82 FR 18045 - Self-Regulatory Organizations; MIAX PEARL, LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend the MIAX PEARL Fee Schedule To Establish an Options Regulatory Fee (“ORF”)

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 82, Issue 71 (April 14, 2017)

Page Range		18045-18048
FR Document		2017-07536
Federal Register, Volume 82 Issue 71 (Friday, April 14, 2017)
[Federal Register Volume 82, Number 71 (Friday, April 14, 2017)]
[Notices]
[Pages 18045-18048]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2017-07536]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-80423; File No. SR-PEARL-2017-15]


Self-Regulatory Organizations; MIAX PEARL, LLC; Notice of Filing 
and Immediate Effectiveness of a Proposed Rule Change To Amend the MIAX 
PEARL Fee Schedule To Establish an Options Regulatory Fee (``ORF'')

April 10, 2017.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on March 30, 2017, MIAX PEARL, LLC (``MIAX PEARL'' or 
``Exchange'') filed with the Securities and Exchange Commission (the 
``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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[[Page 18046]]

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 PEARL Fee 
Schedule (the ``Fee Schedule'') by establishing an Options Regulatory 
Fee (``ORF'').
    The Exchange initially filed the proposal on February 3, 2017 (SR-
PEARL-2017-09).\3\ That filing was withdrawn and replaced with the 
current filing (SR-PEARL-2017-15).
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    \3\ See Securities Exchange Act Release No. 80035 (February 14, 
2017), 82 FR 11272 (February 21, 2017)(SR-PEARL-2017-09).
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    The text of the proposed rule change is available on the Exchange's 
Web site at http://www.miaxoptions.com/rule-filings/pearl, 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 purpose of the proposed rule change is to establish an ORF in 
the amount of $0.0010 per contract side. The per-contract ORF will be 
assessed by MIAX PEARL to each MIAX PEARL Member for all options 
transactions cleared or ultimately cleared by the Member which are 
cleared by the Options Clearing Corporation (``OCC'') in the 
``customer'' range, regardless of the exchange on which the transaction 
occurs. The ORF will be collected either directly from Members or 
indirectly from non-Members that ultimately clear the transaction that 
is subject to the ORF through their clearing firms by OCC on behalf of 
MIAX PEARL.
    To illustrate how the ORF is assessed and collected, the Exchange 
provides the following set of examples. In the case where the 
transaction is executed on the Exchange, the ORF will be assessed to, 
and collected from, the Member who clears the transaction. This is the 
case whether the transaction is (i) both executed and cleared by the 
same Member, or (ii) only cleared by the Member (that is, the executing 
firm is not self-clearing and thus clears through another Exchange 
clearing Member). In the case where the transaction is executed on an 
away exchange, if the transaction is cleared by a Member of the 
Exchange, the ORF will be assessed to, and collected from, the Member 
who clears the transaction. In the case where the transaction is 
executed on an away exchange, if the transaction is cleared by a non-
Member of the Exchange and such non-Member then subsequently ``gives-
up'' or ``CMTAs'' the transaction to a Member of the Exchange (who 
ultimately clears the transaction), the ORF will be assessed to, and 
collected from, the Member who ultimately clears the transaction. 
Further, under certain circumstances, a transaction that is subject to 
the ORF can result in the ORF being collected from a non-Member of the 
Exchange. For example, in the circumstance in which a Member clears a 
transaction and then ``gives-up'' or ``CMTAs'' the trade to a non-
