Document ID: SEC-2015-0704-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Miami International Securities Exchange, LLC
Posted Date: 2015-04-23T04:00Z

[Federal Register Volume 80, Number 78 (Thursday, April 23, 2015)]
[Notices]
[Pages 22756-22759]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-09426]

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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-74758; File No. SR-MIAX-2015-27]

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 17, 2015.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on April 7, 2015, Miami International Securities Exchange LLC (``MIAX'' 
or ``Exchange'') filed with the Securities and Exchange Commission 
(``SEC'' or ``Commission'') the 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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.

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

[[Page 22757]]

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 text of the proposed rule change is available on the Exchange's 
Web site at http://www.miaxoptions.com/filter/wotitle/rule_filing, at 
MIAX's principal office, and at the Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
sections A, B, and C below, of the most significant aspects of such 
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend its current Priority Customer Rebate 
Program (the ``Program'') to modify the volume thresholds of tiers 1-
5.\3\ Under the Program, the Exchange proposes to credit each Member 
the per contract amount set forth in the table below resulting from 
each Priority Customer \4\ order transmitted by that Member which is 
executed on the Exchange in all multiply-listed option classes 
(excluding 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. For each 
Priority Customer order transmitted by that Member which is executed 
electronically on the Exchange in MIAX Select Symbols, MIAX will 
continue to credit each member at the separate per contract rate for 
MIAX Select Symbols.\5\ For each Priority Customer order submitted into 
the PRIME Auction as a PRIME Agency Order, MIAX will continue to credit 
each member at the separate per contract rate for PRIME Agency 
Orders.\6\ The volume thresholds are calculated based on the customer 
average daily volume over the course of the month. Volume will be 
recorded for and credits will be delivered to the Member Firm that 
submits the order to the Exchange.
---------------------------------------------------------------------------

    \3\ See Securities Exchange Act Release Nos. 74007 (January 9, 
2015), 80 FR 1537 (January 12, 2015) (SR-MIAX-2014-69); 72799 
(August 8, 2014), 79 FR 47698 (August 14, 2014) (SR-MIAX-2014-40); 
72355 (June 10, 2014), 79 FR 34368 (June 16, 2014) (SR-MIAX-2014-
25); 71698 (March 12, 2014), 79 FR 15185 (March 18, 2014) (SR-MIAX-
2014-12); 71283 (January 10, 2014), 79 FR 2914 (January 16, 2014) 
(SR-MIAX-2013-63); 71009 (December 6, 2013), 78 FR 75629 (December 
12, 2013) (SR-MIAX-2013-56).
    \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 MIAX Rule 
100.
    \5\ See Securities Exchange Release Nos. 74291 (February 18, 
2015), 80 FR 9841 (February 24, 2015)(SR-MIAX-2015-09); 74288 
(February 18, 2015), 80 FR 9837 (February 24, 2015) (SR-MIAX-2015-
08); 71700 (March 12, 2014), 79 FR 15188 (March 18, 2014) (SR-MIAX-
2014-13); 72356 (June 10, 2014), 79 FR 34384 (June 16, 2014) (SR-
MIAX-2014-26); 72567 (July 8, 2014), 79 FR 40818 (July 14, 2014) 
(SR-MIAX-2014-34); 73328 (October 9, 2014), 79 FR 62230 (October 16, 
2014) (SR-MIAX-2014-50).
    \6\ See Securities Exchange Release No. 72943 (August 28, 2014), 
79 FR 52785 (September 4, 2014) (SR-MIAX-2014-45).

