Self-Regulatory Organizations; Miami International Securities Exchange LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change to Amend the MIAX Options Fee Schedule, 71-75 [2014-30701]

Download as PDF Federal Register / Vol. 80, No. 1 / Friday, January 2, 2015 / Notices impose a burden on competition among exchanges as they are done for regulatory purposes and are therefore irrelevant to competition. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants or Others No written comments were either solicited or received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Because the foregoing proposed rule change does not: (i) Significantly affect the protection of investors or the public interest; (ii) impose any significant burden on competition; and (iii) become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate, it has become effective pursuant to Section 19(b)(3)(A)(ii) of the Act 17 and subparagraph (f)(6) of Rule 19b–4 thereunder.18 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: (i) Necessary or appropriate in the public interest; (ii) for the protection of investors; or (iii) 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: • 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– NASDAQ–2014–123 on the subject line. asabaliauskas on DSK5VPTVN1PROD with NOTICES Paper Comments • Send paper comments in triplicate to Brent J. Fields, Secretary, Securities 17 15 U.S.C. 78s(b)(3)(a)(ii). CFR 240.19b–4(f)(6). In addition, Rule 19b– 4(f)(6) requires a self-regulatory organization to give the Commission written notice of its intent to file the proposed rule change at least five business days prior to the date of filing of the proposed rule change, or such shorter time as designated by the Commission. The Exchange has satisfied this requirement. 18 17 17:50 Dec 31, 2014 For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.19 Brent J. Fields, Secretary. [FR Doc. 2014–30702 Filed 12–31–14; 8:45 am] BILLING CODE 8011–01–P Electronic Comments VerDate Sep<11>2014 and Exchange Commission, 100 F Street NE., Washington, DC 20549. All submissions should refer to File Number SR–NASDAQ–2014–123. 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– NASDAQ–2014–123 and should be submitted on or before January 2, 2015. Jkt 235001 SECURITIES AND EXCHANGE COMMISSION [Release No. 34–73942; File No. SR–MIAX– 2014–66] Self-Regulatory Organizations; Miami International Securities Exchange LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change to Amend the MIAX Options Fee Schedule December 24, 2014. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the ‘‘Act’’),1 and Rule 19b–4 thereunder,2 notice is hereby given that on December 19, 2014, Miami International Securities Exchange LLC (‘‘MIAX’’ or the ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change as described in Items I and II below, which Items have been prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange is filing a proposal to amend the MIAX Options Fee Schedule. The 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 those statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant parts of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange proposes to amend its Fee Schedule to increase the monthly fee for Internal Distributors and External Distributors of MIAX Top of Market (‘‘ToM’’) and Administrative Information Subscriber (‘‘AIS’’). Specifically, the Exchange proposes to: (i) Increase the fee charged to Internal Distributors of ToM and AIS from $1,000 to $1,250 per month; and (ii) increase the fee charged to External Distributors of ToM and AIS from $1,500 to $1,750 per month. The Exchange charges monthly fees to Distributors of the ToM and AIS market data products that receive a feed of data either directly from MIAX or indirectly through another entity and then 1 15 19 17 PO 00000 CFR 200.30–3(a)(12). Frm 00047 Fmt 4703 Sfmt 4703 71 2 17 E:\FR\FM\02JAN1.SGM U.S.C. 78s(b)(1). CFR 240.19b–4. 02JAN1 72 Federal Register / Vol. 80, No. 1 / Friday, January 2, 2015 / Notices asabaliauskas on DSK5VPTVN1PROD with NOTICES distributes it either internally (within that entity) or externally (outside that entity). The monthly Distributor Fee charged depends on whether the Distributor is an ‘‘Internal Distributor’’ 3 or an ‘‘External Distributor.’’ 4 The Exchange notes that all Distributors are required to execute a MIAX Distributor Agreement. ToM provides Distributors with a direct data feed that includes the Exchange’s best bid and offer, with aggregate size, and last sale information based on displayable order and quoting interest on the Exchange, and the PostHalt Notification. The ToM data feed includes data that is identical to the data sent to the processor for the Options Price Regulatory Authority (‘‘OPRA’’). The ToM and OPRA data leave the MIAX system at the same time, as required under Section 5.2(c)(iii)(B) of the Limited Liability Company Agreement of the Options Price Reporting Authority LLC (the ‘‘OPRA Plan’’), which prohibits the dissemination of proprietary information on any more timely basis than the same information is furnished to the OPRA System for inclusion in OPRA’s consolidated dissemination of options information.5 The AIS data feed includes secondary administrative information and liquidity seeking event related information. The Exchange notes that the monthly fee for Internal Distributors and External Distributors of AIS is waived if they also subscribe to the ToM market data product. The Exchange proposes to increase the fee charged to Internal Distributors of ToM and AIS from $1,000 to $1,250 per month and increase the fee charged to External Distributors of ToM and AIS from $1,500 to $1,750 per month in order to increase the Exchange’s nontransaction fee revenues. The proposed fees for the ToM data feed are in the range of similar fees found on another exchange; however the fees are slightly lower in order to increase the intermarket competition for these types of data service.6 3 An Internal Distributor is an organization that subscribes to the Exchange for the use of ToM, and is permitted by agreement with the Exchange to provide ToM data to internal users (i.e., users within their own organization). 4 An External Distributor is an organization that subscribes to the Exchange for the use of ToM, and is permitted by agreement with the Exchange to provide ToM data to both internal users and to external users (i.e., users outside of their own organization). 5 The Exchange previously filed to adopt the ToM market data product, including a detailed description of ToM. See Securities Exchange Act Release No. 69007 (February 28, 2013), 78 FR 14617 (March 6, 2013) (SR–MIAX–2013–05). 6 See NASDAQ OMX PHLX LLC Pricing Schedule, Section IX. VerDate Sep<11>2014 17:50 Dec 31, 2014 Jkt 235001 The Exchange proposes to implement the new market data fees beginning January 1, 2015. 