81_FR_54319 81 FR 54162 - Self-Regulatory Organizations; Miami International Securities Exchange LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Its Fee Schedule

81 FR 54162 - Self-Regulatory Organizations; Miami International Securities Exchange LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Its Fee Schedule

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 81, Issue 157 (August 15, 2016)

Page Range54162-54166
FR Document2016-19321

Federal Register, Volume 81 Issue 157 (Monday, August 15, 2016)
[Federal Register Volume 81, Number 157 (Monday, August 15, 2016)]
[Notices]
[Pages 54162-54166]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2016-19321]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-78519; File No. SR-MIAX-2016-21]


Self-Regulatory Organizations; Miami International Securities 
Exchange LLC; Notice of Filing and Immediate Effectiveness of a 
Proposed Rule Change To Amend Its Fee Schedule

August 9, 2016.
    Pursuant to the provisions of Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice 
is hereby given that on July 29, 2016, Miami International Securities 
Exchange LLC (``MIAX'' or ``Exchange'') filed with the Securities and 
Exchange Commission (``Commission'') a proposed rule change as 
described in Items I, II, and III below, which Items have been prepared 
by the Exchange. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange is filing a proposal to amend the MIAX Options Fee 
Schedule (the ``Fee Schedule'').
    The text of the proposed rule change is available on the Exchange's 
Web site at http://www.miaxoptions.com/filter/wotitle/rule_filing, at 
MIAX's principal office, and at the Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
sections A, B, and C below, of the most significant aspects of such 
statements.

[[Page 54163]]

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend its current MIAX Market Maker \3\ 
Sliding Scale for transaction fees to: (i) Modify the current Market 
Maker Sliding Scale table of Market Maker Transaction Fees in Section 
1)a)i) of the Fee Schedule, as described more fully below; and (ii) 
adopt a ``maker'' fee and a ``taker'' fee for the various Tiers in the 
Market Maker Sliding Scale, as described below.
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    \3\ The term ``Market Maker'' means any MIAX Market Maker 
including Registered Market Makers (``RMMs''), Primary Lead Market 
Makers (``PLMMs''), Lead Market Makers (``LMMs''), Directed Order 
Lead Market Makers (``DLMMs'') and Directed Primary Lead Market 
Makers (``DPLMMs''). See Exchange Rule 100. See also Fee Schedule, 
Footnote 1.
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    The Market Maker Sliding Scale for Transaction Fees reduces a 
Market Maker's per contract transaction fee based on the Market Maker's 
percentage of total national Market Maker volume of any options classes 
that trade on the Exchange during the calendar month, currently based 
on the following scale:

----------------------------------------------------------------------------------------------------------------
                                                                                   Per contract    Per contract
                     Tier                         Percentage of national market   fee for  penny   fee for  non-
                                                          maker volume                classes      penny classes
----------------------------------------------------------------------------------------------------------------
1.............................................  0.00%-0.05%.....................           $0.25           $0.29
2.............................................  Above 0.05%-0.50%...............            0.19            0.23
3.............................................  Above 0.50%-1.00%...............            0.12            0.16
4.............................................  Above 1.00%-1.50%...............            0.07            0.11
5.............................................  Above 1.50%.....................            0.05            0.09
----------------------------------------------------------------------------------------------------------------

    The Market Maker Sliding Scale applies to all Market Makers for 
transactions in all products except mini-options, with different per-
contract transaction fees established for Penny option classes and non-
Penny option classes. A Market Maker's initial $0.25 per contract rate 
in Penny classes and $0.29 per contract in non-Penny classes is reduced 
when the Market Maker reaches the volume thresholds set forth in the 
Market Maker Sliding Scale in a month. As a Market Maker's monthly 
volume increases, its per contract transaction fee decreases when the 
monthly volume thresholds described in the Market Maker Sliding Scale 
are achieved.
    The Exchange proposes to amend the Fee Schedule by deleting the 
current Market Maker Sliding Scale table, and to create two new tables 
based upon volume thresholds in the Priority Customer Rebate Program 
\4\ applicable to Members and their Affiliates (as defined below). One 
of the new tables will apply to Members and their Affiliates \5\ that 
are included in Priority Customer Rebate Program Volume Tier 3 or 
higher, and the other new table will apply to Members and their 
Affiliates that are not included in Priority Customer Rebate Program 
Volume Tier 3 or higher. Currently, the Fee Schedule provides 
discounted transaction fees for Members and their qualified Affiliates 
that achieve certain volume thresholds through the submission of 
Priority Customer Orders \6\ under the Exchange's Priority Customer 
Rebate Program.\7\ The current Fee Schedule describes the discounted 
fees in narrative text and footnotes to the table. The Exchange is 
proposing to delete this narrative text and parts of the footnotes to 
simply include the discounted transaction fees in the two new tables. 
The Market Maker sliding scale will continue to apply to MIAX Market 
Maker transaction fees in all products except mini-options. MIAX Market 
Makers will continue to be assessed a $0.02 per executed contract fee 
for transactions in mini-options. The purpose of basing the proposed 
two new tables on the volume thresholds in the Priority Customer Rebate 
Program is to clarify that the Exchange provides incentives for Members 
and their Affiliates to submit a greater number of Priority Customer 
Orders to the Exchange. The Exchange is simply deleting this 
information from the narrative text in the Fee Schedule and conveying 
it more simply and clearly in table format. The proposed language ``or 
higher,'' which replaces ``or 4,'' is intended to account for potential 
additional tiers in the Priority Customer Rebate Program that may be 
added in the future.
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    \4\ MIAX credits each Member the per contract amount resulting 
from each Priority Customer order transmitted by that Member which 
is executed electronically on the Exchange in all multiply-listed 
option classes (excluding QCC Orders, mini-options, Priority 
Customer-to-Priority Customer Orders, PRIME AOC Responses, PRIME 
Contra-side Orders, PRIME Orders for which both the Agency and 
Contra-side Order are Priority Customers, and executions related to 
contracts that are routed to one or more exchanges in connection 
with the Options Order Protection and Locked/Crossed Market Plan 
referenced in MIAX Rule 1400), provided the Member meets certain 
percentage thresholds in a month as described in the Priority 
Customer Rebate Program table. See Fee Schedule, Section 1)a)iii).
    \5\ For purposes of the MIAX Options Fee Schedule, the term 
``Affiliate'' means an affiliate of a Member of at least 75% common 
ownership between the firms as reflected on each firm's Form BD, 
Schedule A (``Affiliate''). See proposed new Footnote 1 to the Fee 
Schedule.
    \6\ The term ``Priority Customer'' means a person or entity that 
(i) is not a broker or dealer in securities, and (ii) does not place 
more than 390 orders in listed options per day on average during a 
calendar month for its own beneficial account(s). A ``Priority 
Customer Order'' means an order for the account of a Priority 
Customer. See Exchange Rule 100.
    \7\ The Exchange will aggregate the trading activity of separate 
MIAX Market Maker firms for purposes of the sliding scale if there 
is at least 75% common ownership between the firms as reflected on 
each firm's Form BD, Schedule A. Any Member or its affiliates of at 
least 75% common ownership between the firms as reflected on each 
firm's Form BD, Schedule A, that qualifies for Priority Customer 
Rebate Program volume tiers 3 or 4 will be assessed $0.23 per 
contract for tier 1, $0.17 per contract for tier 2, $0.10 per 
contract for tier 3, $0.05 per contract for tier 4, and $0.03 per 
contract for tier 5 for transactions in standard options in Penny 
Pilot Classes. Any Member or its affiliates of at least 75% common 
ownership between the firms as reflected on each firm's Form BD, 
Schedule A, that qualifies for Priority Customer Rebate Program 
volume tiers 3 or 4 will be assessed $0.27 per contract for tier 1, 
$0.21 per contract for tier 2, $0.14 per contract for tier 3, $0.09 
per contract for tier 4, and $0.07 per contract for tier 5 for 
transactions in standard options in non-Penny Pilot classes. See Fee 
Schedule Section 1)a)i).
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    The Exchange also proposes to establish new percentage thresholds 
of national customer volume in the current Tiers in the Market Maker 
Sliding Scale. The new thresholds will be the same in each new table. 
Specifically, the Exchange proposes to establish new percentage 
thresholds of national customer volume in the Market Maker Sliding 
Scale as follows: (i) In Tier 1, from 0-0.0% to 0-0.075%; (ii) in Tier 
2, from above 0.075% to 0.60%; (iii) in Tier 3, from above 0.60% to 
1.00%; (iv) in Tier 4, from above 1.00% to 1.50%; and (v) in Tier 5, 
above 1.50%. These Tiers will apply to both new tables. The Exchange 
notes that a number of other

