Self-Regulatory Organizations; Miami International Securities Exchange LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Its Fee Schedule To Adopt Fees and Credits for Transactions Involving Complex Orders, 75885-75894 [2016-26297]

Download as PDF Federal Register / Vol. 81, No. 211 / Tuesday, November 1, 2016 / Notices D. Calculation and Notification of the Holiday Charge Rules 17Ad–22(b)(1) and (b)(2),10 as described in detail below. Each Clearing Agency would determine the appropriate methodology for calculating the Holiday Charge in advance of each applicable Holiday. Potential methodologies for calculating the Holiday Charge include, for example, time scaling of the VaR charge 8 or application of stress scenarios that cover potential market price risk exposure that may not be appropriately covered by scaling the VaR charge. The Clearing Agencies would establish a methodology for calculating each Holiday Charge that would take into consideration the market conditions prevailing at that time in order to permit the Clearing Agencies to calculate a Holiday Charge that appropriately estimates the risk that may be presented to the Clearing Agency on the applicable Holiday, when Members’ Required Deposit cannot be collected. The Holiday Charge would represent a percentage increase of the volatility charge on the business day prior to the Holiday, and such percentage increase applies uniformly to all Members. This means that if the Holiday Charge is levied, the same methodology (i.e., formula) is applied to all Members (that is, the Holiday Charge is not a set dollar amount applied to all Members). Members would be notified of the applicable methodology by an Important Notice issued no later than 10 business days prior to the application the Holiday Charge, and the charge is collected on the business day prior to the applicable Holiday. The Holiday Charge is removed from the Required Deposit on the business day following the Holiday. A. Consistency With Section 17A asabaliauskas on DSK3SPTVN1PROD with NOTICES II. Discussion and Commission Findings Section 19(b)(2)(C) of the Act 9 directs the Commission to approve a proposed rule change of a self-regulatory organization if it finds that such proposed rule change is consistent with the requirements of the Act and rules and regulations thereunder applicable to such organization. The Commission believes the proposal is consistent with Section 17A(b)(3)(F) of the Act and 8 Market price risk and volatility increase with time as there is a greater potential for loss. This additional risk exposure is often approximated by time scaling of volatility by multiplying square root of the additional period of risk (e.g., if the VaR charge is calibrated to a 3-day risk horizon, an additional day of exposure could be approximated by √4⁄3 VaR charge). 9 15 U.S.C. 78s(b)(2)(C). VerDate Sep<11>2014 00:01 Nov 01, 2016 Jkt 241001 Section 17A(b)(3)(F) of the Act requires, in part, that the rules of a clearing agency be designed to assure the safeguarding of securities and funds that are within the custody or control of the clearing agency.11 By incorporating the Backtesting Charge and Holiday Charge into the Rules, the proposed changes help protect the Clearing Agencies from potential losses in the event that a Member defaults. Specifically, the Backtesting Charge enables the Clearing Agencies to collect additional funds when their current margin collections may be insufficient, as indicated by backtesting deficiencies. Meanwhile, the Holiday Charge enables the Clearing Agencies to collect margin in advance of Holidays when the Clearing Agencies would be unable to collect margin. Therefore, by enabling the Clearing Agencies to better assess and collect funds, as the Clearing Agencies deem necessary, the charges would promote the safeguarding of securities and funds that are within the custody or control of the clearing agency, consistent with the requirements of the Exchange Act, in particular Section 17A(b)(3)(F). B. Consistency With Rule 17Ad–22(b)(1) Rule 17Ad–22(b)(1) under the Act requires a clearing agency to establish, implement, maintain and enforce written policies and procedures reasonably designed to measure its credit exposures to its participants at least once a day and limit its exposures to potential losses from defaults by its participants under normal market conditions, so that the operations of the clearing agency would not be disrupted and non-defaulting participants would not be exposed to losses that they cannot anticipate or control.12 The Backtesting Charge and Holiday Charge are enhancements to the way the Clearing Agencies measure their credit exposure to Members and, ultimately, account for potential increases in exposure by collecting additional margin, as deemed necessary by the Clearing Agencies, to help limit potential losses from a Member default in normal market conditions. Therefore, the proposed rule changes are consistent with Rule 17Ad–22(b)(1) under the Act.13 C. Consistency With Rule 17Ad–22(b)(2) Rule 17Ad–22(b)(2) under the Act requires a clearing agency to maintain and enforce written policies and procedures reasonably designed to use margin requirements to limit its credit exposures to participants under normal market conditions.14 The Backtesting Charge and Holiday Charge are components of the margin requirement that the Clearing Agencies collect from Members, in the form of Required Deposits, to help limit the Clearing Agencies’ credit exposure to Members in normal market conditions. Therefore, the proposed rule changes are consistent with Rule 17Ad–22(b)(2) under the Act.15 III. Conclusion On the basis of the foregoing, the Commission finds that the proposals are consistent with the requirements of the Act and in particular with the requirements of Section 17A of the Act 16 and the rules and regulations thereunder. It is therefore ordered, pursuant to Section 19(b)(2) of the Act, that proposed rule changes SR–FICC–2016– 006 and SR–NSCC–2016–004 be, and hereby are, APPROVED.17 For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.18 Brent J. Fields, Secretary. [FR Doc. 2016–26303 Filed 10–31–16; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–79157; File No. SR–MIAX– 2016–38] Self-Regulatory Organizations; Miami International Securities Exchange LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Its Fee Schedule To Adopt Fees and Credits for Transactions Involving Complex Orders October 26, 2016. Pursuant to the provisions of Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’) 1 and Rule 19b–4 14 17 CFR 240.17Ad–22(b)(2). 15 Id. 16 15 U.S.C. 78q–1. approving the proposed rule change, the Commission considered the proposals’ impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f). 18 17 CFR 200.30–3(a)(12). 1 15 U.S.C. 78s(b)(1). 17 In 10 15 U.S.C. 78q–1(b)(3)(F); 17 CFR 240.17Ad– 22(b)(1); 17 CFR 240.17Ad–22(b)(2). 11 15 U.S.C. 78q–1(b)(3)(F). 12 17 CFR 240.17Ad–22(b)(1). 13 Id. PO 00000 Frm 00081 Fmt 4703 Sfmt 4703 75885 E:\FR\FM\01NON1.SGM 01NON1 75886 Federal Register / Vol. 81, No. 211 / Tuesday, November 1, 2016 / Notices thereunder,2 notice is hereby given that on October 21, 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. A. Self-Regulatory Organization’s Statement of the Purpose of, and the Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange proposes to amend its Fee Schedule to adopt fees and credits for transactions involving complex orders. The Securities and Exchange Commission (‘‘SEC’’ or ‘‘Commission’’) recently approved Exchange rules 3 that authorize and govern the trading of complex orders 4 on MIAX utilizing the 2 17 CFR 240.19b–4. Securities Exchange Act Release No. 79072 (October 7, 2016), 81 FR 71131 (October 14, 2016) (SR–MIAX–2016–26). 4 A ‘‘complex order’’ is any order involving the concurrent purchase and/or sale of two or more different options in the same underlying security (the ‘‘legs’’ or ‘‘components’’ of the complex order), for the same account, in a ratio that is equal to or greater than one-to-three (.333) and less than or equal to three-to-one (3.00) and for the purposes of executing a particular investment strategy. A complex order can also be a ‘‘stock-option’’ order, which is an order to buy or sell a stated number asabaliauskas on DSK3SPTVN1PROD with NOTICES 3 See VerDate Sep<11>2014 00:01 Nov 01, 2016 Jkt 241001 MIAX System.5 Accordingly, the Exchange is proposing to adopt certain fees and credits that will apply to Exchange Members 6 for transactions involving complex orders. All complex order fees will be charged on a per contract per side basis. Market Maker Transaction Fees Section (1)(a)(i) of the Fee Schedule sets forth the Exchange’s Market Maker Sliding Scale for Market Maker Transaction Fees (the ‘‘Sliding Scale’’). The Sliding Scale assesses a per contract transaction fee on a Market Maker 7 for the execution of simple orders and quotes (collectively, ‘‘simple orders’’). The amount of the transaction fee is based on the Market Maker’s percentage of total national market maker volume in an options class that trades on the Exchange during a particular calendar month. The Sliding Scale applies to all Market Makers for transactions in all products (except for mini-options, for which there are separate product fees), with fees established for option classes in the Penny Pilot Program 8 (‘‘penny option classes’’) and separate fees for non-penny option classes. The Exchange is proposing to use the same Sliding Scale structure to establish per contract transaction fees for executions in complex orders. More specifically, the Exchange is proposing to use the same tiers and percentage thresholds that it uses for the execution of simple orders for the execution of complex orders and quotes (collectively, ‘‘complex orders’’), and will aggregate the volume executed by Market Makers in both simple orders and complex orders for purposes of determining the of units of an underlying security coupled with the purchase or sale of options contract(s) on the opposite side of the market, subject to certain contingencies set forth in the proposed rules governing complex orders. See Securities Exchange Act Release No. 78620 (August 18, 2016), 81 FR 58770 (August 25, 2016) (SR–MIAX–2016–26). 5 The term ‘‘System’’ means the automated trading system used by the Exchange for the trading of securities. See Exchange Rule 100. 6 The term ‘‘Member’’ means an individual or organization approved to exercise the trading rights associated with a Trading Permit. Members are deemed ‘‘members’’ under the Exchange Act. See Exchange Rule 100. 7 The term ‘‘Market Makers’’ refers to Lead Market Makers (‘‘LMMs’’), Primary Lead Market Makers (‘‘PLMMs’’), and Registered Market Makers (‘‘RMMs’’) collectively. See Exchange Rule 100. A Directed Order Lead Market Maker (‘‘DLMM’’) and Directed Primary Lead Market Maker (‘‘DPLMM’’) is a party to a transaction being allocated to the LMM or PLMM and is the result of an order that has been directed to the LMM or PLMM. See Fee Schedule note 2. 8 See Securities Exchange Act Release No. 78080 (June 15, 2016), 81 FR 40377 (June 21, 2016) (SR– MIAX–2016–16). PO 00000 Frm 00082 Fmt 4703 Sfmt 4703 applicable tier and corresponding per contract transaction fee amount.9 Since the Exchange will aggregate the number of contracts executed in both simple orders and complex orders in its calculation of the Market Maker’s relevant tier, Market Maker transaction fees in both simple orders and complex orders will be incrementally reduced once the Market Maker reaches a higher tier. The Exchange believes that aggregating simple and complex volume will provide a direct benefit to Market Makers, because it provides Market Makers with enhanced potential to lower their incremental transaction fees on the Exchange. Furthermore, it should encourage Market Makers to provide complex order liquidity on the Exchange because their executed volume in complex orders will enhance their ability to achieve discounted transaction fees in simple orders. Since the Exchange provides discounted transaction fees for Members and their qualified Affiliates that achieve certain volume thresholds through the submission of Priority Customer 10 orders under the Exchange’s Priority Customer Rebate Program (‘‘PCRP’’),11 the Sliding Scale contains two tables: One setting forth the transaction fees applicable to Members and their Affiliates 12 that are in PCRP volume Tier 3 or higher; and the other setting forth the transaction fees applicable to Members and their Affiliates that are not in PCRP volume 9 The calculation of the volume thresholds does not include QCC Orders, PRIME AOC Responses, and PRIME Participating Quotes or Orders. For a discussion of these exclusions, see Securities Exchange Act Release No. 78299 (July 12, 2016), 81 FR 46734 (July 18, 2016) (SR–MIAX–2016–20). 10 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. 11 Under the PCRP, 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). 12 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 Fee Schedule note 1. E:\FR\FM\01NON1.SGM 01NON1 75887 Federal Register / Vol. 81, No. 211 / Tuesday, November 1, 2016 / Notices Tier 3 or higher. The Exchange is proposing to maintain that same, two table construct, and establish a per contract transaction fee for complex orders per tier level. Although the proposed per transaction fees for complex orders will be included in both tables (i.e., one for Members and their Affiliates that are in PCRP volume Tier 3 or higher and the other for Members and their Affiliates that are not in PCRP volume Tier 3 or higher), the per contract fees for complex orders will be the same in each table. Furthermore, the Exchange is not proposing a different maker and taker fee in each tier for complex orders. Instead, the Exchange will assess one per contract fee for complex orders in each tier for penny option classes, and one per contract fee for complex orders in non-penny option classes, with a surcharge for removing liquidity, as described below. The Exchange believes that, with respect to transaction fees for complex orders, it is appropriate to distinguish between (and thus have different transaction fee amounts for) penny option classes and non-penny option classes, as is the case with the current Fee Schedule for transaction fees for simple orders. Accordingly, the Exchange is proposing separate per contract transaction fees for penny option classes and non-penny option classes for complex orders. Specifically, the Exchange would charge a Market Maker a per contract fee in penny option classes of: $0.25 in Tier 1, $0.19 in Tier 2, $0.12 in Tier 3, $0.07 in Tier 4, $0.05 in Tier 5. The Exchange would charge a Market Maker a per contract fee in non-penny option classes of: $0.29 in Tier 1, $0.23 in Tier 2, $0.16 in Tier 3, $0.11 in Tier 4, $0.09 in Tier 5. The proposed Market Maker transaction fees are generally in line with the Market Maker transaction fees charged by other exchanges for executing complex orders.13 The Exchange believes that the proposed transaction fees for complex orders are reasonable, and have been set at an initial level that is favorable to Market Makers and are designed to encourage Market Makers to provide complex order liquidity on the Exchange. For simple orders, the Sliding Scale assesses a per contract transaction fee, which is based upon whether the Market Maker is a ‘‘maker’’ or a ‘‘taker.’’ 