Document ID: SEC-2016-1919-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Miami International Securities Exchange, LLC
Posted Date: 2016-11-01T04:00Z

[Federal Register Volume 81, Number 211 (Tuesday, November 1, 2016)]
[Notices]
[Pages 75885-75894]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-26297]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-79157; File No. SR-MIAX-2016-38]

Self-Regulatory Organizations; Miami International Securities 
Exchange LLC; Notice of Filing and Immediate Effectiveness of a 
Proposed Rule Change To Amend Its Fee Schedule To Adopt Fees and 
Credits for Transactions Involving Complex Orders

October 26, 2016.
    Pursuant to the provisions of Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4

[[Page 75886]]

thereunder,\2\ notice is hereby given that on October 21, 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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend its Fee Schedule to adopt fees and 
credits for transactions involving complex orders. The Securities and 
Exchange Commission (``SEC'' or ``Commission'') recently approved 
Exchange rules \3\ that authorize and govern the trading of complex 
orders \4\ on MIAX utilizing the MIAX System.\5\ Accordingly, the 
Exchange is proposing to adopt certain fees and credits that will apply 
to Exchange Members \6\ for transactions involving complex orders. All 
complex order fees will be charged on a per contract per side basis.
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    \3\ See Securities Exchange Act Release No. 79072 (October 7, 
2016), 81 FR 71131 (October 14, 2016) (SR-MIAX-2016-26).
    \4\ A ``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. A complex order can also be a ``stock-option'' order, 
which is an order to buy or sell a stated number of units of an 
underlying security coupled with the purchase or sale of options 
contract(s) on the opposite side of the market, subject to certain 
contingencies set forth in the proposed rules governing complex 
orders. See Securities Exchange Act Release No. 78620 (August 18, 
2016), 81 FR 58770 (August 25, 2016) (SR-MIAX-2016-26).
    \5\ The term ``System'' means the automated trading system used 
by the Exchange for the trading of securities. See Exchange Rule 
100.
    \6\ The term ``Member'' means an individual or organization 
approved to exercise the trading rights associated with a Trading 
Permit. Members are deemed ``members'' under the Exchange Act. See 
Exchange Rule 100.
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Market Maker Transaction Fees
    Section (1)(a)(i) of the Fee Schedule sets forth the Exchange's 
Market Maker Sliding Scale for Market Maker Transaction Fees (the 
``Sliding Scale''). The Sliding Scale assesses a per contract 
transaction fee on a Market Maker \7\ for the execution of simple 
orders and quotes (collectively, ``simple orders''). The amount of the 
transaction fee is based on the Market Maker's percentage of total 
national market maker volume in an options class that trades on the 
Exchange during a particular calendar month. The Sliding Scale applies 
to all Market Makers for transactions in all products (except for mini-
options, for which there are separate product fees), with fees 
established for option classes in the Penny Pilot Program \8\ (``penny 
option classes'') and separate fees for non-penny option classes.
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    \7\ The term ``Market Makers'' refers to Lead Market Makers 
(``LMMs''), Primary Lead Market Makers (``PLMMs''), and Registered 
Market Makers (``RMMs'') collectively. See Exchange Rule 100. A 
Directed Order Lead Market Maker (``DLMM'') and Directed Primary 
Lead Market Maker (``DPLMM'') is a party to a transaction being 
allocated to the LMM or PLMM and is the result of an order that has 
been directed to the LMM or PLMM. See Fee Schedule note 2.
    \8\ See Securities Exchange Act Release No. 78080 (June 15, 
2016), 81 FR 40377 (June 21, 2016) (SR-MIAX-2016-16).
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    The Exchange is proposing to use the same Sliding Scale structure 
to establish per contract transaction fees for executions in complex 
orders. More specifically, the Exchange is proposing to use the same 
tiers and percentage thresholds that it uses for the execution of 
simple orders for the execution of complex orders and quotes 
(collectively, ``complex orders''), and will aggregate the volume 
executed by Market Makers in both simple orders and complex orders for 
purposes of determining the applicable tier and corresponding per 
contract transaction fee amount.\9\
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    \9\ The calculation of the volume thresholds does not include 
QCC Orders, PRIME AOC Responses, and PRIME Participating Quotes or 
Orders. For a discussion of these exclusions, see Securities 
Exchange Act Release No. 78299 (July 12, 2016), 81 FR 46734 (July 
18, 2016) (SR-MIAX-2016-20).
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    Since the Exchange will aggregate the number of contracts executed 
in both simple orders and complex orders in its calculation of the 
Market Maker's relevant tier, Market Maker transaction fees in both 
simple orders and complex orders will be incrementally reduced once the 
Market Maker reaches a higher tier. The Exchange believes that 
aggregating simple and complex volume will provide a direct benefit to 
Market Makers, because it provides Market Makers with enhanced 
potential to lower their incremental transaction fees on the Exchange. 
Furthermore, it should encourage Market Makers to provide complex order 
liquidity on the Exchange because their executed volume in complex 
orders will enhance their ability to achieve discounted transaction 
fees in simple orders.
    Since the Exchange provides discounted transaction fees for Members 
and their qualified Affiliates that achieve certain volume thresholds 
through the submission of Priority Customer \10\ orders under the 
Exchange's Priority Customer Rebate Program (``PCRP''),\11\ the Sliding 
Scale contains two tables: One setting forth the transaction fees 
applicable to Members and their Affiliates \12\ that are in PCRP volume 
Tier 3 or higher; and the other setting forth the transaction fees 
applicable to Members and their Affiliates that are not in PCRP volume

[[Page 75887]]

