83 FR 6630 - 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 31 (February 14, 2018)

[Federal Register Volume 83, Number 31 (Wednesday, February 14, 2018)]
[Notices]
[Pages 6630-6633]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2018-02986]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-82673; File No. SR-MIAX-2018-02]


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

February 8, 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 January 30, 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

[[Page 6631]]

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'').
    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 Section (1)(a)(iii) of the Fee 
Schedule to modify the volume threshold calculation methodology, in 
connection with the additional $0.02 per contract rebate offered to 
Members \3\ for Priority Customer \4\ orders executed in the PRIME \5\ 
Auction as a PRIME Agency Order, pursuant to the Priority Customer 
Rebate Program.\6\
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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.
    \4\ 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.
    \5\ The MIAX Options Price Improvement Mechanism (``PRIME'') is 
a process by which a Member may electronically submit for execution 
(``Auction'') an order it represents as agent (``Agency Order'') 
against principal interest, and/or an Agency Order against solicited 
interest. For a complete description of PRIME and of PRIME order 
types and responses, see Exchange Rule 515A.
    \6\ Under the Priority Customer Rebate Program, MIAX Options 
credits each Member the per contract amount resulting from each 
Priority Customer order transmitted by that Member which is executed 
electronically on the Exchange in all multiply-listed option classes 
(excluding certain orders specified in Section (1)(a)(iii) of the 
Fee Schedule), provided the Member meets certain percentage 
thresholds in a month as described in the Priority Customer Rebate 
Program table. See Section (1)(a)(iii) of the Fee Schedule.
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    The Exchange currently offers Members the opportunity to qualify 
for an additional $0.02 per contract rebate in connection with certain 
types of executions on the Exchange if the Member or its Affiliates \7\ 
meets certain qualifications. Specifically, any Member or its Affiliate 
that qualifies for Priority Customer Rebate Program volume tiers 3 or 
higher is credited an additional $0.02 per contract for each Priority 
Customer order executed in the PRIME Auction as a PRIME Agency Order, 
over a threshold of 1,500,000 contracts in a month. Volume is recorded 
for and credits are delivered to the Member that submits the order to 
the Exchange.
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    \7\ ``Affiliate'' means (i) an affiliate of a Member of at least 
75% common ownership between the firms as reflected on each firm's 
Form BD, Schedule A, (``Affiliate''), or (ii) the Appointed Market 
Maker of an Appointed EEM (or, conversely, the Appointed EEM of an 
Appointed Market Maker). An ``Appointed Market Maker'' is a MIAX 
Market Maker (who does not otherwise have a corporate affiliation 
based upon common ownership with an EEM) that has been appointed by 
an EEM and an ``Appointed EEM'' is an EEM (who does not otherwise 
have a corporate affiliation based upon common ownership with a MIAX 
Market Maker) that has been appointed by a MIAX Market Maker, 
pursuant to the process described in the Fee Schedule. See Section 
(1)(a)(i) of the Fee Schedule.
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    The Exchange proposes to modify the volume threshold calculation 
methodology in connection with that additional $0.02 per contract 
rebate. The Exchange proposes to change the volume threshold 
calculation methodology from a fixed number of contracts per month 
(1,500,000 per month) to a percentage of national customer volume in 
multiply-listed options classes listed on MIAX Options per month. The 
proposed threshold is above 0.60% of national customer volume in 
multiply-listed options classes listed on MIAX Options during the 
relevant month. National customer volume is the total volume reported 
by the Options Clearing Corporation (``OCC'') in MIAX Options classes 
in the ``customer'' range. Specifically, the Exchange proposes that any 
Member or its Affiliate that qualifies for Priority Customer Rebate 
Program volume tiers 3 or higher will be credited an additional $0.02 
per contract for each Priority Customer order executed in the PRIME 
Auction as a PRIME Agency Order over a threshold of above 0.60% of 
national customer volume in multiply-listed options classes listed on 
MIAX Options during the relevant month.
    There are no other changes to this rebate program. In particular, 
the Exchange currently excludes from the calculation certain types of 
orders, and those same types of orders will continue to be excluded 
using the new calculation methodology. Specifically, the Exchange 
excludes orders executed as QCC and cQCC Orders, mini-options, Priority 
Customer-to-Priority Customer Orders, C2C and cC2C Orders, cPRIME 
Agency Orders, PRIME and cPRIME AOC Responses, PRIME and cPRIME Contra-
side Orders, PRIME and cPRIME Orders for which both the Agency and 
Contra-side Order are Priority Customers, and executions related to 
contracts that are routed to one or more exchanges in connection with 
the Options Order Protection and Locked/Crossed Market Plan referenced 
in MIAX Options Rule 1400. The Exchange will continue to exclude those 
same orders from this rebate program. The Exchange further notes that 
these exclusions are identical to the exclusions that apply to other 
aspects of the Priority Customer Rebate Program as well. There is also 
no change to the additional rebate amount of $0.02 per contract.
    The Exchange believes that changing the volume threshold 
calculation methodology from a fixed number of contracts per month 
(1,500,000 per month) to a percentage of national customer volume in 
multiply-listed options classes listed on MIAX Options per month (above 
0.60% of national customer volume in multiply-listed options classes 
listed on MIAX Options during the relevant month) will result in a 
threshold that is more consistently proportional to national customer 
volume executed during the relevant month, as actual national customer 
volume often changes on a month-to-month basis. Since the Priority 
Customer Rebate Program is designed to encourage Members to execute 
greater Priority Customer volume on the Exchange, having a more 
consistent proportional measure in relation to the number of national 
customer volume executed in a given month will better align this 
particular rebate program to the core purpose of the Priority Customer 
Rebate Program. In turn, the Exchange believes that this change will 
further incentivize Members to execute a greater number of Priority 
Customer orders in the Exchange's PRIME Auction mechanism.
    The Exchange believes that increased PRIME and Priority Customer 
volume will attract more liquidity to the Exchange, which benefits all 
market participants. Increased PRIME and Priority Customer order flow 
should

