81 FR 75885 - Self-Regulatory Organizations; Miami International Securities Exchange LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Its Fee Schedule To Adopt Fees and Credits for Transactions Involving Complex Orders
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 81, Issue 211 (November 1, 2016)
Federal Register Volume 81, Issue 211 (November 1, 2016)
| Page Range | 75885-75894 | |
| FR Document | 2016-26297 |
[Federal Register Volume 81, Number 211 (Tuesday, November 1, 2016)] [Notices] [Pages 75885-75894] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2016-26297] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-79157; File No. SR-MIAX-2016-38] Self-Regulatory Organizations; Miami International Securities Exchange LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Its Fee Schedule To Adopt Fees and Credits for Transactions Involving Complex Orders October 26, 2016. Pursuant to the provisions of Section 19(b)(1) of the Securities Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 [[Page 75886]] thereunder,\2\ notice is hereby given that on October 21, 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. --------------------------------------------------------------------------- \1\ 15 U.S.C. 78s(b)(1). \2\ 17 CFR 240.19b-4. --------------------------------------------------------------------------- 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. A. Self-Regulatory Organization's Statement of the Purpose of, and the Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange proposes to amend its Fee Schedule to adopt fees and credits for transactions involving complex orders. The Securities and Exchange Commission (``SEC'' or ``Commission'') recently approved Exchange rules \3\ that authorize and govern the trading of complex orders \4\ on MIAX utilizing the MIAX System.\5\ Accordingly, the Exchange is proposing to adopt certain fees and credits that will apply to Exchange Members \6\ for transactions involving complex orders. All complex order fees will be charged on a per contract per side basis. --------------------------------------------------------------------------- \3\ See Securities Exchange Act Release No. 79072 (October 7, 2016), 81 FR 71131 (October 14, 2016) (SR-MIAX-2016-26). \4\ A ``complex order'' is any order involving the concurrent purchase and/or sale of two or more different options in the same underlying security (the ``legs'' or ``components'' of the complex order), for the same account, in a ratio that is equal to or greater than one-to-three (.333) and less than or equal to three-to-one (3.00) and for the purposes of executing a particular investment strategy. A complex order can also be a ``stock-option'' order, which is an order to buy or sell a stated number of units of an underlying security coupled with the purchase or sale of options contract(s) on the opposite side of the market, subject to certain contingencies set forth in the proposed rules governing complex orders. See Securities Exchange Act Release No. 78620 (August 18, 2016), 81 FR 58770 (August 25, 2016) (SR-MIAX-2016-26). \5\ The term ``System'' means the automated trading system used by the Exchange for the trading of securities. See Exchange Rule 100. \6\ The term ``Member'' means an individual or organization approved to exercise the trading rights associated with a Trading Permit. Members are deemed ``members'' under the Exchange Act. See Exchange Rule 100. --------------------------------------------------------------------------- Market Maker Transaction Fees Section (1)(a)(i) of the Fee Schedule sets forth the Exchange's Market Maker Sliding Scale for Market Maker Transaction Fees (the ``Sliding Scale''). The Sliding Scale assesses a per contract transaction fee on a Market Maker \7\ for the execution of simple orders and quotes (collectively, ``simple orders''). The amount of the transaction fee is based on the Market Maker's percentage of total national market maker volume in an options class that trades on the Exchange during a particular calendar month. The Sliding Scale applies to all Market Makers for transactions in all products (except for mini- options, for which there are separate product fees), with fees established for option classes in the Penny Pilot Program \8\ (``penny option classes'') and separate fees for non-penny option classes. --------------------------------------------------------------------------- \7\ The term ``Market Makers'' refers to Lead Market Makers (``LMMs''), Primary Lead Market Makers (``PLMMs''), and Registered Market Makers (``RMMs'') collectively. See Exchange Rule 100. A Directed Order Lead Market Maker (``DLMM'') and Directed Primary Lead Market Maker (``DPLMM'') is a party to a transaction being allocated to the LMM or PLMM and is the result of an order that has been directed to the LMM or PLMM. See Fee Schedule note 2. \8\ See Securities Exchange Act Release No. 78080 (June 15, 2016), 81 FR 40377 (June 21, 2016) (SR-MIAX-2016-16). --------------------------------------------------------------------------- The Exchange is proposing to use the same Sliding Scale structure to establish per contract transaction fees for executions in complex orders. More specifically, the Exchange is proposing to use the same tiers and percentage thresholds that it uses for the execution of simple orders for the execution of complex orders and quotes (collectively, ``complex orders''), and will aggregate the volume executed by Market Makers in both simple orders and complex orders for purposes of determining the applicable tier and corresponding per contract transaction fee amount.\9\ --------------------------------------------------------------------------- \9\ The calculation of the volume thresholds does not include QCC Orders, PRIME AOC Responses, and PRIME Participating Quotes or Orders. For a discussion of these exclusions, see Securities Exchange Act Release No. 78299 (July 12, 2016), 81 FR 46734 (July 18, 2016) (SR-MIAX-2016-20). --------------------------------------------------------------------------- Since the Exchange will aggregate the number of contracts executed in both simple orders and complex orders in its calculation of the Market Maker's relevant tier, Market Maker transaction fees in both simple orders and complex orders will be incrementally reduced once the Market Maker reaches a higher tier. The Exchange believes that aggregating simple and complex volume will provide a direct benefit to Market Makers, because it provides Market Makers with enhanced potential to lower their incremental transaction fees on the Exchange. Furthermore, it should encourage Market Makers to provide complex order liquidity on the Exchange because their executed volume in complex orders will enhance their ability to achieve discounted transaction fees in simple orders. Since the Exchange provides discounted transaction fees for Members and their qualified Affiliates that achieve certain volume thresholds through the submission of Priority Customer \10\ orders under the Exchange's Priority Customer Rebate Program (``PCRP''),\11\ the Sliding Scale contains two tables: One setting forth the transaction fees applicable to Members and their Affiliates \12\ that are in PCRP volume Tier 3 or higher; and the other setting forth the transaction fees applicable to Members and their Affiliates that are not in PCRP volume [[Page 75887]] Tier 3 or higher. The Exchange is proposing to maintain that same, two table construct, and establish a per contract transaction fee for complex orders per tier level. Although the proposed per transaction fees for complex orders will be included in both tables (i.e., one for Members and their Affiliates that are in PCRP volume Tier 3 or higher and the other for Members and their Affiliates that are not in PCRP volume Tier 3 or higher), the per contract fees for complex orders will be the same in each table. Furthermore, the Exchange is not proposing a different maker and taker fee in each tier for complex orders. Instead, the Exchange will assess one per contract fee for complex orders in each tier for penny option classes, and one per contract fee for complex orders in non-penny option classes, with a surcharge for removing liquidity, as described below. The Exchange believes that, with respect to transaction fees for complex orders, it is appropriate to distinguish between (and thus have different transaction fee amounts for) penny option classes and non-penny option classes, as is the case with the current Fee Schedule for transaction fees for simple orders. Accordingly, the Exchange is proposing separate per contract transaction fees for penny option classes and non-penny option classes for complex orders. Specifically, the Exchange would charge a Market Maker a per contract fee in penny option classes of: $0.25 in Tier 1, $0.19 in Tier 2, $0.12 in Tier 3, $0.07 in Tier 4, $0.05 in Tier 5. The Exchange would charge a Market Maker a per contract fee in non-penny option classes of: $0.29 in Tier 1, $0.23 in Tier 2, $0.16 in Tier 3, $0.11 in Tier 4, $0.09 in Tier 5. --------------------------------------------------------------------------- \10\ 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. \11\ Under the PCRP, 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). \12\ 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 Fee Schedule note 1. --------------------------------------------------------------------------- The proposed Market Maker transaction fees are generally in line with the Market Maker transaction fees charged by other exchanges for executing complex orders.