Document ID: SEC-2015-0994-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Miami International Securities Exchange LLC
Posted Date: 2015-06-16T04:00Z

[Federal Register Volume 80, Number 115 (Tuesday, June 16, 2015)]
[Notices]
[Pages 34480-34483]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-14669]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-75140; File No. SR-MIAX-2015-37]

Self-Regulatory Organizations; Miami International Securities 
Exchange LLC; Notice of Filing and Immediate Effectiveness of a 
Proposed Rule Change To Amend Fee Schedule

June 10, 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 May 29, 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, 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.

[[Page 34481]]

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 the MIAX Options Fee Schedule (the 
``Fee Schedule'') to modify the fees for MEI Ports to Market Makers. 
Specifically, the Exchange proposes to adopt the following fees for MEI 
Ports: (i) $5,000 for MM Assignments in up to 5 option classes or up to 
10% of option classes by volume; (ii) $10,000 for MM Assignments in up 
to 10 option classes or up to 20% of option classes by volume; (iii) 
$14,000 for MM Assignments in up to 40 option classes or up to 35% of 
option classes by volume; (iv) $17,500 for MM Assignments in up to 100 
option classes or up to 50% of option classes by volume; and (v) 
$20,500.00 for MM Assignments in over 100 option classes or over 50% of 
option classes by volume up to all option classes listed on MIAX. In 
each of the proposed categories above, the stated fee applies if the 
lesser of the two applicable measurements is met.
    Currently, MIAX assesses monthly MEI Port Fees on Market Makers 
based upon the number of MIAX matching engines \3\ used by the Market 
Maker. MEI Port users are allocated two Full Service MEI Ports \4\ and 
two Limited Service MEI Ports \5\ per matching engine to which they 
connect. The Exchange currently assesses a fee of $2,500 per month on 
Market Makers for the first matching engine they use; $1,200 per month 
for each of matching engines 2 through 5; and $700 per month for each 
of matching engines 6 and above. For example, a Market Maker that 
wishes to make markets in just one symbol would require the two MEI 
Ports in a single matching engine; a Market Maker wishing to make 
markets in all symbols traded on MIAX would require the two MEI Ports 
in each of the Exchange's matching engines. The Exchange also currently 
charges $50 per month for each additional Limited Service MEI Port per 
matching engine for Market Makers in addition to the two Limited 
Service MEI Ports per matching engine that are allocated with the Full 
Service MEI Ports. The Full Service MEI Ports, Limited Service MEI 
Ports and the additional Limited Service MEI Ports all include access 
to MIAX's primary and secondary data centers and its disaster recovery 
center.
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    \3\ A ``matching engine'' is a part of the MIAX electronic 
system that processes options quotes and trades on a symbol-by-
symbol basis. Some matching engines will process option classes with 
multiple root symbols, and other matching engines will be dedicated 
to one single option root symbol (for example, options on SPY will 
be processed by one single matching engine that is dedicated only to 
SPY). A particular root symbol may only be assigned to a single 
designated matching engine. A particular root symbol may not be 
assigned to multiple matching engines.
    \4\ Full Service MEI Ports provide Market Makers with the 
ability to send Market Maker quotes, eQuotes, and quote purge 