[[Page 54164]]

exchanges have tiered fee schedules that offer different transaction 
fee rates depending on the monthly average daily volume (``ADV'') of 
liquidity providing executions on their facilities.\8\
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    \8\ See Chicago Board Options Exchange, Incorporated (``CBOE'') 
Fee Schedule, p. 3; see also NASDAQ Options Market (``NOM'') Fees 
and Rebates, Chapter XV, Section 2.
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    The new tables will continue to list separate per contract 
transaction fees for Penny classes and non-Penny classes. The new 
tables will also establish, and the Exchange will assess, different 
fees to MIAX Market Makers that are ``makers'' and Market Makers that 
are ``takers'' in Penny and non-Penny classes. Market Makers that place 
resting liquidity, i.e., quotes or orders on the MIAX System,\9\ will 
be assessed the ``maker'' fees described in the new tables. MIAX Market 
Makers that execute against resting liquidity will be assessed a 
different, higher ``taker'' fee. This is distinguished from traditional 
``maker-taker'' models where ``makers'' typically receive a rebate and 
``takers'' do not; the Exchange is not proposing a rebate but instead 
is simply proposing to assess lower transaction fees to ``makers'' as 
compared to ``takers.'' It is, however, similar to the manner in which 
other exchanges assess fees for resting market maker liquidity.\10\
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    \9\ The term ``System'' means the automated trading system used 
by the Exchange for the trading of securities. See Exchange Rule 
100.
    \10\ The Exchange notes that maker-taker pricing has been 
adopted on at least one other exchange for certain classes of 
options. See, e.g., ISE Schedule of Fees, Section I. The Exchange's 
proposed maker fees are similar in that resting ISE liquidity from 
makers is charged lower fees than the fees for takers. ISE's maker-
taker fees are distinguished from the proposed MIAX maker-taker fees 
because the ISE maker-taker fee applies to ISE market maker orders 
sent to ISE by ISE Electronic Access Members, whereas the current 
Exchange proposal affords lower maker fees for resting quotes and 
orders submitted by Market Makers. Despite this distinction, the 
result is that MIAX will charge a lower fee for resting Market Maker 
liquidity, as ISE does today.
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    The revised Market Maker Sliding Scale proposed by the Exchange 
will be as follows:

                                Members and Their Affiliates in Priority Customer Rebate Program Volume Tier 3 or Higher
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                            Per contract fee for penny    Per contract fee for non-penny
                                                                                                      classes                         classes
                                                 Tier           Percentage thresholds    ---------------------------------------------------------------
                                                                                               Maker           Taker           Maker           Taker
--------------------------------------------------------------------------------------------------------------------------------------------------------
All MIAX Market Makers....................               1  0.00%-0.075%................           $0.21           $0.23           $0.25           $0.30
                                                         2  Above 0.075%-0.60%..........            0.15            0.22            0.19            0.27
                                                         3  Above 0.60%-1.00%...........            0.08            0.15            0.12            0.20
                                                         4  Above 1.00%-1.50%...........            0.04            0.06            0.08            0.12
                                                         5  Above 1.50%.................            0.02            0.04            0.06            0.10
--------------------------------------------------------------------------------------------------------------------------------------------------------


                              Members and Their Affiliates Not In Priority Customer Rebate Program Volume Tier 3 or Higher
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                            Per contract fee for penny    Per contract fee for non-penny
                                                                                                      classes                         classes
                                                 Tier           Percentage thresholds    ---------------------------------------------------------------
                                                                                               Maker           Taker           Maker           Taker
--------------------------------------------------------------------------------------------------------------------------------------------------------
All MIAX Market Makers \11\...............               1  0.00%-0.075%................           $0.23           $0.25           $0.27           $0.32
                                                         2  Above 0.075%-0.60%..........            0.17            0.24            0.21            0.29
                                                         3  Above 0.60%-1.00%...........            0.10            0.17            0.14            0.22
                                                         4  Above 1.00%-1.50%...........            0.06            0.08            0.10            0.14
                                                         5  Above 1.50%.................            0.04            0.06            0.08            0.12
--------------------------------------------------------------------------------------------------------------------------------------------------------

    The Exchange further proposes that the lower per contract ``maker'' 
fee for both Penny pilot classes and non-Penny pilot classes will apply 
to opening transactions, transactions resulting from quotes that 
uncross the Away Best Bid or Offer (``ABBO'') and to any other 
transaction that is not a taker transaction.
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    \11\ See MIAX Rule 100 for the definition of Registered Market 
Maker (``RMM''), Primary Lead Market Maker (``PLMM'') and Lead 
Market Maker (``LMM''). Directed Order Lead Market Maker (``DLMM'') 
and Directed Primary Lead Market Maker (``DPLMM'') are each a party 
to a transaction being allocated to the LMM or PLMM and are each the 
result of an order that has been directed to the LMM or PLMM.
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    For clarity and ease of reference, the Exchange is proposing to 
define the term ``Affiliate'' in the Fee Schedule as an affiliate of a 
Member of at least 75% common ownership between the firms as reflected 
on each firm's Form BD, Schedule A (``Affiliate''). This definition 
will be included in proposed new Footnote 1 to the Fee Schedule, and 
the term ``Affiliate'' will be used in subsequent text and footnotes in 
the Fee Schedule for brevity, clarity and ease of reference. The 
Exchange believes this simplifies and streamlines these sections of the 
Fee Schedule.
    The Exchange believes the proposed changes to the Market Maker 
Sliding Scale are objective because the proposed transaction fees are 
based on the achievement of stated volume thresholds, and on rewarding 
Market Makers that provide liquidity on the Exchange with the reduced 
``maker'' transaction fees. The specific volume thresholds of the tiers 
were set based upon business determinations and an analysis of current 
volume levels. The specific volume thresholds and rates were set in 
order to encourage MIAX Market Makers to reach for higher tiers. The 
Exchange believes that the proposed changes to the tiered fee schedule 
will cause Market Makers to display their quotes and orders on the 
Exchange, to improve the price and size of such quotes and orders, and 
thus increase the volume of contracts traded on the Exchange.
    As stated above, the Exchange does not propose a change in the 
corresponding fees for mini options. The proposed rule change is 
scheduled to become operative August 1, 2016.

