Self-Regulatory Organizations; Miami International Securities Exchange LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Its Fee Schedule, 34368-34371 [2014-13930]

Download as PDF 34368 Federal Register / Vol. 79, No. 115 / Monday, June 16, 2014 / Notices Request For Comment: Peace Corps invites comments on whether the proposed collection of information is necessary for proper performance of the functions of the Peace Corps, including whether the information will have practical use; the accuracy of the agency’s estimate of the burden of the proposed collection of information, including the validity of the information to be collected; and, ways to minimize the burden of the collection of information on those who are to respond, including through the use of automated collection techniques, when appropriate, and other forms of information technology. This notice issued in Washington, DC on June 10, 2014. Denora Miller, FOIA Officer, Management. [FR Doc. 2014–13966 Filed 6–13–14; 8:45 am] BILLING CODE 6051–01–P SECURITIES AND EXCHANGE COMMISSION emcdonald on DSK67QTVN1PROD with NOTICES Sunshine Act Meeting Notice is hereby given, pursuant to the provisions of the Government in the Sunshine Act, Public Law 94–409, that the Securities and Exchange Commission will hold a Closed Meeting on Thursday, June 19, 2014 at 2:00 p.m. Commissioners, Counsel to the Commissioners, the Secretary to the Commission, and recording secretaries will attend the Closed Meeting. Certain staff members who have an interest in the matters also may be present. The General Counsel of the Commission, or her designee, has certified that, in her opinion, one or more of the exemptions set forth in 5 U.S.C. 552b(c)(3), (5), (7), 9(B) and (10) and 17 CFR 200.402(a)(3), (5), (7), 9(ii) and (10), permit consideration of the scheduled matter at the Closed Meeting. Commissioner Stein, as duty officer, voted to consider the items listed for the Closed Meeting in closed session. The subject matter of the Closed Meeting will be: Institution and settlement of injunctive actions; institution and settlement of administrative proceedings; an adjudicatory matter; and other matters relating to enforcement proceedings. At times, changes in Commission priorities require alterations in the scheduling of meeting items. For further information and to ascertain what, if any, matters have been added, deleted or postponed, please VerDate Mar<15>2010 16:36 Jun 13, 2014 Jkt 232001 contact the Office of the Secretary at (202) 551–5400. Dated: June 12, 2014. Jill M. Peterson, Assistant Secretary. 1. Purpose [FR Doc. 2014–14121 Filed 6–12–14; 4:15 pm] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–72355; File No. SR–MIAX– 2014–25] Self-Regulatory Organizations; Miami International Securities Exchange LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Its Fee Schedule June 10, 2014. Pursuant to the provisions of Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 notice is hereby given that on May 27, 2014, 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. 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. 1 15 2 17 PO 00000 U.S.C. 78s(b)(1). CFR 240.19b–4. Frm 00095 Fmt 4703 A. Self-Regulatory Organization’s Statement of the Purpose of, and the Statutory Basis for, the Proposed Rule Change Sfmt 4703 The Exchange proposes to amend its current Priority Customer Rebate Program (the ‘‘Program’’) to modify the volume thresholds of tiers 3, 4, and 5.3 The Program is based on the substantially similar fees of another competing options exchange.4 Under the Program, the Exchange shall credit each Member the per contract amount set forth in the table below resulting from each Priority Customer 5 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. For each Priority Customer order transmitted by that Member which is executed electronically on the Exchange in MIAX Select Symbols, MIAX shall credit each member at the separate per contract rate for MIAX Select Symbols.6 The volume thresholds are calculated based on the customer average daily volume over the course of the month. Volume will be recorded for and credits will be delivered to the Member Firm that submits the order to the Exchange. 3 See Securities Exchange Act Release Nos. 71698 (March 12, 2014), 79 FR 15185 (March 18, 2014) (SR–MIAX–2014–12); 71283 (January 10, 2014), 79 FR 2914 (January 16, 2014) (SR–MIAX–2013–63); 71009 (December 6, 2013), 78 FR 75629 (December 12, 2013) (SR–MIAX–2013–56). 4 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). 5 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. 