messages to the MIAX System. Full Service MEI Ports are also capable 
of receiving administrative information. Market Makers are limited 
to two Full Service MEI Ports per matching engine.
    \5\ Limited Service MEI Ports provide Market Makers with the 
ability to send eQuotes and quote purge messages only, but not 
Market Maker Quotes, to the MIAX System. Limited Service MEI Ports 
are also capable of receiving administrative information. Market 
Makers initially receive two Limited Service MEI Ports per matching 
engine.
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    The Exchange notes that another competing exchange charges 
substantially more [sic] for the use of similar ports.\6\ The Exchange 
established the current rates in an effort to increase the Exchange's 
revenues from non-transaction fee sources and also more closely align 
the fees with the rates charged by another competing options 
exchange.\7\ The Exchange now proposes to modify its fees charged to 
Market Makers in order to provide objective criteria for MMs of 
different sizes and business models to be assessed a MEI Port fee that 
best matches their quoting activity on the Exchange. Accordingly, the 
Exchange proposes to modify the fees charged to Market Makers for use 
of MEI Ports. Specifically, the Exchange proposes to adopt the 
following fees for MEI Ports: (i) $5,000 for MM Assignments in up to 5 
option classes or up to 10% of option classes by volume; (ii) $10,000 
for MM Assignments in up to 10 option classes or up to 20% of option 
classes by volume; (iii) $14,000 for MM Assignments in up to 40 option 
classes or up to 35% of option classes by volume; (iv) $17,500 for MM 
Assignments in up to 100 option classes or up to 50% of option classes 
by volume; and (v) $20,500.00 for MM Assignments in over 100 option 
classes or over 50% of option classes by volume up to all option 
classes listed on MIAX. For the calculation of the monthly MEI Port 
fees that apply to MMs, the number of classes is defined as the 
greatest number of classes the MM was assigned to quote in on any given 
day within the calendar month and the class volume percentage is based 
on the total national average daily volume in classes listed on MIAX in 
the prior calendar quarter \8\. Newly listed option classes are 
excluded from the calculation of the monthly MEI Port fee until the 
calendar quarter following their listing, at which time the newly 
listed option classes will be included in both the per class count and 
the percentage of total national average daily volume. The Exchange 
will assess MMs the monthly MEI Port fee based on the greatest number 
of classes listed on MIAX that the MM was assigned to quote in on any 
given day within a calendar month and the applicable fee rate that is 
the lesser of either the per class basis or percentage of total 
national average daily volume measurement. For example, if MM1 elects 
to quote the top 40 option classes which consist of 58% of the total 
national average daily volume in the prior quarter, the Exchange would 
assess $14,000 to MM1 for the month which is the lesser of `up to 40 
classes' and `above 50% of classes by volume up to all classes listed 
on MIAX'. If the 40 option classes were located on 5 matching engines, 
MM1 would receive two Full Service MEI Ports and two Limited Service 
MEI Ports for each of the 5 matching engines for a total of ten Full 
Service MEI Ports and ten Limited Service MEI Ports for $14,000 per 
month.\9\ If MM2 elects to quote the bottom 1000 option classes which 
consist of 10% of the total national average daily volume in the prior 
quarter, the Exchange would assess $5,000 to MM2 for the month which is

