Self-Regulatory Organizations; Miami International Securities Exchange LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Its Fee Schedule in Connection With the Adoption of Certain New Complex Order Types, 38964-38972 [2017-17277]
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Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
Phlx–2017–64 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Brent J. Fields, Secretary, Securities
and Exchange Commission, 100 F Street
NE., Washington, DC 20549–1090.
asabaliauskas on DSKBBXCHB2PROD with NOTICES
All submissions should refer to File
Number SR–Phlx–2017–64. 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 (https://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
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10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
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received will be posted without change;
the Commission does not edit personal
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submissions. You should submit only
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available publicly. All submissions
should refer to File Number SR–Phlx–
2017–64 and should be submitted on or
before September 6, 2017.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.14
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2017–17278 Filed 8–15–17; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–81372; File No. SR–MIAX–
2017–40]
Self-Regulatory Organizations; Miami
International Securities Exchange LLC;
Notice of Filing and Immediate
Effectiveness of a Proposed Rule
Change To Amend Its Fee Schedule in
Connection With the Adoption of
Certain New Complex Order Types
August 10, 2017.
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 August 7, 2017, 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.
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 adopt
transaction fees and rebates for certain
new complex order types that have
become available for trading on the
Exchange, as described below. The
Exchange also proposes to clarify an
existing transaction fee that applies to
an existing order type, as well as make
a number of technical corrections to its
Fee Schedule.
The Exchange initially filed the
proposal on July 27, 2017 (SR–MIAX–
2017–37). That filing was withdrawn
and replaced with the current filing
(SR–MIAX–2017–40).
. [sic]
The text of the proposed rule change
is available on the Exchange’s Web site
at https://www.miaxoptions.com/rulefilings, 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
1 15
14 17
CFR 200.30–3(a)(12).
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2 17
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PO 00000
U.S.C. 78s(b)(1).
CFR 240.19b–4.
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any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to amend its
Fee Schedule to adopt transaction fees
and rebates for certain new complex
order types that have become available
for trading on the Exchange, as
described below. The Exchange also
proposes to clarify an existing
transaction fee that applies to an
existing order type, as well as make a
number of technical corrections to the
Fee Schedule.
The Exchange began trading complex
orders 3 in October, 2016.4 As part of its
effort to continue to build out its
complex order market segment, the
Exchange recently adopted rules to
establish the following three new types
of complex orders as well as adopted
new provisions that relate to the
processing of such complex order types:
(i) Complex PRIME (‘‘cPRIME’’) Orders,
(ii) Complex Qualified Contingent Cross
(‘‘cQCC’’) Orders, and (iii) Complex
Customer Cross (‘‘cC2C’’) Orders.5 A
cPRIME Order is a complex order that
is submitted for participation in a
cPRIME Auction. A cQCC Order is
comprised of an originating complex
order to buy or sell where each leg is at
3 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. Minioptions may only be part of a complex order that
includes other mini-options. Only those complex
orders in the classes designated by the Exchange
and communicated to Members via Regulatory
Circular with no more than the applicable number
of legs, as determined by the Exchange on a classby-class basis and communicated to Members via
Regulatory Circular, are eligible for processing. See
Exchange Rule 518(a)(5).
4 For a complete description of the trading of
complex orders on the Exchange, see Exchange Rule
518. See also, Securities Exchange Act Release No.
79072 (October 7, 2016), 81 FR 71131 (October 14,
2016) (SR–MIAX–2016–26).
5 See Securities Exchange Act Release No. 81131
(July 12, 2017), 82 FR 32900 (July 18, 2017) (SR–
MIAX–2017–19). (Order Granting Approval of a
Proposed Rule Change to Amend MIAX Options
Rules 515, Execution of Orders and Quotes; 515A,
MIAX Price Improvement Mechanism (‘‘PRIME’’)
and PRIME Solicitation Mechanism; and 518,
Complex Orders).
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least 1,000 contracts and that is
identified as being part of a qualified
contingent trade, as defined in Rule 516,
Interpretations and Policies .01, coupled
with a contra-side complex order or
orders for the same strategy totaling an
equal number of contracts. A cC2C
Order is comprised of one Priority
Customer complex order to buy and one
Priority Customer complex order to sell
the same complex strategy at the same
initiating price (which must be better
than (inside) the icMBBO 6 price or the
best net price of a complex order for the
strategy) and for the same quantity.
cPRIME Orders are processed and
executed in the Exchange’s PRIME
mechanism, the same mechanism that
the Exchange uses to process and
execute simple PRIME orders, pursuant
to Exchange Rule 515A. cQCC and cC2C
Orders are processed and executed in
the same mechanism that the Exchange
uses to cross simple QCC orders and
Customer Cross orders, pursuant to
Exchange Rule 515.
cPRIME Orders
Rule 518(b)(7) defines a cPRIME
Order as a type of complex order that is
submitted for participation in a cPRIME
Auction. Trading of cPRIME Orders is
governed by Rule 515A, Interpretations
and Policies .12. A cPRIME Auction is
the price-improvement mechanism of
the Exchange’s System 7 pursuant to
which a Member (‘‘Initiating Member’’)
electronically submits a complex order
that it represents as agent (an ‘‘Agency
Order’’) into a cPRIME Auction. The
Initiating Member, in submitting an
Agency Order, must be willing to either
(i) cross the Agency Order at a single
price (a ‘‘single-price submission’’)
against principal or solicited interest, or
(ii) automatically match (‘‘auto-match’’),
against principal or solicited interest,
the price and size of responses to a
Request for Response (‘‘RFR’’) that is
broadcast to MIAX Options participants
up to an optional designated limit price.
The Exchange utilizes the same
mechanism for the processing and
cPRIME order fee
Per
contract
fee for
agency
order
Types of market participants
Priority Customer .........................................................................
Public Customer that is Not a Priority Customer ........................
MIAX Market Maker .....................................................................
Non-MIAX Market Maker .............................................................
Non-Member Broker-Dealer .........................................................
Firm ..............................................................................................
asabaliauskas on DSKBBXCHB2PROD with NOTICES
This cPRIME Fee table (including the
amounts therein) is identical to the
PRIME Fee table (including the amounts
therein), which is contained in Section
1(a)(v) of the Fee Schedule.
The Exchange also proposes to adopt
certain explanatory text relating to the
cPRIME Fee table, just as the Exchange
currently has relating to the PRIME Fee
table. The text provides that all fees and
credits are per contract per leg. Also,
MIAX will assess the Responder to
cPRIME Auction Fee to: (i) A cPRIME
AOC Response that executes against a
6 The Implied Complex MIAX Best Bid or Offer
(‘‘icMBBO’’) is a calculation that uses the best price
from the Simple Order Book for each component of
a complex strategy including displayed and nondisplayed trading interest. For stock-option orders,
the icMBBO for a complex strategy will be
calculated using the best price (whether displayed
or non-displayed) on the Simple Order Book in the
individual option component(s), and the NBBO in
the stock component. See Exchange Rule 518(a)(11).
7 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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Per
contract
fee for
contra-side
order
$0.00
0.30
0.30
0.30
0.30
0.30
Responder to cPRIME
auction fee
Per
contract
fee for
penny
classes
$0.00
0.05
0.05
0.05
0.05
0.05
cPRIME Order, and (ii) a cPRIME
Participating Quote or Order 10 that
executes against a cPRIME Order. MIAX
will apply the cPRIME Break-up credit
to the EEM that submitted the cPRIME
Order for agency contracts that are
submitted to the cPRIME Auction that
trade with a cPRIME AOC Response or
a cPRIME Participating Quote or Order
that trades with the cPRIME Order.
MIAX will assess the standard complex
transaction fees to a cPRIME AOC
Response if it executes against unrelated
complex orders. Any Member 11 or its
8 See
supra note 5.
9 Id.
10 The term ‘‘cPRIME Participating Quote or
Order’’ means an unrelated MIAX Market Maker
complex quote or unrelated MIAX Market Maker
complex order that is received during the Response
Time Interval and executed against a cPRIME
Order. See Section 1(a)(i) of the Fee Schedule, as
described below.
11 The term ‘‘Member’’ means an individual or
organization approved to exercise the trading rights
associated with a Trading Permit. Members are
PO 00000
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execution of both PRIME and cPRIME
Orders. Accordingly, the Exchange has
modified Rule 515A so that it also
permits the execution of cPRIME
Orders, through changes to Rule 515A(a)
and the adoption of Interpretations and
Policies .12 (PRIME for Complex
Orders).8 Interpretations and Policies
.12 includes certain processing and
execution requirements for cPRIME
Orders that differ from the processing
and execution requirements under Rule
515A(a) for simple PRIME Orders.9
The Exchange now proposes to adopt
new Section 1(a)(vi), MIAX Complex
Price Improvement Mechanism
(‘‘cPRIME’’) Fees, on the Fee Schedule
to establish transaction fees and credits
for executions in a cPRIME Auction,
which transaction fees and credits are
similar to transaction fees and credits
that the Exchange currently assesses for
executions in a PRIME Auction:
$0.50
0.50
0.50
0.50
0.50
0.50
Per
contract
fee for
non-penny
classes
$0.99
0.99
0.99
0.99
0.99
0.99
cPRIME break-up
credit
Per
contract
credit for
penny
classes
$0.25
0.25
0.25
0.25
0.25
0.25
Per
contract
credit for
non-penny
classes
$0.60
0.60
0.60
0.60
0.60
0.60
Affiliate 12 that qualifies for Priority
Customer Rebate Program volume tiers
3 or higher and submits a cPRIME AOC
Response that is received during the
Response Time Interval and executed
against the cPRIME Order, or a cPRIME
Participating Quote or Order that is
received during the Response Time
Interval and executed against the
cPRIME Order, will be assessed a
Discounted cPRIME Response Fee of
$0.46 per contract for standard complex
order options in Penny Pilot classes.
Any Member or its Affiliate that
deemed ‘‘members’’ under the Exchange Act. See
Exchange Rule 100.
12 For purposes of the MIAX Options Fee
Schedule, the term ‘‘Affiliate’’ means (i) 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’’), or (ii) the Appointed
Market Maker of an Appointed EEM (or, conversely,
the Appointed EEM of an Appointed Market
Maker). See Fee Schedule note 1.
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qualifies for Priority Customer Rebate
Program volume tiers 3 or higher and
submits a cPRIME AOC Response that is
received during the Response Time
Interval and executed against the
cPRIME Order, or a cPRIME
Participating Quote or Order that is
received during the Response Time
Interval and executed against the
cPRIME Order, will be assessed a
Discounted cPRIME Response Fee of
$0.95 per contract for standard complex
order options in non-Penny Pilot
classes.
The Exchange also proposes to amend
Section 1(a)(iii), the Priority Customer
Rebate Program (the ‘‘PCRP’’), of the Fee
Schedule to establish a tiered per
contract credit for cPRIME Agency
Orders. The Exchange proposes to credit
each Member $0.10 per contract per leg
for each Priority Customer cPRIME
Agency Order in each tier. The
Exchange also proposes to adopt certain
explanatory text relating to cPRIME
Agency Orders in PCRP table, just as the
Exchange currently has relating to other
order types in the PCRP table. The text
provides that all fees and rebates are per
contract per leg. Also for each Priority
Customer complex order submitted into
the cPRIME Auction as a cPRIME
Agency Order, MIAX shall credit each
member at the separate per contract per
leg rate for cPRIME Agency Orders.