6 See Securities Exchange Release Nos. 71700 (March 12, 2014), 79 FR 15188 (March 18, 2014) (SR–MIAX–2014–13); (SR–MIAX–2014–26). The Exchange will credit each Member $0.20 per contract resulting from each Priority Customer order transmitted by that Member executed on Exchange in MIAX Select Symbols. The $0.20 per contract credit is in lieu of the applicable credit that would otherwise apply to the transaction based on the volume thresholds. E:\FR\FM\16JNN1.SGM 16JNN1 Federal Register / Vol. 79, No. 115 / Monday, June 16, 2014 / Notices participants and causing a corresponding increase in order flow from such other market participants. The specific volume thresholds of the 0.00%–0.25% ............................. $0.00 Program’s tiers were set based upon Above 0.25%–0.35% .................. 0.10 business determinations and an analysis Above 0.35%–1.25% .................. 0.15 of current volume levels. The volume Above 1.25%–2.00% .................. 0.17 thresholds are intended to incentivize Above 2.00% .............................. 0.18 firms that route some Priority Customer orders to the Exchange to increase the The Exchange will aggregate the number of orders that are sent to the contracts resulting from Priority Exchange to achieve the next threshold Customer orders transmitted and and to incent new participants to send executed electronically on the Exchange Priority Customer orders as well. from affiliated Members for purposes of Increasing the number of orders sent to the thresholds above, provided there is the Exchange will in turn provide at least 75% common ownership tighter and more liquid markets, and between the firms as reflected on each therefore attract more business overall. firm’s Form BD, Schedule A. In the Similarly, the different credit rates at event of a MIAX System outage or other the different tier levels were based on an interruption of electronic trading on analysis of revenue and volume levels MIAX, the Exchange will adjust the and are intended to provide increasing national customer volume in multiply‘‘rewards’’ for increasing the volume of listed options for the duration of the trades sent to the Exchange. The specific outage. A Member may request to amounts of the tiers and rates were set receive its credit under the Priority in order to encourage suppliers of Customer Rebate Program as a separate Priority Customer order flow to reach direct payment. for higher tiers. In addition, the rebate payments will The Exchange limits the Program to be calculated from the first executed multiply-listed options classes on MIAX contract at the applicable threshold per because MIAX does not compete with contract credit with the rebate payments other exchanges for order flow in the made at the highest achieved volume proprietary, singly-listed products.9 In tier for each contract traded in that addition, the Exchange does not trade month. For example, if Member Firm any singly-listed products at this time, XYZ, Inc. (‘‘XYZ’’) has enough Priority but may develop such products in the Customer contracts to achieve 2.5% of future. If at such time the Exchange the national customer volume in develops proprietary products, the multiply-listed option contracts during Exchange anticipates having to devote a the month of October, XYZ will receive lot of resources to develop them, and a credit of $0.18 for each Priority therefore would need to retain funds Customer contract executed in the collected in order to recoup those month of October. expenditures. The purpose of the Program is to The Exchange excludes mini-options encourage Members to direct greater and executions related to contracts that Priority Customer trade volume to the are routed to one or more exchanges in Exchange. Increased Priority Customer connection with the Options Order volume will provide for greater Protection and Locked/Crossed Market liquidity, which benefits all market Plan referenced in Exchange Rule 1400 participants. The practice of from the Program. The Exchange notes incentivizing increased retail customer these exclusions are nearly identical to order flow in order to attract the ones made by CBOE.10 Mini-options professional liquidity providers contracts are excluded from the Program (Market-Makers) is, and has been, because the cost to the Exchange to commonly practiced in the options process quotes, orders and trades in markets. As such, marketing fee mini-options is the same as for standard programs,7 and customer posting options. This, coupled with the lower incentive programs,8 are based on per-contract transaction fees charged to attracting public customer order flow. The Program similarly intends to attract other market participants, makes