81 FR 96133 - 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 Modify the Exchange's Connectivity Fees

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 81, Issue 250 (December 29, 2016)

[Federal Register Volume 81, Number 250 (Thursday, December 29, 2016)]
[Notices]
[Pages 96133-96136]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2016-31481]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-79666; File No. SR-MIAX-2016-47]


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 Modify the Exchange's 
Connectivity Fees

December 22, 2016
    Pursuant to 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 December 13, 2016, Miami International Securities Exchange LLC 
(``MIAX'' or ``Exchange'') filed with the Securities and Exchange 
Commission (``SEC'' or ``Commission'') the 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'') to modify the Exchange's connectivity 
fees.
    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

[[Page 96134]]

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 Fee Schedule regarding 
connectivity to the Exchange.
Network Connectivity Fees
    First, the Exchange proposes to amend Section 5(a) and (b) of the 
Fee Schedule to increase the connectivity fee for the 1 Gigabit 
(``Gb'') fiber connection, the 10 Gb fiber connection, and the 10 Gb 
ultra-low latency (``ULL'') fiber connection, which are charged to both 
Members \3\ and Non-Members of the Exchange.
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    \3\ 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.
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    The Exchange currently offers various bandwidth alternatives for 
connectivity to the Exchange, consisting of a 10Gb ULL fiber 
connection, a 10Gb fiber connection and a 1Gb fiber connection. The 
10Gb ULL offering uses a new ultra-low latency switch, which provides 
faster processing of messages sent to it in comparison to the switch 
used for the other types of connectivity. The Exchange currently 
assesses the following monthly network connectivity fees to both 
Members and non-Members for connectivity to the Exchange's Primary and 
Secondary Facility: (a) $1,000 for the 1Gb connection; (b) $5,000 for 
the 10 Gb connection; and (c) $7,500.00 for the 10Gb ULL connection.
    The Exchange proposes to increase the monthly network connectivity 
fees for such connections for both Members and non-Members as follows: 
(a) From $1,000 to $1,100 for the 1Gb connection; (b) from $5,000 to 
$5,500 for the 10Gb connection; and (c) from $7,500 to $8,500 for the 
10Gb ULL connection. All of the foregoing network connectivity fees 
will continue to be pro-rated based on the number of trading days that 
the Member or non-Member has been credentialed to utilize any of the 
Exchange APIs in a production environment through the applicable 
connection, divided by the total number of trading days in such month 
multiplied by the monthly rate. The 1Gb and 10Gb connectivity fees to 
the Disaster Recovery Facility assessable to both Members and non-
Members shall remain unchanged.
    The Exchange believes that the increase in the pricing of the 
Exchange's connectivity is reflective of the continued value that it 
provides and the increasing costs to the Exchange for providing and 
maintaining the necessary hardware and other infrastructure to support 
this technology. The Exchange notes that other exchanges have similar 
connectivity alternatives for their participants, including similar 
low-latency connectivity. For example, NASDAQ PHLX LLC (``PHLX''), NYSE 
