I'm trying to export my film for VOD streaming on VHX. They gave me their Remmended specs, which are:  H264, 13000 bit rate . I tried that but when the video plays you can see some type of pixilating in the background, like when there is a fade in or if there is a dim background. Ex. A fade in to a sunrise shows multiple bands or halos of colors spreading out around the sun, until the fade in ends. 

Does anyone know what export settings I need to use to correct this (using MC5) for a file that will stream from the VHX site?

Don't use Avid for the H264 export.

Mixdown to a suitable codec (DNX120 maybe) then export a same as source QT. Then use an external encoder like Squeeze to make the H264

Will DNxHD175X work or is it too big for streaming. I usually export out at this setting and it comes out clear but its a large file, then I use Handbrake to knock it down and it still looks good. I just don't know whether this will work for streaming. I'm going through HVX for my streaming provider.

Handbrake should be able to provide a stream that complies with the specs you've listed. 

(You're just doing a variation on the method Pat described above and substituting Handbrake for squeeze.)