it impractical to offer Members a credit for Priority Customer order flow, which will increase liquidity, thereby 9 If a multiply-listed options class is not listed on providing greater trading opportunities MIAX, then the trading volume in that options class and tighter spreads for other market will be omitted from the calculation of national emcdonald on DSK67QTVN1PROD with NOTICES Percentage thresholds of national customer volume in multiply-listed options classes listed on MIAX (monthly) Per contract credit 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’’). VerDate Mar<15>2010 16:36 Jun 13, 2014 Jkt 232001 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. PO 00000 Frm 00096 Fmt 4703 Sfmt 4703 34369 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 June 2, 2014. 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 trading opportunities and tighter spreads. Similarly, offering increasing credits for executing higher percentages of total national customer volume (increased credit rates at increased 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). E:\FR\FM\16JNN1.SGM 16JNN1 34370 Federal Register / Vol. 79, No. 115 / Monday, June 16, 2014 / Notices emcdonald on DSK67QTVN1PROD with NOTICES 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 The Exchange does not believe that the proposed rule change will impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act. The Exchange believes that the proposed change would increase both intermarket and intramarket competition by incenting Members to direct their Priority Customer orders to the Exchange, which will enhance the quality of quoting and increase the volume of contracts traded here. To the extent that there is additional competitive burden on non-Priority Customers, the Exchange believes that this is appropriate because the rebate program should incent Members to direct additional order flow to the Exchange and thus provide additional liquidity that enhances the quality of its markets and increases the volume of contracts traded here. To the extent that this purpose is achieved, all the Exchange’s market participants should benefit from the improved market liquidity. Enhanced market quality and increased transaction volume that results from the anticipated increase in order flow directed to the Exchange will benefit all market participants and improve competition on the Exchange. The Exchange notes that it operates in a highly competitive market in which market participants can readily favor competing venues if they deem fee levels at a particular venue to be excessive. In such an environment, the Exchange must continually adjust its fees to remain competitive with other VerDate Mar<15>2010 16:36 Jun 13, 2014 Jkt 232001 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 14 15 PO 00000 U.S.C. 78s(b)(3)(A)(ii). Frm 00097 Fmt 4703 Sfmt 4703 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–2014–25 on the subject line. Paper Comments • Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090. All submissions should refer to File Number SR–MIAX–2014–25. 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– E:\FR\FM\16JNN1.SGM 16JNN1 Federal Register / Vol. 79, No. 115 / Monday, June 16, 2014 / Notices 2014–25 and should be submitted on or before July 7, 2014. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.15 Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2014–13930 Filed 6–13–14; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–72358; File No. SR–ICC– 2014–09] Self-Regulatory Organizations; ICE Clear Credit LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Update the ICC Risk Management Framework June 10, 2014. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’) 1 and Rule 19b–4 thereunder 2 notice is hereby given that on May 30, 2014, ICE Clear Credit LLC (‘‘ICC’’) 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 primarily by ICC. ICC filed the proposal pursuant to Section 19(b)(3)(A) of the Act,3 and Rule 19b–4(f)(1) 4 thereunder, so that the proposal was effective upon filing with the Commission. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. emcdonald on DSK67QTVN1PROD with NOTICES I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The purpose of this proposed rule change is to revise the ICC Risk Management Framework to clarify language related to ICC’s forced allocation procedures. This revision does not require any changes to the ICC Rules. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, ICC included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received regarding the proposed rule change. The text of these 15 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 15 U.S.C. 78s(b)(3)(A). 