[Federal Register Volume 81, Number 169 (Wednesday, August 31, 2016)]
[Notices]
[Pages 60077-60080]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-20894]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-78681; File No. SR-MIAX-2016-28]
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 25, 2016.
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 August 11, 2016, 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/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 Section 1)b) of the Fee Schedule,
Marketing Fee, to add to the list of symbols for which the Exchange
assesses a $0.12 per contract Posted Liquidity Marketing Fee. In
addition to the current symbols listed in Section 1)b), the Exchange is
proposing to assess the Posted Liquidity Marketing Fee for contracts
executed in DIA, FB, GDX, SLV, USO, UVXY, and VXX. The Exchange also
proposes to assess the applicable per contract non-Market Maker
transaction fees for executions in these new symbols, as described more
fully below.
A Marketing Fee is assessed on certain transactions of all Market
Makers.\3\ Currently, Section 1) b) of the Fee Schedule provides that
the Exchange will assess:
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\3\ See MIAX Fee Schedule, Section 1)b), entitled ``Marketing
Fee'' for more detail regarding the Marketing Fee.
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(i) 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, Qualified Contingent Cross Order, PRIME
Participating Quote or Order, or a PRIME AOC Response in the PRIME
Auction, unless it executes against an unrelated order.
(ii) 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
when the contra-party to the execution is a Priority Customer and the
Priority Customer order was posted on the MIAX 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, Qualified Contingent Cross Order, or a PRIME
AOC Response or PRIME Participating Quote or Order in the PRIME
Auction. MIAX will also not 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.
This Posted Liquidity Marketing Fee is in addition to the current
Marketing Fee of $0.25 per contract for standard options overlying
these enumerated symbols that Market Makers execute in their assigned
class when the contra-party to the execution is a Priority Customer.\4\
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\4\ See Securities Exchange Act Release No. 73848 (December 16,
2014), 79 FR 76421 (December 22, 2014) (SR-MIAX-2014-62) (Notice of
Filing and Immediate Effectiveness of MIAX Posted Liquidity
Marketing Fee with respect to EEM, GLD, IWM, QQQ and SPY).
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Funds collected via the Marketing Fee, including the additional
$0.12 per contract Posted Liquidity Marketing Fee, are put into
``pools'' controlled by Primary Lead Market Makers (``PLMMs'') \5\ and
Lead Market Makers (``LMMs'').\6\ So for example, the $0.12 per
contract Posted Liquidity Marketing Fee goes into the broader Marketing
Fee pool for the Directed LMM or the PLMM
[[Page 60078]]
in EEM, GLD, IWM, QQQ or SPY, as applicable. The PLMM or LMM
controlling a certain pool of funds can then determine the Electronic
Exchange Member(s) (``EEM'') \7\ 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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\5\ The term ``Primary Lead Market Maker'' means a Lead Market
Maker appointed by the Exchange to act as the Primary Lead Market
Maker for the purpose of making markets in securities traded on the
Exchange. The Primary Lead Market Maker is vested with the rights
and responsibilities specified in Chapter VI of these Rules with
respect to Primary Lead Market Makers. See Exchange Rule 100.
\6\ The term ``Lead Market Maker'' means a Member registered
with the Exchange for the purpose of making markets in securities
traded on the Exchange and that is vested with the rights and
responsibilities specified in Chapter VI of these Rules with respect
to Lead Market Makers. When a Lead Market Maker is appointed to act
in the capacity of a Primary Lead Market Maker, the additional
rights and responsibilities of a Primary Lead Market Maker specified
in Chapter VI of these Rules will apply. See Exchange Rule 100.
\7\ The term ``Electronic Exchange Member'' means the holder of
a Trading Permit who is not a Market Maker. Electronic Exchange
Members are deemed ``members'' under the Act. See Exchange Rule 100.
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The purpose of the Posted Liquidity Marketing Fee is to further
encourage Members to post additional Priority Customer orders on the
Exchange's Book in the enumerated high volume symbols. Increased
Priority Customer orders on the Exchange's Book in these symbols
provides for greater liquidity, which benefits all market participants
on the Exchange. The Exchange now proposes to add to the following high
volume symbols to its Posted Liquidity Marketing Fee program: DIA, FB,
GDX, SLV, USO, UVXY, and VXX,\8\ as reflected in the proposed
amendments to Section (1)(b) and Footnote 15 of the Fee Schedule. The
practice of encouraging increased retail customer order flow in order
to attract professional liquidity providers (Market Makers) is, and has
been, commonly applied in the options markets. As such, marketing fee
programs \9\ and posting incentive programs \10\ are based on
attracting public customer order flow. Additional incentives intended
to increase order flow in high volume symbols are, and have been,
commonly offered in the options markets.\11\ The proposed Posted
Liquidity Marketing Fee with respect to high volume symbols DIA, FB,
GDX, SLV, USO, UVXY, and VXX similarly is intended 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. 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\ DIA, FB, GDX, SLV, USO, UVXY, and VXX had among the highest
MIAX volume by class as reported by the Options Clearing Corporation
(``OCC'') for June 2016. See http://www.optionsclearing.com/webapps/volbyclass-reports?reportClass=miax.
\9\ See MIAX Fee Schedule, Section (1)( b); Chicago Board
Options Exchange, Incorporated (``CBOE'') Fees Schedule, p. 4; NYSE
Amex Options Fee Schedule, p. 7.
