Self-Regulatory Organizations; Miami International Securities Exchange LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend the MIAX Fee Schedule, 75629-75631 [2013-29608]
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Federal Register / Vol. 78, No. 239 / Thursday, December 12, 2013 / Notices
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–
2013–53 and should be submitted on or
before January 2, 2014. For the
Commission, by the Division of Trading
and Markets, pursuant to delegated
authority.7
Elizabeth Murphy,
Secretary.
[FR Doc. 2013–29618 Filed 12–11–13; 8:45 am]
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–71009; File No. SR–MIAX–
2013–56]
Self-Regulatory Organizations; Miami
International Securities Exchange LLC;
Notice of Filing and Immediate
Effectiveness of a Proposed Rule
Change To Amend the MIAX Fee
Schedule
December 6, 2013.
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 November 29, 2013, Miami
International Securities Exchange LLC
(‘‘MIAX’’ or ‘‘Exchange’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’) a proposed rule change
as described in Items I, II, and III below,
which Items have been prepared by the
Exchange. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
maindgalligan on DSK5TPTVN1PROD with NOTICES
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange is filing a proposal to
amend its Fee Schedule.
The text of the proposed rule change
is available on the Exchange’s Web site
at https://www.miaxoptions.com/filter/
wotitle/rule_filing, at MIAX’s principal
office, and at the Commission’s Public
Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
BILLING CODE 8011–01–P
7 17
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.
The Exchange proposes to modify its
current Priority Customer Rebate
Program (the ‘‘Program’’) to (i) lower the
volume thresholds of the four highest
volume tiers; and (ii) increase the per
contract credit for the three highest
volume tiers. The new terms of the
Program will be implemented for a
period beginning December 1, 2013 and
ending December 31, 2013.3 The
Program currently applies to the period
beginning July 1, 2013 and ending
November 30, 2013.4 The Program is
based on the substantially similar fees of
another competing options exchange.5
Under the Program, the Exchange shall
credit each Member the per contract
amount set forth in the table below
resulting from each Priority Customer 6
order transmitted by that Member which
is executed on the Exchange in all
multiply-listed option classes
(excluding mini-options 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 Rule 1400), provided the Member
meets certain volume thresholds in a
month as described below. The volume
thresholds are calculated based on the
customer average daily volume over the
course of the month. Volume will be
recorded for and credits will be
3 The Exchange notes that at the end of the
period, the Program will expire unless the Exchange
files another 19b-4 Rule Filing to amend its fees.
4 See Securities Exchange Act Release Nos. 70769
(October 29, 2013), 78 FR 66094 (November 4,
2013); 70523 (September 26, 2013), 78 FR 60966
(October 2, 2013) (SR–MIAX–2013–47); 69947 (July
9, 2013), 78 FR 42138 (July 15, 2013) (SR–MIAX–
2013–31).
5 See Chicago Board Options Exchange,
Incorporated (‘‘CBOE’’) Fees Schedule, p. 4. See
also Securities Exchange Act Release Nos. 66054
(December 23, 2011), 76 FR 82332 (December 30,
2011) (SR–CBOE–2011–120); 68887 (February 8,
2013), 78 FR 10647 (February 14, 2013) (SR–CBOE–
2013–017).
6 The term ‘‘Priority Customer’’ means a person
or entity that (i) is not a broker or dealer in
securities, and (ii) does not place more than 390
orders in listed options per day on average during
a calendar month for its own beneficial accounts(s).
See MIAX Rule 100.
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75629
delivered to the Member Firm that
submits the order to the Exchange.
Percentage Thresholds of
National Customer Volume in
Multiply-Listed Options Classes
Listed on MIAX (Monthly)
0.00%–0.25% ...............................
Above 0.25%–0.35% ....................
Above 0.35%–0.75% ....................
Above 0.75%–1.50% ....................
Above 1.50% ................................
Per
Contract
Credit
$0.00
$0.10
$0.15
$0.17
$0.18
The Exchange will aggregate the
contracts resulting from Priority
Customer orders transmitted and
executed electronically on the Exchange
from affiliated Members for purposes of
the thresholds above, provided there is
at least 75% common ownership
between the firms as reflected on each
firm’s Form BD, Schedule A. In the
event of a MIAX System outage or other
interruption of electronic trading on
MIAX, the Exchange will adjust the
national customer volume in multiplylisted options for the duration of the
outage. A Member may request to
receive its credit under the Priority
Customer Rebate Program as a separate
direct payment.
