[Federal Register Volume 79, Number 245 (Monday, December 22, 2014)]
[Notices]
[Pages 76421-76424]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-29817]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-73848; File No. SR-MIAX-2014-62]
Self-Regulatory Organizations: Notice of Filing and Immediate
Effectiveness of a Proposed Rule Change by Miami International
Securities Exchange, LLC To Amend the MIAX Options Fee Schedule
December 16, 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 December 10, 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.\3\ The Commission is publishing this
notice to solicit comments on the proposed rule change from interested
persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ MIAX initially filed a similar proposal for only SPY options
on November 25, 2014, and indicated in its filing that it would
implement the new fee on December 1, 2014. See File No. SR-MIAX-
2014-59. On December 10, 2014, MIAX withdrew that filing and
submitted this filing.
---------------------------------------------------------------------------
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/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. 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.
---------------------------------------------------------------------------
\4\ See MIAX Options Fee Schedule, Section (1)(b), entitled
Marketing Fee for more detail regarding the marketing fee.
---------------------------------------------------------------------------
Currently, Section 1(b) of the Fee Schedule, provides that the
Exchange will assess a Marketing Fee to all Market Makers for
contracts, including mini options, they execute in their assigned
classes when the contra-party to the execution is a Priority Customer.
MIAX will not assess a Marketing Fee to Market Makers for contracts
executed as a PRIME Agency Order, Contra-side Order, or a PRIME AOC
Response in the PRIME Auction; unless, it executes against an unrelated
order.
The Exchange proposes to amend the Marketing Fee in order to add an
additional incentive for order flow providers to post additional
Priority Customer orders on the Exchange's Book. Specifically, the
Exchange proposes to assess an additional $0.12 per contract Posted
Liquidity Marketing Fee to all Market Makers for any standard options
overlying EEM, GLD, IWM, QQQ, and SPY that Market Makers execute in
their assigned class (e.g., SPY) when the contra-party to the execution
is a Priority Customer and the Priority Customer order was posted on
the Book at the time of the execution. MIAX will not assess the
additional Posted Liquidity Marketing Fee to Market Makers for
contracts executed as a PRIME Agency Order, Contra-side Order, or a
PRIME AOC Response in the PRIME Auction. MIAX will also not
[[Page 76422]]
assess the additional Posted Liquidity Marketing Fee to Market Makers
for contracts executed pursuant to a Liquidity Refresh Pause, route
timer, or during the Opening Process. The Post [sic] Liquidity
Marketing Fee will be in addition to the current Marketing Fee of $0.25
per contract for standard options overlying SPY \5\ that Market Makers
execute in their assigned class (e.g., SPY) when the contra-party to
the execution is a Priority Customer. The new proposed Post [sic]
Liquidity Marketing Fee will otherwise operate in a similar manner as
the standard Marketing Fee, with the additional $0.12 per contract
going into the broader Marketing Fee ``pool'' for the Directed LMM or
the PLMM in EEM, GLD, IWM, QQQ or SPY, respectively.\6\
---------------------------------------------------------------------------
\5\ The Commission notes that MIAX's proposal also covers
standard options overlying EEM, GLD, IWM, and QQQ.
\6\ The Commission notes that the symbols MIAX lists in this
sentence refer to the respective overlying options class.
---------------------------------------------------------------------------
The purpose of the additional marketing fee is to further encourage
Members to post additional Priority Customer orders on the Exchange's
Book in these high volume symbols. Increased Priority Customer orders
on the Exchange's Book 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,\7\ and customer posting incentive programs,\8\ 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.\9\ The
proposed marketing fee 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 EEM, GLD, IWM, QQQ, and SPY.\10\ Increasing the
number of orders sent to the Exchange will in turn provide tighter and
more liquid markets, and therefore attract more business overall.
---------------------------------------------------------------------------
\7\ See MIAX Fee Schedule, Section 1(b); CBOE, Fee Schedule, p.
4; NYSE Amex Options Fee Schedule, p. 6.
\8\ See NYSE Arca, Inc. Fees Schedule, page 4 (section titled
``Customer Monthly Posting Credit Tiers and Qualifications for
Executions in Penny Pilot Issues'').