[[Page 54165]]

2. Statutory Basis
    The Exchange believes that its proposal to amend its Fee Schedule 
is consistent with Section 6(b) of the Act \12\ in general, and 
furthers the objectives of Section 6(b)(4) of the Act,\13\ in that it 
is an equitable allocation of reasonable fees and other charges among 
Exchange members, and issuers and other persons using its facilities, 
and 6(b)(5) of the Act,\14\ in that it is designed to prevent 
fraudulent and manipulative acts and practices, to promote just and 
equitable principles of trade, to foster cooperation and coordination 
with persons engaged in facilitating transactions in securities, to 
remove impediments to and perfect the mechanisms of a free and open 
market and a national market system and, in general, to protect 
investors and the public interest.
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    \12\ 15 U.S.C. 78f(b).
    \13\ 15 U.S.C. 78f(b)(4).
    \14\ 15 U.S.C. 78f(b)(1) and (b)(5).
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    The proposed fee structure is equitable and not unfairly 
discriminatory because all similarly situated MIAX Market Makers are 
subject to the same fee structure, and access to the Exchange is 
offered on terms that are not unfairly discriminatory.
    Volume-based pricing models such as those currently maintained and 
proposed on the Exchange have been widely adopted by options exchanges 
and are equitable because they are open to all Members on an equal 
basis and provide additional benefits or discounts that are reasonably 
related to the value of an exchange's market quality associated with 
higher levels of market activity, such as higher levels of liquidity 
provision and/or growth patterns, and introduction of higher volumes of 
orders into the price and volume discovery processes.
    The Exchange's proposal to offer a reduced fee to Market Makers 
that provide liquidity in Penny and non-Penny options is also equitable 
and not unfairly discriminatory under the Act. While distinguished from 
the traditional ``maker-taker'' fee model under which an exchange pays 
a per-share rebate to their members to encourage them to place resting 
liquidity-providing quotes and orders on their trading systems, the 
instant proposal reflects a substantially similar fee structure that 
provides a reduced fee for ``makers.'' If an execution occurs, rather 
than giving the liquidity providing ``maker'' a rebate and assessing 
the ``taker'' that executes against that resting order a fee, the 
Exchange is simply proposing a reduced fee for ``makers'' as compared 
to ``takers.''
    The Exchange believes that the proposed maker-taker model is an 
important competitive tool for exchanges and directly or indirectly can 
provide better prices for investors. The proposed fee structure may 
narrow the MIAX Bid and Offer (``MBBO'') because the reduced fee for 
``makers'' effectively subsidizes, and thus encourages, the posting of 
liquidity. The Exchange believes that the reduced ``maker'' fees will 
also provide MIAX Market Makers with greater incentive to either match 
or improve upon the best price displayed on MIAX, all to the benefit of 
investors and the public in the form of improved execution prices.
    The use of volume-based incentives has long been accepted as an 
equitable and not unfairly discriminatory pricing practice employed at 
multiple competing options exchanges. In fact, the specific volume-
based incentives proposed here, a reduced fee for providing greater 
amounts of liquidity in Penny and non-Penny options (i.e., in the 
Priority Customer Rebate Program), is currently employed by other 
exchanges and it has been accepted as equitable and not unfairly 
discriminatory under the Act.\15\ The discounted fees for Members and 
their Affiliates that achieve the Tier 3 volume threshold or higher are 
equitable, reasonable and not unfairly discriminatory because they 
provide incentive for Members and their Affiliates to submit more 
orders to the Exchange, thus enhancing liquidity and removing 
impediments to and perfecting the mechanisms of a free and open market 
and a national market system. The proposed reduced maker fee is 
equitable and not unfairly discriminatory because it benefits all 
market participants by attracting valuable liquidity to the market and 
thereby enhancing the quality and efficiency of the MIAX marketplace. 
The market participants that post liquidity to the Book, thereby 
contributing to price discovery and size discovery while taking the 
risk of not receiving an execution by posting passive liquidity are 
justly rewarded with a lower transaction fee.
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    \15\ See, supra note 8. See also, NOM Fees and Rebates, Chapter 
XV, Section 2, and BATS BZX Exchange Fee Schedule (providing rebates 
for adding liquidity and charging fees for removing liquidity in 
securities at or above $1.00).
---------------------------------------------------------------------------

    The Exchange's proposal to charge Market Makers who remove 
liquidity a higher fee is equitable and not unfairly discriminatory and 
follows a similar line of reasoning. It is common practice among 
options exchanges to differentiate between fees for adding liquidity 
and fees for removing liquidity, and such differentiation has been 
accepted as not unfairly discriminatory under the Act.\16\ The Exchange 
believes that the differentiation in pricing between ``makers'' and 
``takers'' is appropriate, because ``takers'' remove liquidity and 
benefit disproportionately from their executions compared to 
``makers,'' without assuming the obligations that ``makers'' assume in 
making continuous, two-sided markets, and without engaging in 
competitive price discovery and improvement in the same manner as 
``makers.'' Liquidity removers benefit from the price and size 
discovery function that liquidity providers have performed in posting 
their quotations and orders, and when executing against resting 
liquidity a ``taker'' is not taking the risk of an order or quote 
sitting unexecuted on the Book. The Exchange believes for these reasons 
that a ``taker'' fee that is higher than a ``maker'' fee or rebate is 
equitable, reasonable and not unfairly discriminatory, and thus 
consistent with the Act.
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    \16\ Id.
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    The lower fees charged for providing liquidity have been considered 
beneficial in that attracting this liquidity benefits all market 
participants by improving the overall quality of trading on the 
Exchange. The level of differentiation between the ``maker'' fee and 
the ``taker'' fee is also within the bounds of what has been accepted 
as not unfairly discriminatory under the Act. Finally, the proposed 
fees will be imposed equally among all participants.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
result in any burden on competition that is not necessary or 
appropriate in furtherance of the purposes of the Act. The Exchange 
believes that the proposed ``maker-taker'' model is an important 
competitive tool for the Exchange and directly or indirectly can 
provide better prices for investors. The proposed fee structure is 
intended to promote narrower spreads and greater liquidity at the best 
prices. The fee-based incentives for market participants to submit 
liquidity providing orders and quotes to the Exchange, and thereafter 
to improve the MBBO to ensure participation, should enable the Exchange 
to attract, and compete for, order flow with other exchanges.
    The Exchange notes that it operates in a highly competitive market 
in which market participants can readily favor competing venues if they 
deem fee levels at a particular venue to be

[[Page 54166]]

excessive. In such an environment, the Exchange must continually adjust 
its fees to remain competitive with other exchanges and to attract 
order flow. The Exchange believes that the proposed rule changes 
reflect this competitive environment because they modify the Exchange's 
fees in a manner that encourages market participants to provide 
liquidity and to send order flow to the Exchange.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    Written comments were neither solicited nor received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A)(ii) of the Act,\17\ and Rule 19b-4(f)(2) \18\ thereunder. 
At any time within 60 days of the filing of the proposed rule change, 
the Commission summarily may temporarily suspend such rule change if it 
appears to the Commission that such action is necessary or appropriate 
in the public interest, for the protection of investors, or otherwise 
in furtherance of the purposes of the Act. If the Commission takes such 
action, the Commission shall institute proceedings to determine whether 
the proposed rule should be approved or disapproved.
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    \17\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \18\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-MIAX-2016-21 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-MIAX-2016-21. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE., 
Washington, DC 20549 on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of such filing also will be available 
for inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-MIAX-2016-21, and should be 
submitted on or before September 6, 2016.
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    \19\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-19321 Filed 8-12-16; 8:45 am]
 BILLING CODE 8011-01-P



