[Federal Register Volume 88, Number 57 (Friday, March 24, 2023)]
[Notices]
[Pages 17902-17907]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-06055]
[[Page 17902]]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-97167; File No. SR-MIAX-2023-12]
Self-Regulatory Organizations: Notice of Filing and Immediate
Effectiveness of a Proposed Rule Change by Miami International
Securities Exchange, LLC To Amend Its Fee Schedule
March 20, 2023.
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 9, 2023, 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 Fee Schedule
(``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: (i) modify the
volume thresholds for the volume criteria in all tiers (described
below) set forth in the Exchange's Market Maker \3\ Sliding Scale for
Market Maker transaction fees (the ``Sliding Scale''); and (ii) modify
the volume thresholds for the volume criteria for tiers 2, 3, and 4 for
Priority Customer \4\ orders in the Priority Customer Rebate Program
(the ``PCRP,'' described below).\5\ The Exchange originally filed this
proposal on February 28, 2023 (SR-MIAX-2023-10). On March 9, 2023, the
Exchange withdrew SR-MIAX-2023-10 and resubmitted this proposal.
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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.
\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 account(s). See Exchange Rule
100.
\5\ See Fee Schedule, Section 1)a)iii.
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Background
In general, the Exchange assesses transaction fees to all Market
Makers, which are based upon a threshold tier structure. Section 1)a)i)
of the Fee Schedule sets forth the Market Maker Sliding Scale for
Market Maker transaction fees. Pursuant to the Sliding Scale, the
Exchange assesses a per contract transaction fee on a Market Maker for
the execution of simple orders and quotes (collectively, ``simple
orders'') and complex orders and quotes (collectively, ``complex
orders'') based on the tier achieved. For Market Makers, the percentage
threshold by tier is based on the Market Maker's percentage of total
national Market Maker volume in all multiply-listed options classes
that trade on the Exchange during a particular calendar month, or total
aggregated volume (``TAV''), and the Exchange aggregates the volume
executed by Market Makers in both simple and complex orders for
purposes of determining the applicable tier and corresponding per
contract transaction fee amount.\6\ The Sliding Scale applies to all
MIAX Market Makers for transactions in all multiply-listed products
(except for mini-options), with fees established for standard option
classes in the Penny Interval Program \7\ (``Penny Classes'') and
separate fees for standard option classes which are not in the Penny
Program (``non-Penny Classes''), and further based on whether the
Market Maker is acting as a ``Maker'' or a ``Taker'' in simple
orders.\8\ Market Makers that place resting liquidity, i.e., quotes or
orders on the MIAX System,\9\ are assessed the ``maker'' fee (each a
``Maker''). Market Makers that execute against (remove) resting
liquidity are generally assessed a higher ``taker'' fee (each a
``Taker'').
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\6\ The calculation of the volume thresholds does not include
QCC and cQCC Orders, PRIME and cPRIME 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'') and
unrelated MIAX Market Maker complex quotes or unrelated MIAX Market
Maker complex orders that are received during the Response Time
Interval and executed against a cPRIME Order (``cPRIME Participating
Quote or Order'') (herein ``Excluded Contracts''). See Fee Schedule,
page 2.
\7\ See Securities Exchange Act Release No. 88988 (June 2,
2020), 85 FR 35153 (June 8, 2020) (SR-MIAX-2020-13). See also
Exchange Rule 510(c).
\8\ See Securities Exchange Act Release No. 78519 (August 9,
2016), 81 FR 54162 (August 15, 2016) (SR-MIAX-2016-21).
\9\ 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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Further, the Exchange provides certain discounted Market Maker
transaction fees for Members \10\ and their qualified Affiliates \11\
that achieve certain volume thresholds through the submission of
Priority Customer orders under the Exchange's PCRP. Market Maker
transaction fees are set forth in two tables in Section 1)a)i) of the
Fee
[[Page 17903]]
Schedule: the first table sets forth the transaction fees applicable to
Members and their Affiliates that are in PCRP volume tier 3 or higher;
and the second table sets forth the transaction fees applicable to
Members and their Affiliates that are not in PCRP volume tier 3 or
higher. The Sliding Scale also includes Maker and Taker fees in both
tables in each tier for simple orders in Penny Classes and non-Penny
Classes, where the fees are discounted/differentiated between the
tables.