\13\ The Exchange believes that the proposed transaction fees for complex orders are reasonable, and have been set at an initial level that is favorable to Market Makers and are designed to encourage Market Makers to provide complex order liquidity on the Exchange. --------------------------------------------------------------------------- \13\ See, e.g., CBOE Fees Schedule Options Transaction Fees; NASDAQ PHLX LLC (``Phlx'') Pricing Schedule, Section II; International Securities Exchange LLC (``ISE'') Schedule of Fees, Section II. --------------------------------------------------------------------------- For simple orders, the Sliding Scale assesses a per contract transaction fee, which is based upon whether the Market Maker is a ``maker'' or a ``taker.'' \14\ As an incentive for Market Makers to provide liquidity on the Exchange, the Exchange's ``maker'' fees are lower than the ``taker'' fees. The Exchange is not proposing to distinguish between a ``maker'' and a ``taker'' for complex order executions as it does in the traditional construct for simple orders. Rather, the Exchange proposes to adopt a surcharge of $0.08 per executed contract for executions in complex orders assessed to a Market Maker and all other market participants except Priority Customers when it removes liquidity by trading against a Priority Customer order that is resting on the Strategy Book.\15\ Market Maker complex orders resting on the Strategy Book before executing against a Priority Customer order would not be assessed the $0.08 per contract surcharge, as reflected in the below tables. The Exchange believes that this $0.08 surcharge is a reasonable alternative to the maker/taker pricing structure in place for simple orders, and is substantially similar in structure and amount to a CBOE surcharge of the same type.\16\ --------------------------------------------------------------------------- \14\ See Securities Exchange Act Release No. 78519 (August 9, 2016), 81 FR 54162 (August 15, 2016) (SR-MIAX-2016-21). \15\ The ``Strategy Book'' is the Exchange's electronic book of complex orders and complex quotes. See Exchange Rule 518(a)(17). \16\ See CBOE Fees Schedule, Complex Taker Fee, and note 35. The Exchange notes that, although its base fee is slightly higher (with a similar complex fee approach), the Exchange believes that this is fair and equitable because the Exchange offers technology with unique risk mitigation features not available elsewhere, such as the Implied Away Best Bid or Offer (``ixABBO'') Price Protection. See Exchange Rule 518.05(d). --------------------------------------------------------------------------- All fees assessed under the Sliding Scale will be assessed on a per contract/per side basis. The fees will apply to complex orders when those complex orders are matched against other complex orders on the Strategy Book, and will also apply, to the complex side of the trade, when they leg into and match against simple orders in the simple order book. Additionally, for the avoidance of doubt, when legging into the simple order book, the contracts that were entered directly in to the simple order book will be subject to all standard transaction fees, marketing fees, rebates, and credits, as set forth in the Exchange's Fee Schedule and as applicable to simple orders. The revised Market Maker Sliding Scale tables proposed by the Exchange will be as follows (with new text in italics): Members and Their Affiliates \17\ In Priority Customer Rebate Program Volume Tier 3 or Higher -------------------------------------------------------------------------------------------------------------------------------------------------------- Simple Complex ------------------------------------------------------------------------------ Per contract fee Per contract fee Per contract for penny classes for non-penny surcharge for -------------------- classes Per removing -------------------- Per contract liquidity against Tier Percentage thresholds contract fee for a resting fee for non- priority customer Maker * Taker penny penny complex order on Maker * Taker classes classes the strategy book for penny and non- penny classes -------------------------------------------------------------------------------------------------------------------------------------------------------- 1 0.00%-0.075%............ $0.21 $0.23 $0.25 $0.30 $0.25 $0.29 $0.08 2 Above 0.075%-0.60%...... $0.15 $0.22 $0.19 $0.27 $0.19 $0.23 $0.08 All MIAX Market Makers............... 3 Above 0.60%-1.00%....... $0.08 $0.15 $0.12 $0.20 $0.12 $0.16 $0.08 4 Above 1.00%-1.50%....... $0.04 $0.06 $0.08 $0.12 $0.07 $0.11 $0.08 5 Above 1.50%............. $0.02 $0.04 $0.06 $0.10 $0.05 $0.09 $0.08 -------------------------------------------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------- \17\ 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''). [[Page 75888]] Members and Their Affiliates Not In Priority Customer Rebate Program Volume Tier 3 or Higher -------------------------------------------------------------------------------------------------------------------------------------------------------- Simple Complex -------------------------------------------------------------------------------- Per contract fee Per contract fee Per contract for penny classes for non-penny surcharge for -------------------- classes Per Per removing liquidity Tier Percentage thresholds -------------------- contract contract against a resting fee for fee for priority customer penny non- complex order on Maker * Taker Maker * Taker classes penny the strategy book classes for penny and non- penny classes -------------------------------------------------------------------------------------------------------------------------------------------------------- 1 0.00%-0.075%........... $0.23 $0.25 $0.27 $0.32 $0.25 $0.29 $0.08 2 Above 0.075%-0.60%..... $0.17 $0.24 $0.21 $0.29 $0.19 $0.23 $0.08 All MIAX Market Makers.............. 3 Above 0.60%-1.00%...... $0.10 $0.17 $0.14 $0.22 $0.12 $0.16 $0.08 4 Above 1.00%-1.50%...... $0.06 $0.08 $0.10 $0.14 $0.07 $0.11 $0.08 5 Above 1.50%............ $0.04 $0.06 $0.08 $0.12 $0.05 $0.09 $0.08 -------------------------------------------------------------------------------------------------------------------------------------------------------- Other Market Participant Transaction Fees Section (1)(a)(ii) of the Fee Schedule sets forth, in a single table format, transaction fees for Other Market Participants, including Priority Customers, Public Customers \18\ that are not Priority Customers, non-MIAX Market Makers, non-Member Broker-Dealers, and Firms \19\ (the ``Fee Table''). The Fee Table currently assesses on participants that are non-MIAX Market Makers a per contract transaction fee for simple order executions. The Fee Table applies to the listed participants for transactions in all products (except mini-options, for which there are separate product fees), with fees established for penny option classes and separate fees for non-penny option classes. --------------------------------------------------------------------------- \18\ The term ``Public Customer'' means a person that is not a broker or dealer in securities. See Exchange Rule 100. \19\ A ``Firm'' fee is assessed on a MIAX Electronic Exchange Member ``EEM'' that enters an order that is executed for an account identified by the EEM for clearing in the Options Clearing Corporation (``OCC'') ``Firm'' range. See Fee Schedule, Section (1)(a)(ii). --------------------------------------------------------------------------- The Exchange is proposing to use the same Fee Table structure to establish per contract transaction fees for executions in complex orders. The Exchange is also proposing to assess the same per-contract transaction fee amounts that are set forth in the Fee Table for execution of simple orders for the execution of complex orders. Thus, as proposed, a participant would be charged the same fee per contract for executing a complex order as it would for executing a simple order for the same option class for the same participant type. Accordingly, the Exchange would charge a Member: $0.00 per contract per complex order executed in both penny option classes and non-penny option classes for a Priority Customer; $0.47 per contract per complex order executed in a penny option class for a Public Customer that is not a Priority Customer, for a non-MIAX Market Maker, and for a non-Member Broker-Dealer (and $0.75 per contract per complex order executed in a non-penny option class for each of those participant types); $0.45 per contract per complex order executed in a penny option class for a Firm (and $0.75 per contract per complex order executed in a non-penny option class for a Firm). The Exchange believes that the proposed fees for complex orders are reasonable and appropriate because they apply to all similarly situated participants equally. The Exchange's proposal to assess the same fees for simple and complex orders to other market participants (listed in Section (1)(a)(ii) of the Fee Schedule) for complex orders is reasonable and not unfairly discriminatory because the fees apply equally to all similarly situated market participants. Just as with the current fees assessed for simple orders in Section (1)(a)(ii), the PCRP tier discounts will not apply to these participants because Market Makers, who qualify for the discounts, have quoting and other obligations that these other market participants do not have, and the Exchange believes that the PCRP tier discounts are thus equitable and not unfairly discriminatory.