[Federal Register Volume 83, Number 53 (Monday, March 19, 2018)]
[Notices]
[Pages 12063-12066]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-05453]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-82868; File No. SR-MIAX-2018-08]


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

March 13, 2018.
    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 February 28, 2018, 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 
website 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 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend the Fee Schedule to modify certain 
aspects of the following fees that apply to MIAX Options Market Makers: 
(i) The Monthly Trading Permit fees; and (ii) the MEI Port fees.
    The Exchange issues Trading Permits that confer the ability to 
transact on the Exchange.\3\ Currently, the Exchange assesses the 
following monthly fees for MIAX Options Market Maker Trading Permits: 
(i) $7,000 for Market Maker Assignments in up to 10 option classes or 
up to 20% of option classes by volume; (ii) $12,000 for Market Maker 
Assignments in up to 40 option classes or up to 35% of option classes 
by volume; (iii) $17,000 for Market Maker Assignments in up to 100 
option classes or up to 50% of option classes by volume; and (iv) 
$22,000.00 for Market Maker Assignments in over 100 option classes or 
over 50% of option classes by volume up to all option classes listed on 
MIAX Options.\4\ For the calculation of these monthly Trading Permit 
fees, the number of classes is defined as the greatest number of 
classes the Market Maker was assigned to quote in on any given day 
within the calendar month and the class volume percentage is based on 
the total national average daily volume in classes listed on MIAX 
Options in the prior calendar quarter.\5\ Newly listed option classes 
are excluded from the calculation of the monthly Market Maker Trading 
Permit fee until the calendar quarter following their listing, at which 
time the newly listed option classes will be included in both the per 
class count and the percentage of total national average daily volume.
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    \3\ There is no limit on the number of Trading Permits that may 
be issued by the Exchange; however, the Exchange has the authority 
to limit or decrease the number of Trading Permits it has determined 
to issue provided it complies with the provisions set forth in Rule 
200(a) and Section 6(c)(4) of the Exchange Act. See 15 U.S.C. 
78(f)(c)(4). For a complete description of MIAX Options Trading 
Permits, see MIAX Rule 200.
    \4\ See the Fee Schedule, Section 3(b).
    \5\ The Exchange will use the following formula to calculate the 
percentage of total national average daily volume that the Market 
Maker assignment is for purposes of the Market Maker trading permit 
fee for a given month:
    Market Maker assignment percentage of national average daily 
volume = [total volume during the prior calendar quarter in a class 
in which the Market Maker was assigned]/[total national volume in 
classes listed on MIAX Options in the prior calendar quarter].
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    The Exchange assesses Market Makers the monthly Trading Permit fee 
based on the greatest number of classes listed on MIAX Options that the 
Market Maker was assigned to quote on any given day within a calendar 
month and the applicable fee rate that is the lesser of either the per 
class basis or percentage of total national average daily volume 
measurement. Members receiving Trading Permits during the month will be 
assessed Trading Permit fees according to this schedule, except that 
the calculation of the Trading Permit fee for the first month in which 
the Trading Permit is issued will be pro-rated based on the number of 
trading days occurring after the date on which the Trading Permit was 
in effect during that first month divided by the total number of 
trading days in such month multiplied by the monthly rate.
    The Exchange now proposes to modify its Trading Permit fees that 
apply to the Market Makers who fall within the following Trading Permit 
fee levels, which represent the 3rd and 4th levels of the fee table: 
(i) Market Maker Assignments in up to 100 option classes or up to 50% 
of option classes by volume; and (ii) Market Maker Assignments in over 
100 option classes or over 50% of option classes by volume up to all 
option classes listed on MIAX Options. Specifically, the Exchange 
proposes for these Monthly Trading Permit Fee levels, if the Market 
Maker's total monthly executed volume during the relevant month is less 
than 0.075% of the total monthly executed volume reported by OCC in the 
market maker account type for MIAX-listed option classes for that 
month, then the fee will be $15,500 instead of the fee otherwise 
applicable to such level.
    The purpose of this proposed change is to provide a lower fixed 
cost to those Market Makers who are willing to quote the entire 
Exchange market (or substantial amount of the Exchange market), as 
objectively measured by either number of classes assigned or national 
ADV, but who do not otherwise execute a significant amount of volume on 
the Exchange. The Exchange believes that, by offering lower fixed costs 
to Market Makers that execute less volume, the Exchange will retain and 
attract smaller-scale Market Makers, which are an integral component of 
the option marketplace, but have been decreasing in number in recent 
years, due to industry consolidation and lower market maker 
profitability. Since these