[[Page 34482]]

the lesser of `above 100 classes' and `up to 10% of classes by volume'. 
If the 1000 option classes were located on 15 matching engines, MM2 
would receive two Full Service MEI Ports and two Limited Service MEI 
Ports for each of the 15 matching engines for a total of thirty Full 
Service MEI Ports and thirty Limited Service MEI Ports for $5,000 per 
month.\10\ The Exchange will continue to charge $50 per month for each 
additional Limited Service MEI Port per matching engine for Market 
Makers in addition to the two Limited Service MEI Ports per matching 
engine that are allocated with the Full Service MEI Ports. As 
currently, the Full Service MEI Ports, Limited Service MEI Ports and 
the additional Limited Service MEI Ports all include access to MIAX's 
primary and secondary data centers and its disaster recovery center.
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    \6\ See NASDAQ OMX PHLX LLC (``PHLX'') Pricing Schedule, Section 
VII. PHLX assesses specialists and market makers Active SQF Port Fee 
of $1,250 per port per month. Active SQF Port Fees are capped at 
$42,000 per month.
    \7\ See Securities Exchange Act Release No. 74633 (April 2, 
2015), 80 FR 18894 (April 8, 2015) (SR-MIAX-2015-25).
    \8\ The Exchange will use the following formula to calculate the 
percentage of total national average daily volume that the MM 
assignment is for purposes of the MEI Port fee for a given month. MM 
assignment percentage of national average daily volume = [total 
volume during the prior calendar quarter in a class in which the MM 
was assigned]/[total national volume in classes listed on MIAX in 
the prior calendar quarter]
    \9\ The Exchange notes that, as currently, the MEI Port fee 
would allow the MM to obtain access to MIAX's primary and secondary 
data centers and its disaster recovery center.
    \10\ See id.
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    The purpose of the proposed fees is to incentivize market 
participants to register as Market Makers on the Exchange, to provide 
liquidity, and to attract order flow. To the extent that this purpose 
is achieved, all the Exchange's market participants should benefit from 
the improved market liquidity. The proposed fee levels and criteria are 
based upon a business determination of current MM assignments and 
trading volume. The Exchange notes that it determines the number of 
options classes allocated to a matching engine, and as such chooses how 
many MEI Ports are necessary to support MM assignments. The Exchange 
notes that while MMs in general terms have control over the number of 
MM assignments that they are assigned and quote, MMs do not have 
control over the number of matching engines that those MM assignments 
may be spread across. The Exchange believes that the proposal gives MMs 
more freedom to focus on MM assignments in their determinations for 
fees versus the number of matching engines. The Exchange believes that 
the proposed fee rates and criteria provide an objective and flexible 
framework that will encourage MMs to be assigned and quote in option 
classes with lower total national average daily volume while also 
equitably allocating the fees in a reasonable manner amongst MM 
assignments to account for quoting and trading activity.
    The Exchange proposes to implement the fee changes beginning June 
1, 2015.
2. Statutory Basis
    The Exchange believes that its proposal to amend its Fee Schedule 
is consistent with Section 6(b) of the Act \11\ in general, and 
furthers the objectives of Section 6(b)(4) of the Act \12\ in 
particular, in that it is an equitable allocation of reasonable fees 
and other charges.
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    \11\ 15 U.S.C. 78f(b).
    \12\ 15 U.S.C. 78f(b)(4).
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    The Exchange believes that the proposed fees are reasonable, 
equitable and not unfairly discriminatory. The proposed fees are 
reasonable in that they are within the range of comparable fees at 
other competing options exchanges.\13\ As such, the proposal is 
reasonably designed to continue to compete with other options exchange 
by incentivizing market participants to register as Market Makers on 
the Exchange in a manner that enables the Exchange to improve its 
overall competitiveness and strengthen its market quality for all 
market participants. The proposed fees are fair and equitable and not 
unreasonably discriminatory because they apply equally to all Market 
Makers regardless of type and access to the Exchange is offered on 
terms that are not unfairly discriminatory. The Exchange designed the 
fee rates in order to provide objective criteria for MMs of different 
sizes and business models to be assessed a MEI Port fee that best 
matches their quoting activity on the Exchange. The Exchange notes that 
trading volume and quoting activity in the options market tends to be 
concentrated in the top ranked options classes; with the vast majority 
of options classes being thinly quoted and traded. The Exchange 
believes that the proposed fee rates and criteria provide an objective 
and flexible framework that will encourage MMs to be assigned and quote 
in option classes with lower total national average daily volume while 
also equitably allocating the fees in a reasonable manner amongst MM 
assignments to account for quoting and trading activity.
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    \13\ See supra note 6.
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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, as amended. The 
Exchange believes that the proposal increases both intermarket and 
intramarket competition by enabling MMs to qualify for lower MEI Port 
fees rates on the Exchange in a manner that is designed to provide 
objective criteria for MMs of different sizes and business models to be 
assessed a MEI Port fee that best matches their quoting activity on the 
Exchange yet still be in the range of comparable fees on other 
exchanges. The Exchange believes that the proposal will increase 
competition amongst MMs of different sizes and business models by 
encouraging MMs to be assigned and quote in option classes with lower 
total national average daily volume. 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 in order to attract market participants to use its 
services. The Exchange believes that the proposal reflects this 
competitive environment because it increases the Exchange's fees in a 
manner that continues to encourage market participants to register as 
Market Makers on the Exchange, to provide liquidity, and to attract 
order flow. To the extent that this purpose is achieved, all the 
Exchange's market participants should benefit from the improved market 
liquidity.

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.\14\ At any time within 60 days of the 
filing of the proposed rule change, the Commission summarily may 
temporarily suspend such rule change if it appears to the Commission 
that such action is necessary or appropriate in the public interest, 
for the protection of investors, or otherwise in furtherance of the 
purposes of the Act. If the Commission takes such action, the 
Commission shall institute proceedings to determine whether the 
proposed rule should be approved or disapproved.
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    \14\ 15 U.S.C. 78s(b)(3)(A)(ii).
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

[[Page 34483]]

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-2015-37 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-2015-37. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE., 
Washington, DC 20549, on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of the filing will also 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-2015-37 and should be 
submitted on or before July 7, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-14669 Filed 6-15-15; 8:45 am]
 BILLING CODE 8011-01-P