\20\ --------------------------------------------------------------------------- \20\ The Commission notes that the Exchange currently offers a discount to the standard option transaction fees for simple orders for Members that qualify for the PCRP volume Tier 3 or higher in Section (1)(a)(ii). The Exchange is not proposing to offer that discount to the standard option transaction fees for complex orders. See footnotes 4, 5, and 8-13 in Section (1)(a)(ii) of the Fee Schedule. --------------------------------------------------------------------------- The Exchange also proposes to assess the same $0.08 per contract surcharge that it assesses on Market Makers for removing liquidity against a resting Priority Customer on the Strategy Book on other market participants, specifically: (i) Public Customers that are not Priority Customers; (ii) non-MIAX Market Makers; (iii) non-Member Broker-Dealers; and (iv) Firms. The purpose of this proposed surcharge is to encourage Members to add liquidity to the Strategy Book, and to recoup costs associated with the execution of complex orders on the Strategy Book. Moreover, the Exchange believes that the proposed fee structure may also narrow the MIAX Bid and Offer (``MBBO'') on the Strategy Book because assessing the surcharge only on participants removing liquidity effectively subsidizes, and thus encourages, the posting of liquidity. The Exchange believes that this fee structure will also provide MIAX Market Makers with greater incentive to either match or improve upon the best price displayed on the Strategy Book, all to the benefit of investors and the public in the form of improved execution prices. The revised Fee Table proposed by the Exchange will be as follows: [[Page 75889]] Other Market Participant Transaction Fees ---------------------------------------------------------------------------------------------------------------- Standard Options Per Contract Mini Options Transaction Fee Surcharge for Transaction Fee for Simple and Removing (per executed Complex Orders Liquidity Against contract) These fees will Types of Other Market (per executed a Resting -------------------- apply to all option Participants contract) Priority Customer classes traded on -------------------- Complex Order on Non- MIAX Non- the Strategy Book Penny Penny Penny Penny for Penny and Non- Classes Classes Classes Classes Penny Classes ---------------------------------------------------------------------------------------------------------------- Priority Customer............... $0.00 $0.00 $0.00 $0.000 $0.000 There is no fee assessed to an Electronic Exchange Member (an ``EEM,'' as defined in MIAX Rule 100) that enters an order that is executed for the account of a Priority Customer. Public Customer that is Not a $0.47 $0.75 $0.08 $0.05 $0.07 This fee is Priority Customer. assessed to an EEM that enters an order that is executed for the account of a Public Customer \21\ that does not meet the criteria for designation as a Priority Customer. This fee will also be charged to an EEM that enters an order for the account of a Public Customer that has elected to be treated as a Voluntary Professional.\22\ Non-MIAX Market Maker........... $0.47 $0.75 $0.08 $0.045 $0.07 This fee is assessed to an EEM that enters an order that is executed for the account of a non- MIAX market maker. A non-MIAX market maker is a market maker registered as such on another options exchange. Non-Member Broker-Dealer........ $0.47 $0.75 $0.08 $0.045 $0.07 This fee is assessed to an EEM that enters an order that (i) is executed for the account of a non- Member Broker- Dealer, and (ii) is identified by the EEM for clearing in the Options Clearing Corporation (``OCC'') ``customer'' range. A non- Member Broker- Dealer is a broker- dealer that is not a member of the OCC, and that is not registered as a Member at MIAX or another options exchange. Firm............................ $0.45 $0.75 $0.08 $0.04 $0.07 This fee is assessed to an EEM that enters an order that is executed for an account identified by the EEM for clearing in the OCC ``Firm'' range. ---------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------- \21\ The term ``Public Customer'' means a person that is not a broker or dealer in securities. See Exchange Rule 100. \22\ The term ``Voluntary Professional'' means any Public Customer that elects, in writing, to be treated in the same manner as a broker or dealer in securities for purposes of Rule 514, as well as the Exchange's schedule of fees. See Exchange Rule 100. --------------------------------------------------------------------------- The Exchange currently offers a discount to the standard option transaction fees for simple orders for Members that qualify for the PCRP volume Tier 3 or higher. The Exchange is not proposing to offer that discount to the standard option transaction fees for complex orders. Thus, the Exchange is proposing to amend Footnotes 4, 5, and 8- 13 in Section (1)(a)(ii) of the Fee Schedule to explicitly state that these discounts only apply for standard options in simple order executions. Additionally, pursuant to Footnote 8 of the Fee Schedule, the Exchange currently assesses Members a $0.48 per contract transaction fee (and a $0.50 per contract transaction fee for non-MIAX market makers) for transactions that occur on or after September 1, 2016 and extending through October 31, 2016 in options overlying EEM, GLD, IWM, QQQ, and SPY. The Exchange is not proposing to apply that transaction fee to complex orders. Thus, the Exchange is proposing to further amend Footnote 8 in Section (1)(a)(ii) of the Fee Schedule to explicitly state that such fees only apply for standard options in simple order executions. Priority Customer Rebate Program The Exchange also proposes to amend the PCRP contained in Section 1)a)iii) of the Fee Schedule by adopting per contract credits for complex orders. Currently, with respect to simple orders, the Exchange credits each Member the per contract amount set forth in the table below 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 volume thresholds in a month as described below. The volume thresholds are calculated based on the customer average daily volume over the course of the month. Volume is recorded for and credits are delivered to the Member that submits the order to the Exchange. The Exchange proposes to extend this per contract credit to executions in complex orders. The Exchange proposes to apply the same volume tier thresholds in the PCRP for complex orders that it [[Page 75890]] currently applies to simple orders. In the same manner that the Exchange proposes to aggregate simple order volume and complex order volume of Market Makers towards the volume tiers in the Sliding Scale, the Exchange proposes to aggregate contract volume for both simple and complex orders in the calculation of the PCRP volume tier threshold applicable to each transaction, and to effect the same exclusions for transactions involving both simple and complex orders, as applicable, with respect to the PCRP volume tier calculation.\23\ --------------------------------------------------------------------------- \23\ MIAX excludes contracts executed as part of QCC Orders, mini-options, Priority Customer-to-Priority Customer Orders, PRIME Agency 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 from this calculation. See Fee Schedule Section 1)a)iii. --------------------------------------------------------------------------- The Exchange proposes to distinguish the amount of the proposed per contract credits in the PCRP for complex orders from the credits currently available to simple orders, except for Tier 1 transactions, for which there would be a $0.00 per contract credit for both simple and complex orders. The proposed per contract credits for complex orders would be: $0.21 for PCRP Tier 2 transactions; $0.24 for PCRP Tier 3 transactions, and $0.25 for PCRP Tier 4 transactions, respectively. The proposed per contract credits for complex orders are greater than the current per contract credits for simple orders. As a new entrant in the complex order marketplace, the Exchange believes that it is appropriate to establish aggressive per contract credits in order to attract order flow in this new segment of the Exchange. For simple orders, the Exchange currently assesses different PCRP credit amounts for executions in the MIAX Select Symbols \24\ versus non-MIAX Select Symbols. The PCRP table in the Fee Schedule will reflect these different credits in simple orders for MIAX Select Symbols versus non-MIAX Select Symbols. The Exchange, however, does not believe it is necessary at this time to distinguish the amount of the proposed PCRP credits for executions in the MIAX Select Symbols versus non-MIAX Select Symbols for complex orders, and thus the per contract credit for complex orders will be the same for transactions involving complex orders in both MIAX Select Symbols and non-MIAX Select Symbols. --------------------------------------------------------------------------- \24\ The term ``MIAX Select Symbols'' means options overlying AA, AAL, AAPL, AIG, AMAT, AMD, AMZN, BA, BABA, BBRY, BIDU, BP, C, CAT, CBS, CELG, CLF, CVX, DAL, EBAY, EEM, FB, FCX, GE, GILD, GLD, GM, GOOGL, GPRO, HAL, HTZ, INTC, IWM, JCP, JNJ, JPM, KMI, KO, MO, MRK, NFLX, NOK, NQ, ORCL, PBR, PFE, PG, QCOM, QQQ, RIG, S, SPY, SUNE, T, TSLA, USO, VALE, VXX, WBA, WFC, WMB, WY, X, XHB, XLE, XLF, XLP, XOM, XOP and YHOO. See Fee Schedule note 14. --------------------------------------------------------------------------- The Exchange is not proposing to establish at this time a price improvement mechanism for complex orders, such as the Exchange has for simple orders, known as MIAX PRIME.