In addition, the rebate payments will
be calculated from the first executed
contract at the applicable threshold per
contract credit with the rebate payments
made at the highest achieved volume
tier for each contract traded in that
month. For example, if Member Firm
XYZ, Inc. (‘‘XYZ’’) has enough Priority
Customer contracts to achieve 2.5% of
the national customer volume in
multiply-listed option contracts during
the month of October, XYZ will receive
a credit of $0.18 for each Priority
Customer contract executed in the
month of October [sic].
The purpose of the Program is to
encourage Members to direct greater
Priority Customer trade volume to the
Exchange. Increased Priority Customer
volume will provide for greater
liquidity, which benefits all market
participants. The practice of
incentivizing increased retail customer
order flow in order to attract
professional liquidity providers
(Market-Makers) is, and has been,
commonly practiced in the options
markets. As such, marketing fee
programs,7 and customer posting
incentive programs,8 are based on
attracting public customer order flow.
The Program similarly intends to attract
Priority Customer order flow, which
7 See
MIAX Fee Schedule, Section 1(b).
NYSE Arca, Inc. Fees Schedule, page 4
(section titled ‘‘Customer Monthly Posting Credit
Tiers and Qualifications for Executions in Penny
Pilot Issues’’).
8 See
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will increase liquidity, thereby
providing greater trading opportunities
and tighter spreads for other market
participants and causing a
corresponding increase in order flow
from such other market participants.
The specific volume thresholds of the
Program’s tiers were set based upon
business determinations and an analysis
of current volume levels. The volume
thresholds are intended to incentivize
firms that route some Priority Customer
orders to the Exchange to increase the
number of orders that are sent to the
Exchange to achieve the next threshold
and to incent new participants to send
Priority Customer orders as well.
Increasing the number of orders sent to
the Exchange will in turn provide
tighter and more liquid markets, and
therefore attract more business overall.
Similarly, the different credit rates at
the different tier levels were based on an
analysis of revenue and volume levels
and are intended to provide increasing
‘‘rewards’’ for increasing the volume of
trades sent to the Exchange. The specific
amounts of the tiers and rates were set
in order to encourage suppliers of
Priority Customer order flow to reach
for higher tiers.
The Exchange proposes limiting the
Program to multiply-listed options
classes on MIAX because MIAX does
not compete with other exchanges for
order flow in the proprietary, singlylisted products.9 In addition, the
Exchange does not trade any singlylisted products at this time, but may
develop such products in the future. If
at such time the Exchange develops
proprietary products, the Exchange
anticipates having to devote a lot of
resources to develop them, and
therefore would need to retain funds
collected in order to recoup those
expenditures.
The Exchange proposes excluding
mini-options 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
Exchange Rule 1400 from the Program.
The Exchange notes these exclusions are
nearly identical to the ones made by
CBOE.10 Mini-options contracts are
excluded from the Program because the
cost to the Exchange to process quotes,
orders and trades in mini-options is the
9 If a multiply-listed options class is not listed on
MIAX, then the trading volume in that options class
will be omitted from the calculation of national
customer volume in multiply-listed options classes.
10 See CBOE Fee Schedule, page 4. CBOE also
excludes QCC trades from their rebate program.
CBOE excluded QCC trades because a bulk of those
trades on CBOE are facilitation orders which are
charged at the $0.00 fee rate on their exchange.
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same as for standard options. This,
coupled with the lower per-contract
transaction fees charged to other market
participants, makes it impractical to
offer Members a credit for Priority
Customer mini-option volume that they
transact. Providing rebates to Priority
Customer executions that occur on other
trading venues would be inconsistent
with the proposal. Therefore, routed
away volume is excluded from the
Program in order to promote the
underlying goal of the proposal, which
is to increase liquidity and execution
volume on the Exchange.
The credits paid out as part of the
program will be drawn from the general
revenues of the Exchange.11 The
Exchange calculates volume thresholds
on a monthly basis.