Tier 3 or higher. The Exchange is proposing to maintain that same, two 
table construct, and establish a per contract transaction fee for 
complex orders per tier level. Although the proposed per transaction 
fees for complex orders will be included in both tables (i.e., one for 
Members and their Affiliates that are in PCRP volume Tier 3 or higher 
and the other for Members and their Affiliates that are not in PCRP 
volume Tier 3 or higher), the per contract fees for complex orders will 
be the same in each table. Furthermore, the Exchange is not proposing a 
different maker and taker fee in each tier for complex orders. Instead, 
the Exchange will assess one per contract fee for complex orders in 
each tier for penny option classes, and one per contract fee for 
complex orders in non-penny option classes, with a surcharge for 
removing liquidity, as described below. The Exchange believes that, 
with respect to transaction fees for complex orders, it is appropriate 
to distinguish between (and thus have different transaction fee amounts 
for) penny option classes and non-penny option classes, as is the case 
with the current Fee Schedule for transaction fees for simple orders. 
Accordingly, the Exchange is proposing separate per contract 
transaction fees for penny option classes and non-penny option classes 
for complex orders. Specifically, the Exchange would charge a Market 
Maker a per contract fee in penny option classes of: $0.25 in Tier 1, 
$0.19 in Tier 2, $0.12 in Tier 3, $0.07 in Tier 4, $0.05 in Tier 5. The 
Exchange would charge a Market Maker a per contract fee in non-penny 
option classes of: $0.29 in Tier 1, $0.23 in Tier 2, $0.16 in Tier 3, 
$0.11 in Tier 4, $0.09 in Tier 5.
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    \10\ The term ``Priority Customer'' means a person or entity 
that (i) is not a broker or dealer in securities, and (ii) does not 
place more than 390 orders in listed options per day on average 
during a calendar month for its own beneficial account(s). A 
``Priority Customer Order'' means an order for the account of a 
Priority Customer. See Exchange Rule 100.
    \11\ Under the PCRP, MIAX credits each Member the per contract 
amount resulting from each Priority Customer order transmitted by 
that Member which is executed electronically on the Exchange in all 
multiply-listed option classes (excluding QCC Orders, mini-options, 
Priority Customer-to-Priority Customer Orders, PRIME AOC Responses, 
PRIME Contra-side Orders, PRIME Orders for which both the Agency and 
Contra-side Order are Priority Customers, and executions related to 
contracts that are routed to one or more exchanges in connection 
with the Options Order Protection and Locked/Crossed Market Plan 
referenced in MIAX Rule 1400), provided the Member meets certain 
percentage thresholds in a month as described in the Priority 
Customer Rebate Program table. See Fee Schedule, Section 
(1)(a)(iii).
    \12\ For purposes of the MIAX Options Fee Schedule, the term 
``Affiliate'' means an affiliate of a Member of at least 75% common 
ownership between the firms as reflected on each firm's Form BD, 
Schedule A (``Affiliate''). See Fee Schedule note 1.
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    The proposed Market Maker transaction fees are generally in line 
with the Market Maker transaction fees charged by other exchanges for 
executing complex orders.\13\ The Exchange believes that the proposed 
transaction fees for complex orders are reasonable, and have been set 
at an initial level that is favorable to Market Makers and are designed 
to encourage Market Makers to provide complex order liquidity on the 
Exchange.
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    \13\ See, e.g., CBOE Fees Schedule Options Transaction Fees; 
NASDAQ PHLX LLC (``Phlx'') Pricing Schedule, Section II; 
International Securities Exchange LLC (``ISE'') Schedule of Fees, 
Section II.
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    For simple orders, the Sliding Scale assesses a per contract 
transaction fee, which is based upon whether the Market Maker is a 
``maker'' or a ``taker.'' \14\ As an incentive for Market Makers to 
provide liquidity on the Exchange, the Exchange's ``maker'' fees are 
lower than the ``taker'' fees. The Exchange is not proposing to 
distinguish between a ``maker'' and a ``taker'' for complex order 
executions as it does in the traditional construct for simple orders. 
Rather, the Exchange proposes to adopt a surcharge of $0.08 per 
executed contract for executions in complex orders assessed to a Market 
Maker and all other market participants except Priority Customers when 
it removes liquidity by trading against a Priority Customer order that 
is resting on the Strategy Book.\15\ Market Maker complex orders 
resting on the Strategy Book before executing against a Priority 
Customer order would not be assessed the $0.08 per contract surcharge, 
as reflected in the below tables. The Exchange believes that this $0.08 
surcharge is a reasonable alternative to the maker/taker pricing 
structure in place for simple orders, and is substantially similar in 
structure and amount to a CBOE surcharge of the same type.\16\
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    \14\ See Securities Exchange Act Release No. 78519 (August 9, 
2016), 81 FR 54162 (August 15, 2016) (SR-MIAX-2016-21).
    \15\ The ``Strategy Book'' is the Exchange's electronic book of 
complex orders and complex quotes. See Exchange Rule 518(a)(17).
    \16\ See CBOE Fees Schedule, Complex Taker Fee, and note 35. The 
Exchange notes that, although its base fee is slightly higher (with 
a similar complex fee approach), the Exchange believes that this is 
fair and equitable because the Exchange offers technology with 
unique risk mitigation features not available elsewhere, such as the 
Implied Away Best Bid or Offer (``ixABBO'') Price Protection. See 
Exchange Rule 518.05(d).
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    All fees assessed under the Sliding Scale will be assessed on a per 
contract/per side basis. The fees will apply to complex orders when 
those complex orders are matched against other complex orders on the 
Strategy Book, and will also apply, to the complex side of the trade, 
when they leg into and match against simple orders in the simple order 
book. Additionally, for the avoidance of doubt, when legging into the 
simple order book, the contracts that were entered directly in to the 
simple order book will be subject to all standard transaction fees, 
marketing fees, rebates, and credits, as set forth in the Exchange's 
Fee Schedule and as applicable to simple orders.
    The revised Market Maker Sliding Scale tables proposed by the 
Exchange will be as follows (with new text in italics):

                              Members and Their Affiliates \17\ In Priority Customer Rebate Program Volume Tier 3 or Higher
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                           Simple                                 Complex
                                                                          ------------------------------------------------------------------------------
                                                                            Per contract fee    Per contract fee                          Per contract
                                                                            for penny classes     for non-penny                          surcharge for
                                                                          --------------------       classes                    Per         removing
                                                                                              --------------------    Per    contract  liquidity against
                                         Tier      Percentage thresholds                                           contract   fee for      a resting
                                                                                                                    fee for    non-    priority customer
                                                                            Maker *    Taker                         penny     penny    complex order on
                                                                                                Maker *    Taker    classes   classes  the strategy book
                                                                                                                                       for penny and non-
                                                                                                                                         penny classes
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                              1  0.00%-0.075%............     $0.21     $0.23     $0.25     $0.30     $0.25     $0.29              $0.08
                                              2  Above 0.075%-0.60%......     $0.15     $0.22     $0.19     $0.27     $0.19     $0.23              $0.08
All MIAX Market Makers...............         3  Above 0.60%-1.00%.......     $0.08     $0.15     $0.12     $0.20     $0.12     $0.16              $0.08
                                              4  Above 1.00%-1.50%.......     $0.04     $0.06     $0.08     $0.12     $0.07     $0.11              $0.08
                                              5  Above 1.50%.............     $0.02     $0.04     $0.06     $0.10     $0.05     $0.09              $0.08
--------------------------------------------------------------------------------------------------------------------------------------------------------

     
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    \17\ For purposes of the MIAX Options Fee Schedule, the term 
``Affiliate'' means an affiliate of a Member of at least 75% common 
ownership between the firms as reflected on each firm's Form BD, 
Schedule A (``Affiliate'').

