[Federal Register Volume 79, Number 245 (Monday, December 22, 2014)]
[Notices]
[Pages 76421-76424]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-29817]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-73848; File No. SR-MIAX-2014-62]


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

December 16, 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 December 10, 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.\3\ 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.
    \3\ MIAX initially filed a similar proposal for only SPY options 
on November 25, 2014, and indicated in its filing that it would 
implement the new fee on December 1, 2014. See File No. SR-MIAX-
2014-59. On December 10, 2014, MIAX withdrew that filing and 
submitted this filing.
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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/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. 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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    \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 the 
Exchange will assess a Marketing Fee to all Market Makers for 
contracts, including mini options, they execute in their assigned 
classes when the contra-party to the execution is a Priority Customer. 
MIAX will not assess a Marketing Fee to Market Makers for contracts 
executed as a PRIME Agency Order, Contra-side Order, or a PRIME AOC 
Response in the PRIME Auction; unless, it executes against an unrelated 
order.
    The Exchange proposes to amend the Marketing Fee in order to add an 
additional incentive for order flow providers to post additional 
Priority Customer orders on the Exchange's Book. Specifically, the 
Exchange proposes to assess an additional $0.12 per contract Posted 
Liquidity Marketing Fee to all Market Makers for any standard options 
overlying EEM, GLD, IWM, QQQ, and SPY that Market Makers execute in 
their assigned class (e.g., SPY) when the contra-party to the execution 
is a Priority Customer and the Priority Customer order was posted on 
the Book at the time of the execution. MIAX will not assess the 
additional Posted Liquidity Marketing Fee to Market Makers for 
contracts executed as a PRIME Agency Order, Contra-side Order, or a 
PRIME AOC Response in the PRIME Auction. MIAX will also not

[[Page 76422]]