14 As an incentive for Market Makers to provide liquidity on the Exchange, the Exchange’s ‘‘maker’’ fees are lower than the ‘‘taker’’ fees. The Exchange is not proposing to distinguish between a ‘‘maker’’ and a ‘‘taker’’ for complex order executions as it does in the traditional construct for simple orders. Rather, the Exchange proposes to adopt a surcharge of $0.08 per executed contract for executions in complex orders assessed to a Market Maker and all other market participants except Priority Customers when it removes liquidity by trading against a Priority Customer order that is resting on the Strategy Book.15 Market Maker complex orders resting on the Strategy Book before executing against a Priority Customer order would not be assessed the $0.08 per contract surcharge, as reflected in the below tables. The Exchange believes that this $0.08 surcharge is a reasonable alternative to the maker/taker pricing structure in place for simple orders, and is substantially similar in structure and amount to a CBOE surcharge of the same type.16 All fees assessed under the Sliding Scale will be assessed on a per contract/ per side basis. The fees will apply to complex orders when those complex orders are matched against other complex orders on the Strategy Book, and will also apply, to the complex side of the trade, when they leg into and match against simple orders in the simple order book. Additionally, for the avoidance of doubt, when legging into the simple order book, the contracts that were entered directly in to the simple order book will be subject to all standard transaction fees, marketing fees, rebates, and credits, as set forth in the Exchange’s Fee Schedule and as applicable to simple orders. The revised Market Maker Sliding Scale tables proposed by the Exchange will be as follows (with new text in italics): MEMBERS AND THEIR AFFILIATES 17 IN PRIORITY CUSTOMER REBATE PROGRAM VOLUME TIER 3 OR HIGHER Simple Per contract fee for penny classes Tier asabaliauskas on DSK3SPTVN1PROD with NOTICES 1 2 3 4 5 0.00%–0.075% .......................... Above 0.075%–0.60% ............... Above 0.60%–1.00% ................. Above 1.00%–1.50% ................. Above 1.50% ............................. 13 See, e.g., CBOE Fees Schedule Options Transaction Fees; NASDAQ PHLX LLC (‘‘Phlx’’) Pricing Schedule, Section II; International Securities Exchange LLC (‘‘ISE’’) Schedule of Fees, Section II. 14 See Securities Exchange Act Release No. 78519 (August 9, 2016), 81 FR 54162 (August 15, 2016) (SR–MIAX–2016–21). VerDate Sep<11>2014 00:01 Nov 01, 2016 Per contract fee for non-penny classes Per contract fee for penny classes Percentage thresholds Maker * All MIAX Market Makers ........... Complex Jkt 241001 Taker $0.21 $0.15 $0.08 $0.04 $0.02 $0.23 $0.22 $0.15 $0.06 $0.04 Maker * $0.25 $0.19 $0.12 $0.08 $0.06 15 The ‘‘Strategy Book’’ is the Exchange’s electronic book of complex orders and complex quotes. See Exchange Rule 518(a)(17). 16 See CBOE Fees Schedule, Complex Taker Fee, and note 35. The Exchange notes that, although its base fee is slightly higher (with a similar complex fee approach), the Exchange believes that this is fair and equitable because the Exchange offers technology with unique risk mitigation features not PO 00000 Frm 00083 Fmt 4703 Sfmt 4703 Taker $0.30 $0.27 $0.20 $0.12 $0.10 Per contract fee for nonpenny classes Per contract surcharge for removing liquidity against a resting priority customer complex order on the strategy book for penny and non-penny classes $0.25 $0.19 $0.12 $0.07 $0.05 $0.29 $0.23 $0.16 $0.11 $0.09 $0.08 $0.08 $0.08 $0.08 $0.08 available elsewhere, such as the Implied Away Best Bid or Offer (‘‘ixABBO’’) Price Protection. See Exchange Rule 518.05(d). 17 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’’). E:\FR\FM\01NON1.SGM 01NON1 75888 Federal Register / Vol. 81, No. 211 / Tuesday, November 1, 2016 / Notices MEMBERS AND THEIR AFFILIATES NOT IN PRIORITY CUSTOMER REBATE PROGRAM VOLUME TIER 3 OR HIGHER Simple Per contract fee for penny classes Tier Percentage thresholds Maker * All MIAX Market Makers .......... 1 2 3 4 5 0.00%–0.075% ........................ Above 0.075%–0.60% ............ Above 0.60%–1.00% .............. Above 1.00%–1.50% .............. Above 1.50% ........................... $0.23 $0.17 $0.10 $0.06 $0.04 Complex Per contract fee for non-penny classes Maker * Taker $0.25 $0.24 $0.17 $0.08 $0.06 $0.27 $0.21 $0.14 $0.10 $0.08 Taker $0.32 $0.29 $0.22 $0.14 $0.12 Per contract fee for penny classes Per contract fee for nonpenny classes Per contract surcharge for removing liquidity against a resting priority customer complex order on the strategy book for penny and nonpenny classes $0.25 $0.19 $0.12 $0.07 $0.05 $0.29 $0.23 $0.16 $0.11 $0.09 $0.08 $0.08 $0.08 $0.08 $0.08 asabaliauskas on DSK3SPTVN1PROD with NOTICES Other Market Participant Transaction Fees Section (1)(a)(ii) of the Fee Schedule sets forth, in a single table format, transaction fees for Other Market Participants, including Priority Customers, Public Customers 18 that are not Priority Customers, non-MIAX Market Makers, non-Member BrokerDealers, and Firms 19 (the ‘‘Fee Table’’). The Fee Table currently assesses on participants that are non-MIAX Market Makers a per contract transaction fee for simple order executions. The Fee Table applies to the listed participants for transactions in all products (except mini-options, for which there are separate product fees), with fees established for penny option classes and separate fees for non-penny option classes. The Exchange is proposing to use the same Fee Table structure to establish per contract transaction fees for executions in complex orders. The Exchange is also proposing to assess the same per-contract transaction fee amounts that are set forth in the Fee Table for execution of simple orders for the execution of complex orders. Thus, as proposed, a participant would be charged the same fee per contract for executing a complex order as it would for executing a simple order for the same option class for the same participant type. Accordingly, the Exchange would charge a Member: $0.00 per contract per complex order executed in both penny option classes and non-penny option classes for a Priority Customer; $0.47 per contract per complex order executed in a penny option class for a Public Customer that is not a Priority Customer, for a nonMIAX Market Maker, and for a nonMember Broker-Dealer (and $0.75 per contract per complex order executed in a non-penny option class for each of those participant types); $0.45 per contract per complex order executed in a penny option class for a Firm (and $0.75 per contract per complex order executed in a non-penny option class for a Firm). The Exchange believes that the proposed fees for complex orders are reasonable and appropriate because they apply to all similarly situated participants equally. The Exchange’s proposal to assess the same fees for simple and complex orders to other market participants (listed in Section (1)(a)(ii) of the Fee Schedule) for complex orders is reasonable and not unfairly discriminatory because the fees apply equally to all similarly situated market participants. Just as with the current fees assessed for simple orders in Section (1)(a)(ii), the PCRP tier discounts will not apply to these participants because Market Makers, who qualify for the discounts, have quoting and other obligations that these other market participants do not have, and the Exchange believes that the PCRP tier discounts are thus equitable and not unfairly discriminatory.20 The Exchange also proposes to assess the same $0.08 per contract surcharge that it assesses on Market Makers for removing liquidity against a resting Priority Customer on the Strategy Book on other market participants, specifically: (i) Public Customers that are not Priority Customers; (ii) nonMIAX Market Makers; (iii) non-Member Broker-Dealers; and (iv) Firms. The purpose of this proposed surcharge is to encourage Members to add liquidity to the Strategy Book, and to recoup costs associated with the execution of complex orders on the Strategy Book. Moreover, the Exchange believes that the proposed fee structure may also narrow the MIAX Bid and Offer (‘‘MBBO’’) on the Strategy Book because assessing the surcharge only on participants removing liquidity effectively subsidizes, and thus encourages, the posting of liquidity. The Exchange believes that this fee structure will also provide MIAX Market Makers with greater incentive to either match or improve upon the best price displayed on the Strategy Book, all to the benefit of investors and the public in the form of improved execution prices. The revised Fee Table proposed by the Exchange will be as follows: 18 The term ‘‘Public Customer’’ means a person that is not a broker or dealer in securities. See Exchange Rule 100. 19 A ‘‘Firm’’ fee is assessed on a MIAX Electronic Exchange Member ‘‘EEM’’ that enters an order that is executed for an account identified by the EEM for clearing in the Options Clearing Corporation (‘‘OCC’’) ‘‘Firm’’ range. See Fee Schedule, Section (1)(a)(ii). 20 The Commission notes that the Exchange currently offers a discount to the standard option transaction fees for simple orders for Members that qualify for the PCRP volume Tier 3 or higher in Section (1)(a)(ii). The Exchange is not proposing to offer that discount to the standard option transaction fees for complex orders. See footnotes 4, 5, and 8–13 in Section (1)(a)(ii) of the Fee Schedule. VerDate Sep<11>2014 00:01 Nov 01, 2016 Jkt 241001 PO 00000 Frm 00084 Fmt 4703 Sfmt 4703 E:\FR\FM\01NON1.SGM 01NON1 Federal Register / Vol. 81, No. 211 / Tuesday, November 1, 2016 / Notices 75889 OTHER MARKET PARTICIPANT TRANSACTION FEES Penny Classes NonPenny Classes Per Contract Surcharge for Removing Liquidity Against a Resting Priority Customer Complex Order on the Strategy Book for Penny and NonPenny Classes Priority Customer ................. $0.00 $0.00 Public Customer that is Not a Priority Customer. $0.47 Non-MIAX Market Maker ..... Types of Other Market Participants Standard Options Transaction Fee for Simple and Complex Orders (per executed contract) Mini Options Transaction Fee (per executed contract) These fees will apply to all option classes raded on MIAX NonPenny Classes $0.00 $0.000 $0.000 $0.75 $0.08 $0.05 $0.07 $0.47 $0.75 $0.08 $0.045 $0.07 Non-Member Broker-Dealer $0.47 $0.75 $0.08 $0.045 $0.07 Firm ...................................... asabaliauskas on DSK3SPTVN1PROD with NOTICES Penny Classes $0.45 $0.75 $0.08 $0.04 $0.07 The Exchange currently offers a discount to the standard option transaction fees for simple orders for Members that qualify for the PCRP volume Tier 3 or higher. The Exchange is not proposing to offer that discount to the standard option transaction fees for complex orders. Thus, the Exchange is proposing to amend Footnotes 4, 5, and 8–13 in Section (1)(a)(ii) of the Fee Schedule to explicitly state that these discounts only apply for standard options in simple order executions. Additionally, pursuant to Footnote 8 of the Fee Schedule, the Exchange currently assesses Members a $0.48 per contract transaction fee (and a $0.50 per 21 The term ‘‘Public Customer’’ means a person that is not a broker or dealer in securities. See Exchange Rule 100. 22 The term ‘‘Voluntary Professional’’ means any Public Customer that elects, in writing, to be treated in the same manner as a broker or dealer in securities for purposes of Rule 514, as well as the Exchange’s schedule of fees. See Exchange Rule 100. VerDate Sep<11>2014 00:01 Nov 01, 2016 Jkt 241001 contract transaction fee for non-MIAX market makers) for transactions that occur on or after September 1, 2016 and extending through October 31, 2016 in options overlying EEM, GLD, IWM, QQQ, and SPY. The Exchange is not proposing to apply that transaction fee to complex orders. Thus, the Exchange is proposing to further amend Footnote 8 in Section (1)(a)(ii) of the Fee Schedule to explicitly state that such fees only apply for standard options in simple order executions. Priority Customer Rebate Program The Exchange also proposes to amend the PCRP contained in Section 1)a)iii) of the Fee Schedule by adopting per contract credits for complex orders. Currently, with respect to simple orders, the Exchange credits each Member the per contract amount set forth in the table below resulting from each Priority Customer order transmitted by that Member which is executed electronically on the Exchange in all PO 00000 Frm 00085 Fmt 4703 Sfmt 4703 There is no fee assessed to an Electronic Exchange Member (an ‘‘EEM,’’ as defined in MIAX Rule 100) that enters an order that is executed for the account of a Priority Customer. This fee is assessed to an EEM that enters an order that is executed for the account of a Public Customer 21 that does not meet the criteria for designation as a Priority Customer. This fee will also be charged to an EEM that enters an order for the account of a Public Customer that has elected to be treated as a Voluntary Professional.22 This fee is assessed to an EEM that enters an order that is executed for the account of a non-MIAX market maker. A non-MIAX market maker is a market maker registered as such on another options exchange. This fee is assessed to an EEM that enters an order that (i) is executed for the account of a non-Member Broker-Dealer, and (ii) is identified by the EEM for clearing in the Options Clearing Corporation (‘‘OCC’’) ‘‘customer’’ range. A non-Member Broker-Dealer is a broker-dealer that is not a member of the OCC, and that is not registered as a Member at MIAX or another options exchange. This fee is assessed to an EEM that enters an order that is executed for an account identified by the EEM for clearing in the OCC ‘‘Firm’’ range. 