4 17 CFR 240.19b–4(f)(1). 1 15 VerDate Mar<15>2010 16:36 Jun 13, 2014 statements may be examined at the places specified in Item IV below. ICC has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of these statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change The proposed revision to ICC’s Risk Management Framework is intended to clarify language related to ICC’s forced allocation procedures and to promote consistency between ICC’s forced allocation procedures as set forth in the ICC Rules and the ICC Risk Management Framework. ICC believes such revision will facilitate the prompt and accurate clearance and settlement of securities transactions and derivative agreements, contracts, and transactions for which it is responsible. The proposed revision is described in detail as follows. Currently, the ICC Risk Management Framework states that, in the event of a forced allocation, positions will be allocated to Clearing Participants (‘‘CPs’’) based on each CP’s overall risk profile. Under ICC Rule 20–605(c)(vii), ICC, in the event of a failed auction or other inability to close-out or transfer relevant positions, may allocate positions to Non-Defaulting CPs on a pro rata basis in proportion to the size of each CP’s required contribution to the Guaranty Fund, as relative to the aggregate of all Non-Defaulting CPs’ required contributions to the Guaranty Fund. ICC proposes revising the ICC Risk Management Framework to more closely reflect the forced allocation language in ICC Rule 20–605(c)(vii). Specifically, ICC proposes adding clarifying language which states that in the event of a forced allocation, positions will be allocated to each NonDefaulting CP on a pro rata basis in proportion to the size of each CP’s required contribution to the Guaranty Fund. ICC believes this update to the ICC Risk Management Framework alleviates potential confusion regarding the allocation process. This is a clarifying revision, and the changes to the ICC Risk Management Framework do not require any operational changes. Section 17A(b)(3)(F) of the Act 5 requires, among other things, that the rules of a clearing agency be designed to promote the prompt and accurate clearance and settlement of securities transactions and, to the extent applicable, derivative agreements, contracts, and transactions and to comply with the provisions of the Act and the rules and regulations thereunder. ICC believes that the proposed revision is consistent with the requirements of the Act and the rules and regulations thereunder applicable to ICC, in particular, to Section 17A(b)(3)(F) 6, because ICC believes that the proposed rule changes will facilitate the prompt and accurate settlement of swaps and contribute to the safeguarding of securities and funds associated with swap transactions which are in the custody or control of ICC or for which it is responsible. The revision to the ICC Risk Management Framework alleviates potential confusion regarding the allocation process. As such, the proposed rule changes will facilitate the prompt and accurate settlement of swaps and contribute to the safeguarding of customer funds and securities within the control of ICC within the meaning of Section 17A(b)(3)(F) 7 of the Act. B. Self-Regulatory Organization’s Statement on Burden on Competition ICC does not believe the proposed revision would have any impact, or impose any burden, on competition. The revision to ICC’s Risk Management Framework regarding forced allocation procedures applies uniformly across all CPs. Therefore, ICC does not believe the proposed revision imposes any burden on competition that is inappropriate in furtherance of the purposes of the Act. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants or Others Written comments relating to the proposed rule change have not been solicited or received. ICC will notify the Commission of any written comments received by ICC. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing rule change has become effective upon filing pursuant to Section 19(b)(3)(A) 8 of the Act and Rule 19b– 4(f)(1) 9 thereunder because the update constitutes a stated policy, practice, or interpretation with respect to the meaning, administration, or enforcement of an existing rule. Specifically, ICC is updating language in the ICC Risk Management Framework to more closely reflect the forced allocation procedures set forth in ICC Rule 20–605(c)(vii). At any time within 6 Id. 7 Id. 8 15 5 15 Jkt 232001 PO 00000 U.S.C. 78q–1(b)(3)(F). Frm 00098 Fmt 4703 Sfmt 4703 34371 9 17 E:\FR\FM\16JNN1.SGM U.S.C. 78s(b)(3)(A). CFR 240.19b–4(f)(1). 16JNN1

