Federal Register / Vol. 85, No. 231 / Tuesday, December 1, 2020 / Notices 77317 

14See SEC Release No. 34–82960 (Mar. 28, 2018), 

83 FR 14300, 14302 (Apr. 3, 2018) (SR–ICC–2018– 

002) (finding improvements to ICC’s end-of-day 

pricing process would improve ‘‘ICC’s risk 

management processes related to the end-of-day 

pricing process, including the calculation and 

collection of certain margin requirements’’ and 

would ‘‘promote the prompt and accurate clearance 

and settlement of the products cleared by ICC, and 

. . . enhance ICC’s ability to assure the 

safeguarding of securities and funds which are in 

the custody or control of ICC or for which it is 

responsible’’). 

15 15 U.S.C. 78q–1(b)(3)(F). 

16 15 U.S.C. 78q–1(b)(3)(G). 

17 15 U.S.C. 78q–1(b)(3)(G). 

18 15 U.S.C. 78q–1(b)(3)(H). 

19 15 U.S.C. 78q–1(b)(3)(H). In addition, the 

Commission believes that ICC’s proposed correction 

of a typographical error in Schedule 702 of the 

Rules with respect to single names will enhance the 

clarity and procedural fairness of ICC’s assessment 

approach with respect to each single name Missed 

Submission. 

20 17 CFR 240.17Ad–22(e)(6)(iv). 

21 17 CFR 240.17Ad–22(e)(6)(iv). 

22 15 U.S.C. 78q–1(b)(3)(F), 15 U.S.C. 78q– 

1(b)(3)(G) and 15 U.S.C. 78q–1(b)(3)(H). 

23 17 CFR 240.17Ad–22(e)(6)(iv). 

24 15 U.S.C. 78s(b)(2). 

25 In approving the proposed rule change, the 

Commission considered the proposal’s impact on 

efficiency, competition, and capital formation. 15 

U.S.C. 78c(f). 

26 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

and collection of margin requirements 

that will account for Index Swaptions as 

part of its overall risk-based margin 

system and risk management processes 

which rely, in part, on the end-of-day 

prices submitted by ICC’s CPs.14

Moreover, the Commission believes 

these risks, if mismanaged, could 

threaten ICC’s ability to operate and 

therefore its ability to clear and settle 

transactions and safeguard funds. As a 

result, the Commission believes that the 

proposed changes should promote ICC’s 

ability to assure the safeguarding of 

securities and funds which are in the 

custody or control of ICC or for which 

it is responsible. 

Therefore, the Commission believes 

that the proposed rule change is 

consistent with Section 17A(b)(3)(F) of 

the Act.15

B. Consistency With Section 

17A(b)(3)(G) of the Act 

Section 17A(b)(3)(G) of the Act 

requires, among other things, that ICC’s 

rules provide that CPs shall be 

appropriately disciplined for violation 

of any provision of ICC’s rules by fine 

or other fitting sanction.16 As noted 

above, the proposed rule change would 

amend current Rule 702(e) and 

Schedule 702 of the Rules to impose an 

assessment amount on any CP that 

violates the ICC Procedures for 

submitting end-of-day prices with 

respect to Index Swaption Contracts. 

The Commission believes that this 

aspect of the proposed rule change 

should be an appropriate form of 

discipline for CPs that violate such price 

submission procedures for any reason 

other than technical failures that meet 

the waiver requirements of Rule 

702(e)(ii)(2). The Commission also 

believes that without an appropriate 

sanction that would deter CPs from 

committing Index Swaption Missed 

Submission Violations, the accuracy, 

integrity and reliability of ICC’s end-ofday price discovery process could be 

impaired. Therefore, the Commission 

believes that the proposed rule change 

is consistent with Section 17A(b)(3)(G) 

of the Act.17

C. Consistency With Section 

17A(b)(3)(H) of the Act 

Section 17A(b)(3)(H) of the Act 18

requires, among other things, that ICC’s 

rules, in general, provide a fair 

procedure with respect to the 

disciplining of participants. As noted 

above, the proposed rule change would 

provide a generally applicable process 

for requesting and reviewing waivers of 

the summary assessment amount for 

Index Swaption Missed Submissions. 