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 volume thresholds in a month as described below. The volume thresholds are calculated based on the customer average daily volume over the course of the month. Volume is recorded for and credits are delivered to the Member that submits the order to the Exchange. The Exchange proposes to extend this per contract credit to executions in complex orders. The Exchange proposes to apply the same volume tier thresholds in the PCRP for complex orders that it E:\FR\FM\01NON1.SGM 01NON1 75890 Federal Register / Vol. 81, No. 211 / Tuesday, November 1, 2016 / Notices currently applies to simple orders. In the same manner that the Exchange proposes to aggregate simple order volume and complex order volume of Market Makers towards the volume tiers in the Sliding Scale, the Exchange proposes to aggregate contract volume for both simple and complex orders in the calculation of the PCRP volume tier threshold applicable to each transaction, and to effect the same exclusions for transactions involving both simple and complex orders, as applicable, with respect to the PCRP volume tier calculation.23 The Exchange proposes to distinguish the amount of the proposed per contract credits in the PCRP for complex orders from the credits currently available to simple orders, except for Tier 1 transactions, for which there would be a $0.00 per contract credit for both simple and complex orders. The proposed per contract credits for complex orders would be: $0.21 for PCRP Tier 2 transactions; $0.24 for PCRP Tier 3 transactions, and $0.25 for PCRP Tier 4 transactions, respectively. The proposed per contract credits for complex orders are greater than the Origin Percentage thresholds of national customer volume in multiplylisted options classes listed on MIAX (monthly) Tier Priority Customer ......... 1 2 3 4 asabaliauskas on DSK3SPTVN1PROD with NOTICES Under the Professional Rebate Program (‘‘PRP’’), the Exchange credits each Member the per contract amount listed in the table below resulting from any contracts executed from an order submitted by a Member for the account(s) of a (i) Public Customer that 23 MIAX excludes contracts executed as part of QCC Orders, mini-options, Priority Customer-toPriority Customer Orders, PRIME Agency 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 from this calculation. See Fee Schedule Section 1)a)iii. 24 The term ‘‘MIAX Select Symbols’’ means options overlying AA, AAL, AAPL, AIG, AMAT, AMD, AMZN, BA, BABA, BBRY, BIDU, BP, C, CAT, CBS, CELG, CLF, CVX, DAL, EBAY, EEM, FB, FCX, GE, GILD, GLD, GM, GOOGL, GPRO, HAL, HTZ, INTC, IWM, JCP, JNJ, JPM, KMI, KO, MO, MRK, NFLX, NOK, NQ, ORCL, PBR, PFE, PG, QCOM, 00:01 Nov 01, 2016 Jkt 241001 PRIME.25 Thus, the Exchange proposes to amend the narrative portion of Section 1)a)iii) to state that, for each Priority Customer order submitted into a PRIME auction as a PRIME agency simple order, MIAX shall credit each Member at the separate per contract rate for PRIME agency simple orders; however, no rebates will be paid if the PRIME agency simple order executes against a contra-side order which is also a Priority Customer. The purpose of this proposed amendment is to explicitly state that these provisions apply only to simple orders, and not to complex orders. The Exchange currently credits each MIAX ‘‘Qualifying Member’’ 26 $0.03 per contract (except exclusions) 27 resulting from each Priority Customer order that falls within the PCRP volume Tier 1, as set forth below. The Exchange believes that it is appropriate to extend this credit to complex orders. Thus, the Exchange proposes to amend the narrative portion of Section 1)a)iii) to state that such credits will apply to both simple and complex order executions. The revised PCRP table proposed by the Exchange will be as follows: Per contract credit for simple orders in non-MIAX select symbols Per contract credit for simple orders in MIAX select symbols $0.00 0.10 0.15 0.21 $0.00 0.10 0.20 0.24 0.00%–0.50% ....................................... Above 0.50%–1.20% ........................... Above 1.20%–1.75% ........................... Above 1.75% ....................................... Professional Rebate Program VerDate Sep<11>2014 current per contract credits for simple orders. As a new entrant in the complex order marketplace, the Exchange believes that it is appropriate to establish aggressive per contract credits in order to attract order flow in this new segment of the Exchange. For simple orders, the Exchange currently assesses different PCRP credit amounts for executions in the MIAX Select Symbols 24 versus non-MIAX Select Symbols. The PCRP table in the Fee Schedule will reflect these different credits in simple orders for MIAX Select Symbols versus non-MIAX Select Symbols. The Exchange, however, does not believe it is necessary at this time to distinguish the amount of the proposed PCRP credits for executions in the MIAX Select Symbols versus nonMIAX Select Symbols for complex orders, and thus the per contract credit for complex orders will be the same for transactions involving complex orders in both MIAX Select Symbols and nonMIAX Select Symbols. The Exchange is not proposing to establish at this time a price improvement mechanism for complex orders, such as the Exchange has for simple orders, known as MIAX Per contract credit for prime agency order $0.10 0.10 0.10 0.10 Per contract credit for complex orders $0.00 0.21 0.24 0.25 is not a Priority Customer; (ii) nonMIAX Market Maker; (iii) non-Member Broker-Dealer; or (iv) Firm (for purposes of the Professional Rebate Program, ‘‘Professionals’’). The Exchange proposes to amend Section 1)a)iv) of the Fee Schedule to include per contract credits for complex orders in the Exchange’s PRP. The PRP affords a per contract credit based upon the increase in the total volume submitted by a Member and executed for the account(s) of a Professional on MIAX (not including Excluded Contracts) 28 during a QQQ, RIG, S, SPY, SUNE, T, TSLA, USO, VALE, VXX, WBA, WFC, WMB, WY, X, XHB, XLE, XLF, XLP, XOM, XOP and YHOO. See Fee Schedule note 14. 25 The MIAX Price Improvement Mechanism (‘‘PRIME’’) is a process by which a Member may electronically submit for execution (‘‘Auction’’) an order it represents as agent (‘‘Agency Order’’) against principal interest. See Exchange Rule 515A. 26 A ‘‘Qualifying Member’’ is a Member or its Affiliate that qualifies for the Professional Rebate Program and achieves a volume increase in excess of 0.065% for Professional orders transmitted by that Member which are executed electronically on the Exchange in all multiply-listed option classes for the account(s) of a Professional and which qualify for the Professional Rebate Program during a particular month relative to the applicable Baseline Percentage (as defined under the Professional Rebate Program). 27 MIAX excludes contracts executed as part of QCC Orders, mini-options, Priority Customer-toPriority Customer Orders, PRIME Agency 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 from this credit. See Fee Schedule Section 1)a)iii. 28 Excluded Contracts are any contracts executed as mini-options, Non-Priority Customer-to-NonPriority Customer Orders, QCC Orders, PRIME Orders, PRIME AOC Responses, PRIME Contra-side Orders, and executions related to contracts that are PO 00000 Frm 00086 Fmt 4703 Sfmt 4703 E:\FR\FM\01NON1.SGM 01NON1 75891 Federal Register / Vol. 81, No. 211 / Tuesday, November 1, 2016 / Notices particular month as a percentage of the total volume reported by the Options Clearing Corporation (‘‘OCC’’) in MIAX classes during the same month (the ‘‘Current Percentage’’), less the total volume submitted by that Member and executed for the account(s) of a Professional on MIAX (not including Excluded Contracts), during the fourth quarter of 2015 as a percentage of the total volume reported by OCC in MIAX classes during the fourth quarter of 2015 (the ‘‘Baseline Percentage’’). The Exchange proposes to use the same volume tier thresholds for complex orders that it currently uses for simple orders, and proposes the following per contract credits to Public Customers that are not a Priority Customer, or are a non-MIAX market maker, non-Member broker-dealer, or Firm: (i) $0.03 Per contract for contracts executed in Tier 1; (ii) $0.05 per contract for contracts executed in Tier 2; and (iii) $0.07 per contract for contracts executed in Tier 3. The current credits for contracts that are part of simple orders will remain unchanged, and the amended table in Section 1(a)iv) will include separate columns, one indicating the credits applicable to contracts from simple orders, and the other indicating the credits applicable to contracts from complex orders. Additionally, proposed amended Section 1)a)iv) will include a clarifying statement that volume for transactions in both simple and complex orders will be aggregated to determine the appropriate volume tier threshold applicable to each transaction. The revised PRP table proposed by the Exchange will be as follows: PROFESSIONAL REBATE PROGRAM Section 1)b) of the Fee Schedule describes Marketing Fees assessed on 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. The current Marketing Fees are: (i) $0.70 Per contract for transactions in standard option classes ($0.070 per contract for transactions in mini options) that are not penny option classes; and (ii) $0.25 per contract for transactions in standard option classes ($0.025 per contract for transactions in mini options) that are penny option classes. The Exchange Per contract credit (except excluded contracts) for complex orders Above 0.00%–0.005% .................................... $0.10 $0.03 2 3 Above 0.005%–0.020% .................................. Above 0.020% ................................................ 0.15 0.20 0.05 0.07 Tier Public Customer that is Not a Priority Customer. Non-MIAX Market Maker ................................ Non-Member Broker-Dealer Firm ................... Marketing Fee Per contract credit (except excluded contracts) for simple orders 1 Type of market participants eligible for rebate Percentage thresholds of volume increase in multiply-listed options (except excluded contracts) for the current month compared to fourth quarter 2015 proposes to amend Section 1)b) to state that the Marketing Fee applies to contracts in simple and complex order executions, and that the Marketing Fee in complex order executions will be assessed per contract whether the transaction executes in the Strategy Book, a Complex Auction, or by Legging into the simple order book (i.e., regardless of how the complex contracts are executed).29 The Exchange is not proposing to extend the Posted Liquidity Marketing Fee to contracts executed from complex orders. Currently, for transactions that occur on or after September 1, 2016 and extending through October 31, 2016, Amount of marketing fee assessed Option classes $0.70 (per contract) ........................ $0.25 30 (per contract) ..................... $0.070 (per contract) ...................... $0.025 (per contract) ...................... asabaliauskas on DSK3SPTVN1PROD with NOTICES MIAX assesses 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 order book at the time of the execution. The Exchange proposes to amend Section 1)b) to state that the Posted Liquidity Marketing Fee applies only to contracts from simple order executions. The revised Marketing Fee table proposed by the Exchange will be as follows: Simple and complex order t [T]ransactions in Standard Option Classes that are not in the Penny Pilot Program. Simple and complex order t [T]ransactions in Standard Option Classes that are in the Penny Pilot Program (a List of those Standard Option Classes in the Penny Pilot Program is available on the MIAX Website). Simple and complex order t [T]ransactions in Mini Options where the corresponding Standard Option is not in the Penny Pilot Program. Simple and complex order t [T]ransactions in Mini Options where the corresponding Standard Option is in the Penny Pilot Program (a List of those Standard Option Classes in the Penny Pilot Program is available on the MIAX Website). All other aspects of the Marketing Fee program of the Exchange will remain unchanged. The proposed rule changes are scheduled to become operative October 24, 2016. routed to one or more exchanges in connection with the Options Order Protection and Locked/Crossed Market Plan referenced in MIAX Rule 1400. 29 For a discussion of these types of executions, see Securities Exchange Act Release No. 78620 (August 18, 2016), 81 FR 58770 (August 25, 2016) (SR–MIAX–2016–26). 30 Extending through October 31, 2016, the Exchange will assess an additional $0.12 per contract Posted Liquidity Marketing Fee to all Market Makers for any simple orders in 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. VerDate Sep<11>2014 00:01 Nov 01, 2016 Jkt 241001 PO 00000 Frm 00087 Fmt 4703 Sfmt 4703 E:\FR\FM\01NON1.SGM 01NON1 asabaliauskas on DSK3SPTVN1PROD with NOTICES 75892 Federal Register / Vol. 81, No. 211 / Tuesday, November 1, 2016 / Notices 2. Statutory Basis MIAX believes that its proposed rule change is consistent with Section 6(b) of the Act 31 in general, and in particular, furthers the objectives of Section 6(b)(4) of the Act,32 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,33 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 market participants are subject to the same fee and rebate structure for complex order transactions, and access to the Exchange is offered on terms that are not unfairly discriminatory. The inclusion of the number of contracts executed in both simple and complex orders in the calculation of the Market Maker’s monthly percentage threshold in Section 1)a)i) is reasonable, equitable and not unfairly discriminatory because it provides a direct and equal fee benefit to Market Makers that trade complex orders. All complex order volume executed will count towards the monthly percentage thresholds required to receive the enumerated discounts in both simple and complex transactions, thus benefiting all Market Makers equally. Furthermore, it should encourage Market Makers to provide liquidity in complex orders on the Exchange because their executed volume in complex orders will enhance their ability to achieve discounted per contract transaction fees in transactions involving both simple and complex orders, thus functioning to remove impediments to and perfect the mechanisms of a free and open market and a national market system. The Exchange’s proposal to assess per contract transaction fees to MIAX Market Makers for complex orders in penny option classes and non-penny option classes is reasonable and not unfairly discriminatory because it enhances the ability of Market Makers to achieve volume levels that qualify them for fees in the higher tiers, and equally rewards all Market Makers that achieve 31 15 U.S.C. 78f(b). U.S.C. 78f(b)(4). 