assess the additional Posted Liquidity Marketing Fee to Market Makers 
for contracts executed pursuant to a Liquidity Refresh Pause, route 
timer, or during the Opening Process. The Post [sic] Liquidity 
Marketing Fee will be in addition to the current Marketing Fee of $0.25 
per contract for standard options overlying SPY \5\ that Market Makers 
execute in their assigned class (e.g., SPY) when the contra-party to 
the execution is a Priority Customer. The new proposed Post [sic] 
Liquidity Marketing Fee will otherwise operate in a similar manner as 
the standard Marketing Fee, with the additional $0.12 per contract 
going into the broader Marketing Fee ``pool'' for the Directed LMM or 
the PLMM in EEM, GLD, IWM, QQQ or SPY, respectively.\6\
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    \5\ The Commission notes that MIAX's proposal also covers 
standard options overlying EEM, GLD, IWM, and QQQ.
    \6\ The Commission notes that the symbols MIAX lists in this 
sentence refer to the respective overlying options class.
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    The purpose of the additional marketing fee is to further encourage 
Members to post additional Priority Customer orders on the Exchange's 
Book in these high volume symbols. Increased Priority Customer orders 
on the Exchange's Book will provide for greater liquidity, which 
benefits all market participants on the Exchange. The practice of 
incentivizing increased retail customer order flow in order to attract 
professional liquidity providers (Market-Makers) is, and has been, 
commonly practiced in the options markets. As such, marketing fee 
programs,\7\ and customer posting incentive programs,\8\ are based on 
attracting public customer order flow. The practice of providing 
additional incentives to increase order flow in high volume symbols is, 
and has been, commonly practiced in the options markets.\9\ The 
proposed marketing fee similarly intends to attract Priority Customer 
order flow, which will increase liquidity, thereby providing greater 
trading opportunities and tighter spreads for other market participants 
and causing a corresponding increase in order flow from such other 
market participants in EEM, GLD, IWM, QQQ, and SPY.\10\ Increasing the 
number of orders sent to the Exchange will in turn provide tighter and 
more liquid markets, and therefore attract more business overall.
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    \7\ See MIAX Fee Schedule, Section 1(b); CBOE, Fee Schedule, p. 
4; NYSE Amex Options Fee Schedule, p. 6.
    \8\ See NYSE Arca, Inc. Fees Schedule, page 4 (section titled 
``Customer Monthly Posting Credit Tiers and Qualifications for 
Executions in Penny Pilot Issues'').
    \9\ See International Securities Exchange, LLC, Schedule of 
Fees, p. 6 (providing reduced fee rates for order flow in Select 
Symbols); NASDAQ OMX PHLX, Pricing Schedule, Section I (providing a 
rebate for adding liquidity in SPY); NYSE Arca, Inc. Fees Schedule, 
page 4 (section titled ``Customer Monthly Posting Credit Tiers and 
Qualifications for Executions in Penny Pilot Issues'').
    \10\ The Commission notes that the symbols MIAX lists in this 
sentence refer to the respective overlying options class.
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    At this time, the Exchange does not propose a Post [sic] Liquidity 
Marketing Fee for mini options. Mini options in [sic] are not traded in 
significant volume across the industry and, as such, MIAX, in 
consultation with its market makers, does not seek to incentivize order 
routers to send such orders to MIAX by extending the new marketing fee 
to posted Priority Customer orders in mini options on SPY and GLD.\11\ 
In addition, because of the lack of significant volume and limited 
demand in the industry to trade mini options, the Exchange believes 
that having a marketing fee for mini options that is in some cases 
lower than the fees for standard contracts, is appropriate, not 
unreasonable, not unfairly discriminatory and not burdensome on 
competition between participants, or between the Exchange and other 
exchanges in the listed options marketplace.
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    \11\ The Exchange notes that mini options are currently listed 
on SPY, AAPL, GLD, GOOGL, and AMZN. If the Exchange were to extend 
the new Marketing Fee to mini options, since there are no mini 
options on EEM, IWM, and QQQ, the Exchange would not be able to 
assess an additional marketing fee for mini options in such symbols, 
but instead would be limited to assessing the additional fee on SPY 
and GLD.
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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 \12\ in general, and 
furthers the objectives of Section 6(b)(4) of the Act \13\ in 
particular, in that it is an equitable allocation of reasonable fees 
and other charges among Exchange members.
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    \12\ 15 U.S.C. 78f(b).
    \13\ 15 U.S.C. 78f(b)(4).
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    The proposed changes are designed to incentivize order flow 
providers to post additional Priority Customer orders in EEM, GLD, IWM, 
QQQ, and SPY options on the Exchange's Book. The proposed marketing fee 
rate is reasonable in that although it results in a marketing fee that 
is slightly higher than similar marketing fee programs, it is still in 
the range of marketing fee programs on other competing exchanges which 
charge lower marketing fees for Penny Pilot options classes versus non-
Penny Pilot options classes.\14\ The proposed rebate program is fair, 
equitable, and not unreasonably discriminatory because it will apply 
equally to all Market Makers that execute against Priority Customer 
orders in EEM, GLD, IWM, QQQ, and SPY options posted on the Exchange's 
Book. All similarly situated Market Makers that execute against 
Priority Customer orders in EEM, GLD, IWM, QQQ, and SPY options that 
are posted to the Exchange's Book are subject to the same marketing 
fee, and access to the Exchange is offered on terms that are not 
unfairly discriminatory. In addition, the proposal is equitable and not 
unfairly discriminatory because, while only posted Priority Customer 
order flow qualifies for the additional marketing fee, an increase in 
Priority Customer orders posted to the Exchange's Book will bring 
greater volume and liquidity as market participants compete to trade 
with the additional Priority Customer order flow, which benefit all 
market participants by providing more trading opportunities and tighter 
spreads. Market participants want to trade with Priority Customer order 
flow. To the extent the posting of Priority Customer orders on the 
Exchange's Book 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 resulting increased volume and liquidity will benefit non-
Market Makers that do not pay the proposed fee and do not qualify for 
the marketing fee program at all, by providing more trading 
opportunities and tighter spreads as market participants increasingly 
compete by sending more orders and providing narrower and larger sized 
quotations in the effort to trade with such Priority Customer order 
flow. In addition, 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. The Exchange believes it 
is equitable to assess marketing fees on Market Makers and not non-
Market Makers because the benefits of the marketing fee program flow to 
PLMM and Directed LMMs that can use the marketing fee funds to attract 
additional flow to the exchange, which benefits Market Makers. 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 as well.
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    \14\ See CBOE, Fee Schedule, p. 4; NYSE Amex Options Fee 
Schedule, p. 6.