[[Page 75888]]

                              Members and Their Affiliates Not In Priority Customer Rebate Program Volume Tier 3 or Higher
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                         Simple                                  Complex
                                                                        --------------------------------------------------------------------------------
                                                                          Per contract fee    Per contract fee                           Per contract
                                                                          for penny classes     for non-penny                           surcharge for
                                                                        --------------------       classes          Per       Per     removing liquidity
                                        Tier     Percentage thresholds                      -------------------- contract  contract   against a resting
                                                                                                                  fee for   fee for   priority customer
                                                                                                                   penny     non-      complex order on
                                                                          Maker *    Taker    Maker *    Taker    classes    penny    the strategy book
                                                                                                                            classes   for penny and non-
                                                                                                                                        penny classes
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                             1  0.00%-0.075%...........     $0.23     $0.25     $0.27     $0.32     $0.25     $0.29                $0.08
                                             2  Above 0.075%-0.60%.....     $0.17     $0.24     $0.21     $0.29     $0.19     $0.23                $0.08
All MIAX Market Makers..............         3  Above 0.60%-1.00%......     $0.10     $0.17     $0.14     $0.22     $0.12     $0.16                $0.08
                                             4  Above 1.00%-1.50%......     $0.06     $0.08     $0.10     $0.14     $0.07     $0.11                $0.08
                                             5  Above 1.50%............     $0.04     $0.06     $0.08     $0.12     $0.05     $0.09                $0.08
--------------------------------------------------------------------------------------------------------------------------------------------------------

Other Market Participant Transaction Fees
    Section (1)(a)(ii) of the Fee Schedule sets forth, in a single 
table format, transaction fees for Other Market Participants, including 
Priority Customers, Public Customers \18\ that are not Priority 
Customers, non-MIAX Market Makers, non-Member Broker-Dealers, and Firms 
\19\ (the ``Fee Table''). The Fee Table currently assesses on 
participants that are non-MIAX Market Makers a per contract transaction 
fee for simple order executions. The Fee Table applies to the listed 
participants for transactions in all products (except mini-options, for 
which there are separate product fees), with fees established for penny 
option classes and separate fees for non-penny option classes.
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    \18\ The term ``Public Customer'' means a person that is not a 
broker or dealer in securities. See Exchange Rule 100.
    \19\ A ``Firm'' fee is assessed on a MIAX Electronic Exchange 
Member ``EEM'' that enters an order that is executed for an account 
identified by the EEM for clearing in the Options Clearing 
Corporation (``OCC'') ``Firm'' range. See Fee Schedule, Section 
(1)(a)(ii).
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    The Exchange is proposing to use the same Fee Table structure to 
establish per contract transaction fees for executions in complex 
orders. The Exchange is also proposing to assess the same per-contract 
transaction fee amounts that are set forth in the Fee Table for 
execution of simple orders for the execution of complex orders. Thus, 
as proposed, a participant would be charged the same fee per contract 
for executing a complex order as it would for executing a simple order 
for the same option class for the same participant type. Accordingly, 
the Exchange would charge a Member: $0.00 per contract per complex 
order executed in both penny option classes and non-penny option 
classes for a Priority Customer; $0.47 per contract per complex order 
executed in a penny option class for a Public Customer that is not a 
Priority Customer, for a non-MIAX Market Maker, and for a non-Member 
Broker-Dealer (and $0.75 per contract per complex order executed in a 
non-penny option class for each of those participant types); $0.45 per 
contract per complex order executed in a penny option class for a Firm 
(and $0.75 per contract per complex order executed in a non-penny 
option class for a Firm). The Exchange believes that the proposed fees 
for complex orders are reasonable and appropriate because they apply to 
all similarly situated participants equally. The Exchange's proposal to 
assess the same fees for simple and complex orders to other market 
participants (listed in Section (1)(a)(ii) of the Fee Schedule) for 
complex orders is reasonable and not unfairly discriminatory because 
the fees apply equally to all similarly situated market participants. 
Just as with the current fees assessed for simple orders in Section 
(1)(a)(ii), the PCRP tier discounts will not apply to these 
participants because Market Makers, who qualify for the discounts, have 
quoting and other obligations that these other market participants do 
not have, and the Exchange believes that the PCRP tier discounts are 
thus equitable and not unfairly discriminatory.\20\
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    \20\ The Commission notes that the Exchange currently offers a 
discount to the standard option transaction fees for simple orders 
for Members that qualify for the PCRP volume Tier 3 or higher in 
Section (1)(a)(ii). The Exchange is not proposing to offer that 
discount to the standard option transaction fees for complex orders. 
See footnotes 4, 5, and 8-13 in Section (1)(a)(ii) of the Fee 
Schedule.
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    The Exchange also proposes to assess the same $0.08 per contract 
surcharge that it assesses on Market Makers for removing liquidity 
against a resting Priority Customer on the Strategy Book on other 
market participants, specifically: (i) Public Customers that are not 
Priority Customers; (ii) non-MIAX Market Makers; (iii) non-Member 
Broker-Dealers; and (iv) Firms. The purpose of this proposed surcharge 
is to encourage Members to add liquidity to the Strategy Book, and to 
recoup costs associated with the execution of complex orders on the 
Strategy Book. Moreover, the Exchange believes that the proposed fee 
structure may also narrow the MIAX Bid and Offer (``MBBO'') on the 
Strategy Book because assessing the surcharge only on participants 
removing liquidity effectively subsidizes, and thus encourages, the 
posting of liquidity. The Exchange believes that this fee structure 
will also provide MIAX Market Makers with greater incentive to either 
match or improve upon the best price displayed on the Strategy Book, 
all to the benefit of investors and the public in the form of improved 
execution prices.
    The revised Fee Table proposed by the Exchange will be as follows:

[[Page 75889]]

                                    Other Market Participant Transaction Fees
----------------------------------------------------------------------------------------------------------------
                                   Standard Options      Per Contract       Mini Options
                                    Transaction Fee     Surcharge for      Transaction Fee
                                    for Simple and         Removing         (per executed
                                    Complex Orders    Liquidity Against       contract)        These fees will
      Types of Other Market          (per executed        a Resting     -------------------- apply to all option
          Participants                 contract)      Priority Customer                       classes  traded on
                                 --------------------  Complex Order on              Non-            MIAX
                                              Non-    the Strategy Book    Penny     Penny
                                    Penny     Penny   for Penny and Non-  Classes   Classes
                                   Classes   Classes    Penny  Classes
----------------------------------------------------------------------------------------------------------------
Priority Customer...............     $0.00     $0.00              $0.00    $0.000    $0.000  There is no fee
                                                                                              assessed to an
                                                                                              Electronic
                                                                                              Exchange Member
                                                                                              (an ``EEM,'' as
                                                                                              defined in MIAX
                                                                                              Rule 100) that
                                                                                              enters an order
                                                                                              that is executed
                                                                                              for the account of
                                                                                              a Priority
                                                                                              Customer.
Public Customer that is Not a        $0.47     $0.75              $0.08     $0.05     $0.07  This fee is
 Priority Customer.                                                                           assessed to an EEM
                                                                                              that enters an
                                                                                              order that is
                                                                                              executed for the
                                                                                              account of a
                                                                                              Public Customer
                                                                                              \21\ that does not
                                                                                              meet the criteria
                                                                                              for designation as
                                                                                              a Priority
                                                                                              Customer. This fee
                                                                                              will also be
                                                                                              charged to an EEM
                                                                                              that enters an
                                                                                              order for the
                                                                                              account of a
                                                                                              Public Customer
                                                                                              that has elected
                                                                                              to be treated as a
                                                                                              Voluntary
                                                                                              Professional.\22\
Non-MIAX Market Maker...........     $0.47     $0.75              $0.08    $0.045     $0.07  This fee is
                                                                                              assessed to an EEM
                                                                                              that enters an
                                                                                              order that is
                                                                                              executed for the
                                                                                              account of a non-
                                                                                              MIAX market maker.
                                                                                              A non-MIAX market
                                                                                              maker is a market
                                                                                              maker registered
                                                                                              as such on another
                                                                                              options exchange.
Non-Member Broker-Dealer........     $0.47     $0.75              $0.08    $0.045     $0.07  This fee is
                                                                                              assessed to an EEM
                                                                                              that enters an
                                                                                              order that (i) is
                                                                                              executed for the
                                                                                              account of a non-
                                                                                              Member Broker-
                                                                                              Dealer, and (ii)
                                                                                              is identified by
                                                                                              the EEM for
                                                                                              clearing in the
                                                                                              Options Clearing
                                                                                              Corporation
                                                                                              (``OCC'')
                                                                                              ``customer''
                                                                                              range. A non-
                                                                                              Member Broker-
                                                                                              Dealer is a broker-
                                                                                              dealer that is not
                                                                                              a member of the
                                                                                              OCC, and that is
                                                                                              not registered as
                                                                                              a Member at MIAX
                                                                                              or another options
                                                                                              exchange.
Firm............................     $0.45     $0.75              $0.08     $0.04     $0.07  This fee is
                                                                                              assessed to an EEM
                                                                                              that enters an
                                                                                              order that is
                                                                                              executed for an
                                                                                              account identified
                                                                                              by the EEM for
                                                                                              clearing in the
                                                                                              OCC ``Firm''
                                                                                              range.
----------------------------------------------------------------------------------------------------------------

     
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    \21\ The term ``Public Customer'' means a person that is not a 
broker or dealer in securities. See Exchange Rule 100.
    \22\ The term ``Voluntary Professional'' means any Public 
Customer that elects, in writing, to be treated in the same manner 
as a broker or dealer in securities for purposes of Rule 514, as 
well as the Exchange's schedule of fees. See Exchange Rule 100.
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    The Exchange currently offers a discount to the standard option 
transaction fees for simple orders for Members that qualify for the 
PCRP volume Tier 3 or higher. The Exchange is not proposing to offer 
that discount to the standard option transaction fees for complex 
orders. Thus, the Exchange is proposing to amend Footnotes 4, 5, and 8-
13 in Section (1)(a)(ii) of the Fee Schedule to explicitly state that 
these discounts only apply for standard options in simple order 
executions. Additionally, pursuant to Footnote 8 of the Fee Schedule, 
the Exchange currently assesses Members a $0.48 per contract 
transaction fee (and a $0.50 per contract transaction fee for non-MIAX 
market makers) for transactions that occur on or after September 1, 
2016 and extending through October 31, 2016 in options overlying EEM, 
GLD, IWM, QQQ, and SPY. The Exchange is not proposing to apply that 
transaction fee to complex orders. Thus, the Exchange is proposing to 
further amend Footnote 8 in Section (1)(a)(ii) of the Fee Schedule to 
explicitly state that such fees only apply for standard options in 
simple order executions.
Priority Customer Rebate Program
    The Exchange also proposes to amend the PCRP contained in Section 
1)a)iii) of the Fee Schedule by adopting per contract credits for 
complex orders. Currently, with respect to simple orders, the Exchange 
credits each Member the per contract amount set forth in the table 
below resulting from each Priority Customer order transmitted by that 
Member which is executed electronically on the Exchange in all 
multiply-listed option classes (excluding QCC Orders, mini-options, 
Priority Customer-to-Priority Customer Orders, PRIME AOC Responses, 
PRIME Contra-side Orders, PRIME Orders for which both the Agency and 
Contra-side Order are Priority Customers, and executions related to 
contracts that are routed to one or more exchanges in connection with 
the Options Order Protection and Locked/Crossed Market Plan referenced 
in MIAX Rule 1400), provided the Member meets certain volume thresholds 
in a month as described below. The volume thresholds are calculated 
based on the customer average daily volume over the course of the 
month. Volume is recorded for and credits are delivered to the Member 
that submits the order to the Exchange. The Exchange proposes to extend 
this per contract credit to executions in complex orders.
    The Exchange proposes to apply the same volume tier thresholds in 
the PCRP for complex orders that it