                                                54162                        Federal Register / Vol. 81, No. 157 / Monday, August 15, 2016 / Notices

                                                investors and the public interest in that               including whether the proposed rule                    SECURITIES AND EXCHANGE
                                                it will facilitate the listing and trading              change is consistent with the Act.                     COMMISSION
                                                of an additional type of actively-                      Comments may be submitted by any of
                                                managed exchange-traded product that                    the following methods:                                 [Release No. 34–78519; File No. SR–MIAX–
                                                principally holds municipal bonds and                   Electronic Comments                                    2016–21]
                                                that will enhance competition among
                                                market participants, to the benefit of                     • Use the Commission’s Internet                     Self-Regulatory Organizations; Miami
                                                investors and the marketplace. As noted                 comment form (http://www.sec.gov/                      International Securities Exchange LLC;
                                                above, the Exchange has in place                        rules/sro.shtml); or
                                                                                                           • Send an email to rule-comments@                   Notice of Filing and Immediate
                                                surveillance procedures relating to                                                                            Effectiveness of a Proposed Rule
                                                                                                        sec.gov. Please include File Number SR–
                                                trading in the Shares and may obtain                                                                           Change To Amend Its Fee Schedule
                                                                                                        NYSEArca–2016–107 on the subject
                                                information via ISG from other
                                                                                                        line.
                                                exchanges that are members of ISG or                                                                           August 9, 2016.
                                                with which the Exchange has entered                     Paper Comments                                            Pursuant to the provisions of Section
                                                into a comprehensive surveillance                          • Send paper comments in triplicate                 19(b)(1) of the Securities Exchange Act
                                                sharing agreement. In addition, as noted                to Secretary, Securities and Exchange                  of 1934 (‘‘Act’’),1 and Rule 19b–4
                                                above, investors will have ready access                 Commission, 100 F Street NE.,                          thereunder,2 notice is hereby given that
                                                to information regarding the Fund’s                     Washington, DC 20549–1090.                             on July 29, 2016, Miami International
                                                holdings, the IIV, the Disclosed                        All submissions should refer to File                   Securities Exchange LLC (‘‘MIAX’’ or
                                                Portfolio, and quotation and last sale                  Number SR–NYSEArca–2016–107. This
                                                information for the Shares.                                                                                    ‘‘Exchange’’) filed with the Securities
                                                                                                        file number should be included on the                  and Exchange Commission
                                                B. Self-Regulatory Organization’s                       subject line if email is used. To help the             (‘‘Commission’’) a proposed rule change
                                                Statement on Burden on Competition                      Commission process and review your                     as described in Items I, II, and III below,
                                                                                                        comments more efficiently, please use
                                                  The Exchange does not believe that                                                                           which Items have been prepared by the
                                                                                                        only one method. The Commission will
                                                the proposed rule change will impose                                                                           Exchange. The Commission is
                                                                                                        post all comments on the Commission’s
                                                any burden on competition that is not                   Internet Web site (http://www.sec.gov/                 publishing this notice to solicit
                                                necessary or appropriate in furtherance                 rules/sro.shtml). Copies of the                        comments on the proposed rule change
                                                of the purpose of the Act. The Exchange                 submission, all subsequent                             from interested persons.
                                                notes that the proposed rule change will                amendments, all written statements
                                                facilitate the listing and trading of an                                                                       I. Self-Regulatory Organization’s
                                                                                                        with respect to the proposed rule                      Statement of the Terms of Substance of
                                                additional type of actively-managed                     change that are filed with the
                                                exchange-traded product that                                                                                   the Proposed Rule Change
                                                                                                        Commission, and all written
                                                principally holds municipal bonds and                   communications relating to the                            The Exchange is filing a proposal to
                                                that will enhance competition among                     proposed rule change between the                       amend the MIAX Options Fee Schedule
                                                market participants, to the benefit of                  Commission and any person, other than                  (the ‘‘Fee Schedule’’).
                                                investors and the marketplace.                          those that may be withheld from the                       The text of the proposed rule change
                                                C. Self-Regulatory Organization’s                       public in accordance with the
                                                                                                                                                               is available on the Exchange’s Web site
                                                Statement on Comments on the                            provisions of 5 U.S.C. 552, will be
                                                                                                        available for Web site viewing and                     at http://www.miaxoptions.com/filter/
                                                Proposed Rule Change Received From                                                                             wotitle/rule_filing, at MIAX’s principal
                                                Members, Participants, or Others                        printing in the Commission’s Public
                                                                                                        Reference Room, 100 F Street NE.,                      office, and at the Commission’s Public
                                                  No written comments were solicited                                                                           Reference Room.
                                                                                                        Washington, DC 20549, on official
                                                or received with respect to the proposed
                                                                                                        business days between the hours of                     II. Self-Regulatory Organization’s
                                                rule change.
                                                                                                        10:00 a.m. and 3:00 p.m. Copies of the                 Statement of the Purpose of, and
                                                III. Date of Effectiveness of the                       filing will also be available for                      Statutory Basis for, the Proposed Rule
                                                Proposed Rule Change and Timing for                     inspection and copying at the principal                Change
                                                Commission Action                                       office of the Exchange. All comments
                                                   Within 45 days of the date of                        received will be posted without change;                  In its filing with the Commission, the
                                                publication of this notice in the Federal               the Commission does not edit personal                  Exchange included statements
                                                Register or within such longer period                   identifying information from                           concerning the purpose of and basis for
                                                up to 90 days (i) as the Commission may                 submissions. You should submit only                    the proposed rule change and discussed
                                                designate if it finds such longer period                information that you wish to make                      any comments it received on the
                                                to be appropriate and publishes its                     available publicly. All submissions                    proposed rule change. The text of these
                                                reasons for so finding or (ii) as to which              should refer to File Number SR–                        statements may be examined at the
                                                the self-regulatory organization                        NYSEArca–2016–107 and should be
                                                                                                                                                               places specified in Item IV below. The
                                                consents, the Commission will:                          submitted on or before September 6,
                                                                                                        2016.                                                  Exchange has prepared summaries, set
                                                   (A) by order approve or disapprove                                                                          forth in sections A, B, and C below, of
                                                such proposed rule change; or                             For the Commission, by the Division of               the most significant aspects of such
                                                   (B) institute proceedings to determine               Trading and Markets, pursuant to delegated
                                                                                                        authority.31                                           statements.
                                                whether the proposed rule change
                                                should be disapproved.                                  Robert W. Errett,
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                                                                                                        Deputy Secretary.
                                                IV. Solicitation of Comments                            [FR Doc. 2016–19325 Filed 8–12–16; 8:45 am]
                                                  Interested persons are invited to                     BILLING CODE 8011–01–P
                                                submit written data, views, and                                                                                  1 15   U.S.C. 78s(b)(1).
                                                arguments concerning the foregoing,                       31 17   CFR 200.30–3(a)(12).                           2 17   CFR 240.19b–4.




