[Federal Register Volume 82, Number 71 (Friday, April 14, 2017)]
[Notices]
[Pages 18028-18031]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-07529]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-80416; File No. SR-MIAX-2017-15]


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

April 10, 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 April 6, 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 substantially 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 Exchange initially filed the proposal on March 29, 2017 (SR-
MIAX-2017-14). That filing was withdrawn and replaced with the current 
filing (SR-MIAX-2017-15).
    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 permit Exchange 
Market Makers \3\ to appoint Electronic Exchange Members \4\ 
(``EEMs''), and vice versa, as ``Affiliates,'' solely for purposes of 
calculating transaction volume in order to qualify for certain 
transaction rebates and fee incentives under the Fee Schedule. The 
Exchange notes that this concept of appointment between market makers 
and order flow providers currently exists at a number of other 
exchanges, including Bats BZX Exchange, Inc. (``BATS''), Bats EDGX 
Exchange, Inc. (``EDGX''), Chicago Board Options Exchange, Incorporated 
(``CBOE''), NYSE Amex Options LLC (``Amex Options''), and NASDAQ PHLX 
LLC (``PHLX''), as more fully discussed below.
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    \3\ 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 Footnote 2 to the Fee 
Schedule.
    \4\ The term ``EEM'' refers to the holder of a Trading Permit 
who is not a Market Maker. See Exchange Rule 100.
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    In order for the Exchange to implement this concept of appointment, 
the Exchange proposes to amend the definition of ``Affiliate'' 
contained in Section (1)(a)(i), footnote 1, of the Fee Schedule. 
Footnote 1 currently reads:

    ``For purposes of the MIAX Options Fee Schedule, the term 
``Affiliate'' means an affiliate of a Member of at least 75% common 
ownership between the firms as reflected on each firm's Form BD, 
Schedule A (``Affiliate'').''


[[Page 18029]]


    The Exchange proposes to amend footnote 1 so that it instead reads:

    ``For purposes of the MIAX Options Fee Schedule, the term 
``Affiliate'' means (i) an affiliate of a Member of at least 75% 
common ownership between the firms as reflected on each firm's Form 
BD, Schedule A, or (ii) the Appointed Market Maker of an Appointed 
EEM (or, conversely, the Appointed EEM of an Appointed Market 
Maker). An ``Appointed Market Maker'' is a MIAX Market Maker (who 
does not otherwise have a corporate affiliation based upon common 
ownership with an EEM) that has been appointed by an EEM and an 
``Appointed EEM'' is an EEM (who does not otherwise have a corporate 
affiliation based upon common ownership with a MIAX Market Maker) 
that has been appointed by a MIAX Market Maker, pursuant to the 
following process. A MIAX Market Maker appoints an EEM and an EEM 
appoints a MIAX Market Maker, for the purposes of the Fee Schedule, 
by each completing and sending an executed Volume Aggregation 
Request Form by email to [email protected] no later than 2 
business days prior to the first business day of the month in which 
the designation is to become effective. Transmittal of a validly 
completed and executed form to the Exchange along with the 
Exchange's acknowledgement of the effective designation to each of 
the Market Maker and EEM will be viewed as acceptance of the 
appointment. The Exchange will only recognize one designation per 
Member. A Member may make a designation not more than once every 12 
months (from the date of its most recent designation), which 
designation shall remain in effect unless or until the Exchange 
receives written notice submitted 2 business days prior to the first 
business day of the month from either Member indicating that the 
appointment has been terminated. Designations will become operative 
on the first business day of the effective month and may not be 
terminated prior to the end of the month. Execution data and reports 
will be provided to both parties.''

