[Federal Register Volume 81, Number 92 (Thursday, May 12, 2016)]
[Notices]
[Pages 29603-29606]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-11152]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-77777; File No. SR-MIAX-2016-09]
Self-Regulatory Organizations; Miami International Securities
Exchange LLC; Notice of Filing and Immediate Effectiveness of a
Proposed Rule Change To Amend Its Fee Schedule
May 6, 2016.
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 April 26, 2016, 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/wotitle/rule_filing, at
MIAX's principal
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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: (i) Offer to
each Qualifying Member (as defined below) a rebate of $0.03 per
contract executed within Tier 1 of the Priority Customer Rebate Program
(the ``PCRP''),\3\ and (ii) amend the definition of ``Baseline
Percentage'' under the Professional Rebate Program. The Exchange is
also proposing a technical clarifying amendment to the Fee Schedule, as
described below.
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\3\ Under the PRCP [sic], MIAX 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 QCC
Orders, mini-options, Priority Customer-to-Priority Customer Orders,
PRIME AOC Responses, PRIME Contra-side Orders, PRIME 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 Rule 1400), provided
the Member meets certain percentage thresholds in a month as
described in the Priority Customer Rebate Program table. See Fee
Schedule, Section (1)(a)(iii).
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The Exchange proposes to amend Section (1)(a)(iii) of the Fee
Schedule to offer a $0.03 rebate per contract executed within Tier 1 of
the PCRP to each ``Qualifying Member,'' as defined below. Tier 1 of the
PRCP [sic] currently offers no per contract credits to Members that
execute a number of Priority Customer \4\ contracts as a percentage of
national customer volume in multiply-listed options classes (with
certain exclusions detailed in the Fee schedule) \5\ listed on MIAX of
0.00% to 0.50% in a given month, unless the Priority Customer contracts
executed in Tier 1 are the result of a PRIME \6\ Agency Order, which
receive a rebate of $0.10 per contract.
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\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).
\5\ See supra note 3.
\6\ The MIAX Price Improvement Mechanism (``PRIME'') is a price
improvement auction under which the Initiating Member electronically
submits an order that it represents as agent (an ``Agency Order'')
into a PRIME Auction (``Auction''), which the Initiating Member is
willing to match as principal, the price and size of responses in
the Auction at a single price or up to an optional designated limit
price. See Exchange Rule 515A.
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In order to provide incentive for order flow providers to increase
the volume of Professional \7\ orders they submit to the Exchange, and
to send additional Priority Customer order flow as well, the Exchange
proposes to offer the $0.03 per contract credit for Priority Customer
contracts executed in Tier 1 of the PRCP [sic] program to Members that
achieve certain volume increases in the Professional Rebate Program.
Specifically, the Exchange proposes to provide a rebate of $0.03 per
Priority Customer contract executed in Tier 1 of the PRCP [sic] in a
given month to Members that execute a certain number of contracts in
that month for the account(s) of a Professional and which qualify for
the Professional Rebate Program described in Section (1)(a)(iv) of the
Fee Schedule.
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\7\ A ``Professional'' is a (i) Public Customer that is not a
Priority Customer; (ii) Non-MIAX Market Maker; (iii) Non-Member
Broker-Dealer; or (iv) Firm. See Fee Schedule, Section (1)(a)(iv).
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In order to qualify for the proposed monthly PRCP [sic] Tier 1
rebate, a Member must execute an increased percentage of contracts on
MIAX in that same month for the account(s) of a Professional (not
including mini-options, Non-Priority Customer-to-Non-Priority Customer
Orders, QCC Orders, PRIME Orders, PRIME AOC Responses, PRIME Contra-
side Orders, 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 Rule 1400 (collectively,
for purposes of the Professional Rebate Program, ``Excluded
Contracts'')) by greater than 0.065% of the number of contracts
executed by the Member for the account(s) of a Professional during the
fourth quarter of 2015 as a percentage of the total volume reported by
the Options Clearing Corporation (``OCC'') in MIAX classes during the
fourth quarter of 2015 (the ``Baseline Percentage''). For the purpose
of establishing a Baseline Percentage for any Member for whom no fourth
quarter 2015 Baseline Percentage exists, MIAX will use 0.03% as that
Member's Baseline Percentage, as described below.
A Member that qualifies to receive the proposed PRCP [sic] Tier 1
rebate will be known as a ``Qualifying Member,'' which is a Member or
its affiliates of at least 75% common ownership between the firms as
reflected on each firm's Form BD, Schedule A, that qualifies for the
Professional Rebate Program and achieves a volume increase in excess of
0.065% over the applicable Baseline Percentage for Professional orders
transmitted by that Member which are executed electronically on the
Exchange in all multiply-listed option classes for the account(s) of a
Professional and which qualify for the Professional Rebate Program
during a particular month, relative to the appropriate Baseline
Percentage (described below). The Exchange will aggregate the contracts
resulting from orders of a Qualifying Member transmitted and executed
electronically on the Exchange from affiliated Members of the
Qualifying Member, provided there is at least 75% common ownership
between the firms as reflected on each firm's Form BD, Schedule A.