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                                                                                          Federal Register / Vol. 81, No. 157 / Monday, August 15, 2016 / Notices                                                                               54163

                                                A. Self-Regulatory Organization’s                                            the current Market Maker Sliding Scale                                    The Market Maker Sliding Scale for
                                                Statement of the Purpose of, and                                             table of Market Maker Transaction Fees                                  Transaction Fees reduces a Market
                                                Statutory Basis for, the Proposed Rule                                       in Section 1)a)i) of the Fee Schedule, as                               Maker’s per contract transaction fee
                                                Change                                                                       described more fully below; and (ii)                                    based on the Market Maker’s percentage
                                                1. Purpose                                                                   adopt a ‘‘maker’’ fee and a ‘‘taker’’ fee                               of total national Market Maker volume
                                                                                                                             for the various Tiers in the Market                                     of any options classes that trade on the
                                                   The Exchange proposes to amend its
                                                                                                                             Maker Sliding Scale, as described                                       Exchange during the calendar month,
                                                current MIAX Market Maker 3 Sliding
                                                                                                                             below.                                                                  currently based on the following scale:
                                                Scale for transaction fees to: (i) Modify

                                                                                                                                                                                                                          Per contract    Per contract
                                                                                                                                                  Percentage of national                                                    fee for          fee for
                                                                          Tier                                                                        market maker                                                           penny         non-penny
                                                                                                                                                         volume                                                             classes         classes

                                                1   .......................................................   0.00%–0.05% ............................................................................................           $0.25             $0.29
                                                2   .......................................................   Above 0.05%–0.50% .................................................................................                 0.19              0.23
                                                3   .......................................................   Above 0.50%–1.00% .................................................................................                 0.12              0.16
                                                4   .......................................................   Above 1.00%–1.50% .................................................................................                 0.07              0.11
                                                5   .......................................................   Above 1.50% .............................................................................................           0.05              0.09



                                                   The Market Maker Sliding Scale                                            the other new table will apply to                                       Members and their Affiliates to submit
                                                applies to all Market Makers for                                             Members and their Affiliates that are not                               a greater number of Priority Customer
                                                transactions in all products except mini-                                    included in Priority Customer Rebate                                    Orders to the Exchange. The Exchange
                                                options, with different per-contract                                         Program Volume Tier 3 or higher.                                        is simply deleting this information from
                                                transaction fees established for Penny                                       Currently, the Fee Schedule provides                                    the narrative text in the Fee Schedule
                                                option classes and non-Penny option                                          discounted transaction fees for Members                                 and conveying it more simply and
                                                classes. A Market Maker’s initial $0.25                                      and their qualified Affiliates that                                     clearly in table format. The proposed
                                                per contract rate in Penny classes and                                       achieve certain volume thresholds                                       language ‘‘or higher,’’ which replaces
                                                $0.29 per contract in non-Penny classes                                      through the submission of Priority                                      ‘‘or 4,’’ is intended to account for
                                                is reduced when the Market Maker                                             Customer Orders 6 under the Exchange’s                                  potential additional tiers in the Priority
                                                reaches the volume thresholds set forth                                      Priority Customer Rebate Program.7 The                                  Customer Rebate Program that may be
                                                in the Market Maker Sliding Scale in a                                       current Fee Schedule describes the                                      added in the future.
                                                month. As a Market Maker’s monthly                                           discounted fees in narrative text and                                      The Exchange also proposes to
                                                volume increases, its per contract                                           footnotes to the table. The Exchange is                                 establish new percentage thresholds of
                                                transaction fee decreases when the                                           proposing to delete this narrative text                                 national customer volume in the current
                                                monthly volume thresholds described in                                       and parts of the footnotes to simply                                    Tiers in the Market Maker Sliding Scale.
                                                the Market Maker Sliding Scale are                                           include the discounted transaction fees                                 The new thresholds will be the same in
                                                achieved.                                                                    in the two new tables. The Market                                       each new table. Specifically, the
                                                   The Exchange proposes to amend the                                        Maker sliding scale will continue to                                    Exchange proposes to establish new
                                                Fee Schedule by deleting the current                                         apply to MIAX Market Maker                                              percentage thresholds of national
                                                Market Maker Sliding Scale table, and to                                     transaction fees in all products except                                 customer volume in the Market Maker
                                                create two new tables based upon                                             mini-options. MIAX Market Makers will                                   Sliding Scale as follows: (i) In Tier 1,
                                                volume thresholds in the Priority                                            continue to be assessed a $0.02 per                                     from 0–0.0% to 0–0.075%; (ii) in Tier 2,
                                                Customer Rebate Program 4 applicable to                                      executed contract fee for transactions in                               from above 0.075% to 0.60%; (iii) in
                                                Members and their Affiliates (as defined                                     mini-options. The purpose of basing the                                 Tier 3, from above 0.60% to 1.00%; (iv)
                                                below). One of the new tables will apply                                     proposed two new tables on the volume                                   in Tier 4, from above 1.00% to 1.50%;
                                                to Members and their Affiliates 5 that are                                   thresholds in the Priority Customer                                     and (v) in Tier 5, above 1.50%. These
                                                included in Priority Customer Rebate                                         Rebate Program is to clarify that the                                   Tiers will apply to both new tables. The
                                                Program Volume Tier 3 or higher, and                                         Exchange provides incentives for                                        Exchange notes that a number of other
                                                   3 The term ‘‘Market Maker’’ means any MIAX                                provided the Member meets certain percentage                            ownership between the firms as reflected on each
                                                Market Maker including Registered Market Makers                              thresholds in a month as described in the Priority                      firm’s Form BD, Schedule A. Any Member or its
                                                (‘‘RMMs’’), Primary Lead Market Makers                                       Customer Rebate Program table. See Fee Schedule,                        affiliates of at least 75% common ownership
                                                (‘‘PLMMs’’), Lead Market Makers (‘‘LMMs’’),                                  Section 1)a)iii).                                                       between the firms as reflected on each firm’s Form
                                                Directed Order Lead Market Makers (‘‘DLMMs’’)                                  5 For purposes of the MIAX Options Fee
                                                                                                                                                                                                     BD, Schedule A, that qualifies for Priority Customer
                                                and Directed Primary Lead Market Makers                                      Schedule, the term ‘‘Affiliate’’ means an affiliate of                  Rebate Program volume tiers 3 or 4 will be assessed
                                                (‘‘DPLMMs’’). See Exchange Rule 100. See also Fee                            a Member of at least 75% common ownership                               $0.23 per contract for tier 1, $0.17 per contract for
                                                Schedule, Footnote 1.                                                        between the firms as reflected on each firm’s Form
                                                                                                                                                                                                     tier 2, $0.10 per contract for tier 3, $0.05 per
                                                   4 MIAX credits each Member the per contract                               BD, Schedule A (‘‘Affiliate’’). See proposed new
                                                                                                                                                                                                     contract for tier 4, and $0.03 per contract for tier
                                                amount resulting from each Priority Customer order                           Footnote 1 to the Fee Schedule.
                                                                                                                                                                                                     5 for transactions in standard options in Penny Pilot
                                                transmitted by that Member which is executed                                   6 The term ‘‘Priority Customer’’ means a person
                                                                                                                                                                                                     Classes. Any Member or its affiliates of at least 75%
                                                electronically on the Exchange in all multiply-listed                        or entity that (i) is not a broker or dealer in
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                                                option classes (excluding QCC Orders, mini-                                  securities, and (ii) does not place more than 390                       common ownership between the firms as reflected
                                                options, Priority Customer-to-Priority Customer                              orders in listed options per day on average during                      on each firm’s Form BD, Schedule A, that qualifies
                                                Orders, PRIME AOC Responses, PRIME Contra-side                               a calendar month for its own beneficial account(s).                     for Priority Customer Rebate Program volume tiers
                                                Orders, PRIME Orders for which both the Agency                               A ‘‘Priority Customer Order’’ means an order for the                    3 or 4 will be assessed $0.27 per contract for tier
                                                and Contra-side Order are Priority Customers, and                            account of a Priority Customer. See Exchange Rule                       1, $0.21 per contract for tier 2, $0.14 per contract
                                                executions related to contracts that are routed to                           100.                                                                    for tier 3, $0.09 per contract for tier 4, and $0.07
                                                one or more exchanges in connection with the                                   7 The Exchange will aggregate the trading activity                    per contract for tier 5 for transactions in standard
                                                Options Order Protection and Locked/Crossed                                  of separate MIAX Market Maker firms for purposes                        options in non-Penny Pilot classes. See Fee
                                                Market Plan referenced in MIAX Rule 1400),                                   of the sliding scale if there is at least 75% common                    Schedule Section 1)a)i).



