[Federal Register Volume 82, Number 28 (Monday, February 13, 2017)]
[Notices]
[Pages 10519-10521]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-02838]



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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-79983; File No. SR-MIAX-2017-02]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of a Proposed Rule Change by Miami International 
Securities Exchange LLC To Amend Its Fee Schedule To Modify Its Market 
Maker and Other Market Participant Transaction Fees

February 7, 2017.
    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 27, 2017, 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 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/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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend its Fee Schedule to increase the per 
contract surcharge assessed for transactions by all market 
participants, except for Priority Customers,\3\ which remove liquidity 
against a resting Priority Customer complex order \4\ on the strategy 
book for standard option classes in the Penny Pilot Program \5\ 
(``Penny classes'') and for standard option classes which are not in 
the Penny Pilot Program (``Non-Penny classes'').
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    \3\ ``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 accounts(s). See Exchange Rule 
100.
    \4\ A ``complex order'' is any order involving the concurrent 
purchase and/or sale of two or more different options in the same 
underlying security (the ``legs'' or ``components'' of the complex 
order), for the same account, in a ratio that is equal to or greater 
than one-to-three (.333) and less than or equal to three-to-one 
(3.00) and for the purposes of executing a particular investment 
strategy. A complex order can also be a ``stock-option'' order, 
which is an order to buy or sell a stated number of units of an 
underlying security coupled with the purchase or sale of options 
contract(s) on the opposite side of the market, subject to certain 
contingencies set forth in the proposed rules governing complex 
orders. See Securities Exchange Act Release No. 78620 (August 18, 
2016), 81 FR 58770 (August 25, 2016) (SR-MIAX-2016-26).
    \5\ See Securities Exchange Act Release Nos. 78080 (June 15, 
2016), 81 FR 40377 (June 21, 2016)(SR-MIAX-2016-16); 79432 (November 
30, 2016), 81 FR 87990 (December 6, 2016) (SR-MIAX-2016-45).
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Market Maker Transaction Fees
    Section 1)a)i) of the Fee Schedule sets forth the Exchange's Market 
Maker \6\ Transaction Fees (the ``Sliding Scale''). The Exchange 
assesses a per contract transaction fee on a Market Maker for the 
execution of simple orders and quotes and complex orders. The amount of 
the transaction fee is based on the Market Maker's percentage of total 
national market maker volume that trades on the Exchange during a 
particular calendar month and the Exchange aggregates the volume 
executed by the Members in both simple orders and quotes and complex 
orders for purposes of determining the applicable tier and 
corresponding per contract transaction fee amount.\7\ In addition, the 
amount of the transaction fee is also based on which tier the Members 
and their affiliates reach in the Priority Customer Rebate Program. 
Members who reach Tier 3 or higher are charged a different set of rates 
than those who don't for simple orders and quotes and complex orders. 
The transaction fees are assessable to all Market Makers for 
transactions in all products (except for mini-options, for which there 
are separate product fees), in both Penny classes and Non-Penny 
classes.
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    \6\ The term ``Market Makers'' refers to Lead Market Makers 
(``LMMs''), Primary Lead Market Makers (``PLMMs''), and Registered 
Market Makers (``RMMs'') collectively. See Exchange Rule 100. A 
Directed Order Lead Market Maker (``DLMM'') and Directed Primary 
Lead Market Maker (``DPLMM'') is a party to a transaction being 
allocated to the LMM or PLMM and is the result of an order that has 
been directed to the LMM or PLMM. See Fee Schedule note 2.
    \7\ The calculation of the volume thresholds does not include 
QCC Orders, PRIME AOC Responses, and PRIME Participating Quotes or 
Orders. For a discussion of these exclusions, see Securities 
Exchange Act Release No. 78299 (July 12, 2016), 81 FR 46734 (July 
18, 2016) (SR-MIAX-2016-20).
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    Additionally, the Exchange assesses one per contract fee for 
complex orders in each tier for Penny classes, and one per contract fee 
for complex orders in Non-Penny classes, with a surcharge for removing 
liquidity in a specific scenario, as described below. For simple orders 
and quotes, the Sliding Scale assesses a per contract transaction fee, 
which is based upon whether the Market Maker is a ``maker'' or a 
``taker.'' \8\ As an incentive for Market Makers to provide liquidity 
on the Exchange, the Exchange's ``maker'' fees are lower than the 
``taker'' fees. The Exchange does not distinguish between a ``maker'' 
and a ``taker'' for complex order executions as it does in the 
traditional construct for simple orders and quotes and instead assesses 
the per contract transaction fee for all executions and a surcharge of 
$0.08 per executed contract for executions in complex orders assessed 
to a Market Maker (and all other market participants except Priority 
Customers) when it removes liquidity by trading against a Priority 
Customer order that is resting on the Strategy Book \9\ (each a ``Taker 
Surcharge''). The purpose of the Taker Surcharge is to encourage 
Members to add liquidity to the Strategy Book, and to recoup costs 
associated with the execution of complex orders on the Strategy Book. 
