81 FR 76988 - 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 214 (November 4, 2016)

[Federal Register Volume 81, Number 214 (Friday, November 4, 2016)]
[Notices]
[Pages 76988-76990]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2016-26645]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-79198; File No. SR-MIAX-2016-37]


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

October 31, 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 October 17, 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''). While changes to the Fee Schedule 
pursuant to this proposal are effective upon filing, the Exchange has 
designated these changes to be operative on October 17, 2016.
    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 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend the MIAX Options Fee Schedule (the 
``Fee Schedule'') to offer two (2) additional Limited Service MIAX 
Express Interface (``MEI'') Ports to Market Makers.\3\
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    \3\ 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.
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    Currently, MIAX assesses monthly MEI Port Fees on Market Makers 
based upon the number of MIAX matching engines \4\ used by the Market 
Maker. Market Makers are allocated two (2) Full Service MEI Ports \5\ 
and two (2) Limited Service MEI Ports \6\ per matching engine to which 
they connect. The Exchange currently assesses the following MEI Port 
fees: (i) $5,000 for Market Maker Assignments in up to 5 option classes 
or up to 10% of option classes by volume; (ii) $10,000 for Market Maker 
Assignments in up to 10 option classes or up to 20% of option classes 
by volume; (iii) $14,000 for Market Maker Assignments in up to 40 
option classes or up to 35% of option classes by volume; (iv) $17,500 
for Market Maker Assignments in up to 100 option classes or up to 50% 
of option classes by volume; and (v) $20,500.00 for Market Maker 
Assignments in over 100 option classes or over 50% of option classes by 
volume up to all option classes listed on MIAX.\7\ In each of the 
foregoing categories, the stated fee applies if the less of the two 
applicable measurements is met. For example, a Market Maker that wishes 
to make markets in just one symbol would require the two (2) MEI Ports 
in a single matching engine; a Market Maker wishing to make markets in 
all symbols traded on MIAX would require the two (2) MEI Ports in each 
of the Exchange's matching engines. The Exchange also currently charges 
$50 per month for each additional Limited Service MEI Port per matching 
engine for Market Makers over and above the two (2) Limited Service MEI 
Ports per matching engine that are allocated with the Full Service MEI 
Ports. The Full Service MEI Ports, Limited Service MEI Ports, and the 
additional Limited Service MEI Ports all include access to MIAX's 
primary and secondary data centers and its disaster recovery center.
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    \4\ A ``matching engine'' is a part of the MIAX electronic 
system that processes options quotes and trades on a symbol-by-
symbol basis. Some matching engines will process option classes with 
multiple root symbols, and other matching engines will be dedicated 
to one single option root symbol (for example, options on SPY will 
be processed by one single matching engine that is dedicated only to 
SPY). A particular root symbol may only be assigned to a single 
designated matching engine. A particular root symbol may not be 
assigned to multiple matching engines.
    \5\ Full Service MEI Ports provide Market Makers with the 
ability to send Market Maker quotes, eQuotes, and quote purge 
messages to the MIAX System. Full Service MEI Ports are also capable 
of receiving administrative information. Market Makers are limited 
to two Full Service MEI Ports per matching engine.
    \6\ Limited Service MEI Ports provide Market Makers with the 
ability to send eQuotes and quote purge messages only, but not 
Market Maker Quotes, to the MIAX System. Limited Service MEI Ports 
are also capable of receiving administrative information. Market 
Makers initially receive two Limited Service MEI Ports per matching 
engine.
    \7\ See MIAX Fee Schedule, Section 5)d)ii).
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    The Exchange originally added the Limited Service MEI Ports to 
enhance the MEI Port connectivity made available to Market Makers, and 
has subsequently made additional Limited Service MEI Ports available to 
Market

[[Page 76989]]