33 15 U.S.C. 78f(b)(1) and (b)(5). the tiers that include even further discounted per contract transaction fees. The amount of the fees in the tiers for complex orders are very similar to the amount of the fees in the tiers for simple orders, therefore the Exchange believes that fee amounts are reasonable and appropriate. The Exchange’s proposal to assess the same fees for simple and complex orders to other market participants (listed in Section 1)a)ii of the Fee Schedule) for complex orders is reasonable and not unfairly discriminatory because the fees apply equally to all similarly situated market participants. Just as with the current fees assessed for simple orders in Section 1)a)ii, the PCRP tier discounts will not apply to these participants because Market Makers, who qualify for the discounts, have quoting and other obligations that the listed other market participants do not have and the Exchange believes that the PCRP tier discounts are thus equitable and not unfairly discriminatory.34 The Exchange believes that it is reasonable and not unfairly discriminatory to offer discounted fees to Market Makers in simple orders if they fall within PCRP volume Tier 3 or higher, while not discounting the per contract fees for complex orders regardless of their PCRP Tier level. While the Exchange has the ability to justify and determine the level of incentives with respect to simple orders, the Exchange believes it would be premature to offer additional incentives and rewards to Market Makers above what the Exchange is offering until Market Makers actually use the new and value-added complex order functionality. The Exchange will better be able to determine if additional incentives or rewards are warranted, and if so at what level, once Market Makers begin using the new functionality and have established a performance baseline for complex orders. The Exchange’s proposal to offer certain credits for complex order transactions under the PCRP and the PRP and to include contracts executed from both simple and complex transactions in the calculation of the various percentage volume thresholds is intended to encourage participants 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 Exchange notes that the proposed per contract credits for the PCRP are 32 15 VerDate Sep<11>2014 00:01 Nov 01, 2016 34 See Jkt 241001 PO 00000 supra note 20. Frm 00088 Fmt 4703 Sfmt 4703 higher for complex orders than they are for simple orders, and the per contract credits for the PRP are lower for complex orders than they are for simple orders. The Exchange believes that this is equitable and reasonable because the nature of the two rebate programs (PCRP and PRP) is fundamentally different in structure and purpose. On the one hand, the PCRP rewards executed Priority Customer volume from ‘‘contract-one.’’ 35 This structure is designed to enable the Exchange to compete with the multitude of Priority Customer payment programs, such as maker-taker rebates and payment for order flow programs that are established in the industry. By offering an aggressive incentive for Priority Customer volume beginning on day one, the Exchange believes it can best compete for order flow in complex orders as soon as they become available on the Exchange. On the other hand, the PRP credit is aimed at Professional volume executed on the Exchange on an incremental basis. The PRP credit is based on a volume increase above and beyond an established baseline. Because the trading of complex orders on the Exchange represents new functionality and new volume to the Exchange, all complex order volume executed on the Exchange is by its nature incremental. As such, the Exchange believes it is not necessary to provide rewards at the same level to Professional complex orders that it provides for Professional simple orders. The Exchange’s proposal to establish and assess a surcharge of $0.08 per contract for Market Makers and other participants for removing liquidity by trading against a Priority Customer order on the Strategy Book is consistent with Section 6(b)(4) of the Act 36 because it applies equally to all participants that remove Priority Customer liquidity from the Strategy Book, and does not apply to participants whose orders or quotes resting on the Strategy Book are executed against Priority Customer complex orders on the Strategy Book. This incentive for providing resting liquidity applies to all participants. Assessing the surcharge to market participants who take liquidity from Priority Customers is reasonable and not unfairly discriminatory because it will provide MIAX Market Makers with equal surcharges for removing 35 The Priority Customer rebate payment will be calculated from the first executed contract at the applicable threshold per contract credit with rebate payments made at the highest achieved volume tier for each contract traded in that month. See Fee Schedule, Section 1)a)iii. 36 15 U.S.C. 78f(b)(4). E:\FR\FM\01NON1.SGM 01NON1 Federal Register / Vol. 81, No. 211 / Tuesday, November 1, 2016 / Notices liquidity, and no surcharge for resting liquidity. As stated above, this is substantially similar to a surcharge assessed on another exchange.37 The Exchange notes that, although its base fee is slightly higher (with a similar complex fee approach), the Exchange believes that this is fair and equitable because the Exchange offers technology with unique risk mitigation features not available elsewhere, such as the Implied Away Best Bid or Offer (‘‘ixABBO’’) Price Protection. See Exchange Rule 518.05(d). The Exchange’s proposal to assess the $.08 surcharge is also consistent with Section 6(b)(5) of the Act 38 because it perfects the mechanisms of a free and open market and a national market system and protect investors and the public interest by encouraging participants to provide liquidity on the Strategy Book, which the Exchange believes is an important competitive tool that directly or indirectly can provide better prices for investors. The proposed fee structure may narrow the MIAX Bid and Offer (‘‘MBBO’’) because not charging the $0.08 surcharge to participants with resting liquidity on the Strategy Book effectively subsidizes, and thus encourages, the posting of liquidity on MIAX. Giving greater incentive for Market Makers to either match or improve upon the best price displayed on MIAX benefits investors and the public by improving execution prices. Non-Priority Customers, non-MIAX Market Makers, broker-dealers and Firms that use sophisticated trading systems will be able to remove liquidity quickly from the Strategy Book, and thus the Exchange believes that assessing the surcharge to participants who remove liquidity, and not assessing the surcharge to participants with complex orders resting on the Strategy Book is reasonable and not unfairly discriminatory. Moreover, the proposed surcharge is substantially similar to the surcharge on CBOE,39 and has been accepted as not unfairly discriminatory under the Act.40 The Exchange believes for these reasons that the surcharge is equitable, reasonable and not unfairly 37 See supra note 16. U.S.C. 78f(b)(1) and (b)(5). 39 See supra notes 16, 37. 40 See CBOE Fees Schedule Complex Taker Fee, (describing a per contract, per side surcharge at note 35); see also International Securities Exchange (‘‘ISE’’) Schedule of Fees, Section II. ISE’s fee structure does not include a specific ‘‘taker surcharge’’ in the same manner as CBOE (and which is also proposed by the Exchange) but instead includes a higher taker fee for complex transactions that remove liquidity from the complex order book. asabaliauskas on DSK3SPTVN1PROD with NOTICES 38 15 VerDate Sep<11>2014 00:01 Nov 01, 2016 Jkt 241001 discriminatory, and thus consistent with the Act. The proposed assessment of the Marketing Fee for all complex order transactions that are executed by a Market Maker in their assigned classes when the contra-party to the trade is a Priority Customer is equitable and not unfairly discriminatory because the fee will apply equally to all Market Makers in their assigned classes. Further, the assessment of a Marketing Fee for complex transactions is a common practice of other exchanges.41 Attracting more order flow to the Exchange will bring greater volume and liquidity which in turn benefits all market participants by providing more trading opportunities and tighter spreads. 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 fee structure for complex order transactions is intended to promote narrower spreads and greater liquidity at the best prices. The fee-based incentives for market participants to provide liquidity by submitting complex orders to the Exchange, and thereafter to improve the MBBO to ensure participation, should enable the Exchange to attract order flow and compete with other exchanges which also provide such incentives to their market participants for similar transactions.42 The Exchange believes that increased complex order flow will bring greater volume and liquidity which in turn benefits all market participants by providing more trading opportunities and tighter spreads. Therefore, any potential effects that the adoption of the complex transaction fees may have on intra-market competition are justifiable due to the reasons stated above. 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. The Exchange believes that the proposed rule changes reflect this competitive environment because they modify the Exchange’s fees in a manner that 41 See CBOE Fees Schedule, p. 4; see also Phlx Pricing Schedule, Section II. 42 See, e.g., Phlx Pricing Schedule, Section B (Customer Rebate Program). PO 00000 Frm 00089 Fmt 4703 Sfmt 4703 75893 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,43 and Rule 19b–4(f)(2) 44 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: 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–2016–38 on the subject line. Paper Comments • Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090. All submissions should refer to File Number SR–MIAX–2016–38. 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 43 15 44 17 E:\FR\FM\01NON1.SGM U.S.C. 78s(b)(3)(A)(ii). CFR 240.19b–4(f)(2). 01NON1 75894 Federal Register / Vol. 81, No. 211 / Tuesday, November 1, 2016 / Notices with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for Web site viewing and printing in the Commission’s Public Reference Room, 100 F Street NE., Washington, DC 20549, on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of the filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR–MIAX– 2016–38, and should be submitted on or before November 22, 2016. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.45 Brent J. Fields, Secretary. [FR Doc. 2016–26297 Filed 10–31–16; 8:45 am] BILLING CODE 8011–01–P FOR FURTHER INFORMATION CONTACT: Mary Frias, Loan Specialist, Office of Financial Assistance, mary.frias@ sba.gov, 202–401–8234, or Curtis B. Rich, Management Analyst, 202–205– 7030, curtis.rich@sba.gov; SUPPLEMENTARY INFORMATION: SBA regulations at 13 CFR, Section 120.830 requires CDCs to submit an annual report which contains financial statements, operational and management information. This information is used by SBA’s district offices, Office of Credit Risk Management, and Office of Financial Assistance to obtain information from the CDCs that is used to evaluate whether CDCs are operating according to the statutes, regulations and policies governing the CDC loan program (504 program). Solicitation of Public Comments SBA is requesting comments on (a) Whether the collection of information is necessary for the agency to properly perform its functions; (b) whether the burden estimates are accurate; (c) whether there are ways to minimize the burden, including through the use of automated techniques or other forms of information technology; and (d) whether there are ways to enhance the quality, utility, and clarity of the information. Effective Date: 10/20/2016. Physical Loan Application Deadline Date: 12/19/2016. Economic Injury (EIDL) Loan Application Deadline Date: 07/20/2017. ADDRESSES: Submit completed loan applications to: U.S. Small Business Administration, Processing and Disbursement Center, 14925 Kingsport Road, Fort Worth, TX 76155. FOR FURTHER INFORMATION CONTACT: A. Escobar, Office of Disaster Assistance, U.S. Small Business Administration, 409 3rd Street SW., Suite 6050, Washington, DC 20416. SUPPLEMENTARY INFORMATION: Notice is hereby given that as a result of the President’s major disaster declaration on 10/20/2016, Private Non-Profit organizations that provide essential services of governmental nature may file disaster loan applications at the address listed above or other locally announced locations. The following areas have been determined to be adversely affected by the disaster: Primary Counties: Brantley; Bryan; Bulloch; Camden; Candler; Chatham; Effingham; Emanuel; Evans; Glynn; Jenkins; Liberty; Long; Mcintosh; Pierce; Screven; Tattnall; Toombs; Wayne The Interest Rates are: Summary of Information Collection SMALL BUSINESS ADMINISTRATION Data Collection Available for Public Comments 60-day notice and request for comments. ACTION: The Small Business Administration (SBA) intends to request approval, from the Office of Management and Budget (OMB) for the collection of information described below. The Paperwork Reduction Act (PRA) of 1995, 44 U.S.C. Chapter 35 requires federal agencies to publish a notice in the Federal Register concerning each proposed collection of information before submission to OMB, and to allow 60 days for public comment in response to the notice. This notice complies with that requirement. DATES: Submit comments on or before January 3, 2017. ADDRESSES: Send all comments to Mary Frias, Loan Specialist, Office of Financial Assistance, Small Business Administration, 409 3rd Street, 8th Floor, Washington, DC 20416. asabaliauskas on DSK3SPTVN1PROD with NOTICES SUMMARY: 45 17 CFR 200.30–3(a)(12). VerDate Sep<11>2014 00:01 Nov 01, 2016 Jkt 241001 Title: Certified Development Company (CDC) Annual Report Guide. Description of Respondents: Small Business Lending Companies. Form Number: SBA Form 1253. Total Estimated Annual Responses: 260. Total Estimated Annual Hour Burden: 7,280. Curtis B. Rich, Management Analyst. [FR Doc. 2016–26296 Filed 10–31–16; 8:45 am] BILLING CODE 8025–01–P SMALL BUSINESS ADMINISTRATION [Disaster Declaration # 14934 and # 14935] Georgia Disaster # GA–00082 Frm 00090 Fmt 4703 Sfmt 4703 2.625 2.625 2.625 The number assigned to this disaster for physical damage is 149348 and for economic injury is 149358 (Catalog of Federal Domestic Assistance Number 59008) Lisa Lopez-Suarez, Acting Associate Administrator for Disaster Assistance. BILLING CODE 8025–01–P This is a Notice of the Presidential declaration of a major disaster for Public Assistance Only for the State of GEORGIA (FEMA–4284– DR), dated 10/20/2016. Incident: Hurricane Matthew. Incident Period: 10/04/2016 through 10/15/2016. PO 00000 For Physical Damage: Non–Profit Organizations With Credit Available Elsewhere ... Non–Profit Organizations Without Credit Available Elsewhere ..................................... For Economic Injury: Non–Profit Organizations Without Credit Available Elsewhere ..................................... [FR Doc. 2016–26285 Filed 10–31–16; 8:45 am] U.S. Small Business Administration. ACTION: Notice. AGENCY: SUMMARY: Percent SMALL BUSINESS ADMINISTRATION [Disaster Declaration # 14839 and # 14840] California Disaster # CA–00252 U.S. Small Business Administration ACTION: Amendment 1. AGENCY: E:\FR\FM\01NON1.SGM 01NON1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 81, Number 211 (Tuesday, November 1, 2016)]
[Notices]
[Pages 75885-75894]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-26297]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-79157; File No. SR-MIAX-2016-38]