However, no rebates will be paid if the
cPRIME Agency Order executes against
a Contra-side Order which is also a
Priority Customer. Finally, unless
otherwise explicitly set forth therein,
the remainder of the explanatory text
relating to the PCRP set forth in that
Section 1(a)(iii) shall apply to cPRIME
Agency Orders. The Exchange notes that
a Member or its Affiliate that qualifies
for PCRP volume tiers 3 or higher
receives an additional rebate of $0.02
per contract for each Priority Customer
order executed in the PRIME Auction as
a PRIME Agency Order over a threshold
of 1,500,000 contracts in a month.
Finally, for clarification, just as is the
case today for other types of complex
orders, if the cPRIME order legs into the
simple order book, the contracts that
were entered directly into 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. Also, the
Exchange will assess only the cPRIME
fees contained in Section 1(a)(vi) with
respect to cPRIME Auctions—the
Exchange will not also assess the
complex order fees contained elsewhere
in Section 1(a). For example, a MIAX
Market Maker would only be charged
$0.50 per contract per leg executed for
responding to a cPRIME Auction,
pursuant to Section 1(a)(vi); it would
not also be charged the $0.10 Per
Contract Surcharge for Removing
Liquidity Against a Resting Priority
Customer Complex Order on the
Strategy Book fee contained in Section
1(a)(i). Also, if a cPRIME Agency Order
legs into a simple Market Maker order
on the simple order book, the Market
Maker order would not be considered to
be a Responder for fee purposes.
As Section 1(a)(vi) will now contain
the proposed cPRIME fees, the current
simple QCC Fees table will be
renumbered as Section 1(a)(vii). There
are no substantive changes for simple
QCC fees.
cQCC Orders
The Exchange proposes to adopt new
Section 1(a)(viii), cQCC Fees, to the Fee
Schedule to establish transaction fees
and rebates for cQCC Orders, which are
identical to transaction fees and rebates
that the Exchange currently charges for
simple QCC Orders:
cQCC Order
Types of market participants
Per contract
fee for
initiator
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Priority Customer .........................................................................................................................
Public Customer that is Not a Priority Customer ........................................................................
MIAX Market Maker .....................................................................................................................
Non-MIAX Market Maker .............................................................................................................
Non-Member Broker-Dealer ........................................................................................................
Firm ..............................................................................................................................................
This cQCC Fees table (including the
amounts therein) is identical to the QCC
Fees table (including the amounts
therein), which is contained in Section
1(a)(vii) of the Fee Schedule. The
Exchange also proposes to adopt certain
explanatory text relating to the cQCC
Fees table, just as the Exchange
currently has relating to the simple QCC
Fees table. The text provides that all
fees and rebates are per contract per leg.
Also, rebates will be delivered to the
Member firm that enters the order into
the MIAX system, but will only be paid
on the initiating side of the cQCC
transaction. However, no rebates will be
paid for cQCC transactions for which
both the initiator and contra-side orders
are Priority Customers. A cQCC
transaction is comprised of an ‘initiating
complex order’ to buy (sell) where each
component is at least 1,000 contracts
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that is identified as being part of a
qualified contingent trade, coupled with
a contra-side complex order or orders to
sell (buy) an equal number of contracts.
C2C and cC2C Orders
The Exchange proposes to adopt new
Section 1(a)(ix), C2C and cC2C Fees, to
the Fee Schedule to clarify and establish
transaction fees and rebates for C2C
Orders and cC2C Orders.
Types of market participants
C2C and
cC2C
order per
contract fee/
rebate
Priority Customer ..................
$0.00
The Exchange notes that it currently
offers trading in C2C Orders.13 Because
13 See
PO 00000
Exchange Rule 516(i).
Frm 00092
Fmt 4703
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$0.00
0.15
0.15
0.15
0.15
0.15
Per contract
fee for
contra-side
$0.00
0.15
0.15
0.15
0.15
0.15
Per contract
rebate for
initiator
$0.10
0.10
0.10
0.10
0.10
0.10
C2C Orders are comprised entirely of
Priority Customer orders, the Exchange
assesses a $0.00 per contract transaction
fee and a $0.00 rebate to such orders,
pursuant to section 1(a)(ii) of the Fee
Schedule. However, the Exchange
desires to clarify and make explicit that
C2C Orders are assessed a $0.00 per
contract transaction fee and paid a $0.00
per contract rebate. The Exchange is
also proposing to assess cC2C Orders a
$0.00 per contract transaction fee and to
pay a $0.00 per contract rebate.
The Exchange also proposes to adopt
certain explanatory text relating to the
C2C and cC2C Fees table. The text
provides that all fees and rebates are per
contract per leg. Also, a C2C Order is
comprised of a Priority Customer Order
to buy and a Priority Customer Order to
sell at the same price and for the same
quantity. A cC2C Order is comprised of
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one Priority Customer complex order to
buy and one Priority Customer complex
order to sell at the same price and for
the same quantity.
Exclusion From Certain Percentage
Thresholds and Programs and Technical
Corrections
The Exchange notes that it currently
excludes certain simple PRIME, QCC,
and C2C order types from counting
towards certain percentage thresholds
and from participating in certain
programs under its Fee Schedule.
Accordingly, with the introduction of
these new complex order types on the
Exchange, i.e. cPRIME, cQCC, and cC2C
Orders, the Exchange is similarly
proposing to exclude these new order
types from counting towards those
certain percentage thresholds and from
participating in certain programs under
its Fee Schedule. The Exchange notes
that C2C Orders are comprised entirely
of Priority Customer orders, and thus,
where applicable, are currently
excluded contracts under Priority
Customer-to-Priority Customer Orders.
However, the Exchange desires to clarify
that C2C Orders are, where applicable,
excluded by explicitly identifying and
adding such orders to the list of
excluded contracts, as described below.
First, in Section 1(a)(i) of the Fee
Schedule, Market Maker Transaction
Fees, Market Maker Sliding Scale, the
Exchange currently excludes certain
contracts executed from counting
towards volume for purposes
calculating the percentage threshold in
each of the Market Maker tiers. The Fee
Schedule currently provides that
volume thresholds are based on the total
national Market Maker volume of any
options classes with traded volume on
MIAX during the month in simple and
complex orders (excluding QCC Orders,
PRIME AOC Responses, and unrelated
MIAX Market Maker quotes or unrelated
MIAX Market Maker orders that are
received during the Response Time
Interval and executed against the PRIME
Order (‘‘PRIME Participating Quotes or
Orders’’)). With the introduction of
these new complex order types, the
Exchange now proposes to add the
following order types to the list of
excluded contracts: cQCC Orders,
cPRIME AOC Responses, and unrelated
MIAX Market Maker complex quotes or
unrelated MIAX Market Maker complex
orders that are received during the
Response Time Interval and executed
against a cPRIME Order (‘‘cPRIME
Participating Quote or Order’’).
Accordingly, as amended, the list of
excluded contracts shall be QCC and
cQCC Orders, PRIME and cPRIME AOC
Responses, and unrelated MIAX Market
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Maker quotes or unrelated MIAX Market
Maker orders that are received during
the Response Time Interval and
executed against the PRIME Order
(‘‘PRIME Participating Quotes or
Orders’’) and unrelated MIAX Market
Maker complex quotes or unrelated
MIAX Market Maker complex orders
that are received during the Response
Time Interval and executed against a
cPRIME Order (‘‘cPRIME Participating
Quote or Order’’).
Second, in Section 1(a)(iii) of the Fee
Schedule, PCRP, the Exchange currently
excludes certain contracts executed
from participation in the PCRP. The Fee
Schedule currently excludes, in simple
or complex as applicable, QCC Orders,
mini-options, Priority Customer-toPriority 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. With the
introduction of these new complex
order types, the Exchange now proposes
to add the following contract executions
to the list of excluded contracts: cQCC
Orders, C2C and cC2C Orders, cPRIME
AOC Responses, cPRIME Contra-side
Orders, and cPRIME Orders for which
both the Agency and Contra-side Order
are Priority Customers. Accordingly, as
amended, the list of excluded contracts
shall be, in simple or complex as
applicable, QCC and cQCC Orders,
mini-options, Priority Customer-toPriority Customer Orders, C2C and cC2C
Orders, PRIME and cPRIME AOC
Responses, PRIME and cPRIME Contraside Orders, PRIME and cPRIME Orders
for which both the Agency and Contraside 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. The
Exchange notes that C2C Orders are
comprised entirely of Priority Customer
orders, and thus are currently excluded
contracts. However, the Exchange
desires to clarify that C2C Orders are
excluded by explicitly identifying and
adding such orders to the list of
excluded contracts. The Exchange notes
that Priority Customer-to-Priority
Customer Orders are two opposite
Priority Customer Orders that are paired
and entered into a PRIME Auction, with
the Member designating one such
Priority Customer Order as the PRIME
Agency Order, which such order
PO 00000
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38967
becomes eligible for price improvement
in the PRIME Auction.
Further, the Exchange currently
excludes certain contracts executed
from counting towards volume for
purposes of calculating the percentage
threshold in each of the PCRP tiers. The
Fee Schedule currently provides that
the percentage thresholds are calculated
based on the percentage of national
customer volume in multiply-listed
options classes listed on MIAX entered
and executed over the course of the
month (excluding QCC Orders, Priority
Customer-to-Priority Customer Orders,
PRIME AOC Responses, PRIME Contraside Orders, PRIME Orders for which
both the Agency and Contra-side Order
are Priority Customers). With the
introduction of these new complex
order types, the Exchange now proposes
to add the following order types to the
list of excluded contracts: cQCC Orders,
C2C and cC2C Orders, cPRIME AOC
Responses, cPRIME Contra-side Orders,
and cPRIME Orders for which both the
Agency and Contra-side Order are
Priority Customers. Accordingly, as
amended, the list of excluded contracts
shall be QCC and cQCC Orders, Priority
Customer-to-Priority Customer Orders,
C2C and cC2C Orders, PRIME and
cPRIME AOC Responses, PRIME and
cPRIME Contra-side Orders, and PRIME
and cPRIME Orders for which both the
Agency and Contra-side Order are
Priority Customers. The Exchange notes
that C2C Orders are comprised entirely
of Priority Customer orders, and thus
are currently excluded contracts under
Priority Customer-to-Priority Customer
Orders. However, the Exchange desires
to clarify that C2C Orders are excluded
by explicitly identifying and adding
such orders to the list of excluded
contracts.
Further, pursuant to the PCRP, the
Exchange currently credits each
‘‘Qualifying Member’’ 14 $0.03 per
contract resulting from each Priority
Customer order in simple or complex
order executions which falls within the
PCRP volume tier 1. However, the
Exchange also currently excludes
certain contracts executed from
receiving the $0.03 per contract credit.
The Fee Schedule currently excludes
QCC Orders, mini-options, Priority
Customer-to-Priority Customer Orders,
14 ‘‘Qualifying Member’’ shall mean a Member or
its Affiliate that qualifies for the Professional Rebate
Program as described below 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).