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\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\ 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, (``Affiliate''), 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.
See Fee Schedule, note 1.
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Section 1)a)iii) of the Fee Schedule describes the PCRP. Pursuant
to the PCRP, the Exchange credits each Member the per contract amount
set forth in the PCRP table \12\ resulting from each Priority Customer
order transmitted by that Member which is executed electronically on
the Exchange in all multiply-listed option classes, provided the Member
meets certain percentage thresholds in a month as described in the PCRP
table. However, the Exchange excludes the following orders from
participating in the PCRP: in simple or complex, as applicable, QCC
\13\ and cQCC Orders,\14\ mini-options, Priority Customer-to-Priority
Customer Orders, C2C,\15\ cC2C Orders,\16\ PRIME and cPRIME AOC
Responses, PRIME and cPRIME contra-side orders, PRIME \17\ and cPRIME
Orders,\18\ for which both the Agency and contra-side order are
Priority Customers, and executions related to contracts that are routed
to one or more exchanges in connection with the Options Order
Protection and Locked/Crossed Market Plan referenced in MIAX Rule
1400).
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\12\ The Exchange notes an exception for broken up cPRIME Agency
Orders in the PCRP, which are subject to the per contract credits
described in the cPRIME Agency Order Break-up Table in Section
1)a)iii) of the Fee Schedule, below the PCRP table.
\13\ 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
Interpretations and Policies .01 below, coupled with a contra-side
order or orders totaling an equal number of contracts. See Exchange
Rule 516(j).
\14\ A Complex Qualified Contingent Cross or ``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, as defined in Rule 516,
Interpretations and Policies .01, coupled with a contra-side complex
order or orders totaling an equal number of contracts. Trading of
cQCC Orders is governed by Rule 515(h)(4). See Exchange Rule
518(b)(6).
\15\ A Customer Cross Order is comprised of a Priority Customer
Order to buy and a Priority Customer Order to sell at the same price
and for the same quantity. See Exchange Rule 516(i).
\16\ A Complex Customer Cross or ``cC2C'' Order is comprised of
one Priority Customer complex order to buy and one Priority Customer
complex order to sell at the same price and for the same quantity.
Trading of cC2C Orders is governed by Rule 515(h)(3). See Exchange
Rule 518(b)(5).
\17\ The Price Improvement Mechanism (``PRIME'') is a process by
which a Member may electronically submit for execution (``Auction'')
an order it represents as agent (``Agency Order'') against principal
interest, and/or an Agency Order against solicited interest. See
Exchange Rule 515A(a).
\18\ Members may use PRIME to execute complex orders at a net
price. ``cPRIME'' is the process by which a Member may
electronically submit a ``cPRIME Order'' (as defined in Exchange
Rule 518(b)(7)) it represents as agent (a ``cPRIME Agency Order'')
against principal or solicited interest for execution (a ``cPRIME
Auction''), pursuant to the provisions of Exchange Rule 515A. See
Exchange Rule 515A, Interpretation and Policy .12(a).
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Volume for transactions in both simple and complex and in
applicable PRIME and cPRIME orders in the PCRP are aggregated to
determine the appropriate volume tier threshold applicable to each
transaction. Volume is recorded for, and credits are delivered to, the
Member that submits the order to MIAX. MIAX aggregates the contracts
resulting from Priority Customer orders transmitted and executed
electronically on MIAX from Members and their Affiliates for purposes
of the volume thresholds described in the PCRP table.
