1).
---------------------------------------------------------------------------

E. Listing

    MIAX does not intend to offer original listings when it commences
operations. Instead, MIAX will list and trade only equity options that
are listed on other national securities exchanges and cleared by the
Options Clearing Corporation. MIAX's listing rules, including the
criteria for the underlying securities of the options to be traded, are
substantially similar to the rules of other exchanges.\395\ The
Commission finds that MIAX's proposed initial and continued listing
rules are consistent with the Act, including Section 6(b)(5), in that
they are designed to protect investors and the public interest and to
promote just and equitable principles of trade. Before beginning
operation, MIAX will need to become a participant in the Plan for the
Purpose of Developing and Implementing Procedures Designed to
Facilitate the Listing and Trading of Standardized Options Submitted
Pursuant to Section 11A(a)(3)(B) of the Act (``OLPP''). In addition,
before beginning operation, MIAX will need to become a participant in
the Options Clearing Corporation.
---------------------------------------------------------------------------

    \395\ See, e.g., ISE Rule 502 (Criteria for Underlying
Securities).
---------------------------------------------------------------------------

IV. Exemption From Section 19(b) of the Act With Regard to CBOE and
NYSE Rules Incorporated by Reference

    MIAX proposes to incorporate by reference certain CBOE rules
concerning arbitration. Thus, MIAX arbitration proceedings will be
governed by the applicable CBOE arbitration rules. Specifically, as
referenced in MIAX Rule 1107 (Arbitration), MIAX proposes to
incorporate by reference Chapter XVIII of CBOE's rulebook (CBOE
Arbitration Rules).\396\ MIAX also proposes in Rule 1502 to incorporate
by reference the CBOE or NYSE rules concerning initial and maintenance
margin requirements.
---------------------------------------------------------------------------

    \396\ In addition, with respect to pre-dispute arbitration
agreements, MIAX Rule 1107(c) provides that CBOE Rule 18.35 would
apply to disputes between MIAX members and their customers.
---------------------------------------------------------------------------

    In connection with the proposal to incorporate the CBOE and NYSE
rules by reference, MIAX requested, pursuant to Rule 240.0-12 under the
Act,\397\ an exemption under Section 36 of the Act from the rule filing
requirements of Section 19(b) of the Act for changes to the MIAX rules
that are effected solely by virtue of a change to a cross-referenced
CBOE or NYSE rules.\398\ MIAX proposes to incorporate by reference
categories of rules, rather than individual rules within a category,
that are not trading rules. In addition, MIAX agrees to provide written
notice to its members whenever CBOE or NYSE proposes a change to a rule
within a cross-referenced category of rules \399\ and whenever any such
proposed changes are approved by the Commission or otherwise become
effective.\400\
---------------------------------------------------------------------------

    \397\ 17 CFR 240.0-12.
    \398\ See Letter from Barbara Comly, General Counsel, MIAX, to
Elizabeth M. Murphy, Secretary, Commission, dated November 30, 2012
(``Section 19(b) Exemption Request'').
    \399\ See id.
    \400\ MIAX will provide such notice through a posting on the
same Web site location where MIAX posts its own rule filings
pursuant to Rule 19b-4 under the Act, within the required time
frame. The Web site posting will include a link to the location on
the FINRA or CBOE Web site where FINRA's or CBOE's proposed rule
change is posted. See id.
---------------------------------------------------------------------------

    Using the authority under Section 36 of the Act,\401\ the
Commission previously exempted certain SROs from the requirement to
file proposed rule changes under Section 19(b) of the Act.\402\ The
Commission is hereby granting MIAX's request for exemption, pursuant to
Section 36 of the Act, from the rule filing requirements of Section
19(b) of the Act with respect to the rules that MIAX proposes to
incorporate by reference. The exemption is conditioned upon MIAX
providing written notice to MIAX members whenever CBOE or NYSE proposes
to change an incorporated by reference rule. The Commission believes
that the exemption is appropriate in the public interest and consistent
with the protection of investors because it will promote more efficient
use of Commission and SROs resources by avoiding duplicative rule
filings based on simultaneous changes to identical rule text sought by
more than one SRO.
---------------------------------------------------------------------------

    \401\ 15 U.S.C. 78mm.
    \402\ See, e.g., DirectEdge Exchanges Order, BATS Order, and BOX
Order, supra note 18, and C2 Order, supra note 41. In particular,
the BOX Order granted relief for BOX's arbitration rule (which is
substantively similar to MIAX's proposed rule), which also
incorporates the same FINRA rules that MIAX proposes to incorporate.
---------------------------------------------------------------------------

V. Conclusion

    It is ordered that the application of MIAX Exchange for
registration as a national securities exchange be, and it hereby is,
granted.
    It is furthered ordered that operation of MIAX Exchange is
conditioned on the satisfaction of the requirements below:
    A. Participation in National Market System Plans Relating to
Options Trading. MIAX Exchange must join: (1) The Plan for the
Reporting of Consolidated Options Last Sale Reports and Quotation
Information (Options Price Reporting Authority); (2) the OLPP; (3) the
Linkage Plan; and (4) the Plan of the Options Regulatory Surveillance
Authority.
    B. Participation in Multiparty Rule 17d-2 Plans. MIAX Exchange must
become a party to the multiparty Rule 17d-2 agreements concerning
options sales practice regulation and market surveillance.
    C. Participation in the Options Clearing Corporation. MIAX Exchange

must become an Options Clearing Corporation participant exchange.
    D. Participation in the Intermarket Surveillance Group. MIAX
Exchange must join the Intermarket Surveillance Group.
    E. Effective Regulation. MIAX Exchange must have, and represent in
a letter to the staff in the Commission's Office of Compliance
Inspections and Examinations that it has, adequate procedures and
programs in place to effectively regulate MIAX.
    F. Trade Processing and Exchange Systems. MIAX Exchange must have,
and represent in a letter to the staff in the Commission's Division of
Trading and Markets that it has, adequate procedures and programs in
place, as detailed in Commission Automation Policy Review guidelines,
to effectively process trades and maintain the confidentiality,
integrity, and availability of MIAX's systems.\403\
---------------------------------------------------------------------------