Member of MIAX PEARL (which non-Member becomes the ultimate clearing 
firm for the transaction), MIAX PEARL will collect the ORF from such 
non-Member that ultimately cleared that transaction. However, for the 
avoidance of doubt, in the case where the transaction is executed on an 
away exchange, the Exchange does not assess or collect the ORF when 
neither the clearing firm nor the ultimate clearing firm is a Member 
(even if a Member is ``given-up'' or ``CMTAed'' and then such Member 
subsequently ``gives-up'' or ``CMTAs'' the transaction to another non-
Member via a CMTA reversal). Further, the Exchange will not assess the 
ORF on linkage trades, whether executed at the Exchange or an away 
exchange. A customer order routed to another exchange results in two 
customer trades, one from the originating exchange and one from the 
recipient exchange. Charging ORF on both trades could result in double-
billing of ORF for a single customer order, thus the Exchange chooses 
not to charge ORF on the trade from the originating exchange in a 
linkage scenario. This assessment practice is identical to the 
assessment practice currently utilized by the Exchange's affiliate, 
Miami International Securities Exchange, LLC (``MIAX Options'').
    As a practical matter, when a transaction that is subject to the 
ORF is not executed on the Exchange, the Exchange lacks the information 
necessary to identify the executing member for that transaction. There 
are countless executing market participants, and each day such 
participants can and often do drop their connection to one market 
center and establish themselves as participants on another. For these 
reasons, it is not possible for the Exchange to identify, and thus 
assess fees such as an ORF on, executing participants on away markets 
on a given trading day.
    Clearing members, however, are distinguished from executing 
participants because they remain identified to the Exchange regardless 
of the identity of the initiating executing participant, their 
location, and the market center on which they execute transactions. 
Therefore, the Exchange believes it is more efficient for the operation 
of the Exchange and for the marketplace as a whole to collect the ORF 
from clearing members.
    As discussed below, the Exchange believes it is appropriate to 
charge the ORF only to transactions that clear as customer at the OCC. 
The Exchange believes that its broad regulatory responsibilities with 
respect to a Member's' activities supports applying the ORF to 
transactions cleared but not executed by a Member. The Exchange's 
regulatory responsibilities are the same regardless of whether a Member 
executes a transaction or clears a transaction executed on its behalf. 
The Exchange regularly reviews all such activities, including 
performing surveillance for position limit violations, manipulation, 
front-running, contrary exercise advice violations and insider trading. 
These activities span across multiple exchanges.
    The ORF is designed to recover a material portion of the costs to 
the Exchange of the supervision and regulation of Members' customer 
options business, including performing routine surveillances and 
investigations, as well as policy, rulemaking, interpretive and 
enforcement activities. The Exchange believes that revenue generated 
from the ORF, when combined with all of the Exchange's other regulatory 
fees and fines, will cover a material portion, but not all, of the 
Exchange's regulatory costs. The Exchange notes that its regulatory 
responsibilities with respect to Member compliance with options sales 
practice rules have been allocated to the Financial Industry Regulatory 
Authority (``FINRA'') under a 17d-2 Agreement. The ORF is not designed 
to cover the cost of options sales practice regulation.
    The Exchange will continue to monitor the amount of revenue 
collected from the ORF to ensure that it,

