[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

[[Page 29604]]

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