This proposed process is consistent 

with the processes currently set forth in 

Rule 702(e) for requesting and reviewing 

waivers for single name Missed 

Submissions and index Missed 

Submissions, which is another 

indication of procedural fairness and 

consistency with respect to disciplining 

CPs for Missed Submissions across all 

three types of CDS Contracts after ICC’s 

proposed launch of clearing Index 

Swaptions. For these reasons, the 

Commission believes that the proposed 

rule change is consistent with Section 

17A(b)(3)(H) of the Act.19

D. Consistency With Rule 17Ad– 

22(e)(6)(iv) Under the Act 

Rule 17Ad–22(e)(6)(iv) 20 requires 

each covered clearing agency to 

establish, implement, maintain, and 

enforce written policies and procedures 

reasonably designed to cover its credit 

exposures to its participants by 

establishing a risk-based margin system 

that, at a minimum, uses reliable 

sources of timely price data and uses 

procedures and sound valuation models 

for addressing circumstances in which 

pricing data are not readily available or 

reliable. The Commission believes the 

proposed rule change is reasonably 

designed to deter the occurrence of 

Index Swaption Missed Submissions 

that would undermine ICC’s ability to 

maintain the integrity and effectiveness 

of its end-of-day price discovery process 

for the provision of reliable prices, 

which could, in turn, be used to 

enhance ICC’s ability to establish and 

maintain risk-based margin 

requirements which rely, in part, on the 

end-of-day prices provided by CPs. The 

Commission believes that the proposed 

rule change is therefore consistent with 

Rule 17Ad–22(e)(6)(iv).21

IV. Conclusion 

On the basis of the foregoing, the 

Commission finds that the proposed 

rule change is consistent with the 

requirements of the Act, and in 

particular, with the requirements of 

Section 17A(b)(3)(F) of the Act, Section 

17A(b)(3)(G) of the Act, Section 

17A(b)(3)(H) of the Act 22 and Rule 

17Ad–22(e)(6)(iv) thereunder.23

It is therefore ordered pursuant to 

Section 19(b)(2) of the Act 24 that the 

proposed rule change (SR–ICC–2020– 

011), be, and hereby is, approved.25

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.26

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2020–26404 Filed 11–30–20; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–90503; File No. SR–MRX– 

2020–18] 

Self-Regulatory Organizations; Nasdaq 

MRX, LLC; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change To Amend Its Pricing 

Schedule at Options 7 for Orders 

Entered Into the Exchange’s Price 

Improvement Mechanism 

November 24, 2020. 

Pursuant to 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 November 

13, 2020, Nasdaq MRX, LLC (‘‘MRX’’ or 

‘‘Exchange’’) filed with the Securities 

and Exchange Commission (‘‘SEC’’ or 

‘‘Commission’’) the proposed rule 

change as described in Items I and II 

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. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to amend its 

Pricing Schedule at Options 7 in 

connection with the pricing for orders 


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77318 Federal Register / Vol. 85, No. 231 / Tuesday, December 1, 2020 / Notices 

3PIM is a process by which an Electronic Access 

Member (‘‘EAM’’) can provide price improvement 

opportunities for a transaction wherein the EAM 

seeks to facilitate an order it represents as agent, 

and/or a transaction wherein the EAM solicited 

interest to execute against an order it represents as 

agent. See Options 3, Section 13. 

4A ‘‘Priority Customer’’ is a person or entity that 

is not a broker/dealer in securities, and does not 

place more than 390 orders in listed options per day 

on average during a calendar month for its own 

beneficial account(s), as defined in Nasdaq MRX 

Options 1, Section 1(a)(36). 

