Self-Regulatory Organizations; Miami International Securities Exchange LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Its Fee Schedule, 60077-60080 [2016-20894]

Download as PDF Federal Register / Vol. 81, No. 169 / Wednesday, August 31, 2016 / Notices submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for Web site viewing and printing in the Commission’s Public Reference Room, 100 F Street NE., Washington, DC 20549, on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of the filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR–Phlx– 2016–89 and should be submitted on or before September 21, 2016. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.17 Brent J. Fields, Secretary. [FR Doc. 2016–20960 Filed 8–30–16; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–78681; File No. SR–MIAX– 2016–28] Self-Regulatory Organizations; Miami International Securities Exchange LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Its Fee Schedule mstockstill on DSK3G9T082PROD with NOTICES August 25, 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 August 11, 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 17 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 21:59 Aug 30, 2016 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 http://www.miaxoptions.com/filter/ wotitle/rule_filing, at MIAX’s principal office, and at the Commission’s Public Reference Room. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange proposes to amend Section 1)b) of the Fee Schedule, Marketing Fee, to add to the list of symbols for which the Exchange assesses a $0.12 per contract Posted Liquidity Marketing Fee. In addition to the current symbols listed in Section 1)b), the Exchange is proposing to assess the Posted Liquidity Marketing Fee for contracts executed in DIA, FB, GDX, SLV, USO, UVXY, and VXX. The Exchange also proposes to assess the applicable per contract non-Market Maker transaction fees for executions in these new symbols, as described more fully below. A Marketing Fee is assessed on certain transactions of all Market Makers.3 Currently, Section 1) b) of the Fee Schedule provides that the Exchange will assess: (i) A Marketing Fee to all Market Makers for contracts, including mini options, they execute in their assigned classes when the contra-party to the execution is a Priority Customer. MIAX will not assess a Marketing Fee to 3 See MIAX Fee Schedule, Section 1)b), entitled ‘‘Marketing Fee’’ for more detail regarding the Marketing Fee. 1 15 VerDate Sep<11>2014 comments on the proposed rule change from interested persons. Jkt 238001 PO 00000 Frm 00102 Fmt 4703 Sfmt 4703 60077 Market Makers for contracts executed as a PRIME Agency Order, Contra-side Order, Qualified Contingent Cross Order, PRIME Participating Quote or Order, or a PRIME AOC Response in the PRIME Auction, unless it executes against an unrelated order. (ii) an additional $0.12 per contract Posted Liquidity Marketing Fee to all Market Makers for any standard options overlying EEM, GLD, IWM, QQQ, and SPY that Market Makers execute in their assigned class when the contra-party to the execution is a Priority Customer and the Priority Customer order was posted on the MIAX Book at the time of the execution. MIAX will not assess the additional Posted Liquidity Marketing Fee to Market Makers for contracts executed as a PRIME Agency Order, Contra-side Order, Qualified Contingent Cross Order, or a PRIME AOC Response or PRIME Participating Quote or Order in the PRIME Auction. MIAX will also not assess the additional Posted Liquidity Marketing Fee to Market Makers for contracts executed pursuant to a Liquidity Refresh Pause, route timer, or during the Opening Process. This Posted Liquidity Marketing Fee is in addition to the current Marketing Fee of $0.25 per contract for standard options overlying these enumerated symbols that Market Makers execute in their assigned class when the contraparty to the execution is a Priority Customer.4 Funds collected via the Marketing Fee, including the additional $0.12 per contract Posted Liquidity Marketing Fee, are put into ‘‘pools’’ controlled by Primary Lead Market Makers (‘‘PLMMs’’) 5 and Lead Market Makers (‘‘LMMs’’).6 So for example, the $0.12 per contract Posted Liquidity Marketing Fee goes into the broader Marketing Fee pool for the Directed LMM or the PLMM 4 See Securities Exchange Act Release No. 73848 (December 16, 2014), 79 FR 76421 (December 22, 2014) (SR–MIAX–2014–62) (Notice of Filing and Immediate Effectiveness of MIAX Posted Liquidity Marketing Fee with respect to EEM, GLD, IWM, QQQ and SPY). 5 The term ‘‘Primary Lead Market Maker’’ means a Lead Market Maker appointed by the Exchange to act as the Primary Lead Market Maker for the purpose of making markets in securities traded on the Exchange. The Primary Lead Market Maker is vested with the rights and responsibilities specified in Chapter VI of these Rules with respect to Primary Lead Market Makers. See Exchange Rule 100. 6 The term ‘‘Lead Market Maker’’ means a Member registered with the Exchange for the purpose of making markets in securities traded on the Exchange and that is vested with the rights and responsibilities specified in Chapter VI of these Rules with respect to Lead Market Makers. When a Lead Market Maker is appointed to act in the capacity of a Primary Lead Market Maker, the additional rights and responsibilities of a Primary Lead Market Maker specified in Chapter VI of these Rules will apply. See Exchange Rule 100. E:\FR\FM\31AUN1.SGM 31AUN1 60078 Federal Register / Vol. 81, No. 169 / Wednesday, August 31, 2016 / Notices mstockstill on DSK3G9T082PROD with NOTICES in EEM, GLD, IWM, QQQ or SPY, as applicable. The PLMM or LMM controlling a certain pool of funds can then determine the Electronic Exchange Member(s) (‘‘EEM’’) 7 to which the funds should be directed in order to encourage such EEM(s) to send orders to the Exchange. In accordance with Exchange Rule 514, an EEM can designate an order (‘‘Directed Order’’) to