Document ID: SEC-2015-1585-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Miami International Securities Exchange LLC
Posted Date: 2015-10-01T04:00Z

[Federal Register Volume 80, Number 190 (Thursday, October 1, 2015)]
[Notices]
[Pages 59204-59207]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-24883]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-75986; File No. SR-MIAX-2015-55]

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

September 25, 2015.
    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 September 21, 2015, 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, 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.
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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 the 
Substance of the Proposed Rule Change

    The Exchange is filing a proposal to amend the MIAX Options Fee 
Schedule (the ``Fee Schedule'') to modify the Exchange's connectivity 
fees.
    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 Fee Schedule regarding 
connectivity to the Exchange. Specifically, the Exchange proposes to 
(a) establish a new connectivity fee for a 10Gigabit (``Gb'') ultra-low 
latency (``ULL'') fiber connection; (b) establish a new connectivity 
testing and certification fee for the 10Gb ULL fiber connection; and 
(c) change the network connectivity fees so that the fees assessed to a 
subscriber during a trading month are pro-rated when a subscriber makes 
a change to the connectivity (by adding or deleting connections) with 
such pro-rated fees based on the number of trading days that the 
subscriber has been credentialed to utilize any of the Exchange 
application program interfaces (``APIs'') in the production environment 
through such connection, divided by the total number of trading days in 
such month multiplied by the applicable monthly rate.
    The Exchange currently offers various bandwidth alternatives for 
connectivity to the Exchange, including a 10Gb fiber connection and a 
1Gb fiber connection.\3\ The Exchange now proposes to provide a second 
10Gb fiber connection offering, which uses ultra-low latency 
switches.\4\ A switch is a type of network hardware that facilitates 
communication between a MIAX participant's application servers and the 
Exchange's application servers that service MIAX participants. Each of 
the Exchange's current connection offerings uses different switches, 
but the switches are of uniform type within each offering. As a 
consequence, all subscribers to a particular connection receive the 
same latency in terms of the capabilities of their switches. The 10Gb 
ULL offering uses a new ultra-low latency switch, which provides faster 
processing of messages sent to it in comparison to the current switch 
in use for other types of connectivity. As a consequence, MIAX 
participants that seek faster processing of their messages to the 
Exchange will now have the opportunity to subscribe to a faster and 
more efficient connection to the Exchange.\5\
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    \3\ See MIAX Fee Schedule, Section 5.
    \4\ The Term ``latency'' for these purposes is a measure of the 
time it takes for an order to enter into a switch and then exit for 
entry into the Exchange's system.
    \5\ The Exchange is not offering a low latency alternative for 
other bandwidth connections at this time, but may do so in the 
future.
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    The Exchange proposes a monthly network connectivity fee of $7,500 
for a 10Gb ULL connection for both members and non-members. The 
Exchange also proposes a network connectivity testing and certification 
fee of $4,000 for members and $4,200 for non-members, which is 
identical to the testing and certification fee for the current 10Gb 
fiber connection. It has been MIAX's experience that Member testing 
takes less time than non-Member testing because Members have more 
experience testing these systems with the Exchange; generally fewer 
questions and issues arise during the testing and certification 
process. Therefore, the Exchange believes that it is reasonable to 
charge non-Members more for testing and certification than Members.
    The network connectivity fee for the 10Gb ULL connectivity will be 
pro-rated based on the number of trading days that the member or non-
member has been credentialed to utilize any of the Exchange APIs in a 
production environment through the 10Gb ULL connection, divided by the 
total number of trading days in such month multiplied by the monthly 
rate. MIAX participants may also be credentialed to receive market data 
through the 10Gb ULL connection.
    The Exchange believes that the pricing of the 10Gb ULL connectivity 
is reflective of the value it will provide and the cost to the Exchange 
for the necessary hardware and other infrastructure and maintenance 
costs to the Exchange associated with this technology. The growth in 
the size of consolidated and proprietary data feeds has resulted in 
demand for faster processing of message traffic, and ultra-low latency 
switches meet this demand by decreasing the time in which individual 
messages are processed and market data is transmitted by these new 
switches. The Exchange's proposal will provide MIAX participants with 
the opportunity to connect to the Exchange via faster switch 
processing. The

[[Page 59205]]