[[Page 18047]]

in combination with its other regulatory fees and fines, does not 
exceed the Exchange's total regulatory costs. The Exchange expects to 
monitor MIAX PEARL regulatory costs and revenues at a minimum on a 
semi-annual basis. If the Exchange determines regulatory revenues 
exceed or are insufficient to cover a material portion of its 
regulatory costs, the Exchange will adjust the ORF by submitting a fee 
change filing to the Commission. The Exchange will notify Members of 
adjustments to the ORF via regulatory circular at least 30 days prior 
to the effective date of the change.
    The Exchange believes it is reasonable and appropriate for the 
Exchange to charge the ORF for options transactions regardless of the 
exchange on which the transactions occur. The Exchange has a statutory 
obligation to enforce compliance by Members and their associated 
persons under the Act and the rules of the Exchange and to surveil for 
other manipulative conduct by market participants (including non-
Members) trading on the Exchange. The Exchange cannot effectively 
surveil for such conduct without looking at and evaluating activity 
across all options markets. Many of the Exchange's market surveillance 
programs require the Exchange to look at and evaluate activity across 
all options markets, such as surveillance for position limit 
violations, manipulation, front-running and contrary exercise advice 
violations/expiring exercise declarations. Also, the Exchange and the 
other options exchanges are required to populate a consolidated options 
audit trail (``COATS'') \4\ system in order to surveil a Member's 
activities across markets.
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    \4\ COATS effectively enhances intermarket options surveillance 
by enabling the options exchanges to reconstruct the market promptly 
to effectively surveil certain rules.
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    In addition to its own surveillance programs, the Exchange works 
with other SROs and exchanges on intermarket surveillance related 
issues. Through its participation in the Intermarket Surveillance Group 
(``ISG''),\5\ the Exchange shares information and coordinates inquiries 
and investigations with other exchanges designed to address potential 
intermarket manipulation and trading abuses. The Exchange's 
participation in ISG helps it to satisfy the requirement that it has 
coordinated surveillance with markets on which security futures are 
traded and markets on which any security underlying security futures 
are traded to detect manipulation and insider trading.\6\
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    \5\ ISG is an industry organization formed in 1983 to coordinate 
intermarket surveillance among the SROs by co-operatively sharing 
regulatory information pursuant to a written agreement between the 
parties. The goal of the ISG's information sharing is to coordinate 
regulatory efforts to address potential intermarket trading abuses 
and manipulations.
    \6\ See Section 6(h)(3)(I) of the Act.
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    The Exchange believes that charging the ORF across markets will 
avoid having Members direct their trades to other markets in order to 
avoid the fee and to thereby avoid paying for their fair share for 
regulation. If the ORF did not apply to activity across markets then a 
Member would send their orders to the least cost, least regulated 
exchange. Other exchanges do impose a similar fee on their member's 
activity, including the activity of those members on MIAX PEARL.\7\
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    \7\ Similar regulatory fees have been instituted by PHLX (See 
Securities Exchange Act Release No. 61133 (December 9, 2009), 74 FR 
66715 (December 16, 2009) (SR-Phlx-2009-100)); ISE (See Securities 
Exchange Act Release No. 61154 (December 11, 2009), 74 FR 67278 
(December 18, 2009) (SR-ISE-2009-105)); and ISE Gemini (See 
Securities Exchange Act Release No. 70200 (August 14, 2013) 78 FR 
51242 (August 20, 2013) (SR-Topaz-2013-01)).
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    The Exchange notes that there is established precedent for an SRO 
charging a fee across markets, namely, FINRAs Trading Activity Fee \8\ 
and the NYSE Amex, NYSE Arca, CBOE, PHLX, ISE, ISE Gemini and BOX ORF. 
While the Exchange does not have all the same regulatory 
responsibilities as FINRA, the Exchange believes that, like other 
exchanges that have adopted an ORF, its broad regulatory 
responsibilities with respect to a Member's activities, irrespective of 
where their transactions take place, supports a regulatory fee 
applicable to transactions on other markets. Unlike FINRA's Trading 
Activity Fee, the ORF would apply only to a Member's customer options 
transactions.
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    \8\ See Securities Exchange Act Release No. 47946 (May 30, 
2003), 68 FR 34021 (June 6, 2003) (SR-NASD-2002-148).
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    Additionally, the Exchange proposes to specify in the Fee Schedule 
that the Exchange may only increase or decrease the ORF semi-annually, 
and any such fee change will be effective on the first business day of 
February or August. In addition to submitting a proposed rule change to 
the Commission as required by the Act to increase or decrease the ORF, 
the Exchange will notify participants via a Regulatory Circular of any 
anticipated change in the amount of the fee at least 30 calendar days 
prior to the effective date of the change. The Exchange believes that 
by providing guidance on the timing of any changes to the ORF, the 
Exchange would make it easier for participants to ensure their systems 
are configured to properly account for the ORF.
2. Statutory Basis
    MIAX PEARL 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 is an equitable allocation of reasonable dues, fees, and other 
charges among its members and issuers and other persons using its 
facilities. 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 the ORF is equitable and not unfairly 
discriminatory because it is objectively allocated to Members in that 
it is charged to all Members on all their transactions that clear as 
customer at the OCC. Moreover, the Exchange believes the ORF ensures 
fairness by assessing fees to those Members that are directly based on 
the amount of customer options business they conduct. Regulating 
customer trading activity is much more labor intensive and requires 
greater expenditure of human and technical resources than regulating 
non-customer trading activity, which tends to be more automated and 
less labor-intensive. As a result, the costs associated with 
administering the customer component of the Exchange's overall 
regulatory program are materially higher than the costs associated with 
administering the non-customer component (e.g., Member proprietary 
transactions) of its regulatory program.
    The ORF is designed to recover a material portion of the costs of 
supervising and regulating Members' customer options business including 
performing routine surveillances, investigations, examinations, 
financial monitoring, and policy, rulemaking, interpretive, and 
enforcement activities. The Exchange will monitor, on at least a semi-
annual basis the amount of revenue collected from the ORF to ensure 
that it, in combination with its other regulatory fees and fines, does 
not exceed the Exchange's total regulatory costs. The Exchange has 
designed the ORF to generate revenues that, when combined with all of 
the Exchange's