    The purpose of the proposed rule change is to increase 
opportunities for EEMs and Market Makers, who do not otherwise have a 
corporate affiliation based upon common ownership with a MIAX Market 
Maker or EEM, as the case may be, to potentially qualify for tiered 
pricing incentives on the Exchange. Specifically, the Exchange proposes 
to allow a MIAX Market Maker to designate an EEM as its ``Appointed 
EEM'' and for an EEM to designate a MIAX Market Maker as its 
``Appointed Market Maker'' for purposes of Sections (1)(a)(i) through 
(1)(a)(v) of the Fee Schedule. Members of the Exchange would effectuate 
such designation by completing and sending an executed Volume 
Aggregation Request Form by email to the Exchange no later than 2 
business days prior to the first business day of the month in which the 
designation is to become effective.\5\ As specified in the proposed Fee 
Schedule, the Exchange would view the transmittal of the validly 
completed and executed form along with the Exchange's acknowledgement 
of the effective designation as acceptance of such an appointment.\6\ 
The proposed new concepts would be applicable to all tiered pricing 
offered by the Exchange in Sections (1)(a)(i) through (1)(a)(v) of the 
Fee Schedule, and are designed to increase opportunities for Members to 
qualify for such tiers.
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    \5\ Members should direct their executed forms to 
[email protected].
    \6\ The Exchange further notes that, as proposed, the Exchange 
would only recognize one such designation for each party once every 
12 months (from the date of its most recent designation), which 
designation would remain in effect unless or until the Exchange 
receives written notice submitted 2 business days prior to the first 
business day of the month from either party indicating that the 
appointment has been terminated.
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    The Exchange currently offers tiers of credits and fees as 
described in Sections (1)(a)(i) through (1)(a)(v) of the Fee Schedule. 
Under the current tiers, Members that achieve certain volume criteria 
may qualify for reduced fees or enhanced credits for various 
executions, including executions of Priority Customer \7\ and Market 
Maker orders. In connection with such tiers, the Exchange calculates on 
a monthly basis a Member's volume in the applicable category (e.g., 
Priority Customer orders or Market Maker orders), as specified in the 
Fee Schedule for each applicable transaction.\8\ For example, upon 
reaching a volume threshold that qualifies a Member for a specified 
tier under the Priority Customer Rebate Program,\9\ a Member receives 
the enhanced credit or reduced fee associated with the highest tier 
achieved for each eligible contract executed on the Exchange. Upon 
reaching a volume threshold that qualifies a Member for a specified 
tier under the MIAX Market Maker Sliding Scale, however, a Member 
receives the enhanced credit or reduced fee associated with the tier 
achieved for each eligible contract executed within that tier on the 
Exchange. Further, upon reaching a volume threshold that qualifies a 
Member for a specified tier under the Professional Rebate Program,\10\ 
a Member receives the enhanced credit for each eligible contract 
executed within that tier based upon that percentage tier only, and 
will not receive a rebate applicable to any other tier for such 
contracts.
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    \7\ 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 accounts(s).
    \8\ For example, under Section (1)(a)(i), volume thresholds are 
based on the total national Market Maker volume of any options 
classes with traded volume on MIAX during the month in simple and 
complex orders (excluding QCC Orders, PRIME AOC Responses, and 
unrelated MIAX Market Maker quotes or unrelated MIAX Market Maker 
orders that are received during the Response Time Interval and 
executed against the PRIME Order (``PRIME Participating Quotes or 
Orders'')).
    \9\ See Securities Exchange Act Release Nos. 77777 (May 6, 
2016), 81 FR 29603 (May 12, 2016)(SR-MIAX-2016-09); 76557 (December 
4, 2015), 80 FR 76716 (December 10, 2015) (SR-MIAX-2015-65); 76098 
(October 7, 2015), 80 FR 61866 (October 14, 2015) (SR-MIAX-2015-58); 
75856 (September 8, 2015), 80 FR 55158 (September 14, 2015) (SR-
MIAX-2015-53); 75631 (August 6, 2015), 80 FR 48382 (August 12, 2015) 
(SR-MIAX-2015-51); 74758 (April 17, 2015), 80 FR 22756 (April 23, 
2015)(SR-MIAX-2015-27); 74007 (January 9, 2015), 80 FR 1537 (January 
12, 2015) (SR-MIAX-2014-69); 72799 (August 8, 2014), 79 FR 47698 
(August 14, 2014) (SR-MIAX-2014-40); 72355 (June 10, 2014), 79 FR 
34368 (June 16, 2014) (SR-MIAX-2014-25); 71698 (March 12, 2014), 79 
FR 15185 (March 18, 2014) (SR-MIAX-2014-12); 71283 (January 10, 
2014), 79 FR 2914 (January 16, 2014) (SR-MIAX-2013-63); 71009 
(December 6, 2013), 78 FR 75629 (December 12, 2013) (SR-MIAX-2013-
56).
    \10\ See Securities Exchange Act Release Nos. 80190 (March 9, 
2017), 82 FR 13895 (March 15, 2017) (SR-MIAX-2017-11); 77097 
(February 9, 2016), 81 FR 7877 (February 16, 2016) (SR-MIAX-2016-
05); 77777 (May 6, 2016), 81 FR 29603 (May 12, 2016) (SR-MIAX-2016-
09); 79157 (October 26, 2016), 81 FR 75885 (November 1, 2016) (SR-
MIAX-2016-38).
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    Under the Exchange's current Fee Schedule, a Member is permitted to 
aggregate volume with a Member's ``Affiliates'', which are defined as 
firms that have at least 75% common ownership with the Member as 
reflected on each firm's Form BD, Schedule A.\11\ Thus, Members that 
act as EEMs with affiliated broker-dealers that are Market Makers on 
the Exchange, and vice-versa, may be able to potentially qualify for 
certain pricing incentives offered by the Exchange based on such 
affiliation and aggregation.
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    \11\ See Footnote 1 to the Fee Schedule.
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    The Exchange proposes that all MIAX Market Makers who do not 
otherwise have a corporate affiliation based upon common ownership with 
an EEM (whether in the same broker-dealer or in a separate broker-
dealer) would be able to appoint an EEM to aggregate its volume for 
purposes of reaching tier thresholds under the Fee Schedule, and 
conversely, all EEMs who do not otherwise have a corporate affiliation 
based upon common ownership with a MIAX Market Maker (whether in the 
same broker-dealer or in a separate broker-dealer) could appoint a MIAX 
Market Maker for the same purposes.\12\