a specific LMM. The purpose of the Posted Liquidity Marketing Fee is to further encourage Members to post additional Priority Customer orders on the Exchange’s Book in the enumerated high volume symbols. Increased Priority Customer orders on the Exchange’s Book in these symbols provides for greater liquidity, which benefits all market participants on the Exchange. The Exchange now proposes to add to the following high volume symbols to its Posted Liquidity Marketing Fee program: DIA, FB, GDX, SLV, USO, UVXY, and VXX,8 as reflected in the proposed amendments to Section (1)(b) and Footnote 15 of the Fee Schedule. The practice of encouraging increased retail customer order flow in order to attract professional liquidity providers (Market Makers) is, and has been, commonly applied in the options markets. As such, marketing fee programs 9 and posting incentive programs 10 are based on attracting public customer order flow. Additional incentives intended to increase order flow in high volume symbols are, and have been, commonly offered in the options markets.11 The proposed Posted Liquidity Marketing Fee with respect to high volume symbols DIA, FB, GDX, SLV, USO, UVXY, and VXX similarly is intended to attract Priority Customer order flow, which will increase liquidity, thereby providing greater trading opportunities and tighter spreads for other market participants and causing a corresponding increase in order flow from such other market participants. Increasing the number of orders sent to 7 The term ‘‘Electronic Exchange Member’’ means the holder of a Trading Permit who is not a Market Maker. Electronic Exchange Members are deemed ‘‘members’’ under the Act. See Exchange Rule 100. 8 DIA, FB, GDX, SLV, USO, UVXY, and VXX had among the highest MIAX volume by class as reported by the Options Clearing Corporation (‘‘OCC’’) for June 2016. See http://www.options clearing.com/webapps/volbyclass-reports?report Class=miax. 9 See MIAX Fee Schedule, Section (1)( b); Chicago Board Options Exchange, Incorporated (‘‘CBOE’’) Fees Schedule, p. 4; NYSE Amex Options Fee Schedule, p. 7. 10 See NYSE Arca, Inc. (‘‘Arca’’) Options Fees and Charges Schedule, page 5. 11 See International Securities Exchange, LLC (‘‘ISE’’) Schedule of Fees, p. 6 ; Arca Option Fees and Charges Schedule, p. 5. VerDate Sep<11>2014 21:59 Aug 30, 2016 Jkt 238001 the Exchange will in turn provide tighter and more liquid markets, and therefore attract more business overall. The Exchange also proposes to adopt the same additional $0.50 per contract transaction fee for options overlying DIA, FB, GDX, SLV, USO, UVXY, and VXX executed by non-MIAX Market Makers as currently applies to options overlying EEM, GLD, IWM, QQQ, and SPY executed by non-MIAX Market Makers as set forth in footnote 8, Section (1)(a)(ii) of the Fee Schedule.12 The purpose of the proposed fee change is to assess the transaction fee for nonMIAX Market Makers in the new symbols (DIA, FB, GDX, SLV, USO, UVXY, and VXX) that are being added to the Exchange’s Posted Liquidity Marketing Fee, in the same manner as the current symbols that are included in each fee. 2. Statutory Basis MIAX believes that its proposed rule change is consistent with Section 6(b) of the Act 13 in general, and in particular, furthers the objectives of Section 6(b)(4) of the Act,14 in that it is an equitable allocation of reasonable dues, fees, and other charges among its Members and other persons using its facilities, and 6(b)(5) of the Act,15 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 changes are designed to incentivize order flow providers to post additional Priority Customer orders in DIA, FB, GDX, SLV, USO, UVXY, and VXX options on the Exchange’s Book. The proposed marketing fee rate is reasonable in that although it may result in a marketing fee that is slightly higher than similar marketing fee programs, it is still in the range of marketing fee programs on other competing exchanges which charge lower marketing fees for Penny Pilot options classes versus nonPenny Pilot options classes.16 The proposed marketing fee is fair, 12 See Securities Exchange Act Release No. 73850 (December 16, 2014), 79 FR 76424 (December 22, 2014) (SR–MIAX–2014–63) (Notice of Filing and Immediate Effectiveness of MIAX non-Market Maker Transaction Fee with respect to EEM, GLD, IWM, QQQ and SPY). 13 15 U.S.C. 78f(b). 14 15 U.S.C. 78f(b)(4). 15 15 U.S.C. 78f(b)(1) and (b)(5). 16 See CBOE Fees Schedule, p. 4; NYSE Amex Options Fee Schedule, p. 7. PO 00000 Frm 00103 Fmt 4703 Sfmt 4703 equitable, and not unreasonably discriminatory because it will apply equally to all Market Makers that execute against Priority Customer orders in DIA, FB, GDX, SLV, USO, UVXY, and VXX options posted on the Exchange’s Book. All similarly situated Market Makers that execute against Priority Customer orders in DIA, FB, GDX, SLV, USO, UVXY, and VXX options that are posted to the Exchange’s Book are subject to the same marketing fee, and access to the Exchange is offered on terms that are not unfairly discriminatory. In addition, the proposal is equitable and not unfairly discriminatory because, while only posted Priority Customer order flow qualifies for the additional marketing fee, an increase in Priority Customer orders posted to the Exchange’s Book will bring greater volume and liquidity as market participants compete to trade with the additional Priority Customer order flow, which benefits all market participants by providing more trading opportunities and tighter spreads. Market participants want to trade with Priority Customer order flow. To the extent the posting of Priority Customer orders on the Exchange’s Book is increased by the proposal, market participants will increasingly compete for the opportunity to trade on the Exchange, including sending more orders and providing narrower and larger sized quotations in their effort to trade with such Priority Customer order flow. The resulting increased volume and liquidity will benefit non-Market Makers