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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. With the
introduction of these new complex
order types, the Exchange now proposes
to add the following contract executions
to the list of excluded contracts: cQCC
Orders, C2C and cC2C Orders, cPRIME
Agency Orders, cPRIME AOC
Responses, cPRIME Contra-side Orders,
and cPRIME Orders for which both the
Agency and Contra-side Order are
Priority Customers. Accordingly, as
amended, the list of excluded contracts
shall be QCC and cQCC Orders, minioptions, Priority Customer-to-Priority
Customer Orders, C2C and cC2C Orders,
PRIME and cPRIME Agency Orders,
PRIME and cPRIME AOC Responses,
PRIME and cPRIME Contra-side Orders,
PRIME and cPRIME 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. The Exchange notes
that C2C Orders are comprised entirely
of Priority Customer orders, and thus
are currently excluded contracts under
Priority Customer-to-Priority Customer
Orders. However, the Exchange desires
to clarify that C2C Orders are excluded
by explicitly identifying and adding
such orders to the list of excluded
contracts.
Further, pursuant to the PCRP, the
Exchange currently credits any Member
or its Affiliate that qualifies for PCRP
volume tiers 3 or higher an additional
$0.02 per contract for each Priority
Customer order executed in the PRIME
Auction as a PRIME Agency Order over
a threshold of 1,500,000 contracts in a
month. The Exchange notes that the
additional $0.02 per contract credit will
not be applicable for cPRIME Agency
orders, and cPRIME Agency orders do
not count toward the threshold as
described below. The Exchange also
currently excludes certain contracts
executed from counting towards the
threshold of 1,500,000 contracts in a
month. The Fee Schedule currently
excludes 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
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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.
With the introduction of these new
complex order types, the Exchange now
proposes to add the following contract
executions to the list of excluded
contracts: cQCC Orders, C2C and cC2C
Orders, cPRIME Agency Orders, cPRIME
AOC Responses, cPRIME Contra-side
Orders, and cPRIME Orders for which
both the Agency and Contra-side Order
are Priority Customers. Accordingly, as
amended, the list of excluded contracts
shall be QCC and cQCC Orders, minioptions, Priority Customer-to-Priority
Customer Orders, C2C and cC2C Orders,
cPRIME Agency Orders, PRIME and
cPRIME AOC Responses, PRIME and
cPRIME Contra-side Orders, PRIME and
cPRIME 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. The Exchange notes
that C2C Orders are comprised entirely
of Priority Customer orders, and thus
are currently excluded contracts under
Priority Customer-to-Priority Customer
Orders. However, the Exchange desires
to clarify that C2C Orders are excluded
by explicitly identifying and adding
such orders to the list of excluded
contracts.
Third, in Section 1(a)(iv) of the Fee
Schedule, Professional Rebate Program
(‘‘PRP’’), the Exchange currently
excludes certain contracts executed
from participation in the PRP. The Fee
Schedule currently excludes, in simple
or complex as applicable, 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 (collectively, for
purposes of the Professional Rebate
Program, ‘‘Excluded Contracts’’). With
the introduction of these new complex
order types, the Exchange now proposes
to add the following contract executions
to the list of Excluded Contracts: cQCC
Orders, cPRIME Orders, cPRIME AOC
Responses, and cPRIME Contra-side
Orders. Accordingly, as amended, the
list of Excluded Contracts shall be, in
simple or complex as applicable, minioptions, Non-Priority Customer-to-NonPriority Customer Orders, QCC and
PO 00000
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cQCC Orders, PRIME and cPRIME
Orders, PRIME and cPRIME AOC
Responses, PRIME and cPRIME Contraside 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.
Fourth, in Section 1(b) of the Fee
Schedule, Marketing Fee, the Exchange
currently does not assess the Marketing
Fee to Market Makers 15 for contracts
executed as a PRIME Agency Order,
Contra-side Order, Qualified Contingent
Cross Order, PRIME Participating Quote
or Order or a PRIME AOC Response in
the PRIME Auction, unless it executes
against an unrelated order. With the
introduction of these new complex
order types, the Exchange now proposes
to add the following executions to that
list: (i) cPRIME Agency Orders, (ii)
cQCC Orders, and (iii) cPRIME
Participating Quotes or Orders or
cPRIME AOC Responses that trade
against a cPRIME Agency Order. The
Exchange also proposes to make a
number of non-substantive technical
corrections to the list, as follows: The
Exchange proposes to abbreviate
‘‘Qualified Contingent Cross Order’’ to
‘‘QCC Order’’; the Exchange proposes to
add clarifying language and to combine
the PRIME Participating Quote or Order
and PRIME AOC Response so that it
reads ‘‘PRIME Participating Quote or
Order or a PRIME AOC Response trades
against a PRIME Agency Order’’; and the
Exchange proposes to delete the text
‘‘Contra side Order’’ and ‘‘in the PRIME
Auction; unless, it executes against an
unrelated order’’, as such text is now
redundant because it is more explicitly
covered in the clarified text.
Accordingly, as amended, the text will
provide that MIAX will not assess a
Marketing Fee to Market Makers for
contracts executed: (i) as a PRIME or
cPRIME Agency Order, or as a QCC or
cQCC Order; (ii) when a PRIME
Participating Quote or Order or a PRIME
AOC Response trades against a PRIME
Agency Order; or (iii) when a cPRIME
Participating Quote or Order or a
cPRIME AOC Response trades against a
cPRIME Agency Order.
Fifth, the Exchange proposes to make
a number of non-substantive, technical
corrections to Section 1(a)(v) of the Fee
15 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.
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Schedule, MIAX Price Improvement
Mechanism (‘‘PRIME’’) Fees. The
Exchange proposes to clarify certain
explanatory text relating to the PRIME
Fees table. The first sentence of the text
currently states that ‘‘MIAX will assess
the Responder to PRIME Auction Fee to:
(i) A PRIME AOC Response that
executes against a PRIME Order, and (ii)
a PRIME Participating Quote or Order.’’
The Exchange proposes to revise the
text so that, as amended, it states
‘‘MIAX will assess the Responder to
PRIME Auction Fee to: (i) A PRIME
AOC Response that executes against a
PRIME Order, and (ii) a PRIME
Participating Quote or Order that
executes against a PRIME Order.’’ The
second sentence of the text states
‘‘MIAX will apply the PRIME Break-up
credit to the EEM that submitted the
PRIME Order for agency contracts that
are submitted to the PRIME Auction that
trade with a PRIME AOC Response or a
PRIME Participating Quote or Order.’’
The Exchange proposes to revise the
text so that, as amended, it states
‘‘MIAX will apply the PRIME Break-up
credit to the EEM that submitted the
PRIME Order for agency contracts that
are submitted to the PRIME Auction that
trade with a PRIME AOC Response or a
PRIME Participating Quote or Order that
trades with the PRIME Order. The third
sentence of the text states ‘‘The
applicable fee for PRIME Orders will be
applied to any contracts for which a
credit is provided.’’ The Exchange
proposes to delete this sentence in its
entirety, as it is redundant and
potentially ambiguous. The Exchange
believes that deleting this sentence
(which reiterates that Exchange charges
the Responder to PRIME Auction Fee
[sic] for all contracts on which the
Exchange pays the PRIME Break-up
Credit) will eliminate any potential
confusion among Members and
investors. The fifth sentence of the text
states ‘‘MIAX will assess the standard
transaction fees to a PRIME AOC
Response if they execute against
unrelated orders.’’ The Exchange
proposes to revise the text so that, as
amended, it states ‘‘MIAX will assess
the standard transaction fees to a PRIME
AOC Response if it executes against
unrelated orders.’’
2. Statutory Basis
The Exchange believes that its
proposal to amend its Fee Schedule is
consistent with Section 6(b) of the Act
in general, and furthers the objectives of
Section 6(b)(4) of the Act in particular,
in that it is an equitable allocation of
reasonable dues, fees, and other charges
among its members and issuers and
other persons using its facilities. The
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Exchange also believes the proposal
furthers the objectives of Section 6(b)(5)
of the Act in that it is designed to
promote just and equitable principles of
trade, to remove impediments to and
perfect the mechanism of a free and
open market and a national market
system, and, in general to protect
investors and the public interest and is
not designed to permit unfair
discrimination between customers,
issuers, brokers and dealers.
The Exchange believes that the
proposed fee structure for cPRIME
Auction transaction fees and rebates is
reasonable, equitable, and not unfairly
discriminatory. The proposed fee
structure is reasonably designed because
it is intended to incentivize market
participants to send complex order flow
to the Exchange in order to participate
in the price improvement mechanism in
a manner that enables the Exchange to
improve its overall competitiveness and
strengthen its market quality for all
market participants. cPRIME Auctions
and the corresponding fees are also
reasonably designed because the
proposed fees and rebates are very
similar to ones the Exchange assesses
for simple PRIME transactions, and are
within the range of fees and rebates
assessed by other exchanges employing
similar fee structures for complex orders
submitted and executed in a price
improvement mechanism.16 Other
competing exchanges offer different fees
and rebates for complex agency orders,
contra-side orders, and responders to an
auction in a manner similar to the
proposal.17 Other competing exchanges
also charge different rates for
transactions in their complex price
improvement mechanisms for customers
versus their non-customers in a manner
similar to the proposal.18
The fee and rebate structure is
reasonable, equitable, and not unfairly
discriminatory because it will apply
equally amongst all Priority Customer
orders in each category of cPRIME
Auction participation and it will also
apply equally amongst all non-Priority
Customer orders in each category of
cPRIME Auction participation. All
similarly situated orders for Priority
Customers are subject to the same
transaction fee and rebate schedule. All
similarly situated orders for market
participants that are not Priority
Customers are subject to the same
transaction fee and rebate schedule, and
access to the Exchange is offered on
16 See Nasdaq ISE, LLC Schedule of Fees, p. 9;
BOX Options Exchange Fee Schedule, p. 8.
17 Id.
18 Id.
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38969
terms that are not unfairly
discriminatory.
The Exchange believes that is
equitable and not unfairly
discriminatory that Priority Customers
be charged lower fees in cPRIME
Auctions than other market participants.
The exchanges in general have
historically aimed to improve markets
for investors and develop various
features within market structure for
customer benefit. The Exchange assesses
Priority Customers lower or no
transactions fees because Priority
Customer order flow enhances liquidity
on the Exchange for the benefit of all
market participants. 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.
Moreover, the Exchange believes that
assessing all other market participants
that are not Priority Customers a higher
transaction fee than Priority Customers
for cPRIME Order transactions is
reasonable, equitable, and not unfairly
discriminatory because these types of
market participants are more
sophisticated and have higher levels of
order flow activity and system usage.
This level of trading activity draws on
a greater amount of system resources
than that of Priority Customers, and
thus, generates greater ongoing
operational costs. Further, the Exchange
believes that charging all market
participants that are not Priority
Customers the same fee for all cPRIME
transactions is not unfairly
discriminatory as the fees will apply to
all these market participants equally.
The Exchange believes that it is
reasonable for cPRIME Agency and
Contra-side Orders to be assessed lower
fees than those providing responses.
Contra-side Orders guarantee the
cPRIME Agency Order, and are subject
to market risk during the time period
that the cPRIME Agency Order is
exposed to other market participants.
The Exchange believes that the market
participants entering the Contra-side
Order acts as a critical role in the
cPRIME Auction as their willingness to
guarantee the cPRIME Agency Order is
the keystone to the cPRIME Agency
Order gaining the opportunity for price
improvement.
