83 FR 40595 - 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 83, Issue 158 (August 15, 2018)

Page Range		40595-40599
FR Document		2018-17494
Federal Register, Volume 83 Issue 158 (Wednesday, August 15, 2018)
[Federal Register Volume 83, Number 158 (Wednesday, August 15, 2018)]
[Notices]
[Pages 40595-40599]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2018-17494]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-83813; File No. SR-MIAX-2018-20]


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

August 9, 2018.
    Pursuant to the provisions of Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice 
is hereby given that on July 31, 2018, Miami International Securities 
Exchange LLC (``MIAX Options'' 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'') to delete a fee waiver relating to 
certain market data feed products.
    The text of the proposed rule change is available on the Exchange's 
website at http://www.miaxoptions.com/rule-filings, 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 its Fee Schedule to delete a fee 
waiver relating to certain market data feed products offered by the 
Exchange--namely, the Exchange's Administrative Information Subscriber 
(``AIS'') market data feed, and the Exchange's Top of Market (``ToM'') 
market data feed.
    The ToM market data feed includes data that is identical to the 
data sent to the processor for the Options Price Regulatory Authority 
(``OPRA''). ToM provides real-time updates of the MIAX Best Bid or 
Offer, or MBBO,\3\ price with aggregate orders and quote size of 
contracts that can be displayed, display of Public Customer \4\ 
interest at the MBBO, display of Priority Customer \5\ interest at the 
MBBO, and MIAX Options last sale.\6\ The Exchange launched ToM in early 
2013,\7\ and

[[Page 40596]]