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                                                54164                         Federal Register / Vol. 81, No. 157 / Monday, August 15, 2016 / Notices

                                                exchanges have tiered fee schedules that                    ‘‘makers’’ and Market Makers that are                          typically receive a rebate and ‘‘takers’’
                                                offer different transaction fee rates                       ‘‘takers’’ in Penny and non-Penny                              do not; the Exchange is not proposing a
                                                depending on the monthly average daily                      classes. Market Makers that place                              rebate but instead is simply proposing
                                                volume (‘‘ADV’’) of liquidity providing                     resting liquidity, i.e., quotes or orders                      to assess lower transaction fees to
                                                executions on their facilities.8                            on the MIAX System,9 will be assessed                          ‘‘makers’’ as compared to ‘‘takers.’’ It is,
                                                  The new tables will continue to list                      the ‘‘maker’’ fees described in the new                        however, similar to the manner in
                                                separate per contract transaction fees for                  tables. MIAX Market Makers that                                which other exchanges assess fees for
                                                Penny classes and non-Penny classes.                        execute against resting liquidity will be                      resting market maker liquidity.10
                                                The new tables will also establish, and                     assessed a different, higher ‘‘taker’’ fee.                      The revised Market Maker Sliding
                                                the Exchange will assess, different fees                    This is distinguished from traditional                         Scale proposed by the Exchange will be
                                                to MIAX Market Makers that are                              ‘‘maker-taker’’ models where ‘‘makers’’                        as follows:

                                                           MEMBERS AND THEIR AFFILIATES IN PRIORITY CUSTOMER REBATE PROGRAM VOLUME TIER 3 OR HIGHER
                                                                                                                                                       Per contract fee for penny             Per contract fee for non-penny
                                                                                                                                                                classes                                  classes
                                                                          Tier                      Percentage thresholds
                                                                                                                                                            Maker            Taker                Maker             Taker

                                                All MIAX Mar-                      1    0.00%–0.075% ..........................................                 $0.21              $0.23              $0.25              $0.30
                                                   ket Makers.
                                                                                   2    Above    0.075%–0.60% ..............................                        0.15             0.22                 0.19              0.27
                                                                                   3    Above    0.60%–1.00% ................................                       0.08             0.15                 0.12              0.20
                                                                                   4    Above    1.00%–1.50% ................................                       0.04             0.06                 0.08              0.12
                                                                                   5    Above    1.50% ............................................                 0.02             0.04                 0.06              0.10


                                                        MEMBERS AND THEIR AFFILIATES NOT IN PRIORITY CUSTOMER REBATE PROGRAM VOLUME TIER 3 OR HIGHER
                                                                                                                                                       Per contract fee for penny             Per contract fee for non-penny
                                                                                                                                                                classes                                  classes
                                                                          Tier                      Percentage thresholds
                                                                                                                                                            Maker            Taker                Maker             Taker

                                                All MIAX Mar-                      1    0.00%–0.075% ..........................................                 $0.23              $0.25              $0.27              $0.32
                                                   ket Mak-
                                                   ers 11.
                                                                                   2    Above    0.075%–0.60% ..............................                        0.17             0.24                 0.21              0.29
                                                                                   3    Above    0.60%–1.00% ................................                       0.10             0.17                 0.14              0.22
                                                                                   4    Above    1.00%–1.50% ................................                       0.06             0.08                 0.10              0.14
                                                                                   5    Above    1.50% ............................................                 0.04             0.06                 0.08              0.12



                                                   The Exchange further proposes that                       term ‘‘Affiliate’’ will be used in                             specific volume thresholds and rates
                                                the lower per contract ‘‘maker’’ fee for                    subsequent text and footnotes in the Fee                       were set in order to encourage MIAX
                                                both Penny pilot classes and non-Penny                      Schedule for brevity, clarity and ease of                      Market Makers to reach for higher tiers.
                                                pilot classes will apply to opening                         reference. The Exchange believes this                          The Exchange believes that the
                                                transactions, transactions resulting from                   simplifies and streamlines these                               proposed changes to the tiered fee
                                                quotes that uncross the Away Best Bid                       sections of the Fee Schedule.                                  schedule will cause Market Makers to
                                                or Offer (‘‘ABBO’’) and to any other                           The Exchange believes the proposed                          display their quotes and orders on the
                                                transaction that is not a taker                             changes to the Market Maker Sliding                            Exchange, to improve the price and size
                                                transaction.                                                Scale are objective because the proposed                       of such quotes and orders, and thus
                                                   For clarity and ease of reference, the                   transaction fees are based on the                              increase the volume of contracts traded
                                                Exchange is proposing to define the                         achievement of stated volume                                   on the Exchange.
                                                term ‘‘Affiliate’’ in the Fee Schedule as                   thresholds, and on rewarding Market                              As stated above, the Exchange does
                                                an affiliate of a Member of at least 75%                    Makers that provide liquidity on the                           not propose a change in the
                                                common ownership between the firms                          Exchange with the reduced ‘‘maker’’                            corresponding fees for mini options.
                                                as reflected on each firm’s Form BD,                        transaction fees. The specific volume                          The proposed rule change is scheduled
                                                Schedule A (‘‘Affiliate’’). This definition                 thresholds of the tiers were set based                         to become operative August 1, 2016.
                                                will be included in proposed new                            upon business determinations and an
                                                Footnote 1 to the Fee Schedule, and the                     analysis of current volume levels. The
                                                   8 See Chicago Board Options Exchange,                    fees are similar in that resting ISE liquidity from            lower fee for resting Market Maker liquidity, as ISE
                                                Incorporated (‘‘CBOE’’) Fee Schedule, p. 3; see also        makers is charged lower fees than the fees for                 does today.
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                                                NASDAQ Options Market (‘‘NOM’’) Fees and                    takers. ISE’s maker-taker fees are distinguished from             11 See MIAX Rule 100 for the definition of
                                                Rebates, Chapter XV, Section 2.                             the proposed MIAX maker-taker fees because the                 Registered Market Maker (‘‘RMM’’), Primary Lead
                                                   9 The term ‘‘System’’ means the automated
                                                                                                            ISE maker-taker fee applies to ISE market maker                Market Maker (‘‘PLMM’’) and Lead Market Maker
                                                trading system used by the Exchange for the trading         orders sent to ISE by ISE Electronic Access                    (‘‘LMM’’). Directed Order Lead Market Maker
                                                of securities. See Exchange Rule 100.                                                                                      (‘‘DLMM’’) and Directed Primary Lead Market
                                                                                                            Members, whereas the current Exchange proposal
                                                   10 The Exchange notes that maker-taker pricing                                                                          Maker (‘‘DPLMM’’) are each a party to a transaction
                                                                                                            affords lower maker fees for resting quotes and
                                                has been adopted on at least one other exchange for                                                                        being allocated to the LMM or PLMM and are each
                                                certain classes of options. See, e.g., ISE Schedule of      orders submitted by Market Makers. Despite this                the result of an order that has been directed to the
                                                Fees, Section I. The Exchange’s proposed maker              distinction, the result is that MIAX will charge a             LMM or PLMM.



