[Federal Register Volume 84, Number 119 (Thursday, June 20, 2019)]
[Notices]
[Pages 28864-28866]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-13071]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-86110; File No. SR-MIAX-2019-29]


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

June 14, 2019.
    Pursuant to 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 May 31, 2019, Miami International Securities Exchange LLC (``MIAX'' 
or ``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') a proposed rule change as described in Items I, II, 
and III below, which Items have been prepared by the Exchange. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange is filing a proposal to amend the MIAX Options Fee 
Schedule (the ``Fee Schedule'') to adopt a rebate program for Market 
Makers \3\ that submit aggressively priced quotes in SPIKES options.
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    \3\ The term ``Market Makers'' refers to ``Lead Market Makers'', 
``Primary Lead Market Makers'' and ``Registered Market Makers'' 
collectively. See Exchange Rule 100.
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    While changes to the Fee Schedule pursuant to this proposal are 
effective upon filing, the Exchange has designated these changes to be 
operative on June 1, 2019.
    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
Background
    On October 12, 2018, the Exchange received approval from the 
Commission to list and trade on the Exchange, options on the 
SPIKES[supreg] Index, a new index that measures expected 30-day 
volatility of the SPDR S&P 500 ETF Trust (commonly known and referred 
to by its ticker symbol, ``SPY'').\4\ The Exchange adopted its initial 
SPIKES transaction fees on February 15, 2019.\5\
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    \4\ See Securities Exchange Act Release No. 84417 (October 12, 
2018), 83 FR 52865 (October 18, 2018) (SR-MIAX-2018-14) (Order 
Granting Approval of a Proposed Rule Change by Miami International 
Securities Exchange, LLC to List and Trade on the Exchange Options 
on the SPIKES\TM\ Index).
    \5\ See Securities Exchange Release No. 85283 (March 11, 2019), 
84 FR 9567 (March 15, 2019) (SR-MIAX-2019-11). (The Exchange 
initially filed the proposal on February 15, 2019 (SR-MIAX-2019-04). 
That filing was withdrawn and replaced with (SR-MIAX-2019-11)).
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Proposal
    The Exchange now proposes to amend Section (1)(a)(xi) of the Fee 
Schedule to adopt a Market Turner Incentive Program (the ``Program'') 
that will provide rebates to Market Makers that submit aggressively 
priced quotes in options on SPIKES. The term ``Market Turner'' will 
mean a Market Maker simple quote (not eQuote) that establishes and 
maintains the new MIAX best bid (the ``MBB'') or the MIAX best offer 
(``MBO'') in a SPIKES option. Under the Program, the Exchange will pay 
a per contract rebate to the Market Turner for each contract that 
executes as the MBB (MBO). The amount of the rebate shall be (i) $0.20 
per executed contract, for options having a premium price greater than 
$0.10, or (ii) $0.05 per executed contract, for options having a 
premium price of $0.10 or less. The Exchange

[[Page 28865]]