that do not pay the proposed fee and do not qualify for the marketing fee program at all, by providing more trading opportunities and tighter spreads as market participants increasingly compete by sending more orders and providing narrower and larger sized quotations in the effort to trade with such Priority Customer order flow. In addition, the proposed change is equitable and not unfairly discriminatory because it is designed to allow LMMs to encourage greater order flow to be sent to the Exchange. The Exchange believes it is equitable to assess marketing fees on Market Makers and not non-Market Makers because the benefits of the marketing fee program flow to PLMM and Directed LMMs that can use the marketing fee funds to attract additional flow to the Exchange, which benefits Market Makers. An LMM could amass a greater pool of funds to use to incentivize order flow providers to send order flow to the Exchange. This increased order flow would benefit all market participants on the Exchange as well. E:\FR\FM\31AUN1.SGM 31AUN1 Federal Register / Vol. 81, No. 169 / Wednesday, August 31, 2016 / Notices mstockstill on DSK3G9T082PROD with NOTICES The Exchange believes that its proposal to assess the additional Posted Liquidity Marketing Fee for transactions in DIA, FB, GDX, SLV, USO, UVXY, and VXX options, and not other options classes, is consistent with other options markets that provide additional incentives to increase order flow in high volume symbols including assessing different marketing fees for Penny options classes as compared to nonPenny options classes.17 The Exchange believes that establishing different pricing for DIA, FB, GDX, SLV, USO, UVXY, and VXX Penny Pilot options is reasonable, equitable, and not unfairly discriminatory because DIA, FB, GDX, SLV, USO, UVXY, and VXX options are more liquid options 18 as compared to other Penny Pilot options and the Exchange wants to provide incentive for order flow providers to send such orders to MIAX in order to increase trading opportunities and overall volume executed on the Exchange. Further, the Exchange’s proposed transaction fees for non-MIAX Market Makers in DIA, FB, GDX, SLV, USO, UVXY, and VXX are reasonable in order to ensure that the net transaction fees for non-MIAX Market Makers remain higher than Market Makers in a manner that is designed to encourage market participants to become members and register as Market Makers versus otherwise sending orders to the Exchange as a non-MIAX Market Maker in order to avoid a higher transaction fee. 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 proposal is designed to encourage an increase in Priority Customer orders in DIA, FB, GDX, SLV, USO, UVXY, and VXX options posted to the Exchange’s Book in order to bring greater volume and liquidity, which benefit all market participants by providing more trading opportunities and tighter spreads. An increase in the submission of Priority Customer orders in DIA, FB, GDX, SLV, USO, UVXY, and VXX options on the Exchange’s Book should result in an increase in competition for the opportunity to trade on the Exchange by, among other things, sending more orders and providing narrower and larger sized quotations in the effort to 17 See CBOE Fees Schedule, p. 4; NYSE Amex Options Fee Schedule, p. 7; ISE Schedule of Fees, p. 13; NYSE Arca Options Fees and Charges Schedule, p. 5. 18 See supra note 8. VerDate Sep<11>2014 21:59 Aug 30, 2016 Jkt 238001 trade with such Priority Customer order flow. The resulting increased volume and liquidity will benefit non-Market Makers that do not pay the proposed fee and do not qualify for the marketing fee program at all, by providing more trading opportunities and tighter spreads. To the extent that there is additional competitive burden on market participants that are not Priority Customers or Market Makers or trading in other symbols, the Exchange believes that this is appropriate because the proposal should encourage Members to direct additional order flow to the Exchange and thus provide additional liquidity that enhances the quality of its markets and increases the volume of contracts traded on the Exchange. The Exchange believes that all of the Exchange’s market participants will benefit from the improved market liquidity. Enhanced market quality and increased transaction volume that results from the anticipated increase in order flow directed to the Exchange will benefit all market participants and improve competition on the Exchange. The Exchange notes that it operates in a highly competitive market in which market participants can readily favor competing venues if they deem fee levels at a particular venue to be excessive. In such an environment, the Exchange must continually adjust its fees to remain competitive with other exchanges and to attract order flow to the Exchange. The Exchange believes that the proposed rule change reflects this competitive environment because it establishes a fee structure in a manner that encourages market participants to direct their order flow, to provide liquidity, and to attract additional transaction volume to the Exchange. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others Written comments were neither solicited nor received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing rule change has become effective pursuant to Section 19(b)(3)(A)(ii) of the Act,19 and Rule 19b–4(f)(2) 20 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 19 15 20 17 PO 00000 U.S.C. 78s(b)(3)(A)(ii). CFR 240.19b–4(f)(2). Frm 00104 Fmt 4703 Sfmt 4703 60079 necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule should be approved or disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission’s Internet comment form (http://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– MIAX–2016–28 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–2016–28. 