[[Page 18048]]

other regulatory fees, will be less than or equal to the Exchange's 
regulatory costs, which is consistent with the Commission's view that 
regulatory fees be used for regulatory purposes and not to support the 
Exchange's business side. In this regard, the Exchange believes that 
the initial level of the fee is reasonable.
    The Exchange believes that the proposal to limit changes to the ORF 
to twice a year on specific dates with advance notice is reasonable 
because it will give participants certainty on the timing of changes, 
if any, and better enable them to properly account for ORF charges 
among their customers. The Exchange believes that the proposed change 
is equitable and not unfairly discriminatory because it will apply in 
the same manner to all Members that are subject to the ORF and provide 
them with additional advance notice of changes to that fee.
    The Exchange believes that the proposal to collect the ORF from 
non-Members under certain circumstances when the transaction that is 
subject to the ORF is executed at an away exchange is an equitable 
allocation of reasonable dues, fees, and other charges among its 
members and issuers and other persons using its facilities. If the 
transaction is subject to the ORF, the Exchange believes that, under 
certain circumstances, it is reasonable and appropriate to collect the 
ORF from non-Members (noting that, as described above, such transaction 
always involves a Member of the Exchange that clears or ultimately 
clears the trade), based on the back office clearing processes of OCC.

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

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act. The ORF is not intended to have 
any impact on competition. Rather, it is designed to enable the 
Exchange to recover a material portion of the Exchange's cost related 
to its regulatory activities. The Exchange is obligated to ensure that 
the amount of regulatory revenue collected from the ORF, in combination 
with its other regulatory fees and fines, does not exceed regulatory 
costs. Unilateral action by MIAX PEARL in establishing fees for 
services provided to its Members and others using its facilities will 
not have an impact on competition. As a new entrant in the already 
highly competitive environment for equity options trading, MIAX PEARL 
does not have the market power necessary to set prices for services 
that are unreasonable or unfairly discriminatory in violation of the 
Act. MIAX PEARL's proposed ORF, as described herein, are comparable to 
fees charged by other options exchanges for the same or similar 
services. The proposal to limit the changes to the ORF to twice a year 
on specific dates with advance notice is not intended to address a 
competitive issue but rather to provide Members with better notice of 
any change that the Exchange may make to the ORF.

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,\12\ and Rule 19b-4(f)(2) \13\ 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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    \12\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \13\ 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 No. SR-PEARL-2017-15 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 No. SR-PEARL-2017-15. 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 No. SR-PEARL-2017-15, and should be 
submitted on or before May 5, 2017.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-07536 Filed 4-13-17; 8:45 am]
 BILLING CODE 8011-01-P
Federal Register / Vol. 82, No. 71 / Friday, April 14, 2017 / Notices 18045

