[Federal Register Volume 84, Number 69 (Wednesday, April 10, 2019)]
[Notices]
[Pages 14438-14441]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-07049]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-85512; File No. SR-MIAX-2019-17]
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 4, 2019.
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 March 27, 2019, 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'') to amend its fees and rebates for
Qualified Contingent Cross (``QCC'') orders and Complex Qualified
Contingent Cross (``cQCC'') orders.
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.
[[Page 14439]]
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 Sections 1(a)(vii) and (viii) of the
Fee Schedule to amend its fees and rebates for QCC and cQCC Orders. A
QCC Order is comprised of an order to buy or sell at least 1,000
contracts that is identified as being part of a qualified contingent
trade, coupled with a contra side order to buy or sell an equal number
of contracts.\3\ Currently, the Exchange assesses a transaction fee for
all types of market participants other than Priority Customer \4\ for
QCC Orders of $0.15 per contract (Priority Customer orders are assessed
a charge of $0.00 per contract) for the Initiator and the Contra-side.
In addition, the Exchange currently pays a $0.10 per contract rebate
for the initiating order, regardless of the type of market participant.
The rebate is paid to the Member \5\ that enters the order into the
System \6\, but is only paid on the initiating side of the QCC
transaction. No rebates are paid for QCC transactions in which both the
initiator and contra-side orders are from Priority Customers. The
Exchange notes that with regard to order entry, the first order
submitted into the System is marked as the initiating side and the
second order is marked as the contra side.
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\3\ A Qualified Contingent Cross Order is comprised of an
originating order to buy or sell at least 1,000 contracts, or 10,000
mini-option contracts, that is identified as being part of a
qualified contingent trade, as that term is defined in
Interpretation and Policy .01 to Rule 516, coupled with a contra-
side order or orders totaling an equal number of contracts. See
Exchange Rule 516(j).
\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 accounts(s). See Exchange Rule
100.
\5\ The term ``Member'' means an individual or organization
approved to exercise the trading rights associated with a Trading
Permit. Members are deemed ``members'' under the Exchange Act. See
Exchange Rule 100.
\6\ The term ``System'' means the automated trading system used
by the Exchange for the trading of securities. See Exchange Rule
100.
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The Exchange now proposes to increase the Per Contract Fee for
Contra-side QCC Orders for all types of market participants other than
Priority Customer from $0.15 to $0.17 (Priority Customer orders will
continue to be assessed a Per Contract Fee for Contra-side QCC Orders
of $0.00). The Exchange does not propose to change the Per Contract Fee
for Initiator QCC Orders for any market participants. In addition, the
Exchange proposes to increase the Per Contract Rebate for Initiator QCC
Orders for all types of market participants from $0.10 per contract to
$0.14 per contract. The Exchange is not proposing to change that no
rebates will be paid for QCC transactions for which both the Initiator
and Contra-side orders are Priority Customers.
A cQCC Order is comprised of an originating complex order to buy or
sell where each component is at least 1,000 contracts that is
identified as being part of a qualified contingent trade, coupled with
a contra-side complex order or orders to sell or buy an equal number of
contracts.\7\ Currently, the Exchange assesses a transaction fee for
all types of market participants other than Priority Customer for cQCC
Orders of $0.15 per contract (Priority Customer orders are assessed a
charge of $0.00 per contract) for the Initiator and the Contra-side. In
addition, the Exchange currently pays a $0.10 per contract rebate for
the initiating order, regardless of the type of market participant. No
rebates are paid for cQCC transactions in which both the initiator and
contra-side orders are from Priority Customers. All fees and rebates
are per contract per leg. The rebate is paid to the Member that enters
the order into the System, but is only paid on the initiating side of
the cQCC transaction.
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\7\ See Exchange Rule 518(b)(6).
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The Exchange now proposes to increase the Per Contract Fee for
Contra-side cQCC Orders for all types of market participants other than
Priority Customer from $0.15 to $0.17 (Priority Customer orders will
continue to be assessed a Per Contract Fee for Contra-side cQCC Orders
of $0.00). The Exchange does not propose to change the Per Contract Fee
for Initiator cQCC Orders for any market participants. In addition, the
Exchange proposes to increase the Per Contract Rebate for Initiator
cQCC Orders for all types of market participants from $0.10 per
contract to $0.14 per contract. The Exchange is not proposing to change
that no rebates will be paid for cQCC transactions for which both the
initiator and contra-side orders are Priority Customers.
The Exchange notes that QCC and cQCC Orders are excluded from: (i)
The volume threshold calculations for the Market Maker Sliding Scale;
(ii) the rebates and volume calculations as part of the Priority
Customer Rebate Program; (iii) participation in the Professional Rebate
Program; and (iv) the Marketing Fee that is assessed to Market Makers
in their assigned classes in simple or complex order executions when
the contra-party to the execution is a Priority Customer.
The purpose of increasing the specified QCC and cQCC Order fees and
rebates is for business and competitive reasons. The Exchange believes
that it is appropriate to adjust these specified QCC and cQCC Order
fees and rebates in order to attract additional QCC and cQCC order flow
and grow its market share in this segment, through offering a higher
rebate (than the Exchange currently offers) and fees that are
consistent with other exchanges, effectively lowering the overall cost
to Members executing these orders on the Exchange. The Exchange notes
that other competing exchanges similarly provide rebates on QCC and
cQCC initiating orders,\8\ and similarly charge fees on QCC and cQCC on
Contra-side orders.\9\
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\8\ See BOX Fee Schedule, Section I(D)(1) (a $0.14 per contract
rebate will be applied to the Agency Order where at least one party
to the QCC transaction is a Non-Public Customer); see also Cboe Fee
Schedule, ``QCC Rate Table,'' Page 5 (a $0.10 per contract credit
will be delivered to the TPH Firm that enters the order into Cboe
Command but will only be paid on the initiating side of the QCC
transaction); see also NYSE American Options Fee Schedule, Section
I.F (a $0.07 credit is applied to Floor Brokers executing 300,000 or
fewer contracts in a month and a $0.10 credit is applied to Floor
Brokers executing more than 300,000 contracts in a month); see also
Nasdaq ISE Pricing Schedule, Options 7, Section 6, Other Options
Fees and Rebate, A. QCC and Solicitation Rebate (rebates range from
$0.00 to $0.11 per contract).
