[Federal Register Volume 77, Number 243 (Tuesday, December 18, 2012)]
[Notices]
[Pages 74905-74907]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-30379]
[[Page 74905]]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-68415; File No. SR-MIAX-2012-01]
Self-Regulatory Organizations; Miami International Securities
Exchange, LLC; Notice of Filing and Immediate Effectiveness of a
Proposed Rule Change To Adopt the MIAX Options Fee Schedule
December 12, 2012.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that on December 7, 2012, Miami International Securities Exchange LLC
(``Exchange'' or ``MIAX'') 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 self-
regulatory organization. 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 adopt the MIAX Options Fee
Schedule (the ``Fee Schedule''). Specifically, the Fee Schedule would
establish select transaction and regulatory fees applicable to Members
trading options on and using services provided by MIAX.
The text of the proposed rule change is available on the Exchange's
Web site at http://www.miaxoptions.com/filter/wotitle/rule_filing, 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 purpose of the proposed rule change is to establish select
transaction and regulatory fees applicable to Members trading options
on and using services provided by the MIAX.
Marketing Fee
MIAX will assess a Marketing Fee to all MIAX Market Makers for
contracts they execute in their assigned classes when the contra-party
to the execution is a Priority Customer. The Marketing Fee is charged
only in a Market Maker's assigned classes because it is in these
classes that the Market Maker has the general obligation to attract
order flow to the Exchange. MIAX will, on a monthly basis, disburse
collected Marketing Fees to specific Electronic Exchange Members in
accordance with instructions received from the applicable Primary Lead
Market Maker ``PLMM'' or Lead Market Maker ``LMM'' in the option class.
The PLMM will provide instructions regarding the disbursement of
Marketing Fees collected in those option classes in which he is the
appointed PLMM on transactions resulting from orders that have been
directed to him and from non-directed orders in that option class. The
LMM will provide instructions regarding the disbursement of Marketing
Fees collected on transactions resulting from orders that have been
directed to him.
Undispersed Marketing Fees will be reimbursed to Market Makers
based upon their pro-rata portion of the entire amount of Marketing
Fees collected on a three month rolling schedule. In order to provide
PLMMs and LMMs flexibility in the timing of their disbursements to
Electronic Exchange Members, PLMMs and LMMs may choose to disburse the
Market Fees collected in one month over a three month period.
Reimbursement of undispersed Marketing Fees will take this into
consideration.
The amount of the Marketing Fee would depend upon whether the
affected option class is included in the option Penny Pilot Program. A
Marketing Fee of $0.25 per contract will be assessed to Market Makers
for transactions in option classes that are included in the Penny Pilot
Program. A Marketing Fee of $0.70 per contract will be assessed to
Market Makers for transactions in option classes that are not in the
Penny Pilot Program. A list of option classes included in the Penny
Pilot Program is available on the MIAX Web site. MIAX's Marketing Fees
are the same as CBOE, ISE, NYSE Amex and PHLX for transactions in
option classes in the Penny Pilot Program. For option classes not in
the Penny Pilot Program, MIAX's Marketing Fees are the same as PHLX
($0.70) and higher than CBOE, ISE and NYSE Amex ($0.65 each
respectively).
Routing Fees
MIAX will assess Routing Fees in order to recoup costs incurred by
MIAX when routing to various away markets. MIAX will also pay to its
Member any rebate it receives on transactions routed to an away market
where there is such a rebate paid. To establish the appropriate Routing
Fee for a particular order that is routed to, and executed on, an away
market, MIAX will assess the transaction fee that is being assessed by
the away market, plus a specified fixed fee, which represents the costs
incurred by the Exchange for routing an order to an away market. The
transaction fee portion of the routing fee will be the actual charge
assessed by the away market at the time that the order was entered into
the MIAX Trading System. This transaction fee will be calculated on an
order-by-order basis since different away markets charge different
amounts.\3\ In the case where there is no transaction fee assessed by
the away market, the Routing Fee assessed by MIAX will be only the
fixed rate surcharge described below.
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\3\ This is similar to the methodologies utilized by the NASDAQ
OMX PHLX LLC (``PHLX'') and the International Securities Exchange,
LLC (``ISE'') in assessing Routing Fees. See PHLX's Pricing Schedule
and ISE's Fee Schedule.