Arca, Inc. (``Arca''), NYSE MKT LLC (``Amex'') and the International 
Securities Exchange, LLC (``ISE'') all offer a 1Gb, 10Gb and 10Gb low 
latency Ethernet connectivity alternative to each of their 
participants.\4\ The Exchange further notes that PHLX, Arca and Amex 
each charge higher rates for such similar connectivity and that the 
Exchange's proposed connectivity fees are within the range of the fees 
charged by the ISE for similar connectivity alternatives.\5\ The 
Exchange believes that it is appropriate to increase its fees charged 
for use of its connectivity to offset increasing costs associated with 
providing and maintaining the necessary hardware and other 
infrastructure to support this technology and also to more closely 
align its fees with the rates charged by competing options exchanges.
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    \4\ See NASDAQ PHLX LLC (``PHLX'') Pricing Schedule, Section 
X(b); see also NYSE Amex Options (``Amex'') Fee Schedule, Section 
V.B, and NYSE Arca Options (``Arca'') Fees and Charges, p. 16; see 
further International Securities Exchange, LLC (``ISE'') Schedule of 
Fees, Section VI.B.
    \5\ Id.
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Port Fees
    Second, the Exchange proposes to amend Section (5)(d)(i) of the Fee 
Schedule to increase the Financial Information Exchange (``FIX'') Port 
fees assessable to Members. A FIX Port is an interface with MIAX 
systems that enables the Port user to submit simple and complex orders 
electronically to MIAX.
    Currently, MIAX assesses monthly FIX Port fees on Members based 
upon the number of FIX Ports used by the Member submitting orders to 
the Exchange. The Exchange currently assesses a fee of $500 per month 
for the first FIX Port, $300 per month for each FIX Port 2 through 5; 
and $100 per month for each additional FIX Port over 5. The FIX Ports 
include access to MIAX's primary and secondary data centers and its 
disaster recovery center.
    Accordingly, the Exchange proposes to increase the fees charged to 
Members for use of FIX Ports. Specifically, the Exchange proposes to: 
(i) Increase the fee for the first FIX Port, from $500 to $550 per 
month; (ii) increase the fee for each FIX Port 2 through 5, from $300 
to $350 per month; and (iii) increase the fee for each FIX Port over 5, 
from $100 to $150 per month. The Exchange notes that a competing 
exchange charges more for the use of similar ports.\6\
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    \6\ See NASDAQ PHLX LLC (``PHLX'') Pricing Schedule, Section VII 
and The NASDAQ Options Market (``NOM'') Pricing Schedule, Chapter 
XV, Section 3. Both PHLX and NOM assess members monthly an Order 
Entry Port Fee of $650 per month per mnemonic.
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    Finally, the Exchange proposes to amend Section 5(d)(ii) of the Fee 
Schedule to increase the fees for MIAX Express Interface (``MEI'') 
Ports to Market Makers assessed for additional Limited Service 
Ports.\7\ The MEI is a connection to MIAX systems that enables Market 
Makers to submit simple and complex electronic quotes to MIAX.
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    \7\ 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 (as defined herein).
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    Currently, MIAX assesses monthly MEI Port Fees on Market Makers 
based upon the number of MIAX matching engines \8\ used by the Market 
Maker. Market Makers are allocated two (2) Full Service MEI Ports \9\ 
and two (2) Limited Service MEI Ports 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