The Exchange also proposes to establish a new ``Baseline
Percentage'' for Members who did not execute contracts for the
account(s) of a Professional during the fourth quarter of 2015 in order
to permit such Members to benefit from all of the rebates offered under
the Professional Rebate Program. Currently, the Professional Rebate
Program affords a per contract credit based upon the increase in the
total volume submitted by a Member and executed for the account(s) of a
Professional on MIAX (not including Excluded Contracts) during a
particular month as a percentage of the total volume reported by (OCC)
in MIAX classes during the same month (the ``Current Percentage''),
less the total volume submitted by that Member and executed for the
account(s) of a Professional on MIAX (not including Excluded Contracts)
during the fourth quarter of 2015 as a percentage of the total volume
reported by OCC in MIAX classes during the fourth quarter of 2015 (the
``Baseline Percentage''). The Exchange proposes to define a Baseline
Percentage for Members who did not execute contracts for the account(s)
of a Professional during the fourth quarter of 2015. For such Members
(with respect to all available rebates in the Professional Rebate
Program), the ``Baseline Percentage'' will be .03%.
The purpose of the proposed rule change is to encourage Members to
direct an increased level of Professional contract volume to the
Exchange by
[[Page 29605]]
offering to provide such Members with an additional, concurrent
incentive to direct Priority Customer order flow to the Exchange. The
Exchange believes that increased Professional and Priority Customer
volume will attract more liquidity to the Exchange, which benefits all
market participants. Increased Professional and Priority Customer order
flow should attract professional liquidity providers (Market Makers),
which in turn should make the MIAX marketplace an attractive venue
where Market Makers will submit narrow quotations with greater size,
deepening and enhancing the quality of the MIAX 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 Exchange is also proposing a minor technical amendment to
Section (1)(a)(iii) of the Fee Schedule to refer specifically to ``The
Priority Customer rebate'' payment instead of stating ``This'' payment
in the third paragraph under the PRCP [sic] table. This is intended for
clarity and ease of reference.
The credits paid out as part of the PCRP will be drawn from the
general revenues of the Exchange.\8\ The Exchange calculates volume
thresholds on a monthly basis. The proposed rule changes are to take
effect May 1, 2016.
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\8\ Despite providing credits under the PCRP and the
Professional 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 each of the PCRP and the Professional 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 \9\ in general, and furthers
the objectives of Section 6(b)(4) of the Act \10\ in particular, in
that it is an equitable allocation of reasonable fees and other charges
among Exchange members, and issuers and other persons using its
facilities.
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\9\ 15 U.S.C. 78f(b).
\10\ 15 U.S.C. 78f(b)(4).
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The Exchange believes that the proposal to offer the rebate under
the PCRP to Qualifying Members is fair, equitable and not unreasonably
discriminatory, because it applies equally to all Qualifying Members.
The proposed per contract rebate for Priority Customer orders is
reasonably designed because it will encourage providers of Professional
order flow to send increased Professional order flow to the Exchange in
order to receive the per contract credit for achieving Tier 1 volume in
contracts executed for Priority Customers. The Exchange thus believes
that the proposed new rebate should improve market quality for all
market participants by providing more execution opportunities. All
Qualifying Members will receive the same rebate for Priority Customer
contracts executed in PRCP [sic] Tier 1.
The Exchange believes that the proposal to amend the definition of
Baseline Percentage is fair, equitable and not unreasonably
discriminatory. The Exchange believes that the proposed definition of
Baseline Percentage should provide an equal opportunity, and a
beginning measuring percentage, for all Members that did not have a
Baseline Percentage for the fourth quarter of 2015 to submit
Professional order flow and thus become Qualifying Members for the Tier
1 Priority Customer contract rebate. This should in turn increase order
flow, trading opportunities and improve the overall depth, liquidity
and quality of the market for all MIAX participants.
Additionally, the proposed amended definition of Baseline
Percentage is equitable and not unfairly discriminatory because it will
benefit Members who did not execute orders for the account(s) of a
Professional in the fourth quarter of 2015 and such Members will now be
on an equal playing field with respect to the calculation of their
potential increase in percentage of Professional contracts executed for
purposes of becoming a Qualifying Member.
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. The Exchange
believes that the proposed changes would increase both intermarket and
intramarket competition by encouraging Members to direct their
Professional and Priority Customer orders to the Exchange, which should
enhance the quality of quoting and increase the volume of contracts
traded on MIAX. The Exchange believes that the changes to each of the
PCRP and the Professional Rebate Program should provide additional
liquidity that enhances the quality of its markets and increases the
number of trading opportunities on MIAX for all participants, who will
be able to compete for such opportunities. This should 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 and rebates
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 adds new rebates and
thus encourages market participants to direct both their Professional
and Priority Customer order flow to the Exchange. Given the robust
competition for volume among options markets, many of which offer the
same products, enhancing the existing volume-based PCRP and
Professional Rebate Programs to attract order flow is consistent with
the goals of the Act. The Exchange believes that the proposal will
enhance competition, because market participants will have another
additional pricing consideration in determining where to execute orders
and post liquidity if they factor the benefits of the proposed
amendments to the PCRP and Professional Rebate Program into the
determination.
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,\11\ and Rule 19b-4(f)(2) \12\ 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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\11\ 15 U.S.C. 78s(b)(3)(A)(ii).
\12\ 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
[[Page 29606]]
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-2016-09 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 20549-1090.
All submissions should refer to File Number SR-MIAX-2016-09. 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-2016-09, and should be
submitted on or before June 2, 2016.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\13\
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\13\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-11152 Filed 5-11-16; 8:45 am]
BILLING CODE 8011-01-P