Makers.\8\ Limited Service MEI Ports have been well received by Market 
Makers since their addition. The Exchange now proposes to offer to 
Market Makers the ability to purchase an additional two (2) Limited 
Service MEI Ports per matching engine over and above the current four 
(4) additional Limited Service MEI Ports per matching engine that are 
available for purchase by Market Makers. The Exchange proposes to 
charge the same amount that it currently charges, $50 per month, for 
each extra Limited Service MEI Port per matching engine. The Exchange 
proposes making a corresponding change to footnote 31 of the Exchange's 
Fee Schedule to specify that Market Makers will now be limited to 
purchasing six (6) additional Limited Service MEI Ports per matching 
engine, for a total of eight (8) per matching engine. All other fees 
related to MEI Ports shall remain unchanged.
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    \8\ See Securities Exchange Act Release Nos. 70137 (August 8, 
2013), 78 FR 49586 (August 14, 2013) (SR-MIAX-2013-39); 70903 
(November 20, 2013), 78 FR 228 [sic] (November 26, 2013) (SR-MIAX-
2013-52); and 78950 (September 27, 2016), 81 FR 68084 (October 3, 
2016) (SR-MIAX-2016-33).
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    The purpose of this amendment to the Fee Schedule is to accommodate 
the Exchange's introduction of complex orders and quotes, as well as to 
provide Market Makers with access to additional functionality to be 
introduced in the future thereby continuing to offer Market Makers 
greater and improved technical flexibility to connect additional 
Limited Service MEI Ports to independent servers that host their eQuote 
and purge functionality. The Exchange believes that the offering of 
additional ports will help Market Makers mitigate the risk of using the 
same server for all of their Market Maker simple and complex quoting. 
By using the additional Limited Service MEI Ports for risk purposes, 
Market Makers can place purge functionality on a different server than 
the Market Maker quoting server (via the Limited Service MEI Ports), 
which provides them a failsafe for getting out of the market in case 
they have an issue with the quote server. Market Makers can also use 
the extra Limited Service MEI Ports to submit eQuotes. Since eQuotes 
are frequently generated by a different algorithm that determines when 
to respond to an auction message, the Exchange believes that the 
offering of additional ports will further enable Market Makers to 
connect to a different server that processes auctions and eQuotes 
rather than forcing them to use their Market Maker Standard quote 
server as a gateway for communicating eQuotes to MIAX.
2. Statutory Basis
    The Exchange believes that its proposal to amend its Fee Schedule 
is consistent with Section 6(b) of the Act \9\ in general, and furthers 
the objectives of Section 6(b)(4) of the Act \10\ in particular, in 
that it provides for the equitable allocation of reasonable dues, fees 
and other charges among members and issuers and other persons using any 
facility or system which the Exchange operates or controls. The 
Exchange also believes the proposal furthers the objectives of Section 
6(b)(5) of the Act \11\ in that it is designed to promote just and 
equitable principles of trade, to remove impediments to and perfect the 
mechanism of a free and open market and a national market system, and, 
in general to protect investors and the public interest and is not 
designed to permit unfair discrimination between customers, issuers, 
brokers and dealers.
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    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(4).
    \11\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that its proposal is consistent with Section 
6(b)(4) of the Act because only Market Makers that decide that they 
need the extra Limited Service MEI Ports will be charged the additional 
fee. The Exchange further believes that the availability of the 
additional Limited Service MEI Ports is equitable and not unfairly 
discriminatory because it further enhances Market Makers' access to the 
MIAX System and consequently enhances the marketplace by helping Market 
Makers to better manage risk, thus preserving the integrity of the MIAX 
markets, all to the benefit of and protection of investors and the 
public as a whole.
    The Exchange also believes that its proposal is consistent with the 
objectives of Section 6(b)(5) of the Act \12\ because the additional 
Limited Service MEI Ports are available to all Market Makers and the 
proposed fees assessable for the additional Limited Service MEI Ports 
apply equally to all Market Makers regardless of type, and access to 
the Exchange is offered on terms that are not unfairly discriminatory. 
The Exchange designed the fee rates in order to provide objective 
criteria for Market Makers of different sizes and business models to be 
assessed a MEI Port fee and to have technical connectivity that best 
matches their quoting activity on the Exchange and the offering of 
additional Limited Service MEI Ports comports with this objective.
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    \12\ 15 U.S.C. 78f(b)(5).
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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 proposal increases both intermarket and intramarket 
competition by enabling Market Makers to enhance their connectivity to 
the Exchange in a manner that is designed to provide Market Makers of 
different sizes and business models to be assessed a MEI Port fee and 
to have technical connectivity that best matches their quoting activity 
on the Exchange and the offering of additional Limited Service MEI 
Ports comports with this objective. The Exchange believes that the 
proposal will increase competition amongst Market Makers of different 
sizes and business models by encouraging Market Makers to connect 
additional Limited Service Ports to independent servers that host their 
eQuote and purge functionality. 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 in order 
to attract market participants to use its services. The Exchange 
believes that the proposal reflects this competitive environment 
because it increases the Exchange's fees in a manner that continues to 
encourage market participants to register as Market Makers on the 
Exchange, to provide liquidity, and to attract order flow. To the 
extent that this purpose is achieved, all the Exchange's market 
participants should benefit from the improved market liquidity.

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,\13\ and Rule 19b-4(f)(2) \14\ thereunder. 
At any time within 60 days of the filing of the proposed rule change, 
the Commission

[[Page 76990]]

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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    \13\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \14\ 17 CFR 240.19b-4(f)(2).
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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-2016-37 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-2016-37. 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 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-2016-37 and should be 
submitted on or before November 25, 2016.
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    \15\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
Brent J. Fields,
Secretary.
[FR Doc. 2016-26645 Filed 11-3-16; 8:45 am]
 BILLING CODE 8011-01-P