[Federal Register Volume 79, Number 134 (Monday, July 14, 2014)]
[Notices]
[Pages 40818-40820]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-16373]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-72567; File No. SR-MIAX-2014-34]
Self-Regulatory Organizations; Miami International Securities
Exchange LLC; Notice of Filing and Immediate Effectiveness of a
Proposed Rule Change To Amend Its Fee Schedule
July 8, 2014.
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 June 25, 2014, 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 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 the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend the Priority Customer Rebate Program
(the ``Program'') \3\ to expand the number of option classes that
qualify for a $0.20 per contract credit for transactions in MIAX Select
Symbols \4\.
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\3\ See Securities Exchange Act Release Nos. 72356 (June 10,
2014), 79 FR 34384 (June 16, 2014) (SR-MIAX-2014-26); 71698 (March
12, 2014), 79 FR 15185 (March 18, 2014) (SR-MIAX-2014-12); 71700
(March 12, 2014), 79 FR 15188 (March 18, 2014) (SR-MIAX-2014-13);
71283 (January 10, 2014), 79 FR 2914 (January 16, 2014) (SR-MIAX-
2013-63); 71009 (December 6, 2013), 78 FR 75629 (December 12, 2013)
(SR-MIAX-2013-56).
\4\ The term ``MIAX Select Symbols'' currently means options
overlying AAL, AAPL, AIG, AMZN, AZN, BP, C, CMCSA, EBAY, EEM, EFA,
FB, FCX, FXI, GILD, GLD, INTC, IWM, IYR, JCP, JPM, NFLX, NQ, PCLN,
PFE, PG, QQQ, S, SUNE, T, TSLA, VALE, WFC, XLE, XLF, and XOM.
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The Program is based on the substantially similar fees of another
competing options exchange.\5\ Under the Program, the Exchange credits
each Member the per contract amount set forth in the table below
resulting from each Priority Customer \6\ order transmitted by that
Member which is executed on the Exchange in all multiply-listed option
classes (excluding mini-options 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 Rule
1400), provided the Member meets certain volume thresholds in a month.
For each Priority Customer order transmitted by that Member which is
executed electronically on the Exchange in MIAX Select Symbols, MIAX
shall credit each member at the separate per contract rate for MIAX
Select Symbols. The volume thresholds are calculated based on the
customer average daily volume over the course of the month. Volume is
recorded for and credits are delivered to the Member Firm that submits
the order to the Exchange. The Exchange aggregates the contracts
resulting from Priority Customer orders transmitted and executed
electronically on the Exchange from affiliated Members for purposes of
the thresholds above, provided there is at least 75% common ownership
between the firms as reflected on each firm's Form BD, Schedule A. In
the event of a MIAX System outage or other interruption of electronic
trading on MIAX, the Exchange adjusts the national customer volume in
multiply-listed options for the duration of the outage. A Member may
request to receive its credit under the Program as a separate direct
payment.
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\5\ See Chicago Board Options Exchange, Incorporated (``CBOE'')
Fees Schedule, p. 4. See also Securities Exchange Act Release Nos.
66054 (December 23, 2011), 76 FR 82332 (December 30, 2011) (SR-CBOE-
2011-120); 68887 (February 8, 2013), 78 FR 10647 (February 14, 2013)
(SR-CBOE-2013-017).
\6\ The term ``Priority Customer'' means a person or entity that
(i) is not a broker or dealer in securities, and (ii) does not place
more than 390 orders in listed options per day on average during a
calendar month for its own beneficial accounts(s). See MIAX Rule
100.
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The Exchange proposes modifying the Program to expand the number of
option classes that qualify for a $0.20 per contract credit for
transactions in MIAX Select Symbols. MIAX Select Symbols currently
include options overlying AAL, AAPL, AIG, AMZN, AZN, BP, C, CMCSA,
EBAY, EEM, EFA, FB, FCX, FXI, GILD, GLD, INTC, IWM, IYR, JCP, JPM,
NFLX, NQ, PCLN, PFE, PG, QQQ, S, SUNE, T, TSLA, VALE, WFC, XLE, XLF,
and XOM. The Exchange proposes to modify the MIAX Select Symbols to add
AA, CBS, CLF, EWJ, GE, GM, GOOG, GOOGL, HTZ, KO, MO, MRK, NOK, PBR,
QCOM, SIRI, SPY, USO, WAG, WMB, WY, XHB, XLP, and XLU. Thus, the
Exchange will credit each Member $0.20 per contract resulting from each
Priority Customer order transmitted by that Member executed on Exchange
in AA, AAL, AAPL, AIG, AMZN, AZN, BP, C, CBS, CLF, CMCSA, EBAY, EEM,
EFA, EWJ, FB, FCX, FXI, GE, GILD, GLD, GM, GOOG, GOOGL, HTZ, INTC, IWM,
IYR, JCP, JPM, KO, MO, MRK, NFLX, NOK, NQ, PBR, PCLN, PFE, PG, QCOM,
QQQ, S, SIRI, SPY, SUNE, T, TSLA, USO, VALE, WAG, WFC, WMB, WY, XHB,
XLE, XLF, XLP, XLU, and XOM. The $0.20 per contract credit would be in
lieu of the applicable credit that would otherwise apply to the
transaction based on the volume thresholds. The Exchange notes that all
the other aspects of the Program would continue to apply to the credits
(e.g., the aggregation of volume of affiliates, exclusion of contracts
that are routed to away exchanges, exclusion of mini-options . . .
