Document ID: SEC-2019-0436-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Miami International Securities Exchange, LLC
Posted Date: 2019-04-10T04:00Z

[Federal Register Volume 84, Number 69 (Wednesday, April 10, 2019)]
[Notices]
[Pages 14438-14441]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-07049]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-85512; File No. SR-MIAX-2019-17]

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

April 4, 2019.
    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 March 27, 2019, Miami International Securities 
Exchange LLC (``MIAX Options'' 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'') to amend its fees and rebates for 
Qualified Contingent Cross (``QCC'') orders and Complex Qualified 
Contingent Cross (``cQCC'') orders.
    The text of the proposed rule change is available on the Exchange's 
website at http://www.miaxoptions.com/rule-filings, 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.

[[Page 14439]]

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 Sections 1(a)(vii) and (viii) of the 
Fee Schedule to amend its fees and rebates for QCC and cQCC Orders. A 
QCC Order is comprised of an order to buy or sell at least 1,000 
contracts that is identified as being part of a qualified contingent 
trade, coupled with a contra side order to buy or sell an equal number 
of contracts.\3\ Currently, the Exchange assesses a transaction fee for 
all types of market participants other than Priority Customer \4\ for 
QCC Orders of $0.15 per contract (Priority Customer orders are assessed 
a charge of $0.00 per contract) for the Initiator and the Contra-side. 
In addition, the Exchange currently pays a $0.10 per contract rebate 
for the initiating order, regardless of the type of market participant. 
The rebate is paid to the Member \5\ that enters the order into the 
System \6\, but is only paid on the initiating side of the QCC 
transaction. No rebates are paid for QCC transactions in which both the 
initiator and contra-side orders are from Priority Customers. The 
Exchange notes that with regard to order entry, the first order 
submitted into the System is marked as the initiating side and the 
second order is marked as the contra side.
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    \3\ A Qualified Contingent Cross Order is comprised of an 
originating order to buy or sell at least 1,000 contracts, or 10,000 
mini-option contracts, that is identified as being part of a 
qualified contingent trade, as that term is defined in 
Interpretation and Policy .01 to Rule 516, coupled with a contra-
side order or orders totaling an equal number of contracts. See 
Exchange Rule 516(j).
    \4\ 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 accounts(s). See Exchange Rule 
100.
    \5\ 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.
    \6\ The term ``System'' means the automated trading system used 
by the Exchange for the trading of securities. See Exchange Rule 
100.
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    The Exchange now proposes to increase the Per Contract Fee for 
Contra-side QCC Orders for all types of market participants other than 
Priority Customer from $0.15 to $0.17 (Priority Customer orders will 
continue to be assessed a Per Contract Fee for Contra-side QCC Orders 
of $0.00). The Exchange does not propose to change the Per Contract Fee 
for Initiator QCC Orders for any market participants. In addition, the 
Exchange proposes to increase the Per Contract Rebate for Initiator QCC 
Orders for all types of market participants from $0.10 per contract to 
$0.14 per contract. The Exchange is not proposing to change that no 
rebates will be paid for QCC transactions for which both the Initiator 
and Contra-side orders are Priority Customers.
    A cQCC Order is comprised of an originating complex order to buy or 
sell where each component is at least 1,000 contracts that is 
identified as being part of a qualified contingent trade, coupled with 
a contra-side complex order or orders to sell or buy an equal number of 
contracts.\7\ Currently, the Exchange assesses a transaction fee for 
all types of market participants other than Priority Customer for cQCC 
Orders of $0.15 per contract (Priority Customer orders are assessed a 
charge of $0.00 per contract) for the Initiator and the Contra-side. In 
addition, the Exchange currently pays a $0.10 per contract rebate for 
the initiating order, regardless of the type of market participant. No 
rebates are paid for cQCC transactions in which both the initiator and 