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 (http://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– E:\FR\FM\31AUN1.SGM 31AUN1 60080 Federal Register / Vol. 81, No. 169 / Wednesday, August 31, 2016 / Notices 2016–28, and should be submitted on or before September 21, 2016. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.21 Robert W. Errett, Deputy Secretary. [FR Doc. 2016–20894 Filed 8–30–16; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–78679; File No. SR–NYSE– 2016–59] Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Amending Rule 13 To Eliminate Orders With a Sell ‘‘Plus’’ and Buy ‘‘Minus’’ Instruction and Retain Orders With a ‘‘Buy Minus Zero Plus’’ Instruction, and Make Conforming Changes to Rules 104, 107B, 123C and 1004 August 25, 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 19, 2016, New York Stock Exchange LLC (‘‘NYSE’’ 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. mstockstill on DSK3G9T082PROD with NOTICES I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to (1) amend Rule 13 to eliminate orders with a sell ‘‘plus’’ and buy ‘‘minus’’ instruction and retain orders with a ‘‘Buy Minus Zero Plus’’ instruction, and (2) make conforming changes to Rules 104, 107B, 123C and 1004. The proposed rule change is available on the Exchange’s Web site at www.nyse.com, at the principal office of the Exchange, and at the Commission’s Public Reference Room. CFR 200.30–3(a)(12). 1 15 U.S.C. 78s(b)(1). 2 15 U.S.C. 78a. 3 17 CFR 240.19b–4. 21:59 Aug 30, 2016 In its filing with the Commission, the self-regulatory organization 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 the Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange proposes to amend Rule 13 to eliminate orders with a sell ‘‘plus’’ and buy ‘‘minus’’ instruction and retain orders with a ‘‘Buy Minus Zero Plus’’ instruction, and make conforming changes to Rules 104, 107B, 123C and 1004. The Exchange proposes to eliminate orders with a sell ‘‘plus’’ and buy ‘‘minus’’ instruction for all securities both to streamline its rules and reduce complexity among its order type offerings.4 Because of the technology changes associated with the proposed rule change, the Exchange proposes to announce the implementation date of the elimination of the order types via Trader Update. Elimination of Sell ‘‘Plus’’ and Buy ‘‘Minus’’ Order Instructions (Rule 13) The Exchange proposes to eliminate, and thus delete from its rules, sell ‘‘plus’’ and buy ‘‘minus’’ order instructions, as defined in Rule 13(f)(4)(A) and (B), respectively. Rule 13(f)(4)(B) would also be amended to retain a ‘‘Buy Minus Zero Plus’’ instruction. First, the Exchange proposes to eliminate the sell ‘‘plus’’ order instruction. An order with a sell ‘‘plus’’ instruction is an order that will not trade at a price that is lower than the last sale if the last sale was a ‘‘plus’’ or ‘‘zero plus’’ tick or that is lower than the last sale plus the minimum fractional change in the stock if the last sale was a ‘‘minus’’ or ‘‘zero minus’’ tick, subject 4 See, e.g., Mary Jo White, Chair, Securities and Exchange Commission, Speech at the Sandler O’Neill & Partners, L.P. Global Exchange and Brokerage Conference (June 5, 2014) (available at www.sec.gov/News/Speech/Detail/Speech/ 1370542004312#.U5HI-fmwJiw). 21 17 VerDate Sep<11>2014 II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change Jkt 238001 PO 00000 Frm 00105 Fmt 4703 Sfmt 4703 to the limit price of an order, if applicable.5 To reflect elimination of the sell ‘‘plus’’ order instruction, the Exchange proposes to delete subsection (f)(4)(A) of Rule 13, which defines the sell ‘‘plus’’ instruction, in its entirety. Subsection (4)(B) of Rule 13(f), amended as described below, would become new subsection (4)(A). Second, the Exchange proposes to eliminate the buy ‘‘minus’’ order instruction defined in Rule 13(f)(4)(B) and retain the ‘‘Buy Minus Zero Plus’’ order. An order with a buy ‘‘minus’’ instruction will not trade at a price that is higher than the last sale if the last sale was a ‘‘minus’’ or ‘‘zero minus’’ tick or that is higher than the last sale minus the minimum fractional change in the stock if the last sale was a ‘‘plus’’ or ‘‘zero plus’’ tick, subject to the limit price of an order, if applicable.6 Exchange rules would continue to permit an order with a ‘‘Buy Minus Zero Plus’’ instruction, which is currently a sub-set of the instructions available under Rule 13(f)(4)(B). A Buy Minus Zero Plus order instruction assists member organizations with compliance with the ‘‘safe harbor’’ provisions of Rule 10b–18 under the Act (‘‘Rule 10b– 18’’) for issuer repurchases.7 One of the four provisions required to meet the safe harbor provision is if the purchase price of a security does not exceed the highest independent bid or the last independent transaction price.8 Because an order with a Buy Minus Zero Plus instruction will not trade at a price that is higher than the last sale, member organizations can use this instruction to facilitate their compliance with at least one of the conditions of the safe harbor provision of Rule 10b–18.9 To reflect elimination of the buy ‘‘minus’’ order instruction and retention of the ‘‘Buy Minus Zero Plus’’ instruction, the Exchange proposes to add ‘‘Zero Plus’’ after ‘‘buy minus’’ in the first sentence of proposed new Rule 13(f)(4)(A), capitalize ‘‘buy minus,’’ and delete the phrase ‘‘if the last sale was a ‘minus’ or ‘zero minus’ tick or that is higher than the last sale minus the minimum fractional change in the stock 5 See Rule 13(f)(4)(A). Rule 13(f)(4)(B). 7 See 17 CFR 240.10b–18. 8 See 17 CFR 240.10b–18(b)(3). The other three conditions relate to time of purchases, volume of purchases, and a requirement that only one broker or dealer be involved in such repurchases on a single day. 9 The Exchange does not represent that an order with a Buy Minus Zero Plus instruction is guaranteed to meet the requirements of the safe harbor provision of Rule 10b–18; rather, this instruction is available to member organizations to facilitate their own compliance with Rule 10b–18. 6 See E:\FR\FM\31AUN1.SGM 31AUN1