The proposed changes will become
operative on December 1, 2013.
2. Statutory Basis
The Exchange believes that its
proposal to amend its fee schedule is
consistent with Section 6(b) of the Act 12
in general, and furthers the objectives of
Section 6(b)(4) of the Act 13 in
particular, in that it is an equitable
allocation of reasonable fees and other
charges among Exchange members.
The Exchange believes that the
proposed Priority Customer Rebate
Program is fair, equitable and not
unreasonably discriminatory. The
Program is reasonably designed because
it will incent providers of Priority
Customer order flow to send that
Priority Customer order flow to the
Exchange in order to receive a credit in
a manner that enables the Exchange to
improve its overall competitiveness and
strengthen its market quality for all
market participants. The proposed
rebate program is fair and equitable and
not unreasonably discriminatory
because it will apply equally to all
Priority Customer orders. All similarly
situated Priority Customer orders are
subject to the same rebate schedule, and
access to the Exchange is offered on
terms that are not unfairly
discriminatory. In addition, the Program
is equitable and not unfairly
discriminatory because, while only
Priority Customer order flow qualifies
for the Program, an increase in Priority
Customer order flow will bring greater
volume and liquidity, which benefit all
market participants by providing more
11 Despite providing credits under the Program,
the Exchange represents that it will continue to
have adequate resources to fund its regulatory
program and fulfill its responsibilities as a selfregulatory organization while the Program will be
in effect.
12 15 U.S.C. 78f(b).
13 15 U.S.C. 78f(b)(4).
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trading opportunities and tighter
spreads. Similarly, offering increasing
credits for executing higher percentages
of total national customer volume
(increased credit rates at increased
volume tiers) is equitable and not
unfairly discriminatory because such
increased rates and tiers encourage
Members to direct increased amounts of
Priority Customer contracts to the
Exchange. The resulting increased
volume and liquidity will benefit those
Members who receive the lower tier
levels, or do not qualify for the Program
at all, by providing more trading
opportunities and tighter spreads.
Limiting the Program to multiplylisted options classes listed on MIAX is
reasonable because those parties trading
heavily in multiply-listed classes will
now begin to receive a credit for such
trading, and is equitable and not
unfairly discriminatory because the
Exchange does not trade any singlylisted products at this time. If at such
time the Exchange develops proprietary
products, the Exchange anticipates
having to devote a lot of resources to
develop them, and therefore would need
to retain funds collected in order to
recoup those expenditures.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
MIAX does not believe that the
proposed rule change will impose any
burden on competition not necessary or
appropriate in furtherance of the
purposes of the Act. The Exchange
believes that the proposed change
would increase both intermarket and
intramarket competition by incenting
Members to direct their Priority
Customer orders to the Exchange, which
will enhance the quality of quoting and
increase the volume of contracts traded
here. To the extent that there is
additional competitive burden on nonPriority Customers, the Exchange
believes that this is appropriate because
the rebate program should incent
Members to direct additional order flow
to the Exchange and thus provide
additional liquidity that enhances the
quality of its markets and increases the
volume of contracts traded here. To the
extent that this purpose is achieved, all
the Exchange’s market participants
should benefit from the improved
market liquidity. Enhanced market
quality and increased transaction
volume that results from the anticipated
increase in order flow directed to the
Exchange will benefit all market
participants and improve competition
on the Exchange. The Exchange notes
that it operates in a highly competitive
market in which market participants can
readily favor competing venues if they
E:\FR\FM\12DEN1.SGM
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Federal Register / Vol. 78, No. 239 / Thursday, December 12, 2013 / Notices
deem fee levels at a particular venue to
be excessive. In such an environment,
the Exchange must continually adjust its
fees to remain competitive with other
exchanges and to attract order flow to
the Exchange. The Exchange believes
that the proposed rule change reflects
this competitive environment because it
reduces the Exchange’s fees in a manner
that encourages market participants to
direct their customer order flow, to
provide liquidity, and to attract
additional transaction volume to the
Exchange. Given the robust competition
for volume among options markets,
many of which offer the same products,
implementing a volume based customer
rebate program to attract order flow like
the one being proposed in this filing is
consistent with the above-mentioned
goals of the Act. This is especially true
for the smaller options markets, such as
MIAX, which is competing for volume
with much larger exchanges that
dominate the options trading industry.