Modifications to Volume Criteria Percentage Thresholds in all Tiers for
the Market Maker Origin Applicable to Members and Affiliates in PCRP
Volume Tier 3 or Higher
Currently, the Market Maker Sliding Scale volume thresholds
applicable to Members and their Affiliates that are in PCRP volume tier
3 or higher are as follows: (i) 0.00% to 0.075% in tier 1; (ii) above
0.075% to 0.70% in tier 2; (iii) above 0.70% to 1.10% in tier 3; (iv)
above 1.10% to 1.50% in tier 4; and (v) above 1.50% in tier 5.\19\ For
these types of transactions where the Market Maker is a Maker in Penny
Classes for simple orders, the Exchange assesses per contract fees as
follows: $0.21 in tier 1, $0.16 in tier 2, $0.10 in tier 3, $0.05 in
tier 4, and $0.03 in tier 5. For these types of transactions where the
Market Maker is a Taker in Penny Classes for simple orders, the
Exchange assesses per contract fees as follows: $0.23 in tier 1, $0.22
in tier 2, $0.19 in tier 3, $0.18 in tier 4, and $0.17 in tier 5. For
these types of transactions where the Market Maker is a Maker in non-
Penny Classes for simple orders, the Exchange assesses per contract
fees as follows: $0.25 in tier 1, $0.19 in tier 2, $0.12 in tier 3,
$0.08 in tier 4, and $0.06 in tier 5. For these types of transactions
where the Market Maker is a Taker in non-Penny Classes for simple
orders, the Exchange assesses per contract fees as follows: $0.30 in
tier 1, $0.27 in tier 2, $0.23 in tier 3, $0.22 in tier 4, and $0.21 in
tier 5. For these types of transactions where the Market Maker is a
Maker or Taker in Penny Classes for complex orders, the Exchange
assesses per contract fees as follows: $0.25 in tier 1, $0.24 in tier
2, $0.21 in tier 3, $0.20 in tier 4, and $0.19 in tier 5. For these
types of transactions where the Market Maker is a Maker or Taker in
non-Penny Classes for complex orders, the Exchange assesses per
contract fees as follows: $0.32 in tier 1, $0.29 in tier 2, $0.25 in
tier 3, $0.24 in tier 4, and $0.23 in tier 5. The Exchange also
assesses a surcharge of $0.12 per contract in all tiers for Market
Maker transactions in complex orders when the Market Maker is trading
against a Priority Customer complex order in Penny and non-Penny
Classes.
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\19\ See Fee Schedule, Section 1)a)i), page 1.
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The Exchange proposes to modify the volume thresholds for the
volume criteria for the Market Maker Sliding Scale applicable to
Members and their Affiliates that are in PCRP volume tier 3 or higher
as follows: (i) tier 1 will be amended from 0.00% to 0.075% to now be
0.00% to 0.40%; (ii) tier 2 will be amended from above 0.075% to 0.70%
to now be above 0.40% to 0.80%; (iii) tier 3 will be amended from above
0.70% to 1.10% to now be above 0.80% to 1.20%; (iv) tier 4 will be
amended from above 1.10% to 1.50% to now be above 1.20% to 1.60%; and
(v) tier 5 will be amended from above 1.50% to now be above 1.60%. The
Exchange does not proposes to amend any of the Maker or Taker fee
amounts pursuant to this proposal.
Modifications to Volume Criteria Percentage Thresholds in all Tiers for
the Market Maker Origin Applicable to Members and Affiliates That Are
Not in PCRP Volume Tier 3 or Higher
Currently, the Market Maker Sliding Scale volume thresholds
applicable to Members and their Affiliates that are not in PCRP volume
tier 3 or higher are as follows: (i) 0.00% to 0.075% in tier 1; (ii)
above 0.075% to 0.70% in tier 2; (iii) above 0.70% to 1.10% in tier 3;
(iv) above 1.10% to 1.50% in tier 4; and (v) above 1.50% in tier 5.\20\
For these types of transactions where the Market Maker is a Maker in
Penny Classes for simple orders, the Exchange assesses per contract
fees as follows: $0.23 in tier 1, $0.18 in tier 2, $0.12 in tier 3,
$0.07 in tier 4, and $0.05 in tier 5. For these types of transactions
where the Market Maker is a Taker in Penny Classes for simple orders,
the Exchange assesses per contract fees as follows: $0.25 in tier 1,
$0.24 in tier 2, $0.21 in tier 3, $0.20 in tier 4, and $0.19 in tier 5.
