Self-Regulatory Organizations; Miami International Securities Exchange LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Its Fee Schedule, 54162-54166 [2016-19321]
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Federal Register / Vol. 81, No. 157 / Monday, August 15, 2016 / Notices
investors and the public interest in that
it will facilitate the listing and trading
of an additional type of activelymanaged exchange-traded product that
principally holds municipal bonds and
that will enhance competition among
market participants, to the benefit of
investors and the marketplace. As noted
above, the Exchange has in place
surveillance procedures relating to
trading in the Shares and may obtain
information via ISG from other
exchanges that are members of ISG or
with which the Exchange has entered
into a comprehensive surveillance
sharing agreement. In addition, as noted
above, investors will have ready access
to information regarding the Fund’s
holdings, the IIV, the Disclosed
Portfolio, and quotation and last sale
information for the Shares.
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 that is not
necessary or appropriate in furtherance
of the purpose of the Act. The Exchange
notes that the proposed rule change will
facilitate the listing and trading of an
additional type of actively-managed
exchange-traded product that
principally holds municipal bonds and
that will enhance competition among
market participants, to the benefit of
investors and the marketplace.
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C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were solicited
or received with respect to the proposed
rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of
publication of this notice in the Federal
Register or within such longer period
up to 90 days (i) as the Commission may
designate if it finds such longer period
to be appropriate and publishes its
reasons for so finding or (ii) as to which
the self-regulatory organization
consents, the Commission will:
(A) by order approve or disapprove
such proposed rule change; or
(B) institute proceedings to determine
whether the proposed rule change
should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
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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–
NYSEArca–2016–107 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–NYSEArca–2016–107. 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 will also 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–
NYSEArca–2016–107 and should be
submitted on or before September 6,
2016.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.31
Robert W. Errett,
Deputy Secretary.
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–78519; File No. SR–MIAX–
2016–21]
Self-Regulatory Organizations; Miami
International Securities Exchange LLC;
Notice of Filing and Immediate
Effectiveness of a Proposed Rule
Change To Amend Its Fee Schedule
August 9, 2016.
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 July 29, 2016, Miami International
Securities Exchange LLC (‘‘MIAX’’ or
‘‘Exchange’’) filed with the Securities
and Exchange Commission
(‘‘Commission’’) a proposed rule change
as described in Items I, II, and III below,
which Items have been prepared by the
Exchange. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange is filing a proposal to
amend the MIAX Options Fee Schedule
(the ‘‘Fee Schedule’’).
The text of the proposed rule change
is available on the Exchange’s Web site
at https://www.miaxoptions.com/filter/
wotitle/rule_filing, at MIAX’s principal
office, and at the Commission’s Public
Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
[FR Doc. 2016–19325 Filed 8–12–16; 8:45 am]
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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
current MIAX Market Maker 3 Sliding
Scale for transaction fees to: (i) Modify
the current Market Maker Sliding Scale
table of Market Maker Transaction Fees
in Section 1)a)i) of the Fee Schedule, as
described more fully below; and (ii)
adopt a ‘‘maker’’ fee and a ‘‘taker’’ fee
for the various Tiers in the Market
Maker Sliding Scale, as described
below.
Per contract
fee for
penny
classes
Percentage of national
market maker
volume
Tier
1
2
3
4
5
The Market Maker Sliding Scale for
Transaction Fees reduces a Market
Maker’s per contract transaction fee
based on the Market Maker’s percentage
of total national Market Maker volume
of any options classes that trade on the
Exchange during the calendar month,
currently based on the following scale:
.......................................................
.......................................................
.......................................................
.......................................................
.......................................................
0.00%–0.05% ............................................................................................
Above 0.05%–0.50% .................................................................................
Above 0.50%–1.00% .................................................................................
Above 1.00%–1.50% .................................................................................
Above 1.50% .............................................................................................
$0.25
0.19
0.12
0.07
0.05
Per contract
fee for
non-penny
classes
$0.29
0.23
0.16
0.11
0.09
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The Market Maker Sliding Scale
applies to all Market Makers for
transactions in all products except minioptions, with different per-contract
transaction fees established for Penny
option classes and non-Penny option
classes. A Market Maker’s initial $0.25
per contract rate in Penny classes and
$0.29 per contract in non-Penny classes
is reduced when the Market Maker
reaches the volume thresholds set forth
in the Market Maker Sliding Scale in a
month. As a Market Maker’s monthly
volume increases, its per contract
transaction fee decreases when the
monthly volume thresholds described in
the Market Maker Sliding Scale are
achieved.
The Exchange proposes to amend the
Fee Schedule by deleting the current
Market Maker Sliding Scale table, and to
create two new tables based upon
volume thresholds in the Priority
Customer Rebate Program 4 applicable to
Members and their Affiliates (as defined
below). One of the new tables will apply
to Members and their Affiliates 5 that are
included in Priority Customer Rebate
Program Volume Tier 3 or higher, and
the other new table will apply to
Members and their Affiliates that are not
included in Priority Customer Rebate
Program Volume Tier 3 or higher.
Currently, the Fee Schedule provides
discounted transaction fees for Members
and their qualified Affiliates that
achieve certain volume thresholds
through the submission of Priority
Customer Orders 6 under the Exchange’s
Priority Customer Rebate Program.7 The
current Fee Schedule describes the
discounted fees in narrative text and
footnotes to the table. The Exchange is
proposing to delete this narrative text
and parts of the footnotes to simply
include the discounted transaction fees
in the two new tables. The Market
Maker sliding scale will continue to
apply to MIAX Market Maker
transaction fees in all products except
mini-options. MIAX Market Makers will
continue to be assessed a $0.02 per
executed contract fee for transactions in
mini-options. The purpose of basing the
proposed two new tables on the volume
thresholds in the Priority Customer
Rebate Program is to clarify that the
Exchange provides incentives for
Members and their Affiliates to submit
a greater number of Priority Customer
Orders to the Exchange. The Exchange
is simply deleting this information from
the narrative text in the Fee Schedule
and conveying it more simply and
clearly in table format. The proposed
language ‘‘or higher,’’ which replaces
‘‘or 4,’’ is intended to account for
potential additional tiers in the Priority
Customer Rebate Program that may be
added in the future.