As a new exchange, MIAX has a
nominal percentage of the average daily
trading volume in options, so it is
unlikely that the customer rebate
program could cause any competitive
harm to the options market or to market
participants. Rather, the customer rebate
program is a modest attempt by a small
options market to attract order volume
away from larger competitors by
adopting an innovative pricing strategy.
The Exchange notes that if the rebate
program resulted in a modest percentage
increase in the average daily trading
volume in options executing on MIAX,
while such percentage would represent
a large volume increase for MIAX, it
would represent a minimal reduction in
volume of its larger competitors in the
industry. The Exchange believes that the
proposal will help further competition,
because market participants will have
yet another additional option in
determining where to execute orders
and post liquidity if they factor the
benefits of a customer rebate program
into the determination.
maindgalligan on DSK5TPTVN1PROD with NOTICES
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
Written comments were neither
solicited nor received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become
effective pursuant to Section
19(b)(3)(A)(ii) of the Act.14 At any time
within 60 days of the filing of the
14 15
U.S.C. 78s(b)(3)(A)(ii).
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16:45 Dec 11, 2013
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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–2013–56 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Elizabeth M. Murphy, Secretary,
Securities and Exchange Commission,
100 F Street NE., Washington, DC
20549–1090.
All submissions should refer to File
Number SR–MIAX–2013–56. 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
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change;
the Commission does not edit personal
identifying information from
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75631
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File Number SR–MIAX–
2013–56 and should be submitted on or
before January 2, 2014.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.15
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2013–29608 Filed 12–11–13; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–71017; File No. SR–
NASDAQ–2013–134]
Self-Regulatory Organizations; The
NASDAQ Stock Market LLC; Notice of
Filing and Immediate Effectiveness of
a Proposed Rule Change to Modify the
Listing of Additional Shares Fees
Payable by Non-U.S. Companies
December 6, 2013.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 2 thereunder,
notice is hereby given that on November
29, 2013, The NASDAQ Stock Market
LLC (‘‘NASDAQ’’ or ‘‘Exchange’’) filed
with the Securities and Exchange
Commission (‘‘SEC’’ or ‘‘Commission’’)
the proposed rule change as described
in Items I, II, and III below, which Items
have been prepared by NASDAQ. 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
NASDAQ is proposing to modify the
listing of additional shares fees payable
by non-U.S. companies.
The text of the proposed rule change
is available on the Exchange’s Web site
at https://nasdaq.cchwallstreet.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. The text of
these statements may be examined at
15 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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Agencies
[Federal Register Volume 78, Number 239 (Thursday, December 12, 2013)]
[Notices]
[Pages 75629-75631]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-29608]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-71009; File No. SR-MIAX-2013-56]
Self-Regulatory Organizations; Miami International Securities
Exchange LLC; Notice of Filing and Immediate Effectiveness of a
Proposed Rule Change To Amend the MIAX Fee Schedule
December 6, 2013.
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 November 29, 2013, Miami International
Securities Exchange LLC (``MIAX'' or ``Exchange'') filed with the
Securities and Exchange Commission (``Commission'') a proposed rule
change as described in Items I, II, and III below, which Items have
been prepared by the Exchange. The Commission is publishing this notice
to solicit comments on the proposed rule change from interested
persons.
---------------------------------------------------------------------------
\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 its Fee Schedule.
The text of the proposed rule change is available on the Exchange's
Web site at https://www.miaxoptions.com/filter/wotitle/rule_filing, at
MIAX's principal office, and at the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to modify its current Priority Customer
Rebate Program (the ``Program'') to (i) lower the volume thresholds of
the four highest volume tiers; and (ii) increase the per contract
credit for the three highest volume tiers. The new terms of the Program
will be implemented for a period beginning December 1, 2013 and ending
December 31, 2013.\3\ The Program currently applies to the period
beginning July 1, 2013 and ending November 30, 2013.\4\ The Program is
based on the substantially similar fees of another competing options
exchange.\5\ Under the Program, the Exchange shall credit each Member
the per contract amount set forth in the table below resulting from
each Priority Customer \6\ order transmitted by that Member which is
executed on the Exchange in all multiply-listed option classes
(excluding mini-options 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 Rule 1400),
provided the Member meets certain volume thresholds in a month as
described below. The volume thresholds are calculated based on the
customer average daily volume over the course of the month. Volume will
be recorded for and credits will be delivered to the Member Firm that
submits the order to the Exchange.
