[Federal Register Volume 85, Number 176 (Thursday, September 10, 2020)]
[Notices]
[Pages 55905-55908]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-20021]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-89769; File No. SR-MIAX-2020-29]


Self-Regulatory Organizations; Miami International Securities 
Exchange, LLC; Notice of Filing and Immediate Effectiveness of a 
Proposed Rule Change To Amend Its Fee Schedule To Increase the Number 
of Additional Limited Service MIAX Express Interface Ports Available to 
Market Makers

September 4, 2020.
    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 August 25, 2020, Miami International Securities Exchange, LLC 
(``MIAX Options'' or ``Exchange'') filed with the Securities and 
Exchange Commission (``Commission'') the 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 increase the number of additional 
Limited Service MIAX Express Interface (``MEI'') Ports available to 
Market Makers.\3\ The Exchange does not propose to amend the fees for 
additional Limited Service MEI Ports.
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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.
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    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 offer two (2) 
additional Limited Service MEI Ports to Market Makers. The Exchange 
does not propose to amend the fees charged for the additional Limited 
Service MEI Ports.
    The Exchange initially filed the proposal to increase the number of 
Limited Service MEI Ports available to Market Makers on June 30, 2020, 
with no change to the actual fee amounts being charged.\4\ The First 
Proposed Rule Change was published for comment in the Federal Register 
on July 20, 2020.\5\ On August 25, 2020, the Exchange

[[Page 55906]]

withdrew the First Proposed Rule Change.\6\
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    \4\ See Securities Exchange Act Release No. 89317 (July 14, 
2020), 85 FR 43918 (July 20, 2020) (SR-MIAX-2020-23) (the ``First 
Proposed Rule Change'').
    \5\ Id.
    \6\ See Comment Letter from Christopher Solgan, VP, Senior 
Counsel, the Exchange, dated August 24, 2020, notifying the 
Commission that the Exchange will withdraw the First Proposed Rule 
Change.
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    The Exchange notes that the First Proposed Rule Change did not 
receive any comment letters; however, the Exchange has determined to 
refile its proposal to increase the number of Limited Service MEI Ports 
available to Market Makers (without increasing the actual fee amounts) 
to provide further clarification regarding the Exchange's annual cost 
for providing additional Limited Service MEI Ports.
    Currently, MIAX assesses monthly MEI Port Fees on Market Makers 
based upon the number of MIAX matching engines \7\ used by the Market 
Maker. Market Makers are allocated two (2) Full Service MEI Ports \8\ 
and two (2) Limited Service MEI Ports \9\ per matching engine to which 
they connect. The Full Service MEI Ports, Limited Service MEI Ports, 
and the additional Limited Service MEI Ports all include access to 
MIAX's primary and secondary data centers and its disaster recovery 
center. Market Makers may request additional Limited Service MEI Ports 
for which they will be assessed the existing $100 monthly fee for each 
additional port they request. This fee has been unchanged since 
2016.\10\
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    \7\ A ``matching engine'' is a part of the MIAX 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. See Fee Schedule, Section 
5)d)ii), note 29.
    \8\ Full Service MEI Ports provide Market Makers with the 
ability to send Market Maker quotes, eQuotes, and quote purge 
messages to the MIAX 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. See Fee Schedule, 
Section 5)d)ii), note 27.
    \9\ Limited Service MEI Ports provide Market Makers with the 
ability to send eQuotes and quote purge messages only, but not 
Market Maker Quotes, to the MIAX System. Limited Service MEI Ports 
are also capable of receiving administrative information. Market 
Makers initially receive two Limited Service MEI Ports per matching 
engine. See Fee Schedule, Section 5)d)ii), note 28.
    \10\ See Securities Exchange Act Release No. 79666 (December 22, 
2016), 81 FR 96133 (December 29, 2016) (SR-MIAX-2016-47).
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    The Exchange originally added the Limited Service MEI Ports to 
enhance the MEI Port connectivity made available to Market Makers, and 
has subsequently made additional Limited Service MEI Ports available to 
Market Makers.\11\ Limited Service MEI Ports have been well received by 
Market Makers since their addition. The Exchange now proposes to offer 
to Market Makers the ability to purchase an additional two (2) Limited 
