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 to Adopt Fees for MIAX PRIME, 52785-52789 [2014-20999]
Download as PDF
<![CDATA[
Federal Register / Vol. 79, No. 171 / Thursday, September 4, 2014 / Notices
MPL Order entered with a FOK modifier
will be rejected.
Furthermore, the Exchange has
proposed to delete commentary .04 to
Rule 7.6, as the commentary provides an
exception to Rule 7.6 (which governs
trading differentials) for Midpoint Cross
Orders, which would be eliminated as a
result of the instant proposal, and for
Midpoint Directed Fills, which were
eliminated in a prior rule filing.14 The
Exchange also proposes to delete
references to Cleanup Orders from Rules
7.34 and 7.35, as Cleanup Orders were
eliminated in the same prior rule filing
that eliminated Midpoint Directed
Fills.15
The Exchange has proposed, due to
the technology changes associated with
this proposal, to announce via Trader
Update the implementation date of the
elimination of the order types under this
proposal.16
III. Discussion and Commission
Findings
mstockstill on DSK4VPTVN1PROD with NOTICES
After careful review, the Commission
finds that the proposed rule change is
consistent with the requirements of the
Act and the rules and regulations
thereunder applicable to a national
securities exchange.17 In particular, the
Commission finds that the proposed
rule change is consistent with Section
6(b)(5) of the Act,18 which requires,
among other things, that the rules of a
national securities exchange be
designed to prevent fraudulent and
manipulative acts and practices, to
promote just and equitable principles of
trade, to remove impediments to and
perfect the mechanism of a free and
open market and a national market
system, and, in general, to protect
investors and the public interest; and
are not designed to permit unfair
discrimination between customers,
issuers, brokers or dealers.
The Commission notes that the
instant proposal does not add any new
functionality but instead reduces the
number of order types and order type/
modifier combinations that will be
accepted by the Exchange, which
should simplify to a degree the order
type functionality available on the
Exchange. The Commission believes
that the proposed rule change should
14 See Notice, 79 FR at 41615–16; see also
Securities Exchange Act Release No. 71331 (January
16, 2014), 79 FR 3907 (January 23, 2014) (SR–
NYSEArca–2013–92).
15 Id.
16 See Notice, 79 FR at 41616.
17 In approving this proposed rule change, the
Commission has considered the proposed rule’s
impact on efficiency, competition, and capital
formation. See 15 U.S.C. 78c(f).
18 15 U.S.C. 78f(b)(5).
VerDate Mar<15>2010
18:14 Sep 03, 2014
Jkt 232001
promote just and equitable principles of
trade, remove impediments to and
perfect the mechanism of a free and
open market and a national market
system, and, in general, protect
investors and the public interest.
IV. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,19 that the
proposed rule change (SR–NYSEArca–
2014–75) be, and it hereby is, approved.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.20
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2014–20998 Filed 9–3–14; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–72943; File No. SR–MIAX–
2014–45]
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 to Adopt Fees for MIAX
PRIME
August 28, 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 August 15, 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 the Substance
of the Proposed Rule Change
The Exchange is filing a proposal to
amend the MIAX Options Fee Schedule.
The text of the proposed rule change
is available on the Exchange’s Web site
at https://www.miaxoptions.com/filter/
wotitle/rulelfiling, at MIAX’s principal
office, and at the Commission’s Public
Reference Room.
19 15
U.S.C. 78s(b)(2).
CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
20 17
PO 00000
Frm 00161
Fmt 4703
Sfmt 4703
52785
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to amend the
Fee Schedule to adopt transaction fees
and rebates for Members that participate
in the price improvement auction
(‘‘PRIME Auction’’ or ‘‘PRIME’’)
pursuant to Rule 515A.3 The Exchange
intends to implement the PRIME
Auction mechanism August 8, 2014 and
therefore proposes to add PRIME
Auction transaction fees and rebates to
the Fee Schedule so that such fees and
rebates will be in place once the PRIME
Auction mechanism is implemented.
PRIME is a process by which a
Member may electronically submit for
execution (‘‘Auction’’) an order it
represents as agent (‘‘Agency Order’’)
against principal interest and/or an
Agency Order against solicited interest.
The Agency Order is referred to as a
PRIME Agency Order for purposes of
the Fee Schedule. The Member that
submits the PRIME Agency Order (the
‘‘Initiating Member’’) agrees to
guarantee the execution of the PRIME
Agency Order by submitting a contraside order representing principal
interest or solicited interest (‘‘Contraside Order’’).4 When the Exchange
receives a properly designated Agency
Order for Auction processing, a Request
for Responses (‘‘RFR’’) detailing the
option, side, size, and initiating price
will be sent to all subscribers of the
Exchange’s data feeds. Members may
submit responses to the RFR (specifying
prices and sizes). RFR responses can be
3 See Exchange Rule 515A. See also Securities
Exchange Act Release Nos. 71640 (March 4, 2014),
79 FR 13334 (March 10, 2014) (SR–MIAX–2014–09)
(‘‘Notice’’); 72009 (April 23, 2014), 79 FR 24032
(April 29, 2014) (SR–MIAX–2014–09).
4 The paired order submitted to PRIME that
includes both the PRIME Agency Order and the
Contra-side Order is referred to as the PRIME Order
for purposes of the Fee Schedule.
E:\FR\FM\04SEN1.SGM
04SEN1
52786
Federal Register / Vol. 79, No. 171 / Thursday, September 4, 2014 / Notices
either an Auction or Cancel (‘‘AOC’’)
order or an AOC eQuote.5
As described above, there are three
ways to participate in a PRIME Auction:
(i) As an Agency Order, also known as
a PRIME Agency Order; (ii) as the
Contra-side Order guaranteeing the
execution of the PRIME Order; and (iii)
any RFR response in the form of an AOC
order or AOC eQuote.