---------------------------------------------------------------------------
\3\ The Exchange notes that at the end of the period, the
Program will expire unless the Exchange files another 19b-4 Rule
Filing to amend its fees.
\4\ See Securities Exchange Act Release Nos. 70769 (October 29,
2013), 78 FR 66094 (November 4, 2013); 70523 (September 26, 2013),
78 FR 60966 (October 2, 2013) (SR-MIAX-2013-47); 69947 (July 9,
2013), 78 FR 42138 (July 15, 2013) (SR-MIAX-2013-31).
\5\ See Chicago Board Options Exchange, Incorporated (``CBOE'')
Fees Schedule, p. 4. See also Securities Exchange Act Release Nos.
66054 (December 23, 2011), 76 FR 82332 (December 30, 2011) (SR-CBOE-
2011-120); 68887 (February 8, 2013), 78 FR 10647 (February 14, 2013)
(SR-CBOE-2013-017).
\6\ The term ``Priority Customer'' means a person or entity that
(i) is not a broker or dealer in securities, and (ii) does not place
more than 390 orders in listed options per day on average during a
calendar month for its own beneficial accounts(s). See MIAX Rule
100.
------------------------------------------------------------------------
Per
Percentage Thresholds of National Customer Volume in Multiply- Contract
Listed Options Classes Listed on MIAX (Monthly) Credit
------------------------------------------------------------------------
0.00%-0.25%.................................................. $0.00
Above 0.25%-0.35%............................................ $0.10
Above 0.35%-0.75%............................................ $0.15
Above 0.75%-1.50%............................................ $0.17
Above 1.50%.................................................. $0.18
------------------------------------------------------------------------
The Exchange will aggregate the contracts resulting from Priority
Customer orders transmitted and executed electronically on the Exchange
from affiliated Members for purposes of the thresholds above, provided
there is at least 75% common ownership between the firms as reflected
on each firm's Form BD, Schedule A. In the event of a MIAX System
outage or other interruption of electronic trading on MIAX, the
Exchange will adjust the national customer volume in multiply-listed
options for the duration of the outage. A Member may request to receive
its credit under the Priority Customer Rebate Program as a separate
direct payment.
In addition, the rebate payments will be calculated from the first
executed contract at the applicable threshold per contract credit with
the rebate payments made at the highest achieved volume tier for each
contract traded in that month. For example, if Member Firm XYZ, Inc.
(``XYZ'') has enough Priority Customer contracts to achieve 2.5% of the
national customer volume in multiply-listed option contracts during the
month of October, XYZ will receive a credit of $0.18 for each Priority
Customer contract executed in the month of October [sic].
The purpose of the Program is to encourage Members to direct
greater Priority Customer trade volume to the Exchange. Increased
Priority Customer volume will provide for greater liquidity, which
benefits all market participants. The practice of incentivizing
increased retail customer order flow in order to attract professional
liquidity providers (Market-Makers) is, and has been, commonly
practiced in the options markets. As such, marketing fee programs,\7\
and customer posting incentive programs,\8\ are based on attracting
public customer order flow. The Program similarly intends to attract
Priority Customer order flow, which
[[Page 75630]]
will increase liquidity, thereby providing greater trading
opportunities and tighter spreads for other market participants and
causing a corresponding increase in order flow from such other market
participants.
---------------------------------------------------------------------------
\7\ See MIAX Fee Schedule, Section 1(b).
\8\ See NYSE Arca, Inc. Fees Schedule, page 4 (section titled
``Customer Monthly Posting Credit Tiers and Qualifications for
Executions in Penny Pilot Issues'').