Exchange notes that other exchanges have adopted low-latency 
connectivity alternatives for their participants. For example, NASDAQ 
OMX PHLX LLC (``PHLX''), NYSE Arca (``Arca''), NYSE MKT LLC (``Amex'') 
and the International Securities Exchange LLC (``ISE'') all offer a 
10Gb low latency Ethernet connectivity alternative to each of their 
participants, which provides a higher speed network to access their 
trading systems.\6\
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    \6\ See Securities Exchange Act Release Nos. 70174 (August 13, 
2013), 78 FR 50477 (August 19, 2013) (SR-PHLX-2013-82); 70886 
(November 15, 2013), 78 FR 69904 (November 21, 2013) (SR-NYSEMKT-
2013-92); 70982 (December 4, 2013), 78 FR 74197 (December 10, 2013) 
(SR-NYSEMKT -2013-97); 70887 (November 15, 2013), 78 FR 69897 
(November 21, 2013) (SR-NYSEARCA-2013-123); 70981 (December 4, 
2013), 78 FR 74203 (December 10, 2013) (SR-NYSEARCA-2013-131); 66525 
(March 7, 2012), 77 FR 14847 (March 13, 2012) (SR-ISE-2012-09). Both 
NYSE Arca and NYSE Amex filed one filing to provide for the new 
lower-latency 10Gb connection and one filing to establish the fees 
associated with the connection.
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    The Exchange also proposes to modify its network connectivity fees 
for all of its connections. Specifically, the Exchange proposes to pro-
rate both member and non-member network connectivity fees assessed when 
a MIAX participant makes a change to its connectivity by adding or 
deleting connections. The pro-rated fee will be based upon the number 
of trading days that the MIAX participant has been credentialed to 
utilize any of the Exchange APIs in a production environment through 
the applicable connection, divided by the total number of trading days 
in such month multiplied by the applicable monthly rate. The Exchange 
believes that providing members and non-members the ability to change 
connectivity between the Exchange's 1Gb, 10Gb and 10Gb ULL lines and be 
charged accordingly will provide each MIAX participant with greater 
flexibility and potential cost savings. MIAX participants may also be 
credentialed to receive market data through such connections.
    The Exchange proposes to implement the proposed changes to the Fee 
Schedule effective as of October 1, 2015.
2. Statutory Basis
    MIAX believes that its proposal to amend its fee schedule is 
consistent with Section 6(b) of the Act \7\ in general, and furthers 
the objectives of Section 6(b)(4) of the Act \8\ 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 or system which the Exchange operates or controls. The 
Exchange also believes the proposal furthers the objectives of Section 
6(b)(5) of the Act \9\ in that it is designed to promote just and 
equitable principles of trade, to remove impediments to and perfect the 
mechanism of a free and open market and a national market system, and, 
in general to protect investors and the public interest and is not 
designed to permit unfair discrimination between customer, issuers, 
brokers and dealers.
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    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(4).
    \9\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that its proposal is consistent with Section 
6(b)(4) of the Act because the fees assessed for 10Gb ULL connectivity 
fee allow the Exchange to cover the costs associated with the purchase 
of new, state-of-the-art switches for this new offering. The switches 
are priced at a premium, the cost of which the Exchange must bear. The 
Exchange believes that the proposal to establish fees for the 10Gb ULL 
connectivity is fair, equitable and not unreasonably discriminatory 
because the fees are assessed equally among all users of the 
connection.
    The Exchange believes that the proposed Member and non-Member 
Network Connectivity Testing and Certification Fees are consistent with 
Section 6(b)(4) of the Act because they are identical to the 
connectivity and certification fees currently assessed for 10Gb fiber 
connectivity. The Exchange notes that it will incur the same costs 
associated with setting up a subscriber with either 10Gb or 10Gb ULL 
fiber connectivity. The network connectivity testing and certification 
fee of $4,000 for members and $4,200 for non-Members, which is 
identical to the testing and certification fee for the current 10Gb 
fiber connection is reasonable and not unfairly discriminatory. As 
stated above, it has been MIAX's experience that Member testing takes 
less time than non-Member testing because Members have more experience 
testing these systems with the Exchange; generally fewer questions and 
issues arise during the testing and certification process. Therefore, 
the Exchange believes that it is reasonable to charge non-Members more 
for testing and certification than Members.
    As discussed above, PHLX and ISE each offer different connections 
with respect to latency, and NYSE Arca, Inc. and NYSE Amex both offer 
similar connectivity alternatives. Despite this, all of them charge a 
higher fee than the Exchange proposes to charge for the same 10Gb 
lower-latency connection. For these reasons, the Exchange believes the 
proposed fees for 10Gb ULL fiber connectivity to the Exchange are 
reasonable and not unfairly discriminatory.
    The Exchange also believes the proposed 10Gb ULL fiber connectivity 
testing and certification fees and connectivity fees are equitably 
allocated in that all Members and non-Members that voluntarily select 
this service option will be charged the same amount to cover the 
hardware, installation, testing and connection costs to maintain and 
manage the enhanced connection. All Members and non-Members may 
subscribe to this voluntary connectivity, and the Exchange is not 
eliminating any existing connectivity. Accordingly, a Member or non-
Member may elect not to subscribe to the 10Gb ULL fiber connection and 
retain the connection to which it is currently subscribed.
    The Exchange also believes that the proposed change to pro-rate the 
fees in the event of a connectivity change during any trading month is 
fair and reasonable because such change will allow all MIAX 
participants to subscribe to the most effective connectivity according 
to their trading and data feed requirements and as a result will only 
be assessed fees for the connectivity for which they were credentialed 
to utilize any of the Exchange APIs in a production environment through 
the applicable connection during any trading month. MIAX participants 
may also be credentialed to receive market data through such 
connections. The Exchange's proposal to pro-rate the fees in the event 
of a connectivity change during any trading month is also equitable 
since it applies equally to all subscribers to the Exchange's 
connectivity.
    The Exchange also believes the proposals further the objectives of 
Section 6(b)(5) of the Act \10\ in that each proposal is designed to 
promote just and equitable principles of trade, to remove impediments 
to and perfect the mechanism of a free and open market and a national 
market system, and, in general to protect investors and the public 
interest and is not designed to permit unfair discrimination between 
customer, issuers, brokers and dealers.
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    \10\ 15 U.S.C. 78f(b)(5).
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    The 10Gb ULL fiber connectivity assists MIAX participants in making 
their network connectivity more efficient by reducing the time messages 
take to reach the Exchange once sent from their server and to be 
received by the MIAX participant from the Exchange. Speed and 
efficiency are important drivers of the U.S. securities markets and the 
Exchange is offering a