\9\ 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'').
\10\ The Commission notes that the symbols MIAX lists in this
sentence refer to the respective overlying options class.
---------------------------------------------------------------------------
At this time, the Exchange does not propose a Post [sic] Liquidity
Marketing Fee for mini options. Mini options in [sic] are not traded in
significant volume across the industry and, as such, MIAX, in
consultation with its market makers, does not seek to incentivize order
routers to send such orders to MIAX by extending the new marketing fee
to posted Priority Customer orders in mini options on SPY and GLD.\11\
In addition, because of the lack of significant volume and limited
demand in the industry to trade mini options, the Exchange believes
that having a marketing fee for mini options that is in some cases
lower than the fees for standard contracts, is appropriate, not
unreasonable, not unfairly discriminatory and not burdensome on
competition between participants, or between the Exchange and other
exchanges in the listed options marketplace.
---------------------------------------------------------------------------
\11\ The Exchange notes that mini options are currently listed
on SPY, AAPL, GLD, GOOGL, and AMZN. If the Exchange were to extend
the new Marketing Fee to mini options, since there are no mini
options on EEM, IWM, and QQQ, the Exchange would not be able to
assess an additional marketing fee for mini options in such symbols,
but instead would be limited to assessing the additional fee on SPY
and GLD.
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\12\ 15 U.S.C. 78f(b).
\13\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------
The proposed changes are designed to incentivize order flow
providers to post additional Priority Customer orders in EEM, GLD, IWM,
QQQ, and SPY options on the Exchange's Book. The proposed marketing fee
rate is reasonable in that although it results in a marketing fee that
is slightly higher than similar marketing fee programs, it is still in
the range of marketing fee programs on other competing exchanges which
charge lower marketing fees for Penny Pilot options classes versus non-
Penny Pilot options classes.\14\ The proposed rebate program is fair,
equitable, and not unreasonably discriminatory because it will apply
equally to all Market Makers that execute against Priority Customer
orders in EEM, GLD, IWM, QQQ, and SPY options posted on the Exchange's
Book. All similarly situated Market Makers that execute against
Priority Customer orders in EEM, GLD, IWM, QQQ, and SPY options that
are posted to the Exchange's Book are subject to the same marketing
fee, and access to the Exchange is offered on terms that are not
unfairly discriminatory. In addition, the proposal is equitable and not
unfairly discriminatory because, while only posted Priority Customer
order flow qualifies for the additional marketing fee, an increase in
Priority Customer orders posted to the Exchange's Book will bring
greater volume and liquidity as market participants compete to trade
with the additional Priority Customer order flow, which benefit all
market participants by providing more trading opportunities and tighter
spreads. Market participants want to trade with Priority Customer order
flow. To the extent the posting of Priority Customer orders on the
Exchange's Book is increased by the proposal, market participants will
increasingly compete for the opportunity to trade on the Exchange
including sending more orders and providing narrower and larger sized
quotations in the effort to trade with such Priority Customer order
flow. The resulting increased volume and liquidity will benefit non-
Market Makers that do not pay the proposed fee and do not qualify for
the marketing fee program at all, by providing more trading
opportunities and tighter spreads as market participants increasingly
compete by sending more orders and providing narrower and larger sized
quotations in the effort to trade with such Priority Customer order
flow. In addition, 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. The Exchange believes it
is equitable to assess marketing fees on Market Makers and not non-
Market Makers because the benefits of the marketing fee program flow to
PLMM and Directed LMMs that can use the marketing fee funds to attract
additional flow to the exchange, which benefits Market Makers. 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 as well.
---------------------------------------------------------------------------
\14\ See CBOE, Fee Schedule, p. 4; NYSE Amex Options Fee
Schedule, p. 6.