adopted monthly fees shortly thereafter.\8\ The Exchange assesses a 
monthly fee of $1,250.00 for ToM Internal Distributors and a monthly 
fee of $1,750.00 for ToM External Distributors.
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    \3\ The term ``MBBO'' means the best bid or offer on the 
Exchange. See Exchange Rule 100. See also Exchange Rule 506(c)(2).
    \4\ The term ``Public Customer'' means a person that is not a 
broker or dealer in securities. See Exchange Rule 100.
    \5\ 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). See Exchange Rule 
100.
    \6\ See Securities Exchange Act Release No. 69007 (February 28, 
2013), 78 FR 14617 (March 6, 2013) (SR-MIAX-2013-05).
    \7\ See id.
    \8\ See Securities Exchange Act Release No. 69323 (April 5, 
2013), 78 FR 21677 (April 11, 2013) (SR-MIAX-2013-14).
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    The Exchange began offering its AIS market data feed in April 
2013.\9\ The AIS market data feed currently includes administrative 
information for both simple and complex orders. The AIS market data 
feed includes: Simple and complex liquidity seeking event 
notifications, listed series updates, complex strategy definition 
updates, system state, and underlying trading state information. The 
Exchange assesses a monthly fee of $1,250.00 for all AIS Internal 
Distributors and a monthly fee of $1,750.00 for all AIS External 
Distributors. However, the monthly fee for Distributors of AIS is 
presently waived if the Distributor also subscribes to ToM.\10\
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    \9\ See Securities Exchange Act Release No. 69320 (April 5, 
2013), 78 FR 21661 (April 11, 2013) (SR-MIAX-2013-13).
    \10\ See Securities Exchange Act Release No. 73326 (October 9, 
2014), 79 FR 62233 (October 16, 2014) (SR-MIAX-2014-51).
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    Accordingly, under the present operation of the Fee Schedule, a 
subscriber who only subscribes to AIS will be charged the AIS monthly 
fee ($1,250.00 for Internal Distributors and $1,750.00 for External 
Distributors). A subscriber who only subscribes to ToM will be charged 
the ToM monthly fee ($1,250.00 for Internal Distributors and $1,750.00 
for External Distributors). A subscriber who subscribes to both ToM and 
AIS will be charged only the ToM monthly fee ($1,250.00 for Internal 
Distributors and $1,750.00 for External Distributors).
    The Exchange now proposes to delete the fee waiver which entitles a 
subscriber of both ToM and AIS to receive a fee waiver for AIS. 
Accordingly, pursuant to this proposal, a subscriber to both ToM and 
AIS would now be assessed a separate fee for each of the data feeds. A 
subscriber who is an Internal Distributor will now pay $2,500.00 in the 
aggregate, if subscribing to both feeds, and a subscriber who is an 
External Distributor will now pay $3,500.00 in the aggregate, if 
subscribing to both feeds.
    The Exchange is not proposing to modify any other aspect of either 
the AIS market data feed product or the ToM market data feed product. 
The Exchange is solely deleting the fee waiver which presently entitles 
a subscriber of ToM to also receive a subscription to AIS for free.
    The proposed rule change is scheduled to become operative on August 
1, 2018.
2. Statutory Basis
    The Exchange believes that its proposal to amend its Fee Schedule 
is consistent with Section 6(b) \11\ of the Act in general, and 
furthers the objectives of Section 6(b)(4) \12\ of the Act, in that it 
is designed to provide for an equitable allocation of reasonable dues, 
fees and other charges among Exchange Members \13\ and other persons 
using its facilities, because it applies equally to all Members and any 
persons using the facilities or services of the Exchange. The Exchange 
also believes that the proposal furthers the objectives of Section 
6(b)(5) \14\ of the Act in particular, 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, and it is not designed to 
permit unfair discrimination among customers, brokers, or dealers.
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    \11\ 15 U.S.C. 78f(b).
    \12\ 15 U.S.C. 78f(b)(4).
    \13\ 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.
    \14\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that the proposed amendment to delete a fee 
waiver relating to certain market data feed products offered by the 
Exchange--namely, the Exchange's AIS market data feed, and the 
Exchange's ToM market data feed--is reasonable, equitable, and not 
unfairly discriminatory. The Exchange has offered an AIS fee waiver to 
ToM subscribers since the inception of AIS.\15\ The Exchange determined 
to establish and continue the AIS fee waiver for business and 
competitive reasons, in order to encourage ToM subscribers to subscribe 
to the AIS feed. The Exchange now believes that it is appropriate to 
delete the fee waiver, based on a business determination of the number 
of ToM feed and AIS feed subscribers, with the fee waiver having 
achieved the intended result.
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    \15\ See supra note 10.
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    The Exchange anticipates the changes will result in a reasonable 
allocation of its costs and expenses among its Members and other 
persons using its facilities because the proposed fees would enable the 
Exchange to recover the costs associated with providing such 
infrastructure, and with offering access through the network 
connections and access and services, responding to customer requests, 
configuring MIAX Options systems, and administering the various 
services connectivity services. The Exchange believes the proposed fees 
are equitable and not unfairly discriminatory because the new fee 
levels result in a more reasonable and equitable allocation of fees 
amongst non-Members and Members for similar services. Access to the 
Exchange is provided on fair and non-discriminatory terms. Moreover, 
the decision as to whether or not to subscribe to AIS is entirely 
optional to all parties. Potential subscribers are not required to 
purchase the AIS market data feed. Subscribers can discontinue their 
use at any time and for any reason, including due to their assessment 
of the reasonableness of fees charged. The allocation of fees among 
subscribers is fair and reasonable because, if the market deems the 
proposed fees to be unfair or inequitable, firms can diminish or 
discontinue their use of this data.
    In adopting Regulation NMS, the Commission granted self-regulatory 
organizations and broker-dealers increased authority and flexibility to 
offer new and unique market data to the public. It was believed that 
this authority would expand the amount of data available to consumers, 
and also spur innovation and competition for the provision of market 
data:

    [E]fficiency is promoted when broker-dealers who do not need the 
data beyond the prices, sizes, market center identifications of the 
NBBO and consolidated last sale information are not required to 
receive (and pay for) such data when broker-dealers may choose to 
receive (and pay for) additional market data based on their own 
internal analysis of the need for such data.\16\
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    \16\ Securities Exchange Act Release No. 51808 (June 9, 2005), 
70 FR 37496 (June 29, 2005).