The Exchange proposes to charge the
following transaction fees for
participation in the PRIME Auction:
PRIME Order
Types of market participants
Per contract
fee for agency
order
Per contract
fee for contraside order
$0.00
0.30
0.30
0.30
0.30
0.30
$0.00
0.05
0.05
0.05
0.05
0.05
Priority Customer .............................................................................................
Public Customer That Is Not a Priority Customer ...........................................
MIAX Market Maker .........................................................................................
Non-MIAX Market Maker .................................................................................
Non-Member Broker-Dealer ............................................................................
Firm ..................................................................................................................
The Exchange also proposes to adopt
the following rebates to be paid to the
Initiating Member for each PRIME Order
Responder to PRIME Auction
Per contract
fee for penny
Classes
Per contract
fee for nonpenny classes
$0.45
0.45
0.45
0.45
0.45
0.45
$0.90
0.90
0.90
0.90
0.90
0.90
contract that trades with a PRIME AOC
Response:
PRIME break-up
Types of market participants
Per contract
credit for
penny classes
Per contract
credit for nonpenny classes
$0.25
0.25
0.25
0.25
0.25
0.25
$0.60
0.60
0.60
0.60
0.60
0.60
mstockstill on DSK4VPTVN1PROD with NOTICES
Priority Customer .....................................................................................................................................................
Public Customer That Is Not a Priority Customer ...................................................................................................
MIAX Market Maker .................................................................................................................................................
Non-MIAX Market Maker .........................................................................................................................................
Non-Member Broker-Dealer ....................................................................................................................................
Firm ..........................................................................................................................................................................
MIAX will apply the PRIME Break-up
credit to the EEM that submitted the
PRIME Order for contracts that are
submitted to the PRIME Auction that
trade with a PRIME AOC Response. The
applicable fee for PRIME Orders will be
applied to any contracts for which a
credit is provided.6 Transaction fees in
mini-options will be 1/10th of the
standard per contract fee or rebate
shown above for the PRIME Auction.
However, the Exchange will assess the
standard transaction fees to a PRIME
AOC Response if they execute against
unrelated orders.
The Exchange proposes to amend the
Priority Customer Rebate Program to
provide that the Exchange will credit
each Member $0.10 per contract credit
for each Priority Customer order
executed as a PRIME Agency Order.
However, no rebates will be paid if the
PRIME Agency Order executes against a
Contra-side Order which is also a
Priority Customer. The $0.10 per
contract credit would be applied in lieu
of the applicable credit that would
otherwise apply to the transaction based
on the volume thresholds or whether
the options class was a MIAX Select
Symbol. In addition, the Exchange
proposes to exclude from the Priority
Customer Rebate Program, and the
corresponding volume calculation,
orders that are executed as a Priority
Customer-to-Priority Customer Order,
PRIME AOC Response, and PRIME
Contra-side Order.
The Exchange proposes to provide
that transaction fees resulting from
participation in a PRIME Auction as a
PRIME AOC Response, or rebates from
the PRIME Break-up credit, will not
count towards the Monthly Firm Fee
Cap. Transaction fees from Firm orders
that participate in the PRIME Auction as
a PRIME Agency Order or Contra-side
Order will count towards the Monthly
Firm Fee Cap.
Finally, the Exchange proposes to add
text to clarify that PRIME Agency Order,
Contra-side Order, or PRIME AOC
Response executions will not result in
the collection of marketing fees.
5 See Exchange Rules 515A(a)(2)(i)(D), 516(b)(4),
517(a)(2)(ii).
6 For example, BD1 submits a Firm PRIME Order
into PRIME for 100 contracts in a penny options
class. 60 contracts trade with MM1 AOC Response
and 40 contracts trade with the Contra-side Order.
The Exchange would assess the following
transaction fees: (i) PRIME Agency Order, 100
contracts × $0.30 per contract, plus 60 × $0.25
break-up credit; (ii) Contra-side Order, 40 contracts
× $0.05; and (iii) Responder, 60 contracts × $0.45.
VerDate Mar<15>2010
19:05 Sep 03, 2014
Jkt 232001
PO 00000
Frm 00162
Fmt 4703
Sfmt 4703
Specifically, the Exchange will not
assess a marketing fee to Market Makers
for contracts executed as a PRIME Order
or PRIME AOC Response in the PRIME
Auction; unless, it executes against an
unrelated order. Unrelated Market
Maker orders or quotes that execute
against the PRIME Order will still be
subject to marketing fees.
The Exchange proposes to implement
the new PRIME Auction transaction fees
and rebates beginning August 8, 2014.7
2. Statutory Basis
The Exchange believes that its
proposal to amend its fee schedule is
consistent with Section 6(b) of the Act 8
in general, and furthers the objectives of
Section 6(b)(4) of the Act 9 in particular,
in that it is an equitable allocation of
reasonable fees and other charges among
Exchange members.
The Exchange believes that the
proposed fee structure for PRIME
Auction transaction fees is reasonable,
equitable and not unfairly
discriminatory. The proposed fee
7 MIAX initially filed its fees for PRIME on
August 6, 2014 (SR–MIAX–2014–43). On August
15, 2014, MIAX withdrew that filing and submitted
this filing.
8 15 U.S.C. 78f(b).
9 15 U.S.C. 78f(b)(4).
E:\FR\FM\04SEN1.SGM
04SEN1
mstockstill on DSK4VPTVN1PROD with NOTICES
Federal Register / Vol. 79, No. 171 / Thursday, September 4, 2014 / Notices
structure is reasonably designed because
it will incent market participants to
send order flow to the Exchange in
order to participate in the price
improvement mechanism in a manner
that enables the Exchange to improve its
overall competitiveness and strengthen
its market quality for all market
participants. The Program is also
reasonably designed because the
proposed fees and rebates are within the
range of fees and rebates assessed by
other exchanges employing similar fee
structures for price improvement
mechanisms.10 Other competing
exchanges offer different fees and
rebates for agency orders, contra-side
order, and responders to the auction in
a manner similar to the proposal.11
Other competing exchanges also charge
different rates for transactions in their
price improvement mechanisms for
customers versus their non-customers in
a manner similar to the proposal.12 As
proposed, all applicable fees and rebates
are within the range of fees and rebates
for executions in price improvement
mechanisms assessed by other
exchanges employing similar fee
structures for price improvement
mechanisms.