\25\ Thus, the Exchange proposes to amend the narrative portion of Section 1)a)iii) to state that, for each Priority Customer order submitted into a PRIME auction as a PRIME agency simple order, MIAX shall credit each Member at the separate per contract rate for PRIME agency simple orders; however, no rebates will be paid if the PRIME agency simple order executes against a contra-side order which is also a Priority Customer. The purpose of this proposed amendment is to explicitly state that these provisions apply only to simple orders, and not to complex orders. --------------------------------------------------------------------------- \25\ The MIAX Price Improvement Mechanism (``PRIME'') is a process by which a Member may electronically submit for execution (``Auction'') an order it represents as agent (``Agency Order'') against principal interest. See Exchange Rule 515A. --------------------------------------------------------------------------- The Exchange currently credits each MIAX ``Qualifying Member'' \26\ $0.03 per contract (except exclusions) \27\ resulting from each Priority Customer order that falls within the PCRP volume Tier 1, as set forth below. The Exchange believes that it is appropriate to extend this credit to complex orders. Thus, the Exchange proposes to amend the narrative portion of Section 1)a)iii) to state that such credits will apply to both simple and complex order executions. --------------------------------------------------------------------------- \26\ A ``Qualifying Member'' is a Member or its Affiliate that qualifies for the Professional Rebate Program and achieves a volume increase in excess of 0.065% for Professional orders transmitted by that Member which are executed electronically on the Exchange in all multiply-listed option classes for the account(s) of a Professional and which qualify for the Professional Rebate Program during a particular month relative to the applicable Baseline Percentage (as defined under the Professional Rebate Program). \27\ MIAX excludes contracts executed as part of QCC Orders, mini-options, Priority Customer-to-Priority Customer Orders, PRIME Agency 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 from this credit. See Fee Schedule Section 1)a)iii. --------------------------------------------------------------------------- The revised PCRP table proposed by the Exchange will be as follows: -------------------------------------------------------------------------------------------------------------------------------------------------------- Percentage thresholds of Per contract Per contract national customer volume in credit for credit for Per contract Per contract Origin Tier multiply- listed options simple orders simple orders credit for credit for classes listed on MIAX in non-MIAX in MIAX select prime agency complex orders (monthly) select symbols symbols order -------------------------------------------------------------------------------------------------------------------------------------------------------- Priority Customer............................ 1 0.00%-0.50%.................... $0.00 $0.00 $0.10 $0.00 2 Above 0.50%-1.20%.............. 0.10 0.10 0.10 0.21 3 Above 1.20%-1.75%.............. 0.15 0.20 0.10 0.24 4 Above 1.75%.................... 0.21 0.24 0.10 0.25 -------------------------------------------------------------------------------------------------------------------------------------------------------- Professional Rebate Program Under the Professional Rebate Program (``PRP''), the Exchange credits each Member the per contract amount listed in the table below resulting from any contracts executed from an order submitted by a Member for the account(s) of a (i) Public Customer that is not a Priority Customer; (ii) non-MIAX Market Maker; (iii) non-Member Broker- Dealer; or (iv) Firm (for purposes of the Professional Rebate Program, ``Professionals''). The Exchange proposes to amend Section 1)a)iv) of the Fee Schedule to include per contract credits for complex orders in the Exchange's PRP. The PRP affords a per contract credit based upon the increase in the total volume submitted by a Member and executed for the account(s) of a Professional on MIAX (not including Excluded Contracts) \28\ during a [[Page 75891]] particular month as a percentage of the total volume reported by the Options Clearing Corporation (``OCC'') in MIAX classes during the same month (the ``Current Percentage''), less the total volume submitted by that Member and executed for the account(s) of a Professional on MIAX (not including Excluded Contracts), during the fourth quarter of 2015 as a percentage of the total volume reported by OCC in MIAX classes during the fourth quarter of 2015 (the ``Baseline Percentage''). The Exchange proposes to use the same volume tier thresholds for complex orders that it currently uses for simple orders, and proposes the following per contract credits to Public Customers that are not a Priority Customer, or are a non-MIAX market maker, non-Member broker- dealer, or Firm: (i) $0.03 Per contract for contracts executed in Tier 1; (ii) $0.05 per contract for contracts executed in Tier 2; and (iii) $0.07 per contract for contracts executed in Tier 3. The current credits for contracts that are part of simple orders will remain unchanged, and the amended table in Section 1(a)iv) will include separate columns, one indicating the credits applicable to contracts from simple orders, and the other indicating the credits applicable to contracts from complex orders. Additionally, proposed amended Section 1)a)iv) will include a clarifying statement that volume for transactions in both simple and complex orders will be aggregated to determine the appropriate volume tier threshold applicable to each transaction. --------------------------------------------------------------------------- \28\ Excluded Contracts are any contracts executed as mini- options, Non-Priority Customer-to-Non-Priority Customer Orders, QCC Orders, PRIME Orders, PRIME AOC Responses, PRIME Contra-side Orders, 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. --------------------------------------------------------------------------- The revised PRP table proposed by the Exchange will be as follows: Professional Rebate Program ---------------------------------------------------------------------------------------------------------------- Percentage thresholds of volume increase in Per contract Per contract multiply-listed options credit (except credit (except Type of market participants eligible Tier (except excluded excluded excluded for rebate contracts) for the contracts) for contracts) for current month compared simple orders complex orders to fourth quarter 2015 ---------------------------------------------------------------------------------------------------------------- Public Customer that is Not a Priority 1 Above 0.00%-0.005%...... $0.10 $0.03 Customer. Non-MIAX Market Maker................. 2 Above 0.005%-0.020%..... 0.15 0.05 Non-Member Broker-Dealer Firm......... 3 Above 0.020%............ 0.20 0.07 ---------------------------------------------------------------------------------------------------------------- Marketing Fee Section 1)b) of the Fee Schedule describes Marketing Fees assessed on all Market Makers for contracts, including mini options, they execute in their assigned classes when the contra-party to the execution is a Priority Customer. The current Marketing Fees are: (i) $0.70 Per contract for transactions in standard option classes ($0.070 per contract for transactions in mini options) that are not penny option classes; and (ii) $0.25 per contract for transactions in standard option classes ($0.025 per contract for transactions in mini options) that are penny option classes. The Exchange proposes to amend Section 1)b) to state that the Marketing Fee applies to contracts in simple and complex order executions, and that the Marketing Fee in complex order executions will be assessed per contract whether the transaction executes in the Strategy Book, a Complex Auction, or by Legging into the simple order book (i.e., regardless of how the complex contracts are executed).