Agencies

[Federal Register Volume 81, Number 169 (Wednesday, August 31, 2016)]
[Notices]
[Pages 60077-60080]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-20894]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-78681; File No. SR-MIAX-2016-28]


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 25, 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 August 11, 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.
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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 ``Fee Schedule'').
    The text of the proposed rule change is available on the Exchange's 
Web site at http://www.miaxoptions.com/filter/wotitle/rule_filing, at 
MIAX's principal office, and at the Commission's Public Reference Room.

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

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
sections A, B, and C below, of the most significant aspects of such 
statements.

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

1. Purpose
    The Exchange proposes to amend Section 1)b) of the Fee Schedule, 
Marketing Fee, to add to the list of symbols for which the Exchange 
assesses a $0.12 per contract Posted Liquidity Marketing Fee. In 
addition to the current symbols listed in Section 1)b), the Exchange is 
proposing to assess the Posted Liquidity Marketing Fee for contracts 
executed in DIA, FB, GDX, SLV, USO, UVXY, and VXX. The Exchange also 
proposes to assess the applicable per contract non-Market Maker 
transaction fees for executions in these new symbols, as described more 
fully below.
    A Marketing Fee is assessed on certain transactions of all Market 
Makers.\3\ Currently, Section 1) b) of the Fee Schedule provides that 
the Exchange will assess:
---------------------------------------------------------------------------

    \3\ See MIAX Fee Schedule, Section 1)b), entitled ``Marketing 
Fee'' for more detail regarding the Marketing Fee.
---------------------------------------------------------------------------