For these types of transactions where the Market Maker is a Maker in
non-Penny Classes
[[Page 17904]]
for simple orders, the Exchange assesses per contract fees as follows:
$0.27 in tier 1, $0.21 in tier 2, $0.14 in tier 3, $0.10 in tier 4, and
$0.08 in tier 5. For these types of transactions where the Market Maker
is a Taker in non-Penny Classes for simple orders, the Exchange
assesses per contract fees as follows: $0.32 in tier 1, $0.29 in tier
2, $0.25 in tier 3, $0.24 in tier 4, and $0.23 in tier 5. For these
types of transactions where the Market Maker is a Maker or Taker in
Penny Classes for complex orders, the Exchange assesses per contract
fees as follows: $0.25 in tier 1, $0.24 in tier 2, $0.21 in tier 3,
$0.20 in tier 4, and $0.19 in tier 5. For these types of transactions
where the Market Maker is a Maker or Taker in non-Penny Classes for
complex orders, the Exchange assesses per contract fees as follows:
$0.32 in tier 1, $0.29 in tier 2, $0.25 in tier 3, $0.24 in tier 4, and
$0.23 in tier 5. The Exchange also assesses a surcharge of $0.12 per
contract in all tiers for Market Maker transactions in complex orders
when the Market Maker is trading against a Priority Customer complex
order in Penny and non-Penny Classes.
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\20\ See Fee Schedule, Section 1)a)i), page 2.
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The Exchange proposes to modify the volume thresholds for the
volume criteria for the Market Maker Sliding Scale applicable to
Members and their Affiliates that are not in PCRP volume tier 3 or
higher as follows: (i) tier 1 will be amended from 0.00% to 0.075% to
now be 0.00% to 0.40%; (ii) tier 2 will be amended from above 0.075% to
0.70% to now be above 0.40% to 0.80%; (iii) tier 3 will be amended from
above 0.70% to 1.10% to now be above 0.80% to 1.20%; (iv) tier 4 will
be amended from above 1.10% to 1.50% to now be above 1.20% to 1.60%;
and (v) tier 5 will be amended from above 1.50% to now be above 1.60%.
The Exchange does not proposes to amend any of the Maker or Taker fee
amounts pursuant to this proposal.
The purpose of adjusting the percentage thresholds for the volume
criteria in all tiers of the Market Maker Sliding Scale for both tables
is for business and competitive reasons. In order to attract order
flow, the Exchange initially set its volume thresholds so that they
were meaningfully lower than other options exchanges. The Exchange now
believes that it is appropriate to adjust the volume thresholds so that
they are more in line with other exchanges, but will still remain
highly competitive such that it should enable the Exchange to continue
to attract order flow and maintain market share.
For example, NYSE American, LLC (``NYSE American'') provides a
similar sliding scale for NYSE American Options Market Maker
transactions. Pursuant to the NYSE American Options Market Maker
sliding scale, the NYSE American Market Maker's tier for transaction
fees is calculated based on that Market Maker's average daily volume
(``ADV'') as a percentage of TCADV.\21\ Similar to the Exchange's
Market Maker Sliding Scale, the NYSE American Options Market Maker
sliding scale tiers are as follows (including applicable fees for
``non-take volume'' and ``take volume''): \22\ (i) 0.00% to 0.25% in
tier 1 (per contract fee of $0.25 regardless of non-take or take
volume); (ii) above 0.25% to 0.70% in tier 2 (per contract fees of
$0.22 for non-take volume and $0.24 for take volume); (iii) above 0.70%
to 1.50% in tier 3 (per contract fees of $0.12 for non-take volume and
$0.17 for take volume); and (iv) above 1.50% in tier 4 (per contract
fees of $0.09 for non-take volume and $0.14 for take volume).\23\
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\21\ ``TCADV'' refers to Total Industry Customer equity and ETF
option average daily volume. TCADV includes OCC calculated Customer
volume of all types, including Complex Order transactions and QCC
transactions, in equity and ETF options. See NYSE American Options
Fee Schedule, Key Terms and Definitions.