----------------------------------------------------------------------------------------------------------------
                                                                                                   Per contract
 Percentage thresholds of national customer volume in multiply-    Per contract    Per contract     credit for
         listed options classes listed on MIAX (Monthly)              credit      credit in MIAX   PRIME agency
                                                                                  select symbols       order
----------------------------------------------------------------------------------------------------------------
0.00%-0.40%.....................................................           $0.00           $0.00           $0.10
Above 0.40%-0.75%...............................................            0.10            0.10            0.10
Above 0.75%-1.75%...............................................            0.15            0.20            0.10
Above 1.75%-2.40%...............................................            0.17            0.20            0.10
Above 2.40%.....................................................            0.18            0.20            0.10
----------------------------------------------------------------------------------------------------------------

    Other aspects of the Program will remain the same as before. 
Consistent with the current Fee Schedule, the Exchange will continue to 
aggregate the contracts resulting from Priority Customer orders 
transmitted and executed electronically on the Exchange from affiliated 
Members for purposes of the thresholds above, provided there is at 
least 75% common ownership between the firms as reflected on each 
firm's Form BD, Schedule A. In the event of a MIAX System outage or 
other interruption of electronic trading on MIAX, the Exchange will 
adjust the national customer volume in multiply-listed options for the 
duration of the outage. A Member may request to receive its credit 
under the Priority Customer Rebate Program as a separate direct 
payment.
    In addition, the rebate payments will continue to be calculated 
from the first executed contract at the applicable threshold per 
contract credit with the rebate payments made at the highest achieved 
volume tier for each contract traded in that month. For example, if 
Member Firm XYZ, Inc. (``XYZ'') has enough Priority Customer contracts 
to achieve 3.25% of the national customer volume in multiply-listed 
option contracts during the month of April, XYZ will receive a credit 
of $0.18 for each Priority Customer contract executed in the month of 
April.
    The purpose of the Program is to encourage Members to direct 
greater Priority Customer trade volume to the Exchange. Increased 
Priority Customer volume will provide for greater liquidity, which 
benefits all market participants. The practice of incentivizing 
increased retail customer order flow in order to attract professional 
liquidity providers (Market-Makers) is, and has been, commonly 
practiced in the options markets. As such, marketing fee programs,\7\ 
and customer posting incentive programs,\8\ are based on attracting 
public customer order flow. The Program similarly intends to attract 
Priority Customer order flow, which will increase liquidity, thereby 
providing greater trading opportunities and tighter spreads for other 
market

[[Page 22758]]

participants and causing a corresponding increase in order flow from 
such other market participants.
---------------------------------------------------------------------------

    \7\ See MIAX Fee Schedule, Section 1(b).
    \8\ See NYSE Arca, Inc. Fees Schedule, page 4 (section titled 
``Customer Monthly Posting Credit Tiers and Qualifications for 
Executions in Penny Pilot Issues'').
---------------------------------------------------------------------------

    The specific volume thresholds of the Program's tiers were set 
based upon business determinations and an analysis of current volume 
levels. The volume thresholds are intended to incentivize firms that 
route some Priority Customer orders to the Exchange to increase the 
number of orders that are sent to the Exchange to achieve the next 
threshold and to incent new participants to send Priority Customer 
orders as well. Increasing the number of orders sent to the Exchange 
will in turn provide tighter and more liquid markets, and therefore 
attract more business overall. Similarly, the different credit rates at 
the different tier levels were based on an analysis of revenue and 
volume levels and are intended to provide increasing ``rewards'' for 
increasing the volume of trades sent to the Exchange. The specific 
amounts of the tiers and rates were set in order to encourage suppliers 
of Priority Customer order flow to reach for higher tiers.
    The credits paid out as part of the program will be drawn from the 
general revenues of the Exchange.\9\ The Exchange calculates volume 
thresholds on a monthly basis.
---------------------------------------------------------------------------

    \9\ Despite providing credits under the Program, the Exchange 
represents that it will continue to have adequate resources to fund 
its regulatory program and fulfill its responsibilities as a self-
regulatory organization while the Program will be in effect.
---------------------------------------------------------------------------

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 is an equitable allocation of reasonable fees 
and other charges among Exchange members.
---------------------------------------------------------------------------

    \10\ 15 U.S.C. 78f(b).
    \11\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