The fee structure is reasonable,
equitable, and not unfairly
discriminatory because it will apply
equally amongst all Priority Customer
orders in each category of PRIME
Auction participation and it will also
apply equally amongst all non-Priority
Customer orders in each category of
PRIME Auction participation. All
similarly situated orders for Priority
Customers are subject to the same
transaction fee and rebate schedule. All
similarly situated orders for market
participants that are not Priority
Customers are subject to the same
transaction fee and rebate schedule, and
access to the Exchange is offered on
terms that are not unfairly
discriminatory. The Exchange believes
that is equitable and not unfairly
discriminatory that Priority Customers
be charged lower fees in PRIME than
other market participants. The
exchanges in general have historically
aimed to improve markets for investors
and develop various features within
market structure for customer benefit.
The Exchange does not assess Priority
Customers transactions fees because
Priority Customer order flow enhances
liquidity on the Exchange for the benefit
10 See
e.g., NYSE Amex Options Fee Schedule, p.
7; International Securities Exchange LLC Schedule
of Fees, p. 6; BOX Options Exchange Fee Schedule,
p. 1.
11 Id.
12 Id.
VerDate Mar<15>2010
18:14 Sep 03, 2014
Jkt 232001
of all market participants. Priority
Customer liquidity benefits all market
participants by providing more trading
opportunities, which attracts Market
Makers. An increase in the activity of
these market participants in turn
facilitates tighter spreads, which may
cause an additional corresponding
increase in order flow from other market
participants.
Moreover, the Exchange believes that
assessing all other market participants a
higher transaction fee than Priority
Customers for PRIME Order transactions
is reasonable, equitable, and not
unfairly discriminatory because these
types of market participants are more
sophisticated and have higher levels of
order flow activity and system usage.
This level of trading activity draws on
a greater amount of system resources
than that of Priority Customers, and
thus, generates greater ongoing
operational costs. Further, the Exchange
believes that charging all market
participants that are not Priority
Customers the same fee for all [sic] 13
PRIME transactions is not unfairly
discriminatory as the fees will apply to
all these market participants equally.
The Exchange believes that it is
reasonable for PRIME Orders to be
assessed lower fees than those providing
responses. Contra-side Orders guarantee
the PRIME Agency Order, and are
subject to market risk during the time
period that the PRIME Agency Order is
exposed to other market participants.
The Exchange believes that the Contraside Order acts as a critical role in the
PRIME as their willingness to guarantee
the PRIME Agency Order is the keystone
to the PRIME Agency Order gaining the
opportunity for price improvement.
The Exchange believes that it is
equitable and not unfairly
discriminatory to assess fees to
responders to the PRIME and credit
another participant to provide incentive
for participants to submit order flow to
PRIME. The Exchange believes that it is
appropriate to provide incentives to
market participants to direct orders to
participate in PRIME. Further, the
Exchange believes that the transaction
fees for responding to the auction will
not deter market participants from
providing price improvement.
The Exchange believes that it is
reasonable to assess lower transaction
and credit rates to penny option classes
than non-penny option classes. The
13 The Commission notes that non-Priority
Customers are not charged the same fee for all
transactions, but rather, the fee varies based on
whether the transaction is in a penny or non-penny
class and whether the non-Priority Customer was
participating as a PRIME Agency Order, Contra-side
Order, or a responder in the PRIME Auction.
PO 00000
Frm 00163
Fmt 4703
Sfmt 4703
52787
Exchange believes that options which
trade at these wider spreads merit
offering greater inducement [sic] for
market participants. In particular,
within the PRIME, option classes that
typically trade in minimum increments
of $.05 or $.10 provide greater
opportunity for market participants to
offer price improvement. As such, the
Exchange believes that the opportunity
for additional price improvement
provided by these wider spreads again
merits offering greater incentive [sic] for
market participants to increase the
potential price improvement for
customer orders in these transactions.
The Exchange believes that the
proposed Priority Customer Rebate
Program rebates for Priority Customer
orders submitted into PRIME are fair,
equitable and not unreasonably
discriminatory. The rebate 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, equitable, and not
unreasonably [sic] discriminatory
because it will apply equally to all
Priority Customer orders submitted as a
PRIME Agency Order. All similarly
situated Priority Customer orders are
subject to the same rebate schedule, and
access to the Exchange is offered on
terms that are not unfairly
discriminatory. In addition, the Program
is equitable and not unfairly
discriminatory because, while only
Priority Customer order flow qualifies
for the rebate program, an increase in
Priority Customer order flow will bring
greater volume and liquidity, which
benefit all market participants by
providing more trading opportunities
and tighter spreads. Market participants
want to trade with Priority Customer
order flow. To the extent Priority
Customer order flow is increased by the
proposal, market participants will
increasingly compete for the
opportunity to trade on the Exchange
including sending more orders and
providing narrower and larger sized
quotations in the effort to trade with
such Priority Customer order flow. The
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.
