[Federal Register Volume 79, Number 210 (Thursday, October 30, 2014)]
[Notices]
[Pages 64642-64644]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-25780]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-73425; File No. SR-MIAX-2014-55]


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

October 24, 2014.
    Pursuant to the provisions of Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice 
is hereby given that on October 16, 2014, Miami International 
Securities Exchange LLC (``MIAX'' or ``Exchange'') filed with the 
Securities and Exchange Commission (``Commission'') a proposed rule 
change as described in Items I, II, and III below, which Items have 
been prepared by the Exchange. The Commission is publishing this notice 
to solicit comments on the proposed rule change from interested 
persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange is filing a proposal to amend the MIAX Options Fee 
Schedule (the ``Fee Schedule'').
    The text of the proposed rule change is available on the Exchange's 
Web site at http://www.miaxoptions.com/filter/

[[Page 64643]]

wotitle/rule_filing, at MIAX's principal office, and at the 
Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
sections A, B, and C below, of the most significant aspects of such 
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend its marketing fee.\3\ The marketing 
fee is assessed on certain transactions of all Market Makers.\4\ The 
funds collected via this marketing fee are then put into pools 
controlled by Primary Lead Market Makers (``PLMMs'') and LMMs. The PLMM 
or LMM controlling a certain pool of funds can then determine the 
Electronic Exchange Member(s) (``EEM'') to which the funds should be 
directed in order to encourage such EEM(s) to send orders to the 
Exchange. In accordance with Exchange Rule 514, an EEM can designate an 
order (``Directed Order'') to a specific LMM.
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    \3\ The proposal is based on a substantially similar filing by 
the Chicago Board Options Exchange, Incorporated. See Securities 
Exchange Act Release No. 68131 (November 1, 2012), 77 FR 67032 
(November 8, 2012) (SR-CBOE-2012-101).
    \4\ See MIAX Options Fee Schedule, Section (1)(b), entitled 
Marketing Fee for more detail regarding the marketing fee.
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    Currently, Section (1)(b) of the Fee Schedule, provides that to 
qualify for a marketing fee allocation for an applicable month, an LMM 
must either: (i) Have an appointment in the relevant option class at 
the time of being directed the order; or (ii) for the month preceding 
the applicable month (the ``qualifying month'') have an appointment as 
an LMM for at least ten (10) trading days in a minimum of fifty percent 
(50%) of the option classes listed on the Exchange for the entire 
qualifying month. For non-directed orders and orders directed to non-
qualifying LMMs, applicable Marketing Fees are allocated to the PLMM's 
Marketing Fee ``pool.'' All Market Makers that participated in such 
transactions will pay the applicable Marketing Fee to the Exchange, 
which will allocate such funds to the Member that controls the 
distribution of the Marketing Fee ``pool.'' Each month the Member will 
submit written instructions to MIAX describing how MIAX is to 
distribute the Marketing Fees in the ``pool'' to Electronic Exchange 
Members identified by the Member.
    However, other options exchanges allow an LMM (or similar position) 
to have access to the marketing fee funds generated from a Directed 
Order (or similar order type) regardless of whether the LMM has an 
appointment in a class in which the Directed Order is received and 
executed without the additional requirement for an LMM to have at least 
ten (10) trading days in a minimum of fifty percent (50%) of the option 
classes listed on the Exchange for the entire qualifying month.\5\ The 
Exchange now proposes to remove this additional requirement so that its 
marketing fee program operates in a manner more similar to that of 
competing options exchanges that offer similar programs.
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    \5\ See CBOE Fees Schedule, fn. 6; NASDAQ OMX Phlx, LLC 
(``Phlx'') Pricing Schedule, section on Payment for Order Flow Fee; 
NYSE Amex Options Fee Schedule, fn. 10; International Securities 
Exchange, LLC (``ISE'') Schedule of Fees, Section IV(D)[sic]. None 
of which contain requirements that a PLMM or LMM (or similar 
position) have an appointment in the class in which a Directed Order 
(or similar order type) is received and executed nor the additional 
requirement of a minimum number of options class appointments in 
order to have access to the marketing fee funds generated from that 
Preferred order.
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    The Exchange proposes amending the Fee Schedule to allow LMMs to 
receive an allocation of marketing fees generated by Directed Orders 
sent to the LMM without any additional requirements. Specifically, the 
Exchange proposes to remove the requirements that provide that an LLM, 
in order to qualify to be allocated Marketing Fees for Directed Orders 
for an applicable month, must either: (i) Have an appointment in the 
relevant option class at the time of being directed the order; or (ii) 
for the month preceding the applicable month (the ``qualifying month'') 
have an appointment as an LMM for at least ten (10) trading days in a 
minimum of fifty percent (50%) of the option classes listed on the 
Exchange for the entire qualifying month. The proposed changes will 
more closely align the Exchange's marketing fee program with the 
requirements of other competing exchanges that offer similar 
programs.\6\
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    \6\ See id.
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    Permitting LMMs to be allocated marketing fees generated from a 
Directed Order without these additional requirements would allow LMMs 
to encourage greater order flow to be sent to the Exchange. This 
increased order flow would benefit all market participants on the 
Exchange, such as customers with resting orders on the Exchange and 
LMMs that have an appointment and quote in the relevant option. 
Allowing LMMs to be allocated marketing fees generated from a Directed 
Order in the manner that is proposed would provide LMMs with an 
incentive to encourage the routing of order flow into classes in which 
the LMM otherwise would not. Further, the proposal will also provide 
LMMs with more flexibility to determine which classes that they choose 
to be appointed in and still receive payment for order flow without the 
restrictive criteria; as they will not have to be concerned with 
whether or not they have met the minimum class appointment threshold 
prior to making arrangements to paying for order flow in a specific 
class.
    The proposed fee changes are to take effect on November 1, 2014.
2. Statutory Basis
    MIAX believes that its proposed rule change is consistent with 
Section 6(b) of the Act \7\ in general, and furthers the objectives of 
Section 6(b)(5) of the Act \8\ 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.
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    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that this proposal to remove a requirement 
that other exchanges do not share, perfects the mechanism for a free 
and open market and a national market system by allowing the Exchange's 
marketing fee program to operate in a manner similar to competing 
options exchanges. In addition, the proposal promotes just and 
equitable principles of trade by encouraging greater order flow to be 
sent to the Exchange through Directed Orders in a manner that will 
benefit all market participants on the Exchange.
    The Exchange also believes that the proposed changes to the 
marketing fee is consistent with Section 6(b)(4) of the Act \9\ which 
provides that Exchange