5Break-up rebates apply only to regular PIM 

orders of 500 or fewer contracts and to complex 

PIM orders where the largest leg is 500 or fewer 

contracts. See Options 7, Section 3.A. 

6Customer Total Consolidated Volume means the 

total volume cleared at The Options Clearing 

Corporation in the Customer range in equity and 

ETF options in that month. See Options 7, Section 

3, Table 3. 

7Specifically, the qualifying tier thresholds for 

the Exchange’s maker/taker pricing are based on 

Customer Total Consolidated Volume percentages. 

See Options 7, Section 3, Table 3. 

8An ‘‘Affiliated Member’’ is a Member that shares 

at least 75% common ownership with a particular 

Member as reflected on the Member’s Form BD, 

Schedule A. See Options 7, Section 1(c). 

9An ‘‘Affiliated Entity’’ is a relationship between 

an Appointed Market Maker and an Appointed OFP 

for purposes of qualifying for certain pricing 

specified in the Pricing Schedule. Market Makers 

and OFPs are required to send an email to the 

Exchange to appoint their counterpart, at least 3 

business days prior to the last day of the month to 

qualify for the next month. The Exchange will 

acknowledge receipt of the emails and specify the 

date the Affiliated Entity is eligible for applicable 

pricing, as specified in the Pricing Schedule. Each 

Affiliated Entity relationship will commence on the 

1st of a month and may not be terminated prior to 

the end of any month. An Affiliated Entity 

relationship will terminate after a one (1) year 

period, unless either party terminates earlier in 

writing by sending an email to the Exchange at least 

3 business days prior to the last day of the month 

to terminate for the next month. Affiliated Entity 

relationships must be renewed annually by each 

party sending an email to the Exchange. Affiliated 

Members may not qualify as a counterparty 

comprising an Affiliated Entity. Each Member may 

qualify for only one (1) Affiliated Entity 

relationship at any given time. See Options 7, 

Section 1(c). 

10See SR–MRX–2020–21(not yet published). 

11An ‘‘OFP’’ is any Member, other than a Market 

Maker, that submits orders, as agent or principal, 

to the Exchange. See Options 7, Section 1(c) 

entered into the Exchange’s Price 

Improvement Mechanism (‘‘PIM’’).3

The text of the proposed rule change 

is available on the Exchange’s website at 

https://listingcenter.nasdaq.com/ 

rulebook/mrx/rules, at the principal 

office of the Exchange, 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 purpose of the proposed rule 

change is to amend the Exchange’s 

Pricing Schedule at Options 7 in 

connection with the pricing for orders 

entered into the Exchange’s PIM. 

Today for both regular and complex 

PIM orders, the Exchange pays a PIM 

break-up rebate to an originating 

Priority Customer 4 PIM order that 

executes with a response (order or 

quote), other than the PIM contra-side 

order, of $0.40 per contract in Penny 

Symbols and $1.00 per contract in NonPenny Symbols.5 The Exchange also 

offers a higher PIM break-up rebate in 

note 3 of Options 7, Section 3.A for 

Members that meet certain cumulative 

volume requirements. In particular, 

Members that execute an average daily 

volume (‘‘ADV’’) of 10,000 PIM 

originating contracts or greater within a 

month are currently eligible to receive a 

rebate of (i) $0.45 per contract in Penny 

Symbols (in lieu of $0.40 per contract) 

for complex PIM orders only, and (ii) 

$1.05 per contract in Non-Penny 

Symbols (in lieu of $1.00 per contract) 

for both regular and complex PIM 

orders. 

The Exchange now proposes a 

number of changes to the break-up 

rebate structure. First, the Exchange 

proposes to lower the base rebates to 

$0.25 in Penny Symbols and $0.60 per 

contract in Non-Penny Symbols. 