The Exchange believes that assessing the Taker Surcharge only on 
participants removing liquidity effectively subsidizes, and thus 
encourages the posting of liquidity, which benefits investors and the 
public in the form of a deeper, more liquid marketplace. This Taker 
Surcharge is

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substantially similar in structure and amount to a CBOE surcharge of 
the same type.\10\
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    \8\ See Securities Exchange Act Release Nos. 78519 (August 9, 
2016), 81 FR 54162 (August 15, 2016) (SR-MIAX-2016-21); 79157 
(October 26, 2016), 81 FR 75885 (November 1, 2016 (SR-MIAX-2016-38).
    \9\ The ``Strategy Book'' is the Exchange's electronic book of 
complex orders and complex quotes. See Exchange Rule 518(a)(17).
    \10\ See CBOE Fees Schedule, Complex Taker Fee, and note 35.
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    The Exchange proposes to increase the Taker Surcharge assessable to 
Market Makers from $0.08 to $0.10. The increase in the Taker Surcharge 
is similar to the increase that was recently made by CBOE with regard 
to its taker surcharge.\11\
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    \11\ See SR-CBOE-2017-008, filed on January 17, 2017, posted on 
the CBOE Web site (www.cboe.com).
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Other Market Participant Transaction Fees
    Section (1)(a)(ii) of the Fee Schedule sets forth transaction fees 
for Other Market Participants, including Priority Customers, Public 
Customers \12\ that are not Priority Customers, non-MIAX Options Market 
Makers, non-Member Broker-Dealers, and Firms.\13\ The Exchange 
currently assesses on these market participants, except for Priority 
Customers, a per contract transaction fee for simple and complex order 
executions. The transaction fees apply to the listed participants for 
transactions in all products (except mini-options, for which there are 
separate product fees), with fees established for Penny classes and 
separate fees for Non-Penny classes.
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    \12\ The term ``Public Customer'' means a person that is not a 
broker or dealer in securities. See Exchange Rule 100.
    \13\ A ``Firm'' fee is assessed on a MIAX Electronic Exchange 
Member ``EEM'' that enters an order that is executed for an account 
identified by the EEM for clearing in the Options Clearing 
Corporation (``OCC'') ``Firm'' range. See Fee Schedule, Section 
(1)(a)(ii).
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    The Exchange also assesses the same $0.08 per contract Taker 
Surcharge that it assesses on Market Makers for removing liquidity 
against a resting Priority Customer on the Strategy Book on the above-
indicated other market participants, specifically: (i) Public Customers 
that are not Priority Customers; (ii) non-MIAX Options Market Makers; 
(iii) non-Member Broker-Dealers; and (iv) Firms.
    The Exchange proposes to also increase the $0.08 per contract Taker 
Surcharge assessable to all of the other market participants indicated 
above to $0.10 per contract. As stated above, the Exchange believes 
that assessing the Take Surcharge only on participants removing 
liquidity effectively subsidizes, and thus encourages the posting of 
liquidity, which benefits investors and the public in the form of a 
deeper, more liquid marketplace.
    All other aspects of the transaction fees assessable to Market 
Makers and to the other indicated market participants other than 
Priority Customers by the Exchange will remain unchanged. Transaction 
fees for Priority Customers will remain unchanged. The proposed rule 
changes are scheduled to become operative February 1, 2017.
2. Statutory Basis
    The Exchange believes that its proposal to amend its fee schedule 
is consistent with Section 6(b) of the Act \14\ in general, and 
furthers the objectives of Section 6(b)(4) of the Act,\15\ in that it 
is an equitable allocation of reasonable fees and other charges among 
Exchange members and issuers and other persons using its facilities, 
and 6(b)(5) of the Act,\16\ 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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    \14\ 15 U.S.C. 78f(b).
    \15\ 15 U.S.C. 78f(b)(4).
    \16\ 15 U.S.C. 78f(b)(1) [sic] and (b)(5).
