[Federal Register Volume 79, Number 210 (Thursday, October 30, 2014)]
[Notices]
[Pages 64642-64644]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-25780]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-73425; File No. SR-MIAX-2014-55]
Self-Regulatory Organizations; Miami International Securities
Exchange LLC; Notice of Filing and Immediate Effectiveness of a
Proposed Rule Change To Amend the MIAX Options Fee Schedule
October 24, 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 October 16, 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 ``Fee Schedule'').
The text of the proposed rule change is available on the Exchange's
Web site at http://www.miaxoptions.com/filter/
[[Page 64643]]
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 Exchange proposes to amend its marketing fee.\3\ The marketing
fee is assessed on certain transactions of all Market Makers.\4\ The
funds collected via this marketing fee are then put into pools
controlled by Primary Lead Market Makers (``PLMMs'') and LMMs. The PLMM
or LMM controlling a certain pool of funds can then determine the
Electronic Exchange Member(s) (``EEM'') to which the funds should be
directed in order to encourage such EEM(s) to send orders to the
Exchange. In accordance with Exchange Rule 514, an EEM can designate an
order (``Directed Order'') to a specific LMM.
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\3\ The proposal is based on a substantially similar filing by
the Chicago Board Options Exchange, Incorporated. See Securities
Exchange Act Release No. 68131 (November 1, 2012), 77 FR 67032
(November 8, 2012) (SR-CBOE-2012-101).
\4\ See MIAX Options Fee Schedule, Section (1)(b), entitled
Marketing Fee for more detail regarding the marketing fee.
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Currently, Section (1)(b) of the Fee Schedule, provides that to
qualify for a marketing fee allocation for an applicable month, an LMM
must either: (i) Have an appointment in the relevant option class at
the time of being directed the order; or (ii) for the month preceding
the applicable month (the ``qualifying month'') have an appointment as
an LMM for at least ten (10) trading days in a minimum of fifty percent
(50%) of the option classes listed on the Exchange for the entire
qualifying month. For non-directed orders and orders directed to non-
qualifying LMMs, applicable Marketing Fees are allocated to the PLMM's
Marketing Fee ``pool.'' All Market Makers that participated in such
transactions will pay the applicable Marketing Fee to the Exchange,
which will allocate such funds to the Member that controls the
distribution of the Marketing Fee ``pool.'' Each month the Member will
submit written instructions to MIAX describing how MIAX is to
distribute the Marketing Fees in the ``pool'' to Electronic Exchange
Members identified by the Member.
However, other options exchanges allow an LMM (or similar position)
to have access to the marketing fee funds generated from a Directed
Order (or similar order type) regardless of whether the LMM has an
appointment in a class in which the Directed Order is received and
executed without the additional requirement for an LMM to have at least
ten (10) trading days in a minimum of fifty percent (50%) of the option
classes listed on the Exchange for the entire qualifying month.\5\ The
Exchange now proposes to remove this additional requirement so that its
marketing fee program operates in a manner more similar to that of
competing options exchanges that offer similar programs.
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\5\ See CBOE Fees Schedule, fn. 6; NASDAQ OMX Phlx, LLC
(``Phlx'') Pricing Schedule, section on Payment for Order Flow Fee;
NYSE Amex Options Fee Schedule, fn. 10; International Securities
Exchange, LLC (``ISE'') Schedule of Fees, Section IV(D)[sic]. None
of which contain requirements that a PLMM or LMM (or similar
position) have an appointment in the class in which a Directed Order
(or similar order type) is received and executed nor the additional
requirement of a minimum number of options class appointments in
order to have access to the marketing fee funds generated from that
Preferred order.
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The Exchange proposes amending the Fee Schedule to allow LMMs to
receive an allocation of marketing fees generated by Directed Orders
sent to the LMM without any additional requirements. Specifically, the
Exchange proposes to remove the requirements that provide that an LLM,
in order to qualify to be allocated Marketing Fees for Directed Orders
for an applicable month, must either: (i) Have an appointment in the
relevant option class at the time of being directed the order; or (ii)
for the month preceding the applicable month (the ``qualifying month'')
have an appointment as an LMM for at least ten (10) trading days in a
minimum of fifty percent (50%) of the option classes listed on the
Exchange for the entire qualifying month. The proposed changes will
more closely align the Exchange's marketing fee program with the
requirements of other competing exchanges that offer similar
programs.\6\
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\6\ See id.