    By removing ``unnecessary regulatory restrictions'' on the ability 
of exchanges to sell their own data, Regulation NMS advanced the goals 
of the Act and the principles reflected in its legislative history. If 
the free market should determine whether proprietary data is sold to 
broker-dealers at all, it follows that the price at which such data is 
sold should be set by the market as well.
    In July, 2010, Congress adopted H.R. 4173, the Dodd-Frank Wall 
Street Reform and Consumer Protection Act of 2010 (``Dodd-Frank Act''), 
which amended Section 19 of the Act. Among

[[Page 40597]]

other things, Section 916 of the Dodd-Frank Act amended paragraph (A) 
of Section 19(b)(3) of the Act by inserting the phrase ``on any person, 
whether or not the person is a member of the self-regulatory 
organization'' after ``due, fee or other charge imposed by the self-
regulatory organization.'' As a result, all SRO rule proposals 
establishing or changing dues, fees or other charges are immediately 
effective upon filing regardless of whether such dues, fees or other 
charges are imposed on members of the SRO, non-members, or both. 
Section 916 further amended paragraph (C) of Section 19(b)(3) of the 
Act to read, in pertinent part, ``At any time within the 60-day period 
beginning on the date of filing of such a proposed rule change in 
accordance with the provisions of paragraph (1) [of Section 19(b)], the 
Commission summarily may temporarily suspend the change in the rules of 
the self-regulatory organization made thereby, 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 this title. If the Commission takes such action, the 
Commission shall institute proceedings under paragraph (2)(B) [of 
Section 19(b)] to determine whether the proposed rule should be 
approved or disapproved.''
    The Exchange believes that these amendments to Section 19 of the 
Act reflect Congress's intent to allow the Commission to rely upon the 
forces of competition to ensure that fees for market data are 
reasonable and equitably allocated. Although Section 19(b) had formerly 
authorized immediate effectiveness for a ``due, fee or other charge 
imposed by the self-regulatory organization,'' the Commission adopted a 
policy and subsequently a rule stating that fees for data and other 
products available to persons that are not members of the self-
regulatory organization must be approved by the Commission after first 
being published for comment. At the time, the Commission supported the 
adoption of the policy and the rule by pointing out that unlike 
members, whose representation in self-regulatory organization 
governance was mandated by the Act, non-members should be given the 
opportunity to comment on fees before being required to pay them, and 
that the Commission should specifically approve all such fees. The 
Exchange believes that the amendment to Section 19 reflects Congress's 
conclusion that the evolution of self-regulatory organization 
governance and competitive market structure have rendered the 
Commission's prior policy on non-member fees obsolete. Specifically, 
many exchanges have evolved from member-owned, not-for-profit 
corporations into for-profit, investor-owned corporations (or 
subsidiaries of investor-owned corporations). Accordingly, exchanges no 
longer have narrow incentives to manage their affairs for the exclusive 
benefit of their members, but rather have incentives to maximize the 
appeal of their products to all customers, whether members or non-
members, so as to broaden distribution and grow revenues. Moreover, the 
Exchange believes that the change also reflects an endorsement of the 
Commission's determinations that reliance on competitive markets is an 
appropriate means to ensure equitable and reasonable prices. Simply 
put, the change reflects a presumption that all fee changes should be 
permitted to take effect immediately, since the level of all fees are 
constrained by competitive forces. The Exchange therefore believes that 
the fees for AIS are properly assessed on Internal and External 
Distributors.
    The decision of the United States Court of Appeals for the District 
of Columbia Circuit in NetCoaliton v. SEC, No. 09-1042 (D.C. Cir. 
2010), although reviewing a Commission decision made prior to the 
effective date of the Dodd-Frank Act, upheld the Commission's reliance 
upon competitive markets to set reasonable and equitably allocated fees 
for market data:

    ``In fact, the legislative history indicates that the Congress 
intended that the market system `evolve through the interplay of 
competitive forces as unnecessary regulatory restrictions are 
removed' and that the SEC wield its regulatory power `in those 
situations where competition may not be sufficient,' such as in the 
creation of a `consolidated transactional reporting system.' '' \17\
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    \17\ NetCoaltion, at 15 (quoting H.R. Rep. No. 94-229, at 92 
(1975), as reprinted in 1975 U.S.C.C.A.N. 321, 323).