contra-side orders are from Priority Customers. All fees and rebates 
are per contract per leg. The rebate is paid to the Member that enters 
the order into the System, but is only paid on the initiating side of 
the cQCC transaction.
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    \7\ See Exchange Rule 518(b)(6).
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    The Exchange now proposes to increase the Per Contract Fee for 
Contra-side cQCC Orders for all types of market participants other than 
Priority Customer from $0.15 to $0.17 (Priority Customer orders will 
continue to be assessed a Per Contract Fee for Contra-side cQCC Orders 
of $0.00). The Exchange does not propose to change the Per Contract Fee 
for Initiator cQCC Orders for any market participants. In addition, the 
Exchange proposes to increase the Per Contract Rebate for Initiator 
cQCC Orders for all types of market participants from $0.10 per 
contract to $0.14 per contract. The Exchange is not proposing to change 
that no rebates will be paid for cQCC transactions for which both the 
initiator and contra-side orders are Priority Customers.
    The Exchange notes that QCC and cQCC Orders are excluded from: (i) 
The volume threshold calculations for the Market Maker Sliding Scale; 
(ii) the rebates and volume calculations as part of the Priority 
Customer Rebate Program; (iii) participation in the Professional Rebate 
Program; and (iv) the Marketing Fee that is assessed to Market Makers 
in their assigned classes in simple or complex order executions when 
the contra-party to the execution is a Priority Customer.
    The purpose of increasing the specified QCC and cQCC Order fees and 
rebates is for business and competitive reasons. The Exchange believes 
that it is appropriate to adjust these specified QCC and cQCC Order 
fees and rebates in order to attract additional QCC and cQCC order flow 
and grow its market share in this segment, through offering a higher 
rebate (than the Exchange currently offers) and fees that are 
consistent with other exchanges, effectively lowering the overall cost 
to Members executing these orders on the Exchange. The Exchange notes 
that other competing exchanges similarly provide rebates on QCC and 
cQCC initiating orders,\8\ and similarly charge fees on QCC and cQCC on 
Contra-side orders.\9\
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    \8\ See BOX Fee Schedule, Section I(D)(1) (a $0.14 per contract 
rebate will be applied to the Agency Order where at least one party 
to the QCC transaction is a Non-Public Customer); see also Cboe Fee 
Schedule, ``QCC Rate Table,'' Page 5 (a $0.10 per contract credit 
will be delivered to the TPH Firm that enters the order into Cboe 
Command but will only be paid on the initiating side of the QCC 
transaction); see also NYSE American Options Fee Schedule, Section 
I.F (a $0.07 credit is applied to Floor Brokers executing 300,000 or 
fewer contracts in a month and a $0.10 credit is applied to Floor 
Brokers executing more than 300,000 contracts in a month); see also 
Nasdaq ISE Pricing Schedule, Options 7, Section 6, Other Options 
Fees and Rebate, A. QCC and Solicitation Rebate (rebates range from 
$0.00 to $0.11 per contract).
    \9\ See BOX Options Market LLC (``BOX'') Fee Schedule, Section 
I(D) (BOX does not charge Public Customers but charges Professional 
Customers, Broker-Dealers and Market Makers $0.17 per contract on 
both Agency and Contra Orders); see also Cboe Exchange, Inc. 
(``Cboe'') Fee Schedule, ``QCC Rate Table,'' Page 5 (Cboe charges 
non-Public Customers $0.17 per contract and does not charge Public 
Customers); see also NYSE American Options Fee Schedule, Section I.F 
(NYSE American charges Non-Customers $0.20 per contract, Specialists 
and e-Specialists $0.13 per contract, and does not charge Customer 
and Professional Customers).
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    The proposed rule change is to become operative April 1, 2019.
2. Statutory Basis
    The Exchange believes that its proposal to amend its Fee Schedule 
is consistent with Section 6(b) of the Act \10\ in general, and 
furthers the objectives of Section 6(b)(4) of the Act \11\ in 
particular, in that it provides for the equitable allocation of 
reasonable dues, fees and other charges among Exchange Members and 
issuers and other persons using its facilities. The Exchange also 
believes the proposal furthers the objectives of Section 6(b)(5) of the 
Act \12\ in that it is designed to promote just and equitable 
principles of trade, to remove