\10\ See NYSE Arca, Inc. (``Arca'') Options Fees and Charges
Schedule, page 5.
\11\ See International Securities Exchange, LLC (``ISE'')
Schedule of Fees, p. 6 ; Arca Option Fees and Charges Schedule, p.
5.
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The Exchange also proposes to adopt the same additional $0.50 per
contract transaction fee for options overlying DIA, FB, GDX, SLV, USO,
UVXY, and VXX executed by non-MIAX Market Makers as currently applies
to options overlying EEM, GLD, IWM, QQQ, and SPY executed by non-MIAX
Market Makers as set forth in footnote 8, Section (1)(a)(ii) of the Fee
Schedule.\12\ The purpose of the proposed fee change is to assess the
transaction fee for non-MIAX Market Makers in the new symbols (DIA, FB,
GDX, SLV, USO, UVXY, and VXX) that are being added to the Exchange's
Posted Liquidity Marketing Fee, in the same manner as the current
symbols that are included in each fee.
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\12\ See Securities Exchange Act Release No. 73850 (December 16,
2014), 79 FR 76424 (December 22, 2014) (SR-MIAX-2014-63) (Notice of
Filing and Immediate Effectiveness of MIAX non-Market Maker
Transaction Fee with respect to EEM, GLD, IWM, QQQ and SPY).
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2. Statutory Basis
MIAX believes that its proposed rule change is consistent with
Section 6(b) of the Act \13\ in general, and in particular, furthers
the objectives of Section 6(b)(4) of the Act,\14\ in that it is an
equitable allocation of reasonable dues, fees, and other charges among
its Members and other persons using its facilities, and 6(b)(5) of the
Act,\15\ 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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\13\ 15 U.S.C. 78f(b).
\14\ 15 U.S.C. 78f(b)(4).
\15\ 15 U.S.C. 78f(b)(1) and (b)(5).
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The proposed changes are designed to incentivize order flow
providers to post additional Priority Customer orders in DIA, FB, GDX,
SLV, USO, UVXY, and VXX options on the Exchange's Book. The proposed
marketing fee rate is reasonable in that although it may result 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.\16\ The
proposed marketing fee is fair, equitable, and not unreasonably
discriminatory because it will apply equally to all Market Makers that
execute against Priority Customer orders in DIA, FB, GDX, SLV, USO,
UVXY, and VXX options posted on the Exchange's Book. All similarly
situated Market Makers that execute against Priority Customer orders in
DIA, FB, GDX, SLV, USO, UVXY, and VXX 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 benefits 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 their
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. An LMM could amass a greater pool of
funds to use to incentivize order flow providers to send order flow to
the Exchange. This increased order flow would benefit all market
participants on the Exchange as well.
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\16\ See CBOE Fees Schedule, p. 4; NYSE Amex Options Fee
Schedule, p. 7.
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[[Page 60079]]
The Exchange believes that its proposal to assess the additional
Posted Liquidity Marketing Fee for transactions in DIA, FB, GDX, SLV,
USO, UVXY, and VXX 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 options classes as
compared to non-Penny options classes.\17\ The Exchange believes that
establishing different pricing for DIA, FB, GDX, SLV, USO, UVXY, and
VXX Penny Pilot options is reasonable, equitable, and not unfairly
discriminatory because DIA, FB, GDX, SLV, USO, UVXY, and VXX options
are more liquid options \18\ as compared to other Penny Pilot options
and the Exchange wants to provide incentive for order flow providers to
send such orders to MIAX in order to increase trading opportunities and
overall volume executed on the Exchange.
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\17\ See CBOE Fees Schedule, p. 4; NYSE Amex Options Fee
Schedule, p. 7; ISE Schedule of Fees, p. 13; NYSE Arca Options Fees
and Charges Schedule, p. 5.
\18\ See supra note 8.
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Further, the Exchange's proposed transaction fees for non-MIAX
Market Makers in DIA, FB, GDX, SLV, USO, UVXY, and VXX are reasonable
in order to ensure that the net transaction fees for non-MIAX Market
Makers remain higher than Market Makers in a manner that is designed to
encourage market participants to become members and register as Market
Makers versus otherwise sending orders to the Exchange as a non-MIAX
Market Maker in order to avoid a higher transaction fee.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
result in any burden on competition that is 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 DIA,
FB, GDX, SLV, USO, UVXY, and VXX 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. An increase in the submission of Priority Customer orders in
DIA, FB, GDX, SLV, USO, UVXY, and VXX options on the Exchange's Book
should result in an increase in competition for the opportunity to
trade on the Exchange by, among other things, 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 encourage 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 on the Exchange. The Exchange believes that
all of the Exchange's market participants will 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,\19\ and Rule 19b-4(f)(2) \20\ thereunder.
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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\19\ 15 U.S.C. 78s(b)(3)(A)(ii).
\20\ 17 CFR 240.19b-4(f)(2).
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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-2016-28 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 20549-1090.
All submissions should refer to File Number SR-MIAX-2016-28. 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-
[[Page 60080]]
2016-28, and should be submitted on or before September 21, 2016.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\21\
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\21\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-20894 Filed 8-30-16; 8:45 am]
BILLING CODE 8011-01-P