Exchange therefore proposes to C. Self-Regulatory Organization’s communications relating to the
eliminate the LVX section of the Fees Statement on Comments on the proposed rule change between the
Schedule (i.e., the Application fees for Proposed Rule Change Received From Commission and any person, other than
Standard and Enterprise Users and the Members, Participants, or Others those that may be withheld from the
LV Routing Intermediary Fee). The The Exchange neither solicited nor public in accordance with the
Exchange believes eliminating fees from received comments on the proposed provisions of 5 U.S.C. 552, will be
the Fees Schedule that are no longer rule change. available for Web site viewing and
charged by the Exchange will eliminate printing in the Commission’s Public
confusion. III. Date of Effectiveness of the
Proposed Rule Change and Timing for Reference Room, 100 F Street NE.,
2. Statutory Basis Commission Action Washington, DC 20549, on official
business days between the hours of
The Exchange believes the proposed The foregoing rule change has become 10:00 a.m. and 3:00 p.m. Copies of such
rule change is consistent with the effective pursuant to Section 19(b)(3)(A) filing also will be available for
Securities Exchange Act of 1934 (the of the Act 5 and paragraph (f) of Rule
inspection and copying at the principal
‘‘Act’’) and the rules and regulations 19b–4 6 thereunder. At any time within
60 days of the filing of the proposed rule office of the Exchange. All comments
thereunder applicable to the Exchange
and, in particular, the requirements of change, the Commission summarily may received will be posted without change;
Section 6(b) of the Act.3 Specifically, temporarily suspend such rule change if the Commission does not edit personal
the Exchange believes the proposed rule it appears to the Commission that such identifying information from
change is consistent with the Section action is necessary or appropriate in the submissions. You should submit only
6(b)(5) 4 requirements that the rules of public interest, for the protection of information that you wish to make
an exchange be designed to prevent investors, or otherwise in furtherance of available publicly. All submissions
fraudulent and manipulative acts and the purposes of the Act. If the should refer to File Number SR–CBOE–
practices, to promote just and equitable Commission takes such action, the 2017–023 and should be submitted on
principles of trade, to foster cooperation Commission will institute proceedings or before May 5, 2017.
and coordination with persons engaged to determine whether the proposed rule For the Commission, by the Division of
in regulating, clearing, settling, change should be approved or Trading and Markets, pursuant to delegated
processing information with respect to, disapproved. authority.7
and facilitating transactions in IV. Solicitation of Comments Eduardo A. Aleman,
securities, to remove impediments to
Interested persons are invited to Assistant Secretary.
and perfect the mechanism of a free and
open market and a national market submit written data, views, and [FR Doc. 2017–07535 Filed 4–13–17; 8:45 am]
system, and, in general, to protect arguments concerning the foregoing, BILLING CODE 8011–01–P
investors and the public interest. including whether the proposed rule
change is consistent with the Act.
The Exchange believes eliminating
Comments may be submitted by any of SECURITIES AND EXCHANGE
references to (i) classes that are no
the following methods: COMMISSION
longer listed on the Exchange, (ii)
functionality that is no longer offered at Electronic Comments
the Exchange and (iii) fees that will no • Use the Commission’s Internet [Release No. 34–80423; File No. SR–
longer be assessed due to the sale of PEARL–2017–15]
comment form (http://www.sec.gov/
LVX to a third party, will help to avoid rules/sro.shtml); or
confusion, thereby removing Self-Regulatory Organizations; MIAX
• Send an email to rule-comments@
impediments to and perfecting the sec.gov. Please include File Number SR– PEARL, LLC; Notice of Filing and
mechanism of a free and open market CBOE–2017–023 on the subject line. Immediate Effectiveness of a Proposed
and a national market system. Rule Change To Amend the MIAX
Additionally, the Exchange notes that Paper Comments PEARL Fee Schedule To Establish an
no substantive changes are being made • Send paper comments in triplicate Options Regulatory Fee (‘‘ORF’’)
by the proposed rule change. to Brent J. Fields, Secretary, Securities
and Exchange Commission, 100 F Street April 10, 2017.
B. Self-Regulatory Organization’s
Statement on Burden on Competition NE., Washington, DC 20549. Pursuant to Section 19(b)(1) of the
All submissions should refer to File Securities Exchange Act of 1934 (the
The Exchange does not believe that Number SR–CBOE–2017–023. This file ‘‘Act’’),1 and Rule 19b–4 thereunder,2
the proposed rule change will impose number should be included on the notice is hereby given that on March 30,
any burden on intramarket or subject line if email is used. To help the 2017, MIAX PEARL, LLC (‘‘MIAX
intermarket competition that is not Commission process and review your PEARL’’ or ‘‘Exchange’’) filed with the
necessary or appropriate in furtherance comments more efficiently, please use Securities and Exchange Commission
of the purposes of the Act. The only one method. The Commission will (the ‘‘Commission’’) the proposed rule
proposed change to eliminate obsolete post all comments on the Commission’s change as described in Items I, II, and
references to delisted options and fees Internet Web site (http://www.sec.gov/ III below, which Items have been
and functionality no longer offered will rules/sro.shtml). Copies of the prepared by the Exchange. The
alleviate confusion and is not intended
sradovich on DSK3GMQ082PROD with NOTICES

submission, all subsequent Commission is publishing this notice to
for competitive reasons and only applies amendments, all written statements solicit comments on the proposed rule
to CBOE. The Exchange also notes that with respect to the proposed rule
no rights or obligations of Permit change from interested persons.
change that are filed with the
Holders are affected by the change. Commission, and all written
7 17 CFR 200.30–3(a)(12).
3 15 1 15 U.S.C. 78s(b)(1).
U.S.C. 78f(b). 5 15 U.S.C. 78s(b)(3)(A).
4 15 U.S.C. 78f(b)(5). 6 17 CFR 240.19b–4(f). 2 17 CFR 240.19b–4.