The Exchange also proposes to
establish new percentage thresholds of
national customer volume in the current
Tiers in the Market Maker Sliding Scale.
The new thresholds will be the same in
each new table. Specifically, the
Exchange proposes to establish new
percentage thresholds of national
customer volume in the Market Maker
Sliding Scale as follows: (i) In Tier 1,
from 0–0.0% to 0–0.075%; (ii) in Tier 2,
from above 0.075% to 0.60%; (iii) in
Tier 3, from above 0.60% to 1.00%; (iv)
in Tier 4, from above 1.00% to 1.50%;
and (v) in Tier 5, above 1.50%. These
Tiers will apply to both new tables. The
Exchange notes that a number of other
3 The term ‘‘Market Maker’’ means any MIAX
Market Maker including Registered Market Makers
(‘‘RMMs’’), Primary Lead Market Makers
(‘‘PLMMs’’), Lead Market Makers (‘‘LMMs’’),
Directed Order Lead Market Makers (‘‘DLMMs’’)
and Directed Primary Lead Market Makers
(‘‘DPLMMs’’). See Exchange Rule 100. See also Fee
Schedule, Footnote 1.
4 MIAX credits each Member the per contract
amount resulting from each Priority Customer order
transmitted by that Member which is executed
electronically on the Exchange in all multiply-listed
option classes (excluding QCC Orders, minioptions, Priority Customer-to-Priority Customer
Orders, PRIME AOC Responses, PRIME Contra-side
Orders, PRIME Orders for which both the Agency
and Contra-side Order are Priority Customers, and
executions related to contracts that are routed to
one or more exchanges in connection with the
Options Order Protection and Locked/Crossed
Market Plan referenced in MIAX Rule 1400),
provided the Member meets certain percentage
thresholds in a month as described in the Priority
Customer Rebate Program table. See Fee Schedule,
Section 1)a)iii).
5 For purposes of the MIAX Options Fee
Schedule, the term ‘‘Affiliate’’ means an affiliate of
a Member of at least 75% common ownership
between the firms as reflected on each firm’s Form
BD, Schedule A (‘‘Affiliate’’). See proposed new
Footnote 1 to the Fee Schedule.
6 The term ‘‘Priority Customer’’ means a person
or entity that (i) is not a broker or dealer in
securities, and (ii) does not place more than 390
orders in listed options per day on average during
a calendar month for its own beneficial account(s).
A ‘‘Priority Customer Order’’ means an order for the
account of a Priority Customer. See Exchange Rule
100.
7 The Exchange will aggregate the trading activity
of separate MIAX Market Maker firms for purposes
of the sliding scale if there is at least 75% common
ownership between the firms as reflected on each
firm’s Form BD, Schedule A. Any Member or its
affiliates of at least 75% common ownership
between the firms as reflected on each firm’s Form
BD, Schedule A, that qualifies for Priority Customer
Rebate Program volume tiers 3 or 4 will be assessed
$0.23 per contract for tier 1, $0.17 per contract for
tier 2, $0.10 per contract for tier 3, $0.05 per
contract for tier 4, and $0.03 per contract for tier
5 for transactions in standard options in Penny Pilot
Classes. Any Member or its affiliates of at least 75%
common ownership between the firms as reflected
on each firm’s Form BD, Schedule A, that qualifies
for Priority Customer Rebate Program volume tiers
3 or 4 will be assessed $0.27 per contract for tier
1, $0.21 per contract for tier 2, $0.14 per contract
for tier 3, $0.09 per contract for tier 4, and $0.07
per contract for tier 5 for transactions in standard
options in non-Penny Pilot classes. See Fee
Schedule Section 1)a)i).
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Federal Register / Vol. 81, No. 157 / Monday, August 15, 2016 / Notices
exchanges have tiered fee schedules that
offer different transaction fee rates
depending on the monthly average daily
volume (‘‘ADV’’) of liquidity providing
executions on their facilities.8
The new tables will continue to list
separate per contract transaction fees for
Penny classes and non-Penny classes.
The new tables will also establish, and
the Exchange will assess, different fees
to MIAX Market Makers that are
‘‘makers’’ and Market Makers that are
‘‘takers’’ in Penny and non-Penny
classes. Market Makers that place
resting liquidity, i.e., quotes or orders
on the MIAX System,9 will be assessed
the ‘‘maker’’ fees described in the new
tables. MIAX Market Makers that
execute against resting liquidity will be
assessed a different, higher ‘‘taker’’ fee.
This is distinguished from traditional
‘‘maker-taker’’ models where ‘‘makers’’
typically receive a rebate and ‘‘takers’’
do not; the Exchange is not proposing a
rebate but instead is simply proposing
to assess lower transaction fees to
‘‘makers’’ as compared to ‘‘takers.’’ It is,
however, similar to the manner in
which other exchanges assess fees for
resting market maker liquidity.10
The revised Market Maker Sliding
Scale proposed by the Exchange will be
as follows:
MEMBERS AND THEIR AFFILIATES IN PRIORITY CUSTOMER REBATE PROGRAM VOLUME TIER 3 OR HIGHER
Tier
Per contract fee for penny
classes
Percentage thresholds
Maker
All MIAX Market Makers.
1
0.00%–0.075% ..........................................
2
3
4
5
Above
Above
Above
Above
Taker
Per contract fee for non-penny
classes
Maker
Taker
$0.21
$0.23
$0.25
$0.30
0.15
0.08
0.04
0.02
0.22
0.15
0.06
0.04
0.19
0.12
0.08
0.06
0.27
0.20
0.12
0.10
0.075%–0.60% ..............................
0.60%–1.00% ................................
1.00%–1.50% ................................
1.50% ............................................
MEMBERS AND THEIR AFFILIATES NOT IN PRIORITY CUSTOMER REBATE PROGRAM VOLUME TIER 3 OR HIGHER
Tier
Per contract fee for penny
classes
Percentage thresholds
Maker
All MIAX Market Makers 11.