Self-Regulatory Organizations; Miami International Securities 
Exchange LLC; Notice of Filing and Immediate Effectiveness of a 
Proposed Rule Change To Amend Its Fee Schedule To Adopt Fees and 
Credits for Transactions Involving Complex Orders

October 26, 2016.
    Pursuant to the provisions of Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4

[[Page 75886]]

thereunder,\2\ notice is hereby given that on October 21, 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.
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    \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 https://www.miaxoptions.com/filter/wotitle/rule_filing, at 
MIAX's principal office, and at the Commission's Public Reference Room.

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

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

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

1. Purpose
    The Exchange proposes to amend its Fee Schedule to adopt fees and 
credits for transactions involving complex orders. The Securities and 
Exchange Commission (``SEC'' or ``Commission'') recently approved 
Exchange rules \3\ that authorize and govern the trading of complex 
orders \4\ on MIAX utilizing the MIAX System.\5\ Accordingly, the 
Exchange is proposing to adopt certain fees and credits that will apply 
to Exchange Members \6\ for transactions involving complex orders. All 
complex order fees will be charged on a per contract per side basis.
---------------------------------------------------------------------------

    \3\ See Securities Exchange Act Release No. 79072 (October 7, 
2016), 81 FR 71131 (October 14, 2016) (SR-MIAX-2016-26).
    \4\ A ``complex order'' is any order involving the concurrent 
purchase and/or sale of two or more different options in the same 
underlying security (the ``legs'' or ``components'' of the complex 
order), for the same account, in a ratio that is equal to or greater 
than one-to-three (.333) and less than or equal to three-to-one 
(3.00) and for the purposes of executing a particular investment 
strategy. A complex order can also be a ``stock-option'' order, 
which is an order to buy or sell a stated number of units of an 
underlying security coupled with the purchase or sale of options 
contract(s) on the opposite side of the market, subject to certain 
contingencies set forth in the proposed rules governing complex 
orders. See Securities Exchange Act Release No. 78620 (August 18, 
2016), 81 FR 58770 (August 25, 2016) (SR-MIAX-2016-26).
    \5\ The term ``System'' means the automated trading system used 
by the Exchange for the trading of securities. See Exchange Rule 
100.
    \6\ The term ``Member'' means an individual or organization 
approved to exercise the trading rights associated with a Trading 
Permit. Members are deemed ``members'' under the Exchange Act. See 
Exchange Rule 100.
---------------------------------------------------------------------------

Market Maker Transaction Fees
    Section (1)(a)(i) of the Fee Schedule sets forth the Exchange's 
Market Maker Sliding Scale for Market Maker Transaction Fees (the 
``Sliding Scale''). The Sliding Scale assesses a per contract 
transaction fee on a Market Maker \7\ for the execution of simple 
orders and quotes (collectively, ``simple orders''). The amount of the 
transaction fee is based on the Market Maker's percentage of total 
national market maker volume in an options class that trades on the 
Exchange during a particular calendar month. The Sliding Scale applies 
to all Market Makers for transactions in all products (except for mini-
options, for which there are separate product fees), with fees 
established for option classes in the Penny Pilot Program \8\ (``penny 
option classes'') and separate fees for non-penny option classes.
---------------------------------------------------------------------------

    \7\ The term ``Market Makers'' refers to Lead Market Makers 
(``LMMs''), Primary Lead Market Makers (``PLMMs''), and Registered 
Market Makers (``RMMs'') collectively. See Exchange Rule 100. A 
Directed Order Lead Market Maker (``DLMM'') and Directed Primary 
Lead Market Maker (``DPLMM'') is a party to a transaction being 
allocated to the LMM or PLMM and is the result of an order that has 
been directed to the LMM or PLMM. See Fee Schedule note 2.
    \8\ See Securities Exchange Act Release No. 78080 (June 15, 
2016), 81 FR 40377 (June 21, 2016) (SR-MIAX-2016-16).
---------------------------------------------------------------------------

    The Exchange is proposing to use the same Sliding Scale structure 
to establish per contract transaction fees for executions in complex 
orders. More specifically, the Exchange is proposing to use the same 
tiers and percentage thresholds that it uses for the execution of 
simple orders for the execution of complex orders and quotes 
(collectively, ``complex orders''), and will aggregate the volume 
executed by Market Makers in both simple orders and complex orders for 
purposes of determining the applicable tier and corresponding per 
contract transaction fee amount.\9\
---------------------------------------------------------------------------

    \9\ The calculation of the volume thresholds does not include 
QCC Orders, PRIME AOC Responses, and PRIME Participating Quotes or 
Orders. For a discussion of these exclusions, see Securities 
Exchange Act Release No. 78299 (July 12, 2016), 81 FR 46734 (July 
18, 2016) (SR-MIAX-2016-20).
---------------------------------------------------------------------------