Second, the Exchange proposes to 

replace the existing note 3 incentive 

described above with a new program. As 

amended, note 3 of Options 7, Section 

3.A would provide: 

Break-up Rebates are provided for an 

originating Priority Customer PIM Order 

that executes with any response (order 

or quote) other than the PIM contra-side 

order. Members that are not in an 

Affiliated Member or Affiliated Entity 

relationship and that execute 0.05% or 

greater of Customer Total Consolidated 

Volume in non-PIM Priority Customer 

contracts within a month will receive an 

additional rebate of: (i) $0.20 per 

contract in Penny Symbols for Complex 

PIM Orders only, (ii) $0.15 per contract 

in Penny Symbols for Regular PIM 

Orders only, and (iii) $0.45 per contract 

in Non-Penny Symbols for both Regular 

and Complex PIM Orders. Alternatively, 

Affiliated Members or Affiliated Entities 

will be eligible to receive the rebates in 

this note 3 without any additional 

volume requirements. The Exchange 

will provide the rebate to the OFP arm 

of an Affiliated Member relationship, or 

the Appointed OFP arm of an Affiliated 

Entity relationship. 

The new program replaces the current 

cumulative ADV threshold with a total 

industry percentage threshold, 

specifically a Customer Total 

Consolidated Volume 6 percentage 

threshold. The Exchange notes that the 

proposed percentage threshold of 0.05% 

or greater of Customer Total 

Consolidated Volume is comparable in 

terms of requisite volume to the existing 

ADV threshold of 10,000 or greater 

contracts. The Exchange is proposing to 

replace the current cumulative volume 

thresholds with total industry volume 

percentages to align with increasing 

Member activity on MRX over time. The 

Exchange notes that total industry 

percentage thresholds are established 

concepts within its Pricing Schedule.7

The Exchange is also modifying this 

qualification by requiring that Members 

execute 0.05% or greater of Customer 

Total Consolidated Volume in non-PIM 

Priority Customer contracts (instead of 

PIM originating contracts, as currently 

required). The Exchange believes this 

change will incentivize Members to 

bring a wider range of order flow for 

execution on the Exchange, which 

activity may result in tighter spreads 

making the Exchange a more attractive 

trading venue to the benefit of all 

market participants. As discussed in the 

following paragraph, this volume 

qualification only applies to Members 

that are not in affiliated relationships. 

The new program will also offer a 

new, alternative basis, to qualify for the 

higher break-up rebates in amended 

note 3. Specifically, as proposed, 

Members may enter into certain 

affiliated relationships (i.e., Affiliated 

Members 8 or Affiliated Entities 9) to 

qualify for the higher break-up rebates. 

The Exchange recently filed to permit 

Members to enter into Affiliated Entities 

in order to aggregate volume and qualify 

for certain pricing incentives, provided 

they are not Affiliated Members.10

Accordingly, the proposed changes are 

intended to enhance participation in the 

Exchange’s new Affiliated Entity 

program in order to encourage 

additional order flow to MRX. As 

described above, the rebates in note 3 

will be provided to the OFP 11 arm of 

the Affiliated Member relationship, or 


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12 15 U.S.C. 78 f(b). 

13 15 U.S.C. 78f(b)(4) and (5). 

14NetCoalition v. SEC, 615 F.3d 525, 539 (DC Cir. 

2010) (quoting Securities Exchange Act Release No. 

59039 (December 2, 2008), 73 FR 74770, 74782–83 

(December 9, 2008) (SR–NYSEArca–2006–21)). 

15Securities Exchange Act Release No. 51808 

(June 9, 2005), 70 FR 37496, 37499 (June 29, 2005) 

(‘‘Regulation NMS Adopting Release’’). 

16See MIAX Options (‘‘MIAX’’) Fee Schedule, 

Sections 1(a)(v) and (vi), which set forth MIAX 

Price Improvement Mechanism (‘‘PRIME’’) and 

MIAX Complex PRIME (‘‘cPRIME’’) pricing. MIAX 

PRIME and cPRIME Break-up Credits are $0.25 per 

contract (Penny Classes) and $0.60 per contract 

(Non-Penny Classes). See also Cboe Exchange, Inc. 