The Exchange believes excluding
Priority Customer-to-Priority Customer
Orders, Priority Customer responses,
E:\FR\FM\04SEN1.SGM
04SEN1
mstockstill on DSK4VPTVN1PROD with NOTICES
52788
Federal Register / Vol. 79, No. 171 / Thursday, September 4, 2014 / Notices
contra-side orders, and Priority
Customer-to-Priority Customer PRIME
transactions from the number of options
contracts executed on the Exchange by
any Member for purposes of the volume
thresholds and the rebate program is
reasonable, equitable, and not unfairly
discriminatory because participating
Members could otherwise game the
rebate program and volume thresholds
by executing excess volumes in these
types of transactions in which no
transaction fees are charged on the
Exchange. Further, the Exchange
believes that excluding these PRIME
transactions from the volume thresholds
is reasonable, equitable, and not
unfairly discriminatory because the
volume thresholds and rebate program
was established prior to the
introduction of the PRIME Auction
based on non-auction transaction fee
and volume calculations. In contrast,
the Exchange proposes to target new
volume to the Exchange to compete
with electronic price improvement
mechanisms on other exchanges. The
Exchange believes that the new rebate
for Priority Customer agency orders in
the PRIME Auction is reasonably
designed to incentivize additional retail
customer order flow to the PRIME
Auction. The Exchange further believes
that subjecting Priority Customer-toPriority Customer Orders to the same
treatment as Priority Customer-toPriority Customer PRIME transactions is
reasonable and not unfairly
discriminatory because these
transactions are substantially similar; as
such, they should be subject to similar
fees. Participating Members could
otherwise game the rebate program and
volume thresholds by executing excess
volumes in these types of transactions
in which no transaction fees are charged
on the Exchange.
The Exchange believes that specifying
that transaction fees for responses and
the break-up credit will not count
towards the Monthly Firm Fee Cap is
reasonable and not unfairly
discriminatory because the fee cap was
established prior to the introduction of
the PRIME Auction based on nonauction transaction fee and volume
calculations. With the PRIME Auction,
the Exchange proposes to target new
volume to the Exchange to compete
with electronic price improvement
mechanisms available on other
exchanges. Any transaction fees and
volume that would be executed as part
of the PRIME Action was not factored
into the creation of the Exchange’s
previous Monthly Firm Fee Cap. As
such, the Exchange believes that it is
reasonable to exclude responses and the
VerDate Mar<15>2010
18:14 Sep 03, 2014
Jkt 232001
break-up credit that will result from the
PRIME Auction from this cap, because
market participants would not be using
the new PRIME Auction in order to
meet the Monthly Firm Fee Cap.
The Exchange believes that specifying
that PRIME Order executions are not
subject to marketing fees is reasonable,
equitable and not unfairly
discriminatory. The Exchange is seeking
to encourage all participants, including
Market Makers, to send PRIME Orders
and to respond to PRIME Auction RFR
messages; the Exchange believes that
collecting marketing fees from Market
Makers may discourage such
participation. By encouraging as many
participants as possible to respond, the
Exchange believes that it will lead to
greater opportunities for price
improvement for all PRIME Orders, not
just those entered on behalf of
customers. For these reasons, the
Exchange believes that excluding
PRIME Orders and responses from the
marketing fees is reasonable, equitable
and not unfairly discriminatory. The
Exchange believes that it is equitable
and not unfairly discriminatory to
continue to charge a marketing fee if an
unrelated order executes in the PRIME,
because that unrelated order is not
subject to the specialized fee structure
for PRIME that is designed to
incentivize participation. The market
participant receives the benefit of a
PRIME execution and would already
expect to be charged a marketing fee
that is no different than the fee the
market participant was expecting to pay
trading against unrelated orders outside
the auction.
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 will enhance the competiveness
of the Exchange relative to other
exchanges that offer their own
electronic crossing mechanism. The
Exchange believes that the proposed
fees and rebates for participation in the
PRIME Auction are not going to have an
impact on intra-market competition
based on the total cost for participants
to transact as respondents to the
Auction as compared to the cost for
participants to engage in non-Auction
electronic transactions on the Exchange.
As noted above, the Exchange believes
that the proposed pricing for the PRIME
Auction is comparable to that of other
exchanges offering similar electronic
price improvement mechanisms, and
PO 00000
Frm 00164
Fmt 4703
Sfmt 4703
the Exchange believes that, based on
experience with electronic price
improvement crossing mechanisms on
other markets, market participants
understand that the price-improving
benefits offered by the Auction justify
and offset the transaction costs
associated with Auction. To the extent
that there is a difference between nonAuction transactions and Auction
transactions, the Exchange does not
believe this difference will cause
participants to refrain from responding
to Auctions. In addition, the Exchange
does not believe that the proposed
transaction fees and credits burden
competition by creating a disparity of
transaction fees between the PRIME
Order and the transaction fees a
responder pays would result in certain
participants being unable to compete
with the Contra-side Order. The
Exchange expects to see robust
competition within the PRIME Auction,
despite the apparent differences in nonAuction versus Auction responses. The
Exchange notes that it operates in a
highly competitive market in which
market participants can readily favor
competing venues if they deem fee
levels at a particular venue to be
excessive. In such an environment, the
Exchange must continually adjust its
fees to remain competitive with other
exchanges and to attract order flow to
the Exchange. The Exchange believes
that the proposed rule change reflects
this competitive environment because it
establishes a fee structure in a manner
that encourages market participants to
direct their order flow, to provide
liquidity, and to attract additional
transaction volume to the Exchange.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
Written comments were neither
solicited nor received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become
effective pursuant to Section
19(b)(3)(A)(ii) of the Act.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
14 15
E:\FR\FM\04SEN1.SGM
U.S.C. 78s(b)(3)(A)(ii).
04SEN1
Federal Register / Vol. 79, No. 171 / Thursday, September 4, 2014 / Notices
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.15
Kevin M. O’Neill,
Deputy Secretary.
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–2014–45 on the subject line.
Paper Comments
mstockstill on DSK4VPTVN1PROD with NOTICES
• 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–2014–45. 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 such
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change;
the Commission does not edit personal
identifying information from
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File Number SR–MIAX–
2014–45, and should be submitted on or
before September 25, 2014.
VerDate Mar<15>2010
18:14 Sep 03, 2014
Jkt 232001
[FR Doc. 2014–20999 Filed 9–3–14; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–72944; File No. SR–ICC–
2014–08]
Self-Regulatory Organizations; ICE
Clear Credit LLC; Order Approving
Proposed Rule Change Related to
ICC’s Authority to Use Guaranty Fund
and House Initial Margin as an Internal
Liquidity Resource
August 28, 2014.