[[Page 64644]]

rules may provide for the equitable allocation of reasonable dues, 
fees, and other charges among its members and other persons using its 
facilities. The proposed change is reasonable because it will allow 
LMMs greater access to marketing fee funds. The proposed change is 
equitable and not unfairly discriminatory because it is designed to 
allow LMMs to encourage greater order flow to be sent to the Exchange. 
A LMM could be able to amass a greater pool of funds with which to use 
to incent order flow providers to send order flow to the Exchange. This 
increased order flow would benefit all market participants on the 
Exchange. Further, allowing additional LMMs to access marketing fee 
funds generated from a Directed Order would provide LMMs with an 
incentive to encourage the routing of order flow into classes in which 
the LMM otherwise would not.
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    \9\ 15 U.S.C. 78f(b)(4).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act. The proposed rule change would 
place the Exchange on equal footing as other exchanges that allow their 
LMM equivalents to be allocated marketing fees generated by Directed 
Orders. The Exchange believes that such an even playing field will 
promote competition among options exchanges. The Exchange notes that it 
operates in a highly competitive market in which market participants 
can readily direct order flow to competing venues who offer similar fee 
structures. Many competing venues offer similar fee structures to 
market participants. To this end, the Exchange is proposing a market 
enhancement to encourage market participants to trade on the Exchange. 
The Exchange believes the proposed rule change is procompetitive 
because it would enable the Exchange to provide member organizations 
with a fee structure that is similar to that of other exchanges.

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.\10\ 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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    \10\ 15 U.S.C. 78s(b)(3)(A)(ii).
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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-2014-55 on the subject line.

Paper Comments

     Send paper comments in triplicate to Brent J. Fields, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549.
All submissions should refer to File Number SR-MIAX-2014-55. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE., 
Washington, DC 20549, on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of such filing also will be available 
for inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-MIAX-2014-55 and should be 
submitted on or before November 20, 2014.

    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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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-25780 Filed 10-29-14; 8:45 am]
BILLING CODE 8011-01-P