The Exchange believes that it is
equitable and not unfairly
discriminatory to assess fees to
responders to the cPRIME Auction and
credit another participant to provide
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incentive for participants to submit
order flow to cPRIME Auctions. The
Exchange believes that it is appropriate
to provide incentives to market
participants to direct orders to
participate in cPRIME Auctions.
Further, the Exchange believes that the
transaction fees for responding to the
cPRIME Auction will not deter market
participants from providing price
improvement.
The Exchange believes that it is
reasonable to assess lower transaction
and credit rates to penny option classes
than non-penny option classes. The
Exchange believes that options which
trade at these wider spreads merit
offering greater inducement for market
participants. In particular, within the
cPRIME Auction, option classes that
typically trade in minimum increments
of $0.05 or $0.10 provide greater
opportunity for market participants to
offer price improvement. As such, the
Exchange believes that the opportunity
for additional price improvement
provided by these wider spreads again
merits offering greater incentive for
market participants to increase the
potential price improvement for
customer orders in these transactions.
The Exchange believes that the
proposed PCRP rebates for Priority
Customer orders submitted into cPRIME
Auctions are fair, equitable, and not
unreasonably discriminatory. The rebate
program is reasonably designed because
it will incentivize 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 proposed
tiered rebate is fair, equitable, and not
unreasonably discriminatory because it
will apply equally to all Priority
Customer orders submitted as a cPRIME
Agency Order. 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 PCRP is equitable and not unfairly
discriminatory because, while only
Priority Customer order flow qualifies
for the rebate 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. 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
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including sending more orders and
providing narrower and larger-sized
quotations in the effort to trade with
such Priority Customer order flow.
The Exchange believes that excluding
cQCC Orders, C2C and cC2C Orders,
cPRIME AOC Responses, cPRIME
Contra-side Orders, and cPRIME Orders
for which both the Agency and Contraside Order are Priority Customers from
the number of options contracts
executed on the Exchange by any
Member for purposes of the volume
thresholds and the PCRP is reasonable,
equitable, and not unfairly
discriminatory because participating
Members could otherwise collect the
rebates offered and volume thresholds
by executing excess volume in these
types of transactions in which no
transaction fees are charged on the
Exchange. The Exchange believes that
the rebate for Priority Customer agency
orders in the cPRIME Auction is
reasonably designed to incentivize
additional customer order flow to the
cPRIME Auction.
The Exchange believes the proposed
transaction fees for cQCC Orders are
reasonable because the proposed
amounts are identical to the fees
assessed for QCC transactions and are in
line with the amounts assessed at other
Exchanges for similar transactions.19
Additionally, the proposed fees would
be assessed to all non-Priority
Customers alike.
The Exchange believes the proposed
rebate for the initiating order side of a
cQCC transaction is reasonable because
other competing exchanges also provide
a rebate on the initiating order side.20
Additionally, the proposed rebate
amount is within the range of the rebate
amounts at the other competing
exchanges.21 The Exchange believes the
19 See BOX Options Exchange LLC (‘‘BOX’’) Fee
Schedule, Section I(D) (BOX does not charge Public
Customers but charges Professional Customers,
Broker Dealers and Market Makers $0.20 per
contract on both Agency and Contra Orders); see
also Chicago Board Options Exchange (‘‘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 Amex Options Fee Schedule, Section I.F
(NYSE Amex charges Non-Customers $0.20 per
contract, Specialists and e-Specialists $0.13 per
contract, and does not charge Customer and
Professional Customers).
20 See BOX Fee Schedule, Section I(D)(1); see also
CBOE Fee Schedule, ‘‘QCC Rate Table,’’ Page 5; see
also NYSE Amex Options Fee Schedule, Section
I.F; see also Nasdaq ISE Fee Schedule, Section
IV(A).
21 See BOX Fee Schedule, Section I(D)(1) (a $0.15
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
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proposed 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 cQCC Orders to the Exchange. The
Exchange believes it is reasonable,
equitable, and not unfairly
discriminatory to not provide a rebate
for the initiating order for cQCC
transactions for which both the initiator
and the contra-side orders are Priority
Customers since Priority Customers are
already incentivized by a reduced fee
for submitting cQCC Orders. The
Exchange believes that the proposed
exclusion of cQCC Orders from the
Market Maker Sliding Scale, the PCRP,
and the PRP is reasonable because it
enables cQCC Orders from all market
participants to be subject to only the
specific transaction fees as described
above that are tailored specifically for
encouraging market participants to
transact cQCC Orders on the Exchange.
The Exchange believes that the
exclusion is equitable and not unfairly
discriminatory because it ensures all
market participants, other than Priority
Customers, to be subject to the same
transaction fee for cQCC Orders. While
Priority Customers will benefit from a
reduced transaction fee rate for cQCC
Orders, excluding cQCC Orders from the
PCRP enables a more equitable and not
unfairly discriminatory outcome.
The Exchange believes that adding the
C2C fee to the Fee Schedule is
reasonable since it is clarifying the
Exchange’s existing practice and by
adding such C2C Order fee to the Fee
Schedule the Exchange believes that it
will make it more transparent as to how
the Exchange assesses such fee and
avoid any confusion as to how such fee
is assessed for simple (C2C) and
complex (cC2C) orders. The Exchange
believes that the proposed transaction
fee for cC2C Orders is reasonable
because the proposed amount is
identical to the fee assessed for C2C
transactions, which is currently $0.00.
The proposed fees would be charged to
all Priority Customers alike and the
Exchange believes that assessing a $0.00
fee to Priority Customers is equitable
and not unfairly discriminatory. By
assessing a $0.00 fee to Priority
Customer orders, the C2C and cC2C
side of the QCC transaction); see also NYSE Amex
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 Fee
Schedule, Section IV(A) (rebates range from $0.01
to $0.11 per contract).
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transaction fees will not discourage the
sending of Priority Customer orders.
The Exchange believes that specifying
that cPRIME Order and cQCC Order
executions are not subject to marketing
fees is reasonable, equitable and not
unfairly discriminatory. The Exchange
is seeking to encourage all participants,
including Market Makers, to send
cPRIME Orders and to respond to
cPRIME Auction RFR messages and the
Exchange believes that collecting
marketing fees from Market Makers may
discourage such participation. By
encouraging as many participants as
possible to respond, the Exchange
believes that it will lead to greater
opportunities for price improvement for
all cPRIME Agency Orders, not just
those entered on behalf of customers.
For these reasons, the Exchange believes
that excluding cPRIME Orders and
responses from the marketing fees are
reasonable, equitable, and not unfairly
discriminatory. The Exchange believes
that it is equitable and not unfairly
discriminatory to continue to charge a
marketing fee if an unrelated order
executes in the cPRIME Auction,
because that unrelated order is not
subject to the specialized fee structure
for cPRIME Auctions that is designed to
incentivize participation. The market
participant receives the benefit of a
cPRIME Auction execution and would
already expect to be charged a
marketing fee that is no different than
the fee the market participant was
expecting to pay trading against
unrelated orders outside the cPRIME
Auction. The Exchange further believes
that not assessing a Marketing Fee for
contracts executed as a cQCC Order is
equitable and not unfairly
discriminatory because such order type
originated from the same Member, thus
obviating the purpose of the Marketing
Fee.
The Exchange believes that the
proposed technical changes are
consistent with Section 6(b)(5) of the
Act because they are designed to
promote just and equitable principles of
trade, 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. The
Exchange believes it is appropriate to
make the proposed technical corrections
to its Fee Schedule so that Exchange
Members have a clear and accurate
understanding of the meaning of the
Exchange’s Fee Schedule.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will result in
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any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act. The
Exchange believes that the proposed
change will enhance the competiveness
of the Exchange relative to other
exchanges that offer their own
electronic crossing mechanisms and
offer their own complex crossing order
types. The Exchange believes that the
proposed fees and rebates for
participation in the cPRIME Auction,
the cQCC fees, and the C2C and cC2C
fees are not going to have an impact on
intra-market competition based on the
total cost for participants to transact in
such order types versus the cost for
participants to transact in the other
order types available for trading on the
Exchange. As noted above, the Exchange
believes that the proposed pricing for
the cPRIME Auction is comparable to
that of other exchanges offering similar
electronic price improvement
mechanisms for complex orders,22 and
the Exchange believes that, based on
experience with electronic price
improvement crossing mechanisms on
other markets, market participants
understand that the price-improving
benefits offered by the cPRIME Auction
justify the transaction costs associated
with the cPRIME Auction. To the extent
that there is a difference between noncPRIME Auction transactions and
cPRIME Auction transactions, the
Exchange does not believe this
difference will cause participants to
refrain from responding to cPRIME
Auctions. In addition, the Exchange
does not believe that the proposed
transaction fees and credits for these
new complex crossing order types
burden competition by creating a
disparity of transaction fees between
these order types and other order types.
The Exchange expects to see robust
competition within the cPRIME Auction
to trade against the cPRIME Agency
Order. The Exchange also expects to see
robust competition in the trading of
cQCC Orders and cC2C Orders, as the
Exchange’s pricing for those order types
is competitive with the pricing of other
competing Exchanges.
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,23 and Rule
19b–4(f)(2) 24 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.
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 (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
MIAX–2017–40 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Brent J. Fields, Secretary, Securities
and Exchange Commission, 100 F Street
NE., Washington, DC 20549–1090.
All submissions should refer to File
Number SR–MIAX–2017–40. 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 (https://www.sec.gov/
rules/sro.shtml). Copies of the
23 15
22 See
PO 00000
supra note 16.
Frm 00097
Fmt 4703
24 17
Sfmt 4703
38971
E:\FR\FM\16AUN1.SGM
U.S.C. 78s(b)(3)(A)(ii).
CFR 240.19b–4(f)(2).
16AUN1
38972
Federal Register / Vol. 82, No. 157 / Wednesday, August 16, 2017 / Notices
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
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–
2017–40, and should be submitted on or
before September 6, 2017.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.25
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2017–17277 Filed 8–15–17; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
Self-Regulatory Organizations; Bats
EDGA Exchange, Inc.; Notice of Filing
and Immediate Effectiveness of a
Proposed Rule Change Related to Fees
for Use on Bats EDGA Exchange, Inc.
asabaliauskas on DSKBBXCHB2PROD with NOTICES
August 10, 2017
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on July 31,
2017, Bats EDGA Exchange, Inc. (the
‘‘Exchange’’ or ‘‘EDGA’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I, II and III
below, which Items have been prepared
by the Exchange. The Exchange has
designated the proposed rule change as
one establishing or changing a member
due, fee, or other charge imposed by the
Exchange under Section 19(b)(3)(A)(ii)
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
VerDate Sep<11>2014
18:33 Aug 15, 2017
Jkt 241001
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange filed a proposal to
amend the fee schedule applicable to
Members 5 and non-Members of the
Exchange pursuant to EDGA Rules
15.1(a) and (c).