[[Page 12064]]

smaller-scale Market Makers utilize less Exchange capacity due to lower 
overall volume executed, the Exchange believes it is reasonable and 
equitable to offer such Market Makers a lower fixed cost. The Exchange 
notes that other options exchanges assess certain of their membership 
fees at different rates, based upon a member's participation on that 
exchange,\6\ and, as such, this concept is not novel. The proposed 
changes to the Trading Permit fees for Market Makers who fall within 
the 3rd and 4th levels of the fee table are based upon a business 
determination of current Market Maker assignments and trading volume.
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    \6\ Cboe BZX Options Exchange (``BZX Options'') assesses the 
Participant Fee, which is a membership fee, according to a member's 
ADV. See Cboe BZX Options Exchange Fee Schedule under ``Membership 
Fees''. The Participant Fee is $500 if the member ADV is under 5000 
and $1,000 if the member ADV is equal to or over 5000. Id.
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    The Exchange also proposes to modify its MEI Port fees assessable 
to certain Market Makers. Currently, MIAX Options assesses monthly MEI 
Port fees on Market Makers based upon the number of classes or class 
volume accessed by the Market Maker. Market Makers are allocated two 
(2) Full Service MEI Ports \7\ and two (2) Limited Service MEI Ports 
per matching engine \8\ to which they connect. The Exchange currently 
assesses the following MEI Port fees: (a) $5,000 for Market Maker 
Assignments in up to 5 option classes or up to 10% of option classes by 
volume; (b) $10,000 for Market Maker Assignments in up to 10 option 
classes or up to 20% of option classes by volume; (c) $14,000 for 
Market Maker Assignments in up to 40 option classes or up to 35% of 
option classes by volume; (d) $17,500 for Market Maker Assignments in 
up to 100 option classes or up to 50% of option classes by volume; and 
(e) $20,500 for Market Maker Assignments in over 100 option classes or 
over 50% of option classes by volume up to all option classes listed on 
MIAX Options.\9\ The Exchange also currently charges $100 per month for 
each additional Limited Service MEI Port per matching engine for Market 
Makers over and above the two (2) Limited Service MEI Ports per 
matching engine that are allocated with the Full Service MEI Ports. The 
Full Service MEI Ports, Limited Service MEI Ports and the additional 
Limited Service MEI Ports all include access to the Exchange's Primary 
and Secondary data centers and its Disaster Recovery center. For the 
calculation of the monthly MEI Port fees that apply to Market Makers, 
the number of classes is defined as the greatest number of classes the 
Market Maker was assigned to quote in on any given day within the 
calendar month and the class volume percentage is based on the total 
national average daily volume in classes listed on MIAX Options in the 
prior calendar quarter.\10\ Newly listed option classes are excluded 
from the calculation of the monthly MEI Port fee until the calendar 
quarter following their listing, at which time the newly listed option 
classes will be included in both the per class count and the percentage 
of total national average daily volume.
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    \7\ Full Service MEI Ports provide Market Makers with the 
ability to send Market Maker quotes, eQuotes, and quote purge 
messages to the MIAX Options System. Full Service MEI Ports are also 
capable of receiving administrative information. Market Makers are 
limited to two Full Service MEI Ports per matching engine.
    \8\ A ``matching engine'' is a part of the MIAX Options 
electronic system that processes options quotes and trades on a 
symbol-by-symbol basis. Some matching engines will process option 
classes with multiple root symbols, and other matching engines will 
be dedicated to one single option root symbol (for example, options 
on SPY will be processed by one single matching engine that is 
dedicated only to SPY). A particular root symbol may only be 
assigned to a single designated matching engine. A particular root 
symbol may not be assigned to multiple matching engines.
    \9\ See the Fee Schedule, Section 5(d)(ii).
    \10\ The Exchange will use the following formula to calculate 
the percentage of total national average daily volume that the 