---------------------------------------------------------------------------
[[Page 76423]]
The Exchange believes that specifying that PRIME Order executions,
Liquidity Reference Pause, route timer, and Opening Process executions
are not subject to the proposed marketing fee is reasonable, equitable
and not unfairly discriminatory. The Exchange is seeking to encourage
the posting of additional Priority Customer orders to the Exchange's
Book and these four excluded functionalities involve RFR messages that
are related to encouraging additional trading interest from within the
market participants on the Exchange. The Exchange believes that
charging additional marketing fees from Market Makers in these
situations may discourage participation in responding to RFR messages.
The exclusion of PRIME Order executions, Liquidity Reference Pause,
route timer, and Opening Process executions from the additional
marketing fee will continue to encourage as many participants as
possible to respond; which the Exchange believes will help the RFR
message processes to continue to lead to greater opportunities for
price improvement for all orders subject to PRIME, the Liquidity
Refresh Pause, route timer, or Opening Process not just those entered
on behalf of customers. In addition, the Exchange designed the new fee
to encourage the posting of additional Priority Customer orders during
regular trading hours; which is exclusive of the Opening Process. Thus,
for these reasons, the Exchange believes that excluding PRIME Order
executions, Liquidity Reference Pause, route timer, and Opening Process
executions from the proposed marketing fees is reasonable, equitable
and not unfairly discriminatory.
The Exchange believes that its proposal to assess the additional
marketing fee for transaction fees in EEM, GLD, IWM, QQQ, and SPY
options, and not other options classes, is consistent with other
options markets that provide additional incentives to increase order
flow in high volume symbols including assessing different marketing
fees for Penny Pilot options classes as compared to non-Penny Pilot
options classes.\15\ The Exchange believes that establishing different
pricing for EEM, GLD, IWM, QQQ, and SPY options and Penny Pilot options
is reasonable, equitable, and not unfairly discriminatory because EEM,
GLD, IWM, QQQ, and SPY options are more liquid options as compared to
other Penny Pilot options and the Exchange wants to incentivize order
flow providers to send such orders to MIAX in order to increase trading
opportunities and overall volume executed on the Exchange. Finally, the
Exchange believes that the proposal to assess to an additional
marketing fee for standard transactions and not mini options is
reasonable because of the lack of significant volume and limited demand
in the industry to trade mini options.
---------------------------------------------------------------------------
\15\ See CBOE, Fee Schedule, p. 4; NYSE Amex Options Fee
Schedule, p. 6; 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'').
---------------------------------------------------------------------------
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 proposal is designed to
encourage an increase in Priority Customer orders in EEM, GLD, IWM,
QQQ, and SPY options posted to the Exchange's Book in order to bring
greater volume and liquidity, which benefit all market participants by
providing more trading opportunities and tighter spreads. To the extent
the posting of Priority Customer orders in EEM, GLD, IWM, QQQ, and SPY
options on the Exchange's Book is increased by the proposal, market
participants will increasingly compete for the opportunity to trade on
the Exchange including sending more orders and providing narrower and
larger sized quotations in the effort to trade with such Priority
Customer order flow. The resulting increased volume and liquidity will
benefit non-Market Makers that do not pay the proposed fee and do not
qualify for the marketing fee program at all, by providing more trading
opportunities and tighter spreads. To the extent that there is
additional competitive burden on market participants that are not
Priority Customers or Market Makers or trading in other symbols, the
Exchange believes that this is appropriate because the proposal 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. To the extent that
this purpose is achieved, all the Exchange's market participants should
benefit from the improved market liquidity. 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. 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 establishes a fee structure in a manner that
encourages market participants to direct their order flow, to provide
liquidity, and to attract additional transaction volume to the
Exchange.
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.\16\ 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.
---------------------------------------------------------------------------
\16\ 15 U.S.C. 78s(b)(3)(A)(ii).
---------------------------------------------------------------------------
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-2014-62 on the subject line.
Paper Comments
Send paper comments in triplicate to Brent J. Fields,
Secretary, Securities
[[Page 76424]]
and Exchange Commission, 100 F Street NE., Washington, DC 20549.
All submissions should refer to File Number SR-MIAX-2014-62. 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-2014-62 and should be
submitted on or before January 12, 2015.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\17\
---------------------------------------------------------------------------
\17\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-29817 Filed 12-19-14; 8:45 am]
BILLING CODE 8011-01-P