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MIAX will assess a routing fee surcharge at a fixed rate of $0.10
per contract for Public Customer orders that are routed to and executed
on away markets.\4\ The routing fee surcharge represents the cost to
MIAX for routing the order to the away market. In analyzing its costs,
the Exchange took into account clearing costs,\5\ administrative,
regulatory and technical costs associated with routing orders to an
away market. The Exchange uses unaffiliated routing brokers to route
orders to the away markets; the costs associated with the use of these
services
[[Page 74906]]
are included in the fixed fee surcharge. The Exchange analyzed its
potential costs in determining to assess a fixed fee surcharge of $0.10
per contract to represent the overall cost to the Exchange for
technical, administrative, clearing, regulatory, compliance and other
costs, which is in addition to the transaction fee assessed by the away
market. The routing fee surcharge of $0.10 is the same as the fixed fee
charged by PHLX for orders routed to exchanges other than NASDAQ OMX
BX, Inc. (``BX'') and NASDAQ Options Market (``NOM'').\6\
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\4\ The Commission notes that, under the MIAX routing rules,
orders other than Public Customer orders are not routed to away
markets. See Securities Exchange Act Release No. 68341 (December 3,
2012), 77 FR 73065, at 73086 (December 7, 2012).
\5\ The Options Clearing Corporation (``OCC'') recently amended
its clearing fee from $0.03 per contract side to $0.01 per contract
side. See Securities Exchange Act Release No. 68025 (October 10,
2012), 77 FR 63398 (October 16, 2012) (SR-OCC-2012-18).
\6\ See Securities Exchange Act Release No. 68213 (November 13,
2012), 77 FR 69530 (November 19, 2012) (SR-PHLX-2012-129).
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MIAX is also proposing to pay a market participant any rebate
offered by an away market where there is such a rebate paid. Any rebate
paid would be netted against the fixed fee surcharge assessed by MIAX.
For example, if a Public Customer order is routed to BOX Options
Exchange, LLC (``BOX''), and BOX offers a customer rebate of $0.20 per
contract, MIAX would deduct its fixed fee surcharge of $0.10 per
contract from the rebate and pay the $0.10 per contract rebate to the
market participant for the customer order that was routed.
Regulatory Fees
A. Sales Value Fee
The Sales Value Fee \7\ is assessed by the Exchange to each Member
for sales on the Exchange with respect to which the Exchange is
obligated to pay a fee to the Commission pursuant to Section 31 of the
Exchange Act. The Sales Value Fee is equal to the Section 31 fee rate
multiplied by the Member's aggregate dollar amount of covered sales
resulting from options transactions occurring on the Exchange during
any computational period. To the extent there may be any excess monies
collected under this rule, the Exchange may retain those monies to help
fund general operating expenses. The sales transactions to which the
fee applies are sales of options (other than options on a security
index) and the sales of securities resulting from the exercise of
physical-delivery options. The fee is collected indirectly from Members
through their clearing firms by The Options Clearing Corporation on
behalf of MIAX with respect to option sales and options exercises.
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\7\ See Exchange Rule 1207.
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B. Web CRD \8\ Fees
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\8\ FINRA operates the Web Central Registration Depository
(CRD[supreg]), the central licensing and registration system for the
U.S. securities industry and its regulators. It contains the
registration records of more than 6,800 registered broker-dealers
and the qualification, employment, and disclosure histories of more
than 660,000 active registered individuals.
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Financial Industry Regulatory Authority (``FINRA''), through the
Web CRD\SM\ registration system for the registration of associated
persons of Electronic Exchange Member and Market Maker organizations
that are not also FINRA members, collects from those MIAX Members
general registration fees and fingerprint processing fees. The MIAX
Options Fee Schedule sets forth both the Web CRD Fees FINRA is
currently charging and the new Web CRD Fees it will begin charging
January 2, 2013.
2. Statutory Basis
The Exchange believes that its proposal to adopt its Fee Schedule
for select transaction and regulatory fees is consistent with Section
6(b) of the Act \9\ in general, and furthers the objectives of Section
6(b)(4) of the Act \10\ in particular, in that it is an equitable
allocation of reasonable fees and other charges among Exchange members
and other persons using its facilities.
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\9\ 15 U.S.C. 78f(b).
\10\ 15 U.S.C. 78f(b)(4).
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The Exchange believes the fees proposed for transactions on MIAX
are reasonable. MIAX will operate within a highly competitive market in
which market participants can readily send order flow to any of ten
other competing venues if they deem fees at a particular venue to be
excessive. The proposed fee structure is intended to attract order flow
to MIAX by offering market participants incentives to submit their
orders to MIAX.