(‘‘Cboe’’) Fee Schedule, Break-Up Credits, which 

provides Break-Up Credits of $0.25 per contract 

(Penny Classes) and $0.60 per contract (Non-Penny 

Classes) to orders executed in Cboe’s Automated 

Improvement Mechanism. 

17Specifically, the qualifying tier thresholds for 

the Exchange’s maker/taker pricing are based on 

Customer Total Consolidated Volume percentages. 

See Options 7, Section 3, Table 3. 

the Appointed OFP in the Affiliated 

Entity relationship, without additional 

volume requirements. The Exchange 

believes that this will encourage 

Members who are not Affiliated 

Members to enter into Affiliated Entity 

relationships and submit any amount of 

Priority Customer PIM order flow in 

order to receive the note 3 rebates. The 

Exchange will also make clear in note 3 

that the 0.05% or greater Customer Total 

Consolidated Volume requirement only 

applies to Members that are not in an 

Affiliated Member or Affiliated Entity 

relationship. 

2. Statutory Basis 

The Exchange believes that its 

proposal is consistent with Section 6(b) 

of the Act,12 in general, and furthers the 

objectives of Sections 6(b)(4) and 6(b)(5) 

of the Act,13 in particular, in that it 

provides for the equitable allocation of 

reasonable dues, fees, and other charges 

among members and issuers and other 

persons using any facility, and is not 

designed to permit unfair 

discrimination between customers, 

issuers, brokers, or dealers. 

The Exchange’s proposed changes to 

its Pricing Schedule are reasonable in 

several respects. As a threshold matter, 

the Exchange is subject to significant 

competitive forces in the market for 

options securities transaction services 

that constrain its pricing determinations 

in that market. The fact that this market 

is competitive has long been recognized 

by the courts. In NetCoalition v. 

Securities and Exchange Commission, 

the D.C. Circuit stated as follows: ‘‘[n]o 

one disputes that competition for order 

flow is ‘fierce.’ . . . As the SEC 

explained, ‘[i]n the U.S. national market 

system, buyers and sellers of securities, 

and the broker-dealers that act as their 

order-routing agents, have a wide range 

of choices of where to route orders for 

execution’; [and] ‘no exchange can 

afford to take its market share 

percentages for granted’ because ‘no 

exchange possesses a monopoly, 

regulatory or otherwise, in the execution 

of order flow from broker 

dealers’. . . .’’ 14

The Commission and the courts have 

repeatedly expressed their preference 

for competition over regulatory 

intervention in determining prices, 

products, and services in the securities 

markets. In Regulation NMS, while 

adopting a series of steps to improve the 

current market model, the Commission 

highlighted the importance of market 

forces in determining prices and SRO 

revenues and, also, recognized that 

current regulation of the market system 

‘‘has been remarkably successful in 

promoting market competition in its 

broader forms that are most important to 

investors and listed companies.’’ 15

Numerous indicia demonstrate the 

competitive nature of this market. For 

example, clear substitutes to the 

Exchange exist in the market for options 

security transaction services. The 

Exchange is only one of sixteen options 

exchanges to which market participants 

may direct their order flow. Within this 

environment, market participants can 

freely and often do shift their order flow 

among the Exchange and competing 

venues in response to changes in their 

respective pricing schedules. As such, 

the proposal represents a reasonable 

attempt by the Exchange to increase its 

liquidity and market share relative to its 

competitors. 

In this context, the Exchange believes 

that its proposal for the PIM break-up 

rebates is reasonable. While the 

Exchange is proposing to lower the base 

break-up rebates to $0.25 in Penny 

Symbols and $0.60 per contract in NonPenny Symbols, the Exchange believes 

that market participants will continue to 

be incentivized to send Priority 

Customer order flow to PIM to receive 

the base break-up rebate. Furthermore, 

the Exchange notes the proposed breakup rebates remain in line with similar 

rebates provided at other exchanges.16

In addition, the Exchange believes 

that the amended note 3 incentive 

providing higher break-up rebates to 

qualifying Members, as described above, 

is reasonable in several respects. 