    \403\ On November 16, 1989, the Commission published its first
Automation Review Policy (``ARP I''), in which the Commission
created a voluntary framework for SROs to establish comprehensive
planning and assessment programs to determine systems capacity and
vulnerability. On May 9, 1991, the Commission published its second
Automation Review Policy (``ARP II'') to clarify the types of review
and reports expected from SROs. See Securities Exchange Act Release
Nos. 27445 (November 16, 1989), 54 FR 48703 (November 24, 1989) and
29185 (May 9, 1991), 56 FR 22490 (May 15, 1991).
---------------------------------------------------------------------------

    It is further ordered, pursuant to Section 36 of the Act,\404\ that
MIAX shall be exempted from the rule filing requirements of Section
19(b) of the Act with respect to the FINRA and CBOE rules that MIAX
proposes to incorporate by reference, subject to the conditions
specified in this Order.
---------------------------------------------------------------------------

    \404\ 15 U.S.C. 78mm.

    By the Commission.
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-29568 Filed 12-6-12; 8:45 am]
BILLING CODE 8011-01-P


[Federal Register Volume 83, Number 234 (Thursday, December 6, 2018)]
[Notices]
[Page 62860]
[FR Doc No: 2018-26482]

=======================================================================
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ENVIRONMENTAL PROTECTION AGENCY

[FRL-9987-44-Region 10]

Clean Air Act Operating Permit Program; Petition for Objection To
State Operating Permit for the U.S. Department of Energy-Hanford
Operations, Benton County, Washington

AGENCY: Environmental Protection Agency (EPA).

ACTION: Notice of final Order on Petition for objection to Clean Air
Act title V operating permit.

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SUMMARY: The Environmental Protection Agency (EPA) Administrator signed
an Order, dated October 15, 2018, granting a petition dated September
1, 2016, filed by Bill Green of Richland, Washington. The Petition
requested that the EPA object to a Clean Air Act (CAA) title V
operating permit (Permit No. 00-05-006, Renewal 2, Revision B) issued
by the Washington State Department of Ecology (Ecology) to the U.S.
Department of Energy-Hanford Operations (DOE) for the Hanford site
located in Benton County, Washington.

ADDRESSES: The EPA requests that you contact the individual listed in
the FOR FURTHER INFORMATION CONTACT section to view copies of the final
Order, the Petition, and other supporting information. You may view
hard copies of these documents Monday through Friday, from 9 a.m. to 3
p.m., excluding federal holidays, at EPA Region 10, 1200 Sixth Avenue,
Seattle, Washington. If you wish to examine these documents, you should
make an appointment at least 24 hours before the visiting day.
Additionally, the final Order and Petition are available electronically
at: http://www.epa.gov/title-v-operating-permits/title-v-petition-database.

FOR FURTHER INFORMATION CONTACT: Kelly McFadden, EPA Region 10, (206)
553-1679, [email protected].

SUPPLEMENTARY INFORMATION: The CAA affords the EPA a 45-day period to
review and object to, as appropriate, a title V operating permit
proposed by a state permitting authority under title V of the CAA.
Section 505(b)(2) of the CAA authorizes any person to petition the EPA
Administrator to object to a title V operating permit within 60 days
after the expiration of the EPA's 45-day review period if the EPA has
not objected on its own initiative. Petitions must be based only on
objections to the permit that were raised with reasonable specificity
during the public comment period provided by the state, unless the
petitioner demonstrates that it was impracticable to raise these issues
during the comment period or unless the grounds for the issue arose
after this period.
    The EPA received the Petition from Bill Green of Richland,
Washington, dated September 1, 2016, requesting that the EPA object to
the issuance of title V operating permit no. 00-05-006, Renewal 2,
Revision B, issued by Ecology to DOE for the Hanford site in Benton
County, Washington.
    The Petition claims that Ecology did not, as required by 40 CFR
70.7(h)(2), make available during the public comment process all of the
information that the permitting authority had deemed to be relevant by
using it in the permitting process.
    On October 15, 2018, the EPA Administrator issued an Order granting
the Petition. The Order explains the basis for EPA's decision.
    Sections 307(b) and 505(b)(2) of the CAA provide that a petitioner
may ask for judicial review of those portions of an order that deny
issues raised in a petition. Any petition for review shall be filed in
the United States Court of Appeals for the appropriate circuit no later
than February 4, 2019.

    Dated: November 21, 2018.
Michelle L. Pirzadeh,
Acting Regional Administrator, EPA Region 10.
[FR Doc. 2018-26482 Filed 12-4-18; 8:45 am]
 BILLING CODE 6560-50-P