    The court's conclusions about Congressional intent are therefore 
reinforced by the Dodd-Frank Act amendments, which create a presumption 
that exchange fees, including market data fees, may take effect 
immediately, without prior Commission approval, and that the Commission 
should take action to suspend a fee change and institute a proceeding 
to determine whether the fee change should be approved or disapproved 
only where the Commission has concerns that the change may not be 
consistent with the Act.

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. Notwithstanding 
its determination that the Commission may rely upon competition to 
establish fair and equitably allocated fees for market data, the 
NetCoalition Court found that the Commission had not, in that case, 
compiled a record that adequately supported its conclusion that the 
market for the data at issue in the case was competitive. The Exchange 
believes that a record may readily be established to demonstrate the 
competitive nature of the market in question.
    The market for data products is extremely competitive and users may 
freely choose alternative venues and data vendors based on the 
aggregate fees assessed, the data offered, and the value provided. 
Numerous exchanges compete with each other for listings, trades, and 
market data itself, providing virtually limitless opportunities for 
entrepreneurs who wish to produce and distribute their own market data. 
Transaction execution and proprietary data products are complementary 
in that market data is both an input and a byproduct of the execution 
service. In fact, market data and trade execution are a paradigmatic 
example of joint products with joint costs. The decision whether and on 
which platform to post an order will depend on the attributes of the 
platform where the order can be posted, including the execution fees, 
data quality and price, and distribution of its data products. Without 
trade executions, exchange data products cannot exist. Moreover, data 
products are valuable to many end users only insofar as they provide 
information that end users expect will assist them or their customers 
in making trading decisions.
    The costs of producing market data include not only the costs of 
the data distribution infrastructure, but also the costs of designing, 
maintaining, and operating the exchange's transaction execution 
platform and the cost of regulating the exchange to ensure its fair 
operation and maintain investor confidence. The total return that a 
trading platform earns reflects the revenues it receives from both 
products and the joint costs it incurs. Moreover, the operation of the 
Exchange is characterized by high fixed costs and low marginal costs. 
This cost structure

[[Page 40598]]