Regarding the change in the volume 

qualification to replace the current 

cumulative ADV threshold with a total 

industry percentage threshold, the 

Exchange notes that this is to align with 

increasing Member activity on MRX 

over time. The Exchange is proposing to 

base the volume qualification on a 

percentage of industry volume in 

recognition of the fact that the volume 

executed by a Member may rise or fall 

with industry volume. A percentage of 

industry volume calculation allows the 

note 3 qualification to be calibrated to 

current market volumes rather than 

requiring a static amount of volume 

regardless of market conditions. While 

the amount of volume required by the 

proposed qualification in note 3 may 

change in any given month due to 

increases or decreases in industry 

volume, the Exchange believes that the 

proposed threshold requirement is set at 

an appropriate level. As discussed 

above, the proposed threshold of 0.05% 

Customer Total Consolidated Volume is 

comparable to the existing ADV 

threshold of 10,000 contracts, so the 

Exchange anticipates minimal impact to 

Members as a result of replacing the 

current cumulative volume threshold 

with the new total industry percentage 

threshold. Furthermore, as noted above, 

total industry percentage thresholds are 

established concepts within its Pricing 

Schedule.17

The Exchange also believes that 

modifying this qualification in note 3 to 

require Members that are not in an 

Affiliated Member or Affiliated Entity 

relationship to execute 0.05% or greater 

of Customer Total Consolidated Volume 

in non-PIM Priority Customer contracts 

(instead of PIM originating contracts, as 

currently required) is reasonable 

because this change will incentivize 

Members to bring a wider range of order 

flow for execution on the Exchange. 

This could ultimately result in 

increased trading opportunities, tighter 

spreads and greater price discovery, 

making the Exchange a more attractive 

trading venue to the benefit of all 

market participants. 

Furthermore, the Exchange believes 

that the new, alternative basis, to qualify 

for the higher break-up rebates in 

amended note 3 is reasonable. In 

particular, the Exchange will permit 

Affiliated Members or Affiliated Entities 

to send any amount of Priority Customer 

PIM volume for purposes of qualifying 

for higher break-up rebates. The 

Exchange believes that this will attract 

additional Priority Customer PIM order 

flow to the Exchange and will fortify 

participation in the Exchange’s 

Affiliated Entity program, as noted 

above. Permitting Members to enter into 

an Affiliated Entity relationship for 

purposes of qualifying the OFP arm of 

an Affiliated Member relationship, or 

the Appointed OFP of an Affiliated 

Entity relationship, for the higher breakup rebates in amended note 3 may also 


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18 15 U.S.C. 78s(b)(3)(A)(ii). 

19 17 CFR 240.19b–4(f)(2). 

encourage the counterparties that 

comprise the Affiliated Members or 

Affiliated Entities to incentivize each 

other to attract and seek to execute more 

Priority Customer volume in PIM. In 

turn, market participants would benefit 

from the increased liquidity with which 

to interact and potentially tighter 

spreads on orders. Overall, incentivizing 

market participants with increased 

opportunities to earn higher break-up 

rebates may increase the quality of the 

liquidity available on MRX. 

The Exchange believes that the PIM 

break-up rebate changes, as proposed, 

are equitable and not unfairly 

discriminatory because the proposed 

rebates will apply equally to all Priority 

Customer PIM originating orders that 

execute against PIM responses. The 

Exchange’s proposal to permit Affiliated 

Members or Affiliated Entities to send 

any amount of Priority Customer PIM 

volume for purposes of qualifying the 

OFP arm or the Appointed OFP for the 

higher break-up rebates in note 3 is 

equitable and not unfairly 

discriminatory because all Members 

who are not Affiliated Members may 

elect to become an Affiliated Entity. 