I. Introduction
On June 24, 2014, ICE Clear Credit
LLC (‘‘ICC’’) filed with the Securities
and Exchange Commission
(‘‘Commission’’) the proposed rule
change SR–ICC–2014–08 pursuant to
Section 19(b)(1) of the Securities
Exchange Act of 1934 (‘‘Act’’) 1 and Rule
19b–4 thereunder.2 The proposed rule
change was published for comment in
the Federal Register on July 14, 2014.3
The Commission did not receive
comments on the proposed rule change.
For the reasons described below, the
Commission is approving the proposed
rule change.
II. Description of the Proposed Rule
Change
ICC has stated that the principal
purpose of the proposed rule change is
to formalize ICC’s Liquidity Risk
Management Framework, including its
comprehensive liquidity monitoring
program, and, through proposed
changes to two sections of ICC’s
Rulebook, to clarify ICC’s authority to
use, and to provide details as to how
ICC would use, Guaranty Fund and
House Initial Margin as an internal
liquidity resource.
ICC’s proposed Liquidity Risk
Management Framework includes a
discussion of all resources available to
ICC and the order in which ICC would
use available liquidity resources, if
necessary, when managing one or more
Clearing Participant defaults. The
liquidity waterfall classifies available
liquidity resources on any given day
15 17
CFR 200.30–3(a)(12).
U.S.C. 78(s)(b)(1).
2 17 CFR 240.19b–4.
3 Securities Exchange Act Release No. 34–72556
(July 8, 2014), 79 FR 40796 (July 14, 2014) (SR–ICC–
2014–08).
1 15
PO 00000
Frm 00165
Fmt 4703
Sfmt 4703
52789
into four levels. Level One includes the
House Initial Margin and Guaranty
Fund cash deposits of the defaulting
Clearing Participant. Level Two
includes Guaranty Fund cash deposits
of: (i) ICC; and (ii) non-defaulting
Clearing Participants. Level Three
includes House Initial Margin cash
deposits of the non-defaulting Clearing
Participants. Level Four includes ICC’s
committed credit facility to access
additional cash, and contemplates the
establishment of other committed
facilities to convert U.S. Treasuries to
USD cash.
In addition, the Liquidity Risk
Management Framework describes: (i)
The methodology used by ICC to
estimate its minimum day-of-default
available liquidity resources based on
its liquidity risk management model; (ii)
historical analysis based on back testing
considerations; and (iii) forward-looking
analysis based on stress testing. The
Liquidity Risk Management Framework
also provides for governance concerning
ICC’s liquidity testing, amending the
liquidity program and the procedure for
additional risk measures to be taken, as
necessary, based upon testing results.
Proposed new Rule 402(j) addresses
ICC’s use of any Clearing Participant’s
House Initial Margin as a liquidity
resource in connection with a Clearing
Participant’s default. ICC states that
under this rule, ICC may use a Clearing
Participant’s cash, securities or other
property constituting Initial Margin for
its House account to support liquidity
arrangements relating to ICC’s payment
obligations. Such liquidity arrangements
would include borrowing, repurchase
transactions, exchange of Initial Margin
for other assets or similar transactions,
under which equivalent value is
provided for such Initial Margin and
such equivalent value will be held as
Initial Margin and used or applied by
ICC solely for the purposes for which
Initial Margin in the House Account
may be used. ICC states that any use of
House Initial Margin may be used in a
manner consistent with ICC’s liquidity
policies and applicable law.
Additionally, ICC states that in
connection with a Clearing Participant’s
default, ICC will be able to exchange
cash that is House Initial Margin for the
equivalent value of securities or cash of
a different currency.
Proposed new Rule 802(f)(iv)
addresses ICC’s authority to pledge
assets in the Guaranty Fund to secure
loans made to the clearing house,
including for purposes of default
management, or to transfer such assets
to counterparties under repurchase
transactions or similar transactions. ICC
states that the proceeds of such
E:\FR\FM\04SEN1.SGM
04SEN1
]]>Agencies
[Federal Register Volume 79, Number 171 (Thursday, September 4, 2014)]
[Notices]
[Pages 52785-52789]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-20999]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-72943; File No. SR-MIAX-2014-45]
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 to Adopt Fees for
MIAX PRIME
August 28, 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 August 15, 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 the
Substance of the Proposed Rule Change
The Exchange is filing a proposal to amend the MIAX Options Fee
Schedule.
The text of the proposed rule change is available on the Exchange's
Web site at https://www.miaxoptions.com/filter/wotitle/
rulefiling, at MIAX's principal office, and at the
Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend the Fee Schedule to adopt
transaction fees and rebates for Members that participate in the price
improvement auction (``PRIME Auction'' or ``PRIME'') pursuant to Rule
515A.\3\ The Exchange intends to implement the PRIME Auction mechanism
August 8, 2014 and therefore proposes to add PRIME Auction transaction
fees and rebates to the Fee Schedule so that such fees and rebates will
be in place once the PRIME Auction mechanism is implemented.
---------------------------------------------------------------------------
\3\ See Exchange Rule 515A. See also Securities Exchange Act
Release Nos. 71640 (March 4, 2014), 79 FR 13334 (March 10, 2014)
(SR-MIAX-2014-09) (``Notice''); 72009 (April 23, 2014), 79 FR 24032
(April 29, 2014) (SR-MIAX-2014-09).