2. Statutory Basis The Exchange believes that its proposal to amend its fee schedule is consistent with Section 6(b) of the Act 7 in general, and furthers the objectives of Section 6(b)(4) of the Act 8 in particular, in that it is an equitable allocation of reasonable fees and other charges among Exchange members. The Exchange believes the proposed fees are a reasonable allocation of its costs and expenses among its Members and other persons using its facilities since it is recovering not only the costs of the data distribution infrastructure, but also the costs of designing, maintaining, and operating the exchange’s transaction execution platform and the cost of regulating the exchange to ensure its fair operation and maintain investor confidence. Access to the Exchange is provided on fair and non-discriminatory terms. The proposed fees for ToM are reasonable since they are in the range of similar fees charged by another exchange; however, the proposed fees are slightly lower in order to increase the intermarket competition for this type of data service. The Exchange believes the proposed fees are equitable and not unfairly discriminatory because the new fee level results in a reasonable and equitable allocation of fees amongst External Distributors and Internal Distributors for similar services. Moreover, the decision as to whether or not to subscribe to ToM or AIS is entirely optional to all parties. Potential subscribers are not required to purchase the ToM or AIS market data feed, and the Exchange is not required to make the ToM or AIS market data feeds available. Subscribers can discontinue their use at any time and for any reason, including due to their assessment of the reasonableness of fees charged. The allocation of fees among subscribers is fair and reasonable because, if the market deems the proposed fees to be unfair or inequitable, firms can diminish or discontinue their use of this data. In adopting Regulation NMS, the Commission granted self-regulatory organizations and broker-dealers increased authority and flexibility to offer new and unique market data to the public. It was believed that this authority would expand the amount of data available to consumers, and also 7 15 8 15 PO 00000 U.S.C. 78f(b). U.S.C. 78f(b)(4). Frm 00048 Fmt 4703 spur innovation and competition for the provision of market data: ‘‘[E]fficiency is promoted when brokerdealers who do not need the data beyond the prices, sizes, market center identifications of the NBBO and consolidated last sale information are not required to receive (and pay for) such data when broker-dealers may choose to receive (and pay for) additional market data based on their own internal analysis of the need for such data.’’ 9 By removing ‘‘unnecessary regulatory restrictions’’ on the ability of exchanges to sell their own data, Regulation NMS advanced the goals of the Act and the principles reflected in its legislative history. If the free market should determine whether proprietary data is sold to broker-dealers at all, it follows that the price at which such data is sold should be set by the market as well. In July, 2010, Congress adopted H.R. 4173, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (‘‘Dodd-Frank Act’’), which amended Section 19 of the Act. Among other things, Section 916 of the DoddFrank Act amended paragraph (A) of Section 19(b)(3) of the Act by inserting the phrase ‘‘on any person, whether or not the person is a member of the selfregulatory organization’’ after ‘‘due, fee or other charge imposed by the selfregulatory organization.’’ As a result, all SRO rule proposals establishing or changing dues, fees or other charges are immediately effective upon filing regardless of whether such dues, fees or other charges are imposed on members of the SRO, non-members, or both. Section 916 further amended paragraph (C) of Section 19(b)(3) of the Act to read, in pertinent part, ‘‘At any time within the 60-day period beginning on the date of filing of such a proposed rule change in accordance with the provisions of paragraph (1) [of Section 19(b)], the Commission summarily may temporarily suspend the change in the rules of the self-regulatory organization made thereby, 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 this title. If the Commission takes such action, the Commission shall institute proceedings under paragraph (2)(B) [of Section 19(b)] to determine whether the proposed rule should be approved or disapproved.’’ The Exchange believes that these amendments to Section 19 of the Act reflect Congress’s intent to allow the Commission to rely upon the forces of competition to ensure that fees for 9 Securities Exchange Act Release No. 51808 (June 9, 2005), 70 FR 37496 (June 29, 2005). Sfmt 4703 E:\FR\FM\02JAN1.SGM 02JAN1 asabaliauskas on DSK5VPTVN1PROD with NOTICES Federal Register / Vol. 80, No. 1 / Friday, January 2, 2015 / Notices market data are reasonable and equitably allocated. Although Section 19(b) had formerly authorized immediate effectiveness for a ‘‘due, fee or other charge imposed by the selfregulatory organization,’’ the Commission adopted a policy and subsequently a rule stating that fees for data and other products available to persons that are not members of the selfregulatory organization must be approved by the Commission after first being published for comment. At the time, the Commission supported the adoption of the policy and the rule by pointing out that unlike members, whose representation in self-regulatory organization governance was mandated by the Act, non-members should be given the opportunity to comment on fees before being required to pay them, and that the Commission should specifically approve all such fees. The Exchange believes that the amendment to Section 19 reflects Congress’s conclusion that the evolution of selfregulatory organization governance and competitive market structure have rendered the Commission’s prior policy on non-member fees obsolete. Specifically, many exchanges have evolved from member-owned, not-forprofit corporations into for-profit, investor-owned corporations (or subsidiaries of investor-owned corporations). Accordingly, exchanges no longer have narrow incentives to manage their affairs for the exclusive benefit of their members, but rather have incentives to maximize the appeal of their products to all customers, whether members or non-members, so as to broaden distribution and grow revenues. Moreover, the Exchange believes that the change also reflects an endorsement of the Commission’s determinations that reliance on competitive markets is an appropriate means to ensure equitable and reasonable prices. Simply put, the change reflects a presumption that all fee changes should be permitted to take effect immediately, since the level of all fees are constrained by competitive forces. The Exchange therefore believes that the fees for ToM are properly assessed on non-member Distributors. The decision of the United States Court of Appeals for the District of Columbia Circuit in NetCoaliton v. SEC, No. 09–1042 (D.C. Cir. 2010), although reviewing a Commission decision made prior to the effective date of the DoddFrank Act, upheld the Commission’s reliance upon competitive markets to set reasonable and equitably allocated fees for market data: VerDate Sep<11>2014 17:50 Dec 31, 2014 Jkt 235001 ‘‘In fact, the legislative history indicates that the Congress intended that the market system ‘evolve through the interplay of competitive forces as unnecessary regulatory restrictions are removed’ and that the SEC wield its regulatory power ‘in those situations where competition may not be sufficient,’ such as in the creation of a ‘consolidated transactional reporting system.’ ’’ 10 The court’s conclusions about Congressional intent are therefore reinforced by the Dodd-Frank Act amendments, which create a presumption that exchange fees, including market data fees, may take effect immediately, without prior Commission approval, and that the Commission should take action to suspend a fee change and institute a proceeding to determine whether the fee change should be approved or disapproved only where the Commission has concerns that the change may not be consistent with the Act. B. Self-Regulatory Organization’s Statement on Burden on Competition The Exchange does not believe that the proposed rule change will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. Notwithstanding its determination that the Commission may rely upon competition to establish fair and equitably allocated fees for market data, the NetCoalition Court found that the Commission had not, in that case, compiled a record that adequately supported its conclusion that the market for the data at issue in the case was competitive. The Exchange believes that a record may readily be established to demonstrate the competitive nature of the market in question. There is intense competition between trading platforms that provide transaction execution and routing services and proprietary data products. Transaction execution and proprietary data products are complementary in that market data is both an input and a byproduct of the execution service. In fact, market data and trade execution are a representative example of joint products with joint costs. The decision whether and on which platform to post an order will depend on the attributes of the platform where the order can be posted, including the execution fees, data quality and price and distribution of its data products. Without the prospect of a taking order seeing and reacting to a posted order on a particular 10 NetCoaltion, at 15 (quoting H.R. Rep. No. 94– 229, at 92 (1975), as reprinted in 1975 U.S.C.C.A.N. 321, 323). PO 00000 Frm 00049 Fmt 4703 Sfmt 4703 73 platform, the posting of the order would accomplish little. Without trade executions, exchange data products cannot exist. Data products are valuable to many end subscribers only insofar as they provide information that end subscribers expect will assist them or their customers in making trading decisions. The costs of producing market data include not only the costs of the data distribution infrastructure, but also the costs of designing, maintaining, and operating the exchange’s transaction execution platform and the cost of regulating the exchange to ensure its fair operation and maintain investor confidence. The total return that a trading platform earns reflects the revenues it receives from both products and the joint costs it incurs. Moreover, an exchange’s customers view the costs of transaction executions and of data as a unified cost of doing business with the exchange. A broker-dealer will direct orders to a particular exchange only if the expected revenues from executing trades on the exchange exceed net transaction execution costs and the cost of data that the broker-dealer chooses to buy to support its trading decisions (or those of its customers). The choice of data products is, in turn, a product of the value of the products in making profitable trading decisions. If the cost of the product exceeds its expected value, the broker-dealer will choose not to buy it. Moreover, as a broker-dealer chooses to direct fewer orders to a particular exchange, the value of the product to the broker-dealer decreases, for two reasons. First, the product will contain less information, because executions of the broker-dealer’s orders will not be reflected in it. Second, and perhaps more important, the product will be less valuable to that broker-dealer because it does not provide information about the venue to which it is directing its orders. Data from the competing venue to which the broker-dealer is directing orders will become correspondingly more valuable. Thus, a super-competitive increase in the fees charged for either transactions or data has the potential to impair revenues from both products. ‘‘No one disputes that competition for order flow is ‘fierce’.’’ 11 However, the existence of fierce competition for order flow implies a high degree of price sensitivity on the part of broker-dealers with order flow, since they may readily reduce costs by directing orders toward the lowest-cost trading venues. A brokerdealer that shifted its order flow from 11 NetCoalition E:\FR\FM\02JAN1.SGM 02JAN1 at 24. asabaliauskas on DSK5VPTVN1PROD with NOTICES 74 Federal Register / Vol. 80, No. 1 / Friday, January 2, 2015 / Notices one platform to another in response to order execution price differentials would both reduce the value of that platform’s market data and reduce its own need to consume data from the disfavored platform. Similarly, if a platform increases its market data fees, the change will affect the overall cost of doing business with the platform, and affected broker-dealers will assess whether they can lower their trading costs by directing orders elsewhere and thereby lessening the need for the more expensive data. Analyzing the cost of market data distribution in isolation from the cost of all of the inputs supporting the creation of market data will inevitably underestimate the cost of the data. Thus, because it is impossible to create data without a fast, technologically robust, and well-regulated execution system, system costs and regulatory costs affect the price of market data. It would be equally misleading, however, to attribute all of the exchange’s costs to the market data portion of an exchange’s joint product. Rather, all of the exchange’s costs are incurred for the unified purposes of attracting order flow, executing and/or routing orders, and generating and selling data about market activity. The total return that an exchange earns reflects the revenues it receives from the joint products and the total costs of the joint products. Competition among trading platforms can be expected to constrain the aggregate return each platform earns from the sale of its joint products, but different platforms may choose from a range of possible, and equally reasonable, pricing strategies as the means of recovering total costs. For example, some platforms may choose to pay rebates to attract orders, charge relatively low prices for market information (or provide information free of charge) and charge relatively high prices for accessing posted liquidity. Other platforms may choose a strategy of paying lower rebates (or no rebates) to attract orders, setting relatively high prices for market information, and setting relatively low prices for accessing posted liquidity. In this environment, there is no economic basis for regulating maximum prices for one of the joint products in an industry in which suppliers face competitive constraints with regard to the joint offering. This would be akin to strictly regulating the price that an automobile manufacturer can charge for car sound systems despite the existence of a highly competitive market for cars and the availability of aftermarket alternatives to the manufacturer-supplied system. VerDate Sep<11>2014 17:50 Dec 31, 2014 Jkt 235001 The market for market data products is competitive and inherently contestable because there is fierce competition for the inputs necessary to the creation of proprietary data and strict pricing discipline for the proprietary products themselves. Numerous exchanges compete with each other for listings, trades, and market data itself, providing virtually limitless opportunities for entrepreneurs who wish to produce and distribute their own market data. This proprietary data is produced by each individual exchange, as well as other entities, in a vigorously competitive market. Broker-dealers currently have numerous alternative venues for their order flow, including eleven existing options markets. Each SRO market competes to produce transaction reports via trade executions. Competitive markets for order flow, executions, and transaction reports provide pricing discipline for the inputs of proprietary data products. The large number of SROs that currently produce proprietary data or are currently capable of producing it provides further pricing discipline for proprietary data products. Each SRO is currently permitted to produce proprietary data products, and many in addition to MIAX currently do, including NASDAQ, CBOE, ISE, NYSE Amex, and NYSEArca. Additionally, order