[[Page 75890]]

currently applies to simple orders. In the same manner that the 
Exchange proposes to aggregate simple order volume and complex order 
volume of Market Makers towards the volume tiers in the Sliding Scale, 
the Exchange proposes to aggregate contract volume for both simple and 
complex orders in the calculation of the PCRP volume tier threshold 
applicable to each transaction, and to effect the same exclusions for 
transactions involving both simple and complex orders, as applicable, 
with respect to the PCRP volume tier calculation.\23\
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    \23\ MIAX excludes contracts executed as part of QCC Orders, 
mini-options, Priority Customer-to-Priority Customer Orders, PRIME 
Agency Orders, PRIME AOC Responses, PRIME Contra-side Orders, PRIME 
Orders for which both the Agency and Contra-side Order are Priority 
Customers, and executions related to contracts that are routed to 
one or more exchanges in connection with the Options Order 
Protection and Locked/Crossed Market Plan referenced in MIAX Rule 
1400 from this calculation. See Fee Schedule Section 1)a)iii.
---------------------------------------------------------------------------

    The Exchange proposes to distinguish the amount of the proposed per 
contract credits in the PCRP for complex orders from the credits 
currently available to simple orders, except for Tier 1 transactions, 
for which there would be a $0.00 per contract credit for both simple 
and complex orders. The proposed per contract credits for complex 
orders would be: $0.21 for PCRP Tier 2 transactions; $0.24 for PCRP 
Tier 3 transactions, and $0.25 for PCRP Tier 4 transactions, 
respectively. The proposed per contract credits for complex orders are 
greater than the current per contract credits for simple orders. As a 
new entrant in the complex order marketplace, the Exchange believes 
that it is appropriate to establish aggressive per contract credits in 
order to attract order flow in this new segment of the Exchange.
    For simple orders, the Exchange currently assesses different PCRP 
credit amounts for executions in the MIAX Select Symbols \24\ versus 
non-MIAX Select Symbols. The PCRP table in the Fee Schedule will 
reflect these different credits in simple orders for MIAX Select 
Symbols versus non-MIAX Select Symbols. The Exchange, however, does not 
believe it is necessary at this time to distinguish the amount of the 
proposed PCRP credits for executions in the MIAX Select Symbols versus 
non-MIAX Select Symbols for complex orders, and thus the per contract 
credit for complex orders will be the same for transactions involving 
complex orders in both MIAX Select Symbols and non-MIAX Select Symbols.
---------------------------------------------------------------------------

    \24\ The term ``MIAX Select Symbols'' means options overlying 
AA, AAL, AAPL, AIG, AMAT, AMD, AMZN, BA, BABA, BBRY, BIDU, BP, C, 
CAT, CBS, CELG, CLF, CVX, DAL, EBAY, EEM, FB, FCX, GE, GILD, GLD, 
GM, GOOGL, GPRO, HAL, HTZ, INTC, IWM, JCP, JNJ, JPM, KMI, KO, MO, 
MRK, NFLX, NOK, NQ, ORCL, PBR, PFE, PG, QCOM, QQQ, RIG, S, SPY, 
SUNE, T, TSLA, USO, VALE, VXX, WBA, WFC, WMB, WY, X, XHB, XLE, XLF, 
XLP, XOM, XOP and YHOO. See Fee Schedule note 14.
---------------------------------------------------------------------------

    The Exchange is not proposing to establish at this time a price 
improvement mechanism for complex orders, such as the Exchange has for 
simple orders, known as MIAX PRIME.\25\ Thus, the Exchange proposes to 
amend the narrative portion of Section 1)a)iii) to state that, for each 
Priority Customer order submitted into a PRIME auction as a PRIME 
agency simple order, MIAX shall credit each Member at the separate per 
contract rate for PRIME agency simple orders; however, no rebates will 
be paid if the PRIME agency simple order executes against a contra-side 
order which is also a Priority Customer. The purpose of this proposed 
amendment is to explicitly state that these provisions apply only to 
simple orders, and not to complex orders.
---------------------------------------------------------------------------

    \25\ The MIAX Price Improvement Mechanism (``PRIME'') is a 
process by which a Member may electronically submit for execution 
(``Auction'') an order it represents as agent (``Agency Order'') 
against principal interest. See Exchange Rule 515A.
---------------------------------------------------------------------------

    The Exchange currently credits each MIAX ``Qualifying Member'' \26\ 
$0.03 per contract (except exclusions) \27\ resulting from each 
Priority Customer order that falls within the PCRP volume Tier 1, as 
set forth below. The Exchange believes that it is appropriate to extend 
this credit to complex orders. Thus, the Exchange proposes to amend the 
narrative portion of Section 1)a)iii) to state that such credits will 
apply to both simple and complex order executions.
---------------------------------------------------------------------------

    \26\ A ``Qualifying Member'' is a Member or its Affiliate that 
qualifies for the Professional Rebate Program and achieves a volume 
increase in excess of 0.065% for Professional orders transmitted by 
that Member which are executed electronically on the Exchange in all 
multiply-listed option classes for the account(s) of a Professional 
and which qualify for the Professional Rebate Program during a 
particular month relative to the applicable Baseline Percentage (as 
defined under the Professional Rebate Program).
    \27\ MIAX excludes contracts executed as part of QCC Orders, 
mini-options, Priority Customer-to-Priority Customer Orders, PRIME 
Agency Orders, PRIME AOC Responses, PRIME Contra-side Orders, PRIME 
Orders for which both the Agency and Contra-side Order are Priority 
Customers, and executions related to contracts that are routed to 
one or more exchanges in connection with the Options Order 
Protection and Locked/Crossed Market Plan referenced in MIAX Rule 
1400 from this credit. See Fee Schedule Section 1)a)iii.
---------------------------------------------------------------------------