    (i) A Marketing Fee to all Market Makers for contracts, including 
mini options, they execute in their assigned classes when the contra-
party to the execution is a Priority Customer. MIAX will not assess a 
Marketing Fee to Market Makers for contracts executed as a PRIME Agency 
Order, Contra-side Order, Qualified Contingent Cross Order, PRIME 
Participating Quote or Order, or a PRIME AOC Response in the PRIME 
Auction, unless it executes against an unrelated order.
    (ii) an additional $0.12 per contract Posted Liquidity Marketing 
Fee to all Market Makers for any standard options overlying EEM, GLD, 
IWM, QQQ, and SPY that Market Makers execute in their assigned class 
when the contra-party to the execution is a Priority Customer and the 
Priority Customer order was posted on the MIAX Book at the time of the 
execution. MIAX will not assess the additional Posted Liquidity 
Marketing Fee to Market Makers for contracts executed as a PRIME Agency 
Order, Contra-side Order, Qualified Contingent Cross Order, or a PRIME 
AOC Response or PRIME Participating Quote or Order in the PRIME 
Auction. MIAX will also not assess the additional Posted Liquidity 
Marketing Fee to Market Makers for contracts executed pursuant to a 
Liquidity Refresh Pause, route timer, or during the Opening Process. 
This Posted Liquidity Marketing Fee is in addition to the current 
Marketing Fee of $0.25 per contract for standard options overlying 
these enumerated symbols that Market Makers execute in their assigned 
class when the contra-party to the execution is a Priority Customer.\4\
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    \4\ See Securities Exchange Act Release No. 73848 (December 16, 
2014), 79 FR 76421 (December 22, 2014) (SR-MIAX-2014-62) (Notice of 
Filing and Immediate Effectiveness of MIAX Posted Liquidity 
Marketing Fee with respect to EEM, GLD, IWM, QQQ and SPY).
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    Funds collected via the Marketing Fee, including the additional 
$0.12 per contract Posted Liquidity Marketing Fee, are put into 
``pools'' controlled by Primary Lead Market Makers (``PLMMs'') \5\ and 
Lead Market Makers (``LMMs'').\6\ So for example, the $0.12 per 
contract Posted Liquidity Marketing Fee goes into the broader Marketing 
Fee pool for the Directed LMM or the PLMM

[[Page 60078]]