routers and market data vendors can facilitate single or multiple brokerdealers’ production of proprietary data products. The potential sources of proprietary products are virtually limitless. Market data vendors provide another form of price discipline for proprietary data products because they control the primary means of access to end subscribers. Vendors impose price restraints based upon their business models. For example, vendors such as Bloomberg and Thomson Reuters that assess a surcharge on data they sell may refuse to offer proprietary products that end subscribers will not purchase in sufficient numbers. Internet portals, such as Google, impose a discipline by providing only data that will enable them to attract ‘‘eyeballs’’ that contribute to their advertising revenue. Retail broker-dealers, such as Schwab and Fidelity, offer their customers proprietary data only if it promotes trading and generates sufficient commission revenue. Although the business models may differ, these vendors’ pricing discipline is the same: They can simply refuse to purchase any proprietary data product that fails to provide sufficient value. The Exchange and other producers of proprietary data products must understand and respond PO 00000 Frm 00050 Fmt 4703 Sfmt 4703 to these varying business models and pricing disciplines in order to market proprietary data products successfully. In addition to the competition and price discipline described above, the market for proprietary data products is also highly contestable because market entry is rapid, inexpensive, and profitable. The history of electronic trading is replete with examples of entrants that swiftly grew into some of the largest electronic trading platforms and proprietary data producers: Archipelago, BATS Trading and Direct Edge. Regulation NMS, by deregulating the market for proprietary data, has increased the contestability of that market. While broker-dealers have previously published their proprietary data individually, Regulation NMS encourages market data vendors and broker-dealers to produce proprietary products cooperatively in a manner never before possible. Multiple market data vendors already have the capability to aggregate data and disseminate it on a profitable scale, including Bloomberg, and Thomson Reuters. The Court in NetCoalition concluded that the Commission had failed to demonstrate that the market for market data was competitive based on the reasoning of the Commission’s NetCoalition order because, in the Court’s view, the Commission had not adequately demonstrated that the proprietary data at issue in the case is used to attract order flow. The Exchange believes, however, that evidence not then before the court clearly demonstrates that availability of data attracts order flow. Due to competition among platforms, the Exchange intends to improve its platform data offerings on a continuing basis, and to respond promptly to customers’ data needs. The intensity of competition for proprietary information is significant and the Exchange believes that this proposal itself clearly evidences such competition. The Exchange is offering ToM in order to keep pace with changes in the industry and evolving customer needs. It is entirely optional and is geared towards attracting new Member Applicants and customers. MIAX competitors continue to create new market data products and innovative pricing in this space. The Exchange expects to see firms challenge its pricing on the basis of the Exchange’s explicit fees being higher than the zero-priced fees from other competitors such as BATS. In all cases, the Exchange expects firms to make decisions on how much and what types of data to consume on the basis of the total cost of interacting with MIAX or other exchanges. Of course, the explicit data E:\FR\FM\02JAN1.SGM 02JAN1 Federal Register / Vol. 80, No. 1 / Friday, January 2, 2015 / Notices fees are only one factor in a total platform analysis. Some competitors have lower transactions fees and higher data fees, and others are vice versa. The market for this proprietary information is highly competitive and continually evolves as products develop and change. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants or Others Written comments were neither solicited nor received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing rule change has become effective pursuant to Section 19(b)(3)(A)(ii) of the Act 12 and paragraph (f)(2) of Rule 19b–4 thereunder.13 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. 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: asabaliauskas on DSK5VPTVN1PROD with NOTICES 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–2014–66 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–2014–66. 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 MIAX. 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– 2014–66 and should be submitted on or before January 23, 2015. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.14 Brent J. Fields, Secretary. [FR Doc. 2014–30701 Filed 12–31–14; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–73941; File No. SR–ICC– 2014–21] Self-Regulatory Organizations; ICE Clear Credit LLC; Notice of Filing of Proposed Rule Change To Provide for the Clearance of Additional Standard Western European Sovereign Single Names December 24, 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 December 16, 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. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. 14 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 12 15 U.S.C. 78s(b)(3)(A)(ii). 13 17 CFR 240.19b–4(f)(2). VerDate Sep<11>2014 17:50 Dec 31, 2014 1 15 Jkt 235001 PO 00000 Frm 00051 Fmt 4703 Sfmt 4703 75 I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The purpose of the proposed rule change is to adopt rules that will provide the basis for ICC to clear additional credit default swap (‘‘CDS’’) contracts. Specifically, ICC is proposing to amend Section 26I of its Rules to provide for the clearance of additional Standard Western European Sovereign CDS contracts (collectively, ‘‘SWES Contracts’’). ICC has been approved to clear four SWES Contracts: The Republic of Ireland, the Italian Republic, the Portuguese Republic, and the Kingdom of Spain.3 The proposed changes to the ICC Rules would provide for the clearance of additional SWES Contracts, specifically the Kingdom of Belgium and the Republic of Austria. 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 on the proposed rule change. The text of these 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 purpose of the proposed rule change is to adopt rules that will provide the basis for ICC to clear additional credit default swap contracts. ICC has been approved to clear four SWES Contracts: The Republic of Ireland, the Italian Republic, the Portuguese Republic, and the Kingdom of Spain.4 ICC proposes amending Subchapter 26I of its Rules to provide for the clearance of two additional SWES Contracts, specifically the Kingdom of Belgium and the Republic of Austria. These two additional SWES Contracts will be offered on the 2003 and 2014 ISDA Credit Derivatives Definitions. The addition of these SWES Contracts will benefit the market for credit default swaps on Western European by providing market 3 See Exchange Act Release No. 34–72941 (Nov. 5, 2014), 79 FR 67213 (Nov. 12, 2014) (File No. SR– ICC–2014–14) (order approving rule change to clear other Western European sovereign CDS contracts) (the ‘‘Prior WES Order’’). 4 Id. E:\FR\FM\02JAN1.SGM 02JAN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 80, Number 1 (Friday, January 2, 2015)]
[Notices]
[Pages 71-75]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-30701]