The text of the proposed rule change
is available at the Exchange’s Web site
at www.bats.com, at the principal office
of the Exchange, 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 parts of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
[Release No. 34–81369; File No. SR–
BatsEDGA–2017–20]
25 17
of the Act 3 and Rule 19b–4(f)(2)
thereunder,4 which renders the
proposed rule change effective upon
filing with the Commission. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
1. Purpose
The Exchange proposes to amend its
fee schedule to increase the fee for
orders in securities priced at or above
$1.00 that yield fee code RT.6 Fee code
RT is appended to orders that are routed
using a ROUT 7 routing strategy. ROUT
is a routing strategy that checks the
System 8 for available shares and it then
sent to destinations on the System
3 15
U.S.C. 78s(b)(3)(A)(ii).
CFR 240.19b–4(f)(2).
5 The term ‘‘Member’’ is defined as ‘‘any
registered broker or dealer that has been admitted
to membership in the Exchange.’’ See Exchange
Rule 1.5(n).
6 The Exchange does not propose to amend the
fees for orders yielding fee code RT in securities
priced below $1.00.
7 See Exchange Rule 11.11(g)(3).
8 The term ‘‘System’’ is defined as the electronic
communications and trading facility designated by
the Board through which securities orders of Users
are consolidated for ranking, execution and, when
applicable, routing away. See Exchange Rule
1.5(cc).
4 17
PO 00000
Frm 00098
Fmt 4703
Sfmt 4703
Routing Table.9 The Exchange proposes
to increase the fee charged for orders
that yield fee code RT from $0.00250 to
$0.00260 per share. The Exchange
proposes to implement this amendment
to its fee schedule August 1, 2017.10
2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
the objectives of Section 6 of the Act,11
in general, and furthers the objectives of
Section 6(b)(4),12 in particular, as it is
designed to provide for the equitable
allocation of reasonable dues, fees and
other charges among its Members and
other persons using its facilities.
The Exchange believes that its
proposal to increase the fee for orders
that yield fee code RT represents an
equitable allocation of reasonable dues,
fees, and other charges among Members
and other persons using its facilities in
that they are designed in part to cover
the costs of routing. While the affected
Members’ orders will be charged higher
fees due to the proposal, the increased
revenue received by the Exchange will
be used to fund the Exchange generally,
including the cost of maintaining and
improving the technology used to
handle and route orders from the
Exchange as well as programs that the
Exchange believes help to attract
additional liquidity and thus improve
the depth of liquidity available on the
Exchange. Accordingly, although the
cost of routing is increasing, the
Exchange believes that he increase is
modest and that higher routing fees will
benefit Members in other ways.
Furthermore, the Exchange notes that
routing through the Exchange is
voluntary. Lastly, the Exchange also
believes that the proposed amendment
is non-discriminatory because it applies
uniformly to all Members.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
This proposed rule change does not
impose any burden on competition that
is not necessary or appropriate in
furtherance of the purposes of the Act.
The Exchange does not believe that the
9 The System Routing Table refers to the
proprietary process for determining the specific
trading venues to which the System routes orders
and the order in which it routes them. See
Exchange Rule 11.11(g). See also Exchange Rule
11.11(g)(3).
10 By way of background, on May 1, 2017, the
Exchange previously charged $0.00250 per share for
orders in securities priced at or above $1.00 that
yield fee code RT. See Securities Exchange Act
Release Nos. 80653 (May 11, 2017), 82 FR 22685
(May 17, 2017) (SR–BatsEDGA–2017–12); and
79305 (November 14, 2016), 81 FR 81892
(November 18, 2016) (SR–BatsEDGA–2016–26).
11 15 U.S.C. 78f.
12 15 U.S.C. 78f(b)(4).
E:\FR\FM\16AUN1.SGM
16AUN1
]]>Agencies
[Federal Register Volume 82, Number 157 (Wednesday, August 16, 2017)]
[Notices]
[Pages 38964-38972]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-17277]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-81372; File No. SR-MIAX-2017-40]
Self-Regulatory Organizations; Miami International Securities
Exchange LLC; Notice of Filing and Immediate Effectiveness of a
Proposed Rule Change To Amend Its Fee Schedule in Connection With the
Adoption of Certain New Complex Order Types
August 10, 2017.
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 August 7, 2017, 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.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
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 adopt transaction fees and rebates
for certain new complex order types that have become available for
trading on the Exchange, as described below. The Exchange also proposes
to clarify an existing transaction fee that applies to an existing
order type, as well as make a number of technical corrections to its
Fee Schedule.
The Exchange initially filed the proposal on July 27, 2017 (SR-
MIAX-2017-37). That filing was withdrawn and replaced with the current
filing (SR-MIAX-2017-40).
. [sic]
The text of the proposed rule change is available on the Exchange's
Web site at https://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.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend its Fee Schedule to adopt
transaction fees and rebates for certain new complex order types that
have become available for trading on the Exchange, as described below.
The Exchange also proposes to clarify an existing transaction fee that
applies to an existing order type, as well as make a number of
technical corrections to the Fee Schedule.
The Exchange began trading complex orders \3\ in October, 2016.\4\
As part of its effort to continue to build out its complex order market
segment, the Exchange recently adopted rules to establish the following
three new types of complex orders as well as adopted new provisions
that relate to the processing of such complex order types: (i) Complex
PRIME (``cPRIME'') Orders, (ii) Complex Qualified Contingent Cross
(``cQCC'') Orders, and (iii) Complex Customer Cross (``cC2C'')
Orders.\5\ A cPRIME Order is a complex order that is submitted for
participation in a cPRIME Auction. A cQCC Order is comprised of an
originating complex order to buy or sell where each leg is at
[[Page 38965]]
least 1,000 contracts and that is identified as being part of a
qualified contingent trade, as defined in Rule 516, Interpretations and
Policies .01, coupled with a contra-side complex order or orders for
the same strategy totaling an equal number of contracts. A cC2C Order
is comprised of one Priority Customer complex order to buy and one
Priority Customer complex order to sell the same complex strategy at
the same initiating price (which must be better than (inside) the
icMBBO \6\ price or the best net price of a complex order for the
strategy) and for the same quantity. cPRIME Orders are processed and
executed in the Exchange's PRIME mechanism, the same mechanism that the
Exchange uses to process and execute simple PRIME orders, pursuant to
Exchange Rule 515A. cQCC and cC2C Orders are processed and executed in
the same mechanism that the Exchange uses to cross simple QCC orders
and Customer Cross orders, pursuant to Exchange Rule 515.
---------------------------------------------------------------------------
\3\ 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. Mini-options may only be part of a complex order that
includes other mini-options. Only those complex orders in the
classes designated by the Exchange and communicated to Members via
Regulatory Circular with no more than the applicable number of legs,
as determined by the Exchange on a class-by-class basis and
communicated to Members via Regulatory Circular, are eligible for
processing. See Exchange Rule 518(a)(5).
\4\ For a complete description of the trading of complex orders
on the Exchange, see Exchange Rule 518. See also, Securities
Exchange Act Release No. 79072 (October 7, 2016), 81 FR 71131
(October 14, 2016) (SR-MIAX-2016-26).
\5\ See Securities Exchange Act Release No. 81131 (July 12,
2017), 82 FR 32900 (July 18, 2017) (SR-MIAX-2017-19). (Order
Granting Approval of a Proposed Rule Change to Amend MIAX Options
Rules 515, Execution of Orders and Quotes; 515A, MIAX Price
Improvement Mechanism (``PRIME'') and PRIME Solicitation Mechanism;
and 518, Complex Orders).
\6\ The Implied Complex MIAX Best Bid or Offer (``icMBBO'') is a
calculation that uses the best price from the Simple Order Book for
each component of a complex strategy including displayed and non-
displayed trading interest. For stock-option orders, the icMBBO for
a complex strategy will be calculated using the best price (whether
displayed or non-displayed) on the Simple Order Book in the
individual option component(s), and the NBBO in the stock component.
See Exchange Rule 518(a)(11).
---------------------------------------------------------------------------
cPRIME Orders
Rule 518(b)(7) defines a cPRIME Order as a type of complex order
that is submitted for participation in a cPRIME Auction. Trading of
cPRIME Orders is governed by Rule 515A, Interpretations and Policies
.12. A cPRIME Auction is the price-improvement mechanism of the
Exchange's System \7\ pursuant to which a Member (``Initiating
Member'') electronically submits a complex order that it represents as
agent (an ``Agency Order'') into a cPRIME Auction. The Initiating
Member, in submitting an Agency Order, must be willing to either (i)
cross the Agency Order at a single price (a ``single-price
submission'') against principal or solicited interest, or (ii)
automatically match (``auto-match''), against principal or solicited
interest, the price and size of responses to a Request for Response
(``RFR'') that is broadcast to MIAX Options participants up to an
optional designated limit price.
---------------------------------------------------------------------------
\7\ The term ``System'' means the automated trading system used
by the Exchange for the trading of securities. See Exchange Rule
100.
---------------------------------------------------------------------------
The Exchange utilizes the same mechanism for the processing and
execution of both PRIME and cPRIME Orders. Accordingly, the Exchange
has modified Rule 515A so that it also permits the execution of cPRIME
Orders, through changes to Rule 515A(a) and the adoption of
Interpretations and Policies .12 (PRIME for Complex Orders).\8\
Interpretations and Policies .12 includes certain processing and
execution requirements for cPRIME Orders that differ from the
processing and execution requirements under Rule 515A(a) for simple
PRIME Orders.\9\
---------------------------------------------------------------------------
\8\ See supra note 5.
\9\ Id.
---------------------------------------------------------------------------
The Exchange now proposes to adopt new Section 1(a)(vi), MIAX
Complex Price Improvement Mechanism (``cPRIME'') Fees, on the Fee
Schedule to establish transaction fees and credits for executions in a
cPRIME Auction, which transaction fees and credits are similar to
transaction fees and credits that the Exchange currently assesses for
executions in a PRIME Auction:
----------------------------------------------------------------------------------------------------------------
cPRIME order fee Responder to cPRIME cPRIME break-up
------------------------ auction fee credit
-----------------------------------------------
Per Per Per Per Per Per
Types of market participants contract contract contract contract contract contract
fee for fee for fee for fee for credit for credit for
agency contra- penny non-penny penny non-penny
order side order classes classes classes classes
----------------------------------------------------------------------------------------------------------------
Priority Customer....................... $0.00 $0.00 $0.50 $0.99 $0.25 $0.60
Public Customer that is Not a Priority 0.30 0.05 0.50 0.99 0.25 0.60
Customer...............................
MIAX Market Maker....................... 0.30 0.05 0.50 0.99 0.25 0.60
Non-MIAX Market Maker................... 0.30 0.05 0.50 0.99 0.25 0.60
Non-Member Broker-Dealer................ 0.30 0.05 0.50 0.99 0.25 0.60
Firm.................................... 0.30 0.05 0.50 0.99 0.25 0.60
----------------------------------------------------------------------------------------------------------------
This cPRIME Fee table (including the amounts therein) is identical to
the PRIME Fee table (including the amounts therein), which is contained
in Section 1(a)(v) of the Fee Schedule.