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                                                                               Federal Register / Vol. 81, No. 157 / Monday, August 15, 2016 / Notices                                             54165

                                                2. Statutory Basis                                          The Exchange believes that the                     liquidity, and such differentiation has
                                                   The Exchange believes that its                        proposed maker-taker model is an                      been accepted as not unfairly
                                                proposal to amend its Fee Schedule is                    important competitive tool for                        discriminatory under the Act.16 The
                                                consistent with Section 6(b) of the Act 12               exchanges and directly or indirectly can              Exchange believes that the
                                                in general, and furthers the objectives of               provide better prices for investors. The              differentiation in pricing between
                                                Section 6(b)(4) of the Act,13 in that it is              proposed fee structure may narrow the                 ‘‘makers’’ and ‘‘takers’’ is appropriate,
                                                an equitable allocation of reasonable                    MIAX Bid and Offer (‘‘MBBO’’) because                 because ‘‘takers’’ remove liquidity and
                                                fees and other charges among Exchange                    the reduced fee for ‘‘makers’’ effectively            benefit disproportionately from their
                                                members, and issuers and other persons                   subsidizes, and thus encourages, the                  executions compared to ‘‘makers,’’
                                                using its facilities, and 6(b)(5) of the                 posting of liquidity. The Exchange                    without assuming the obligations that
                                                Act,14 in that it is designed to prevent                 believes that the reduced ‘‘maker’’ fees              ‘‘makers’’ assume in making continuous,
                                                fraudulent and manipulative acts and                     will also provide MIAX Market Makers                  two-sided markets, and without
                                                practices, to promote just and equitable                 with greater incentive to either match or             engaging in competitive price discovery
                                                principles of trade, to foster cooperation               improve upon the best price displayed                 and improvement in the same manner
                                                and coordination with persons engaged                    on MIAX, all to the benefit of investors              as ‘‘makers.’’ Liquidity removers benefit
                                                in facilitating transactions in securities,              and the public in the form of improved                from the price and size discovery
                                                to remove impediments to and perfect                     execution prices.                                     function that liquidity providers have
                                                the mechanisms of a free and open                           The use of volume-based incentives                 performed in posting their quotations
                                                market and a national market system                      has long been accepted as an equitable                and orders, and when executing against
                                                and, in general, to protect investors and                and not unfairly discriminatory pricing               resting liquidity a ‘‘taker’’ is not taking
                                                the public interest.                                     practice employed at multiple                         the risk of an order or quote sitting
                                                   The proposed fee structure is                         competing options exchanges. In fact,                 unexecuted on the Book. The Exchange
                                                equitable and not unfairly                               the specific volume-based incentives                  believes for these reasons that a ‘‘taker’’
                                                discriminatory because all similarly                     proposed here, a reduced fee for                      fee that is higher than a ‘‘maker’’ fee or
                                                situated MIAX Market Makers are                          providing greater amounts of liquidity                rebate is equitable, reasonable and not
                                                subject to the same fee structure, and                   in Penny and non-Penny options (i.e., in              unfairly discriminatory, and thus
                                                access to the Exchange is offered on                     the Priority Customer Rebate Program),                consistent with the Act.
                                                terms that are not unfairly                              is currently employed by other                           The lower fees charged for providing
                                                discriminatory.                                          exchanges and it has been accepted as                 liquidity have been considered
                                                   Volume-based pricing models such as                   equitable and not unfairly                            beneficial in that attracting this liquidity
                                                those currently maintained and                           discriminatory under the Act.15 The                   benefits all market participants by
                                                proposed on the Exchange have been                       discounted fees for Members and their                 improving the overall quality of trading
                                                widely adopted by options exchanges                      Affiliates that achieve the Tier 3 volume             on the Exchange. The level of
                                                and are equitable because they are open                  threshold or higher are equitable,                    differentiation between the ‘‘maker’’ fee
                                                to all Members on an equal basis and                     reasonable and not unfairly                           and the ‘‘taker’’ fee is also within the
                                                provide additional benefits or discounts                 discriminatory because they provide                   bounds of what has been accepted as
                                                that are reasonably related to the value                 incentive for Members and their                       not unfairly discriminatory under the
                                                of an exchange’s market quality                          Affiliates to submit more orders to the               Act. Finally, the proposed fees will be
                                                associated with higher levels of market                  Exchange, thus enhancing liquidity and                imposed equally among all participants.
                                                activity, such as higher levels of                       removing impediments to and
                                                                                                                                                               B. Self-Regulatory Organization’s
                                                liquidity provision and/or growth                        perfecting the mechanisms of a free and
                                                                                                                                                               Statement on Burden on Competition
                                                patterns, and introduction of higher                     open market and a national market
                                                volumes of orders into the price and                     system. The proposed reduced maker                       The Exchange does not believe that
                                                volume discovery processes.                              fee is equitable and not unfairly                     the proposed rule change will result in
                                                   The Exchange’s proposal to offer a                    discriminatory because it benefits all                any burden on competition that is not
                                                reduced fee to Market Makers that                        market participants by attracting                     necessary or appropriate in furtherance
                                                provide liquidity in Penny and non-                      valuable liquidity to the market and                  of the purposes of the Act. The
                                                Penny options is also equitable and not                  thereby enhancing the quality and                     Exchange believes that the proposed
                                                unfairly discriminatory under the Act.                   efficiency of the MIAX marketplace. The               ‘‘maker-taker’’ model is an important
                                                While distinguished from the traditional                 market participants that post liquidity to            competitive tool for the Exchange and
                                                ‘‘maker-taker’’ fee model under which                    the Book, thereby contributing to price               directly or indirectly can provide better
                                                an exchange pays a per-share rebate to                   discovery and size discovery while                    prices for investors. The proposed fee
                                                their members to encourage them to                       taking the risk of not receiving an                   structure is intended to promote
                                                place resting liquidity-providing quotes                 execution by posting passive liquidity                narrower spreads and greater liquidity
                                                and orders on their trading systems, the                 are justly rewarded with a lower                      at the best prices. The fee-based
                                                instant proposal reflects a substantially                transaction fee.                                      incentives for market participants to
                                                similar fee structure that provides a                       The Exchange’s proposal to charge                  submit liquidity providing orders and
                                                reduced fee for ‘‘makers.’’ If an                        Market Makers who remove liquidity a                  quotes to the Exchange, and thereafter to
                                                execution occurs, rather than giving the                 higher fee is equitable and not unfairly              improve the MBBO to ensure
                                                liquidity providing ‘‘maker’’ a rebate                   discriminatory and follows a similar                  participation, should enable the
                                                and assessing the ‘‘taker’’ that executes                line of reasoning. It is common practice              Exchange to attract, and compete for,
sradovich on DSK3GMQ082PROD with NOTICES




                                                against that resting order a fee, the                    among options exchanges to                            order flow with other exchanges.
                                                Exchange is simply proposing a reduced                   differentiate between fees for adding                    The Exchange notes that it operates in
                                                fee for ‘‘makers’’ as compared to                        liquidity and fees for removing                       a highly competitive market in which
                                                ‘‘takers.’’                                                                                                    market participants can readily favor
                                                                                                            15 See, supra note 8. See also, NOM Fees and
                                                                                                                                                               competing venues if they deem fee
                                                                                                         Rebates, Chapter XV, Section 2, and BATS BZX
                                                  12 15 U.S.C. 78f(b).                                   Exchange Fee Schedule (providing rebates for
                                                                                                                                                               levels at a particular venue to be
                                                  13 15 U.S.C. 78f(b)(4).                                adding liquidity and charging fees for removing
                                                  14 15 U.S.C. 78f(b)(1) and (b)(5).                     liquidity in securities at or above $1.00).             16 Id.