    Since the Exchange will aggregate the number of contracts executed 
in both simple orders and complex orders in its calculation of the 
Market Maker's relevant tier, Market Maker transaction fees in both 
simple orders and complex orders will be incrementally reduced once the 
Market Maker reaches a higher tier. The Exchange believes that 
aggregating simple and complex volume will provide a direct benefit to 
Market Makers, because it provides Market Makers with enhanced 
potential to lower their incremental transaction fees on the Exchange. 
Furthermore, it should encourage Market Makers to provide complex order 
liquidity on the Exchange because their executed volume in complex 
orders will enhance their ability to achieve discounted transaction 
fees in simple orders.
    Since the Exchange provides discounted transaction fees for Members 
and their qualified Affiliates that achieve certain volume thresholds 
through the submission of Priority Customer \10\ orders under the 
Exchange's Priority Customer Rebate Program (``PCRP''),\11\ the Sliding 
Scale contains two tables: One setting forth the transaction fees 
applicable to Members and their Affiliates \12\ that are in PCRP volume 
Tier 3 or higher; and the other setting forth the transaction fees 
applicable to Members and their Affiliates that are not in PCRP volume

[[Page 75887]]

Tier 3 or higher. The Exchange is proposing to maintain that same, two 
table construct, and establish a per contract transaction fee for 
complex orders per tier level. Although the proposed per transaction 
fees for complex orders will be included in both tables (i.e., one for 
Members and their Affiliates that are in PCRP volume Tier 3 or higher 
and the other for Members and their Affiliates that are not in PCRP 
volume Tier 3 or higher), the per contract fees for complex orders will 
be the same in each table. Furthermore, the Exchange is not proposing a 
different maker and taker fee in each tier for complex orders. Instead, 
the Exchange will assess one per contract fee for complex orders in 
each tier for penny option classes, and one per contract fee for 
complex orders in non-penny option classes, with a surcharge for 
removing liquidity, as described below. The Exchange believes that, 
with respect to transaction fees for complex orders, it is appropriate 
to distinguish between (and thus have different transaction fee amounts 
for) penny option classes and non-penny option classes, as is the case 
with the current Fee Schedule for transaction fees for simple orders. 
Accordingly, the Exchange is proposing separate per contract 
transaction fees for penny option classes and non-penny option classes 
for complex orders. Specifically, the Exchange would charge a Market 
Maker a per contract fee in penny option classes of: $0.25 in Tier 1, 
$0.19 in Tier 2, $0.12 in Tier 3, $0.07 in Tier 4, $0.05 in Tier 5. The 
Exchange would charge a Market Maker a per contract fee in non-penny 
option classes of: $0.29 in Tier 1, $0.23 in Tier 2, $0.16 in Tier 3, 
$0.11 in Tier 4, $0.09 in Tier 5.
---------------------------------------------------------------------------

    \10\ 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.
    \11\ Under the PCRP, 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).
    \12\ 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 Fee Schedule note 1.
---------------------------------------------------------------------------

    The proposed Market Maker transaction fees are generally in line 
with the Market Maker transaction fees charged by other exchanges for 
executing complex orders.\13\ The Exchange believes that the proposed 
transaction fees for complex orders are reasonable, and have been set 
at an initial level that is favorable to Market Makers and are designed 
to encourage Market Makers to provide complex order liquidity on the 
Exchange.
---------------------------------------------------------------------------

    \13\ See, e.g., CBOE Fees Schedule Options Transaction Fees; 
NASDAQ PHLX LLC (``Phlx'') Pricing Schedule, Section II; 
International Securities Exchange LLC (``ISE'') Schedule of Fees, 
Section II.
---------------------------------------------------------------------------

    For simple orders, the Sliding Scale assesses a per contract 
transaction fee, which is based upon whether the Market Maker is a 
``maker'' or a ``taker.'' \14\ As an incentive for Market Makers to 
provide liquidity on the Exchange, the Exchange's ``maker'' fees are 
lower than the ``taker'' fees. The Exchange is not proposing to 
distinguish between a ``maker'' and a ``taker'' for complex order 
executions as it does in the traditional construct for simple orders. 
Rather, the Exchange proposes to adopt a surcharge of $0.08 per 
executed contract for executions in complex orders assessed to a Market 
Maker and all other market participants except Priority Customers when 
it removes liquidity by trading against a Priority Customer order that 
is resting on the Strategy Book.\15\ Market Maker complex orders 
resting on the Strategy Book before executing against a Priority 
Customer order would not be assessed the $0.08 per contract surcharge, 
as reflected in the below tables. The Exchange believes that this $0.08 
surcharge is a reasonable alternative to the maker/taker pricing 
structure in place for simple orders, and is substantially similar in 
structure and amount to a CBOE surcharge of the same type.\16\
---------------------------------------------------------------------------

    \14\ See Securities Exchange Act Release No. 78519 (August 9, 
2016), 81 FR 54162 (August 15, 2016) (SR-MIAX-2016-21).
    \15\ The ``Strategy Book'' is the Exchange's electronic book of 
complex orders and complex quotes. See Exchange Rule 518(a)(17).
    \16\ See CBOE Fees Schedule, Complex Taker Fee, and note 35. The 
Exchange notes that, although its base fee is slightly higher (with 
a similar complex fee approach), the Exchange believes that this is 
fair and equitable because the Exchange offers technology with 
unique risk mitigation features not available elsewhere, such as the 
Implied Away Best Bid or Offer (``ixABBO'') Price Protection. See 
Exchange Rule 518.05(d).
---------------------------------------------------------------------------

    All fees assessed under the Sliding Scale will be assessed on a per 
contract/per side basis. The fees will apply to complex orders when 
those complex orders are matched against other complex orders on the 
Strategy Book, and will also apply, to the complex side of the trade, 
when they leg into and match against simple orders in the simple order 
book. Additionally, for the avoidance of doubt, when legging into the 
simple order book, the contracts that were entered directly in to the 
simple order book will be subject to all standard transaction fees, 
marketing fees, rebates, and credits, as set forth in the Exchange's 
Fee Schedule and as applicable to simple orders.
    The revised Market Maker Sliding Scale tables proposed by the 
Exchange will be as follows (with new text in italics):

                              Members and Their Affiliates \17\ In Priority Customer Rebate Program Volume Tier 3 or Higher
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                           Simple                                 Complex
                                                                          ------------------------------------------------------------------------------
                                                                            Per contract fee    Per contract fee                          Per contract
                                                                            for penny classes     for non-penny                          surcharge for
                                                                          --------------------       classes                    Per         removing
                                                                                              --------------------    Per    contract  liquidity against
                                         Tier      Percentage thresholds                                           contract   fee for      a resting
                                                                                                                    fee for    non-    priority customer
                                                                            Maker *    Taker                         penny     penny    complex order on
                                                                                                Maker *    Taker    classes   classes  the strategy book
                                                                                                                                       for penny and non-
                                                                                                                                         penny classes
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                              1  0.00%-0.075%............     $0.21     $0.23     $0.25     $0.30     $0.25     $0.29              $0.08
                                              2  Above 0.075%-0.60%......     $0.15     $0.22     $0.19     $0.27     $0.19     $0.23              $0.08
All MIAX Market Makers...............         3  Above 0.60%-1.00%.......     $0.08     $0.15     $0.12     $0.20     $0.12     $0.16              $0.08
                                              4  Above 1.00%-1.50%.......     $0.04     $0.06     $0.08     $0.12     $0.07     $0.11              $0.08
                                              5  Above 1.50%.............     $0.02     $0.04     $0.06     $0.10     $0.05     $0.09              $0.08
--------------------------------------------------------------------------------------------------------------------------------------------------------

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

    \17\ 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'').

[[Page 75888]]



                              Members and Their Affiliates Not In Priority Customer Rebate Program Volume Tier 3 or Higher
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                         Simple                                  Complex
                                                                        --------------------------------------------------------------------------------
                                                                          Per contract fee    Per contract fee                           Per contract
                                                                          for penny classes     for non-penny                           surcharge for
                                                                        --------------------       classes          Per       Per     removing liquidity
                                        Tier     Percentage thresholds                      -------------------- contract  contract   against a resting
                                                                                                                  fee for   fee for   priority customer
                                                                                                                   penny     non-      complex order on
                                                                          Maker *    Taker    Maker *    Taker    classes    penny    the strategy book
                                                                                                                            classes   for penny and non-
                                                                                                                                        penny classes
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                             1  0.00%-0.075%...........     $0.23     $0.25     $0.27     $0.32     $0.25     $0.29                $0.08
                                             2  Above 0.075%-0.60%.....     $0.17     $0.24     $0.21     $0.29     $0.19     $0.23                $0.08
All MIAX Market Makers..............         3  Above 0.60%-1.00%......     $0.10     $0.17     $0.14     $0.22     $0.12     $0.16                $0.08
                                             4  Above 1.00%-1.50%......     $0.06     $0.08     $0.10     $0.14     $0.07     $0.11                $0.08
                                             5  Above 1.50%............     $0.04     $0.06     $0.08     $0.12     $0.05     $0.09                $0.08
--------------------------------------------------------------------------------------------------------------------------------------------------------

Other Market Participant Transaction Fees
    Section (1)(a)(ii) of the Fee Schedule sets forth, in a single 
table format, transaction fees for Other Market Participants, including 
Priority Customers, Public Customers \18\ that are not Priority 
Customers, non-MIAX Market Makers, non-Member Broker-Dealers, and Firms 
\19\ (the ``Fee Table''). The Fee Table currently assesses on 
participants that are non-MIAX Market Makers a per contract transaction 
fee for simple order executions. The Fee Table applies to the listed 
participants for transactions in all products (except mini-options, for 
which there are separate product fees), with fees established for penny 
option classes and separate fees for non-penny option classes.
---------------------------------------------------------------------------

    \18\ The term ``Public Customer'' means a person that is not a 
broker or dealer in securities. See Exchange Rule 100.
    \19\ A ``Firm'' fee is assessed on a MIAX Electronic Exchange 
Member ``EEM'' that enters an order that is executed for an account 
identified by the EEM for clearing in the Options Clearing 
Corporation (``OCC'') ``Firm'' range. See Fee Schedule, Section 
(1)(a)(ii).
---------------------------------------------------------------------------

    The Exchange is proposing to use the same Fee Table structure to 
establish per contract transaction fees for executions in complex 
orders. The Exchange is also proposing to assess the same per-contract 
transaction fee amounts that are set forth in the Fee Table for 
execution of simple orders for the execution of complex orders. Thus, 
as proposed, a participant would be charged the same fee per contract 
for executing a complex order as it would for executing a simple order 
for the same option class for the same participant type. Accordingly, 
the Exchange would charge a Member: $0.00 per contract per complex 
order executed in both penny option classes and non-penny option 
classes for a Priority Customer; $0.47 per contract per complex order 
executed in a penny option class for a Public Customer that is not a 
Priority Customer, for a non-MIAX Market Maker, and for a non-Member 
Broker-Dealer (and $0.75 per contract per complex order executed in a 
non-penny option class for each of those participant types); $0.45 per 
contract per complex order executed in a penny option class for a Firm 
(and $0.75 per contract per complex order executed in a non-penny 
option class for a Firm). The Exchange believes that the proposed fees 
for complex orders are reasonable and appropriate because they apply to 
all similarly situated participants equally. The Exchange's proposal to 
assess the same fees for simple and complex orders to other market 
participants (listed in Section (1)(a)(ii) of the Fee Schedule) for 
complex orders is reasonable and not unfairly discriminatory because 
the fees apply equally to all similarly situated market participants. 
Just as with the current fees assessed for simple orders in Section 
(1)(a)(ii), the PCRP tier discounts will not apply to these 
participants because Market Makers, who qualify for the discounts, have 
quoting and other obligations that these other market participants do 
not have, and the Exchange believes that the PCRP tier discounts are 
thus equitable and not unfairly discriminatory.\20\
---------------------------------------------------------------------------