[[Page 96135]]

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.\10\ 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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    \8\ 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.
    \9\ 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.
    \10\ See MIAX Fee Schedule, Section 5(d)(ii).
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    Accordingly, the Exchange proposes to increase the fees charged to 
Market Makers for use of additional Limited Service MEI Ports. 
Specifically, the Exchange proposes to increase the fee for additional 
Limited Service MEI Ports from $50 to $100 per month. The Exchange 
notes that a competing exchange charges more for the use of similar 
ports.\11\
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    \11\ See PHLX Pricing Schedule, Section VII. PHLX assesses 
specialists and market makers an Active SQF Port Fee of $1,250 per 
month, with such total port fees capped at $42,000 per month. See 
also NOM Pricing Schedule, Chapter XV, Section 3. NOM assesses 
Market Makers a monthly SQF Port Fee per port of $500 for the use of 
21 Ports or more.
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    The Exchange proposes to implement the proposed changes to the Fee 
Schedule effective as of January 1, 2017.
2. Statutory Basis
    The Exchange believes that its proposal to amend its Fee Schedule 
is consistent with Section 6(b) of the Act \12\ in general, and 
furthers the objectives of Section 6(b)(4) of the Act \13\ in 
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 \14\ 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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    \12\ 15 U.S.C. 78f(b).
    \13\ 15 U.S.C. 78f(b)(4).
    \14\ 15 U.S.C. 78f(b)(5).
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Network Connectivity Fees
    The Exchange believes that its proposal is consistent with Section 
6(b)(4) of the Act because the fees assessed for connectivity allow the 
Exchange to cover the costs associated with providing and maintaining 
the necessary hardware and other infrastructure to support this 
technology. The Exchange believes that the proposal to increase the 
fees for connectivity alternatives is fair, equitable and not 
unreasonably discriminatory because the increased fees are assessed 
equally among all users of the applicable connections.
    As discussed above, PHLX and ISE each offer different connections 
with respect to latency, and NYSE Arca, Inc. and NYSE Amex both offer 
similar connectivity alternatives.\15\ Despite this, PHLX, Arca and 
Amex charge a higher fee than the Exchange currently charges for 
similar connections and ISE's fees are within the range of that of the 
proposed fees of the Exchange.\16\ For these reasons, the Exchange 
believes the proposed increase in the fees for the fiber connectivity 
to the Exchange is reasonable and not unfairly discriminatory.
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    \15\ See supra note 4.
    \16\ Id.
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    The Exchange also believes that its proposal is consistent with 
Section 6(b)(5) of the Act \17\ because all MIAX participants have the 
opportunity to subscribe to the Exchange's connections. There is also 
no differentiation among MIAX participants with regard to the fees 
charged for these services.
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    \17\ 15 U.S.C. 78f(b)(5).
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Port Fees
    The Exchange believes that its proposal to increase the FIX Port 
fees is consistent with Section 6(b)(4) of the Act and is reasonable, 
equitable and not unfairly discriminatory because Members are free to 
add or remove FIX Ports and will only be charged for the amount of FIX 
Ports that are utilized. The proposed fee is fair and equitable and not 
unreasonably discriminatory because it applies equally to all Members 
regardless of type.
    The Exchange also believes that its proposal is consistent with 
Section 6(b)(5) of the Act \18\ because all similarly situated Members, 
with the same number of FIX Ports, will be subject to the same fee, and 
access to the Exchange is offered on terms that are not unfairly 
discriminatory. The Exchange believes that the proposed fees are 
reasonable in that the rates are within the range of those charged by 
competing options exchanges.
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    \18\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that its proposal to increase the fee for 
additional Limited Service MEI Ports is consistent with Section 6(b)(4) 
of the Act and is reasonable, equitable and not unfairly discriminatory 
because Market Makers are free to add or remove additional Limited 
Service MEI Ports and will only be charged for the number of additional 
Limited Service MEI Ports that are utilized.
    The Exchange also believes that its proposal is consistent with 
Section 6(b)(5) of the Act \19\ because it will be uniformly applied to 
all Market Makers. All similarly situated Market Makers, with the same 
number of additional Limited Service MEI Ports, will be subject to the 
same fee, and access to the Exchange is offered on terms that are not 
unfairly discriminatory. The Exchange believes that the proposed fees 
are reasonable in that the rates are within the range of those charged 
by other competing options exchanges.
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    \19\ 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. On the contrary, 
the Exchange believes that the proposed changes should increase both 
intermarket and intramarket competition. Specifically, the Exchange 
believes that the changes will promote competition by increasing the 
connectivity fees to become more within the range of comparable fees 
assessed by other competing exchanges.\20\
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    \20\ See supra notes 4, 6 and 11.
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    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. The Exchange believes that the 
proposed changes reflect this competitive environment. 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.

[[Page 96136]]

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,\21\ and Rule 19b-4(f)(2) \22\ thereunder. 
At any time within 60 days of the filing of the proposed rule change, 
the Commission summarily may temporarily suspend such rule change if it 
appears to the Commission that such action is necessary or appropriate 
in the public interest, for the protection of investors, or otherwise 
in furtherance of the purposes of the Act. If the Commission takes such 
action, the Commission shall institute proceedings to determine whether 
the proposed rule should be approved or disapproved.
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    \21\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \22\ 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-2016-47 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-MIAX-2016-47. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE., 
Washington, DC 20549 on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of such filing also will be available 
for inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-MIAX-2016-47, and should be 
submitted on or before January 19, 2017.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\23\
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    \23\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2016-31481 Filed 12-28-16; 8:45 am]
 BILLING CODE 8011-01-P