---------------------------------------------------------------------------
The specific volume thresholds of the Program's tiers were set
based upon business determinations and an analysis of current volume
levels. The volume thresholds are intended to incentivize firms that
route some Priority Customer orders to the Exchange to increase the
number of orders that are sent to the Exchange to achieve the next
threshold and to incent new participants to send Priority Customer
orders as well. Increasing the number of orders sent to the Exchange
will in turn provide tighter and more liquid markets, and therefore
attract more business overall. Similarly, the different credit rates at
the different tier levels were based on an analysis of revenue and
volume levels and are intended to provide increasing ``rewards'' for
increasing the volume of trades sent to the Exchange. The specific
amounts of the tiers and rates were set in order to encourage suppliers
of Priority Customer order flow to reach for higher tiers.
The Exchange proposes limiting the Program to multiply-listed
options classes on MIAX because MIAX does not compete with other
exchanges for order flow in the proprietary, singly-listed products.\9\
In addition, the Exchange does not trade any singly-listed products at
this time, but may develop such products in the future. If at such time
the Exchange develops proprietary products, the Exchange anticipates
having to devote a lot of resources to develop them, and therefore
would need to retain funds collected in order to recoup those
expenditures.
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\9\ If a multiply-listed options class is not listed on MIAX,
then the trading volume in that options class will be omitted from
the calculation of national customer volume in multiply-listed
options classes.
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The Exchange proposes excluding mini-options 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 Exchange Rule 1400 from the Program. The Exchange notes
these exclusions are nearly identical to the ones made by CBOE.\10\
Mini-options contracts are excluded from the Program because the cost
to the Exchange to process quotes, orders and trades in mini-options is
the same as for standard options. This, coupled with the lower per-
contract transaction fees charged to other market participants, makes
it impractical to offer Members a credit for Priority Customer mini-
option volume that they transact. Providing rebates to Priority
Customer executions that occur on other trading venues would be
inconsistent with the proposal. Therefore, routed away volume is
excluded from the Program in order to promote the underlying goal of
the proposal, which is to increase liquidity and execution volume on
the Exchange.
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\10\ See CBOE Fee Schedule, page 4. CBOE also excludes QCC
trades from their rebate program. CBOE excluded QCC trades because a
bulk of those trades on CBOE are facilitation orders which are
charged at the $0.00 fee rate on their exchange.
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The credits paid out as part of the program will be drawn from the
general revenues of the Exchange.\11\ The Exchange calculates volume
thresholds on a monthly basis.
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\11\ Despite providing credits under the Program, the Exchange
represents that it will continue to have adequate resources to fund
its regulatory program and fulfill its responsibilities as a self-
regulatory organization while the Program will be in effect.
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The proposed changes will become operative on December 1, 2013.
2. Statutory Basis
The Exchange believes that its proposal to amend its fee schedule
is consistent with Section 6(b) of the Act \12\ in general, and
furthers the objectives of Section 6(b)(4) of the Act \13\ in
particular, in that it is an equitable allocation of reasonable fees
and other charges among Exchange members.
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\12\ 15 U.S.C. 78f(b).
\13\ 15 U.S.C. 78f(b)(4).
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The Exchange believes that the proposed Priority Customer Rebate
Program is fair, equitable and not unreasonably discriminatory. The
Program is reasonably designed because it will incent providers of
Priority Customer order flow to send that Priority Customer order flow
to the Exchange in order to receive a credit in a manner that enables
the Exchange to improve its overall competitiveness and strengthen its
market quality for all market participants. The proposed rebate program
is fair and equitable and not unreasonably discriminatory because it
will apply equally to all Priority Customer orders. All similarly
situated Priority Customer orders are subject to the same rebate
schedule, and access to the Exchange is offered on terms that are not
unfairly discriminatory. In addition, the Program is equitable and not
unfairly discriminatory because, while only Priority Customer order
flow qualifies for the Program, an increase in Priority Customer order
flow will bring greater volume and liquidity, which benefit all market
participants by providing more trading opportunities and tighter
spreads. Similarly, offering increasing credits for executing higher
percentages of total national customer volume (increased credit rates
at increased volume tiers) is equitable and not unfairly discriminatory
because such increased rates and tiers encourage Members to direct
increased amounts of Priority Customer contracts to the Exchange. The
resulting increased volume and liquidity will benefit those Members who
receive the lower tier levels, or do not qualify for the Program at
all, by providing more trading opportunities and tighter spreads.