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18046 Federal Register / Vol. 82, No. 71 / Friday, April 14, 2017 / Notices

I. Self-Regulatory Organization’s Member who clears the transaction. necessary to identify the executing
Statement of the Terms of Substance of This is the case whether the transaction member for that transaction. There are
the Proposed Rule Change is (i) both executed and cleared by the countless executing market participants,
The Exchange is filing a proposal to same Member, or (ii) only cleared by the and each day such participants can and
Member (that is, the executing firm is often do drop their connection to one
amend the MIAX PEARL Fee Schedule
not self-clearing and thus clears through market center and establish themselves
(the ‘‘Fee Schedule’’) by establishing an
another Exchange clearing Member). In as participants on another. For these
Options Regulatory Fee (‘‘ORF’’).
the case where the transaction is reasons, it is not possible for the
The Exchange initially filed the
executed on an away exchange, if the Exchange to identify, and thus assess
proposal on February 3, 2017 (SR–
transaction is cleared by a Member of fees such as an ORF on, executing
PEARL–2017–09).3 That filing was
the Exchange, the ORF will be assessed participants on away markets on a given
withdrawn and replaced with the
to, and collected from, the Member who trading day.
current filing (SR–PEARL–2017–15). Clearing members, however, are
The text of the proposed rule change clears the transaction. In the case where
the transaction is executed on an away distinguished from executing
is available on the Exchange’s Web site participants because they remain
at http://www.miaxoptions.com/rule- exchange, if the transaction is cleared by
a non-Member of the Exchange and such identified to the Exchange regardless of
filings/pearl, at MIAX’s principal office, the identity of the initiating executing
and at the Commission’s Public non-Member then subsequently ‘‘gives-
up’’ or ‘‘CMTAs’’ the transaction to a participant, their location, and the
Reference Room. market center on which they execute
Member of the Exchange (who
II. Self-Regulatory Organization’s ultimately clears the transaction), the transactions. Therefore, the Exchange
Statement of the Purpose of, and ORF will be assessed to, and collected believes it is more efficient for the
Statutory Basis for, the Proposed Rule from, the Member who ultimately clears operation of the Exchange and for the
Change the transaction. Further, under certain marketplace as a whole to collect the
circumstances, a transaction that is ORF from clearing members.
In its filing with the Commission, the As discussed below, the Exchange
Exchange included statements subject to the ORF can result in the ORF
being collected from a non-Member of believes it is appropriate to charge the
concerning the purpose of and basis for ORF only to transactions that clear as
the proposed rule change and discussed the Exchange. For example, in the
circumstance in which a Member clears customer at the OCC. The Exchange
any comments it received on the believes that its broad regulatory
proposed rule change. The text of these a transaction and then ‘‘gives-up’’ or
‘‘CMTAs’’ the trade to a non-Member of responsibilities with respect to a
statements may be examined at the Member’s’ activities supports applying
places specified in Item IV below. The MIAX PEARL (which non-Member
the ORF to transactions cleared but not
Exchange has prepared summaries, set becomes the ultimate clearing firm for
executed by a Member. The Exchange’s
forth in sections A, B, and C below, of the transaction), MIAX PEARL will
regulatory responsibilities are the same
the most significant aspects of such collect the ORF from such non-Member
regardless of whether a Member
statements. that ultimately cleared that transaction.
executes a transaction or clears a
However, for the avoidance of doubt, in
A. Self-Regulatory Organization’s transaction executed on its behalf. The
the case where the transaction is
Statement of the Purpose of, and the Exchange regularly reviews all such
executed on an away exchange, the
Statutory Basis for, the Proposed Rule activities, including performing
Exchange does not assess or collect the
Change surveillance for position limit
ORF when neither the clearing firm nor
violations, manipulation, front-running,
1. Purpose the ultimate clearing firm is a Member contrary exercise advice violations and
(even if a Member is ‘‘given-up’’ or insider trading. These activities span
The purpose of the proposed rule ‘‘CMTAed’’ and then such Member
change is to establish an ORF in the across multiple exchanges.
subsequently ‘‘gives-up’’ or ‘‘CMTAs’’ The ORF is designed to recover a
amount of $0.0010 per contract side. the transaction to another non-Member
The per-contract ORF will be assessed material portion of the costs to the
via a CMTA reversal). Further, the Exchange of the supervision and
by MIAX PEARL to each MIAX PEARL Exchange will not assess the ORF on
Member for all options transactions regulation of Members’ customer
linkage trades, whether executed at the options business, including performing
cleared or ultimately cleared by the Exchange or an away exchange. A
Member which are cleared by the routine surveillances and investigations,
customer order routed to another as well as policy, rulemaking,
Options Clearing Corporation (‘‘OCC’’) exchange results in two customer trades,
in the ‘‘customer’’ range, regardless of interpretive and enforcement activities.
one from the originating exchange and The Exchange believes that revenue
the exchange on which the transaction one from the recipient exchange.
occurs. The ORF will be collected either generated from the ORF, when
Charging ORF on both trades could combined with all of the Exchange’s
directly from Members or indirectly result in double-billing of ORF for a
from non-Members that ultimately clear other regulatory fees and fines, will
single customer order, thus the cover a material portion, but not all, of
the transaction that is subject to the ORF Exchange chooses not to charge ORF on
through their clearing firms by OCC on the Exchange’s regulatory costs. The
the trade from the originating exchange Exchange notes that its regulatory
behalf of MIAX PEARL. in a linkage scenario. This assessment
To illustrate how the ORF is assessed responsibilities with respect to Member
practice is identical to the assessment compliance with options sales practice
and collected, the Exchange provides practice currently utilized by the
sradovich on DSK3GMQ082PROD with NOTICES