1
0.00%–0.075% ..........................................
2
3
4
5
Above
Above
Above
Above
0.075%–0.60% ..............................
0.60%–1.00% ................................
1.00%–1.50% ................................
1.50% ............................................
Taker
Per contract fee for non-penny
classes
Maker
Taker
$0.23
$0.25
$0.27
$0.32
0.17
0.10
0.06
0.04
0.24
0.17
0.08
0.06
0.21
0.14
0.10
0.08
0.29
0.22
0.14
0.12
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The Exchange further proposes that
the lower per contract ‘‘maker’’ fee for
both Penny pilot classes and non-Penny
pilot classes will apply to opening
transactions, transactions resulting from
quotes that uncross the Away Best Bid
or Offer (‘‘ABBO’’) and to any other
transaction that is not a taker
transaction.
For clarity and ease of reference, the
Exchange is proposing to define the
term ‘‘Affiliate’’ in the Fee Schedule as
an affiliate of a Member of at least 75%
common ownership between the firms
as reflected on each firm’s Form BD,
Schedule A (‘‘Affiliate’’). This definition
will be included in proposed new
Footnote 1 to the Fee Schedule, and the
term ‘‘Affiliate’’ will be used in
subsequent text and footnotes in the Fee
Schedule for brevity, clarity and ease of
reference. The Exchange believes this
simplifies and streamlines these
sections of the Fee Schedule.
The Exchange believes the proposed
changes to the Market Maker Sliding
Scale are objective because the proposed
transaction fees are based on the
achievement of stated volume
thresholds, and on rewarding Market
Makers that provide liquidity on the
Exchange with the reduced ‘‘maker’’
transaction fees. The specific volume
thresholds of the tiers were set based
upon business determinations and an
analysis of current volume levels. The
specific volume thresholds and rates
were set in order to encourage MIAX
Market Makers to reach for higher tiers.
The Exchange believes that the
proposed changes to the tiered fee
schedule will cause Market Makers to
display their quotes and orders on the
Exchange, to improve the price and size
of such quotes and orders, and thus
increase the volume of contracts traded
on the Exchange.
As stated above, the Exchange does
not propose a change in the
corresponding fees for mini options.
The proposed rule change is scheduled
to become operative August 1, 2016.
8 See Chicago Board Options Exchange,
Incorporated (‘‘CBOE’’) Fee Schedule, p. 3; see also
NASDAQ Options Market (‘‘NOM’’) Fees and
Rebates, Chapter XV, Section 2.
9 The term ‘‘System’’ means the automated
trading system used by the Exchange for the trading
of securities. See Exchange Rule 100.
10 The Exchange notes that maker-taker pricing
has been adopted on at least one other exchange for
certain classes of options. See, e.g., ISE Schedule of
Fees, Section I. The Exchange’s proposed maker
fees are similar in that resting ISE liquidity from
makers is charged lower fees than the fees for
takers. ISE’s maker-taker fees are distinguished from
the proposed MIAX maker-taker fees because the
ISE maker-taker fee applies to ISE market maker
orders sent to ISE by ISE Electronic Access
Members, whereas the current Exchange proposal
affords lower maker fees for resting quotes and
orders submitted by Market Makers. Despite this
distinction, the result is that MIAX will charge a
lower fee for resting Market Maker liquidity, as ISE
does today.
11 See MIAX Rule 100 for the definition of
Registered Market Maker (‘‘RMM’’), Primary Lead
Market Maker (‘‘PLMM’’) and Lead Market Maker
(‘‘LMM’’). Directed Order Lead Market Maker
(‘‘DLMM’’) and Directed Primary Lead Market
Maker (‘‘DPLMM’’) are each a party to a transaction
being allocated to the LMM or PLMM and are each
the result of an order that has been directed to the
LMM or PLMM.
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Federal Register / Vol. 81, No. 157 / Monday, August 15, 2016 / Notices
2. Statutory Basis
The Exchange believes that its
proposal to amend its Fee Schedule is
consistent with Section 6(b) of the Act 12
in general, and furthers the objectives of
Section 6(b)(4) of the Act,13 in that it is
an equitable allocation of reasonable
fees and other charges among Exchange
members, and issuers and other persons
using its facilities, and 6(b)(5) of the
Act,14 in that it is designed to prevent
fraudulent and manipulative acts and
practices, to promote just and equitable
principles of trade, to foster cooperation
and coordination with persons engaged
in facilitating transactions in securities,
to remove impediments to and perfect
the mechanisms of a free and open
market and a national market system
and, in general, to protect investors and
the public interest.
The proposed fee structure is
equitable and not unfairly
discriminatory because all similarly
situated MIAX Market Makers are
subject to the same fee structure, and
access to the Exchange is offered on
terms that are not unfairly
discriminatory.
Volume-based pricing models such as
those currently maintained and
proposed on the Exchange have been
widely adopted by options exchanges
and are equitable because they are open
to all Members on an equal basis and
provide additional benefits or discounts
that are reasonably related to the value
of an exchange’s market quality
associated with higher levels of market
activity, such as higher levels of
liquidity provision and/or growth
patterns, and introduction of higher
volumes of orders into the price and
volume discovery processes.
The Exchange’s proposal to offer a
reduced fee to Market Makers that
provide liquidity in Penny and nonPenny options is also equitable and not
unfairly discriminatory under the Act.
While distinguished from the traditional
‘‘maker-taker’’ fee model under which
an exchange pays a per-share rebate to
their members to encourage them to
place resting liquidity-providing quotes
and orders on their trading systems, the
instant proposal reflects a substantially
similar fee structure that provides a
reduced fee for ‘‘makers.’’ If an
execution occurs, rather than giving the
liquidity providing ‘‘maker’’ a rebate
and assessing the ‘‘taker’’ that executes
against that resting order a fee, the
Exchange is simply proposing a reduced
fee for ‘‘makers’’ as compared to
‘‘takers.’’
12 15
U.S.C. 78f(b).