The Exchange also proposes to adopt certain explanatory text
relating to the cPRIME Fee table, just as the Exchange currently has
relating to the PRIME Fee table. The text provides that all fees and
credits are per contract per leg. Also, MIAX will assess the Responder
to cPRIME Auction Fee to: (i) A cPRIME AOC Response that executes
against a cPRIME Order, and (ii) a cPRIME Participating Quote or Order
\10\ that executes against a cPRIME Order. MIAX will apply the cPRIME
Break-up credit to the EEM that submitted the cPRIME Order for agency
contracts that are submitted to the cPRIME Auction that trade with a
cPRIME AOC Response or a cPRIME Participating Quote or Order that
trades with the cPRIME Order. MIAX will assess the standard complex
transaction fees to a cPRIME AOC Response if it executes against
unrelated complex orders. Any Member \11\ or its Affiliate \12\ that
qualifies for Priority Customer Rebate Program volume tiers 3 or higher
and submits a cPRIME AOC Response that is received during the Response
Time Interval and executed against the cPRIME Order, or a cPRIME
Participating Quote or Order that is received during the Response Time
Interval and executed against the cPRIME Order, will be assessed a
Discounted cPRIME Response Fee of $0.46 per contract for standard
complex order options in Penny Pilot classes. Any Member or its
Affiliate that
[[Page 38966]]
qualifies for Priority Customer Rebate Program volume tiers 3 or higher
and submits a cPRIME AOC Response that is received during the Response
Time Interval and executed against the cPRIME Order, or a cPRIME
Participating Quote or Order that is received during the Response Time
Interval and executed against the cPRIME Order, will be assessed a
Discounted cPRIME Response Fee of $0.95 per contract for standard
complex order options in non-Penny Pilot classes.
---------------------------------------------------------------------------
\10\ The term ``cPRIME Participating Quote or Order'' means an
unrelated MIAX Market Maker complex quote or unrelated MIAX Market
Maker complex order that is received during the Response Time
Interval and executed against a cPRIME Order. See Section 1(a)(i) of
the Fee Schedule, as described below.
\11\ 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.
\12\ For purposes of the MIAX Options Fee Schedule, the term
``Affiliate'' means (i) 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''), or (ii) the Appointed Market Maker
of an Appointed EEM (or, conversely, the Appointed EEM of an
Appointed Market Maker). See Fee Schedule note 1.
---------------------------------------------------------------------------
The Exchange also proposes to amend Section 1(a)(iii), the Priority
Customer Rebate Program (the ``PCRP''), of the Fee Schedule to
establish a tiered per contract credit for cPRIME Agency Orders. The
Exchange proposes to credit each Member $0.10 per contract per leg for
each Priority Customer cPRIME Agency Order in each tier. The Exchange
also proposes to adopt certain explanatory text relating to cPRIME
Agency Orders in PCRP table, just as the Exchange currently has
relating to other order types in the PCRP table. The text provides that
all fees and rebates are per contract per leg. Also for each Priority
Customer complex order submitted into the cPRIME Auction as a cPRIME
Agency Order, MIAX shall credit each member at the separate per
contract per leg rate for cPRIME Agency Orders. However, no rebates
will be paid if the cPRIME Agency Order executes against a Contra-side
Order which is also a Priority Customer. Finally, unless otherwise
explicitly set forth therein, the remainder of the explanatory text
relating to the PCRP set forth in that Section 1(a)(iii) shall apply to
cPRIME Agency Orders. The Exchange notes that a Member or its Affiliate
that qualifies for PCRP volume tiers 3 or higher receives an additional
rebate of $0.02 per contract for each Priority Customer order executed
in the PRIME Auction as a PRIME Agency Order over a threshold of
1,500,000 contracts in a month.
Finally, for clarification, just as is the case today for other
types of complex orders, if the cPRIME order legs into the simple order
book, the contracts that were entered directly into 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. Also, the Exchange will assess only the
cPRIME fees contained in Section 1(a)(vi) with respect to cPRIME
Auctions--the Exchange will not also assess the complex order fees
contained elsewhere in Section 1(a). For example, a MIAX Market Maker
would only be charged $0.50 per contract per leg executed for
responding to a cPRIME Auction, pursuant to Section 1(a)(vi); it would
not also be charged the $0.10 Per Contract Surcharge for Removing
Liquidity Against a Resting Priority Customer Complex Order on the
Strategy Book fee contained in Section 1(a)(i). Also, if a cPRIME
Agency Order legs into a simple Market Maker order on the simple order
book, the Market Maker order would not be considered to be a Responder
for fee purposes.
As Section 1(a)(vi) will now contain the proposed cPRIME fees, the
current simple QCC Fees table will be renumbered as Section 1(a)(vii).
There are no substantive changes for simple QCC fees.
cQCC Orders
The Exchange proposes to adopt new Section 1(a)(viii), cQCC Fees,
to the Fee Schedule to establish transaction fees and rebates for cQCC
Orders, which are identical to transaction fees and rebates that the
Exchange currently charges for simple QCC Orders:
----------------------------------------------------------------------------------------------------------------
cQCC Order
-----------------------------------------------
Types of market participants Per contract Per contract Per contract
fee for fee for rebate for
initiator contra-side initiator
----------------------------------------------------------------------------------------------------------------
Priority Customer............................................... $0.00 $0.00 $0.10
Public Customer that is Not a Priority Customer................. 0.15 0.15 0.10
MIAX Market Maker............................................... 0.15 0.15 0.10
Non-MIAX Market Maker........................................... 0.15 0.15 0.10
Non-Member Broker-Dealer........................................ 0.15 0.15 0.10
Firm............................................................ 0.15 0.15 0.10
----------------------------------------------------------------------------------------------------------------
This cQCC Fees table (including the amounts therein) is identical to
the QCC Fees table (including the amounts therein), which is contained
in Section 1(a)(vii) of the Fee Schedule. The Exchange also proposes to
adopt certain explanatory text relating to the cQCC Fees table, just as
the Exchange currently has relating to the simple QCC Fees table. The
text provides that all fees and rebates are per contract per leg. Also,
rebates will be delivered to the Member firm that enters the order into
the MIAX system, but will only be paid on the initiating side of the
cQCC transaction. However, no rebates will be paid for cQCC
transactions for which both the initiator and contra-side orders are
Priority Customers. A cQCC transaction is comprised of an `initiating
complex order' to buy (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 (buy)
an equal number of contracts.
C2C and cC2C Orders
The Exchange proposes to adopt new Section 1(a)(ix), C2C and cC2C
Fees, to the Fee Schedule to clarify and establish transaction fees and
rebates for C2C Orders and cC2C Orders.
------------------------------------------------------------------------
C2C and cC2C
order per
Types of market participants contract fee/
rebate
------------------------------------------------------------------------
Priority Customer...................................... $0.00
------------------------------------------------------------------------
The Exchange notes that it currently offers trading in C2C
Orders.\13\ Because C2C Orders are comprised entirely of Priority
Customer orders, the Exchange assesses a $0.00 per contract transaction
fee and a $0.00 rebate to such orders, pursuant to section 1(a)(ii) of
the Fee Schedule. However, the Exchange desires to clarify and make
explicit that C2C Orders are assessed a $0.00 per contract transaction
fee and paid a $0.00 per contract rebate. The Exchange is also
proposing to assess cC2C Orders a $0.00 per contract transaction fee
and to pay a $0.00 per contract rebate.
---------------------------------------------------------------------------
\13\ See Exchange Rule 516(i).
---------------------------------------------------------------------------
The Exchange also proposes to adopt certain explanatory text
relating to the C2C and cC2C Fees table. The text provides that all
fees and rebates are per contract per leg. Also, a C2C Order is
comprised of a Priority Customer Order to buy and a Priority Customer
Order to sell at the same price and for the same quantity. A cC2C Order
is comprised of
[[Page 38967]]
one Priority Customer complex order to buy and one Priority Customer
complex order to sell at the same price and for the same quantity.
Exclusion From Certain Percentage Thresholds and Programs and Technical
Corrections
The Exchange notes that it currently excludes certain simple PRIME,
QCC, and C2C order types from counting towards certain percentage
thresholds and from participating in certain programs under its Fee
Schedule. Accordingly, with the introduction of these new complex order
types on the Exchange, i.e. cPRIME, cQCC, and cC2C Orders, the Exchange
is similarly proposing to exclude these new order types from counting
towards those certain percentage thresholds and from participating in
certain programs under its Fee Schedule. The Exchange notes that C2C
Orders are comprised entirely of Priority Customer orders, and thus,
where applicable, are currently excluded contracts under Priority
Customer-to-Priority Customer Orders. However, the Exchange desires to
clarify that C2C Orders are, where applicable, excluded by explicitly
identifying and adding such orders to the list of excluded contracts,
as described below.
First, in Section 1(a)(i) of the Fee Schedule, Market Maker
Transaction Fees, Market Maker Sliding Scale, the Exchange currently
excludes certain contracts executed from counting towards volume for
purposes calculating the percentage threshold in each of the Market
Maker tiers. The Fee Schedule currently provides that volume thresholds
are based on the total national Market Maker volume of any options
classes with traded volume on MIAX during the month in simple and
complex orders (excluding QCC Orders, PRIME AOC Responses, and
unrelated MIAX Market Maker quotes or unrelated MIAX Market Maker
orders that are received during the Response Time Interval and executed
against the PRIME Order (``PRIME Participating Quotes or Orders'')).
With the introduction of these new complex order types, the Exchange
now proposes to add the following order types to the list of excluded
contracts: cQCC Orders, cPRIME AOC Responses, and unrelated MIAX Market
Maker complex quotes or unrelated MIAX Market Maker complex orders that
are received during the Response Time Interval and executed against a
cPRIME Order (``cPRIME Participating Quote or Order''). Accordingly, as
amended, the list of excluded contracts shall be QCC and cQCC Orders,
PRIME and cPRIME AOC Responses, and unrelated MIAX Market Maker quotes
or unrelated MIAX Market Maker orders that are received during the
Response Time Interval and executed against the PRIME Order (``PRIME
Participating Quotes or Orders'') and unrelated MIAX Market Maker
complex quotes or unrelated MIAX Market Maker complex orders that are
received during the Response Time Interval and executed against a
cPRIME Order (``cPRIME Participating Quote or Order'').
Second, in Section 1(a)(iii) of the Fee Schedule, PCRP, the
Exchange currently excludes certain contracts executed from
participation in the PCRP. The Fee Schedule currently excludes, in
simple or complex as applicable, 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. With the introduction of these new complex order types, the
Exchange now proposes to add the following contract executions to the
list of excluded contracts: cQCC Orders, C2C and cC2C Orders, cPRIME
AOC Responses, cPRIME Contra-side Orders, and cPRIME Orders for which
both the Agency and Contra-side Order are Priority Customers.
Accordingly, as amended, the list of excluded contracts shall be, in
simple or complex as applicable, QCC and cQCC Orders, mini-options,
Priority Customer-to-Priority Customer Orders, C2C and cC2C Orders,
PRIME and cPRIME AOC Responses, PRIME and cPRIME Contra-side Orders,
PRIME and cPRIME 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.
The Exchange notes that C2C Orders are comprised entirely of Priority
Customer orders, and thus are currently excluded contracts. However,
the Exchange desires to clarify that C2C Orders are excluded by
explicitly identifying and adding such orders to the list of excluded
contracts. The Exchange notes that Priority Customer-to-Priority
Customer Orders are two opposite Priority Customer Orders that are
paired and entered into a PRIME Auction, with the Member designating
one such Priority Customer Order as the PRIME Agency Order, which such
order becomes eligible for price improvement in the PRIME Auction.