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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-73942; File No. SR-MIAX-2014-66]

Self-Regulatory Organizations; Miami International Securities
Exchange LLC; Notice of Filing and Immediate Effectiveness of a
Proposed Rule Change to Amend the MIAX Options Fee Schedule

December 24, 2014.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that on December 19, 2014, Miami International Securities Exchange LLC
(``MIAX'' or the ``Exchange'') filed with the Securities and Exchange
Commission (``Commission'') the proposed rule change as described in
Items I and II 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.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

The Exchange is filing a proposal to amend the MIAX Options Fee
Schedule.
The text of the proposed rule change is available on the Exchange's
Web site at 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 those statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant parts of such
statements.

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

1. Purpose
The Exchange proposes to amend its Fee Schedule to increase the
monthly fee for Internal Distributors and External Distributors of MIAX
Top of Market (``ToM'') and Administrative Information Subscriber
(``AIS''). Specifically, the Exchange proposes to: (i) Increase the fee
charged to Internal Distributors of ToM and AIS from $1,000 to $1,250
per month; and (ii) increase the fee charged to External Distributors
of ToM and AIS from $1,500 to $1,750 per month.
The Exchange charges monthly fees to Distributors of the ToM and
AIS market data products that receive a feed of data either directly
from MIAX or indirectly through another entity and then

[[Page 72]]

distributes it either internally (within that entity) or externally
(outside that entity). The monthly Distributor Fee charged depends on
whether the Distributor is an ``Internal Distributor'' \3\ or an
``External Distributor.'' \4\ The Exchange notes that all Distributors
are required to execute a MIAX Distributor Agreement.
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\3\ An Internal Distributor is an organization that subscribes
to the Exchange for the use of ToM, and is permitted by agreement
with the Exchange to provide ToM data to internal users (i.e., users
within their own organization).
\4\ An External Distributor is an organization that subscribes
to the Exchange for the use of ToM, and is permitted by agreement
with the Exchange to provide ToM data to both internal users and to
external users (i.e., users outside of their own organization).
---------------------------------------------------------------------------

ToM provides Distributors with a direct data feed that includes the
Exchange's best bid and offer, with aggregate size, and last sale
information based on displayable order and quoting interest on the
Exchange, and the Post-Halt Notification. The ToM data feed includes
data that is identical to the data sent to the processor for the
Options Price Regulatory Authority (``OPRA''). The ToM and OPRA data
leave the MIAX system at the same time, as required under Section
5.2(c)(iii)(B) of the Limited Liability Company Agreement of the
Options Price Reporting Authority LLC (the ``OPRA Plan''), which
prohibits the dissemination of proprietary information on any more
timely basis than the same information is furnished to the OPRA System
for inclusion in OPRA's consolidated dissemination of options
information.\5\ The AIS data feed includes secondary administrative
information and liquidity seeking event related information. The
Exchange notes that the monthly fee for Internal Distributors and
External Distributors of AIS is waived if they also subscribe to the
ToM market data product.
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\5\ The Exchange previously filed to adopt the ToM market data
product, including a detailed description of ToM. See Securities
Exchange Act Release No. 69007 (February 28, 2013), 78 FR 14617
(March 6, 2013) (SR-MIAX-2013-05).
---------------------------------------------------------------------------