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[[Page 76423]]

    The Exchange believes that specifying that PRIME Order executions, 
Liquidity Reference Pause, route timer, and Opening Process executions 
are not subject to the proposed marketing fee is reasonable, equitable 
and not unfairly discriminatory. The Exchange is seeking to encourage 
the posting of additional Priority Customer orders to the Exchange's 
Book and these four excluded functionalities involve RFR messages that 
are related to encouraging additional trading interest from within the 
market participants on the Exchange. The Exchange believes that 
charging additional marketing fees from Market Makers in these 
situations may discourage participation in responding to RFR messages. 
The exclusion of PRIME Order executions, Liquidity Reference Pause, 
route timer, and Opening Process executions from the additional 
marketing fee will continue to encourage as many participants as 
possible to respond; which the Exchange believes will help the RFR 
message processes to continue to lead to greater opportunities for 
price improvement for all orders subject to PRIME, the Liquidity 
Refresh Pause, route timer, or Opening Process not just those entered 
on behalf of customers. In addition, the Exchange designed the new fee 
to encourage the posting of additional Priority Customer orders during 
regular trading hours; which is exclusive of the Opening Process. Thus, 
for these reasons, the Exchange believes that excluding PRIME Order 
executions, Liquidity Reference Pause, route timer, and Opening Process 
executions from the proposed marketing fees is reasonable, equitable 
and not unfairly discriminatory.
    The Exchange believes that its proposal to assess the additional 
marketing fee for transaction fees in EEM, GLD, IWM, QQQ, and SPY 
options, and not other options classes, is consistent with other 
options markets that provide additional incentives to increase order 
flow in high volume symbols including assessing different marketing 
fees for Penny Pilot options classes as compared to non-Penny Pilot 
options classes.\15\ The Exchange believes that establishing different 
pricing for EEM, GLD, IWM, QQQ, and SPY options and Penny Pilot options 
is reasonable, equitable, and not unfairly discriminatory because EEM, 
GLD, IWM, QQQ, and SPY options are more liquid options as compared to 
other Penny Pilot options and the Exchange wants to incentivize order 
flow providers to send such orders to MIAX in order to increase trading 
opportunities and overall volume executed on the Exchange. Finally, the 
Exchange believes that the proposal to assess to an additional 
marketing fee for standard transactions and not mini options is 
reasonable because of the lack of significant volume and limited demand 
in the industry to trade mini options.
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    \15\ See CBOE, Fee Schedule, p. 4; NYSE Amex Options Fee 
Schedule, p. 6; International Securities Exchange, LLC, Schedule of 
Fees, p. 6 (providing reduced fee rates for order flow in Select 
Symbols); NASDAQ OMX PHLX, Pricing Schedule, Section I (providing a 
rebate for adding liquidity in SPY); NYSE Arca, Inc. Fees Schedule, 
page 4 (section titled ``Customer Monthly Posting Credit Tiers and 
Qualifications for Executions in Penny Pilot Issues'').
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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 proposal is designed to 
encourage an increase in Priority Customer orders in EEM, GLD, IWM, 
QQQ, and SPY options posted to the Exchange's Book in order to bring 
greater volume and liquidity, which benefit all market participants by 
providing more trading opportunities and tighter spreads. To the extent 
the posting of Priority Customer orders in EEM, GLD, IWM, QQQ, and SPY 
options on the Exchange's Book 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 resulting increased volume and liquidity will 
benefit non-Market Makers that do not pay the proposed fee and do not 
qualify for the marketing fee program at all, by providing more trading 
opportunities and tighter spreads. To the extent that there is 
additional competitive burden on market participants that are not 
Priority Customers or Market Makers or trading in other symbols, the 
Exchange believes that this is appropriate because the proposal should 
incent Members to direct additional order flow to the Exchange and thus 
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 to the Exchange. The Exchange 
believes that the proposed rule change reflects this competitive 
environment because it establishes a fee structure in a manner that 
encourages market participants to direct their order flow, to provide 
liquidity, and to attract additional transaction volume to the 
Exchange.

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.\16\ 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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    \16\ 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-2014-62 on the subject line.

Paper Comments

     Send paper comments in triplicate to Brent J. Fields, 
Secretary, Securities

[[Page 76424]]

and Exchange Commission, 100 F Street NE., Washington, DC 20549.

All submissions should refer to File Number SR-MIAX-2014-62. 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-2014-62 and should be 
submitted on or before January 12, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
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    \17\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-29817 Filed 12-19-14; 8:45 am]
BILLING CODE 8011-01-P