\9\ See BOX Options Market LLC (``BOX'') Fee Schedule, Section
I(D) (BOX does not charge Public Customers but charges Professional
Customers, Broker-Dealers and Market Makers $0.17 per contract on
both Agency and Contra Orders); see also Cboe Exchange, Inc.
(``Cboe'') Fee Schedule, ``QCC Rate Table,'' Page 5 (Cboe charges
non-Public Customers $0.17 per contract and does not charge Public
Customers); see also NYSE American Options Fee Schedule, Section I.F
(NYSE American charges Non-Customers $0.20 per contract, Specialists
and e-Specialists $0.13 per contract, and does not charge Customer
and Professional Customers).
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The proposed rule change is to become operative April 1, 2019.
2. Statutory Basis
The Exchange believes that its proposal to amend its Fee Schedule
is consistent with Section 6(b) of the Act \10\ in general, and
furthers the objectives of Section 6(b)(4) of the Act \11\ 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 its facilities. The Exchange also
believes the proposal furthers the objectives of Section 6(b)(5) of the
Act \12\ in that it is designed to promote just and equitable
principles of trade, to remove
[[Page 14440]]
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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\10\ 15 U.S.C. 78f(b).
\11\ 15 U.S.C. 78f(b)(4).
\12\ 15 U.S.C. 78f(b)(5).
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The Exchange believes its proposal to increase the Per Contract Fee
for Contra-side QCC and cQCC Orders is reasonable, equitable and not
unfairly discriminatory because, at the same time, the Exchange is
proposing to increase the Per Contract Rebate for Initiator QCC and
cQCC Orders for all types of market participants, effectively resulting
in a lower, all-in execution cost for Members for these orders. The
Exchange believes that the proposed fee and rebate changes are
reasonable, equitable, and not unfairly discriminatory because the
proposed fees and rebates are intended to attract additional QCC and
cQCC Order flow, grow the Exchange's market share in this segment by
effectively reducing the all-in execution cost for these orders to the
benefit of all market participants.
Additionally, the Exchange believes that the proposed increase to
the Per Contract Fee for Contra-side QCC and cQCC Orders is not
unfairly discriminatory because the proposed fees would be charged to
all market participants other than Priority Customers. Assessing QCC
and cQCC Order rates to all market participants other than Priority
Customer is equitable and not unfairly discriminatory because Priority
Customer order flow enhances liquidity on the Exchange for the benefit
of all market participants. Specifically, Priority Customer liquidity
benefits all market participants by providing more trading
opportunities, which attracts Market Makers. An increase in the
activity of these market participants in turn facilitates tighter
spreads, which may cause an additional corresponding increase in order
flow from other market participants. By assessing a $0.00 fee for
Priority Customer orders, the Exchange believes the proposed QCC and
cQCC Order fees will not discourage the sending of Priority Customer
orders. The Exchange believes the proposed increase to the Per Contract
Fee for Contra-side QCC and cQCC Orders for all types of market
participants is reasonable because the proposed amount is in line with
the amount assessed at other Exchanges for similar transactions.\13\
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\13\ See supra note 9.
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The Exchange believes the proposed increase to the Per Contract
Rebate for Initiator QCC and cQCC Orders for all types of market
participants is reasonable because the rebate will offset the fee
resulting in a lower all-in execution cost for Members for these
orders, even with the proposed increase to the Per Contract Fee for
Contra-side QCC and cQCC Orders. Further, other competing exchanges
also provide rebates on the initiating order side and the proposed
rebate amount is within the range of the rebate amounts at the other
competing exchanges.\14\ The Exchange believes the proposed increase to
the rebate is equitable and not unfairly discriminatory because it
applies to all Members that enter the initiating order (except for when
both the initiator and contra-side orders are Priority Customers) and
because it is intended to incentivize the sending of more QCC and cQCC
Orders to the Exchange. The Exchange believes it is reasonable,
equitable and not unfairly discriminatory to not provide a rebate for
the Initiator for QCC and cQCC Orders for which both the Initiator and
the Contra-side are Priority Customers since Priority Customers are
already incentivized by being assessed a fee of $0.00 for submitting
QCC and cQCC Orders.
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\14\ See supra note 8.
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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, because the proposed rule
change applies to all Members. The Exchange believes this proposal will
not cause an unnecessary burden on intermarket competition because the
proposed changes will actually enhance the competiveness of the
Exchange relative to other exchanges which offer comparable fees and
rebates for QCC and cQCC Orders. To the extent that the proposed
changes make the Exchange a more attractive marketplace for market
participants at other exchanges, such market participants are welcome
to become market participants 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 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 establishes a fee structure in
a manner that encourages market participants to direct their order
flow, to provide liquidity, and to attract additional transaction
volume 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,\15\ and Rule 19b-4(f)(2) \16\ 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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\15\ 15 U.S.C. 78s(b)(3)(A)(ii).
\16\ 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-2019-17 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-2019-17. 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
[[Page 14441]]
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-2019-17, and should be submitted on or before May 1, 2019.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\17\
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\17\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-07049 Filed 4-9-19; 8:45 am]
BILLING CODE 8011-01-P