Further, the Exchange currently excludes certain contracts executed
from counting towards volume for purposes of calculating the percentage
threshold in each of the PCRP tiers. The Fee Schedule currently
provides that the percentage thresholds are calculated based on the
percentage of national customer volume in multiply-listed options
classes listed on MIAX entered and executed over the course of the
month (excluding QCC Orders, 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).
With the introduction of these new complex order types, the Exchange
now proposes to add the following order types to the list of excluded
contracts: cQCC Orders, C2C and cC2C Orders, cPRIME AOC Responses,
cPRIME Contra-side Orders, and cPRIME Orders for which both the Agency
and Contra-side Order are Priority Customers. Accordingly, as amended,
the list of excluded contracts shall be QCC and cQCC Orders, Priority
Customer-to-Priority Customer Orders, C2C and cC2C Orders, PRIME and
cPRIME AOC Responses, PRIME and cPRIME Contra-side Orders, and PRIME
and cPRIME Orders for which both the Agency and Contra-side Order are
Priority Customers. The Exchange notes that C2C Orders are comprised
entirely of Priority Customer orders, and thus are currently excluded
contracts under Priority Customer-to-Priority Customer Orders. However,
the Exchange desires to clarify that C2C Orders are excluded by
explicitly identifying and adding such orders to the list of excluded
contracts.
Further, pursuant to the PCRP, the Exchange currently credits each
``Qualifying Member'' \14\ $0.03 per contract resulting from each
Priority Customer order in simple or complex order executions which
falls within the PCRP volume tier 1. However, the Exchange also
currently excludes certain contracts executed from receiving the $0.03
per contract credit. The Fee Schedule currently excludes QCC Orders,
mini-options, Priority Customer-to-Priority Customer Orders,
[[Page 38968]]
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.
With the introduction of these new complex order types, the Exchange
now proposes to add the following contract executions to the list of
excluded contracts: cQCC Orders, C2C and cC2C Orders, cPRIME Agency
Orders, cPRIME AOC Responses, cPRIME Contra-side Orders, and cPRIME
Orders for which both the Agency and Contra-side Order are Priority
Customers. Accordingly, as amended, the list of excluded contracts
shall be QCC and cQCC Orders, mini-options, Priority Customer-to-
Priority Customer Orders, C2C and cC2C Orders, PRIME and cPRIME Agency
Orders, PRIME and cPRIME AOC Responses, PRIME and cPRIME Contra-side
Orders, PRIME and cPRIME 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. The Exchange notes that C2C Orders are comprised entirely of
Priority Customer orders, and thus are currently excluded contracts
under Priority Customer-to-Priority Customer Orders. However, the
Exchange desires to clarify that C2C Orders are excluded by explicitly
identifying and adding such orders to the list of excluded contracts.
---------------------------------------------------------------------------
\14\ ``Qualifying Member'' shall mean a Member or its Affiliate
that qualifies for the Professional Rebate Program as described
below 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).
---------------------------------------------------------------------------
Further, pursuant to the PCRP, the Exchange currently credits any
Member or its Affiliate that qualifies for PCRP volume tiers 3 or
higher an additional $0.02 per contract for each Priority Customer
order executed in the PRIME Auction as a PRIME Agency Order over a
threshold of 1,500,000 contracts in a month. The Exchange notes that
the additional $0.02 per contract credit will not be applicable for
cPRIME Agency orders, and cPRIME Agency orders do not count toward the
threshold as described below. The Exchange also currently excludes
certain contracts executed from counting towards the threshold of
1,500,000 contracts in a month. The Fee Schedule currently excludes 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. With the introduction
of these new complex order types, the Exchange now proposes to add the
following contract executions to the list of excluded contracts: cQCC
Orders, C2C and cC2C Orders, cPRIME Agency Orders, cPRIME AOC
Responses, cPRIME Contra-side Orders, and cPRIME Orders for which both
the Agency and Contra-side Order are Priority Customers. Accordingly,
as amended, the list of excluded contracts shall be QCC and cQCC
Orders, mini-options, Priority Customer-to-Priority Customer Orders,
C2C and cC2C Orders, cPRIME Agency Orders, PRIME and cPRIME AOC
Responses, PRIME and cPRIME Contra-side Orders, PRIME and cPRIME 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. The Exchange notes
that C2C Orders are comprised entirely of Priority Customer orders, and
thus are currently excluded contracts under Priority Customer-to-
Priority Customer Orders. However, the Exchange desires to clarify that
C2C Orders are excluded by explicitly identifying and adding such
orders to the list of excluded contracts.
Third, in Section 1(a)(iv) of the Fee Schedule, Professional Rebate
Program (``PRP''), the Exchange currently excludes certain contracts
executed from participation in the PRP. The Fee Schedule currently
excludes, in simple or complex as applicable, 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 (collectively, for purposes of the
Professional Rebate Program, ``Excluded Contracts''). With the
introduction of these new complex order types, the Exchange now
proposes to add the following contract executions to the list of
Excluded Contracts: cQCC Orders, cPRIME Orders, cPRIME AOC Responses,
and cPRIME Contra-side Orders. Accordingly, as amended, the list of
Excluded Contracts shall be, in simple or complex as applicable, mini-
options, Non-Priority Customer-to-Non-Priority Customer Orders, QCC and
cQCC Orders, PRIME and cPRIME Orders, PRIME and cPRIME AOC Responses,
PRIME and cPRIME 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.
Fourth, in Section 1(b) of the Fee Schedule, Marketing Fee, the
Exchange currently does not assess the Marketing Fee to Market Makers
\15\ for contracts executed as a PRIME Agency Order, Contra-side Order,
Qualified Contingent Cross Order, PRIME Participating Quote or Order or
a PRIME AOC Response in the PRIME Auction, unless it executes against
an unrelated order. With the introduction of these new complex order
types, the Exchange now proposes to add the following executions to
that list: (i) cPRIME Agency Orders, (ii) cQCC Orders, and (iii) cPRIME
Participating Quotes or Orders or cPRIME AOC Responses that trade
against a cPRIME Agency Order. The Exchange also proposes to make a
number of non-substantive technical corrections to the list, as
follows: The Exchange proposes to abbreviate ``Qualified Contingent
Cross Order'' to ``QCC Order''; the Exchange proposes to add clarifying
language and to combine the PRIME Participating Quote or Order and
PRIME AOC Response so that it reads ``PRIME Participating Quote or
Order or a PRIME AOC Response trades against a PRIME Agency Order'';
and the Exchange proposes to delete the text ``Contra side Order'' and
``in the PRIME Auction; unless, it executes against an unrelated
order'', as such text is now redundant because it is more explicitly
covered in the clarified text. Accordingly, as amended, the text will
provide that MIAX will not assess a Marketing Fee to Market Makers for
contracts executed: (i) as a PRIME or cPRIME Agency Order, or as a QCC
or cQCC Order; (ii) when a PRIME Participating Quote or Order or a
PRIME AOC Response trades against a PRIME Agency Order; or (iii) when a
cPRIME Participating Quote or Order or a cPRIME AOC Response trades
against a cPRIME Agency Order.
---------------------------------------------------------------------------
\15\ 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.
---------------------------------------------------------------------------
Fifth, the Exchange proposes to make a number of non-substantive,
technical corrections to Section 1(a)(v) of the Fee
[[Page 38969]]
Schedule, MIAX Price Improvement Mechanism (``PRIME'') Fees. The
Exchange proposes to clarify certain explanatory text relating to the
PRIME Fees table. The first sentence of the text currently states that
``MIAX will assess the Responder to PRIME Auction Fee to: (i) A PRIME
AOC Response that executes against a PRIME Order, and (ii) a PRIME
Participating Quote or Order.'' The Exchange proposes to revise the
text so that, as amended, it states ``MIAX will assess the Responder to
PRIME Auction Fee to: (i) A PRIME AOC Response that executes against a
PRIME Order, and (ii) a PRIME Participating Quote or Order that
executes against a PRIME Order.'' The second sentence of the text
states ``MIAX will apply the PRIME Break-up credit to the EEM that
submitted the PRIME Order for agency contracts that are submitted to
the PRIME Auction that trade with a PRIME AOC Response or a PRIME
Participating Quote or Order.'' The Exchange proposes to revise the
text so that, as amended, it states ``MIAX will apply the PRIME Break-
up credit to the EEM that submitted the PRIME Order for agency
contracts that are submitted to the PRIME Auction that trade with a
PRIME AOC Response or a PRIME Participating Quote or Order that trades
with the PRIME Order. The third sentence of the text states ``The
applicable fee for PRIME Orders will be applied to any contracts for
which a credit is provided.'' The Exchange proposes to delete this
sentence in its entirety, as it is redundant and potentially ambiguous.
The Exchange believes that deleting this sentence (which reiterates
that Exchange charges the Responder to PRIME Auction Fee [sic] for all
contracts on which the Exchange pays the PRIME Break-up Credit) will
eliminate any potential confusion among Members and investors. The
fifth sentence of the text states ``MIAX will assess the standard
transaction fees to a PRIME AOC Response if they execute against
unrelated orders.'' The Exchange proposes to revise the text so that,
as amended, it states ``MIAX will assess the standard transaction fees
to a PRIME AOC Response if it executes against unrelated orders.''
2. Statutory Basis
The Exchange believes that its proposal to amend its Fee Schedule
is consistent with Section 6(b) of the Act in general, and furthers the
objectives of Section 6(b)(4) of the Act in particular, in that it is
an equitable allocation of reasonable dues, fees, and other charges
among its 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 in that it is designed to promote just and
equitable principles of trade, to remove impediments to and perfect the
mechanism of a free and open market and a national market system, and,
in general to protect investors and the public interest and is not
designed to permit unfair discrimination between customers, issuers,
brokers and dealers.
The Exchange believes that the proposed fee structure for cPRIME
Auction transaction fees and rebates is reasonable, equitable, and not
unfairly discriminatory. The proposed fee structure is reasonably
designed because it is intended to incentivize market participants to
send complex order flow to the Exchange in order to participate in the
price improvement mechanism in a manner that enables the Exchange to
improve its overall competitiveness and strengthen its market quality
for all market participants. cPRIME Auctions and the corresponding fees
are also reasonably designed because the proposed fees and rebates are
very similar to ones the Exchange assesses for simple PRIME
transactions, and are within the range of fees and rebates assessed by
other exchanges employing similar fee structures for complex orders
submitted and executed in a price improvement mechanism.\16\ Other
competing exchanges offer different fees and rebates for complex agency
orders, contra-side orders, and responders to an auction in a manner
similar to the proposal.\17\ Other competing exchanges also charge
different rates for transactions in their complex price improvement
mechanisms for customers versus their non-customers in a manner similar
to the proposal.\18\
---------------------------------------------------------------------------
\16\ See Nasdaq ISE, LLC Schedule of Fees, p. 9; BOX Options
Exchange Fee Schedule, p. 8.
\17\ Id.
\18\ Id.
---------------------------------------------------------------------------
The fee and rebate structure is reasonable, equitable, and not
unfairly discriminatory because it will apply equally amongst all
Priority Customer orders in each category of cPRIME Auction
participation and it will also apply equally amongst all non-Priority
Customer orders in each category of cPRIME Auction participation. All
similarly situated orders for Priority Customers are subject to the
same transaction fee and rebate schedule. All similarly situated orders
for market participants that are not Priority Customers are subject to
the same transaction fee and rebate schedule, and access to the
Exchange is offered on terms that are not unfairly discriminatory.