    The Exchange believes that the proposed Priority Customer Rebate 
Program is fair, equitable and not unreasonably discriminatory. The 
Program is reasonably designed because it will incent providers of 
Priority Customer order flow to send that Priority Customer order flow 
to the Exchange in order to receive a credit in a manner that enables 
the Exchange to improve its overall competitiveness and strengthen its 
market quality for all market participants. The Program is also 
reasonably designed because the proposed credits are within the range 
of credits assessed by other exchanges employing similar rebate 
programs. The proposed rebate program is fair and equitable and not 
unreasonably discriminatory because it will apply equally to all 
Priority Customer orders. All similarly situated Priority Customer 
orders are subject to the same rebate schedule, and access to the 
Exchange is offered on terms that are not unfairly discriminatory. In 
addition, the Program is equitable and not unfairly discriminatory 
because, while only Priority Customer order flow qualifies for the 
Program, an increase in Priority Customer order flow will bring greater 
volume and liquidity, which benefit all market participants by 
providing more trading opportunities and tighter spreads. Similarly, 
offering increasing credits for executing higher percentages of total 
national customer volume (increased credit rates at increased volume 
tiers) is equitable and not unfairly discriminatory because such 
increased rates and tiers encourage Members to direct increased amounts 
of Priority Customer contracts to the Exchange. Market participants 
want to trade with Priority Customer order flow. To the extent Priority 
Customer order flow is increased by the proposal, market participants 
will increasingly compete for the opportunity to trade on the Exchange 
including sending more orders and providing narrower and larger sized 
quotations in the effort to trade with such Priority Customer order 
flow. The resulting increased volume and liquidity will benefit those 
Members who receive the lower tier levels, or do not qualify for the 
Program at all, by providing more trading opportunities and tighter 
spreads.
    Limiting the Program to multiply-listed options classes listed on 
MIAX is reasonable because those parties trading heavily in multiply-
listed classes will receive a credit for such trading, and is equitable 
and not unfairly discriminatory because the Exchange does not trade any 
singly-listed products at this time. If at such time the Exchange 
develops proprietary products, the Exchange anticipates having to 
devote a lot of resources to develop them, and therefore would need to 
retain funds collected in order to recoup those expenditures.

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. The Exchange believes that the 
proposed change would increase both intermarket and intramarket 
competition by incenting Members to direct their Priority Customer 
orders to the Exchange, which will enhance the quality of quoting and 
increase the volume of contracts traded here. To the extent that there 
is additional competitive burden on non-Priority Customers, the 
Exchange believes that this is appropriate because the rebate program 
should incent Members to direct additional order flow to the Exchange 
and thus provide additional liquidity that enhances the quality of its 
markets and increases the volume of contracts traded here. To the 
extent that this purpose is achieved, all the Exchange's market 
participants should benefit from the improved market liquidity. 
Enhanced market quality and increased transaction volume that results 
from the anticipated increase in order flow directed to the Exchange 
will benefit all market participants and improve competition 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 reduces the Exchange's fees in 
a manner that encourages market participants to direct their customer 
order flow, to provide liquidity, and to attract additional transaction 
volume to the Exchange. Given the robust competition for volume among 
options markets, many of which offer the same products, implementing a 
volume based customer rebate program to attract order flow like the one 
being proposed in this filing is consistent with the above-mentioned 
goals of the Act. This is especially true for the smaller options 
markets, such as MIAX, which is competing for volume with much larger 
exchanges that dominate the options trading industry.

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.\12\ At any time within 60 days of the 
filing of the proposed rule change, the Commission

[[Page 22759]]

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.
---------------------------------------------------------------------------

    \12\ 15 U.S.C. 78s(b)(3)(A)(ii).
---------------------------------------------------------------------------

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-2015-27 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-2015-27. 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 such filing also will be available 
for inspection and copying at the principal offices 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-2015-27, 
and should be submitted on or May 14, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
---------------------------------------------------------------------------

    \13\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Brent J. Fields,
Secretary.
[FR Doc. 2015-09426 Filed 4-22-15; 8:45 am]
 BILLING CODE 8011-01-P