    \20\ The Commission notes that the Exchange currently offers a 
discount to the standard option transaction fees for simple orders 
for Members that qualify for the PCRP volume Tier 3 or higher in 
Section (1)(a)(ii). The Exchange is not proposing to offer that 
discount to the standard option transaction fees for complex orders. 
See footnotes 4, 5, and 8-13 in Section (1)(a)(ii) of the Fee 
Schedule.
---------------------------------------------------------------------------

    The Exchange also proposes to assess the same $0.08 per contract 
surcharge that it assesses on Market Makers for removing liquidity 
against a resting Priority Customer on the Strategy Book on other 
market participants, specifically: (i) Public Customers that are not 
Priority Customers; (ii) non-MIAX Market Makers; (iii) non-Member 
Broker-Dealers; and (iv) Firms. The purpose of this proposed surcharge 
is to encourage Members to add liquidity to the Strategy Book, and to 
recoup costs associated with the execution of complex orders on the 
Strategy Book. Moreover, the Exchange believes that the proposed fee 
structure may also narrow the MIAX Bid and Offer (``MBBO'') on the 
Strategy Book because assessing the surcharge only on participants 
removing liquidity effectively subsidizes, and thus encourages, the 
posting of liquidity. The Exchange believes that this fee structure 
will also provide MIAX Market Makers with greater incentive to either 
match or improve upon the best price displayed on the Strategy Book, 
all to the benefit of investors and the public in the form of improved 
execution prices.
    The revised Fee Table proposed by the Exchange will be as follows:

[[Page 75889]]



                                    Other Market Participant Transaction Fees
----------------------------------------------------------------------------------------------------------------
                                   Standard Options      Per Contract       Mini Options
                                    Transaction Fee     Surcharge for      Transaction Fee
                                    for Simple and         Removing         (per executed
                                    Complex Orders    Liquidity Against       contract)        These fees will
      Types of Other Market          (per executed        a Resting     -------------------- apply to all option
          Participants                 contract)      Priority Customer                       classes  traded on
                                 --------------------  Complex Order on              Non-            MIAX
                                              Non-    the Strategy Book    Penny     Penny
                                    Penny     Penny   for Penny and Non-  Classes   Classes
                                   Classes   Classes    Penny  Classes
----------------------------------------------------------------------------------------------------------------
Priority Customer...............     $0.00     $0.00              $0.00    $0.000    $0.000  There is no fee
                                                                                              assessed to an
                                                                                              Electronic
                                                                                              Exchange Member
                                                                                              (an ``EEM,'' as
                                                                                              defined in MIAX
                                                                                              Rule 100) that
                                                                                              enters an order
                                                                                              that is executed
                                                                                              for the account of
                                                                                              a Priority
                                                                                              Customer.
Public Customer that is Not a        $0.47     $0.75              $0.08     $0.05     $0.07  This fee is
 Priority Customer.                                                                           assessed to an EEM
                                                                                              that enters an
                                                                                              order that is
                                                                                              executed for the
                                                                                              account of a
                                                                                              Public Customer
                                                                                              \21\ that does not
                                                                                              meet the criteria
                                                                                              for designation as
                                                                                              a Priority
                                                                                              Customer. This fee
                                                                                              will also be
                                                                                              charged to an EEM
                                                                                              that enters an
                                                                                              order for the
                                                                                              account of a
                                                                                              Public Customer
                                                                                              that has elected
                                                                                              to be treated as a
                                                                                              Voluntary
                                                                                              Professional.\22\
Non-MIAX Market Maker...........     $0.47     $0.75              $0.08    $0.045     $0.07  This fee is
                                                                                              assessed to an EEM
                                                                                              that enters an
                                                                                              order that is
                                                                                              executed for the
                                                                                              account of a non-
                                                                                              MIAX market maker.
                                                                                              A non-MIAX market
                                                                                              maker is a market
                                                                                              maker registered
                                                                                              as such on another
                                                                                              options exchange.
Non-Member Broker-Dealer........     $0.47     $0.75              $0.08    $0.045     $0.07  This fee is
                                                                                              assessed to an EEM
                                                                                              that enters an
                                                                                              order that (i) is
                                                                                              executed for the
                                                                                              account of a non-
                                                                                              Member Broker-
                                                                                              Dealer, and (ii)
                                                                                              is identified by
                                                                                              the EEM for
                                                                                              clearing in the
                                                                                              Options Clearing
                                                                                              Corporation
                                                                                              (``OCC'')
                                                                                              ``customer''
                                                                                              range. A non-
                                                                                              Member Broker-
                                                                                              Dealer is a broker-
                                                                                              dealer that is not
                                                                                              a member of the
                                                                                              OCC, and that is
                                                                                              not registered as
                                                                                              a Member at MIAX
                                                                                              or another options
                                                                                              exchange.
Firm............................     $0.45     $0.75              $0.08     $0.04     $0.07  This fee is
                                                                                              assessed to an EEM
                                                                                              that enters an
                                                                                              order that is
                                                                                              executed for an
                                                                                              account identified
                                                                                              by the EEM for
                                                                                              clearing in the
                                                                                              OCC ``Firm''
                                                                                              range.
----------------------------------------------------------------------------------------------------------------

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

    \21\ The term ``Public Customer'' means a person that is not a 
broker or dealer in securities. See Exchange Rule 100.
    \22\ The term ``Voluntary Professional'' means any Public 
Customer that elects, in writing, to be treated in the same manner 
as a broker or dealer in securities for purposes of Rule 514, as 
well as the Exchange's schedule of fees. See Exchange Rule 100.
---------------------------------------------------------------------------

    The Exchange currently offers a discount to the standard option 
transaction fees for simple orders for Members that qualify for the 
PCRP volume Tier 3 or higher. The Exchange is not proposing to offer 
that discount to the standard option transaction fees for complex 
orders. Thus, the Exchange is proposing to amend Footnotes 4, 5, and 8-
13 in Section (1)(a)(ii) of the Fee Schedule to explicitly state that 
these discounts only apply for standard options in simple order 
executions. Additionally, pursuant to Footnote 8 of the Fee Schedule, 
the Exchange currently assesses Members a $0.48 per contract 
transaction fee (and a $0.50 per contract transaction fee for non-MIAX 
market makers) for transactions that occur on or after September 1, 
2016 and extending through October 31, 2016 in options overlying EEM, 
GLD, IWM, QQQ, and SPY. The Exchange is not proposing to apply that 
transaction fee to complex orders. Thus, the Exchange is proposing to 
further amend Footnote 8 in Section (1)(a)(ii) of the Fee Schedule to 
explicitly state that such fees only apply for standard options in 
simple order executions.
Priority Customer Rebate Program
    The Exchange also proposes to amend the PCRP contained in Section 
1)a)iii) of the Fee Schedule by adopting per contract credits for 
complex orders. Currently, with respect to simple orders, the Exchange 
credits each Member the per contract amount set forth in the table 
below 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 volume thresholds 
in a month as described below. The volume thresholds are calculated 
based on the customer average daily volume over the course of the 
month. Volume is recorded for and credits are delivered to the Member 
that submits the order to the Exchange. The Exchange proposes to extend 
this per contract credit to executions in complex orders.
    The Exchange proposes to apply the same volume tier thresholds in 
the PCRP for complex orders that it

[[Page 75890]]

currently applies to simple orders. In the same manner that the 
Exchange proposes to aggregate simple order volume and complex order 
volume of Market Makers towards the volume tiers in the Sliding Scale, 
the Exchange proposes to aggregate contract volume for both simple and 
complex orders in the calculation of the PCRP volume tier threshold 
applicable to each transaction, and to effect the same exclusions for 
transactions involving both simple and complex orders, as applicable, 
with respect to the PCRP volume tier calculation.\23\
---------------------------------------------------------------------------

    \23\ MIAX excludes contracts executed as part of QCC Orders, 
mini-options, Priority Customer-to-Priority Customer Orders, PRIME 
Agency 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 from this calculation. See Fee Schedule Section 1)a)iii.
---------------------------------------------------------------------------

    The Exchange proposes to distinguish the amount of the proposed per 
contract credits in the PCRP for complex orders from the credits 
currently available to simple orders, except for Tier 1 transactions, 
for which there would be a $0.00 per contract credit for both simple 
and complex orders. The proposed per contract credits for complex 
orders would be: $0.21 for PCRP Tier 2 transactions; $0.24 for PCRP 
Tier 3 transactions, and $0.25 for PCRP Tier 4 transactions, 
respectively. The proposed per contract credits for complex orders are 
greater than the current per contract credits for simple orders. As a 
new entrant in the complex order marketplace, the Exchange believes 
that it is appropriate to establish aggressive per contract credits in 
order to attract order flow in this new segment of the Exchange.
    For simple orders, the Exchange currently assesses different PCRP 
credit amounts for executions in the MIAX Select Symbols \24\ versus 
non-MIAX Select Symbols. The PCRP table in the Fee Schedule will 
reflect these different credits in simple orders for MIAX Select 
Symbols versus non-MIAX Select Symbols. The Exchange, however, does not 
believe it is necessary at this time to distinguish the amount of the 
proposed PCRP credits for executions in the MIAX Select Symbols versus 
non-MIAX Select Symbols for complex orders, and thus the per contract 
credit for complex orders will be the same for transactions involving 
complex orders in both MIAX Select Symbols and non-MIAX Select Symbols.
---------------------------------------------------------------------------

    \24\ The term ``MIAX Select Symbols'' means options overlying 
AA, AAL, AAPL, AIG, AMAT, AMD, AMZN, BA, BABA, BBRY, BIDU, BP, C, 
CAT, CBS, CELG, CLF, CVX, DAL, EBAY, EEM, FB, FCX, GE, GILD, GLD, 
GM, GOOGL, GPRO, HAL, HTZ, INTC, IWM, JCP, JNJ, JPM, KMI, KO, MO, 
MRK, NFLX, NOK, NQ, ORCL, PBR, PFE, PG, QCOM, QQQ, RIG, S, SPY, 
SUNE, T, TSLA, USO, VALE, VXX, WBA, WFC, WMB, WY, X, XHB, XLE, XLF, 
XLP, XOM, XOP and YHOO. See Fee Schedule note 14.
---------------------------------------------------------------------------

    The Exchange is not proposing to establish at this time a price 
improvement mechanism for complex orders, such as the Exchange has for 
simple orders, known as MIAX PRIME.\25\ Thus, the Exchange proposes to 
amend the narrative portion of Section 1)a)iii) to state that, for each 
Priority Customer order submitted into a PRIME auction as a PRIME 
agency simple order, MIAX shall credit each Member at the separate per 
contract rate for PRIME agency simple orders; however, no rebates will 
be paid if the PRIME agency simple order executes against a contra-side 
order which is also a Priority Customer. The purpose of this proposed 
amendment is to explicitly state that these provisions apply only to 
simple orders, and not to complex orders.
---------------------------------------------------------------------------

    \25\ The MIAX Price Improvement Mechanism (``PRIME'') is a 
process by which a Member may electronically submit for execution 
(``Auction'') an order it represents as agent (``Agency Order'') 
against principal interest. See Exchange Rule 515A.
---------------------------------------------------------------------------