---------------------------------------------------------------------------
PRIME is a process by which a Member may electronically submit for
execution (``Auction'') an order it represents as agent (``Agency
Order'') against principal interest and/or an Agency Order against
solicited interest. The Agency Order is referred to as a PRIME Agency
Order for purposes of the Fee Schedule. The Member that submits the
PRIME Agency Order (the ``Initiating Member'') agrees to guarantee the
execution of the PRIME Agency Order by submitting a contra-side order
representing principal interest or solicited interest (``Contra-side
Order'').\4\ When the Exchange receives a properly designated Agency
Order for Auction processing, a Request for Responses (``RFR'')
detailing the option, side, size, and initiating price will be sent to
all subscribers of the Exchange's data feeds. Members may submit
responses to the RFR (specifying prices and sizes). RFR responses can
be
[[Page 52786]]
either an Auction or Cancel (``AOC'') order or an AOC eQuote.\5\
---------------------------------------------------------------------------
\4\ The paired order submitted to PRIME that includes both the
PRIME Agency Order and the Contra-side Order is referred to as the
PRIME Order for purposes of the Fee Schedule.
\5\ See Exchange Rules 515A(a)(2)(i)(D), 516(b)(4),
517(a)(2)(ii).
---------------------------------------------------------------------------
As described above, there are three ways to participate in a PRIME
Auction: (i) As an Agency Order, also known as a PRIME Agency Order;
(ii) as the Contra-side Order guaranteeing the execution of the PRIME
Order; and (iii) any RFR response in the form of an AOC order or AOC
eQuote.
The Exchange proposes to charge the following transaction fees for
participation in the PRIME Auction:
----------------------------------------------------------------------------------------------------------------
PRIME Order Responder to PRIME Auction
---------------------------------------------------------------
Types of market participants Per contract Per contract Per contract Per contract
fee for agency fee for contra- fee for penny fee for non-
order side order Classes penny classes
----------------------------------------------------------------------------------------------------------------
Priority Customer............................... $0.00 $0.00 $0.45 $0.90
Public Customer That Is Not a Priority Customer. 0.30 0.05 0.45 0.90
MIAX Market Maker............................... 0.30 0.05 0.45 0.90
Non-MIAX Market Maker........................... 0.30 0.05 0.45 0.90
Non-Member Broker-Dealer........................ 0.30 0.05 0.45 0.90
Firm............................................ 0.30 0.05 0.45 0.90
----------------------------------------------------------------------------------------------------------------
The Exchange also proposes to adopt the following rebates to be
paid to the Initiating Member for each PRIME Order contract that trades
with a PRIME AOC Response:
------------------------------------------------------------------------
PRIME break-up
-------------------------------
Types of market participants Per contract Per contract
credit for credit for non-
penny classes penny classes
------------------------------------------------------------------------
Priority Customer....................... $0.25 $0.60
Public Customer That Is Not a Priority 0.25 0.60
Customer...............................
MIAX Market Maker....................... 0.25 0.60
Non-MIAX Market Maker................... 0.25 0.60
Non-Member Broker-Dealer................ 0.25 0.60
Firm.................................... 0.25 0.60
------------------------------------------------------------------------
MIAX will apply the PRIME Break-up credit to the EEM that submitted
the PRIME Order for contracts that are submitted to the PRIME Auction
that trade with a PRIME AOC Response. The applicable fee for PRIME
Orders will be applied to any contracts for which a credit is
provided.\6\ Transaction fees in mini-options will be 1/10th of the
standard per contract fee or rebate shown above for the PRIME Auction.
However, the Exchange will assess the standard transaction fees to a
PRIME AOC Response if they execute against unrelated orders.
---------------------------------------------------------------------------
\6\ For example, BD1 submits a Firm PRIME Order into PRIME for
100 contracts in a penny options class. 60 contracts trade with MM1
AOC Response and 40 contracts trade with the Contra-side Order. The
Exchange would assess the following transaction fees: (i) PRIME
Agency Order, 100 contracts x $0.30 per contract, plus 60 x $0.25
break-up credit; (ii) Contra-side Order, 40 contracts x $0.05; and
(iii) Responder, 60 contracts x $0.45.
---------------------------------------------------------------------------
The Exchange proposes to amend the Priority Customer Rebate Program
to provide that the Exchange will credit each Member $0.10 per contract
credit for each Priority Customer order executed as a PRIME Agency
Order. However, no rebates will be paid if the PRIME Agency Order
executes against a Contra-side Order which is also a Priority Customer.
The $0.10 per contract credit would be applied in lieu of the
applicable credit that would otherwise apply to the transaction based
on the volume thresholds or whether the options class was a MIAX Select
Symbol. In addition, the Exchange proposes to exclude from the Priority
Customer Rebate Program, and the corresponding volume calculation,
orders that are executed as a Priority Customer-to-Priority Customer
Order, PRIME AOC Response, and PRIME Contra-side Order.
The Exchange proposes to provide that transaction fees resulting
from participation in a PRIME Auction as a PRIME AOC Response, or
rebates from the PRIME Break-up credit, will not count towards the
Monthly Firm Fee Cap. Transaction fees from Firm orders that
participate in the PRIME Auction as a PRIME Agency Order or Contra-side
Order will count towards the Monthly Firm Fee Cap.
Finally, the Exchange proposes to add text to clarify that PRIME
Agency Order, Contra-side Order, or PRIME AOC Response executions will
not result in the collection of marketing fees. Specifically, the
Exchange will not assess a marketing fee to Market Makers for contracts
executed as a PRIME Order or PRIME AOC Response in the PRIME Auction;
unless, it executes against an unrelated order. Unrelated Market Maker
orders or quotes that execute against the PRIME Order will still be
subject to marketing fees.
The Exchange proposes to implement the new PRIME Auction
transaction fees and rebates beginning August 8, 2014.\7\
---------------------------------------------------------------------------
\7\ MIAX initially filed its fees for PRIME on August 6, 2014
(SR-MIAX-2014-43). On August 15, 2014, MIAX withdrew that filing and
submitted this filing.
---------------------------------------------------------------------------
2. Statutory Basis
The Exchange believes that its proposal to amend its fee schedule
is consistent with Section 6(b) of the Act \8\ in general, and furthers
the objectives of Section 6(b)(4) of the Act \9\ in particular, in that
it is an equitable allocation of reasonable fees and other charges
among Exchange members.