    The revised PCRP table proposed by the Exchange will be as follows:

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                            Percentage  thresholds of      Per contract    Per contract
                                                           national customer  volume in     credit for      credit for     Per contract    Per contract
                    Origin                       Tier        multiply- listed options      simple orders   simple orders    credit for      credit for
                                                             classes listed on  MIAX        in non-MIAX   in MIAX select   prime agency   complex orders
                                                                    (monthly)             select symbols      symbols          order
--------------------------------------------------------------------------------------------------------------------------------------------------------
Priority Customer............................         1  0.00%-0.50%....................           $0.00           $0.00           $0.10           $0.00
                                                      2  Above 0.50%-1.20%..............            0.10            0.10            0.10            0.21
                                                      3  Above 1.20%-1.75%..............            0.15            0.20            0.10            0.24
                                                      4  Above 1.75%....................            0.21            0.24            0.10            0.25
--------------------------------------------------------------------------------------------------------------------------------------------------------

Professional Rebate Program
    Under the Professional Rebate Program (``PRP''), the Exchange 
credits each Member the per contract amount listed in the table below 
resulting from any contracts executed from an order submitted by a 
Member for the account(s) of a (i) Public Customer that is not a 
Priority Customer; (ii) non-MIAX Market Maker; (iii) non-Member Broker-
Dealer; or (iv) Firm (for purposes of the Professional Rebate Program, 
``Professionals''). The Exchange proposes to amend Section 1)a)iv) of 
the Fee Schedule to include per contract credits for complex orders in 
the Exchange's PRP.
    The PRP affords a per contract credit based upon the increase in 
the total volume submitted by a Member and executed for the account(s) 
of a Professional on MIAX (not including Excluded Contracts) \28\ 
during a

[[Page 75891]]

particular month as a percentage of the total volume reported by the 
Options Clearing Corporation (``OCC'') in MIAX classes during the same 
month (the ``Current Percentage''), less the total volume submitted by 
that Member and executed for the account(s) of a Professional on MIAX 
(not including Excluded Contracts), during the fourth quarter of 2015 
as a percentage of the total volume reported by OCC in MIAX classes 
during the fourth quarter of 2015 (the ``Baseline Percentage''). The 
Exchange proposes to use the same volume tier thresholds for complex 
orders that it currently uses for simple orders, and proposes the 
following per contract credits to Public Customers that are not a 
Priority Customer, or are a non-MIAX market maker, non-Member broker-
dealer, or Firm: (i) $0.03 Per contract for contracts executed in Tier 
1; (ii) $0.05 per contract for contracts executed in Tier 2; and (iii) 
$0.07 per contract for contracts executed in Tier 3. The current 
credits for contracts that are part of simple orders will remain 
unchanged, and the amended table in Section 1(a)iv) will include 
separate columns, one indicating the credits applicable to contracts 
from simple orders, and the other indicating the credits applicable to 
contracts from complex orders. Additionally, proposed amended Section 
1)a)iv) will include a clarifying statement that volume for 
transactions in both simple and complex orders will be aggregated to 
determine the appropriate volume tier threshold applicable to each 
transaction.
---------------------------------------------------------------------------

    \28\ Excluded Contracts are any contracts executed as mini-
options, Non-Priority Customer-to-Non-Priority Customer Orders, QCC 
Orders, PRIME Orders, PRIME AOC Responses, PRIME Contra-side Orders, 
and executions related to contracts that are routed to one or more 
exchanges in connection with the Options Order Protection and 
Locked/Crossed Market Plan referenced in MIAX Rule 1400.
---------------------------------------------------------------------------

    The revised PRP table proposed by the Exchange will be as follows:

                                           Professional Rebate Program
----------------------------------------------------------------------------------------------------------------
                                                        Percentage thresholds of
                                                           volume increase in      Per contract    Per contract
                                                         multiply-listed options  credit (except  credit (except
 Type of market participants eligible        Tier           (except excluded         excluded        excluded
              for rebate                                   contracts) for the     contracts) for  contracts) for
                                                         current month compared    simple orders  complex orders
                                                         to fourth quarter 2015
----------------------------------------------------------------------------------------------------------------
Public Customer that is Not a Priority               1  Above 0.00%-0.005%......           $0.10           $0.03
 Customer.
Non-MIAX Market Maker.................               2  Above 0.005%-0.020%.....            0.15            0.05
Non-Member Broker-Dealer Firm.........               3  Above 0.020%............            0.20            0.07
----------------------------------------------------------------------------------------------------------------

Marketing Fee
    Section 1)b) of the Fee Schedule describes Marketing Fees assessed 
on 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. The current Marketing Fees are: (i) 
$0.70 Per contract for transactions in standard option classes ($0.070 
per contract for transactions in mini options) that are not penny 
option classes; and (ii) $0.25 per contract for transactions in 
standard option classes ($0.025 per contract for transactions in mini 
options) that are penny option classes. The Exchange proposes to amend 
Section 1)b) to state that the Marketing Fee applies to contracts in 
simple and complex order executions, and that the Marketing Fee in 
complex order executions will be assessed per contract whether the 
transaction executes in the Strategy Book, a Complex Auction, or by 
Legging into the simple order book (i.e., regardless of how the complex 
contracts are executed).\29\
---------------------------------------------------------------------------

    \29\ For a discussion of these types of executions, see 
Securities Exchange Act Release No. 78620 (August 18, 2016), 81 FR 
58770 (August 25, 2016) (SR-MIAX-2016-26).
---------------------------------------------------------------------------

    The Exchange is not proposing to extend the Posted Liquidity 
Marketing Fee to contracts executed from complex orders. Currently, for 
transactions that occur on or after September 1, 2016 and extending 
through October 31, 2016, MIAX assesses 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 order book at the time of the execution. The 
Exchange proposes to amend Section 1)b) to state that the Posted 
Liquidity Marketing Fee applies only to contracts from simple order 
executions. The revised Marketing Fee table proposed by the Exchange 
will be as follows:

------------------------------------------------------------------------
 Amount of marketing fee assessed              Option classes
------------------------------------------------------------------------
$0.70 (per contract)..............  Simple and complex order t
                                     [T]ransactions in Standard Option
                                     Classes that are not in the Penny
                                     Pilot Program.
$0.25 \30\ (per contract).........  Simple and complex order t
                                     [T]ransactions in Standard Option
                                     Classes that are in the Penny Pilot
                                     Program (a List of those Standard
                                     Option Classes in the Penny Pilot
                                     Program is available on the MIAX
                                     Website).
$0.070 (per contract).............  Simple and complex order t
                                     [T]ransactions in Mini Options
                                     where the corresponding Standard
                                     Option is not in the Penny Pilot
                                     Program.
$0.025 (per contract).............  Simple and complex order t
                                     [T]ransactions in Mini Options
                                     where the corresponding Standard
                                     Option is in the Penny Pilot
                                     Program (a List of those Standard
                                     Option Classes in the Penny Pilot
                                     Program is available on the MIAX
                                     Website).
------------------------------------------------------------------------

    All other aspects of the Marketing Fee program of the Exchange will 
remain unchanged. The proposed rule changes are scheduled to become 
operative October 24, 2016.
---------------------------------------------------------------------------

    \30\ Extending through October 31, 2016, the Exchange will 
assess an additional $0.12 per contract Posted Liquidity Marketing 
Fee to all Market Makers for any simple orders in 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.

---------------------------------------------------------------------------

[[Page 75892]]

2. Statutory Basis
    MIAX believes that its proposed rule change is consistent with 
Section 6(b) of the Act \31\ in general, and in particular, furthers 
the objectives of Section 6(b)(4) of the Act,\32\ in that it is an 
equitable allocation of reasonable fees and other charges among 
Exchange members and issuers and other persons using its facilities, 
and 6(b)(5) of the Act,\33\ 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.
---------------------------------------------------------------------------

    \31\ 15 U.S.C. 78f(b).
    \32\ 15 U.S.C. 78f(b)(4).
    \33\ 15 U.S.C. 78f(b)(1) and (b)(5).
---------------------------------------------------------------------------

    The proposed fee structure is equitable and not unfairly 
discriminatory because all similarly situated market participants are 
subject to the same fee and rebate structure for complex order 
transactions, and access to the Exchange is offered on terms that are 
not unfairly discriminatory. The inclusion of the number of contracts 
executed in both simple and complex orders in the calculation of the 
Market Maker's monthly percentage threshold in Section 1)a)i) is 
reasonable, equitable and not unfairly discriminatory because it 
provides a direct and equal fee benefit to Market Makers that trade 
complex orders. All complex order volume executed will count towards 
the monthly percentage thresholds required to receive the enumerated 
discounts in both simple and complex transactions, thus benefiting all 
Market Makers equally. Furthermore, it should encourage Market Makers 
to provide liquidity in complex orders on the Exchange because their 
executed volume in complex orders will enhance their ability to achieve 
discounted per contract transaction fees in transactions involving both 
simple and complex orders, thus functioning to remove impediments to 
and perfect the mechanisms of a free and open market and a national 
market system.
    The Exchange's proposal to assess per contract transaction fees to 
MIAX Market Makers for complex orders in penny option classes and non-
penny option classes is reasonable and not unfairly discriminatory 
because it enhances the ability of Market Makers to achieve volume 
levels that qualify them for fees in the higher tiers, and equally 
rewards all Market Makers that achieve the tiers that include even 
further discounted per contract transaction fees. The amount of the 
fees in the tiers for complex orders are very similar to the amount of 
the fees in the tiers for simple orders, therefore the Exchange 
believes that fee amounts are reasonable and appropriate.
    The Exchange's proposal to assess the same fees for simple and 
complex orders to other market participants (listed in Section 1)a)ii 
of the Fee Schedule) for complex orders is reasonable and not unfairly 
discriminatory because the fees apply equally to all similarly situated 
market participants. Just as with the current fees assessed for simple 
orders in Section 1)a)ii, the PCRP tier discounts will not apply to 
these participants because Market Makers, who qualify for the 
discounts, have quoting and other obligations that the listed other 
market participants do not have and the Exchange believes that the PCRP 
tier discounts are thus equitable and not unfairly discriminatory.\34\
---------------------------------------------------------------------------

    \34\ See supra note 20.
---------------------------------------------------------------------------

    The Exchange believes that it is reasonable and not unfairly 
discriminatory to offer discounted fees to Market Makers in simple 
orders if they fall within PCRP volume Tier 3 or higher, while not 
discounting the per contract fees for complex orders regardless of 
their PCRP Tier level. While the Exchange has the ability to justify 
and determine the level of incentives with respect to simple orders, 
the Exchange believes it would be premature to offer additional 
incentives and rewards to Market Makers above what the Exchange is 
offering until Market Makers actually use the new and value-added 
complex order functionality. The Exchange will better be able to 
determine if additional incentives or rewards are warranted, and if so 
at what level, once Market Makers begin using the new functionality and 
have established a performance baseline for complex orders.
    The Exchange's proposal to offer certain credits for complex order 
transactions under the PCRP and the PRP and to include contracts 
executed from both simple and complex transactions in the calculation 
of the various percentage volume thresholds is intended to encourage 
participants to submit more orders to the Exchange, thus enhancing 
liquidity and removing impediments to and perfecting the mechanisms of 
a free and open market and a national market system.
    The Exchange notes that the proposed per contract credits for the 
PCRP are higher for complex orders than they are for simple orders, and 
the per contract credits for the PRP are lower for complex orders than 
they are for simple orders. The Exchange believes that this is 
equitable and reasonable because the nature of the two rebate programs 
(PCRP and PRP) is fundamentally different in structure and purpose.
    On the one hand, the PCRP rewards executed Priority Customer volume 
from ``contract-one.'' \35\ This structure is designed to enable the 
Exchange to compete with the multitude of Priority Customer payment 
programs, such as maker-taker rebates and payment for order flow 
programs that are established in the industry. By offering an 
aggressive incentive for Priority Customer volume beginning on day one, 
the Exchange believes it can best compete for order flow in complex 
orders as soon as they become available on the Exchange.
---------------------------------------------------------------------------

    \35\ The Priority Customer rebate payment will be calculated 
from the first executed contract at the applicable threshold per 
contract credit with rebate payments made at the highest achieved 
volume tier for each contract traded in that month. See Fee 
Schedule, Section 1)a)iii.
---------------------------------------------------------------------------