U.S.C. 78f(b)(4).
14 15 U.S.C. 78f(b)(1) and (b)(5).
13 15
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The Exchange believes that the
proposed maker-taker model is an
important competitive tool for
exchanges and directly or indirectly can
provide better prices for investors. The
proposed fee structure may narrow the
MIAX Bid and Offer (‘‘MBBO’’) because
the reduced fee for ‘‘makers’’ effectively
subsidizes, and thus encourages, the
posting of liquidity. The Exchange
believes that the reduced ‘‘maker’’ fees
will also provide MIAX Market Makers
with greater incentive to either match or
improve upon the best price displayed
on MIAX, all to the benefit of investors
and the public in the form of improved
execution prices.
The use of volume-based incentives
has long been accepted as an equitable
and not unfairly discriminatory pricing
practice employed at multiple
competing options exchanges. In fact,
the specific volume-based incentives
proposed here, a reduced fee for
providing greater amounts of liquidity
in Penny and non-Penny options (i.e., in
the Priority Customer Rebate Program),
is currently employed by other
exchanges and it has been accepted as
equitable and not unfairly
discriminatory under the Act.15 The
discounted fees for Members and their
Affiliates that achieve the Tier 3 volume
threshold or higher are equitable,
reasonable and not unfairly
discriminatory because they provide
incentive for Members and their
Affiliates to submit more orders to the
Exchange, thus enhancing liquidity and
removing impediments to and
perfecting the mechanisms of a free and
open market and a national market
system. The proposed reduced maker
fee is equitable and not unfairly
discriminatory because it benefits all
market participants by attracting
valuable liquidity to the market and
thereby enhancing the quality and
efficiency of the MIAX marketplace. The
market participants that post liquidity to
the Book, thereby contributing to price
discovery and size discovery while
taking the risk of not receiving an
execution by posting passive liquidity
are justly rewarded with a lower
transaction fee.
The Exchange’s proposal to charge
Market Makers who remove liquidity a
higher fee is equitable and not unfairly
discriminatory and follows a similar
line of reasoning. It is common practice
among options exchanges to
differentiate between fees for adding
liquidity and fees for removing
15 See, supra note 8. See also, NOM Fees and
Rebates, Chapter XV, Section 2, and BATS BZX
Exchange Fee Schedule (providing rebates for
adding liquidity and charging fees for removing
liquidity in securities at or above $1.00).
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54165
liquidity, and such differentiation has
been accepted as not unfairly
discriminatory under the Act.16 The
Exchange believes that the
differentiation in pricing between
‘‘makers’’ and ‘‘takers’’ is appropriate,
because ‘‘takers’’ remove liquidity and
benefit disproportionately from their
executions compared to ‘‘makers,’’
without assuming the obligations that
‘‘makers’’ assume in making continuous,
two-sided markets, and without
engaging in competitive price discovery
and improvement in the same manner
as ‘‘makers.’’ Liquidity removers benefit
from the price and size discovery
function that liquidity providers have
performed in posting their quotations
and orders, and when executing against
resting liquidity a ‘‘taker’’ is not taking
the risk of an order or quote sitting
unexecuted on the Book. The Exchange
believes for these reasons that a ‘‘taker’’
fee that is higher than a ‘‘maker’’ fee or
rebate is equitable, reasonable and not
unfairly discriminatory, and thus
consistent with the Act.
The lower fees charged for providing
liquidity have been considered
beneficial in that attracting this liquidity
benefits all market participants by
improving the overall quality of trading
on the Exchange. The level of
differentiation between the ‘‘maker’’ fee
and the ‘‘taker’’ fee is also within the
bounds of what has been accepted as
not unfairly discriminatory under the
Act. Finally, the proposed fees will be
imposed equally among all participants.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will result in
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act. The
Exchange believes that the proposed
‘‘maker-taker’’ model is an important
competitive tool for the Exchange and
directly or indirectly can provide better
prices for investors. The proposed fee
structure is intended to promote
narrower spreads and greater liquidity
at the best prices. The fee-based
incentives for market participants to
submit liquidity providing orders and
quotes to the Exchange, and thereafter to
improve the MBBO to ensure
participation, should enable the
Exchange to attract, and compete for,
order flow with other exchanges.
The Exchange notes that it operates in
a highly competitive market in which
market participants can readily favor
competing venues if they deem fee
levels at a particular venue to be
16 Id.
E:\FR\FM\15AUN1.SGM
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Federal Register / Vol. 81, No. 157 / Monday, August 15, 2016 / Notices
excessive. In such an environment, the
Exchange must continually adjust its
fees to remain competitive with other
exchanges and to attract order flow. The
Exchange believes that the proposed
rule changes reflect this competitive
environment because they modify the
Exchange’s fees in a manner that
encourages market participants to
provide liquidity and to send order flow
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,17 and Rule
19b–4(f)(2) 18 thereunder. At any time
within 60 days of the filing of the
proposed rule change, the Commission
summarily may temporarily suspend
such rule change if it appears to the
Commission that such action is
necessary or appropriate in the public
interest, for the protection of investors,
or otherwise in furtherance of the
purposes of the Act. If the Commission
takes such action, the Commission shall
institute proceedings to determine
whether the proposed rule should be
approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
sradovich on DSK3GMQ082PROD 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–2016–21 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Brent J. Fields, Secretary, Securities
and Exchange Commission, 100 F Street
NE., Washington, DC 20549–1090.
All submissions should refer to File
Number SR–MIAX–2016–21. This file
number should be included on the
subject line if email is used. To help the
U.S.C. 78s(b)(3)(A)(ii).
18 17 CFR 240.19b–4(f)(2).
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–
2016–21, and should be submitted on or
before September 6, 2016.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.19
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016–19321 Filed 8–12–16; 8:45 am]
19:23 Aug 12, 2016
Dated: August 10, 2016.
Lynn M. Powalski,
Deputy Secretary.