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    The Exchange's proposal to increase the Taker Surcharge for Market 
Makers and other participants for removing liquidity by trading against 
a Priority Customer order on the Strategy Book is consistent with 
Section 6(b)(4) of the Act \17\ because it applies equally to all 
participants that remove Priority Customer liquidity from the Strategy 
Book, and does not apply to participants whose orders or quotes resting 
on the Strategy Book are executed against Priority Customer complex 
orders on the Strategy Book. Assessing the Taker Surcharge to market 
participants who take liquidity from Priority Customers is reasonable 
and not unfairly discriminatory because it will provide MIAX Options 
Market Makers and other participants with equal surcharges for removing 
liquidity, and no surcharge for resting liquidity. As stated above, 
this is substantially similar to a surcharge assessed on another 
exchange.\18\ The Exchange notes that, although this represents a 
slight fee increase, the Exchange believes that this increase is fair 
and equitable because the Exchange offers technology with unique risk 
mitigation features not available elsewhere, such as the Implied Away 
Best Bid or Offer (``ixABBO'') Price Protection, and the increase will 
help offset the credits given to complex orders under the Exchange's 
Priority Customer Rebate Program (``PCRP'') \19\ and the Professional 
Rebate Program (``PRP'').\20\
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    \17\ 15 U.S.C. 78f(b)(4).
    \18\ See supra notes 10 and 11.
    \19\ Under the PCRP, 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, in simple 
or complex as applicable, 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).
    \20\ Under the PRP, MIAX Options credits each Member the per 
contract amount resulting from contracts executed from an order 
submitted by that Member for the account(s) of a (i) Public Customer 
that is not a Priority Customer; (ii) Non-MIAX Market Maker; (iii) 
Non-Member Broker-Dealer; or (iv) Firm (for purposes of the 
Professional Rebate Program, ``Professional'') which is executed 
electronically on the Exchange in all multiply-listed option classes 
(excluding, in simple or complex as applicable, 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), provided 
the Member achieves certain Professional volume increase percentage 
thresholds in the month relative to the fourth quarter of 2015, as 
described in the table above [sic]. See Fee Schedule, Section 
(1)(a)(iv).
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    The Exchange's proposal to increase the Taker Surcharge is also 
consistent with Section 6(b)(5) of the Act \21\ because it perfects the 
mechanisms of a free and open market and a national market system and 
protect investors and the public interest by encouraging participants 
to provide liquidity on the Strategy Book, which the Exchange believes 
is an important competitive tool that directly or indirectly can 
provide better prices for investors. The Exchange believes that 
assessing the Taker Surcharge only on participants removing liquidity 
effectively subsidizes, and thus encourages the posting of liquidity, 
which benefits investors and the public in the form of a deeper, more 
liquid marketplace.
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    \21\ 15 U.S.C. 78f(b)(1) [sic] and (b)(5).
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    Public Customers that are not Priority Customers, non-MIAX Options 
Market Makers, non-Member Broker-Dealers and Firms that use 
sophisticated trading systems will be able to remove liquidity from the 
Strategy Book, and thus the Exchange believes that assessing the Taker 
Surcharge to participants who remove liquidity, and not assessing the 
Taker Surcharge to participants with complex orders resting on the 
Strategy Book, is reasonable and not unfairly discriminatory. Moreover, 
the proposed

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Taker Surcharge increase is substantially similar to the surcharge 
increase on CBOE.\22\ The Exchange believes for these reasons that the 
Taker Surcharge for complex orders is equitable, reasonable and not 
unfairly discriminatory, and thus consistent with the Act.
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    \22\ See supra notes 10 and 11.
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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 
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 increase in the Taker Surcharge for complex 
transactions is intended to promote narrower spreads and greater 
liquidity at the best prices. The fee-based incentives for market 
participants to provide liquidity by submitting complex orders to the 
Exchange, and thereby improve the MBBO to ensure participation, should 
enable the Exchange to attract order flow and compete with other 
exchanges which also provide such incentives to their market 
participants for similar transactions.
    The Exchange believes that increased complex order flow will bring 
greater volume and liquidity which in turn benefits all market 
participants by providing more trading opportunities and tighter 
spreads. Therefore, any potential effects that the increased Taker 
Surcharge for complex transactions may have on intra-market competition 
are justifiable due to the reasons stated above.
    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 proposed rule change reflects this 
competitive environment because they modify the Exchange's fees in a 
manner that encourages market participants to provide liquidity and to 
send order flow 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,\23\ and Rule 19b-4(f)(2) \24\ 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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    \23\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \24\ 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-2017-02 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-2017-02. 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 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 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; 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-2017-02, and should be 
submitted on or before March 6, 2017.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\25\
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    \25\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-02838 Filed 2-10-17; 8:45 am]
 BILLING CODE 8011-01-P