The Exchange proposes to increase the fee charged to Internal
Distributors of ToM and AIS from $1,000 to $1,250 per month and
increase the fee charged to External Distributors of ToM and AIS from
$1,500 to $1,750 per month in order to increase the Exchange's non-
transaction fee revenues. The proposed fees for the ToM data feed are
in the range of similar fees found on another exchange; however the
fees are slightly lower in order to increase the intermarket
competition for these types of data service.\6\
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\6\ See NASDAQ OMX PHLX LLC Pricing Schedule, Section IX.
---------------------------------------------------------------------------

The Exchange proposes to implement the new market data fees
beginning January 1, 2015.
2. Statutory Basis
The Exchange believes that its proposal to amend its fee schedule
is consistent with Section 6(b) of the Act \7\ in general, and furthers
the objectives of Section 6(b)(4) of the Act \8\ in particular, in that
it is an equitable allocation of reasonable fees and other charges
among Exchange members.
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\7\ 15 U.S.C. 78f(b).
\8\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

The Exchange believes the proposed fees are a reasonable allocation
of its costs and expenses among its Members and other persons using its
facilities since it is recovering not only the costs of the data
distribution infrastructure, but also the costs of designing,
maintaining, and operating the exchange's transaction execution
platform and the cost of regulating the exchange to ensure its fair
operation and maintain investor confidence. Access to the Exchange is
provided on fair and non-discriminatory terms. The proposed fees for
ToM are reasonable since they are in the range of similar fees charged
by another exchange; however, the proposed fees are slightly lower in
order to increase the intermarket competition for this type of data
service. The Exchange believes the proposed fees are equitable and not
unfairly discriminatory because the new fee level results in a
reasonable and equitable allocation of fees amongst External
Distributors and Internal Distributors for similar services. Moreover,
the decision as to whether or not to subscribe to ToM or AIS is
entirely optional to all parties. Potential subscribers are not
required to purchase the ToM or AIS market data feed, and the Exchange
is not required to make the ToM or AIS market data feeds available.
Subscribers can discontinue their use at any time and for any reason,
including due to their assessment of the reasonableness of fees
charged. The allocation of fees among subscribers is fair and
reasonable because, if the market deems the proposed fees to be unfair
or inequitable, firms can diminish or discontinue their use of this
data.
In adopting Regulation NMS, the Commission granted self-regulatory
organizations and broker-dealers increased authority and flexibility to
offer new and unique market data to the public. It was believed that
this authority would expand the amount of data available to consumers,
and also spur innovation and competition for the provision of market
data:

``[E]fficiency is promoted when broker-dealers who do not need
the data beyond the prices, sizes, market center identifications of
the NBBO and consolidated last sale information are not required to
receive (and pay for) such data when broker-dealers may choose to
receive (and pay for) additional market data based on their own
internal analysis of the need for such data.'' \9\
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\9\ Securities Exchange Act Release No. 51808 (June 9, 2005), 70
FR 37496 (June 29, 2005).

By removing ``unnecessary regulatory restrictions'' on the ability
of exchanges to sell their own data, Regulation NMS advanced the goals
of the Act and the principles reflected in its legislative history. If
the free market should determine whether proprietary data is sold to
broker-dealers at all, it follows that the price at which such data is
sold should be set by the market as well.
In July, 2010, Congress adopted H.R. 4173, the Dodd-Frank Wall
Street Reform and Consumer Protection Act of 2010 (``Dodd-Frank Act''),
which amended Section 19 of the Act. Among other things, Section 916 of
the Dodd-Frank Act amended paragraph (A) of Section 19(b)(3) of the Act
by inserting the phrase ``on any person, whether or not the person is a
member of the self-regulatory organization'' after ``due, fee or other
charge imposed by the self-regulatory organization.'' As a result, all
SRO rule proposals establishing or changing dues, fees or other charges
are immediately effective upon filing regardless of whether such dues,
fees or other charges are imposed on members of the SRO, non-members,
or both. Section 916 further amended paragraph (C) of Section 19(b)(3)
of the Act to read, in pertinent part, ``At any time within the 60-day
period beginning on the date of filing of such a proposed rule change
in accordance with the provisions of paragraph (1) [of Section 19(b)],
the Commission summarily may temporarily suspend the change in the
rules of the self-regulatory organization made thereby, 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 this title. If the Commission takes such
action, the Commission shall institute proceedings under paragraph
(2)(B) [of Section 19(b)] to determine whether the proposed rule should
be approved or disapproved.''
The Exchange believes that these amendments to Section 19 of the
Act reflect Congress's intent to allow the Commission to rely upon the
forces of competition to ensure that fees for

[[Page 73]]

market data are reasonable and equitably allocated. Although Section
19(b) had formerly authorized immediate effectiveness for a ``due, fee
or other charge imposed by the self-regulatory organization,'' the
Commission adopted a policy and subsequently a rule stating that fees
for data and other products available to persons that are not members
of the self-regulatory organization must be approved by the Commission
after first being published for comment. At the time, the Commission
supported the adoption of the policy and the rule by pointing out that
unlike members, whose representation in self-regulatory organization
governance was mandated by the Act, non-members should be given the
opportunity to comment on fees before being required to pay them, and
that the Commission should specifically approve all such fees. The
Exchange believes that the amendment to Section 19 reflects Congress's
conclusion that the evolution of self-regulatory organization
governance and competitive market structure have rendered the
Commission's prior policy on non-member fees obsolete. Specifically,
many exchanges have evolved from member-owned, not-for-profit
corporations into for-profit, investor-owned corporations (or
subsidiaries of investor-owned corporations). Accordingly, exchanges no
longer have narrow incentives to manage their affairs for the exclusive
benefit of their members, but rather have incentives to maximize the
appeal of their products to all customers, whether members or non-
members, so as to broaden distribution and grow revenues. Moreover, the
Exchange believes that the change also reflects an endorsement of the
Commission's determinations that reliance on competitive markets is an
appropriate means to ensure equitable and reasonable prices. Simply
put, the change reflects a presumption that all fee changes should be
permitted to take effect immediately, since the level of all fees are
constrained by competitive forces. The Exchange therefore believes that
the fees for ToM are properly assessed on non-member Distributors.
The decision of the United States Court of Appeals for the District
of Columbia Circuit in NetCoaliton v. SEC, No. 09-1042 (D.C. Cir.
2010), although reviewing a Commission decision made prior to the
effective date of the Dodd-Frank Act, upheld the Commission's reliance
upon competitive markets to set reasonable and equitably allocated fees
for market data:

``In fact, the legislative history indicates that the Congress
intended that the market system `evolve through the interplay of
competitive forces as unnecessary regulatory restrictions are
removed' and that the SEC wield its regulatory power `in those
situations where competition may not be sufficient,' such as in the
creation of a `consolidated transactional reporting system.' '' \10\
---------------------------------------------------------------------------

\10\ NetCoaltion, at 15 (quoting H.R. Rep. No. 94-229, at 92
(1975), as reprinted in 1975 U.S.C.C.A.N. 321, 323).
---------------------------------------------------------------------------

The court's conclusions about Congressional intent are therefore
reinforced by the Dodd-Frank Act amendments, which create a presumption
that exchange fees, including market data fees, may take effect
immediately, without prior Commission approval, and that the Commission
should take action to suspend a fee change and institute a proceeding
to determine whether the fee change should be approved or disapproved
only where the Commission has concerns that the change may not be
consistent with the Act.

B. Self-Regulatory Organization's Statement on Burden on Competition

The Exchange does not believe that the proposed rule change will
result in any burden on competition that is not necessary or
appropriate in furtherance of the purposes of the Act. Notwithstanding
its determination that the Commission may rely upon competition to
establish fair and equitably allocated fees for market data, the
NetCoalition Court found that the Commission had not, in that case,
compiled a record that adequately supported its conclusion that the
market for the data at issue in the case was competitive. The Exchange
believes that a record may readily be established to demonstrate the
competitive nature of the market in question.
There is intense competition between trading platforms that provide
transaction execution and routing services and proprietary data
products. Transaction execution and proprietary data products are
complementary in that market data is both an input and a byproduct of
the execution service. In fact, market data and trade execution are a
representative example of joint products with joint costs. The decision
whether and on which platform to post an order will depend on the
attributes of the platform where the order can be posted, including the
execution fees, data quality and price and distribution of its data
products. Without the prospect of a taking order seeing and reacting to
a posted order on a particular platform, the posting of the order would
accomplish little.
Without trade executions, exchange data products cannot exist. Data
products are valuable to many end subscribers only insofar as they
provide information that end subscribers expect will assist them or
their customers in making trading decisions. The costs of producing
market data include not only the costs of the data distribution
infrastructure, but also the costs of designing, maintaining, and
operating the exchange's transaction execution platform and the cost of
regulating the exchange to ensure its fair operation and maintain
investor confidence. The total return that a trading platform earns
reflects the revenues it receives from both products and the joint
costs it incurs. Moreover, an exchange's customers view the costs of
transaction executions and of data as a unified cost of doing business
with the exchange. A broker-dealer will direct orders to a particular
exchange only if the expected revenues from executing trades on the
exchange exceed net transaction execution costs and the cost of data
that the broker-dealer chooses to buy to support its trading decisions
(or those of its customers). The choice of data products is, in turn, a
product of the value of the products in making profitable trading
decisions. If the cost of the product exceeds its expected value, the
broker-dealer will choose not to buy it.
Moreover, as a broker-dealer chooses to direct fewer orders to a
particular exchange, the value of the product to the broker-dealer
decreases, for two reasons. First, the product will contain less
information, because executions of the broker-dealer's orders will not
be reflected in it. Second, and perhaps more important, the product
will be less valuable to that broker-dealer because it does not provide
information about the venue to which it is directing its orders. Data
from the competing venue to which the broker-dealer is directing orders
will become correspondingly more valuable.
Thus, a super-competitive increase in the fees charged for either
transactions or data has the potential to impair revenues from both
products. ``No one disputes that competition for order flow is
`fierce'.'' \11\ However, the existence of fierce competition for order
flow implies a high degree of price sensitivity on the part of broker-
dealers with order flow, since they may readily reduce costs by
directing orders toward the lowest-cost trading venues. A broker-dealer
that shifted its order flow from

[[Page 74]]

one platform to another in response to order execution price
differentials would both reduce the value of that platform's market
data and reduce its own need to consume data from the disfavored
platform. Similarly, if a platform increases its market data fees, the
change will affect the overall cost of doing business with the
platform, and affected broker-dealers will assess whether they can
lower their trading costs by directing orders elsewhere and thereby
lessening the need for the more expensive data.
---------------------------------------------------------------------------

\11\ NetCoalition at 24.
---------------------------------------------------------------------------