is common in content distribution industries such as software, where 
developing new software typically requires a large initial investment 
(and continuing large investments to upgrade software), but once the 
software is developed, the incremental cost of providing that software 
to an additional user is typically small, or even zero (e.g., if the 
software can be downloaded over the internet after being 
purchased).\18\ In the case of any exchange, it is costly to build and 
maintain a trading platform, but the incremental cost of trading each 
additional share on an existing platform, or distributing an additional 
instance of data, is very low. Market information and executions are 
each produced jointly (in the sense that the activities of trading and 
placing orders are the source of the information that is distributed) 
and are each subject to significant scale economies.
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    \18\ See William J. Baumol and Daniel G. Swanson, ``The New 
Economy and Ubiquitous Competitive Price Discrimination: Identifying 
Defensible Criteria of Market Power,'' Antitrust Law Journal, Vol. 
70, No. 3 (2003).
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    Competition among trading platforms can be expected to constrain 
the aggregate return each platform earns from the sale of its joint 
products. The level of competition and contestability in the market is 
evidence in the numerous alternative venues that compete for order 
flow, including SRO markets, as well as internalizing BDs and various 
forms of alternative trading systems (``ATSs''), including dark pools 
and electronic communication networks (``ECNs''). Each SRO market 
competes to produce transaction reports via trade executions. It is 
common for BDs to further and exploit this competition by sending their 
order flow and transaction reports to multiple markets, rather than 
providing them all to a single market. Competitive markets for order 
flow, executions, and transaction reports provide pricing discipline 
for the inputs of proprietary data products. The large number of SROs, 
TRFs, BDs, and ATSs that currently produce proprietary data or are 
currently capable of producing it provides further pricing discipline 
for proprietary data products. Each SRO, TRF, ATS, and BD is currently 
permitted to produce proprietary data products, and many currently do 
or have announced plans to do so, including the Nasdaq exchanges, NYSE 
exchanges, and CBOE/Bats exchanges.
    In this competitive environment, an ``excessive'' price for one 
product will have to be reflected in lower prices for other products 
sold by the Exchange, or otherwise the Exchange may experience a loss 
in sales that may adversely affect its profitability. In this case, the 
proposed rule change enhances competition by providing Historical 
Market Data at a fixed price. As such, the Exchange believes that the 
proposed changes will enhance, not impair, competition in the financial 
markets.
    The market for market data products is competitive and inherently 
contestable because there is fierce competition for the inputs 
necessary to the creation of proprietary data and strict pricing 
discipline for the proprietary products themselves. Numerous exchanges 
compete with each other for listings, trades, and market data itself, 
providing virtually limitless opportunities for entrepreneurs who wish 
to produce and distribute their own market data. This proprietary data 
is produced by each individual exchange, as well as other entities, in 
a vigorously competitive market. Broker-dealers currently have numerous 
alternative venues for their order flow, including eleven existing 
options markets. Each SRO market competes to produce transaction 
reports via trade executions. Competitive markets for order flow, 
executions, and transaction reports provide pricing discipline for the 
inputs of proprietary data products. The large number of SROs that 
currently produce proprietary data or are currently capable of 
producing it provides further pricing discipline for proprietary data 
products. Each SRO is currently permitted to produce proprietary data 
products, and many in addition to MIAX Options currently do, including 
Nasdaq, CBOE, Nasdaq ISE, NYSE American, and NYSE Arca. Additionally, 
order routers and market data vendors can facilitate single or multiple 
broker-dealers' production of proprietary data products. The potential 
sources of proprietary products are virtually limitless.
    Market data vendors provide another form of price discipline for 
proprietary data products because they control the primary means of 
access to end subscribers. Vendors impose price restraints based upon 
their business models. For example, vendors such as Bloomberg and 
Thomson Reuters that assess a surcharge on data they sell may refuse to 
offer proprietary products that end subscribers will not purchase in 
sufficient numbers. Internet portals, such as Google, impose a 
discipline by providing only data that will enable them to attract 
``eyeballs'' that contribute to their advertising revenue. Retail 
broker-dealers, such as Schwab and Fidelity, offer their customers 
proprietary data only if it promotes trading and generates sufficient 
commission revenue. Although the business models may differ, these 
vendors' pricing discipline is the same: they can simply refuse to 
purchase any proprietary data product that fails to provide sufficient 
value. The Exchange and other producers of proprietary data products 
must understand and respond to these varying business models and 
pricing disciplines in order to market proprietary data products 
successfully.
    In addition to the competition and price discipline described 
above, the market for proprietary data products is also highly 
contestable because market entry is rapid, inexpensive, and profitable. 
The history of electronic trading is replete with examples of entrants 
that swiftly grew into some of the largest electronic trading platforms 
and proprietary data producers: Archipelago, BATS Trading and Direct 
Edge. Regulation NMS, by deregulating the market for proprietary data, 
has increased the contestability of that market. While broker-dealers 
have previously published their proprietary data individually, 
Regulation NMS encourages market data vendors and broker-dealers to 
produce proprietary products cooperatively in a manner never before 
possible. Multiple market data vendors already have the capability to 
aggregate data and disseminate it on a profitable scale, including 
Bloomberg, and Thomson Reuters.
    The Court in NetCoalition concluded that the Commission had failed 
to demonstrate that the market for market data was competitive based on 
the reasoning of the Commission's NetCoalition order because, in the 
Court's view, the Commission had not adequately demonstrated that the 
proprietary data at issue in the case is used to attract order flow. 
The Exchange believes, however, that evidence not then before the court 
clearly demonstrates that availability of data attracts order flow. Due 
to competition among platforms, the Exchange intends to improve its 
platform data offerings on a continuing basis, and to respond promptly 
to customers' data needs.
    The intensity of competition for proprietary information is 
significant and the Exchange believes that this proposal itself clearly 
evidences such competition. The Exchange has offered an AIS fee waiver 
to ToM subscribers since the inception of AIS. The Exchange now 
believes that it is appropriate to delete the fee waiver, based on a 
business determination of the number of ToM feed and AIS feed 
subscribers. It is entirely optional and is geared towards attracting 
new Member Applicants and customers. MIAX Options competitors continue 
to create new market data products and