\29\ --------------------------------------------------------------------------- \29\ For a discussion of these types of executions, see Securities Exchange Act Release No. 78620 (August 18, 2016), 81 FR 58770 (August 25, 2016) (SR-MIAX-2016-26). --------------------------------------------------------------------------- The Exchange is not proposing to extend the Posted Liquidity Marketing Fee to contracts executed from complex orders. Currently, for transactions that occur on or after September 1, 2016 and extending through October 31, 2016, MIAX assesses an additional $0.12 per contract Posted Liquidity Marketing Fee to all Market Makers for any standard options overlying EEM, GLD, IWM, QQQ and SPY that Market Makers execute in their assigned class when the contra-party to the execution is a Priority Customer and the Priority Customer order was posted on the MIAX order book at the time of the execution. The Exchange proposes to amend Section 1)b) to state that the Posted Liquidity Marketing Fee applies only to contracts from simple order executions. The revised Marketing Fee table proposed by the Exchange will be as follows: ------------------------------------------------------------------------ Amount of marketing fee assessed Option classes ------------------------------------------------------------------------ $0.70 (per contract).............. Simple and complex order t [T]ransactions in Standard Option Classes that are not in the Penny Pilot Program. $0.25 \30\ (per contract)......... Simple and complex order t [T]ransactions in Standard Option Classes that are in the Penny Pilot Program (a List of those Standard Option Classes in the Penny Pilot Program is available on the MIAX Website). $0.070 (per contract)............. Simple and complex order t [T]ransactions in Mini Options where the corresponding Standard Option is not in the Penny Pilot Program. $0.025 (per contract)............. Simple and complex order t [T]ransactions in Mini Options where the corresponding Standard Option is in the Penny Pilot Program (a List of those Standard Option Classes in the Penny Pilot Program is available on the MIAX Website). ------------------------------------------------------------------------ All other aspects of the Marketing Fee program of the Exchange will remain unchanged. The proposed rule changes are scheduled to become operative October 24, 2016. --------------------------------------------------------------------------- \30\ Extending through October 31, 2016, the Exchange will assess an additional $0.12 per contract Posted Liquidity Marketing Fee to all Market Makers for any simple orders in standard options overlying EEM, GLD, IWM, QQQ, and SPY that Market Makers execute in their assigned class when the contra-party to the execution is a Priority Customer and the Priority Customer order was posted on the MIAX Book at the time of the execution. --------------------------------------------------------------------------- [[Page 75892]] 2. Statutory Basis MIAX believes that its proposed rule change is consistent with Section 6(b) of the Act \31\ in general, and in particular, furthers the objectives of Section 6(b)(4) of the Act,\32\ 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,\33\ 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. --------------------------------------------------------------------------- \31\ 15 U.S.C. 78f(b). \32\ 15 U.S.C. 78f(b)(4). \33\ 15 U.S.C. 78f(b)(1) and (b)(5). --------------------------------------------------------------------------- The proposed fee structure is equitable and not unfairly discriminatory because all similarly situated market participants are subject to the same fee and rebate structure for complex order transactions, and access to the Exchange is offered on terms that are not unfairly discriminatory. The inclusion of the number of contracts executed in both simple and complex orders in the calculation of the Market Maker's monthly percentage threshold in Section 1)a)i) is reasonable, equitable and not unfairly discriminatory because it provides a direct and equal fee benefit to Market Makers that trade complex orders. All complex order volume executed will count towards the monthly percentage thresholds required to receive the enumerated discounts in both simple and complex transactions, thus benefiting all Market Makers equally. Furthermore, it should encourage Market Makers to provide liquidity in complex orders on the Exchange because their executed volume in complex orders will enhance their ability to achieve discounted per contract transaction fees in transactions involving both simple and complex orders, thus functioning to remove impediments to and perfect the mechanisms of a free and open market and a national market system. The Exchange's proposal to assess per contract transaction fees to MIAX Market Makers for complex orders in penny option classes and non- penny option classes is reasonable and not unfairly discriminatory because it enhances the ability of Market Makers to achieve volume levels that qualify them for fees in the higher tiers, and equally rewards all Market Makers that achieve the tiers that include even further discounted per contract transaction fees. The amount of the fees in the tiers for complex orders are very similar to the amount of the fees in the tiers for simple orders, therefore the Exchange believes that fee amounts are reasonable and appropriate. The Exchange's proposal to assess the same fees for simple and complex orders to other market participants (listed in Section 1)a)ii of the Fee Schedule) for complex orders is reasonable and not unfairly discriminatory because the fees apply equally to all similarly situated market participants. Just as with the current fees assessed for simple orders in Section 1)a)ii, the PCRP tier discounts will not apply to these participants because Market Makers, who qualify for the discounts, have quoting and other obligations that the listed other market participants do not have and the Exchange believes that the PCRP tier discounts are thus equitable and not unfairly discriminatory.\34\ --------------------------------------------------------------------------- \34\ See supra note 20. --------------------------------------------------------------------------- The Exchange believes that it is reasonable and not unfairly discriminatory to offer discounted fees to Market Makers in simple orders if they fall within PCRP volume Tier 3 or higher, while not discounting the per contract fees for complex orders regardless of their PCRP Tier level. While the Exchange has the ability to justify and determine the level of incentives with respect to simple orders, the Exchange believes it would be premature to offer additional incentives and rewards to Market Makers above what the Exchange is offering until Market Makers actually use the new and value-added complex order functionality. The Exchange will better be able to determine if additional incentives or rewards are warranted, and if so at what level, once Market Makers begin using the new functionality and have established a performance baseline for complex orders. The Exchange's proposal to offer certain credits for complex order transactions under the PCRP and the PRP and to include contracts executed from both simple and complex transactions in the calculation of the various percentage volume thresholds is intended to encourage participants 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 Exchange notes that the proposed per contract credits for the PCRP are higher for complex orders than they are for simple orders, and the per contract credits for the PRP are lower for complex orders than they are for simple orders. The Exchange believes that this is equitable and reasonable because the nature of the two rebate programs (PCRP and PRP) is fundamentally different in structure and purpose. On the one hand, the PCRP rewards executed Priority Customer volume from ``contract-one.'' \35\ This structure is designed to enable the Exchange to compete with the multitude of Priority Customer payment programs, such as maker-taker rebates and payment for order flow programs that are established in the industry. By offering an aggressive incentive for Priority Customer volume beginning on day one, the Exchange believes it can best compete for order flow in complex orders as soon as they become available on the Exchange. --------------------------------------------------------------------------- \35\ The Priority Customer rebate payment will be calculated from the first executed contract at the applicable threshold per contract credit with rebate payments made at the highest achieved volume tier for each contract traded in that month. See Fee Schedule, Section 1)a)iii. --------------------------------------------------------------------------- On the other hand, the PRP credit is aimed at Professional volume executed on the Exchange on an incremental basis. The PRP credit is based on a volume increase above and beyond an established baseline. Because the trading of complex orders on the Exchange represents new functionality and new volume to the Exchange, all complex order volume executed on the Exchange is by its nature incremental. As such, the Exchange believes it is not necessary to provide rewards at the same level to Professional complex orders that it provides for Professional simple orders. The Exchange's proposal to establish and assess a surcharge of $0.08 per contract for Market Makers and other participants for removing liquidity by trading against a Priority Customer order on the Strategy Book is consistent with Section 6(b)(4) of the Act \36\ because it applies equally to all participants that remove Priority Customer liquidity from the Strategy Book, and does not apply to participants whose orders or quotes resting on the Strategy Book are executed against Priority Customer complex orders on the Strategy Book. This incentive for providing resting liquidity applies to all participants. Assessing the surcharge to market participants who take liquidity from Priority Customers is reasonable and not unfairly discriminatory because it will provide MIAX Market Makers with equal surcharges for removing [[Page 75893]] liquidity, and no surcharge for resting liquidity. As stated above, this is substantially similar to a surcharge assessed on another exchange.