    On the other hand, the PRP credit is aimed at Professional volume 
executed on the Exchange on an incremental basis. The PRP credit is 
based on a volume increase above and beyond an established baseline. 
Because the trading of complex orders on the Exchange represents new 
functionality and new volume to the Exchange, all complex order volume 
executed on the Exchange is by its nature incremental. As such, the 
Exchange believes it is not necessary to provide rewards at the same 
level to Professional complex orders that it provides for Professional 
simple orders.
    The Exchange's proposal to establish and assess a surcharge of 
$0.08 per contract for Market Makers and other participants for 
removing liquidity by trading against a Priority Customer order on the 
Strategy Book is consistent with Section 6(b)(4) of the Act \36\ 
because it applies equally to all participants that remove Priority 
Customer liquidity from the Strategy Book, and does not apply to 
participants whose orders or quotes resting on the Strategy Book are 
executed against Priority Customer complex orders on the Strategy Book. 
This incentive for providing resting liquidity applies to all 
participants. Assessing the surcharge to market participants who take 
liquidity from Priority Customers is reasonable and not unfairly 
discriminatory because it will provide MIAX Market Makers with equal 
surcharges for removing

[[Page 75893]]

liquidity, and no surcharge for resting liquidity. As stated above, 
this is substantially similar to a surcharge assessed on another 
exchange.\37\ The Exchange notes that, although its base fee is 
slightly higher (with a similar complex fee approach), the Exchange 
believes that this is fair and equitable because the Exchange offers 
technology with unique risk mitigation features not available 
elsewhere, such as the Implied Away Best Bid or Offer (``ixABBO'') 
Price Protection. See Exchange Rule 518.05(d).
---------------------------------------------------------------------------

    \36\ 15 U.S.C. 78f(b)(4).
    \37\ See supra note 16.
---------------------------------------------------------------------------

    The Exchange's proposal to assess the $.08 surcharge is also 
consistent with Section 6(b)(5) of the Act \38\ because it perfects the 
mechanisms of a free and open market and a national market system and 
protect investors and the public interest by encouraging participants 
to provide liquidity on the Strategy Book, which the Exchange believes 
is an important competitive tool that directly or indirectly can 
provide better prices for investors. The proposed fee structure may 
narrow the MIAX Bid and Offer (``MBBO'') because not charging the $0.08 
surcharge to participants with resting liquidity on the Strategy Book 
effectively subsidizes, and thus encourages, the posting of liquidity 
on MIAX. Giving greater incentive for Market Makers to either match or 
improve upon the best price displayed on MIAX benefits investors and 
the public by improving execution prices.
---------------------------------------------------------------------------

    \38\ 15 U.S.C. 78f(b)(1) and (b)(5).
---------------------------------------------------------------------------

    Non-Priority Customers, non-MIAX Market Makers, broker-dealers and 
Firms that use sophisticated trading systems will be able to remove 
liquidity quickly from the Strategy Book, and thus the Exchange 
believes that assessing the surcharge to participants who remove 
liquidity, and not assessing the surcharge to participants with complex 
orders resting on the Strategy Book is reasonable and not unfairly 
discriminatory. Moreover, the proposed surcharge is substantially 
similar to the surcharge on CBOE,\39\ and has been accepted as not 
unfairly discriminatory under the Act.\40\ The Exchange believes for 
these reasons that the surcharge is equitable, reasonable and not 
unfairly discriminatory, and thus consistent with the Act.
---------------------------------------------------------------------------

    \39\ See supra notes 16, 37.
    \40\ See CBOE Fees Schedule Complex Taker Fee, (describing a per 
contract, per side surcharge at note 35); see also International 
Securities Exchange (``ISE'') Schedule of Fees, Section II. ISE's 
fee structure does not include a specific ``taker surcharge'' in the 
same manner as CBOE (and which is also proposed by the Exchange) but 
instead includes a higher taker fee for complex transactions that 
remove liquidity from the complex order book.
---------------------------------------------------------------------------

    The proposed assessment of the Marketing Fee for all complex order 
transactions that are executed by a Market Maker in their assigned 
classes when the contra-party to the trade is a Priority Customer is 
equitable and not unfairly discriminatory because the fee will apply 
equally to all Market Makers in their assigned classes. Further, the 
assessment of a Marketing Fee for complex transactions is a common 
practice of other exchanges.\41\ Attracting more order flow to the 
Exchange will bring greater volume and liquidity which in turn benefits 
all market participants by providing more trading opportunities and 
tighter spreads.
---------------------------------------------------------------------------

    \41\ See CBOE Fees Schedule, p. 4; see also Phlx Pricing 
Schedule, Section II.
---------------------------------------------------------------------------

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 Exchange 
believes that the proposed fee structure for complex order transactions 
is intended to promote narrower spreads and greater liquidity at the 
best prices. The fee-based incentives for market participants to 
provide liquidity by submitting complex orders to the Exchange, and 
thereafter to improve the MBBO to ensure participation, should enable 
the Exchange to attract order flow and compete with other exchanges 
which also provide such incentives to their market participants for 
similar transactions.\42\
---------------------------------------------------------------------------

    \42\ See, e.g., Phlx Pricing Schedule, Section B (Customer 
Rebate Program).
---------------------------------------------------------------------------

    The Exchange believes that increased complex order flow will bring 
greater volume and liquidity which in turn benefits all market 
participants by providing more trading opportunities and tighter 
spreads. Therefore, any potential effects that the adoption of the 
complex transaction fees may have on intra-market competition are 
justifiable due to the reasons stated above.
    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. The 
Exchange believes that the proposed rule changes reflect this 
competitive environment because they modify the Exchange's fees in a 
manner that encourages market participants to provide liquidity and to 
send order flow 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,\43\ and Rule 19b-4(f)(2) \44\ 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.
---------------------------------------------------------------------------

    \43\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \44\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------

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-MIAX-2016-38 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-MIAX-2016-38. 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

[[Page 75894]]

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 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; 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-2016-38, and should be 
submitted on or before November 22, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\45\
---------------------------------------------------------------------------

    \45\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Brent J. Fields,
Secretary.
[FR Doc. 2016-26297 Filed 10-31-16; 8:45 am]
 BILLING CODE 8011-01-P