[FR Doc. 2016–19455 Filed 8–11–16; 11:15 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–78510; File No. SR–IEX–
2016–11]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
Sunshine Act Meeting
Notice is hereby given, pursuant to
the provisions of the Government in the
Sunshine Act, Pub. L. 94–409, that the
Securities and Exchange Commission
will hold an Open Meeting on
Wednesday, August 17, 2016 at 2:00
p.m., in the Auditorium (L–002) at the
Commission’s headquarters building, to
hear oral argument in an appeal from an
initial decision of an administrative law
judge by respondent Larry C. Grossman.
On December 23, 2014, the ALJ found
that Grossman, the former principal of
a registered investment adviser, violated
certain antifraud, broker-dealer, and
investment adviser provisions of the
federal securities laws by, among other
things, making misrepresentations and
17 15
VerDate Sep<11>2014
omissions of material fact to his
advisory clients when he advised them
to invest in funds as to which he had
an economic conflict of interest. For
these violations, the ALJ ordered
Grossman to pay a $1.55 million civil
penalty, to pay approximately $3
million in disgorgement plus
prejudgment interest, and to cease and
desist from further violations of the
securities laws. The ALJ also barred him
from association with the securities
industry.
Respondent appealed, challenging
only the imposition of sanctions. The
issues likely to be considered at oral
argument include, among other things,
whether the five year statute of
limitations in 28 U.S.C. 2462 prohibits
us from imposing a civil penalty,
disgorgement, industry bar, or ceaseand-desist order, and, to the extent that
it does not, what sanctions, if any, are
appropriate in the public interest.
For further information, please
contact Brent J. Fields from the Office of
the Secretary at (202) 551–5400.
Self-Regulatory Organizations;
Investors Exchange LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change To Amend Rule
11.190(g) Related to Discretionary Peg
Orders
August 9, 2016.
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934 (the
‘‘Act’’) 2 and Rule 19b–4 thereunder,3
notice is hereby given that, on August
4, 2016, the Investors Exchange LLC
(‘‘IEX’’ or the ‘‘Exchange’’) filed with the
Securities and Exchange Commission
(the ‘‘Commission’’) the proposed rule
change as described in Items I and II
below, which Items have been prepared
by the self-regulatory organization. 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).
U.S.C. 78a.
3 17 CFR 240.19b–4.
2 15
19 17
Jkt 238001
PO 00000
CFR 200.30–3(a)(12).
Frm 00126
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]]>Agencies
[Federal Register Volume 81, Number 157 (Monday, August 15, 2016)]
[Notices]
[Pages 54162-54166]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-19321]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-78519; File No. SR-MIAX-2016-21]
Self-Regulatory Organizations; Miami International Securities
Exchange LLC; Notice of Filing and Immediate Effectiveness of a
Proposed Rule Change To Amend Its Fee Schedule
August 9, 2016.
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 July 29, 2016, Miami International Securities
Exchange LLC (``MIAX'' or ``Exchange'') filed with the Securities and
Exchange Commission (``Commission'') a proposed rule change as
described in Items I, II, and III below, which Items have been prepared
by the Exchange. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange is filing a proposal to amend the MIAX Options Fee
Schedule (the ``Fee Schedule'').
The text of the proposed rule change is available on the Exchange's
Web site at https://www.miaxoptions.com/filter/wotitle/rule_filing, at
MIAX's principal office, and at the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
[[Page 54163]]
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 current MIAX Market Maker \3\
Sliding Scale for transaction fees to: (i) Modify the current Market
Maker Sliding Scale table of Market Maker Transaction Fees in Section
1)a)i) of the Fee Schedule, as described more fully below; and (ii)
adopt a ``maker'' fee and a ``taker'' fee for the various Tiers in the
Market Maker Sliding Scale, as described below.
---------------------------------------------------------------------------
\3\ The term ``Market Maker'' means any MIAX Market Maker
including Registered Market Makers (``RMMs''), Primary Lead Market
Makers (``PLMMs''), Lead Market Makers (``LMMs''), Directed Order
Lead Market Makers (``DLMMs'') and Directed Primary Lead Market
Makers (``DPLMMs''). See Exchange Rule 100. See also Fee Schedule,
Footnote 1.
---------------------------------------------------------------------------
The Market Maker Sliding Scale for Transaction Fees reduces a
Market Maker's per contract transaction fee based on the Market Maker's
percentage of total national Market Maker volume of any options classes
that trade on the Exchange during the calendar month, currently based
on the following scale:
----------------------------------------------------------------------------------------------------------------
Per contract Per contract
Tier Percentage of national market fee for penny fee for non-
maker volume classes penny classes
----------------------------------------------------------------------------------------------------------------
1............................................. 0.00%-0.05%..................... $0.25 $0.29
2............................................. Above 0.05%-0.50%............... 0.19 0.23
3............................................. Above 0.50%-1.00%............... 0.12 0.16
4............................................. Above 1.00%-1.50%............... 0.07 0.11
5............................................. Above 1.50%..................... 0.05 0.09
----------------------------------------------------------------------------------------------------------------
The Market Maker Sliding Scale applies to all Market Makers for
transactions in all products except mini-options, with different per-
contract transaction fees established for Penny option classes and non-
Penny option classes. A Market Maker's initial $0.25 per contract rate
in Penny classes and $0.29 per contract in non-Penny classes is reduced
when the Market Maker reaches the volume thresholds set forth in the
Market Maker Sliding Scale in a month. As a Market Maker's monthly
volume increases, its per contract transaction fee decreases when the
monthly volume thresholds described in the Market Maker Sliding Scale
are achieved.
The Exchange proposes to amend the Fee Schedule by deleting the
current Market Maker Sliding Scale table, and to create two new tables
based upon volume thresholds in the Priority Customer Rebate Program
\4\ applicable to Members and their Affiliates (as defined below). One
of the new tables will apply to Members and their Affiliates \5\ that
are included in Priority Customer Rebate Program Volume Tier 3 or
higher, and the other new table will apply to Members and their
Affiliates that are not included in Priority Customer Rebate Program
Volume Tier 3 or higher. Currently, the Fee Schedule provides
discounted transaction fees for Members and their qualified Affiliates
that achieve certain volume thresholds through the submission of
Priority Customer Orders \6\ under the Exchange's Priority Customer
Rebate Program.\7\ The current Fee Schedule describes the discounted
fees in narrative text and footnotes to the table. The Exchange is
proposing to delete this narrative text and parts of the footnotes to
simply include the discounted transaction fees in the two new tables.