\22\ For the purposes of the Sliding Scale transaction charges,
all eligible volume that does not remove liquidity will be
considered ``non-take volume''; whereas all volume that removes
liquidity will be considered ``take volume.'' See NYSE American
Options Fee Schedule, Section I.C. NYSE American Options Market
Maker Sliding Scale--Electronic, page 9-10.
\23\ See id.
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Modifications to Volume Criteria Percentage Thresholds in PCRP Tiers 2,
3 and 4
Currently, the volume thresholds applicable to Priority Customer
orders in PCRP tiers 2, 3 and 4 are as follows: (i) above 0.50% to
1.20% in tier 2; (ii) above 1.20% to 1.75% in tier 3; and (iii) above
1.75% in tier 4.\24\ For Priority Customer orders in the PCRP, the
Exchange provides a per contract credit for simple orders in non-MIAX
Select Symbols \25\ as follows: $0.00 in tier 1, $0.10 in tier 2, $0.15
in tier 3, and $0.21 in tier 4. For Priority Customer orders in the
PCRP, the Exchange provides a per contract credit for simple orders in
MIAX Select Symbols as follows: $0.00 in tier 1, $0.10 in tier 2, $0.18
in tier 3, and $0.24 in tier 4. For Priority Customer orders in the
PCRP, the Exchange provides a per contract credit for PRIME Agency
Orders as follows: $0.10 in tier 1, $0.11 in tier 2, $0.11 in tier 3,
and $0.11 in tier 4. For Priority Customer orders in the PCRP, the
Exchange provides a per contract credit for cPRIME Agency orders based
on the order break-up percentage, described in the cPRIME Agency Order
Break-up Table in Section 1)a)iii) of the Fee Schedule.\26\ For
Priority Customer orders in the PCRP, the Exchange provides a per
contract credit for complex orders as follows: $0.20 in tier 1, $0.21
in tier 2, $0.26 or $0.27 in tier 3 (depending on whether the executing
buyer and seller are the same Member and Affiliate or not),\27\ and
$0.27 or $0.28 in tier 4 (depending on whether the executing buyer and
seller are the same Member and Affiliate or not).\28\
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\24\ See Fee Schedule, Section 1)a)iii), page 5.
\25\ The term ``MIAX Select Symbols'' means options overlying
AAL, AAPL, AMAT, AMD, AMZN, BA, BABA, BB, BIDU, BP, C, CAT, CLF,
CVX, DAL, EBAY, EEM, FCX, GE, GILD, GLD, GM, GOOGL, GPRO, HAL, INTC,
IWM, JNJ, JPM, KMI, KO, META, MO, MRK, NFLX, NOK, ORCL, PBR, PFE,
PG, QCOM, QQQ, RIG, SPY, T, TSLA, USO, VALE, WBA, WFC, WMB, X, XHB,
XLE, XLF, XLP, XOM and XOP. See Fee Schedule, Section 1)a)iii), note
14.
\26\ See Fee Schedule, Section 1)a)iii), cPRIME Agency Order
Break-up Table.
\27\ See Fee Schedule, Section 1)a)iii), notes K and [ssquf].
\28\ See id.
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The Exchange proposes to modify the volume thresholds for the
volume criteria for Priority Customer orders in PCRP tiers 2, 3 and 4
as follows: (i) tier 2 will be amended from above 0.50% to 1.20% to now
be above 0.50% to 1.50%; (ii) tier 3 will be amended from above 1.20%
to 1.75% to now be above 1.50% to 2.00%; and (iv) tier 4 will be
amended from above 1.75% to now be above 2.00%. The Exchange does not
propose to amend any of the credit amounts in the PCRP pursuant to this
proposal.