Limiting the Program to multiply-listed options classes listed on
MIAX is reasonable because those parties trading heavily in multiply-
listed classes will now begin to receive a credit for such trading, and
is equitable and not unfairly discriminatory because the Exchange does
not trade any singly-listed products at this time. If at such time the
Exchange develops proprietary products, the Exchange anticipates having
to devote a lot of resources to develop them, and therefore would need
to retain funds collected in order to recoup those expenditures.
B. Self-Regulatory Organization's Statement on Burden on Competition
MIAX does not believe that the proposed rule change will impose any
burden on competition not necessary or appropriate in furtherance of
the purposes of the Act. The Exchange believes that the proposed change
would increase both intermarket and intramarket competition by
incenting Members to direct their Priority Customer orders to the
Exchange, which will enhance the quality of quoting and increase the
volume of contracts traded here. To the extent that there is additional
competitive burden on non-Priority Customers, the Exchange believes
that this is appropriate because the rebate program should incent
Members to direct additional order flow to the Exchange and thus
provide additional liquidity that enhances the quality of its markets
and increases the volume of contracts traded here. To the extent that
this purpose is achieved, all the Exchange's market participants should
benefit from the improved market liquidity. Enhanced market quality and
increased transaction volume that results from the anticipated increase
in order flow directed to the Exchange will benefit all market
participants and improve competition on the Exchange. The Exchange
notes that it operates in a highly competitive market in which market
participants can readily favor competing venues if they
[[Page 75631]]
deem fee levels at a particular venue to be excessive. In such an
environment, the Exchange must continually adjust its fees to remain
competitive with other exchanges and to attract order flow to the
Exchange. The Exchange believes that the proposed rule change reflects
this competitive environment because it reduces the Exchange's fees in
a manner that encourages market participants to direct their customer
order flow, to provide liquidity, and to attract additional transaction
volume to the Exchange. Given the robust competition for volume among
options markets, many of which offer the same products, implementing a
volume based customer rebate program to attract order flow like the one
being proposed in this filing is consistent with the above-mentioned
goals of the Act. This is especially true for the smaller options
markets, such as MIAX, which is competing for volume with much larger
exchanges that dominate the options trading industry. As a new
exchange, MIAX has a nominal percentage of the average daily trading
volume in options, so it is unlikely that the customer rebate program
could cause any competitive harm to the options market or to market
participants. Rather, the customer rebate program is a modest attempt
by a small options market to attract order volume away from larger
competitors by adopting an innovative pricing strategy. The Exchange
notes that if the rebate program resulted in a modest percentage
increase in the average daily trading volume in options executing on
MIAX, while such percentage would represent a large volume increase for
MIAX, it would represent a minimal reduction in volume of its larger
competitors in the industry. The Exchange believes that the proposal
will help further competition, because market participants will have
yet another additional option in determining where to execute orders
and post liquidity if they factor the benefits of a customer rebate
program into the determination.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
Written comments were neither solicited nor received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become effective pursuant to Section
19(b)(3)(A)(ii) of the Act.\14\ At any time within 60 days of the
filing of the proposed rule change, the Commission summarily may
temporarily suspend such rule change if it appears to the Commission
that such action is necessary or appropriate in the public interest,
for the protection of investors, or otherwise in furtherance of the
purposes of the Act. If the Commission takes such action, the
Commission shall institute proceedings to determine whether the
proposed rule should be approved or disapproved.
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\14\ 15 U.S.C. 78s(b)(3)(A)(ii).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
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-2013-56 on the subject line.
Paper Comments
Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, 100 F Street NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-MIAX-2013-56. 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 business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of the filing also will be available for inspection
and copying at the principal office of the Exchange. All comments
received will be posted without change; the Commission does not edit
personal identifying information from submissions. You should submit
only information that you wish to make available publicly. All
submissions should refer to File Number SR-MIAX-2013-56 and should be
submitted on or before January 2, 2014.
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\15\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\15\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-29608 Filed 12-11-13; 8:45 am]
BILLING CODE 8011-01-P