Service MEI Ports per matching engine over and above the current six 
(6) additional Limited Service MEI Ports per matching engine that are 
available for purchase by Market Makers. The Exchange proposes making a 
corresponding change to footnote 30 of the Exchange's Fee Schedule to 
specify that Market Makers will now be limited to purchasing eight (8) 
additional Limited Service MEI Ports per matching engine, for a total 
of ten (10) per matching engine. All fees related to MEI Ports shall 
remain unchanged and Market Makers that voluntarily purchase the 
additional Limited Service MEI Ports will remain subject to the 
existing $100 monthly fee per port.
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    \11\ See Securities Exchange Act Release Nos. 70137 (August 8, 
2013), 78 FR 49586 (August 14, 2013) (SR-MIAX-2013-39); 70903 
(November 20, 2013), 78 FR 70615 (November 26, 2013) (SR-MIAX-2013-
52); 78950 (September 27, 2016), 81 FR 68084 (October 3, 2016) (SR-
MIAX-2016-33); and 79198 (October 31, 2016), 81 FR 76988 (November 
4, 2016) (SR-MIAX-2016-37).
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    The Exchange is increasing the number of additional Limited Service 
MEI Ports because the Exchange is expanding its network. This network 
expansion is necessary due to increased customer demand and increased 
volatility in the marketplace, both of which have translated into 
increased message traffic rates across the network. Consequently, this 
network expansion, which increases the number of switches supporting 
customer facing systems, is necessary in order to provide sufficient 
access to new and existing Members,\12\ to maintain a sufficient amount 
of network capacity head-room, and to continue to provide the same 
level of service across the Exchange's low-latency, high-throughput 
technology environment.
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    \12\ 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.
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    Currently, the Exchange has 8 network switches that support the 
entire customer base of MIAX. The Exchange plans to increase this to 10 
switches, which will increase the number of available customer ports by 
25%. This increase in the number of available customer ports will 
enable the Exchange to continue to provide sufficient and equal access 
to MIAX Systems to all Members. Absent the proposed increase in 
available MEI Ports, the Exchange projects that its current inventory 
will be depleted and it will lack sufficient capacity to continue to 
meet Members' access needs.
2. Statutory Basis
    The Exchange believes that its proposal to amend its Fee Schedule 
is consistent with Section 6(b) of the Act \13\ in general, and 
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 customers, issuers, brokers and dealers.
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    \13\ 15 U.S.C. 78f(b).
    \14\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that its proposal is consistent with the 
objectives of Section 6(b)(5) of the Act \15\ because the proposed 
additional Limited Service MEI Ports will be available to all Market 
Makers and the current fees for the additional Limited Service MEI 
Ports apply equally to all Market Makers regardless of type, and access 
to the Exchange is offered on terms that are not unfairly 
discriminatory. The Exchange is proposing to increase the number of 
available Limited Service MEI Ports because the Exchange is expanding 
its network. This network expansion is necessary due to increased 
customer demand and increased volatility in the marketplace, both of 
which have translated into increased message traffic rates across the 
network. Consequently, this network expansion, which increases the 
number of switches supporting customer facing systems, is necessary in 
order to provide sufficient and equal access to new and existing 
Members, to maintain a sufficient amount of network capacity head-room, 
and to continue to provide the same level of service across the 
Exchange's low-latency, high-throughput technology environment.
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    \15\ 15 U.S.C. 78f(b)(5).
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    Currently, the Exchange has 8 network switches that support the 
entire customer base of MIAX. The Exchange plans to increase this to 10 
switches, which will increase the number of available customer ports by 
25%. This increase in the number of available customer ports will 
enable the Exchange to continue to provide sufficient and equal access 
to MIAX Systems for all Members. Absent the proposed increase in 
available MEI Ports, the Exchange projects that its current inventory 
will be depleted and it will lack sufficient