the following set of examples. In the rules have been allocated to the
Exchange’s affiliate, Miami International Financial Industry Regulatory Authority
case where the transaction is executed Securities Exchange, LLC (‘‘MIAX
on the Exchange, the ORF will be (‘‘FINRA’’) under a 17d–2 Agreement.
Options’’). The ORF is not designed to cover the
assessed to, and collected from, the
As a practical matter, when a cost of options sales practice regulation.
3 See Securities Exchange Act Release No. 80035 transaction that is subject to the ORF is The Exchange will continue to
(February 14, 2017), 82 FR 11272 (February 21, not executed on the Exchange, the monitor the amount of revenue
2017)(SR–PEARL–2017–09). Exchange lacks the information collected from the ORF to ensure that it,

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18048 Federal Register / Vol. 82, No. 71 / Friday, April 14, 2017 / Notices

other regulatory fees, will be less than or unfairly discriminatory in violation if email is used. To help the
or equal to the Exchange’s regulatory of the Act. MIAX PEARL’s proposed Commission process and review your
costs, which is consistent with the ORF, as described herein, are comments more efficiently, please use
Commission’s view that regulatory fees comparable to fees charged by other only one method. The Commission will
be used for regulatory purposes and not options exchanges for the same or post all comments on the Commission’s
to support the Exchange’s business side. similar services. The proposal to limit Internet Web site (http://www.sec.gov/
In this regard, the Exchange believes the changes to the ORF to twice a year rules/sro.shtml). Copies of the
that the initial level of the fee is on specific dates with advance notice is submission, all subsequent
reasonable. not intended to address a competitive amendments, all written statements
The Exchange believes that the issue but rather to provide Members with respect to the proposed rule
proposal to limit changes to the ORF to with better notice of any change that the change that are filed with the
twice a year on specific dates with Exchange may make to the ORF. Commission, and all written
advance notice is reasonable because it communications relating to the
will give participants certainty on the C. Self-Regulatory Organization’s proposed rule change between the
timing of changes, if any, and better Statement on Comments on the Commission and any person, other than
enable them to properly account for Proposed Rule Change Received From those that may be withheld from the
ORF charges among their customers. Members, Participants, or Others public in accordance with the
The Exchange believes that the Written comments were neither provisions of 5 U.S.C. 552, will be
proposed change is equitable and not solicited nor received. available for Web site viewing and
unfairly discriminatory because it will printing in the Commission’s Public
apply in the same manner to all III. Date of Effectiveness of the
Reference Room, 100 F Street NE.,
Members that are subject to the ORF and Proposed Rule Change and Timing for Washington, DC 20549, on official
provide them with additional advance Commission Action business days between the hours of
notice of changes to that fee. The foregoing rule change has become 10:00 a.m. and 3:00 p.m. Copies of the
The Exchange believes that the effective pursuant to Section filing also will be available for
proposal to collect the ORF from non- 19(b)(3)(A)(ii) of the Act,12 and Rule inspection and copying at the principal
Members under certain circumstances 19b–4(f)(2) 13 thereunder. At any time office of the Exchange. All comments
when the transaction that is subject to within 60 days of the filing of the received will be posted without change;
the ORF is executed at an away proposed rule change, the Commission the Commission does not edit personal
exchange is an equitable allocation of summarily may temporarily suspend identifying information from