[[Page 18030]]

The proposal would be available to all MIAX Market Makers and EEMs, 
except for those MIAX Market Makers who otherwise have a corporate 
affiliation based upon common ownership with an EEM (and vice versa). 
The proposed change would enable a MIAX Market Maker without an 
affiliated EEM to enter into a relationship with an Appointed EEM. By 
virtue of designating an Appointed Market Maker, an EEM benefits by 
establishing an execution relationship with a MIAX Market Maker that 
may potentially provide greater liquidity to trade with its own 
Priority Customer volume. To be clear, the Exchange notes that an EEM 
that has a corporate affiliation based upon common ownership with a 
MIAX Market Maker may only aggregate volumes with its corporate-
affiliated MIAX Market Maker, and not with any other MIAX Market Maker. 
Further, MIAX Market Makers that have multiple Market Maker memberships 
which are already aggregated by the Exchange for purposes of qualifying 
the Member for tiered pricing incentives will be treated as a single 
entity.
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    \12\ The Commission notes that the Exchange calculates on a 
monthly basis a Member's volume in the applicable category (e.g., 
Priority Customer orders or Market Maker orders), as specified in 
the Fee Schedule for each applicable transaction. See supra note 8 
and accompanying text.
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    Thus, the proposed changes would enable Members that may not 
currently qualify for tiered pricing incentives to potentially avail 
themselves of such incentives, as well as to assist Members to 
potentially achieve a higher tier, thus qualifying for higher credits 
or reduced transaction fees. The Exchange believes these proposed 
changes would incentivize Members to direct their order flow to the 
Exchange to the benefit of all market participants. Further, the 
Exchange believes that the proposed changes would encourage MIAX Market 
Makers to increase their participation on the Exchange, which would 
increase capital commitment and liquidity on the Exchange to the 
benefit of all market participants.
    As proposed, the Exchange will only recognize one such designation 
for each party once every 12 months (from the date of its most recent 
designation), which designation would remain in effect unless or until 
the parties informed the Exchange of its termination.\13\ The Exchange 
believes that this requirement would impose a measure of exclusivity 
and would enable both parties to rely upon each other's transaction 
volumes executed on the Exchange, and potentially increase such 
volumes, which is beneficial to all Exchange participants. Other 
exchanges have adopted similar concepts and permit their market makers 
and order flow providers to appoint one another for purposes of volume 
aggregation to reach higher volume tier thresholds.\14\
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    \13\ See supra note 6.
    \14\ See Securities Exchange Act Release Nos. 77524 (April 5, 
2016), 81 FR 21417 (April 11, 2016)(SR-BatsBZX-2016-04); 77526 
(April 5, 2016), 81 FR 21405 (April 11, 2016) (SR-BatsEDGX-2016-05); 
77926 (May 26, 2016), 81 FR 35421 (June 2, 2016) (SR-CBOE-2016-045); 
78382 (July 21, 2016), 81 FR 49293 (July 27,2016) (SR-Phlx-2016-62).
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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 \15\ in general, and 
furthers the objectives of Sections 6(b)(4) of the Act,\16\ in that it 
is an equitable allocation of reasonable dues, fees and other charges 
among its members and issuers and other persons using its facilities, 
and Section 6(b)(5) of the Act,\17\ 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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    \15\ 15 U.S.C. 78f(b).
    \16\ 15 U.S.C. 78f(b)(4).
    \17\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that its proposed fees and rebates are 
reasonable, fair and equitable, and non-discriminatory for the 
following reasons. First, the proposal would be available to all MIAX 
Market Makers and EEMs (except for those MIAX Market Makers who 
otherwise have a corporate affiliation based upon common ownership with 
an EEM (and vice versa)), and the decision to be designated as an 
``Appointed EEM'' or ``Appointed Market Maker'' is completely voluntary 
and Members may elect to accept this appointment or not. Excluding 
Members that have a corporate affiliation by common ownership from also 
appointing other Members as ``Affiliates'' is equitable and not 
unfairly discriminatory because those Members are already eligible to 
aggregate volume and thus potentially qualify for tiered pricing 
incentives. In addition, the proposed changes would enable Members that 
are not able to achieve tiered pricing incentives to potentially avail 
themselves of such pricing as well as to assist Members that are 
currently able to achieve such tiers to potentially achieve a higher 
tier, thus qualifying for higher rebates or lower fees. The Exchange 
believes these proposed changes would incentivize Members to direct 
their order flow to the Exchange. Specifically, the proposed changes 
would enable any MIAX Market Maker (except for those MIAX Market Makers 
who otherwise have a corporate affiliation based upon common ownership 
with an EEM) to qualify its Appointed EEM for purposes of potential 
tiered pricing incentives. Moreover, the proposed change would allow 
any EEM (except for those EEMs who otherwise have a corporate 
affiliation based upon common ownership with a MIAX Market Maker), by 
virtue of designating an Appointed Market Maker, to establish an 
execution relationship with a MIAX Market Maker that may potentially 
provide greater liquidity to trade with its own volume, including 
Priority Customer volume. The Exchange believes these proposed changes 
would incentivize Appointed EEMs with an Appointed Market Maker to 
direct their order flow to the Exchange, which would result in an 
increase in orders routed to the Exchange which in turn would benefit 
all market participants by expanding liquidity and providing more 
trading opportunities on the Exchange. Similarly, the Exchange believes 
these proposed changes would incentivize Appointed Market Makers with 
an Appointed EEM to increase their participation on the Exchange, which 
would increase capital commitment and liquidity and decrease spreads on 
the Exchange to the benefit of all market participants. The Exchange 
believes that, similar to volume-based tiers offered by the Exchange, 
the benefits of the proposal extend to all market participants based on 
the increased quality of liquidity on the Exchange, including those 
market participants that opt not to become an Appointed EEM or 
Appointed Market Maker.
    Further, the Exchange believes that the proposal is reasonable and 
equitably allocated because it is beneficial to all Exchange 
participants based on the fact that it enables parties to rely upon 
each other's transaction volumes executed on the Exchange, and 
potentially increase such volumes. In turn, as above, the potential 
increase in order flow, capital commitment and resulting liquidity on 
the Exchange would benefit all market participants by expanding 
liquidity, providing more trading opportunities and tighter spreads. 
The proposal is also reasonable, equitable and not unfairly 
discriminatory because the Exchange would only recognize one such 
designation for each party once every 12 months (from the date of its 
most recent designation), which requirement would impose a measure of 
exclusivity while