[[Page 40599]]

innovative pricing in this space. The Exchange expects firms to make 
decisions on how much and what types of data to consume on the basis of 
the total cost of interacting with MIAX Options or other exchanges. Of 
course, the explicit data fees are only one factor in a total platform 
analysis. Some competitors have lower transactions fees and higher data 
fees, and others are vice versa. The market for this proprietary 
information is highly competitive and continually evolves as products 
develop and change. Additionally, respecting intra-market competition, 
the AIS feed and the ToM feed are available to all subscribers, thus 
providing all subscribers to the data products with an even playing 
field with respect to information and access to trade on MIAX Options.

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,\19\ and Rule 19b-4(f)(2) \20\ 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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    \19\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \20\ 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-2018-20 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-2018-20. 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 website (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 website 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. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-MIAX-2018-20, and should be submitted on 
or before September 5, 2018.
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    \21\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\21\
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-17494 Filed 8-14-18; 8:45 am]
 BILLING CODE 8011-01-P
Federal Register / Vol. 83, No. 158 / Wednesday, August 15, 2018 / Notices 40597

other things, Section 916 of the Dodd- rendered the Commission’s prior policy change may not be consistent with the
Frank Act amended paragraph (A) of on non-member fees obsolete. Act.
Section 19(b)(3) of the Act by inserting Specifically, many exchanges have
B. Self-Regulatory Organization’s
the phrase ‘‘on any person, whether or evolved from member-owned, not-for-
Statement on Burden on Competition
not the person is a member of the self- profit corporations into for-profit,
regulatory organization’’ after ‘‘due, fee investor-owned corporations (or The Exchange does not believe that
or other charge imposed by the self- subsidiaries of investor-owned the proposed rule change will result in
regulatory organization.’’ As a result, all corporations). Accordingly, exchanges any burden on competition that is not
SRO rule proposals establishing or no longer have narrow incentives to necessary or appropriate in furtherance
changing dues, fees or other charges are manage their affairs for the exclusive of the purposes of the Act.
immediately effective upon filing benefit of their members, but rather Notwithstanding its determination that
regardless of whether such dues, fees or have incentives to maximize the appeal the Commission may rely upon
other charges are imposed on members of their products to all customers, competition to establish fair and
of the SRO, non-members, or both. whether members or non-members, so equitably allocated fees for market data,
Section 916 further amended paragraph as to broaden distribution and grow the NetCoalition Court found that the
(C) of Section 19(b)(3) of the Act to read, revenues. Moreover, the Exchange Commission had not, in that case,
in pertinent part, ‘‘At any time within believes that the change also reflects an compiled a record that adequately
the 60-day period beginning on the date endorsement of the Commission’s supported its conclusion that the market
of filing of such a proposed rule change determinations that reliance on for the data at issue in the case was
in accordance with the provisions of competitive markets is an appropriate competitive. The Exchange believes that
paragraph (1) [of Section 19(b)], the means to ensure equitable and a record may readily be established to
Commission summarily may reasonable prices. Simply put, the demonstrate the competitive nature of
temporarily suspend the change in the change reflects a presumption that all the market in question.
The market for data products is
rules of the self-regulatory organization fee changes should be permitted to take
extremely competitive and users may
made thereby, if it appears to the effect immediately, since the level of all
freely choose alternative venues and
Commission that such action is fees are constrained by competitive
data vendors based on the aggregate fees
necessary or appropriate in the public forces. The Exchange therefore believes