etc.).\7\
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\7\ See MIAX Options Fee Schedule, p. 3. See also Securities
Exchange Act Release Nos. 72356 (June 10, 2014), 79 FR 34384 (June
16, 2014) (SR-MIAX-2014-26); 71698 (March 12, 2014), 79 FR 15185
(March 18, 2014) (SR-MIAX-2014-12); 71700 (March 12, 2014), 79 FR
15188 (March 18, 2014) (SR-MIAX-2014-13); 71283 (January 10, 2014),
79 FR 2914 (January 16, 2014) (SR-MIAX-2013-63); 71009 (December 6,
2013), 78 FR 75629 (December 12, 2013) (SR-MIAX-2013-56).
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For example, if Member Firm ABC, Inc. (``ABC'') has enough Priority
Customer contracts to achieve 0.3% of the national customer volume in
multiply-listed option contracts during
[[Page 40819]]
the month of October, ABC will receive a credit of $0.10 for each
Priority Customer contract executed in the month of October. However,
any qualifying Priority Customer transactions during such month that
occurred in AA, AAL, AAPL, AIG, AMZN, AZN, BP, C, CBS, CLF, CMCSA,
EBAY, EEM, EFA, EWJ, FB, FCX, FXI, GE, GILD, GLD, GM, GOOG, GOOGL, HTZ,
INTC, IWM, IYR, JCP, JPM, KO, MO, MRK, NFLX, NOK, NQ, PBR, PCLN, PFE,
PG, QCOM, QQQ, S, SIRI, SPY, SUNE, T, TSLA, USO, VALE, WAG, WFC, WMB,
WY, XHB, XLE, XLF, XLP, XLU, and XOM would be credited at the $0.20 per
contact rate versus the standard credit of $0.10. Similarly, if Member
Firm XYZ, Inc. (``XYZ'') has enough Priority Customer contracts to
achieve 2.5% of the national customer volume in multiply-listed option
contracts during the month of October, XYZ will receive a credit of
$0.18 for each Priority Customer contract executed in the month of
October. However, any qualifying Priority Customer transactions during
such month that occurred in AA, AAL, AAPL, AIG, AMZN, AZN, BP, C, CBS,
CLF, CMCSA, EBAY, EEM, EFA, EWJ, FB, FCX, FXI, GE, GILD, GLD, GM, GOOG,
GOOGL, HTZ, INTC, IWM, IYR, JCP, JPM, KO, MO, MRK, NFLX, NOK, NQ, PBR,
PCLN, PFE, PG, QCOM, QQQ, S, SIRI, SPY, SUNE, T, TSLA, USO, VALE, WAG,
WFC, WMB, WY, XHB, XLE, XLF, XLP, XLU, and XOM would be credited at the
$0.20 per contact rate versus the standard credit of $0.18.
The purpose of the amendment to the Program is to further encourage
Members to direct greater Priority Customer trade volume to the
Exchange in these high volume symbols. Increased Priority Customer
volume will provide for greater liquidity, which benefits all market
participants on the Exchange. The practice of incentivizing increased
retail customer order flow in order to attract professional liquidity
providers (Market-Makers) is, and has been, commonly practiced in the
options markets. As such, marketing fee programs,\8\ and customer
posting incentive programs,\9\ are based on attracting public customer
order flow. The practice of providing additional incentives to increase
order flow in high volume symbols is, and has been, commonly practiced
in the options markets.\10\ The Program similarly intends to attract
Priority Customer order flow, which will increase liquidity, thereby
providing greater trading opportunities and tighter spreads for other
market participants and causing a corresponding increase in order flow
from such other market participants in these select symbols. Increasing
the number of orders sent to the Exchange will in turn provide tighter
and more liquid markets, and therefore attract more business overall.
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\8\ See MIAX Fee Schedule, Section 1(b).
\9\ See NYSE Arca, Inc. Fees Schedule, page 4 (section titled
``Customer Monthly Posting Credit Tiers and Qualifications for
Executions in Penny Pilot Issues'').