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Permitting LMMs to be allocated marketing fees generated from a
Directed Order without these additional requirements would allow LMMs
to encourage greater order flow to be sent to the Exchange. This
increased order flow would benefit all market participants on the
Exchange, such as customers with resting orders on the Exchange and
LMMs that have an appointment and quote in the relevant option.
Allowing LMMs to be allocated marketing fees generated from a Directed
Order in the manner that is proposed would provide LMMs with an
incentive to encourage the routing of order flow into classes in which
the LMM otherwise would not. Further, the proposal will also provide
LMMs with more flexibility to determine which classes that they choose
to be appointed in and still receive payment for order flow without the
restrictive criteria; as they will not have to be concerned with
whether or not they have met the minimum class appointment threshold
prior to making arrangements to paying for order flow in a specific
class.
The proposed fee changes are to take effect on November 1, 2014.
2. Statutory Basis
MIAX believes that its proposed rule change is consistent with
Section 6(b) of the Act \7\ in general, and furthers the objectives of
Section 6(b)(5) of the Act \8\ in particular, 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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\7\ 15 U.S.C. 78f(b).
\8\ 15 U.S.C. 78f(b)(5).
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The Exchange believes that this proposal to remove a requirement
that other exchanges do not share, perfects the mechanism for a free
and open market and a national market system by allowing the Exchange's
marketing fee program to operate in a manner similar to competing
options exchanges. In addition, the proposal promotes just and
equitable principles of trade by encouraging greater order flow to be
sent to the Exchange through Directed Orders in a manner that will
benefit all market participants on the Exchange.
The Exchange also believes that the proposed changes to the
marketing fee is consistent with Section 6(b)(4) of the Act \9\ which
provides that Exchange
[[Page 64644]]
rules may provide for the equitable allocation of reasonable dues,
fees, and other charges among its members and other persons using its
facilities. The proposed change is reasonable because it will allow
LMMs greater access to marketing fee funds. The proposed change is
equitable and not unfairly discriminatory because it is designed to
allow LMMs to encourage greater order flow to be sent to the Exchange.
A LMM could be able to amass a greater pool of funds with which to use
to incent order flow providers to send order flow to the Exchange. This
increased order flow would benefit all market participants on the
Exchange. Further, allowing additional LMMs to access marketing fee
funds generated from a Directed Order would provide LMMs with an
incentive to encourage the routing of order flow into classes in which
the LMM otherwise would not.
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\9\ 15 U.S.C. 78f(b)(4).
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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 proposed rule change would
place the Exchange on equal footing as other exchanges that allow their
LMM equivalents to be allocated marketing fees generated by Directed
Orders. The Exchange believes that such an even playing field will
promote competition among options exchanges. The Exchange notes that it
operates in a highly competitive market in which market participants
can readily direct order flow to competing venues who offer similar fee
structures. Many competing venues offer similar fee structures to
market participants. To this end, the Exchange is proposing a market
enhancement to encourage market participants to trade on the Exchange.
The Exchange believes the proposed rule change is procompetitive
because it would enable the Exchange to provide member organizations
with a fee structure that is similar to that of other exchanges.
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.\10\ 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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\10\ 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-2014-55 on the subject line.
Paper Comments
Send paper comments in triplicate to Brent J. Fields,
Secretary, Securities and Exchange Commission, 100 F Street NE.,
Washington, DC 20549.
All submissions should refer to File Number SR-MIAX-2014-55. 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 available publicly. All
submissions should refer to File Number SR-MIAX-2014-55 and should be
submitted on or before November 20, 2014.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\11\
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\11\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-25780 Filed 10-29-14; 8:45 am]
BILLING CODE 8011-01-P