assessed, the data offered, and the value
interest, for the protection of investors, that the fees for AIS are properly
provided. Numerous exchanges compete
or otherwise in furtherance of the assessed on Internal and External
with each other for listings, trades, and
purposes of this title. If the Commission Distributors.
market data itself, providing virtually
takes such action, the Commission shall The decision of the United States limitless opportunities for entrepreneurs
institute proceedings under paragraph Court of Appeals for the District of who wish to produce and distribute
(2)(B) [of Section 19(b)] to determine Columbia Circuit in NetCoaliton v. SEC, their own market data. Transaction
whether the proposed rule should be No. 09–1042 (D.C. Cir. 2010), although execution and proprietary data products
approved or disapproved.’’ reviewing a Commission decision made are complementary in that market data
The Exchange believes that these prior to the effective date of the Dodd- is both an input and a byproduct of the
amendments to Section 19 of the Act Frank Act, upheld the Commission’s execution service. In fact, market data
reflect Congress’s intent to allow the reliance upon competitive markets to set and trade execution are a paradigmatic
Commission to rely upon the forces of reasonable and equitably allocated fees example of joint products with joint
competition to ensure that fees for for market data: costs. The decision whether and on
market data are reasonable and ‘‘In fact, the legislative history indicates which platform to post an order will
equitably allocated. Although Section that the Congress intended that the market depend on the attributes of the platform
19(b) had formerly authorized system ‘evolve through the interplay of where the order can be posted,
immediate effectiveness for a ‘‘due, fee competitive forces as unnecessary regulatory including the execution fees, data
or other charge imposed by the self- restrictions are removed’ and that the SEC quality and price, and distribution of its
regulatory organization,’’ the wield its regulatory power ‘in those data products. Without trade
Commission adopted a policy and situations where competition may not be executions, exchange data products
subsequently a rule stating that fees for sufficient,’ such as in the creation of a cannot exist. Moreover, data products
data and other products available to ‘consolidated transactional reporting
are valuable to many end users only
system.’ ’’ 17
persons that are not members of the self- insofar as they provide information that
regulatory organization must be The court’s conclusions about end users expect will assist them or
approved by the Commission after first Congressional intent are therefore their customers in making trading
being published for comment. At the reinforced by the Dodd-Frank Act decisions.
time, the Commission supported the amendments, which create a The costs of producing market data
adoption of the policy and the rule by presumption that exchange fees, include not only the costs of the data
pointing out that unlike members, including market data fees, may take distribution infrastructure, but also the
whose representation in self-regulatory effect immediately, without prior costs of designing, maintaining, and
organization governance was mandated Commission approval, and that the operating the exchange’s transaction
by the Act, non-members should be Commission should take action to execution platform and the cost of
given the opportunity to comment on suspend a fee change and institute a regulating the exchange to ensure its fair
fees before being required to pay them, proceeding to determine whether the fee operation and maintain investor
daltland on DSKBBV9HB2PROD with NOTICES

and that the Commission should change should be approved or confidence. The total return that a
specifically approve all such fees. The disapproved only where the trading platform earns reflects the
Exchange believes that the amendment Commission has concerns that the revenues it receives from both products
to Section 19 reflects Congress’s and the joint costs it incurs. Moreover,
conclusion that the evolution of self- 17 NetCoaltion, at 15 (quoting H.R. Rep. No. 94– the operation of the Exchange is
regulatory organization governance and 229, at 92 (1975), as reprinted in 1975 U.S.C.C.A.N. characterized by high fixed costs and
competitive market structure have 321, 323). low marginal costs. This cost structure

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Document Created: 2018-08-15 01:25:39
Document Modified: 2018-08-15 01:25:39
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		83 FR 40595