Market Maker assignment is for purposes of the MEI Port fee for a 
given month:
    Market Maker assignment percentage of national average daily 
volume = [total volume during the prior calendar quarter in a class 
in which the Market Maker was assigned]/[total national volume in 
classes listed on MIAX Options in the prior calendar quarter].
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    The Exchange assesses Market Makers the monthly MEI Port fees based 
on the greatest number of classes listed on MIAX Options that the 
Market Maker was assigned to quote on any given day within a calendar 
month and the applicable fee rate that is the lesser of either the per 
class basis or percentage of total national average daily volume 
measurement.
    The Exchange now proposes to modify its MEI Port fees that apply to 
the Market Makers who fall within the following MEI Port fee levels, 
which represent the 4th and 5th levels of the fee table: Market Makers 
who have (i) Assignments in up to 100 option classes or up to 50% of 
option classes by volume and (ii) Assignments in over 100 option 
classes or over 50% of option classes by volume up to all option 
classes listed on MIAX Options. Specifically, the Exchange proposes for 
these Monthly MEI Port Fee levels, if the Market Maker's total monthly 
executed volume during the relevant month is less than 0.075% of the 
total monthly executed volume reported by OCC in the market maker 
account type for MIAX-listed option classes for that month, then the 
fee will be $14,500 instead of the fee otherwise applicable to such 
level.
    The purpose of this proposed change is to provide a lower fixed 
cost to those Market Makers who are willing to quote the entire 
Exchange market (or substantial amount of the Exchange market), as 
objectively measured by either number of classes assigned or national 
ADV, but who do not otherwise execute a significant amount of volume on 
the Exchange. The Exchange believes that, by offering lower fixed costs 
to Market Makers that execute less volume, the Exchange will retain and 
attract smaller-scale Market Makers, which are an integral component of 
the option industry marketplace, but have been decreasing in number in 
recent years, due to industry consolidation and lower market maker 
profitability. Since these smaller-scale Market Makers utilize less 
Exchange capacity due to lower overall volume executed, the Exchange 
believes it is reasonable and appropriate to offer such Market Makers a 
lower fixed cost. The Exchange notes that other options exchanges 
assess certain of their membership fees at different rates, based upon 
a member's participation on that exchange,\11\ and, as such, this 
concept is not novel. The proposed changes to the MEI Port fees for 
Market Makers who fall within the 4th and 5th levels of the fee table 
are based upon a business determination of current Market Maker 
assignments and trading volume.
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    \11\ See supra note 6. Also, regarding port fees specifically, 
Nasdaq Phlx LLC (``Phlx'') capped its Active SQF Port fee at $500 
per month for smaller member organizations that they defined as 
``Phlx Only Members'' and that had ``50 or less SQT assignments 
affiliated with their member organizations'' so that ``the Exchange 
may provide an equal opportunity to all members to access the 
Specialized Quote Fee (``SQF'') data at a lower cost.'' See 
Securities Exchange Act Release No. 64381 (May 3, 2011), 76 FR 26777 
(May 9, 2011) (SR-Phlx-2011-57). Phlx currently caps all Active SQF 
Port fees assessed to members at $42,000 per month. See the Nasdaq 
Phlx LLC Pricing Schedule, Article VII, Section B. Phlx more 
recently capped the total fees assessable to PSX Participants at 
$30,000 per month and stated as reasoning that ``[t]he Exchange 
believes that the proposed fee cap will make PSX a more attractive 
venue for Participants, and help PSX both retain and attract new 
Participants.'' See Securities Exchange Act Release No. 78665 
(August 24, 2016), 81 FR 59693 (August 30, 2016) (SR-Phlx-2016-85). 
See the Nasdaq Phlx LLC Pricing Schedule, Article VIII.
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    The proposed rule changes are scheduled to become operative on 
March 1, 2018.
2. Statutory Basis
    The Exchange believes that its proposal to amend its Fee Schedule 
is consistent with Section 6(b) of the Act \12\