in EEM, GLD, IWM, QQQ or SPY, as applicable. The PLMM or LMM 
controlling a certain pool of funds can then determine the Electronic 
Exchange Member(s) (``EEM'') \7\ to which the funds should be directed 
in order to encourage such EEM(s) to send orders to the Exchange. In 
accordance with Exchange Rule 514, an EEM can designate an order 
(``Directed Order'') to a specific LMM.
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    \5\ The term ``Primary Lead Market Maker'' means a Lead Market 
Maker appointed by the Exchange to act as the Primary Lead Market 
Maker for the purpose of making markets in securities traded on the 
Exchange. The Primary Lead Market Maker is vested with the rights 
and responsibilities specified in Chapter VI of these Rules with 
respect to Primary Lead Market Makers. See Exchange Rule 100.
    \6\ The term ``Lead Market Maker'' means a Member registered 
with the Exchange for the purpose of making markets in securities 
traded on the Exchange and that is vested with the rights and 
responsibilities specified in Chapter VI of these Rules with respect 
to Lead Market Makers. When a Lead Market Maker is appointed to act 
in the capacity of a Primary Lead Market Maker, the additional 
rights and responsibilities of a Primary Lead Market Maker specified 
in Chapter VI of these Rules will apply. See Exchange Rule 100.
    \7\ The term ``Electronic Exchange Member'' means the holder of 
a Trading Permit who is not a Market Maker. Electronic Exchange 
Members are deemed ``members'' under the Act. See Exchange Rule 100.
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    The purpose of the Posted Liquidity Marketing Fee is to further 
encourage Members to post additional Priority Customer orders on the 
Exchange's Book in the enumerated high volume symbols. Increased 
Priority Customer orders on the Exchange's Book in these symbols 
provides for greater liquidity, which benefits all market participants 
on the Exchange. The Exchange now proposes to add to the following high 
volume symbols to its Posted Liquidity Marketing Fee program: DIA, FB, 
GDX, SLV, USO, UVXY, and VXX,\8\ as reflected in the proposed 
amendments to Section (1)(b) and Footnote 15 of the Fee Schedule. The 
practice of encouraging increased retail customer order flow in order 
to attract professional liquidity providers (Market Makers) is, and has 
been, commonly applied in the options markets. As such, marketing fee 
programs \9\ and posting incentive programs \10\ are based on 
attracting public customer order flow. Additional incentives intended 
to increase order flow in high volume symbols are, and have been, 
commonly offered in the options markets.\11\ The proposed Posted 
Liquidity Marketing Fee with respect to high volume symbols DIA, FB, 
GDX, SLV, USO, UVXY, and VXX similarly is intended to attract Priority 
Customer order flow, which will increase liquidity, thereby providing 
greater trading opportunities and tighter spreads for other market 
participants and causing a corresponding increase in order flow from 
such other market participants. Increasing the number of orders sent to 
the Exchange will in turn provide tighter and more liquid markets, and 
therefore attract more business overall.
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    \8\ DIA, FB, GDX, SLV, USO, UVXY, and VXX had among the highest 
MIAX volume by class as reported by the Options Clearing Corporation 
(``OCC'') for June 2016. See http://www.optionsclearing.com/webapps/volbyclass-reports?reportClass=miax.
    \9\ See MIAX Fee Schedule, Section (1)( b); Chicago Board 
Options Exchange, Incorporated (``CBOE'') Fees Schedule, p. 4; NYSE 
Amex Options Fee Schedule, p. 7.
    \10\ See NYSE Arca, Inc. (``Arca'') Options Fees and Charges 
Schedule, page 5.
    \11\ See International Securities Exchange, LLC (``ISE'') 
Schedule of Fees, p. 6 ; Arca Option Fees and Charges Schedule, p. 
5.
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    The Exchange also proposes to adopt the same additional $0.50 per 
contract transaction fee for options overlying DIA, FB, GDX, SLV, USO, 
UVXY, and VXX executed by non-MIAX Market Makers as currently applies 
to options overlying EEM, GLD, IWM, QQQ, and SPY executed by non-MIAX 
Market Makers as set forth in footnote 8, Section (1)(a)(ii) of the Fee 
Schedule.\12\ The purpose of the proposed fee change is to assess the 
transaction fee for non-MIAX Market Makers in the new symbols (DIA, FB, 
GDX, SLV, USO, UVXY, and VXX) that are being added to the Exchange's 
Posted Liquidity Marketing Fee, in the same manner as the current 
symbols that are included in each fee.
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    \12\ See Securities Exchange Act Release No. 73850 (December 16, 
2014), 79 FR 76424 (December 22, 2014) (SR-MIAX-2014-63) (Notice of 
Filing and Immediate Effectiveness of MIAX non-Market Maker 
Transaction Fee with respect to EEM, GLD, IWM, QQQ and SPY).
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2. Statutory Basis
    MIAX believes that its proposed rule change is consistent with 
Section 6(b) of the Act \13\ in general, and in particular, furthers 
the objectives of Section 6(b)(4) of the Act,\14\ in that it is an 
equitable allocation of reasonable dues, fees, and other charges among 
its Members and other persons using its facilities, and 6(b)(5) of the 
Act,\15\ 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.
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    \13\ 15 U.S.C. 78f(b).
    \14\ 15 U.S.C. 78f(b)(4).
    \15\ 15 U.S.C. 78f(b)(1) and (b)(5).
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    The proposed changes are designed to incentivize order flow 
providers to post additional Priority Customer orders in DIA, FB, GDX, 
SLV, USO, UVXY, and VXX options on the Exchange's Book. The proposed 
marketing fee rate is reasonable in that although it may result in a 
marketing fee that is slightly higher than similar marketing fee 
programs, it is still in the range of marketing fee programs on other 
competing exchanges which charge lower marketing fees for Penny Pilot 
options classes versus non-Penny Pilot options classes.\16\ The 
proposed marketing fee is fair, equitable, and not unreasonably 
discriminatory because it will apply equally to all Market Makers that 
execute against Priority Customer orders in DIA, FB, GDX, SLV, USO, 
UVXY, and VXX options posted on the Exchange's Book. All similarly 
situated Market Makers that execute against Priority Customer orders in 
DIA, FB, GDX, SLV, USO, UVXY, and VXX options that are posted to the 
Exchange's Book are subject to the same marketing fee, and access to 
the Exchange is offered on terms that are not unfairly discriminatory. 
In addition, the proposal is equitable and not unfairly discriminatory 
because, while only posted Priority Customer order flow qualifies for 
the additional marketing fee, an increase in Priority Customer orders 
posted to the Exchange's Book will bring greater volume and liquidity 
as market participants compete to trade with the additional Priority 
Customer order flow, which benefits all market participants by 
providing more trading opportunities and tighter spreads. Market 
participants want to trade with Priority Customer order flow. To the 
extent the posting of Priority Customer orders on the Exchange's Book 
is increased by the proposal, market participants will increasingly 
compete for the opportunity to trade on the Exchange, including sending 
more orders and providing narrower and larger sized quotations in their 
effort to trade with such Priority Customer order flow. The resulting 
increased volume and liquidity will benefit non-Market Makers that do 
not pay the proposed fee and do not qualify for the marketing fee 
program at all, by providing more trading opportunities and tighter 
spreads as market participants increasingly compete by sending more 
orders and providing narrower and larger sized quotations in the effort 
to trade with such Priority Customer order flow. In addition, the 
proposed change is equitable and not unfairly discriminatory because it 
is designed to allow LMMs to encourage greater order flow to be sent to 
the Exchange. The Exchange believes it is equitable to assess marketing 
fees on Market Makers and not non-Market Makers because the benefits of 
the marketing fee program flow to PLMM and Directed LMMs that can use 
the marketing fee funds to attract additional flow to the Exchange, 
which benefits Market Makers. An LMM could amass a greater pool of 
funds to use to incentivize order flow providers to send order flow to 
the Exchange. This increased order flow would benefit all market 
participants on the Exchange as well.
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    \16\ See CBOE Fees Schedule, p. 4; NYSE Amex Options Fee 
Schedule, p. 7.