The Exchange believes that is equitable and not unfairly
discriminatory that Priority Customers be charged lower fees in cPRIME
Auctions than other market participants. The exchanges in general have
historically aimed to improve markets for investors and develop various
features within market structure for customer benefit. The Exchange
assesses Priority Customers lower or no transactions fees because
Priority Customer order flow enhances liquidity on the Exchange for the
benefit of all market participants. 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.
Moreover, the Exchange believes that assessing all other market
participants that are not Priority Customers a higher transaction fee
than Priority Customers for cPRIME Order transactions is reasonable,
equitable, and not unfairly discriminatory because these types of
market participants are more sophisticated and have higher levels of
order flow activity and system usage. This level of trading activity
draws on a greater amount of system resources than that of Priority
Customers, and thus, generates greater ongoing operational costs.
Further, the Exchange believes that charging all market participants
that are not Priority Customers the same fee for all cPRIME
transactions is not unfairly discriminatory as the fees will apply to
all these market participants equally.
The Exchange believes that it is reasonable for cPRIME Agency and
Contra-side Orders to be assessed lower fees than those providing
responses. Contra-side Orders guarantee the cPRIME Agency Order, and
are subject to market risk during the time period that the cPRIME
Agency Order is exposed to other market participants. The Exchange
believes that the market participants entering the Contra-side Order
acts as a critical role in the cPRIME Auction as their willingness to
guarantee the cPRIME Agency Order is the keystone to the cPRIME Agency
Order gaining the opportunity for price improvement.
The Exchange believes that it is equitable and not unfairly
discriminatory to assess fees to responders to the cPRIME Auction and
credit another participant to provide
[[Page 38970]]
incentive for participants to submit order flow to cPRIME Auctions. The
Exchange believes that it is appropriate to provide incentives to
market participants to direct orders to participate in cPRIME Auctions.
Further, the Exchange believes that the transaction fees for responding
to the cPRIME Auction will not deter market participants from providing
price improvement.
The Exchange believes that it is reasonable to assess lower
transaction and credit rates to penny option classes than non-penny
option classes. The Exchange believes that options which trade at these
wider spreads merit offering greater inducement for market
participants. In particular, within the cPRIME Auction, option classes
that typically trade in minimum increments of $0.05 or $0.10 provide
greater opportunity for market participants to offer price improvement.
As such, the Exchange believes that the opportunity for additional
price improvement provided by these wider spreads again merits offering
greater incentive for market participants to increase the potential
price improvement for customer orders in these transactions.
The Exchange believes that the proposed PCRP rebates for Priority
Customer orders submitted into cPRIME Auctions are fair, equitable, and
not unreasonably discriminatory. The rebate program is reasonably
designed because it will incentivize 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 proposed tiered rebate is fair,
equitable, and not unreasonably discriminatory because it will apply
equally to all Priority Customer orders submitted as a cPRIME Agency
Order. 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 PCRP is
equitable and not unfairly discriminatory because, while only Priority
Customer order flow qualifies for the rebate 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. 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 Exchange believes that excluding cQCC Orders, C2C and cC2C
Orders, cPRIME AOC Responses, cPRIME Contra-side Orders, and cPRIME
Orders for which both the Agency and Contra-side Order are Priority
Customers from the number of options contracts executed on the Exchange
by any Member for purposes of the volume thresholds and the PCRP is
reasonable, equitable, and not unfairly discriminatory because
participating Members could otherwise collect the rebates offered and
volume thresholds by executing excess volume in these types of
transactions in which no transaction fees are charged on the Exchange.
The Exchange believes that the rebate for Priority Customer agency
orders in the cPRIME Auction is reasonably designed to incentivize
additional customer order flow to the cPRIME Auction.
The Exchange believes the proposed transaction fees for cQCC Orders
are reasonable because the proposed amounts are identical to the fees
assessed for QCC transactions and are in line with the amounts assessed
at other Exchanges for similar transactions.\19\ Additionally, the
proposed fees would be assessed to all non-Priority Customers alike.
---------------------------------------------------------------------------
\19\ See BOX Options Exchange LLC (``BOX'') Fee Schedule,
Section I(D) (BOX does not charge Public Customers but charges
Professional Customers, Broker Dealers and Market Makers $0.20 per
contract on both Agency and Contra Orders); see also Chicago Board
Options Exchange (``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 Amex Options Fee Schedule,
Section I.F (NYSE Amex charges Non-Customers $0.20 per contract,
Specialists and e-Specialists $0.13 per contract, and does not
charge Customer and Professional Customers).
---------------------------------------------------------------------------
The Exchange believes the proposed rebate for the initiating order
side of a cQCC transaction is reasonable because other competing
exchanges also provide a rebate on the initiating order side.\20\
Additionally, the proposed rebate amount is within the range of the
rebate amounts at the other competing exchanges.\21\ The Exchange
believes the proposed 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 cQCC Orders to the Exchange. The
Exchange believes it is reasonable, equitable, and not unfairly
discriminatory to not provide a rebate for the initiating order for
cQCC transactions for which both the initiator and the contra-side
orders are Priority Customers since Priority Customers are already
incentivized by a reduced fee for submitting cQCC Orders. The Exchange
believes that the proposed exclusion of cQCC Orders from the Market
Maker Sliding Scale, the PCRP, and the PRP is reasonable because it
enables cQCC Orders from all market participants to be subject to only
the specific transaction fees as described above that are tailored
specifically for encouraging market participants to transact cQCC
Orders on the Exchange. The Exchange believes that the exclusion is
equitable and not unfairly discriminatory because it ensures all market
participants, other than Priority Customers, to be subject to the same
transaction fee for cQCC Orders. While Priority Customers will benefit
from a reduced transaction fee rate for cQCC Orders, excluding cQCC
Orders from the PCRP enables a more equitable and not unfairly
discriminatory outcome.
---------------------------------------------------------------------------
\20\ See BOX Fee Schedule, Section I(D)(1); see also CBOE Fee
Schedule, ``QCC Rate Table,'' Page 5; see also NYSE Amex Options Fee
Schedule, Section I.F; see also Nasdaq ISE Fee Schedule, Section
IV(A).
\21\ See BOX Fee Schedule, Section I(D)(1) (a $0.15 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 Amex 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 Fee Schedule, Section IV(A) (rebates range from $0.01 to
$0.11 per contract).
---------------------------------------------------------------------------
The Exchange believes that adding the C2C fee to the Fee Schedule
is reasonable since it is clarifying the Exchange's existing practice
and by adding such C2C Order fee to the Fee Schedule the Exchange
believes that it will make it more transparent as to how the Exchange
assesses such fee and avoid any confusion as to how such fee is
assessed for simple (C2C) and complex (cC2C) orders. The Exchange
believes that the proposed transaction fee for cC2C Orders is
reasonable because the proposed amount is identical to the fee assessed
for C2C transactions, which is currently $0.00. The proposed fees would
be charged to all Priority Customers alike and the Exchange believes
that assessing a $0.00 fee to Priority Customers is equitable and not
unfairly discriminatory. By assessing a $0.00 fee to Priority Customer
orders, the C2C and cC2C
[[Page 38971]]
transaction fees will not discourage the sending of Priority Customer
orders.
The Exchange believes that specifying that cPRIME Order and cQCC
Order executions are not subject to marketing fees is reasonable,
equitable and not unfairly discriminatory. The Exchange is seeking to
encourage all participants, including Market Makers, to send cPRIME
Orders and to respond to cPRIME Auction RFR messages and the Exchange
believes that collecting marketing fees from Market Makers may
discourage such participation. By encouraging as many participants as
possible to respond, the Exchange believes that it will lead to greater
opportunities for price improvement for all cPRIME Agency Orders, not
just those entered on behalf of customers. For these reasons, the
Exchange believes that excluding cPRIME Orders and responses from the
marketing fees are reasonable, equitable, and not unfairly
discriminatory. The Exchange believes that it is equitable and not
unfairly discriminatory to continue to charge a marketing fee if an
unrelated order executes in the cPRIME Auction, because that unrelated
order is not subject to the specialized fee structure for cPRIME
Auctions that is designed to incentivize participation. The market
participant receives the benefit of a cPRIME Auction execution and
would already expect to be charged a marketing fee that is no different
than the fee the market participant was expecting to pay trading
against unrelated orders outside the cPRIME Auction. The Exchange
further believes that not assessing a Marketing Fee for contracts
executed as a cQCC Order is equitable and not unfairly discriminatory
because such order type originated from the same Member, thus obviating
the purpose of the Marketing Fee.
The Exchange believes that the proposed technical changes are
consistent with Section 6(b)(5) of the Act because they are designed to
promote just and equitable principles of trade, 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. The Exchange believes it is appropriate to make the proposed
technical corrections to its Fee Schedule so that Exchange Members have
a clear and accurate understanding of the meaning of the Exchange's Fee
Schedule.
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 change will enhance the competiveness of the
Exchange relative to other exchanges that offer their own electronic
crossing mechanisms and offer their own complex crossing order types.
The Exchange believes that the proposed fees and rebates for
participation in the cPRIME Auction, the cQCC fees, and the C2C and
cC2C fees are not going to have an impact on intra-market competition
based on the total cost for participants to transact in such order
types versus the cost for participants to transact in the other order
types available for trading on the Exchange. As noted above, the
Exchange believes that the proposed pricing for the cPRIME Auction is
comparable to that of other exchanges offering similar electronic price
improvement mechanisms for complex orders,\22\ and the Exchange
believes that, based on experience with electronic price improvement
crossing mechanisms on other markets, market participants understand
that the price-improving benefits offered by the cPRIME Auction justify
the transaction costs associated with the cPRIME Auction. To the extent
that there is a difference between non-cPRIME Auction transactions and
cPRIME Auction transactions, the Exchange does not believe this
difference will cause participants to refrain from responding to cPRIME
Auctions. In addition, the Exchange does not believe that the proposed
transaction fees and credits for these new complex crossing order types
burden competition by creating a disparity of transaction fees between
these order types and other order types. The Exchange expects to see
robust competition within the cPRIME Auction to trade against the
cPRIME Agency Order. The Exchange also expects to see robust
competition in the trading of cQCC Orders and cC2C Orders, as the
Exchange's pricing for those order types is competitive with the
pricing of other competing Exchanges.
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\22\ See supra note 16.
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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,\23\ and Rule 19b-4(f)(2) \24\ 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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\23\ 15 U.S.C. 78s(b)(3)(A)(ii).
\24\ 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 (https://www.sec.gov/rules/sro.shtml); or
Send an email to rule-comments@sec.gov. Please include
File Number SR-MIAX-2017-40 on the subject line.
Paper Comments
Send paper comments in triplicate to Brent J. Fields,
Secretary, Securities and Exchange Commission, 100 F Street NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-MIAX-2017-40. 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 (https://www.sec.gov/rules/sro.shtml). Copies of the
[[Page 38972]]
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 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-2017-40, and should be
submitted on or before September 6, 2017.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\25\
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\25\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2017-17277 Filed 8-15-17; 8:45 am]
BILLING CODE 8011-01-P