The purpose of adjusting the percentage thresholds for the volume
criteria in tiers 2, 3 and 4 of the PCRP is for business and
competitive reasons. In order to attract order flow, the Exchange
initially set its volume thresholds so that they were meaningfully
lower than other options exchanges. The Exchange now believes that it
is appropriate to adjust the volume thresholds so that they are more in
line with other exchanges, but will still remain highly competitive
such that it should enable the Exchange to continue to attract order
flow and maintain market share.
For example, NYSE American provides a similar range of volume
thresholds for its American Customer Engagement (``ACE'') Program.
Pursuant to the ACE Program, NYSE American Customer tiers for credits
are calculated utilizing two different methods: (1) based on the
Customer's electronic ADV as a percentage of TCADV; or (2) based on the
total electronic ADV (of which 20% or greater of the minimum qualifying
volume for each tier must be
[[Page 17905]]
Customer) as a percentage of TCADV.\29\ The ACE Program provides
similar volume thresholds as the PCRP, which are as follows: (i) less
than 0.40% in the Base tier; (ii) 0.40% to 0.75% in tier 1; (iii) above
0.75% to 1.00% in tier 2; (iv) above 1.00% to 1.25% in tier 3; (v)
above 1.25% to 1.75% in tier 4; and (vi) above 1.75% in tier 5.\30\
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\29\ See NYSE American Options Fee Schedule, Section I.E.
\30\ See id.
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Implementation
The proposed changes are immediately effective.
2. Statutory Basis
The Exchange believes that its proposed changes to the Fee Schedule
are consistent with Section 6(b) of the Act \31\ in general, and
furthers the objectives of Section 6(b)(4) of the Act,\32\ in that it
is an equitable allocation of reasonable dues, fees and other charges
among Exchange Members and issuers and other persons using its
facilities, and 6(b)(5) of the Act,\33\ 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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\31\ 15 U.S.C. 78f(b).
\32\ 15 U.S.C. 78f(b)(4).
\33\ 15 U.S.C. 78f(b)(1) and (b)(5).
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The Exchange believes its proposal provides for the equitable
allocation of reasonable dues and fees and is not unfairly
discriminatory for the following reasons. The Exchange operates in a
highly competitive market. The Commission has repeatedly expressed its
preference for competition over regulatory intervention in determining
prices, products, and services in the securities markets. In Regulation
NMS, the Commission highlighted the importance of market forces in
determining prices and SRO revenues and, also, recognized that current
regulation of the market system ``has been remarkably successful in
promoting market competition in its broader forms that are most
important to investors and listed companies.'' \34\ There are currently
16 registered options exchanges competing for order flow. Based on
publicly-available information, and excluding index-based options, no
single exchange had more than 12.93% of the market share of executed
volume of multiply-listed equity and exchange-traded fund (``ETF'')
options trades for the month of February 2023.\35\ Therefore, no
exchange possesses significant pricing power in the execution of
multiply-listed equity and ETF options order flow. More specifically,
the Exchange had a market share of 6.82% of executed volume of
multiply-listed equity and ETF options for the month of February
2023.\36\
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\34\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496 (June 29, 2005).
\35\ See ``The Market at a Glance,'' available at https://www.miaxoptions.com/ (last visited March 9, 2023).
\36\ See id.
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The Exchange believes that the ever-shifting market shares among
the exchanges from month to month demonstrates that market participants
can shift order flow, or discontinue or reduce use of certain
categories of products, in response to transaction and/or non-
transaction fee changes. For example, on February 28, 2019, the
Exchange's affiliate, MIAX PEARL, LLC (``MIAX Pearl''), filed with the
Commission a proposal to increase Taker fees in certain tiers for
options transactions in certain Penny Classes for Priority Customers
and decrease Maker rebates in certain tiers for options transactions in
Penny Classes for Priority Customers (which fee was to be effective
March 1, 2019).\37\ MIAX Pearl experienced a decrease in total market
share between the months of February and March of 2019, after the fees
were in effect. Accordingly, the Exchange believes that the MIAX Pearl
March 1, 2019 fee change may have contributed to the decrease in MIAX
Pearl's market share and, as such, the Exchange believes competitive
forces constrain options exchange transaction fees and market
participants can shift order flow based on fee changes instituted by
the exchanges.