reasonable dues, fees, and other charges such rule change if it appears to the submissions. You should submit only
among its members and issuers and Commission that such action is information that you wish to make
other persons using its facilities. If the necessary or appropriate in the public available publicly. All submissions
transaction is subject to the ORF, the interest, for the protection of investors, should refer to File No. SR–PEARL–
Exchange believes that, under certain or otherwise in furtherance of the 2017–15, and should be submitted on or
circumstances, it is reasonable and purposes of the Act. If the Commission before May 5, 2017.
appropriate to collect the ORF from takes such action, the Commission shall For the Commission, by the Division of
non-Members (noting that, as described institute proceedings to determine Trading and Markets, pursuant to delegated
above, such transaction always involves whether the proposed rule should be authority.14
a Member of the Exchange that clears or approved or disapproved. Eduardo A. Aleman,
ultimately clears the trade), based on the Assistant Secretary.
back office clearing processes of OCC. IV. Solicitation of Comments
[FR Doc. 2017–07536 Filed 4–13–17; 8:45 am]
B. Self-Regulatory Organization’s Interested persons are invited to
BILLING CODE 8011–01–P
Statement on Burden on Competition submit written data, views, and
arguments concerning the foregoing,
The Exchange does not believe that including whether the proposed rule
the proposed rule change will impose SECURITIES AND EXCHANGE
change is consistent with the Act. COMMISSION
any burden on competition not Comments may be submitted by any of
necessary or appropriate in furtherance the following methods: [Release No. 34–80421; File No. SR–CBOE–
of the purposes of the Act. The ORF is 2017–029]
not intended to have any impact on Electronic Comments
Self-Regulatory Organizations;
competition. Rather, it is designed to • Use the Commission’s Internet
enable the Exchange to recover a Chicago Board Options Exchange,
comment form (http://www.sec.gov/
material portion of the Exchange’s cost Incorporated; Notice of Filing of a
rules/sro.shtml); or
related to its regulatory activities. The • Send an email to rule-comments@ Proposed Rule Change Relating to the
Exchange is obligated to ensure that the Automated Improvement Mechanism
sec.gov. Please include File No. SR–
amount of regulatory revenue collected and the Solicitation Auction
PEARL–2017–15 on the subject line.
from the ORF, in combination with its Mechanism
other regulatory fees and fines, does not Paper Comments
April 10, 2017.
exceed regulatory costs. Unilateral • Send paper comments in triplicate Pursuant to Section 19(b)(1) of the
action by MIAX PEARL in establishing to Secretary, Securities and Exchange Securities Exchange Act of 1934 (the
fees for services provided to its Commission, 100 F Street NE.,
sradovich on DSK3GMQ082PROD with NOTICES

‘‘Act’’),1 and Rule 19b–4 thereunder,2
Members and others using its facilities Washington, DC 20549–1090. notice is hereby given that on March 31,
will not have an impact on competition. All submissions should refer to File No. 2017, Chicago Board Options Exchange,
As a new entrant in the already highly SR–PEARL–2017–15. This file number Incorporated (the ‘‘Exchange’’ or
competitive environment for equity should be included on the subject line
options trading, MIAX PEARL does not 14 17 CFR 200.30–3(a)(12).
have the market power necessary to set 12 15 U.S.C. 78s(b)(3)(A)(ii). 1 15 U.S.C. 78s(b)(1).
prices for services that are unreasonable 13 17 CFR 240.19b–4(f)(2). 2 17 CFR 240.19b–4.

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Document Created: 2017-04-14 00:56:26
Document Modified: 2017-04-14 00:56:26
Category		Regulatory Information
Collection		Federal Register
sudoc Class		AE 2.7: GS 4.107: AE 2.106:
Publisher		Office of the Federal Register, National Archives and Records Administration
Section		Notices
FR Citation		82 FR 18045