The Market Maker sliding scale will continue to apply to MIAX Market
Maker transaction fees in all products except mini-options. MIAX Market
Makers will continue to be assessed a $0.02 per executed contract fee
for transactions in mini-options. The purpose of basing the proposed
two new tables on the volume thresholds in the Priority Customer Rebate
Program is to clarify that the Exchange provides incentives for Members
and their Affiliates to submit a greater number of Priority Customer
Orders to the Exchange. The Exchange is simply deleting this
information from the narrative text in the Fee Schedule and conveying
it more simply and clearly in table format. The proposed language ``or
higher,'' which replaces ``or 4,'' is intended to account for potential
additional tiers in the Priority Customer Rebate Program that may be
added in the future.
---------------------------------------------------------------------------
\4\ MIAX credits each Member the per contract amount resulting
from each Priority Customer order transmitted by that Member which
is executed electronically on the Exchange in all multiply-listed
option classes (excluding QCC Orders, mini-options, Priority
Customer-to-Priority Customer Orders, PRIME AOC Responses, PRIME
Contra-side Orders, PRIME Orders for which both the Agency and
Contra-side Order are Priority Customers, and executions related to
contracts that are routed to one or more exchanges in connection
with the Options Order Protection and Locked/Crossed Market Plan
referenced in MIAX Rule 1400), provided the Member meets certain
percentage thresholds in a month as described in the Priority
Customer Rebate Program table. See Fee Schedule, Section 1)a)iii).
\5\ For purposes of the MIAX Options Fee Schedule, the term
``Affiliate'' means an affiliate of a Member of at least 75% common
ownership between the firms as reflected on each firm's Form BD,
Schedule A (``Affiliate''). See proposed new Footnote 1 to the Fee
Schedule.
\6\ The term ``Priority Customer'' means a person or entity that
(i) is not a broker or dealer in securities, and (ii) does not place
more than 390 orders in listed options per day on average during a
calendar month for its own beneficial account(s). A ``Priority
Customer Order'' means an order for the account of a Priority
Customer. See Exchange Rule 100.
\7\ The Exchange will aggregate the trading activity of separate
MIAX Market Maker firms for purposes of the sliding scale if there
is at least 75% common ownership between the firms as reflected on
each firm's Form BD, Schedule A. Any Member or its affiliates of at
least 75% common ownership between the firms as reflected on each
firm's Form BD, Schedule A, that qualifies for Priority Customer
Rebate Program volume tiers 3 or 4 will be assessed $0.23 per
contract for tier 1, $0.17 per contract for tier 2, $0.10 per
contract for tier 3, $0.05 per contract for tier 4, and $0.03 per
contract for tier 5 for transactions in standard options in Penny
Pilot Classes. Any Member or its affiliates of at least 75% common
ownership between the firms as reflected on each firm's Form BD,
Schedule A, that qualifies for Priority Customer Rebate Program
volume tiers 3 or 4 will be assessed $0.27 per contract for tier 1,
$0.21 per contract for tier 2, $0.14 per contract for tier 3, $0.09
per contract for tier 4, and $0.07 per contract for tier 5 for
transactions in standard options in non-Penny Pilot classes. See Fee
Schedule Section 1)a)i).
---------------------------------------------------------------------------
The Exchange also proposes to establish new percentage thresholds
of national customer volume in the current Tiers in the Market Maker
Sliding Scale. The new thresholds will be the same in each new table.
Specifically, the Exchange proposes to establish new percentage
thresholds of national customer volume in the Market Maker Sliding
Scale as follows: (i) In Tier 1, from 0-0.0% to 0-0.075%; (ii) in Tier
2, from above 0.075% to 0.60%; (iii) in Tier 3, from above 0.60% to
1.00%; (iv) in Tier 4, from above 1.00% to 1.50%; and (v) in Tier 5,
above 1.50%. These Tiers will apply to both new tables. The Exchange
notes that a number of other
[[Page 54164]]
exchanges have tiered fee schedules that offer different transaction
fee rates depending on the monthly average daily volume (``ADV'') of
liquidity providing executions on their facilities.\8\
---------------------------------------------------------------------------
\8\ See Chicago Board Options Exchange, Incorporated (``CBOE'')
Fee Schedule, p. 3; see also NASDAQ Options Market (``NOM'') Fees
and Rebates, Chapter XV, Section 2.
---------------------------------------------------------------------------
The new tables will continue to list separate per contract
transaction fees for Penny classes and non-Penny classes. The new
tables will also establish, and the Exchange will assess, different
fees to MIAX Market Makers that are ``makers'' and Market Makers that
are ``takers'' in Penny and non-Penny classes. Market Makers that place
resting liquidity, i.e., quotes or orders on the MIAX System,\9\ will
be assessed the ``maker'' fees described in the new tables. MIAX Market
Makers that execute against resting liquidity will be assessed a
different, higher ``taker'' fee. This is distinguished from traditional
``maker-taker'' models where ``makers'' typically receive a rebate and
``takers'' do not; the Exchange is not proposing a rebate but instead
is simply proposing to assess lower transaction fees to ``makers'' as
compared to ``takers.'' It is, however, similar to the manner in which
other exchanges assess fees for resting market maker liquidity.\10\
---------------------------------------------------------------------------
\9\ The term ``System'' means the automated trading system used
by the Exchange for the trading of securities. See Exchange Rule
100.