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                                                54166                          Federal Register / Vol. 81, No. 157 / Monday, August 15, 2016 / Notices

                                                excessive. In such an environment, the                   Commission process and review your                     omissions of material fact to his
                                                Exchange must continually adjust its                     comments more efficiently, please use                  advisory clients when he advised them
                                                fees to remain competitive with other                    only one method. The Commission will                   to invest in funds as to which he had
                                                exchanges and to attract order flow. The                 post all comments on the Commission’s                  an economic conflict of interest. For
                                                Exchange believes that the proposed                      Internet Web site (http://www.sec.gov/                 these violations, the ALJ ordered
                                                rule changes reflect this competitive                    rules/sro.shtml). Copies of the                        Grossman to pay a $1.55 million civil
                                                environment because they modify the                      submission, all subsequent                             penalty, to pay approximately $3
                                                Exchange’s fees in a manner that                         amendments, all written statements                     million in disgorgement plus
                                                encourages market participants to                        with respect to the proposed rule                      prejudgment interest, and to cease and
                                                provide liquidity and to send order flow                 change that are filed with the                         desist from further violations of the
                                                to the Exchange.                                         Commission, and all written                            securities laws. The ALJ also barred him
                                                                                                         communications relating to the                         from association with the securities
                                                C. Self-Regulatory Organization’s                        proposed rule change between the
                                                Statement on Comments on the                                                                                    industry.
                                                                                                         Commission and any person, other than
                                                Proposed Rule Change Received From                       those that may be withheld from the                       Respondent appealed, challenging
                                                Members, Participants, or Others                         public in accordance with the                          only the imposition of sanctions. The
                                                  Written comments were neither                          provisions of 5 U.S.C. 552, will be                    issues likely to be considered at oral
                                                solicited nor received.                                  available for Web site viewing and                     argument include, among other things,
                                                                                                         printing in the Commission’s Public                    whether the five year statute of
                                                III. Date of Effectiveness of the                                                                               limitations in 28 U.S.C. 2462 prohibits
                                                                                                         Reference Room, 100 F Street NE.,
                                                Proposed Rule Change and Timing for                      Washington, DC 20549 on official                       us from imposing a civil penalty,
                                                Commission Action                                        business days between the hours of                     disgorgement, industry bar, or cease-
                                                   The foregoing rule change has become                  10:00 a.m. and 3:00 p.m. Copies of such                and-desist order, and, to the extent that
                                                effective pursuant to Section                            filing also will be available for                      it does not, what sanctions, if any, are
                                                19(b)(3)(A)(ii) of the Act,17 and Rule                   inspection and copying at the principal                appropriate in the public interest.
                                                19b–4(f)(2) 18 thereunder. At any time                   office of the Exchange. All comments                      For further information, please
                                                within 60 days of the filing of the                      received will be posted without change;                contact Brent J. Fields from the Office of
                                                proposed rule change, the Commission                     the Commission does not edit personal                  the Secretary at (202) 551–5400.
                                                summarily may temporarily suspend                        identifying information from
                                                such rule change if it appears to the                    submissions. You should submit only                      Dated: August 10, 2016.
                                                Commission that such action is                           information that you wish to make                      Lynn M. Powalski,
                                                necessary or appropriate in the public                   available publicly. All submissions                    Deputy Secretary.
                                                interest, for the protection of investors,               should refer to File Number SR–MIAX–                   [FR Doc. 2016–19455 Filed 8–11–16; 11:15 am]
                                                or otherwise in furtherance of the                       2016–21, and should be submitted on or                 BILLING CODE 8011–01–P
                                                purposes of the Act. If the Commission                   before September 6, 2016.
                                                takes such action, the Commission shall                    For the Commission, by the Division of
                                                institute proceedings to determine                       Trading and Markets, pursuant to delegated             SECURITIES AND EXCHANGE
                                                whether the proposed rule should be                      authority.19                                           COMMISSION
                                                approved or disapproved.                                 Robert W. Errett,
                                                IV. Solicitation of Comments                             Deputy Secretary.                                      [Release No. 34–78510; File No. SR–IEX–
                                                                                                         [FR Doc. 2016–19321 Filed 8–12–16; 8:45 am]            2016–11]
                                                  Interested persons are invited to
                                                                                                         BILLING CODE 8011–01–P
                                                submit written data, views, and
                                                                                                                                                                Self-Regulatory Organizations;
                                                arguments concerning the foregoing,
                                                                                                                                                                Investors Exchange LLC; Notice of
                                                including whether the proposed rule                      SECURITIES AND EXCHANGE                                Filing and Immediate Effectiveness of
                                                change is consistent with the Act.                       COMMISSION                                             Proposed Rule Change To Amend Rule
                                                Comments may be submitted by any of
                                                                                                                                                                11.190(g) Related to Discretionary Peg
                                                the following methods:                                   Sunshine Act Meeting                                   Orders
                                                Electronic Comments                                         Notice is hereby given, pursuant to                 August 9, 2016.
                                                  • Use the Commission’s Internet                        the provisions of the Government in the
                                                comment form (http://www.sec.gov/                        Sunshine Act, Pub. L. 94–409, that the                    Pursuant to Section 19(b)(1) 1 of the
                                                rules/sro.shtml); or                                     Securities and Exchange Commission                     Securities Exchange Act of 1934 (the
                                                  • Send an email to rule-comments@                      will hold an Open Meeting on                           ‘‘Act’’) 2 and Rule 19b–4 thereunder,3
                                                sec.gov. Please include File Number SR–                  Wednesday, August 17, 2016 at 2:00                     notice is hereby given that, on August
                                                MIAX–2016–21 on the subject line.                        p.m., in the Auditorium (L–002) at the                 4, 2016, the Investors Exchange LLC
                                                                                                         Commission’s headquarters building, to                 (‘‘IEX’’ or the ‘‘Exchange’’) filed with the
                                                Paper Comments                                                                                                  Securities and Exchange Commission
                                                                                                         hear oral argument in an appeal from an
                                                  • Send paper comments in triplicate                    initial decision of an administrative law              (the ‘‘Commission’’) the proposed rule
                                                to Brent J. Fields, Secretary, Securities                judge by respondent Larry C. Grossman.                 change as described in Items I and II
                                                and Exchange Commission, 100 F Street                       On December 23, 2014, the ALJ found                 below, which Items have been prepared
                                                NE., Washington, DC 20549–1090.
sradovich on DSK3GMQ082PROD with NOTICES




                                                                                                         that Grossman, the former principal of                 by the self-regulatory organization. The
                                                All submissions should refer to File                     a registered investment adviser, violated              Commission is publishing this notice to
                                                Number SR–MIAX–2016–21. This file                        certain antifraud, broker-dealer, and                  solicit comments on the proposed rule
                                                number should be included on the                         investment adviser provisions of the                   change from interested persons.
                                                subject line if email is used. To help the               federal securities laws by, among other
                                                                                                         things, making misrepresentations and                    1 15 U.S.C. 78s(b)(1).
                                                  17 15 U.S.C. 78s(b)(3)(A)(ii).                                                                                  2 15 U.S.C. 78a.
                                                  18 17 CFR 240.19b–4(f)(2).                               19 17   CFR 200.30–3(a)(12).                           3 17 CFR 240.19b–4.




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Document Created: 2016-08-13 02:22:33
Document Modified: 2016-08-13 02:22:33
CategoryRegulatory Information
CollectionFederal Register
sudoc ClassAE 2.7:
GS 4.107:
AE 2.106:
PublisherOffice of the Federal Register, National Archives and Records Administration
SectionNotices
FR Citation81 FR 54162 

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