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\37\ See Securities Exchange Act Release No. 85304 (March 13,
2019), 84 FR 10144 (March 19, 2019) (SR-PEARL-2019-07).
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The Exchange believes its proposal to modify the volume thresholds
for the volume criteria in all Market Maker Sliding Scale tiers and in
tiers 2, 3 and 4 for Priority Customer orders in the PCRP is
reasonable, equitably allocated and not unfairly discriminatory because
these changes are for business and competitive reasons. In order to
attract order flow, the Exchange initially set its volume thresholds at
meaningful low levels. The Exchange now believes that it is appropriate
to adjust these volume thresholds so that they are more reflective of
the current operating conditions and the current type and amount of
volume (Market Maker and Priority Customer orders) executed on the
Exchange. The Exchange believes that the proposed volume thresholds
will still allow the Exchange to remain highly competitive such that
the thresholds should enable the Exchange to continue to attract order
flow and maintain market share.
The Exchange believes its proposal to modify the volume thresholds
for the volume criteria in all Market Maker Sliding Scale tiers and in
tiers 2, 3 and 4 for Priority Customer orders in the PCRP is
reasonable, equitable and not unfairly discriminatory because all
similarly situated market participants in the same origin type are
subject to the same volume thresholds, as proposed. With the proposed
changes, Market Makers will have to increase their volume as a
percentage threshold in order to achieve the lower fees afforded by the
higher tiers of the Sliding Scale for both Market Maker transaction fee
tables in simple and complex orders, as applicable. The Exchange cannot
predict with certainty how many Market Makers with volume applicable to
either table of the Sliding Scale will be impacted by the proposed
higher volume thresholds; however, the Exchange notes that all Market
Makers will be subject to the proposed thresholds, but based on volume
in recent months, up to six Market Makers may be impacted by the
proposed higher threshold volume requirements of the Sliding Scale to
achieve lower transaction fees in simple (Penny and non-Penny Classes)
and complex orders. However, even with the proposed volume threshold
changes, the Exchange believes its volume thresholds will still allow
the Exchange to remain highly competitive such that the thresholds
should enable the Exchange to continue to attract order flow and
maintain market share. As the amount and type of volume that is
executed on the Exchange has shifted since it first established the
Market Maker Sliding Scale, provided that the Market Maker and its
Affiliates are in tier 3 of higher of the PCRP or not, the Exchange has
determined to level-set the volume criteria threshold amounts so that
they are more reflective of the current operating conditions and the
current type and amount of volume executed on the Exchange.
Similarly, with the proposed changes, market participants will need
increased volume as a percentage threshold of Priority Customer orders
in the PCRP in order to achieve the higher rebates afforded by the
higher tiers of the PCRP in simple and complex orders and PRIME and
cPRIME Agency orders, as applicable. The Exchange cannot
[[Page 17906]]
predict with certainty how many market participants will be impacted by
the proposed higher volume thresholds of the PCRP. However, even with
the proposed volume threshold changes, the Exchange believes its volume
thresholds will still allow the Exchange to remain highly competitive
such that the thresholds should enable the Exchange to continue to
attract order flow and maintain market share. As the amount and type of
volume that is executed on the Exchange has shifted since it first
established the PCRP, the Exchange has determined to level-set the
volume criteria threshold amounts so that they are more reflective of
the current operating conditions and the current type and amount of
volume executed on the Exchange.