\10\ The Exchange notes that maker-taker pricing has been
adopted on at least one other exchange for certain classes of
options. See, e.g., ISE Schedule of Fees, Section I. The Exchange's
proposed maker fees are similar in that resting ISE liquidity from
makers is charged lower fees than the fees for takers. ISE's maker-
taker fees are distinguished from the proposed MIAX maker-taker fees
because the ISE maker-taker fee applies to ISE market maker orders
sent to ISE by ISE Electronic Access Members, whereas the current
Exchange proposal affords lower maker fees for resting quotes and
orders submitted by Market Makers. Despite this distinction, the
result is that MIAX will charge a lower fee for resting Market Maker
liquidity, as ISE does today.
---------------------------------------------------------------------------
The revised Market Maker Sliding Scale proposed by the Exchange
will be as follows:
Members and Their Affiliates in Priority Customer Rebate Program Volume Tier 3 or Higher
--------------------------------------------------------------------------------------------------------------------------------------------------------
Per contract fee for penny Per contract fee for non-penny
classes classes
Tier Percentage thresholds ---------------------------------------------------------------
Maker Taker Maker Taker
--------------------------------------------------------------------------------------------------------------------------------------------------------
All MIAX Market Makers.................... 1 0.00%-0.075%................ $0.21 $0.23 $0.25 $0.30
2 Above 0.075%-0.60%.......... 0.15 0.22 0.19 0.27
3 Above 0.60%-1.00%........... 0.08 0.15 0.12 0.20
4 Above 1.00%-1.50%........... 0.04 0.06 0.08 0.12
5 Above 1.50%................. 0.02 0.04 0.06 0.10
--------------------------------------------------------------------------------------------------------------------------------------------------------
Members and Their Affiliates Not In Priority Customer Rebate Program Volume Tier 3 or Higher
--------------------------------------------------------------------------------------------------------------------------------------------------------
Per contract fee for penny Per contract fee for non-penny
classes classes
Tier Percentage thresholds ---------------------------------------------------------------
Maker Taker Maker Taker
--------------------------------------------------------------------------------------------------------------------------------------------------------
All MIAX Market Makers \11\............... 1 0.00%-0.075%................ $0.23 $0.25 $0.27 $0.32
2 Above 0.075%-0.60%.......... 0.17 0.24 0.21 0.29
3 Above 0.60%-1.00%........... 0.10 0.17 0.14 0.22
4 Above 1.00%-1.50%........... 0.06 0.08 0.10 0.14
5 Above 1.50%................. 0.04 0.06 0.08 0.12
--------------------------------------------------------------------------------------------------------------------------------------------------------
The Exchange further proposes that the lower per contract ``maker''
fee for both Penny pilot classes and non-Penny pilot classes will apply
to opening transactions, transactions resulting from quotes that
uncross the Away Best Bid or Offer (``ABBO'') and to any other
transaction that is not a taker transaction.
---------------------------------------------------------------------------
\11\ See MIAX Rule 100 for the definition of Registered Market
Maker (``RMM''), Primary Lead Market Maker (``PLMM'') and Lead
Market Maker (``LMM''). Directed Order Lead Market Maker (``DLMM'')
and Directed Primary Lead Market Maker (``DPLMM'') are each a party
to a transaction being allocated to the LMM or PLMM and are each the
result of an order that has been directed to the LMM or PLMM.
---------------------------------------------------------------------------
For clarity and ease of reference, the Exchange is proposing to
define the term ``Affiliate'' in the Fee Schedule as an affiliate of a
Member of at least 75% common ownership between the firms as reflected
on each firm's Form BD, Schedule A (``Affiliate''). This definition
will be included in proposed new Footnote 1 to the Fee Schedule, and
the term ``Affiliate'' will be used in subsequent text and footnotes in
the Fee Schedule for brevity, clarity and ease of reference. The
Exchange believes this simplifies and streamlines these sections of the
Fee Schedule.
The Exchange believes the proposed changes to the Market Maker
Sliding Scale are objective because the proposed transaction fees are
based on the achievement of stated volume thresholds, and on rewarding
Market Makers that provide liquidity on the Exchange with the reduced
``maker'' transaction fees. The specific volume thresholds of the tiers
were set based upon business determinations and an analysis of current
volume levels. The specific volume thresholds and rates were set in
order to encourage MIAX Market Makers to reach for higher tiers. The
Exchange believes that the proposed changes to the tiered fee schedule
will cause Market Makers to display their quotes and orders on the
Exchange, to improve the price and size of such quotes and orders, and
thus increase the volume of contracts traded on the Exchange.
As stated above, the Exchange does not propose a change in the
corresponding fees for mini options. The proposed rule change is
scheduled to become operative August 1, 2016.
[[Page 54165]]
2. Statutory Basis
The Exchange believes that its proposal to amend its Fee Schedule
is consistent with Section 6(b) of the Act \12\ in general, and
furthers the objectives of Section 6(b)(4) of the Act,\13\ in that it
is an equitable allocation of reasonable fees and other charges among
Exchange members, and issuers and other persons using its facilities,
and 6(b)(5) of the Act,\14\ in that it is designed to prevent
fraudulent and manipulative acts and practices, to promote just and
equitable principles of trade, to foster cooperation and coordination
with persons engaged in facilitating transactions in securities, to
remove impediments to and perfect the mechanisms of a free and open
market and a national market system and, in general, to protect
investors and the public interest.
---------------------------------------------------------------------------
\12\ 15 U.S.C. 78f(b).
\13\ 15 U.S.C. 78f(b)(4).
\14\ 15 U.S.C. 78f(b)(1) and (b)(5).
---------------------------------------------------------------------------
The proposed fee structure is equitable and not unfairly
discriminatory because all similarly situated MIAX Market Makers are
subject to the same fee structure, and access to the Exchange is
offered on terms that are not unfairly discriminatory.
Volume-based pricing models such as those currently maintained and
proposed on the Exchange have been widely adopted by options exchanges
and are equitable because they are open to all Members on an equal
basis and provide additional benefits or discounts that are reasonably
related to the value of an exchange's market quality associated with
higher levels of market activity, such as higher levels of liquidity
provision and/or growth patterns, and introduction of higher volumes of
orders into the price and volume discovery processes.