\10\ See International Securities Exchange, LLC, Schedule of
Fees, p. 6 (providing reduced fee rates for order flow in Select
Symbols); NASDAQ OMX PHLX, Pricing Schedule, Section I (providing a
rebate for adding liquidity in SPY); NYSE Arca, Inc. Fees Schedule,
page 4 (section titled ``Customer Monthly Posting Credit Tiers and
Qualifications for Executions in Penny Pilot Issues'').
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The credits paid out as part of the program will be drawn from the
general revenues of the Exchange.\11\ The Exchange calculates volume
thresholds on a monthly basis.
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\11\ Despite providing credits under the Program, the Exchange
represents that it will continue to have adequate resources to fund
its regulatory program and fulfill its responsibilities as a self-
regulatory organization while the Program will be in effect.
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The Exchange proposes to implement the new transaction fees
beginning July 1, 2014.
2. Statutory Basis
The Exchange believes that its proposal to amend its fee schedule
is consistent with Section 6(b) of the Act \12\ in general, and
furthers the objectives of Section 6(b)(4) of the Act \13\ in
particular, in that it is an equitable allocation of reasonable fees
and other charges among Exchange members.
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\12\ 15 U.S.C. 78f(b).
\13\ 15 U.S.C. 78f(b)(4).
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The Exchange believes that the proposal to modify the Program to
expand the number of option classes that qualify for the credit for
transactions in MIAX Select Symbols is fair, equitable and not
unreasonably discriminatory. The credit for transactions in the select
symbols is reasonably designed because it will incent providers of
Priority Customer order flow to send that Priority Customer order flow
to the Exchange in order to receive a credit in a manner that enables
the Exchange to improve its overall competitiveness and strengthen its
market quality for all market participants. The proposal to increase
the incentives in the high volume select symbols is also reasonably
designed to increase the competitiveness of the Exchange with other
options exchanges that also offer increased incentives to higher volume
symbols. The proposed rebate program is fair and equitable and not
unreasonably discriminatory because it will apply equally to all
Priority Customer orders in the select symbols. All similarly situated
Priority Customer orders in the select symbols are subject to the same
rebate schedule, and access to the Exchange is offered on terms that
are not unfairly discriminatory. In addition, the Program is equitable
and not unfairly discriminatory because, while only Priority Customer
order flow qualifies for the Program, an increase in Priority Customer
order flow will bring greater volume and liquidity, which benefit all
market participants by providing more trading opportunities and tighter
spreads.
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 change would increase both intermarket and intramarket
competition by incenting Members to direct their Priority Customer
orders in the select symbols to the Exchange, which will enhance the
quality of quoting and increase the volume of contracts traded here in
those symbols. To the extent that there is additional competitive
burden on non-Priority Customers or trading in non-select symbols, the
Exchange believes that this is appropriate because the proposed changes
to the rebate program should incent Members to direct additional order
flow to the Exchange and thus provide additional liquidity that
enhances the quality of its markets and increases the volume of
contracts traded here in those symbols. To the extent that this purpose
is achieved, all the Exchange's market participants should benefit from
the improved market liquidity in such select symbols. Enhanced market
quality and increased transaction volume that results from the
anticipated increase in order flow directed to the Exchange will
benefit all market participants and improve competition on the Exchange
in such select symbols. The Exchange notes that it operates in a highly
competitive market in which market participants can readily favor
competing venues if they deem fee levels at a particular venue to be
excessive. In such an environment, the Exchange must continually adjust
its fees to remain competitive with other exchanges and to attract
order flow to the Exchange. The Exchange believes that the proposed
rule change reflects this competitive environment because it reduces
the Exchange's fees in a manner that encourages market participants to
[[Page 40820]]
direct their customer order flow, to provide liquidity, and to attract
additional transaction volume to the Exchange. Given the robust
competition for volume among options markets, many of which offer the
same products, implementing a volume based customer rebate program to
attract order flow like the one being proposed in this filing is
consistent with the above-mentioned goals of the Act. This is
especially true for the smaller options markets, such as MIAX, which is
competing for volume with much larger exchanges that dominate the
options trading industry. MIAX has a nominal percentage of the average
daily trading volume in options, so it is unlikely that the customer
rebate program could cause any competitive harm to the options market
or to market participants. Rather, the customer rebate program is a
modest attempt by a small options market to attract order volume away
from larger competitors by adopting an innovative pricing strategy. The
Exchange notes that if the rebate program resulted in a modest
percentage increase in the average daily trading volume in options
executing on MIAX, while such percentage would represent a large volume
increase for MIAX, it would represent a minimal reduction in volume of
its larger competitors in the industry. The Exchange believes that the
proposal will help further competition, because market participants
will have yet another additional option in determining where to execute
orders and post liquidity if they factor the benefits of a customer
rebate program into the determination.
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.\14\ 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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\14\ 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-2014-34 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-2014-34. 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 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; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-MIAX-2014-34 and should be
submitted on or before August 4, 2014.
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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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-16373 Filed 7-11-14; 8:45 am]
BILLING CODE 8011-01-P