[[Page 14440]]

impediments to and perfect the mechanism of a free and open market and 
a national market system, and, in general to protect investors and the 
public interest and is not designed to permit unfair discrimination 
between customer, issuers, brokers and dealers.
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    \10\ 15 U.S.C. 78f(b).
    \11\ 15 U.S.C. 78f(b)(4).
    \12\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes its proposal to increase the Per Contract Fee 
for Contra-side QCC and cQCC Orders is reasonable, equitable and not 
unfairly discriminatory because, at the same time, the Exchange is 
proposing to increase the Per Contract Rebate for Initiator QCC and 
cQCC Orders for all types of market participants, effectively resulting 
in a lower, all-in execution cost for Members for these orders. The 
Exchange believes that the proposed fee and rebate changes are 
reasonable, equitable, and not unfairly discriminatory because the 
proposed fees and rebates are intended to attract additional QCC and 
cQCC Order flow, grow the Exchange's market share in this segment by 
effectively reducing the all-in execution cost for these orders to the 
benefit of all market participants.
    Additionally, the Exchange believes that the proposed increase to 
the Per Contract Fee for Contra-side QCC and cQCC Orders is not 
unfairly discriminatory because the proposed fees would be charged to 
all market participants other than Priority Customers. Assessing QCC 
and cQCC Order rates to all market participants other than Priority 
Customer is equitable and not unfairly discriminatory because Priority 
Customer order flow enhances liquidity on the Exchange for the benefit 
of all market participants. Specifically, Priority Customer liquidity 
benefits all market participants by providing more trading 
opportunities, which attracts Market Makers. An increase in the 
activity of these market participants in turn facilitates tighter 
spreads, which may cause an additional corresponding increase in order 
flow from other market participants. By assessing a $0.00 fee for 
Priority Customer orders, the Exchange believes the proposed QCC and 
cQCC Order fees will not discourage the sending of Priority Customer 
orders. The Exchange believes the proposed increase to the Per Contract 
Fee for Contra-side QCC and cQCC Orders for all types of market 
participants is reasonable because the proposed amount is in line with 
the amount assessed at other Exchanges for similar transactions.\13\
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    \13\ See supra note 9.
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    The Exchange believes the proposed increase to the Per Contract 
Rebate for Initiator QCC and cQCC Orders for all types of market 
participants is reasonable because the rebate will offset the fee 
resulting in a lower all-in execution cost for Members for these 
orders, even with the proposed increase to the Per Contract Fee for 
Contra-side QCC and cQCC Orders. Further, other competing exchanges 
also provide rebates on the initiating order side and the proposed 
rebate amount is within the range of the rebate amounts at the other 
competing exchanges.\14\ The Exchange believes the proposed increase to 
the rebate is equitable and not unfairly discriminatory because it 
applies to all Members that enter the initiating order (except for when 
both the initiator and contra-side orders are Priority Customers) and 
because it is intended to incentivize the sending of more QCC and cQCC 
Orders to the Exchange. The Exchange believes it is reasonable, 
equitable and not unfairly discriminatory to not provide a rebate for 
the Initiator for QCC and cQCC Orders for which both the Initiator and 
the Contra-side are Priority Customers since Priority Customers are 
already incentivized by being assessed a fee of $0.00 for submitting 
QCC and cQCC Orders.
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    \14\ See supra note 8.
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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 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act, because the proposed rule 
change applies to all Members. The Exchange believes this proposal will 
not cause an unnecessary burden on intermarket competition because the 
proposed changes will actually enhance the competiveness of the 
Exchange relative to other exchanges which offer comparable fees and 
rebates for QCC and cQCC Orders. To the extent that the proposed 
changes make the Exchange a more attractive marketplace for market 
participants at other exchanges, such market participants are welcome 
to become market participants on the Exchange.
    The Exchange notes that it operates in a highly competitive market 
in which market participants can readily favor competing venues if they 
deem fee levels at a particular venue to be excessive. In such an 
environment, the Exchange must continually adjust its fees to remain 
competitive with other exchanges and to attract order flow to the 
Exchange. The Exchange believes that the proposed rule change reflects 
this competitive environment because it establishes a fee structure in 
a manner that encourages market participants to direct their order 
flow, to provide liquidity, and to attract additional transaction 
volume to the Exchange.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    Written comments were neither solicited nor received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A)(ii) of the Act,\15\ and Rule 19b-4(f)(2) \16\ thereunder. 
At any time within 60 days of the filing of the proposed rule change, 
the Commission summarily may temporarily suspend such rule change if it 
appears to the Commission that such action is necessary or appropriate 
in the public interest, for the protection of investors, or otherwise 
in furtherance of the purposes of the Act. If the Commission takes such 
action, the Commission shall institute proceedings to determine whether 
the proposed rule should be approved or disapproved.
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    \15\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \16\ 17 CFR 240.19b-4(f)(2).
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IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-MIAX-2019-17 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-2019-17. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (http://www.sec.gov/rules/sro.shtml). 
Copies of the submission, all subsequent

[[Page 14441]]

amendments, all written statements with respect to the proposed rule 
change that are filed with the Commission, and all written 
communications relating to the proposed rule change between the 
Commission and any person, other than those that may be withheld from 
the public in accordance with the provisions of 5 U.S.C. 552, will be 
available for website viewing and printing in the Commission's Public 
Reference Room, 100 F Street NE, Washington, DC 20549 on official 
business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of 
the filing also will be available for inspection and copying at the 
principal office of the Exchange. All comments received will be posted 
without change. Persons submitting comments are cautioned that we do 
not redact or edit personal identifying information from comment 
submissions. You should submit only information that you wish to make 
available publicly. All submissions should refer to File Number SR-
MIAX-2019-17, and should be submitted on or before May 1, 2019.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
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    \17\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-07049 Filed 4-9-19; 8:45 am]
 BILLING CODE 8011-01-P