Analyzing the cost of market data distribution in isolation from
the cost of all of the inputs supporting the creation of market data
will inevitably underestimate the cost of the data. Thus, because it is
impossible to create data without a fast, technologically robust, and
well-regulated execution system, system costs and regulatory costs
affect the price of market data. It would be equally misleading,
however, to attribute all of the exchange's costs to the market data
portion of an exchange's joint product. Rather, all of the exchange's
costs are incurred for the unified purposes of attracting order flow,
executing and/or routing orders, and generating and selling data about
market activity. The total return that an exchange earns reflects the
revenues it receives from the joint products and the total costs of the
joint products.
Competition among trading platforms can be expected to constrain
the aggregate return each platform earns from the sale of its joint
products, but different platforms may choose from a range of possible,
and equally reasonable, pricing strategies as the means of recovering
total costs. For example, some platforms may choose to pay rebates to
attract orders, charge relatively low prices for market information (or
provide information free of charge) and charge relatively high prices
for accessing posted liquidity. Other platforms may choose a strategy
of paying lower rebates (or no rebates) to attract orders, setting
relatively high prices for market information, and setting relatively
low prices for accessing posted liquidity. In this environment, there
is no economic basis for regulating maximum prices for one of the joint
products in an industry in which suppliers face competitive constraints
with regard to the joint offering. This would be akin to strictly
regulating the price that an automobile manufacturer can charge for car
sound systems despite the existence of a highly competitive market for
cars and the availability of aftermarket alternatives to the
manufacturer-supplied system.
The market for market data products is competitive and inherently
contestable because there is fierce competition for the inputs
necessary to the creation of proprietary data and strict pricing
discipline for the proprietary products themselves. Numerous exchanges
compete with each other for listings, trades, and market data itself,
providing virtually limitless opportunities for entrepreneurs who wish
to produce and distribute their own market data. This proprietary data
is produced by each individual exchange, as well as other entities, in
a vigorously competitive market.
Broker-dealers currently have numerous alternative venues for their
order flow, including eleven existing options markets. Each SRO market
competes to produce transaction reports via trade executions.
Competitive markets for order flow, executions, and transaction reports
provide pricing discipline for the inputs of proprietary data products.
The large number of SROs that currently produce proprietary data or are
currently capable of producing it provides further pricing discipline
for proprietary data products. Each SRO is currently permitted to
produce proprietary data products, and many in addition to MIAX
currently do, including NASDAQ, CBOE, ISE, NYSE Amex, and NYSEArca.
Additionally, order routers and market data vendors can facilitate
single or multiple broker-dealers' production of proprietary data
products. The potential sources of proprietary products are virtually
limitless.
Market data vendors provide another form of price discipline for
proprietary data products because they control the primary means of
access to end subscribers. Vendors impose price restraints based upon
their business models. For example, vendors such as Bloomberg and
Thomson Reuters that assess a surcharge on data they sell may refuse to
offer proprietary products that end subscribers will not purchase in
sufficient numbers. Internet portals, such as Google, impose a
discipline by providing only data that will enable them to attract
``eyeballs'' that contribute to their advertising revenue. Retail
broker-dealers, such as Schwab and Fidelity, offer their customers
proprietary data only if it promotes trading and generates sufficient
commission revenue. Although the business models may differ, these
vendors' pricing discipline is the same: They can simply refuse to
purchase any proprietary data product that fails to provide sufficient
value. The Exchange and other producers of proprietary data products
must understand and respond to these varying business models and
pricing disciplines in order to market proprietary data products
successfully.
In addition to the competition and price discipline described
above, the market for proprietary data products is also highly
contestable because market entry is rapid, inexpensive, and profitable.
The history of electronic trading is replete with examples of entrants
that swiftly grew into some of the largest electronic trading platforms
and proprietary data producers: Archipelago, BATS Trading and Direct
Edge. Regulation NMS, by deregulating the market for proprietary data,
has increased the contestability of that market. While broker-dealers
have previously published their proprietary data individually,
Regulation NMS encourages market data vendors and broker-dealers to
produce proprietary products cooperatively in a manner never before
possible. Multiple market data vendors already have the capability to
aggregate data and disseminate it on a profitable scale, including
Bloomberg, and Thomson Reuters.
The Court in NetCoalition concluded that the Commission had failed
to demonstrate that the market for market data was competitive based on
the reasoning of the Commission's NetCoalition order because, in the
Court's view, the Commission had not adequately demonstrated that the
proprietary data at issue in the case is used to attract order flow.
The Exchange believes, however, that evidence not then before the court
clearly demonstrates that availability of data attracts order flow. Due
to competition among platforms, the Exchange intends to improve its
platform data offerings on a continuing basis, and to respond promptly
to customers' data needs.
The intensity of competition for proprietary information is
significant and the Exchange believes that this proposal itself clearly
evidences such competition. The Exchange is offering ToM in order to
keep pace with changes in the industry and evolving customer needs. It
is entirely optional and is geared towards attracting new Member
Applicants and customers. MIAX competitors continue to create new
market data products and innovative pricing in this space. The Exchange
expects to see firms challenge its pricing on the basis of the
Exchange's explicit fees being higher than the zero-priced fees from
other competitors such as BATS. In all cases, the Exchange expects
firms to make decisions on how much and what types of data to consume
on the basis of the total cost of interacting with MIAX or other
exchanges. Of course, the explicit data

[[Page 75]]

fees are only one factor in a total platform analysis. Some competitors
have lower transactions fees and higher data fees, and others are vice
versa. The market for this proprietary information is highly
competitive and continually evolves as products develop and change.

C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants or Others

Written comments were neither solicited nor received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action

The foregoing rule change has become effective pursuant to Section
19(b)(3)(A)(ii) of the Act \12\ and paragraph (f)(2) of Rule 19b-4
thereunder.\13\ 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.
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\12\ 15 U.S.C. 78s(b)(3)(A)(ii).
\13\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------

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-2014-66 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-2014-66. 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 MIAX. 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-2014-66 and should be
submitted on or before January 23, 2015.

For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\14\
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\14\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2014-30701 Filed 12-31-14; 8:45 am]
BILLING CODE 8011-01-P

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