Agencies

[Federal Register Volume 79, Number 115 (Monday, June 16, 2014)]
[Notices]
[Pages 34368-34371]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-13930]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-72355; File No. SR-MIAX-2014-25]


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

June 10, 2014.
    Pursuant to the provisions of Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice 
is hereby given that on May 27, 2014, 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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend its current Priority Customer Rebate 
Program (the ``Program'') to modify the volume thresholds of tiers 3, 
4, and 5.\3\ The Program is based on the substantially similar fees of 
another competing options exchange.\4\ Under the Program, the Exchange 
shall credit each Member the per contract amount set forth in the table 
below resulting from each Priority Customer \5\ 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. For each Priority Customer order transmitted 
by that Member which is executed electronically on the Exchange in MIAX 
Select Symbols, MIAX shall credit each member at the separate per 
contract rate for MIAX Select Symbols.\6\ The volume thresholds are 
calculated based on the customer average daily volume over the course 
of the month. Volume will be recorded for and credits will be delivered 
to the Member Firm that submits the order to the Exchange.
---------------------------------------------------------------------------

    \3\ See Securities Exchange Act Release Nos. 71698 (March 12, 
2014), 79 FR 15185 (March 18, 2014) (SR-MIAX-2014-12); 71283 
(January 10, 2014), 79 FR 2914 (January 16, 2014) (SR-MIAX-2013-63); 
71009 (December 6, 2013), 78 FR 75629 (December 12, 2013) (SR-MIAX-
2013-56).
    \4\ 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).
    \5\ 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.
    \6\ See Securities Exchange Release Nos. 71700 (March 12, 2014), 
79 FR 15188 (March 18, 2014) (SR-MIAX-2014-13); (SR-MIAX-2014-26). 
The Exchange will credit each Member $0.20 per contract resulting 
from each Priority Customer order transmitted by that Member 
executed on Exchange in MIAX Select Symbols. The $0.20 per contract 
credit is in lieu of the applicable credit that would otherwise 
apply to the transaction based on the volume thresholds.

[[Page 34369]]



------------------------------------------------------------------------
                                                                  Per
    Percentage thresholds of national customer volume in       contract
  multiply-listed options classes listed on MIAX (monthly)      credit
------------------------------------------------------------------------
0.00%-0.25%.................................................       $0.00
Above 0.25%-0.35%...........................................        0.10
Above 0.35%-1.25%...........................................        0.15
Above 1.25%-2.00%...........................................        0.17
Above 2.00%.................................................        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.
    The purpose of the Program is to encourage Members to direct 
greater Priority Customer trade volume to the Exchange. Increased 
Priority Customer volume will provide for greater liquidity, which 
benefits all market participants. The practice of incentivizing 
increased retail customer order flow in order to attract professional 
liquidity providers (Market-Makers) is, and has been, commonly 
practiced in the options markets. As such, marketing fee programs,\7\ 
and customer posting incentive programs,\8\ are based on attracting 
public customer order flow. The Program similarly intends to attract 
Priority Customer order flow, which will increase liquidity, thereby 
providing greater trading opportunities and tighter spreads for other 
market participants and causing a corresponding increase in order flow 
from such other market participants.
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    \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'').
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    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 limits 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 excludes 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 June 2, 2014.
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

[[Page 34370]]

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

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act. The Exchange believes that the 
proposed change would increase both intermarket and intramarket 
competition by incenting Members to direct their Priority Customer 
orders to the Exchange, which will enhance the quality of quoting and 
increase the volume of contracts traded here. To the extent that there 
is additional competitive burden on non-Priority Customers, the 
Exchange believes that this is appropriate because the rebate program 
should incent Members to direct additional order flow to the Exchange 
and thus provide additional liquidity that enhances the quality of its 
markets and increases the volume of contracts traded here. To the 
extent that this purpose is achieved, all the Exchange's market 
participants should benefit from the improved market liquidity. 
Enhanced market quality and increased transaction volume that results 
from the anticipated increase in order flow directed to the Exchange 
will benefit all market participants and improve competition on the 
Exchange. The Exchange notes that it operates in a highly competitive 
market in which market participants can readily favor competing venues 
if they deem fee levels at a particular venue to be excessive. In such 
an environment, the Exchange must continually adjust its fees to remain 
competitive with other exchanges and to attract order flow to the 
Exchange. The Exchange believes that the proposed rule change reflects 
this competitive environment because it reduces the Exchange's fees in 
a manner that encourages market participants to direct their customer 
order flow, to provide liquidity, and to attract additional transaction 
volume to the Exchange. Given the robust competition for volume among 
options markets, many of which offer the same products, implementing a 
volume based customer rebate program to attract order flow like the one 
being proposed in this filing is consistent with the above-mentioned 
goals of the Act. This is especially true for the smaller options 
markets, such as MIAX, which is competing for volume with much larger 
exchanges that dominate the options trading industry. 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-2014-25 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-MIAX-2014-25. 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-

[[Page 34371]]

2014-25 and should be submitted on or before July 7, 2014.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-13930 Filed 6-13-14; 8:45 am]
BILLING CODE 8011-01-P
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