[[Page 55907]]

capacity to continue to meet Members' access needs. Further, the 
Exchange notes the decision of whether to purchase two additional 
Limited Service MEI Ports is completely optional and it is a business 
decision for each Market Maker to determine whether the additional 
Limited Service MEI Ports are necessary to meet their business 
requirements.
    The Exchange further believes that the availability of the 
additional Limited Service MEI Ports is equitable and not unfairly 
discriminatory because it will enable Market Makers to maintain 
uninterrupted access to the MIAX System and consequently enhance the 
marketplace by helping Market Makers to better manage risk, thus 
preserving the integrity of the MIAX markets, all to the benefit of and 
protection of investors and the public as a whole.
    The Exchange also believes that its proposal is consistent with 
Section 6(b)(4) of the Act because only Market Makers that voluntarily 
purchase the two additional Limited Service MEI Ports will be charged 
the existing $100 monthly fee per port, which has been unchanged since 
2016.\16\ The Exchange does not propose to amend the fees applicable to 
additional Limited Service MEI Ports which have been previously filed 
with the Commission and become effective after notice and public 
comment.\17\ As stated above, the Exchange proposes to expand its 
network by making available two additional Limit Service MEI Ports due 
to increased customer demand and increased volatility in the 
marketplace, both of which have translated into increased message 
traffic rates across the network. The cost to expand the network in 
this manner is greater than the revenue the Exchange anticipates the 
additional Limited Service MEI Ports will generate. Specifically, the 
Exchange estimates it will incur a one-time cost of approximately 
$175,000 in capital expenditures on hardware, software, and other items 
to expand the network to make available the two additional Limited 
Service MEI Ports. This estimated cost also includes expense associated 
with providing the necessary engineering and support personnel to 
transition those Market Makers who wish to acquire the two additional 
Limited Service MEI Ports.
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    \16\ See supra note 10.
    \17\ See supra notes 10 and 11.
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    The Exchange projects that approximately six or seven Market Makers 
will elect to purchase the additional Limited Service MEI Ports, which 
will be subject to the existing monthly fee of $100 per port. 
Accordingly, the Exchange projects that the annualized revenue from the 
two additional Limited Service MEI Ports will be approximately $16,800 
(assuming that seven Market Makers purchase the two additional Limited 
Service MEI Ports). Therefore, the Exchange's cost in expanding its 
network to provide its Members with the two additional Limited Service 
MEI Ports--approximately $175,000--is clearly greater than the 
anticipated annualized revenue the Exchange expects to bring in from 
the two additional Limited Service MEI Ports--approximately $16,800. 
Further, the Exchange anticipates it will incur approximately $100,371 
in annual ongoing operating expense in order to support the expanded 
network and the two additional Limited Service MEI Ports. Thus, the 
Exchange is not generating a supra-competitive profit from the 
provision of these two additional Limited Service MEI Ports. In fact, 
even excluding the one-time capital expenditure cost of $175,000, the 
Exchange anticipates generating an annual loss from the provision of 
these two additional Limited Service MEI Ports of ($83,571)--that is, 
$16,800 in revenue minus $100,371 in expense equates to a loss of 
($83,571) to support the additional ports annually.
    Subjecting the two additional Limited Service MEI Ports to the 
existing $100 monthly fee per port is also designed to encourage Market 
Makers to be efficient with their port usage, thereby resulting in a 
corresponding increase in the efficiency that the Exchange would be 
able to realize in managing its aggregate costs for providing the two 
additional ports. There is no requirement that any Market Maker 
maintain a specific number of Limited Service MEI Ports and a Market 
Maker may choose to maintain as many or as few of such ports as each 
Market Maker deems appropriate.
    Finally, subjecting the two additional Limited Service MEI Ports to 
the existing $100 monthly fee will help to encourage Limited Service 
MEI Port usage in a way that aligns with the Exchange's regulatory 
obligations. As a national securities exchange, the Exchange is subject 
to Regulation Systems Compliance and Integrity (``Reg. SCI'').\18\ Reg. 
SCI Rule 1001(a) requires that the Exchange establish, maintain, and 
enforce written policies and procedures reasonably designed to ensure 
(among other things) that its Reg. SCI systems have levels of capacity 
adequate to maintain the Exchange's operational capability and promote 
the maintenance of fair and orderly markets.\19\ By encouraging Members 
to be efficient with their usage of Limited MEI Ports, the current fee 
that will continue to apply to the proposed two (2) additional Limited 
Service MEI Ports will support the Exchange's Reg. SCI obligations in 
this regard by ensuring that unused ports are available to be allocated 
based on individual Members needs and as the Exchange's overall order 
and trade volumes increase.
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    \18\ 17 CFR 242.1000-1007.
    \19\ 17 CFR 242.1001(a).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    MIAX 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, as amended. The proposed rule 
change will not impose a burden on competition but will benefit 
competition by enhancing the Exchange's ability to compete by providing 
additional services to market participants. It is not intended to 
address a competitive issue. Rather, the proposed increase in the 
number of additional Limited Service MEI Ports available per Market 
Maker is intended to allow the Exchange to increase its inventory of 
MEI Ports to meet increased Member demand. The Exchange is increasing 
the number of available additional Limited Service MEI Ports in 
response to Market Maker demand for increased connectivity to the MIAX 
System. The Exchange's current inventory may soon be insufficient to 
meet those needs. Again, the Exchange is not proposing to amend the 
fees for MEI Ports, just to increase the number of MEI Ports available 
per Market Maker. The Exchange also does not believe that the proposed 
rule change will impose a burden on intramarket competition because the 
two additional Limited Service MEI Ports will be available to all 
Market Makers on an equal basis. It is a business decision of each 
Market Maker whether to pay for the additional Limited Service MEI 
Ports.

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

[[Page 55908]]

19(b)(3)(A)(ii) of the Act,\20\ and Rule 19b-4(f)(2) \21\ 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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    \20\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \21\ 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-2020-29 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-2020-29. 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-2020-29, and should be submitted on 
or before October 1, 2020.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\22\
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    \22\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.

[FR Doc. 2020-20021 Filed 9-9-20; 8:45 am]
BILLING CODE 8011-01-P