\37\ The Exchange notes that, although its base fee is slightly higher (with a similar complex fee approach), the Exchange believes that this is fair and equitable because the Exchange offers technology with unique risk mitigation features not available elsewhere, such as the Implied Away Best Bid or Offer (``ixABBO'') Price Protection. See Exchange Rule 518.05(d). --------------------------------------------------------------------------- \36\ 15 U.S.C. 78f(b)(4). \37\ See supra note 16. --------------------------------------------------------------------------- The Exchange's proposal to assess the $.08 surcharge is also consistent with Section 6(b)(5) of the Act \38\ because it perfects the mechanisms of a free and open market and a national market system and protect investors and the public interest by encouraging participants to provide liquidity on the Strategy Book, which the Exchange believes is an important competitive tool that directly or indirectly can provide better prices for investors. The proposed fee structure may narrow the MIAX Bid and Offer (``MBBO'') because not charging the $0.08 surcharge to participants with resting liquidity on the Strategy Book effectively subsidizes, and thus encourages, the posting of liquidity on MIAX. Giving greater incentive for Market Makers to either match or improve upon the best price displayed on MIAX benefits investors and the public by improving execution prices. --------------------------------------------------------------------------- \38\ 15 U.S.C. 78f(b)(1) and (b)(5). --------------------------------------------------------------------------- Non-Priority Customers, non-MIAX Market Makers, broker-dealers and Firms that use sophisticated trading systems will be able to remove liquidity quickly from the Strategy Book, and thus the Exchange believes that assessing the surcharge to participants who remove liquidity, and not assessing the surcharge to participants with complex orders resting on the Strategy Book is reasonable and not unfairly discriminatory. Moreover, the proposed surcharge is substantially similar to the surcharge on CBOE,\39\ and has been accepted as not unfairly discriminatory under the Act.\40\ The Exchange believes for these reasons that the surcharge is equitable, reasonable and not unfairly discriminatory, and thus consistent with the Act. --------------------------------------------------------------------------- \39\ See supra notes 16, 37. \40\ See CBOE Fees Schedule Complex Taker Fee, (describing a per contract, per side surcharge at note 35); see also International Securities Exchange (``ISE'') Schedule of Fees, Section II. ISE's fee structure does not include a specific ``taker surcharge'' in the same manner as CBOE (and which is also proposed by the Exchange) but instead includes a higher taker fee for complex transactions that remove liquidity from the complex order book. --------------------------------------------------------------------------- The proposed assessment of the Marketing Fee for all complex order transactions that are executed by a Market Maker in their assigned classes when the contra-party to the trade is a Priority Customer is equitable and not unfairly discriminatory because the fee will apply equally to all Market Makers in their assigned classes. Further, the assessment of a Marketing Fee for complex transactions is a common practice of other exchanges.\41\ Attracting more order flow to the Exchange will bring greater volume and liquidity which in turn benefits all market participants by providing more trading opportunities and tighter spreads. --------------------------------------------------------------------------- \41\ See CBOE Fees Schedule, p. 4; see also Phlx Pricing Schedule, Section II. --------------------------------------------------------------------------- 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 fee structure for complex order transactions is intended to promote narrower spreads and greater liquidity at the best prices. The fee-based incentives for market participants to provide liquidity by submitting complex orders to the Exchange, and thereafter to improve the MBBO to ensure participation, should enable the Exchange to attract order flow and compete with other exchanges which also provide such incentives to their market participants for similar transactions.\42\ --------------------------------------------------------------------------- \42\ See, e.g., Phlx Pricing Schedule, Section B (Customer Rebate Program). --------------------------------------------------------------------------- The Exchange believes that increased complex order flow will bring greater volume and liquidity which in turn benefits all market participants by providing more trading opportunities and tighter spreads. Therefore, any potential effects that the adoption of the complex transaction fees may have on intra-market competition are justifiable due to the reasons stated above. 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 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,\43\ and Rule 19b-4(f)(2) \44\ 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. --------------------------------------------------------------------------- \43\ 15 U.S.C. 78s(b)(3)(A)(ii). \44\ 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 CommentsUse 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-2016-38 on the subject line. Paper Comments Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090. All submissions should refer to File Number SR-MIAX-2016-38. 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 [[Page 75894]] 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 the filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-MIAX-2016-38, and should be submitted on or before November 22, 2016. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\45\ --------------------------------------------------------------------------- \45\ 17 CFR 200.30-3(a)(12). --------------------------------------------------------------------------- Brent J. Fields, Secretary. [FR Doc. 2016-26297 Filed 10-31-16; 8:45 am] BILLING CODE 8011-01-P
![Federal Register / Vol. 81, No. 211 / Tuesday, November 1, 2016 / Notices 75885
D. Calculation and Notification of the Rules 17Ad–22(b)(1) and (b)(2),10 as C. Consistency With Rule 17Ad–22(b)(2)
Holiday Charge described in detail below. Rule 17Ad–22(b)(2) under the Act
Each Clearing Agency would A. Consistency With Section 17A requires a clearing agency to maintain
determine the appropriate methodology and enforce written policies and
Section 17A(b)(3)(F) of the Act
for calculating the Holiday Charge in procedures reasonably designed to use
requires, in part, that the rules of a
advance of each applicable Holiday. margin requirements to limit its credit
clearing agency be designed to assure
Potential methodologies for calculating exposures to participants under normal
the safeguarding of securities and funds
the Holiday Charge include, for market conditions.14 The Backtesting
that are within the custody or control of
example, time scaling of the VaR Charge and Holiday Charge are
the clearing agency.11 By incorporating
charge 8 or application of stress components of the margin requirement
the Backtesting Charge and Holiday
scenarios that cover potential market that the Clearing Agencies collect from
Charge into the Rules, the proposed
Members, in the form of Required
price risk exposure that may not be changes help protect the Clearing
Deposits, to help limit the Clearing
appropriately covered by scaling the Agencies from potential losses in the
Agencies’ credit exposure to Members
VaR charge. The Clearing Agencies event that a Member defaults.
in normal market conditions. Therefore,
would establish a methodology for Specifically, the Backtesting Charge
the proposed rule changes are consistent
calculating each Holiday Charge that enables the Clearing Agencies to collect
with Rule 17Ad–22(b)(2) under the
would take into consideration the additional funds when their current
Act.15
market conditions prevailing at that margin collections may be insufficient,
time in order to permit the Clearing as indicated by backtesting deficiencies. III. Conclusion
Agencies to calculate a Holiday Charge Meanwhile, the Holiday Charge enables On the basis of the foregoing, the
that appropriately estimates the risk that the Clearing Agencies to collect margin Commission finds that the proposals are
may be presented to the Clearing in advance of Holidays when the consistent with the requirements of the
Agency on the applicable Holiday, Clearing Agencies would be unable to Act and in particular with the
when Members’ Required Deposit collect margin. Therefore, by enabling requirements of Section 17A of the
cannot be collected. The Holiday Charge the Clearing Agencies to better assess Act 16 and the rules and regulations
would represent a percentage increase and collect funds, as the Clearing thereunder.