---------------------------------------------------------------------------
\8\ 15 U.S.C. 78f(b).
\9\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------
The Exchange believes that the proposed fee structure for PRIME
Auction transaction fees is reasonable, equitable and not unfairly
discriminatory. The proposed fee
[[Page 52787]]
structure is reasonably designed because it will incent market
participants to send order flow to the Exchange in order to participate
in the price improvement mechanism in a manner that enables the
Exchange to improve its overall competitiveness and strengthen its
market quality for all market participants. The Program is also
reasonably designed because the proposed fees and rebates are within
the range of fees and rebates assessed by other exchanges employing
similar fee structures for price improvement mechanisms.\10\ Other
competing exchanges offer different fees and rebates for agency orders,
contra-side order, and responders to the auction in a manner similar to
the proposal.\11\ Other competing exchanges also charge different rates
for transactions in their price improvement mechanisms for customers
versus their non-customers in a manner similar to the proposal.\12\ As
proposed, all applicable fees and rebates are within the range of fees
and rebates for executions in price improvement mechanisms assessed by
other exchanges employing similar fee structures for price improvement
mechanisms.
---------------------------------------------------------------------------
\10\ See e.g., NYSE Amex Options Fee Schedule, p. 7;
International Securities Exchange LLC Schedule of Fees, p. 6; BOX
Options Exchange Fee Schedule, p. 1.
\11\ Id.
\12\ Id.
---------------------------------------------------------------------------
The fee structure is reasonable, equitable, and not unfairly
discriminatory because it will apply equally amongst all Priority
Customer orders in each category of PRIME Auction participation and it
will also apply equally amongst all non-Priority Customer orders in
each category of PRIME Auction participation. All similarly situated
orders for Priority Customers are subject to the same transaction fee
and rebate schedule. All similarly situated orders for market
participants that are not Priority Customers are subject to the same
transaction fee and rebate schedule, and access to the Exchange is
offered on terms that are not unfairly discriminatory. The Exchange
believes that is equitable and not unfairly discriminatory that
Priority Customers be charged lower fees in PRIME than other market
participants. The exchanges in general have historically aimed to
improve markets for investors and develop various features within
market structure for customer benefit. The Exchange does not assess
Priority Customers transactions fees because Priority Customer order
flow enhances liquidity on the Exchange for the benefit of all market
participants. Priority Customer liquidity benefits all market
participants by providing more trading opportunities, which attracts
Market Makers. An increase in the activity of these market participants
in turn facilitates tighter spreads, which may cause an additional
corresponding increase in order flow from other market participants.
Moreover, the Exchange believes that assessing all other market
participants a higher transaction fee than Priority Customers for PRIME
Order transactions is reasonable, equitable, and not unfairly
discriminatory because these types of market participants are more
sophisticated and have higher levels of order flow activity and system
usage. This level of trading activity draws on a greater amount of
system resources than that of Priority Customers, and thus, generates
greater ongoing operational costs. Further, the Exchange believes that
charging all market participants that are not Priority Customers the
same fee for all [sic] \13\ PRIME transactions is not unfairly
discriminatory as the fees will apply to all these market participants
equally.
---------------------------------------------------------------------------
\13\ The Commission notes that non-Priority Customers are not
charged the same fee for all transactions, but rather, the fee
varies based on whether the transaction is in a penny or non-penny
class and whether the non-Priority Customer was participating as a
PRIME Agency Order, Contra-side Order, or a responder in the PRIME
Auction.
---------------------------------------------------------------------------
The Exchange believes that it is reasonable for PRIME Orders to be
assessed lower fees than those providing responses. Contra-side Orders
guarantee the PRIME Agency Order, and are subject to market risk during
the time period that the PRIME Agency Order is exposed to other market
participants. The Exchange believes that the Contra-side Order acts as
a critical role in the PRIME as their willingness to guarantee the
PRIME Agency Order is the keystone to the PRIME Agency Order gaining
the opportunity for price improvement.
The Exchange believes that it is equitable and not unfairly
discriminatory to assess fees to responders to the PRIME and credit
another participant to provide incentive for participants to submit
order flow to PRIME. The Exchange believes that it is appropriate to
provide incentives to market participants to direct orders to
participate in PRIME. Further, the Exchange believes that the
transaction fees for responding to the auction will not deter market
participants from providing price improvement.
The Exchange believes that it is reasonable to assess lower
transaction and credit rates to penny option classes than non-penny
option classes. The Exchange believes that options which trade at these
wider spreads merit offering greater inducement [sic] for market
participants. In particular, within the PRIME, option classes that
typically trade in minimum increments of $.05 or $.10 provide greater
opportunity for market participants to offer price improvement. As
such, the Exchange believes that the opportunity for additional price
improvement provided by these wider spreads again merits offering
greater incentive [sic] for market participants to increase the
potential price improvement for customer orders in these transactions.
The Exchange believes that the proposed Priority Customer Rebate
Program rebates for Priority Customer orders submitted into PRIME are
fair, equitable and not unreasonably discriminatory. The rebate 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, equitable, and not unreasonably [sic] discriminatory because
it will apply equally to all Priority Customer orders submitted as a
PRIME Agency Order. All similarly situated Priority Customer orders are
subject to the same rebate schedule, and access to the Exchange is
offered on terms that are not unfairly discriminatory. In addition, the
Program is equitable and not unfairly discriminatory because, while
only Priority Customer order flow qualifies for the rebate program, an
increase in Priority Customer order flow will bring greater volume and
liquidity, which benefit all market participants by providing more
trading opportunities and tighter spreads. Market participants want to
trade with Priority Customer order flow. To the extent Priority
Customer order flow is increased by the proposal, market participants
will increasingly compete for the opportunity to trade on the Exchange
including sending more orders and providing narrower and larger sized
quotations in the effort to trade with such Priority Customer order
flow. The 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.