[[Page 12065]]

in general, and furthers the objectives of Section 6(b)(4) of the Act 
\13\ in particular, in that it provides for the equitable allocation of 
reasonable dues, fees and other charges among Exchange members and 
issuers and other persons using any facility or system which the 
Exchange operates or controls. The Exchange also believes the proposal 
furthers the objectives of Section 6(b)(5) of the Act \14\ in that it 
is designed to promote just and equitable principles of trade, to 
remove impediments to and perfect the mechanism of a free and open 
market and a national market system, and, in general to protect 
investors and the public interest and is not designed to permit unfair 
discrimination between customer, issuers, brokers and dealers.
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    \12\ 15 U.S.C. 78f(b).
    \13\ 15 U.S.C. 78f(b)(4).
    \14\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that the proposed amendments to the Trading 
Permit fees are consistent with Section 6(b)(4) of the Act in that they 
are reasonable, equitable and not unfairly discriminatory. The proposed 
amendments to the Trading Permit fees are reasonable in that, by 
offering lower fixed costs to Market Makers that execute less volume, 
the Exchange will retain and attract smaller-scale Market Makers, which 
are an integral component of the option industry marketplace, but have 
been decreasing in number in recent years, due to industry 
consolidation and lower market maker profitability. Since these 
smaller-scale Market Makers utilize less Exchange capacity due to lower 
overall volume executed, the Exchange believes it is reasonable and 
appropriate to offer such Market Makers a lower fixed cost who are 
willing to quote the majority or entirety of the market. The Exchange 
also believes that its proposal is consistent with Section 6(b)(5) of 
the Act \15\ because it will be uniformly applied to all Market Makers 
that execute less volume on the Exchange, as determined and measured by 
a uniform, objective, quantitative volume amount. The proposed Trading 
Permit fees are fair and equitable and not unreasonably discriminatory 
because they apply equally to all similarly situated Market Makers 
regardless of type and access to the Exchange is offered on terms that 
are not unfairly discriminatory.
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    \15\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that the proposed amendments to the MEI Port 
fees are consistent with Section 6(b)(4) of the Act in that they are 
reasonable, equitable and not unfairly discriminatory. The proposed 
amendments to the MEI Port fees are reasonable in that, by offering 
lower fixed costs to Market Makers that execute less volume, the 
Exchange will retain and attract smaller-scale Market Makers, which are 
an integral component of the option industry marketplace, but have been 
decreasing in number in recent years, due to industry consolidation and 
lower market maker profitability. Since these smaller-scale Market 
Makers utilize less Exchange capacity due to lower overall volume 
executed, the Exchange believes it is reasonable and appropriate to 
offer such Market Makers (who are willing to quote the majority or 
entirety of the market) a lower fixed cost. The Exchange also believes 
that its proposal is consistent with Section 6(b)(5) of the Act \16\ 
because it will be uniformly applied to all Market Makers that execute 
less volume on the Exchange, as determined and measured by a uniform, 
objective, quantitative volume amount. The proposed MEI Port fees are 
fair and equitable and not unreasonably discriminatory because they 
apply equally to all similarly situated Market Makers regardless of 
type and access to the Exchange is offered on terms that are not 
unfairly discriminatory.
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    \16\ 15 U.S.C. 78f(b)(5).
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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 Exchange believes that the 
proposed rule changes will increase both intermarket and intramarket 
competition by enabling smaller-scale Market Makers who are willing to 
quote the entire marketplace (or a substantial amount of the entire 
marketplace) to access the Exchange at a lower fixed cost. By offering 
lower fixed costs to Market Makers that execute less volume, the 
Exchange believes that it will retain and attract smaller-scale Market 
Makers, which are an integral component of the option industry 
marketplace, but have been decreasing in number in recent years, due to 
industry consolidation and lower market maker profitability. Since 
these smaller-scale Market Makers utilize less Exchange capacity due to 
lower overall volume executed, the Exchange believes it is reasonable 
and appropriate to offer such Market Makers a lower fixed cost.
    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 changes reflect 
this competitive environment because they modify the Exchange's fees in 
a manner that continues to encourage market participants to register as 
Market Makers on the Exchange, to provide liquidity and to attract 
order flow. To the extent that this purpose is achieved, all the 
Exchange's market participants should benefit from the improved market 
liquidity.

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,\17\ and Rule 19b-4(f)(2) \18\ 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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    \17\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \18\ 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-2018-08 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.


[[Page 12066]]


All submissions should refer to File Number SR-MIAX-2018-08. 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 website (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 website 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. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-MIAX-2018-08 and should be submitted on 
or before April 9, 2018.
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    \19\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-05453 Filed 3-16-18; 8:45 am]
BILLING CODE 8011-01-P