of the volatility charge on the business Agencies deem necessary, the charges It is therefore ordered, pursuant to
day prior to the Holiday, and such would promote the safeguarding of Section 19(b)(2) of the Act, that
percentage increase applies uniformly to securities and funds that are within the proposed rule changes SR–FICC–2016–
all Members. This means that if the custody or control of the clearing 006 and SR–NSCC–2016–004 be, and
Holiday Charge is levied, the same agency, consistent with the hereby are, APPROVED.17
methodology (i.e., formula) is applied to requirements of the Exchange Act, in
particular Section 17A(b)(3)(F). For the Commission, by the Division of
all Members (that is, the Holiday Charge Trading and Markets, pursuant to delegated
is not a set dollar amount applied to all B. Consistency With Rule 17Ad–22(b)(1) authority.18
Members). Brent J. Fields,
Rule 17Ad–22(b)(1) under the Act
Members would be notified of the Secretary.
requires a clearing agency to establish,
applicable methodology by an Important [FR Doc. 2016–26303 Filed 10–31–16; 8:45 am]
implement, maintain and enforce
Notice issued no later than 10 business
written policies and procedures BILLING CODE 8011–01–P
days prior to the application the
reasonably designed to measure its
Holiday Charge, and the charge is
credit exposures to its participants at
collected on the business day prior to SECURITIES AND EXCHANGE
least once a day and limit its exposures
the applicable Holiday. The Holiday COMMISSION
to potential losses from defaults by its
Charge is removed from the Required
participants under normal market [Release No. 34–79157; File No. SR–MIAX–
Deposit on the business day following
conditions, so that the operations of the 2016–38]
the Holiday.
clearing agency would not be disrupted
II. Discussion and Commission and non-defaulting participants would Self-Regulatory Organizations; Miami
Findings not be exposed to losses that they International Securities Exchange LLC;
cannot anticipate or control.12 The Notice of Filing and Immediate
Section 19(b)(2)(C) of the Act 9 directs Backtesting Charge and Holiday Charge Effectiveness of a Proposed Rule
the Commission to approve a proposed are enhancements to the way the Change To Amend Its Fee Schedule To
rule change of a self-regulatory Clearing Agencies measure their credit Adopt Fees and Credits for
organization if it finds that such exposure to Members and, ultimately, Transactions Involving Complex
proposed rule change is consistent with account for potential increases in Orders
the requirements of the Act and rules exposure by collecting additional
and regulations thereunder applicable to October 26, 2016.
margin, as deemed necessary by the
such organization. The Commission Clearing Agencies, to help limit Pursuant to the provisions of Section
believes the proposal is consistent with potential losses from a Member default 19(b)(1) of the Securities Exchange Act
Section 17A(b)(3)(F) of the Act and in normal market conditions. Therefore, of 1934 (‘‘Act’’) 1 and Rule 19b–4
asabaliauskas on DSK3SPTVN1PROD with NOTICES
the proposed rule changes are consistent 14 17 CFR 240.17Ad–22(b)(2).
8 Market price risk and volatility increase with
with Rule 17Ad–22(b)(1) under the 15 Id.
time as there is a greater potential for loss. This Act.13 16 15 U.S.C. 78q–1.
additional risk exposure is often approximated by
17 In approving the proposed rule change, the
time scaling of volatility by multiplying square root
10 15 U.S.C. 78q–1(b)(3)(F); 17 CFR 240.17Ad–
of the additional period of risk (e.g., if the VaR Commission considered the proposals’ impact on
charge is calibrated to a 3-day risk horizon, an 22(b)(1); 17 CFR 240.17Ad–22(b)(2). efficiency, competition, and capital formation. 15
11 15 U.S.C. 78q–1(b)(3)(F). U.S.C. 78c(f).
additional day of exposure could be approximated
by √4⁄3 VaR charge). 12 17 CFR 240.17Ad–22(b)(1). 18 17 CFR 200.30–3(a)(12).
9 15 U.S.C. 78s(b)(2)(C). 13 Id. 1 15 U.S.C. 78s(b)(1).
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![Federal Register / Vol. 81, No. 211 / Tuesday, November 1, 2016 / Notices 75891
particular month as a percentage of the volume tier thresholds for complex Section 1(a)iv) will include separate
total volume reported by the Options orders that it currently uses for simple columns, one indicating the credits
Clearing Corporation (‘‘OCC’’) in MIAX orders, and proposes the following per applicable to contracts from simple
classes during the same month (the contract credits to Public Customers that orders, and the other indicating the
‘‘Current Percentage’’), less the total are not a Priority Customer, or are a credits applicable to contracts from
volume submitted by that Member and non-MIAX market maker, non-Member complex orders. Additionally, proposed
executed for the account(s) of a broker-dealer, or Firm: (i) $0.03 Per amended Section 1)a)iv) will include a
Professional on MIAX (not including contract for contracts executed in Tier 1; clarifying statement that volume for
Excluded Contracts), during the fourth (ii) $0.05 per contract for contracts transactions in both simple and
quarter of 2015 as a percentage of the executed in Tier 2; and (iii) $0.07 per complex orders will be aggregated to
total volume reported by OCC in MIAX contract for contracts executed in Tier 3. determine the appropriate volume tier
classes during the fourth quarter of 2015 The current credits for contracts that are threshold applicable to each transaction.
(the ‘‘Baseline Percentage’’). The part of simple orders will remain The revised PRP table proposed by
Exchange proposes to use the same unchanged, and the amended table in the Exchange will be as follows:
PROFESSIONAL REBATE PROGRAM
Per contract
Per contract
Percentage thresholds of volume increase in credit (except
credit (except
multiply-listed options (except excluded con- excluded con-
Type of market participants eligible for rebate Tier excluded con-
tracts) for the current month compared to tracts) for
tracts) for sim-
fourth quarter 2015 complex or-
ple orders ders
Public Customer that is Not a Priority Cus- 1 Above 0.00%–0.005% .................................... $0.10 $0.03
tomer.
Non-MIAX Market Maker ................................ 2 Above 0.005%–0.020% .................................. 0.15 0.05
Non-Member Broker-Dealer Firm ................... 3 Above 0.020% ................................................ 0.20 0.07
Marketing Fee proposes to amend Section 1)b) to state MIAX assesses an additional $0.12 per
that the Marketing Fee applies to contract Posted Liquidity Marketing Fee
Section 1)b) of the Fee Schedule contracts in simple and complex order to all Market Makers for any standard
describes Marketing Fees assessed on all executions, and that the Marketing Fee options overlying EEM, GLD, IWM,
Market Makers for contracts, including in complex order executions will be QQQ and SPY that Market Makers
mini options, they execute in their assessed per contract whether the execute in their assigned class when the
assigned classes when the contra-party transaction executes in the Strategy contra-party to the execution is a
to the execution is a Priority Customer. Book, a Complex Auction, or by Legging Priority Customer and the Priority
The current Marketing Fees are: (i) $0.70 into the simple order book (i.e., Customer order was posted on the
Per contract for transactions in standard regardless of how the complex contracts MIAX order book at the time of the
option classes ($0.070 per contract for are executed).29 execution. The Exchange proposes to
transactions in mini options) that are The Exchange is not proposing to amend Section 1)b) to state that the
not penny option classes; and (ii) $0.25 extend the Posted Liquidity Marketing Posted Liquidity Marketing Fee applies
per contract for transactions in standard Fee to contracts executed from complex only to contracts from simple order
option classes ($0.025 per contract for orders. Currently, for transactions that executions. The revised Marketing Fee
transactions in mini options) that are occur on or after September 1, 2016 and table proposed by the Exchange will be
penny option classes. The Exchange extending through October 31, 2016, as follows:
Amount of
marketing fee Option classes
assessed
$0.70 (per contract) ........................ Simple and complex order t [T]ransactions in Standard Option Classes that are not in the Penny Pilot Pro-
gram.