The Exchange believes it is equitable and not unfairly
discriminatory to modify the volume thresholds for the volume criteria
in all Market Maker Sliding Scale tiers and in tiers 2, 3 and 4 for
Priority Customer orders in the PCRP for business and competitive
reasons because the Exchange initially set its volume thresholds so
that they were meaningfully lower than other options exchanges. The
Exchange now believes that it is appropriate to adjust the volume
thresholds so that they are more in line with other exchanges,\38\ but
will still remain highly competitive such that it should enable the
Exchange to continue to attract order flow and maintain market share.
The Exchange cannot predict with certainty, but the Exchange notes that
even with the proposed increase to the volume thresholds for the volume
criteria in tiers 2, 3 and 4 for Priority Customer orders in the PCRP,
no Affiliated Market Makers will be affected (with the determining
factor being Market Makers in PCRP tier 3 or higher or not being in
PCRP tier 3 or higher). Stated another way, with the proposed changes
to the PCRP volume threshold criteria, Market Makers with Affiliates in
PCRP tier 3 or higher will continue to remain the same respective
Market Maker Sliding Scale table. Likewise, Market Makers with
Affiliates not in PCRP tier 3 or higher will continue to remain in the
same respective Market Maker Sliding Scale table. The Market Makers
that were not in PCRP tier 3 or higher prior to the proposed changes
will continue to remain in the same respective Market Maker Sliding
Scale table. Accordingly, the Exchange believes the proposed changes
are reasonable and not unfairly discriminatory because the proposed
changes to the PCRP volume criteria thresholds will impact all Market
Makers equally when determining which transaction fee table they are
assessed for the Market Maker Sliding Scale.
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\38\ See supra notes 22 and 29.
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule changes will
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act.
The Exchange believes its proposal will not impose any burden on
intra-market competition because the Exchange believes that its
proposal will not place any category of Exchange market participant at
a competitive disadvantage because the changes would apply equally
among market participants that have Priority Customer orders receive
credits pursuant to the PCRP. As the amount and type of volume that is
executed on the Exchange has shifted since it first established the
PCRP and Market Maker Sliding Scale, the Exchange has determined to
level-set the volume criteria threshold amounts so that they are more
reflective of the current operating conditions and the current type and
amount of volume executed on the Exchange. The proposal to modify the
volume thresholds is intended to improve market quality. The Exchange
believes that its proposal will continue to encourage additional Market
Maker and Priority Customer volume to be executed on the Exchange,
which will attract further liquidity to the Exchange and benefit all
market participants. Accordingly, the Exchange believes that the
proposed changes will continue to attract order flow to the Exchange,
thereby encouraging additional volume and liquidity to the benefit of
all market participants.
The Exchange believes its proposal will not impose any burden on
inter-market competition because 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, or rebate opportunities available at other venues to be
more favorable. There are currently 16 registered options exchanges
competing for order flow. Based on publicly-available information, and
excluding index-based options, no single exchange had more than 12.93%
of the market share of executed volume of multiply-listed equity and
ETF options trades for the month of February 2023.\39\ Therefore, no
exchange possesses significant pricing power in the execution of
multiply-listed equity and ETF options order flow. More specifically,
the Exchange had a market share of 6.82% of executed volume of
multiply-listed equity and ETF options for the month of February
2023.\40\ In such an environment, the Exchange must continually adjust
its fees and tiers to remain competitive with other options exchanges.
Because competitors are free to modify their own fees and tiers in
response, and because market participants may readily adjust their
order routing practices, the Exchange believes that the degree to which
fee changes in this market may impose any burden on competition is
extremely limited. The Exchange believes that the proposed rule changes
reflect this competitive environment because they modify the Exchange's
fees in a manner that encourages market participants to continue to
provide liquidity and to send order flow to the Exchange.
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\39\ See supra note 35.
\40\ See id.
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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,\41\ and Rule 19b-4(f)(2) \42\ 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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\41\ 15 U.S.C. 78s(b)(3)(A)(ii).
\42\ 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:
[[Page 17907]]
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-2023-12 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-2023-12. 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 such 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-2023-12 and should be
submitted on or before April 14, 2023.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\43\
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\43\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-06055 Filed 3-23-23; 8:45 am]
BILLING CODE 8011-01-P