MIAX notes that the U.S. options markets are highly competitive,
and the Marketing Fee is intended to provide an incentive for PLLMs and
LMMs to enter into marketing agreements with Electronic Exchange
Members so that they will provide order flow to MIAX. The Marketing Fee
is charged only in a Market Maker's assigned classes because it is in
these classes that the Market Maker has the general obligation to
attract order flow to the Exchange. MIAX believes that its program of
Marketing Fees, which is similar to marketing fee programs that have
previously been implemented on other options exchanges,\11\ will
enhance the MIAX's competitive position and will result in increased
liquidity on the MIAX, thereby providing more of an opportunity for
customers to receive best executions on MIAX. MIAX believes that its
Marketing Fee is reasonable since the amount of MIAX's Marketing Fee is
the same as other exchanges for options classes in the Penny Pilot
Program and slightly higher than some of the other exchanges and the
same as two of the exchanges for options classes not in the Penny Pilot
Program.
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\11\ See e.g., Securities Exchange Act Release Nos. 53969 (June
9, 2006), 71 FR 34973 (June 16, 2006) (SR-CBOE-2006-53); 55265
(February 9, 2007), 72 FR 7697 (February 16, 2007) (SR-CBOE-2007-
11); 55271 (February 12, 2007), 72 FR 7699 (February 16, 2007) (SR-
ISE-2007-08); and 54152 (July 14, 2006), 71 FR 41488 (July 21,
2006). See also, Securities Exchange Act Release Nos. 53841 (May 19,
2006), 71 FR 30461 (May 26, 2006) (SR-Phlx-2006-33); 54297 (August
9, 2006), 71 FR 47280 (August 16, 2006) (SR-Phlx-2006-47); 54485
(September 22, 2006), 71 FR 57017 (September 28, 2006) (SR-Phlx-
2006-56); 55290 (February 13, 2007), 72 FR 8051 (February 22, 2007)
(SR-Phlx- 2007-05); and 55473 (March 14, 2007), 72 FR 13338 (March
21, 2007) (SR-Phlx- 2007-12).
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The Exchange believes that the proposed Routing Fees are reasonable
because they seek to recoup costs that are incurred by the Exchange
when routing Public Customer orders to away markets on behalf of
members. Each destination market's transaction charge varies and there
is a cost incurred by the Exchange when routing orders to away markets.
The costs to the Exchange include clearing costs, administrative,
regulatory and technical costs associated with routing options. The
Exchange believes that the proposed Routing Fees would enable the
Exchange to recover the costs it incurs to route orders to away markets
in addition to transaction fees assessed to market participants for the
execution of Public Customer orders by the away market. The Exchange
believes that it is reasonable for it to recoup its actual costs
associated with routing orders to away markets. Also, market
participants whose orders routed to away markets will be entitled to
receive rebates offered by the away markets, which rebates will net
against fees assessed by the Exchange for routing orders. The Exchange
believes that the opportunity to collect a rebate will reduce Routing
Fees.
MIAX also believes that it is equitable and not unfairly
discriminatory for market participants to receive rebates on orders
routed to away markets that pay rebates. MIAX would pay rebates offered
by away markets uniformly to market participants when their orders are
routed to a destination market that offers a rebate.
The proposed Sales Value Fee allows the Exchange to offset the cost
it incurs in payment to the Commission of a transaction fee that is
designed to recover the costs related to the government's supervision
and regulation of the securities markets and securities professionals.
The amount of the fee is the same amount assessed to
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the Exchange pursuant to Section 31 of the Exchange Act. The Exchange
believes it is reasonable to recover the actual costs associated with
the payment of Section 31 fees.
Finally, the Exchange believes it is reasonable, equitable and not
unfairly discriminatory for the FINRA fees to be included on the Fee
Schedule because these fees are not being assessed or set by MIAX, but
by FINRA, and will be assessed to broker-dealers that register
associated persons through FINRA's WebCRD system.
Finally, the Exchange notes that it operates in a highly
competitive market in which market participants can readily favor
competing venues. In such an environment, the Exchange must establish
fees that are competitive with other exchanges. For the reasons
described above, the Exchange believes that the proposed MIAX Options
Fee Schedule for select transaction and regulatory fees appropriately
reflects this competitive environment.
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.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
Written comments were neither solicited or 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.\12\ 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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\12\ 15 U.S.C. 78s(b)(3)(A)(ii).
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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-2012-01 on the subject line.
Paper Comments
Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, 100 F Street NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-MIAX-2012-01. 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 Web site (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 Web site 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; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make publicly available. All
submissions should refer to File Number SR-MIAX-2012-01 and should be
submitted on or before January 8, 2013.
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\13\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\13\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-30379 Filed 12-17-12; 8:45 am]
BILLING CODE 8011-01-P