[[Page 18031]]

allowing both parties to rely upon each other's transaction volumes 
executed on the Exchange, and potentially increase such volumes, again, 
to the benefit of all market participants. Finally, the Exchange 
believes the proposal is reasonable, equitable and not unfairly 
discriminatory and facilitates trading as it may encourage an increase 
in orders routed to the Exchange, which would expand liquidity and 
provide more trading opportunities and tighter spreads to the benefit 
of all market participants, even to those market participants that are 
either currently affiliated by virtue of their common ownership or that 
opt not to become an Appointed EEM or Appointed Market Maker under this 
proposal. Other exchanges have adopted similar concepts.\18\
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    \18\ See supra note 14.
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed amendments to its 
fee schedule will impose 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 are pro-competitive as they 
would increase opportunities for MIAX Market Makers and EEMs (who do 
not otherwise have a corporate affiliation based upon common ownership 
with an EEM, and MIAX Market Maker, respectively) to potentially 
qualify for tiered pricing incentives on the Exchange, which may 
increase intermarket and intramarket competition by incentivizing 
participants to direct their orders to the Exchange thereby increasing 
the volume of contracts traded on the Exchange. Enhanced market quality 
and increased transaction volume that results from the anticipated 
increase in order flow directed to the Exchange would 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. In such an 
environment, the Exchange must continually review, and consider 
adjusting, its fees and rebates to remain competitive with other 
exchanges. For the reasons described above, the Exchange believes that 
the proposed rule change reflects this competitive environment

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,\19\ and Rule 19b-4(f)(2) \20\ 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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    \19\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \20\ 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-2017-15 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-2017-15. 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-2017-15, and should be 
submitted on or before May 5, 2017.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\21\
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    \21\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-07529 Filed 4-13-17; 8:45 am]
 BILLING CODE 8011-01-P