notes that a Market Maker who is also a Maker but not a Market Turner 
will not receive the Market Turner rebate and will receive the Maker 
rate currently prescribed in the Simple and Complex Fee table in 
Section (xi) of the Fee Schedule. The purpose of the Program is to 
encourage Market Makers to submit aggressively-priced quotes in SPIKES 
options, which will enable the Exchange to strengthen its market 
quality for all market participants in SPIKES options.
    Under the Program, a Market Turner must submit a resting quote that 
sets a more aggressive price, and subsequently does not become inferior 
to another quote or order. A Market Turner will lose its Market Turner 
status if a more aggressively priced resting quote or order price 
improves the current Market Turner's quote. Market Turner status will 
also be lost if the Market Turner's quote becomes inferior. Market 
Turner quote size changes without any price change will not affect 
Market Turner status. The Exchange also proposes that, under the 
Program, Market Turner status is not available for quotes coming out of 
the opening, reopening after a trading halt, or uncrossing. Further, 
the Exchange proposes that there will not be Market Turner status for a 
Taker, except when there is remaining interest that rests (becomes the 
Maker).
    The Program is similar to a NBBO setter incentive plan in place at 
Cboe BZX Exchange, Inc. (``Cboe BZX'').\6\ However, the Exchange notes 
that there are several differences between MIAX's proposal and the plan 
adopted by Cboe BZX: (1) The Program only includes rebates for Market 
Makers in SPIKES options (a Proprietary Product) while Cboe BZX's plan 
includes multi-listed options; (2) the Program will not require an ADV 
threshold while Cboe BZX requires certain thresholds to be met; (3) the 
Program has one level of rebate while Cboe BZX has different tier 
levels; and (4) the Program requires that a ``Market Turner must submit 
a resting quote that sets a more aggressive price, and subsequently 
does not become inferior to another quote or order'' whereas under Cboe 
BZX's plan, ``[a]n order that is entered at the most aggressive price 
both on the [Cboe BZX] book and according to then current OPRA data 
will be determined to have set the NBB or NBO for purposes of the NBBO 
Setter Rebate without regard to whether a more aggressive order is 
entered prior to the original order being executed.'' \7\
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    \6\ See Securities Exchange Act Release No. 63632 (January 3, 
2011), 76 FR 1205 (January 7, 2011) (SR-BATS-2010-038).
    \7\ See supra note 6.
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    The proposed rebates are targeted at Market Makers in SPIKES 
options. There are currently fewer than five (5) Market Makers in 
SPIKES options that could benefit from these rebates, however the 
Program is also designed to attract additional market makers (both 
existing Market Maker members of MIAX as well as non-members to join 
MIAX) to quote in SPIKES options. Thus, the Exchange estimates that, 
overall, there would be fewer than fifteen (15) such market 
participants that could benefit from these rebates. The proposed 
rebates do not apply differently to different sizes of market 
participants, however they do only apply to Market Makers (and not 
EEMs). The Exchange believes it is reasonable to only offer rebates to 
Market Makers because the Exchange is seeking continuous, two-sided 
quoting liquidity providers for SPIKES options, in order to enhance 
liquidity and spreads in SPIKES Options, which is traditionally 
provided by Market Makers, as opposed to EEMs.
    The proposed rule change is to become operative June 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 \8\ in general, and furthers 
the objectives of Section 6(b)(4) of the Act \9\ in particular, in that 
it provides for the equitable allocation of reasonable dues, fees and 
other charges among Exchange Members \10\ 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 \11\ 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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    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(4).
    \10\ 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.
    \11\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that its proposal to adopt the Program for 
Market Makers in SPIKES options is consistent with Section 6(b)(4) of 
the Act in that the proposal is reasonable, equitable and not unfairly 
discriminatory. The proposed fee changes are reasonably designed 
because they are intended to incentivize Market Makers to quote 
aggressively in SPIKES options on the Exchange, which will enable the 
Exchange to strengthen its market quality for all market participants 
in SPIKES options. In particular, the proposed changes are designed to 
incentivize Market Makers in SPIKES options to enter quotes which 
establish and maintain a new MBB or MBO on the Exchange in an effort to 
qualify for a rebate as a Market Turner under the Program.
    The Exchange believes that it is equitable and not unfairly 
discriminatory to have the Program rebates apply only to Market Makers 
(as compared to Electronic Exchange Members \12\ (``EEMs'')) because 
Market Makers, unlike other market participants, take on a number of 
obligations, including quoting obligations that other market 
participants do not have. In particular, the proposed rebates will 
encourage Market Maker quotes at the MBB or MBO, and is therefore 
directly focused on encouraging aggressively priced liquidity in SPIKES 
options. Further, Market Makers have added market making and regulatory 
requirements, which normally do not apply to other market participants. 
For example, Market Makers have obligations to maintain continuous 
markets, engage in a course of dealings reasonably calculated to 
contribute to the maintenance of a fair and orderly market, and to not 
make bids or offers or enter into transactions that are inconsistent 
with a course of dealing.
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    \12\ The term ``Electronic Exchange Member'' or ``EEM'' means 
the holder of a Trading Permit who is not a Market Maker. Electronic 
Exchange Members are deemed ``members'' under the Exchange Act. See 
Exchange Rule 100.
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    The Exchange believes that it is reasonable to establish a separate 
incentive program for Market Makers in SPIKES options in order to 
encourage trading in SPIKES options on the Exchange. Defining the 
proposed Program on the Fee Schedule promotes just and equitable 
principles of trade, removes impediments to and perfects the mechanism 
of a free and open market and a national market system, and, in general 
protects investors and the public interest by creating a clear 
understanding of the Program.
    The proposed Program rebates are reasonable, equitable, and not 
unfairly discriminatory because they will apply similarly to all Market 
Makers who trade in SPIKES options and establish a Market Turner quote. 
All similarly

[[Page 28866]]

situated Market Makers are subject to the same transaction rebate 
schedule, and access to the Exchange is offered on terms that are not 
unfairly discriminatory.
    The Exchange believes that the proposed rebates constitute an 
equitable allocation of reasonable fees and other charges among its 
members and issuers and other persons using its facilities. The 
proposed rebates are available to all Market Maker Members of the 
Exchange that quote in SPIKES options. The proposed rebates do not 
apply to EEMs, because the Exchange is seeking to enhance the quality 
of its markets in SPIKES options through introducing more competition 
among market makers in SPIKES options. The Exchange believes that 
offering the proposed rebates to Market Turners will cause Market 
Makers to quote more aggressively, thus improving the overall market 
quality in SPIKES options, for the benefit of all market participants 
in SPIKES options. In order to increase competition among Market 
Makers, the Exchange believes that it must pay rebates to Market 
Makers. EEMs do not provide the same type of continuous, two-sided 
market liquidity which is provided by Market Makers, therefore the 
Exchange believes it is reasonable and not unfairly discriminatory to 
only offer the proposed rebates to Market Makers (and not EEMs).

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 changes would increase intramarket competition by 
incentivizing Market Makers to quote aggressively in SPIKES options, 
which will enhance the quality of quoting and increase the volume of 
contracts in SPIKES options traded on MIAX. To the extent that this 
purpose is achieved, all the Exchange's market participants should 
benefit from the improved market liquidity for the Exchange's SPIKES 
options. Enhanced market quality and increased transaction volume in 
SPIKES options that results from the anticipated increase in Market 
Maker activity on the Exchange will benefit all market participants and 
improve competition on the Exchange.
    The Exchange does not believe that the proposed rule change will 
impose any burden on intramarket competition that is not necessary or 
appropriate in furtherance of the purposes of the Act because the 
proposed changes for Market Makers will be assessed equally to all such 
Market Makers. While different fees are assessed to different market 
participants in some circumstances, these different market participants 
have different obligations and different circumstances as discussed 
above. For example, Market Makers have quoting obligations that other 
market participants (such as EEMs) do not have.
    The Exchange does not believe that the proposed rule change will 
impose any burden on intermarket competition that is not necessary or 
appropriate in furtherance of the purposes of the Act because the 
propose rebates relate solely to SPIKES options, which are traded 
exclusively on 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,\13\ and Rule 19b-4(f)(2) \14\ 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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    \13\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \14\ 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-2019-29 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-2019-29. 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-2019-29 and should be submitted on 
or before July 11, 2019.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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Vanessa A. Countryman,
Acting Secretary.
[FR Doc. 2019-13071 Filed 6-19-19; 8:45 am]
 BILLING CODE 8011-01-P