[[Page 6632]]

attract liquidity providers, which in turn should make the MIAX Options 
marketplace an attractive venue where Market Makers may submit narrow 
quotations with greater size, deepening and enhancing the quality of 
the MIAX Options marketplace. This should provide more trading 
opportunities and tighter spreads for other market participants and 
result in a corresponding increase in order flow from such other market 
participants.
    The credits paid out as part of the Priority Customer Rebate 
Program are drawn from the general revenues of the Exchange.\8\ The 
Exchange calculates volume thresholds on a monthly basis. The proposed 
rule change is scheduled to become operative on February 1, 2018.
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    \8\ Despite providing credits under the Priority Customer Rebate 
Program, the Exchange represents that it will continue to have 
adequate resources to fund its regulatory program and fulfill its 
responsibilities as a self-regulatory organization while the 
Priority Customer Rebate Program is in effect.
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2. Statutory Basis
    The Exchange believes that its proposal to amend its Fee Schedule 
is consistent with Section 6(b) of the Act in general, and furthers the 
objectives of Section 6(b)(4) of the Act 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 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.
    The Exchange believes that changing the volume threshold 
calculation methodology from a fixed number of contracts per month 
(1,500,000 per month) to a percentage of national customer volume in 
multiply-listed options classes listed on MIAX Options per month (above 
0.60% of national customer volume in multiply-listed options classes 
listed on MIAX Options during the relevant month) in the Priority 
Customer Rebate Program for the additional $0.02 rebate for Priority 
Customer orders submitted into PRIME as PRIME Agency is consistent with 
Section 6(b)(4) of the Act in that it is fair, equitable and not 
unreasonably discriminatory. The rebate program is reasonably designed 
because it incentivizes providers of Priority Customer order flow to 
send order flow to the Exchange and, upon meeting certain volume 
criteria, enables them to receive the credit in a manner that enables 
the Exchange to improve its overall competitiveness and strengthen its 
market quality for all market participants. The proposed change to the 
volume threshold calculation methodology is fair, equitable, and not 
unreasonably discriminatory because they will apply equally to all 
Priority Customer orders submitted as a PRIME Agency Order. All 
similarly situated Priority Customer orders are subject to the same 
rebate and volume calculations, and access to the Exchange is offered 
on terms that are not unfairly discriminatory. In addition, the 
proposed volume threshold calculation is equitable and not unfairly 
discriminatory because, while only Priority Customer order flow that is 
submitted as a PRIME Agency Order over the proposed threshold qualifies 
for the rebate, an increase in overall Priority Customer order flow 
will bring greater volume and liquidity, which benefits all market 
participants by providing more trading opportunities and tighter 
spreads. Market participants want to trade with Priority Customer order 
flow. To the extent Priority Customer order flow is increased by the 
proposal, market participants will increasingly compete for the 
opportunity to trade on the Exchange including sending more orders and 
providing narrower and larger sized quotations in the effort to trade 
with such Priority Customer order flow.
    The Exchange believes that the proposed rule change modifying the 
volume threshold calculation methodology for the $0.02 rebate from a 
fixed number of contracts per month (1,500,000 per month) to a 
percentage of national customer volume in multiply-listed options 
classes listed on MIAX Options per month (above 0.60% of national 
customer volume in multiply-listed options classes listed on MIAX 
Options during the relevant month) is consistent with Section 6(b)(5) 
of the Act in that it promotes just and equitable principles of trade 
since the Exchange believes that it will result in a threshold that is 
more consistently proportional to national customer volume executed 
during the relevant month, as actual national customer volume often 
changes on a month-to-month basis. To the extent Member volume in 
Priority Customer orders and PRIME Agency Orders is increased by the 
proposal, market participants will increasingly compete for the 
opportunity to trade on the Exchange which could result in more 
liquidity on the Exchange. The Exchange believes that offering all such 
market participants the opportunity to lower transaction fees by 
incentivizing them to transact Priority Customer order flow in turn 
benefits all market participants.

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 Exchange believes the 
proposal is consistent with robust competition by increasing the 
intermarket competition for order flow from market participants. To the 
extent that there is additional competitive burden on market 
participants without Priority Customer order flow and those market 
participants that are not able to aggregate order flow with Affiliates, 
the Exchange believes that this should incent Members to direct volume 
to the Exchange in order to provide additional liquidity that enhances 
the quality of its markets and increases the volume of contracts traded 
here. To the extent that this purpose is achieved, all the Exchange's 
market participants should benefit from the improved market liquidity. 
Enhanced market quality and increased transaction volume that results 
from the anticipated increase in order flow directed to the Exchange 
will benefit all market participants and improve competition on the 
Exchange. The Exchange notes that it operates in a highly competitive 
market in which market participants can readily favor competing venues 
if they deem fee levels at a particular venue to be excessive. In such 
an environment, the Exchange must continually adjust its fees to remain 
competitive with other exchanges and to attract order flow. The 
Exchange believes that the proposal reflects this competitive 
environment.

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,\9\ and Rule

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19b-4(f)(2) \10\ 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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    \9\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \10\ 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-2018-02 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-2018-02. 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-2018-02 and should be submitted on 
or before March 7, 2018.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-02986 Filed 2-13-18; 8:45 am]
 BILLING CODE 8011-01-P