The Exchange believes excluding Priority Customer-to-Priority
Customer Orders, Priority Customer responses,
[[Page 52788]]
contra-side orders, and Priority Customer-to-Priority Customer PRIME
transactions from the number of options contracts executed on the
Exchange by any Member for purposes of the volume thresholds and the
rebate program is reasonable, equitable, and not unfairly
discriminatory because participating Members could otherwise game the
rebate program and volume thresholds by executing excess volumes in
these types of transactions in which no transaction fees are charged on
the Exchange. Further, the Exchange believes that excluding these PRIME
transactions from the volume thresholds is reasonable, equitable, and
not unfairly discriminatory because the volume thresholds and rebate
program was established prior to the introduction of the PRIME Auction
based on non-auction transaction fee and volume calculations. In
contrast, the Exchange proposes to target new volume to the Exchange to
compete with electronic price improvement mechanisms on other
exchanges. The Exchange believes that the new rebate for Priority
Customer agency orders in the PRIME Auction is reasonably designed to
incentivize additional retail customer order flow to the PRIME Auction.
The Exchange further believes that subjecting Priority Customer-to-
Priority Customer Orders to the same treatment as Priority Customer-to-
Priority Customer PRIME transactions is reasonable and not unfairly
discriminatory because these transactions are substantially similar; as
such, they should be subject to similar fees. Participating Members
could otherwise game the rebate program and volume thresholds by
executing excess volumes in these types of transactions in which no
transaction fees are charged on the Exchange.
The Exchange believes that specifying that transaction fees for
responses and the break-up credit will not count towards the Monthly
Firm Fee Cap is reasonable and not unfairly discriminatory because the
fee cap was established prior to the introduction of the PRIME Auction
based on non-auction transaction fee and volume calculations. With the
PRIME Auction, the Exchange proposes to target new volume to the
Exchange to compete with electronic price improvement mechanisms
available on other exchanges. Any transaction fees and volume that
would be executed as part of the PRIME Action was not factored into the
creation of the Exchange's previous Monthly Firm Fee Cap. As such, the
Exchange believes that it is reasonable to exclude responses and the
break-up credit that will result from the PRIME Auction from this cap,
because market participants would not be using the new PRIME Auction in
order to meet the Monthly Firm Fee Cap.
The Exchange believes that specifying that PRIME Order executions
are not subject to marketing fees is reasonable, equitable and not
unfairly discriminatory. The Exchange is seeking to encourage all
participants, including Market Makers, to send PRIME Orders and to
respond to PRIME Auction RFR messages; the Exchange believes that
collecting marketing fees from Market Makers may discourage such
participation. By encouraging as many participants as possible to
respond, the Exchange believes that it will lead to greater
opportunities for price improvement for all PRIME Orders, not just
those entered on behalf of customers. For these reasons, the Exchange
believes that excluding PRIME Orders and responses from the marketing
fees is reasonable, equitable and not unfairly discriminatory. The
Exchange believes that it is equitable and not unfairly discriminatory
to continue to charge a marketing fee if an unrelated order executes in
the PRIME, because that unrelated order is not subject to the
specialized fee structure for PRIME that is designed to incentivize
participation. The market participant receives the benefit of a PRIME
execution and would already expect to be charged a marketing fee that
is no different than the fee the market participant was expecting to
pay trading against unrelated orders outside the auction.
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 will enhance the competiveness of the Exchange relative
to other exchanges that offer their own electronic crossing mechanism.
The Exchange believes that the proposed fees and rebates for
participation in the PRIME Auction are not going to have an impact on
intra-market competition based on the total cost for participants to
transact as respondents to the Auction as compared to the cost for
participants to engage in non-Auction electronic transactions on the
Exchange. As noted above, the Exchange believes that the proposed
pricing for the PRIME Auction is comparable to that of other exchanges
offering similar electronic price improvement mechanisms, and the
Exchange believes that, based on experience with electronic price
improvement crossing mechanisms on other markets, market participants
understand that the price-improving benefits offered by the Auction
justify and offset the transaction costs associated with Auction. To
the extent that there is a difference between non-Auction transactions
and Auction transactions, the Exchange does not believe this difference
will cause participants to refrain from responding to Auctions. In
addition, the Exchange does not believe that the proposed transaction
fees and credits burden competition by creating a disparity of
transaction fees between the PRIME Order and the transaction fees a
responder pays would result in certain participants being unable to
compete with the Contra-side Order. The Exchange expects to see robust
competition within the PRIME Auction, despite the apparent differences
in non-Auction versus Auction responses. The Exchange notes that it
operates in a highly competitive market in which market participants
can readily favor competing venues if they deem fee levels at a
particular venue to be excessive. In such an environment, the Exchange
must continually adjust its fees to remain competitive with other
exchanges and to attract order flow to the Exchange. The Exchange
believes that the proposed rule change reflects this competitive
environment because it establishes a fee structure in a manner that
encourages market participants to direct their order flow, to provide
liquidity, and to attract additional transaction volume to the
Exchange.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
Written comments were neither solicited nor received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become effective pursuant to Section
19(b)(3)(A)(ii) of the Act.\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
[[Page 52789]]
institute proceedings to determine whether the proposed rule should be
approved or disapproved.
---------------------------------------------------------------------------
\14\ 15 U.S.C. 78s(b)(3)(A)(ii).
---------------------------------------------------------------------------
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to rule-comments@sec.gov. Please include
File Number SR-MIAX-2014-45 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-2014-45. 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 such filing also will be available
for inspection and copying at the principal office of the Exchange. All
comments received will be posted without change; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-MIAX-2014-45, and should be
submitted on or before September 25, 2014.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\15\
---------------------------------------------------------------------------
\15\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-20999 Filed 9-3-14; 8:45 am]
BILLING CODE 8011-01-P