While Priority Customer PIM orders will 

continue to receive the break-up rebate, 

as opposed to other market participant 

orders, the Exchange believes that this 

application of the rebate is equitable 

and not unfairly discriminatory because 

Priority Customer order flow enhances 

liquidity on the Exchange. This, in turn, 

provides more trading opportunities and 

attracts other market participants, thus 

facilitating tighter spreads, increased 

order flow and trading opportunities to 

the benefit of all market participants. 

Moreover, the Exchange has historically 

provided lower pricing or other 

incentives to Priority Customers in 

order to attract such order flow to MRX. 

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. 

In terms of intra-market competition, 

the Exchange does not believe that its 

proposal will place any category of 

Exchange market participant at a 

competitive disadvantage. The proposed 

changes to the Exchange’s PIM break-up 

rebate program are designed to 

incentivize market participants to direct 

PIM order flow to the Exchange. While 

PIM break-up rebates apply directly to 

Priority Customer orders, the Exchange 

believes that the proposed changes 

benefit all market participants by 

fortifying and encouraging additional 

liquidity and order flow to MRX. 

Furthermore, the Exchange believes that 

encouraging additional activity by 

Affiliated Members and Affiliated 

Entities in the manner discussed above 

likewise benefits all market participants 

as it contributes to the Exchange’s depth 

of book as well as to the top of book 

liquidity. To the extent that the proposal 

attracts more liquidity, this increased 

order flow would continue to make the 

Exchange a more competitive venue for 

order execution and all of the 

Exchange’s market participants should 

benefit from the improved market 

quality. Enhanced market quality and 

increased transaction volume that 

results from the anticipated increase in 

order flow directed to the Exchange 

would benefit all market participants 

and improve competition on the 

Exchange. 

In terms of inter-market competition, 

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, or rebate opportunities 

available at other venues to be more 

favorable. In such an environment, the 

Exchange must continually adjust its 

fees to remain competitive with other 

options exchanges. Because competitors 

are free to modify their own fees in 

response, and because market 

participants may readily adjust their 

order routing practices, the Exchange 

believes that the degree to which fee 

changes in this market may impose any 

burden on competition is extremely 

limited. 

Moreover, as noted above, price 

competition between exchanges is 

fierce, with liquidity and market share 

moving freely between exchanges in 

reaction to fee and rebate changes. In 

sum, if the changes proposed herein are 

unattractive to market participants, it is 

likely that the Exchange will lose 

market share as a result. Accordingly, 

the Exchange does not believe that the 

proposed changes will impair the ability 

of Members or competing order 

execution venues to maintain their 

competitive standing in the financial 

markets. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

No written comments were either 

solicited or 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 18 and Rule 

19b–4(f)(2) 19 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: (i) 

Necessary or appropriate in the public 

interest; (ii) for the protection of 

investors; or (iii) 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. 

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 rule-comments@

sec.gov. Please include File Number SR– 

MRX–2020–18 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–MRX–2020–18. 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 website (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 website viewing and 

printing in the Commission’s Public 


khammond on DSKJM1Z7X2PROD with NOTICES4
Federal Register / Vol. 85, No. 231 / Tuesday, December 1, 2020 / Notices 77321 

20 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3A ‘‘complex order’’ is any order involving the 

concurrent purchase and/or sale of two or more 

different options in the same underlying security 

(the ‘‘legs’’ or ‘‘components’’ of the complex order), 

for the same account, in a ratio that is equal to or 

greater than one-to-three (.333) and less than or 

equal to three-to-one (3.00) and for the purposes of 

executing a particular investment strategy. Minioptions may only be part of a complex order that 

includes other mini-options. Only those complex 

orders in the classes designated by the Exchange 

and communicated to Members via Regulatory 

Circular with no more than the applicable number 

of legs, as determined by the Exchange on a classby-class basis and communicated to Members via 

Regulatory Circular, are eligible for processing. See 

Exchange Rule 518(a)(5). 