The Exchange's proposal to offer a reduced fee to Market Makers
that provide liquidity in Penny and non-Penny options is also equitable
and not unfairly discriminatory under the Act. While distinguished from
the traditional ``maker-taker'' fee model under which an exchange pays
a per-share rebate to their members to encourage them to place resting
liquidity-providing quotes and orders on their trading systems, the
instant proposal reflects a substantially similar fee structure that
provides a reduced fee for ``makers.'' If an execution occurs, rather
than giving the liquidity providing ``maker'' a rebate and assessing
the ``taker'' that executes against that resting order a fee, the
Exchange is simply proposing a reduced fee for ``makers'' as compared
to ``takers.''
The Exchange believes that the proposed maker-taker model is an
important competitive tool for exchanges and directly or indirectly can
provide better prices for investors. The proposed fee structure may
narrow the MIAX Bid and Offer (``MBBO'') because the reduced fee for
``makers'' effectively subsidizes, and thus encourages, the posting of
liquidity. The Exchange believes that the reduced ``maker'' fees will
also provide MIAX Market Makers with greater incentive to either match
or improve upon the best price displayed on MIAX, all to the benefit of
investors and the public in the form of improved execution prices.
The use of volume-based incentives has long been accepted as an
equitable and not unfairly discriminatory pricing practice employed at
multiple competing options exchanges. In fact, the specific volume-
based incentives proposed here, a reduced fee for providing greater
amounts of liquidity in Penny and non-Penny options (i.e., in the
Priority Customer Rebate Program), is currently employed by other
exchanges and it has been accepted as equitable and not unfairly
discriminatory under the Act.\15\ The discounted fees for Members and
their Affiliates that achieve the Tier 3 volume threshold or higher are
equitable, reasonable and not unfairly discriminatory because they
provide incentive for Members and their Affiliates to submit more
orders to the Exchange, thus enhancing liquidity and removing
impediments to and perfecting the mechanisms of a free and open market
and a national market system. The proposed reduced maker fee is
equitable and not unfairly discriminatory because it benefits all
market participants by attracting valuable liquidity to the market and
thereby enhancing the quality and efficiency of the MIAX marketplace.
The market participants that post liquidity to the Book, thereby
contributing to price discovery and size discovery while taking the
risk of not receiving an execution by posting passive liquidity are
justly rewarded with a lower transaction fee.
---------------------------------------------------------------------------
\15\ See, supra note 8. See also, NOM Fees and Rebates, Chapter
XV, Section 2, and BATS BZX Exchange Fee Schedule (providing rebates
for adding liquidity and charging fees for removing liquidity in
securities at or above $1.00).
---------------------------------------------------------------------------
The Exchange's proposal to charge Market Makers who remove
liquidity a higher fee is equitable and not unfairly discriminatory and
follows a similar line of reasoning. It is common practice among
options exchanges to differentiate between fees for adding liquidity
and fees for removing liquidity, and such differentiation has been
accepted as not unfairly discriminatory under the Act.\16\ The Exchange
believes that the differentiation in pricing between ``makers'' and
``takers'' is appropriate, because ``takers'' remove liquidity and
benefit disproportionately from their executions compared to
``makers,'' without assuming the obligations that ``makers'' assume in
making continuous, two-sided markets, and without engaging in
competitive price discovery and improvement in the same manner as
``makers.'' Liquidity removers benefit from the price and size
discovery function that liquidity providers have performed in posting
their quotations and orders, and when executing against resting
liquidity a ``taker'' is not taking the risk of an order or quote
sitting unexecuted on the Book. The Exchange believes for these reasons
that a ``taker'' fee that is higher than a ``maker'' fee or rebate is
equitable, reasonable and not unfairly discriminatory, and thus
consistent with the Act.
---------------------------------------------------------------------------
\16\ Id.
---------------------------------------------------------------------------
The lower fees charged for providing liquidity have been considered
beneficial in that attracting this liquidity benefits all market
participants by improving the overall quality of trading on the
Exchange. The level of differentiation between the ``maker'' fee and
the ``taker'' fee is also within the bounds of what has been accepted
as not unfairly discriminatory under the Act. Finally, the proposed
fees will be imposed equally among all participants.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
result in any burden on competition that is not necessary or
appropriate in furtherance of the purposes of the Act. The Exchange
believes that the proposed ``maker-taker'' model is an important
competitive tool for the Exchange and directly or indirectly can
provide better prices for investors. The proposed fee structure is
intended to promote narrower spreads and greater liquidity at the best
prices. The fee-based incentives for market participants to submit
liquidity providing orders and quotes to the Exchange, and thereafter
to improve the MBBO to ensure participation, should enable the Exchange
to attract, and compete for, order flow with other exchanges.
The Exchange notes that it operates in a highly competitive market
in which market participants can readily favor competing venues if they
deem fee levels at a particular venue to be
[[Page 54166]]
excessive. In such an environment, the Exchange must continually adjust
its fees to remain competitive with other exchanges and to attract
order flow. The Exchange believes that the proposed rule changes
reflect this competitive environment because they modify the Exchange's
fees in a manner that encourages market participants to provide
liquidity and to send order flow 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,\17\ and Rule 19b-4(f)(2) \18\ thereunder.
At any time within 60 days of the filing of the proposed rule change,
the Commission summarily may temporarily suspend such rule change if it
appears to the Commission that such action is necessary or appropriate
in the public interest, for the protection of investors, or otherwise
in furtherance of the purposes of the Act. If the Commission takes such
action, the Commission shall institute proceedings to determine whether
the proposed rule should be approved or disapproved.
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\17\ 15 U.S.C. 78s(b)(3)(A)(ii).
\18\ 17 CFR 240.19b-4(f)(2).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to rule-comments@sec.gov. Please include
File Number SR-MIAX-2016-21 on the subject line.
Paper Comments
Send paper comments in triplicate to Brent J. Fields,
Secretary, Securities and Exchange Commission, 100 F Street NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-MIAX-2016-21. 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-2016-21, and should be
submitted on or before September 6, 2016.
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\19\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\19\
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-19321 Filed 8-12-16; 8:45 am]
BILLING CODE 8011-01-P