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[[Page 60079]]

    The Exchange believes that its proposal to assess the additional 
Posted Liquidity Marketing Fee for transactions in DIA, FB, GDX, SLV, 
USO, UVXY, and VXX options, and not other options classes, is 
consistent with other options markets that provide additional 
incentives to increase order flow in high volume symbols including 
assessing different marketing fees for Penny options classes as 
compared to non-Penny options classes.\17\ The Exchange believes that 
establishing different pricing for DIA, FB, GDX, SLV, USO, UVXY, and 
VXX Penny Pilot options is reasonable, equitable, and not unfairly 
discriminatory because DIA, FB, GDX, SLV, USO, UVXY, and VXX options 
are more liquid options \18\ as compared to other Penny Pilot options 
and the Exchange wants to provide incentive for order flow providers to 
send such orders to MIAX in order to increase trading opportunities and 
overall volume executed on the Exchange.
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    \17\ See CBOE Fees Schedule, p. 4; NYSE Amex Options Fee 
Schedule, p. 7; ISE Schedule of Fees, p. 13; NYSE Arca Options Fees 
and Charges Schedule, p. 5.
    \18\ See supra note 8.
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    Further, the Exchange's proposed transaction fees for non-MIAX 
Market Makers in DIA, FB, GDX, SLV, USO, UVXY, and VXX are reasonable 
in order to ensure that the net transaction fees for non-MIAX Market 
Makers remain higher than Market Makers in a manner that is designed to 
encourage market participants to become members and register as Market 
Makers versus otherwise sending orders to the Exchange as a non-MIAX 
Market Maker in order to avoid a higher transaction fee.

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 proposal is 
designed to encourage an increase in Priority Customer orders in DIA, 
FB, GDX, SLV, USO, UVXY, and VXX options posted to the Exchange's Book 
in order to bring greater volume and liquidity, which benefit all 
market participants by providing more trading opportunities and tighter 
spreads. An increase in the submission of Priority Customer orders in 
DIA, FB, GDX, SLV, USO, UVXY, and VXX options on the Exchange's Book 
should result in an increase in competition for the opportunity to 
trade on the Exchange by, among other things, sending more orders and 
providing narrower and larger sized quotations in the effort to trade 
with such Priority Customer order flow. The resulting increased volume 
and liquidity will benefit non-Market Makers that do not pay the 
proposed fee and do not qualify for the marketing fee program at all, 
by providing more trading opportunities and tighter spreads.
    To the extent that there is additional competitive burden on market 
participants that are not Priority Customers or Market Makers or 
trading in other symbols, the Exchange believes that this is 
appropriate because the proposal should encourage Members to direct 
additional order flow to the Exchange and thus provide additional 
liquidity that enhances the quality of its markets and increases the 
volume of contracts traded on the Exchange. The Exchange believes that 
all of the Exchange's market participants will benefit from the 
improved market liquidity. Enhanced market quality and increased 
transaction volume that results from the anticipated increase in order 
flow directed to the Exchange will benefit all market participants and 
improve competition on the Exchange.
    The Exchange notes that it operates in a highly competitive market 
in which market participants can readily favor competing venues if they 
deem fee levels at a particular venue to be excessive. In such an 
environment, the Exchange must continually adjust its fees to remain 
competitive with other exchanges and to attract order flow to the 
Exchange. The Exchange believes that the proposed rule change reflects 
this competitive environment because it establishes a fee structure in 
a manner that encourages market participants to direct their order 
flow, to provide liquidity, and to attract additional transaction 
volume to the Exchange.

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

    Written comments were neither solicited nor received.

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

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A)(ii) of the Act,\19\ and Rule 19b-4(f)(2) \20\ 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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    \19\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \20\ 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 (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-MIAX-2016-28 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-2016-28. 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 (http://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-

[[Page 60080]]

2016-28, and should be submitted on or before September 21, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\21\
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    \21\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-20894 Filed 8-30-16; 8:45 am]
 BILLING CODE 8011-01-P