4The ‘‘Simple Order Book’’ is the Exchange’s 

regular electronic book of orders and quotes. See 

Exchange Rule 518(a)(15). 

5The term ‘‘NBBO’’ means the national best bid 

or offer as calculated by the Exchange based on 

market information received by the Exchange from 

the appropriate Securities Information Processor 

(‘‘SIP’’). See Exchange Rule 518(a)(14). 

6See Securities Exchange Release No. 87440 

(November 1, 2019), 84 FR 60117 (November 7, 

2019) (SR–MIAX–2019–45). 

7See Securities Exchange Release No. 88691 

(April 20, 2020), 85 FR 23092 (April 24, 2020) (SR– 

MIAX–2020–07). 

8 15 U.S.C. 78f(b). 

9 15 U.S.C. 78f(b)(5). 

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. 

Persons submitting comments are 

cautioned that we do not redact or edit 

personal identifying information from 

comment submissions. You should 

submit only information that you wish 

to make available publicly. All 

submissions should refer to File 

Number SR–MRX–2020–18 and should 

be submitted on or before December 22, 

2020. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.20

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2020–26402 Filed 11–30–20; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–90507; File No. SR–MIAX– 

2020–36] 

Self-Regulatory Organizations; Miami 

International Securities Exchange, 

LLC; Notice of Filing and Immediate 

Effectiveness of a Proposed Rule 

Change To Delay Implementation of an 

Amendment to Rule 518, Complex 

Orders, To Permit Legging Through 

the Simple Market 

November 24, 2020. 

Pursuant to 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 November 

20, 2020, Miami International Securities 

Exchange, LLC (‘‘MIAX Options’’ or the 

‘‘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. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange is filing a proposal to 

delay implementation of the change to 

allow a component of a complex order 3

that legs into the Simple Order Book 4 to 

execute at a price that is outside the 

NBBO.5

The text of the proposed rule change 

is available on the Exchange’s website at 

http://www.miaxoptions.com/rulefilings/ at MIAX Options’ 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 

On October 22, 2019, the Exchange 

filed a proposed rule change to amend 

subsection (c)(2)(iii) of Exchange Rule 

518, Complex Orders, to remove the 

provision which provides that a 

component of a complex order that legs 

into the Simple Order Book may not 

execute at a price that is outside the 

NBBO.6 The proposed rule change 

indicated that the Exchange would 

announce the implementation date of 

the proposed rule change by Regulatory 

Circular to be published no later than 90 

days following the operative date of the 

proposed rule. The implementation date 

will be no later than 90 days following 

the issuance of the Regulatory Circular. 

The Exchange delayed the 

implementation of this functionality 

until the fourth quarter of 2020.7 The 

Exchange now proposes to delay the 

implementation of this functionality 

until the second quarter of 2021. 

The Exchange proposes this delay in 

order to allow the Exchange to reprioritize its software delivery and 

release schedule as a result of a shift in 

priorities resulting from the impact the 

coronavirus pandemic has had on 

Exchange operations. The Exchange will 

issue a Regulatory Circular notifying 

market participants at least 45 days 

prior to implementing this functionality. 

2. Statutory Basis 

The Exchange believes that its 

proposed rule change is consistent with 

Section 6(b) of the Act 8 in general, and 

furthers the objectives of Section 6(b)(5) 

of the Act 9 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 

regulating, clearing, settling, processing 

information with respect to, and 

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 by allowing the 

Exchange additional time to implement 

the proposed functionality. 

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 that is not 

necessary or appropriate in furtherance 

of the purposes of the Act. The 

Exchange’s proposal to delay the 

implementation of the proposed 

functionality does not impose an undue 

burden on competition. Delaying the 

implementation will simply allow the 

Exchange additional time to properly 

plan and implement the proposed 

functionality. 


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