[[Page 59206]]

connectivity solution that promotes speed and efficiency by providing 
enhanced technology that is available to all MIAX participants. The 
Exchange believes the enhanced 10Gb ULL connection will remove 
impediments to and perfect the mechanism of a free and open market and 
a national market system because the Exchange will provide faster 
switching technology to market participants, which will improve the 
speed and efficiency of processing messages arriving at the market from 
MIAX participants' servers, and will provide a more efficient means for 
the Exchange's processing of executions and reports.
    The Exchange also believes the proposed connectivity testing and 
certification fees and connectivity fees for the 10Gb ULL fiber 
connection are consistent with Section 6(b)(5) of the Act because all 
MIAX participants have the opportunity to subscribe to the 10Gb ULL 
connection. There is no differentiation among MIAX participants with 
regard to the fees charged for these services.
    The Exchange also believes that the Exchange's pro-rating of 
network connectivity fees in the event of a connectivity change is 
consistent with Section 6(b)(5) of the Act since all subscribers will 
receive the benefit of being charged only for the connectivity through 
which it was credentialed to utilize the Exchange APIs in a production 
environment through the applicable connection during any trading month. 
MIAX participants may also be credentialed to receive market data 
through such connections.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule changes will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. On the contrary, the 
Exchange believes that the proposed changes should increase both 
intermarket and intramarket competition. Specifically, the Exchange 
believes that the changes will promote competition by offering MIAX 
participants more flexibility in their choice of Exchange connectivity, 
and that the availability of the lower-latency connectivity in turn 
will enhance their trading operations and ultimately bring greater 
speed and efficiency to trading in the marketplace.
    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. The Exchange believes that the 
proposed changes reflect this competitive environment because they 
increase the types of connections available to MIAX participants and 
should result in potential cost savings to a market participant. Given 
the robust competition for a higher speed network among options 
markets, many of which offer the same products, enhancing the type of 
connectivity available on MIAX is consistent with the goals of the Act.

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

    Because the foregoing proposed rule change does not: (i) 
Significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days after the date of the filing, or such 
shorter time as the Commission may designate, it has become effective 
pursuant to 19(b)(3)(A) of the Act \11\ and Rule 19b-4(f)(6) \12\ 
thereunder.
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    \11\ 15 U.S.C. 78s(b)(3)(A).
    \12\ 17 CFR 240.19b-4(f)(6). As required under Rule 19b-
4(f)(6)(iii), the Exchange provided the Commission with written 
notice of its intent to file the proposed rule change, along with a 
brief description and the text of the proposed rule change, at least 
five business days prior to the date of filing of the proposed rule 
change, or such shorter time as designated by the Commission.
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    A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the 
Act \13\ normally does not become operative for 30 days after the date 
of its filing. However, Rule 19b-4(f)(6)(iii) \14\ permits the 
Commission to designate a shorter time if such action is consistent 
with the protection of investors and the public interest. The Exchange 
has asked the Commission to waive the 30-day operative delay so that 
the filing can be operative on October 1, 2015. The Exchange states 
that the proposal would provide MIAX participants an opportunity to 
enhance the efficiency of their trading through the 10Gb ULL 
connectivity, and the Commission notes that other exchanges offer 
similar upgraded, low-latency hardware. The Commission believes that 
waiving the 30-day operative delay is consistent with the protection of 
investors and the public interest. Therefore, the Commission hereby 
waives the operative delay and designates the proposed rule change 
operative on October 1, 2015.\15\
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    \13\ 17 CFR 240.19b-4(f)(6).
    \14\ 17 CFR 240.19b-4(f)(6)(iii).
    \15\ For purposes only of waiving the 30-day operative delay, 
the Commission has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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    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.

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 No. SR-MIAX-2015-55 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 20549-1090.

All submissions should refer to File No. SR-MIAX-2015-55. 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.,

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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 No. SR-MIAX-2015-55, and should be 
submitted on or before October 22, 2015.

For the Commission, by the Division of Trading and Markets, pursuant 
to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-24883 Filed 9-30-15; 8:45 am]
BILLING CODE 8011-01-P