$0.25 30 (per contract) ..................... Simple and complex order t [T]ransactions in Standard Option Classes that are in the Penny Pilot Program
(a List of those Standard Option Classes in the Penny Pilot Program is available on the MIAX Website).
$0.070 (per contract) ...................... Simple and complex order t [T]ransactions in Mini Options where the corresponding Standard Option is not
in the Penny Pilot Program.
$0.025 (per contract) ...................... Simple and complex order t [T]ransactions in Mini Options where the corresponding Standard Option is in
the Penny Pilot Program (a List of those Standard Option Classes in the Penny Pilot Program is avail-
able on the MIAX Website).
asabaliauskas on DSK3SPTVN1PROD with NOTICES
All other aspects of the Marketing Fee unchanged. The proposed rule changes are scheduled to become operative
program of the Exchange will remain October 24, 2016.
routed to one or more exchanges in connection with (August 18, 2016), 81 FR 58770 (August 25, 2016) options overlying EEM, GLD, IWM, QQQ, and SPY
the Options Order Protection and Locked/Crossed (SR–MIAX–2016–26). that Market Makers execute in their assigned class
Market Plan referenced in MIAX Rule 1400. 30 Extending through October 31, 2016, the when the contra-party to the execution is a Priority
29 For a discussion of these types of executions, Exchange will assess an additional $0.12 per Customer and the Priority Customer order was
contract Posted Liquidity Marketing Fee to all posted on the MIAX Book at the time of the
see Securities Exchange Act Release No. 78620
Market Makers for any simple orders in standard execution.
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![75894 Federal Register / Vol. 81, No. 211 / Tuesday, November 1, 2016 / Notices
with respect to the proposed rule FOR FURTHER INFORMATION CONTACT: Effective Date: 10/20/2016.
change that are filed with the Mary Frias, Loan Specialist, Office of Physical Loan Application Deadline
Commission, and all written Financial Assistance, mary.frias@ Date: 12/19/2016.
communications relating to the sba.gov, 202–401–8234, or Curtis B. Economic Injury (EIDL) Loan
proposed rule change between the Rich, Management Analyst, 202–205– Application Deadline Date: 07/20/2017.
Commission and any person, other than 7030, curtis.rich@sba.gov; ADDRESSES: Submit completed loan
those that may be withheld from the SUPPLEMENTARY INFORMATION: applications to: U.S. Small Business
public in accordance with the SBA regulations at 13 CFR, Section Administration, Processing and
provisions of 5 U.S.C. 552, will be 120.830 requires CDCs to submit an Disbursement Center, 14925 Kingsport
available for Web site viewing and annual report which contains financial Road, Fort Worth, TX 76155.
printing in the Commission’s Public statements, operational and FOR FURTHER INFORMATION CONTACT: A.
Reference Room, 100 F Street NE., management information. This Escobar, Office of Disaster Assistance,
Washington, DC 20549, on official information is used by SBA’s district U.S. Small Business Administration,
business days between the hours of offices, Office of Credit Risk 409 3rd Street SW., Suite 6050,
10:00 a.m. and 3:00 p.m. Copies of the Management, and Office of Financial Washington, DC 20416.
filing also will be available for Assistance to obtain information from SUPPLEMENTARY INFORMATION: Notice is
inspection and copying at the principal the CDCs that is used to evaluate hereby given that as a result of the
office of the Exchange. All comments whether CDCs are operating according President’s major disaster declaration on
received will be posted without change; to the statutes, regulations and policies 10/20/2016, Private Non-Profit
the Commission does not edit personal governing the CDC loan program (504 organizations that provide essential
identifying information from program). services of governmental nature may file
submissions. You should submit only disaster loan applications at the address
information that you wish to make Solicitation of Public Comments
listed above or other locally announced
available publicly. All submissions SBA is requesting comments on (a) locations.
should refer to File Number SR–MIAX– Whether the collection of information is The following areas have been
2016–38, and should be submitted on or necessary for the agency to properly determined to be adversely affected by
before November 22, 2016. perform its functions; (b) whether the the disaster:
For the Commission, by the Division of burden estimates are accurate; (c) Primary Counties:
Trading and Markets, pursuant to delegated whether there are ways to minimize the Brantley; Bryan; Bulloch; Camden;
authority.45 burden, including through the use of Candler; Chatham; Effingham; Emanuel;
Brent J. Fields, automated techniques or other forms of Evans; Glynn; Jenkins; Liberty; Long;
Secretary. information technology; and (d) whether Mcintosh; Pierce; Screven; Tattnall;
[FR Doc. 2016–26297 Filed 10–31–16; 8:45 am]
there are ways to enhance the quality, Toombs; Wayne
utility, and clarity of the information. The Interest Rates are:
BILLING CODE 8011–01–P
Summary of Information Collection
Percent
Title: Certified Development
Company (CDC) Annual Report Guide. For Physical Damage:
SMALL BUSINESS ADMINISTRATION Non–Profit Organizations With
Description of Respondents: Small
Business Lending Companies. Credit Available Elsewhere ... 2.625
Data Collection Available for Public Non–Profit Organizations With-
Comments Form Number: SBA Form 1253.
Total Estimated Annual Responses: out Credit Available Else-
where ..................................... 2.625
60-day notice and request for
ACTION: 260. For Economic Injury:
comments. Total Estimated Annual Hour Burden: Non–Profit Organizations With-
7,280. out Credit Available Else-
SUMMARY: The Small Business where ..................................... 2.625
Administration (SBA) intends to request Curtis B. Rich,
approval, from the Office of Management Analyst.
The number assigned to this disaster
Management and Budget (OMB) for the [FR Doc. 2016–26296 Filed 10–31–16; 8:45 am]
for physical damage is 149348 and for
collection of information described BILLING CODE 8025–01–P economic injury is 149358
below. The Paperwork Reduction Act
(Catalog of Federal Domestic Assistance
(PRA) of 1995, 44 U.S.C. Chapter 35 Number 59008)
requires federal agencies to publish a SMALL BUSINESS ADMINISTRATION
notice in the Federal Register [Disaster Declaration # 14934 and # 14935] Lisa Lopez-Suarez,
concerning each proposed collection of Acting Associate Administrator for Disaster
information before submission to OMB, Georgia Disaster # GA–00082 Assistance.
and to allow 60 days for public [FR Doc. 2016–26285 Filed 10–31–16; 8:45 am]
comment in response to the notice. This AGENCY: U.S. Small Business
BILLING CODE 8025–01–P
notice complies with that requirement. Administration.
ACTION: Notice.
DATES: Submit comments on or before
asabaliauskas on DSK3SPTVN1PROD with NOTICES
January 3, 2017. SMALL BUSINESS ADMINISTRATION
SUMMARY: This is a Notice of the
ADDRESSES: Send all comments to Mary Presidential declaration of a major [Disaster Declaration # 14839 and # 14840]
Frias, Loan Specialist, Office of disaster for Public Assistance Only for
Financial Assistance, Small Business the State of GEORGIA (FEMA–4284– California Disaster # CA–00252
Administration, 409 3rd Street, 8th DR), dated 10/20/2016. AGENCY: U.S. Small Business
Floor, Washington, DC 20416. Incident: Hurricane Matthew. Administration
Incident Period: 10/04/2016 through ACTION: Amendment 1.
45 17 CFR 200.30–3(a)(12). 10/15/2016.
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Document Created: 2016-11-01 02:36:50
Document Modified: 2016-11-01 02:36:50
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