[Federal Register Volume 79, Number 157 (Thursday, August 14, 2014)]
[Notices]
[Pages 47695-47698]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-19224]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-72798; File No. SR-MIAX-2014-41]
Self-Regulatory Organizations; Miami International Securities
Exchange LLC; Notice of Filing and Immediate Effectiveness of a
Proposed Rule Change To Amend Its Fee Schedule
August 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 July 29, 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
[[Page 47696]]
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 lower the per contract credit for transactions
in MIAX Select Symbols \4\ for tiers 1 and 2.
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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'' means options overlying 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.
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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 located in
the Fee Schedule 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. 3. 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 to lower the per contract credit for
transactions in MIAX Select Symbols for tiers 1 and 2. Currently, the
Exchange credits at the $0.20 per contract rate for qualifying Priority
Customer transactions in MIAX Select Symbols. The $0.20 per contract
credit is in lieu of the applicable credit that would otherwise apply
to the transaction based on the volume thresholds. The Exchange
proposes reducing the per contract credit to $0.00 for the tier 1
volume threshold and to $0.10 for the tier 2 volume threshold. The
proposed changes align the per contract credit for qualifying Priority
Customer transactions in MIAX Select Symbols with the standard per
contract rate for transactions in non-MIAX Select Symbols that occur in
volume tiers 1 and 2. The $0.20 per contract credit will continue to be
applied in lieu of the applicable credit that would otherwise apply to
the transaction based on the volume thresholds in tiers 3, 4, and 5.
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 0.4% of the national customer volume in
multiply-listed option contracts during the month of October, ABC will
receive a credit of $0.10 for each Priority Customer contract executed
in the month of October. 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 $0.10 per contact rate, the same as the standard credit
of $0.10. In contrast, 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 Exchange believes the proposed changes to the Program are
objective in that the credits are based solely on reaching stated
volume thresholds. The specific volume thresholds of the tiers
[[Page 47697]]
were set based upon business determinations and an analysis of current
volume levels. The specific volume thresholds and rates were set in
order to encourage Members to reach for higher tiers. 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 August 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
lower the credit for certain 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 Program which provides increased incentives in 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
changes to the rebate Program are fair and equitable and not
unreasonably discriminatory because they 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
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
[[Page 47698]]
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-2014-41 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-2014-41. 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-2014-41 and should be
submitted on or before September 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. 2014-19224 Filed 8-13-14; 8:45 am]
BILLING CODE 8011-01-P