    The Exchange currently credits each MIAX ``Qualifying Member'' \26\ 
$0.03 per contract (except exclusions) \27\ resulting from each 
Priority Customer order that falls within the PCRP volume Tier 1, as 
set forth below. The Exchange believes that it is appropriate to extend 
this credit to complex orders. Thus, the Exchange proposes to amend the 
narrative portion of Section 1)a)iii) to state that such credits will 
apply to both simple and complex order executions.
---------------------------------------------------------------------------

    \26\ A ``Qualifying Member'' is a Member or its Affiliate that 
qualifies for the Professional Rebate Program and achieves a volume 
increase in excess of 0.065% for Professional orders transmitted by 
that Member which are executed electronically on the Exchange in all 
multiply-listed option classes for the account(s) of a Professional 
and which qualify for the Professional Rebate Program during a 
particular month relative to the applicable Baseline Percentage (as 
defined under the Professional Rebate Program).
    \27\ MIAX excludes contracts executed as part of QCC Orders, 
mini-options, Priority Customer-to-Priority Customer Orders, PRIME 
Agency 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 from this credit. See Fee Schedule Section 1)a)iii.
---------------------------------------------------------------------------

    The revised PCRP table proposed by the Exchange will be as follows:

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                            Percentage  thresholds of      Per contract    Per contract
                                                           national customer  volume in     credit for      credit for     Per contract    Per contract
                    Origin                       Tier        multiply- listed options      simple orders   simple orders    credit for      credit for
                                                             classes listed on  MIAX        in non-MIAX   in MIAX select   prime agency   complex orders
                                                                    (monthly)             select symbols      symbols          order
--------------------------------------------------------------------------------------------------------------------------------------------------------
Priority Customer............................         1  0.00%-0.50%....................           $0.00           $0.00           $0.10           $0.00
                                                      2  Above 0.50%-1.20%..............            0.10            0.10            0.10            0.21
                                                      3  Above 1.20%-1.75%..............            0.15            0.20            0.10            0.24
                                                      4  Above 1.75%....................            0.21            0.24            0.10            0.25
--------------------------------------------------------------------------------------------------------------------------------------------------------

Professional Rebate Program
    Under the Professional Rebate Program (``PRP''), the Exchange 
credits each Member the per contract amount listed in the table below 
resulting from any contracts executed from an order submitted by a 
Member for the account(s) of a (i) Public Customer that is not a 
Priority Customer; (ii) non-MIAX Market Maker; (iii) non-Member Broker-
Dealer; or (iv) Firm (for purposes of the Professional Rebate Program, 
``Professionals''). The Exchange proposes to amend Section 1)a)iv) of 
the Fee Schedule to include per contract credits for complex orders in 
the Exchange's PRP.
    The PRP affords a per contract credit based upon the increase in 
the total volume submitted by a Member and executed for the account(s) 
of a Professional on MIAX (not including Excluded Contracts) \28\ 
during a

[[Page 75891]]

particular month as a percentage of the total volume reported by the 
Options Clearing Corporation (``OCC'') in MIAX classes during the same 
month (the ``Current Percentage''), less the total volume submitted by 
that Member and executed for the account(s) of a Professional on MIAX 
(not including Excluded Contracts), during the fourth quarter of 2015 
as a percentage of the total volume reported by OCC in MIAX classes 
during the fourth quarter of 2015 (the ``Baseline Percentage''). The 
Exchange proposes to use the same volume tier thresholds for complex 
orders that it currently uses for simple orders, and proposes the 
following per contract credits to Public Customers that are not a 
Priority Customer, or are a non-MIAX market maker, non-Member broker-
dealer, or Firm: (i) $0.03 Per contract for contracts executed in Tier 
1; (ii) $0.05 per contract for contracts executed in Tier 2; and (iii) 
$0.07 per contract for contracts executed in Tier 3. The current 
credits for contracts that are part of simple orders will remain 
unchanged, and the amended table in Section 1(a)iv) will include 
separate columns, one indicating the credits applicable to contracts 
from simple orders, and the other indicating the credits applicable to 
contracts from complex orders. Additionally, proposed amended Section 
1)a)iv) will include a clarifying statement that volume for 
transactions in both simple and complex orders will be aggregated to 
determine the appropriate volume tier threshold applicable to each 
transaction.
---------------------------------------------------------------------------

    \28\ Excluded Contracts are any contracts executed as mini-
options, Non-Priority Customer-to-Non-Priority Customer Orders, QCC 
Orders, PRIME Orders, PRIME AOC Responses, PRIME Contra-side Orders, 
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.
---------------------------------------------------------------------------

    The revised PRP table proposed by the Exchange will be as follows:

                                           Professional Rebate Program
----------------------------------------------------------------------------------------------------------------
                                                        Percentage thresholds of
                                                           volume increase in      Per contract    Per contract
                                                         multiply-listed options  credit (except  credit (except
 Type of market participants eligible        Tier           (except excluded         excluded        excluded
              for rebate                                   contracts) for the     contracts) for  contracts) for
                                                         current month compared    simple orders  complex orders
                                                         to fourth quarter 2015
----------------------------------------------------------------------------------------------------------------
Public Customer that is Not a Priority               1  Above 0.00%-0.005%......           $0.10           $0.03
 Customer.
Non-MIAX Market Maker.................               2  Above 0.005%-0.020%.....            0.15            0.05
Non-Member Broker-Dealer Firm.........               3  Above 0.020%............            0.20            0.07
----------------------------------------------------------------------------------------------------------------

Marketing Fee
    Section 1)b) of the Fee Schedule describes Marketing Fees assessed 
on 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. The current Marketing Fees are: (i) 
$0.70 Per contract for transactions in standard option classes ($0.070 
per contract for transactions in mini options) that are not penny 
option classes; and (ii) $0.25 per contract for transactions in 
standard option classes ($0.025 per contract for transactions in mini 
options) that are penny option classes. The Exchange proposes to amend 
Section 1)b) to state that the Marketing Fee applies to contracts in 
simple and complex order executions, and that the Marketing Fee in 
complex order executions will be assessed per contract whether the 
transaction executes in the Strategy Book, a Complex Auction, or by 
Legging into the simple order book (i.e., regardless of how the complex 
contracts are executed).\29\
---------------------------------------------------------------------------

    \29\ For a discussion of these types of executions, see 
Securities Exchange Act Release No. 78620 (August 18, 2016), 81 FR 
58770 (August 25, 2016) (SR-MIAX-2016-26).
---------------------------------------------------------------------------

    The Exchange is not proposing to extend the Posted Liquidity 
Marketing Fee to contracts executed from complex orders. Currently, for 
transactions that occur on or after September 1, 2016 and extending 
through October 31, 2016, MIAX assesses 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 order book at the time of the execution. The 
Exchange proposes to amend Section 1)b) to state that the Posted 
Liquidity Marketing Fee applies only to contracts from simple order 
executions. The revised Marketing Fee table proposed by the Exchange 
will be as follows:

------------------------------------------------------------------------
 Amount of marketing fee assessed              Option classes
------------------------------------------------------------------------
$0.70 (per contract)..............  Simple and complex order t
                                     [T]ransactions in Standard Option
                                     Classes that are not in the Penny
                                     Pilot Program.
$0.25 \30\ (per contract).........  Simple and complex order t
                                     [T]ransactions in Standard Option
                                     Classes that are in the Penny Pilot
                                     Program (a List of those Standard
                                     Option Classes in the Penny Pilot
                                     Program is available on the MIAX
                                     Website).
$0.070 (per contract).............  Simple and complex order t
                                     [T]ransactions in Mini Options
                                     where the corresponding Standard
                                     Option is not in the Penny Pilot
                                     Program.
$0.025 (per contract).............  Simple and complex order t
                                     [T]ransactions in Mini Options
                                     where the corresponding Standard
                                     Option is in the Penny Pilot
                                     Program (a List of those Standard
                                     Option Classes in the Penny Pilot
                                     Program is available on the MIAX
                                     Website).
------------------------------------------------------------------------

    All other aspects of the Marketing Fee program of the Exchange will 
remain unchanged. The proposed rule changes are scheduled to become 
operative October 24, 2016.
---------------------------------------------------------------------------

    \30\ Extending through October 31, 2016, the Exchange will 
assess an additional $0.12 per contract Posted Liquidity Marketing 
Fee to all Market Makers for any simple orders in 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.

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

[[Page 75892]]

2. Statutory Basis
    MIAX believes that its proposed rule change is consistent with 
Section 6(b) of the Act \31\ in general, and in particular, furthers 
the objectives of Section 6(b)(4) of the Act,\32\ 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,\33\ 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.
---------------------------------------------------------------------------

    \31\ 15 U.S.C. 78f(b).
    \32\ 15 U.S.C. 78f(b)(4).
    \33\ 15 U.S.C. 78f(b)(1) and (b)(5).
---------------------------------------------------------------------------

    The proposed fee structure is equitable and not unfairly 
discriminatory because all similarly situated market participants are 
subject to the same fee and rebate structure for complex order 
transactions, and access to the Exchange is offered on terms that are 
not unfairly discriminatory. The inclusion of the number of contracts 
executed in both simple and complex orders in the calculation of the 
Market Maker's monthly percentage threshold in Section 1)a)i) is 
reasonable, equitable and not unfairly discriminatory because it 
provides a direct and equal fee benefit to Market Makers that trade 
complex orders. All complex order volume executed will count towards 
the monthly percentage thresholds required to receive the enumerated 
discounts in both simple and complex transactions, thus benefiting all 
Market Makers equally. Furthermore, it should encourage Market Makers 
to provide liquidity in complex orders on the Exchange because their 
executed volume in complex orders will enhance their ability to achieve 
discounted per contract transaction fees in transactions involving both 
simple and complex orders, thus functioning to remove impediments to 
and perfect the mechanisms of a free and open market and a national 
market system.
    The Exchange's proposal to assess per contract transaction fees to 
MIAX Market Makers for complex orders in penny option classes and non-
penny option classes is reasonable and not unfairly discriminatory 
because it enhances the ability of Market Makers to achieve volume 
levels that qualify them for fees in the higher tiers, and equally 
rewards all Market Makers that achieve the tiers that include even 
further discounted per contract transaction fees. The amount of the 
fees in the tiers for complex orders are very similar to the amount of 
the fees in the tiers for simple orders, therefore the Exchange 
believes that fee amounts are reasonable and appropriate.
    The Exchange's proposal to assess the same fees for simple and 
complex orders to other market participants (listed in Section 1)a)ii 
of the Fee Schedule) for complex orders is reasonable and not unfairly 
discriminatory because the fees apply equally to all similarly situated 
market participants. Just as with the current fees assessed for simple 
orders in Section 1)a)ii, the PCRP tier discounts will not apply to 
these participants because Market Makers, who qualify for the 
discounts, have quoting and other obligations that the listed other 
market participants do not have and the Exchange believes that the PCRP 
tier discounts are thus equitable and not unfairly discriminatory.\34\
---------------------------------------------------------------------------

    \34\ See supra note 20.
---------------------------------------------------------------------------

    The Exchange believes that it is reasonable and not unfairly 
discriminatory to offer discounted fees to Market Makers in simple 
orders if they fall within PCRP volume Tier 3 or higher, while not 
discounting the per contract fees for complex orders regardless of 
their PCRP Tier level. While the Exchange has the ability to justify 
and determine the level of incentives with respect to simple orders, 
the Exchange believes it would be premature to offer additional 
incentives and rewards to Market Makers above what the Exchange is 
offering until Market Makers actually use the new and value-added 
complex order functionality. The Exchange will better be able to 
determine if additional incentives or rewards are warranted, and if so 
at what level, once Market Makers begin using the new functionality and 
have established a performance baseline for complex orders.
    The Exchange's proposal to offer certain credits for complex order 
transactions under the PCRP and the PRP and to include contracts 
executed from both simple and complex transactions in the calculation 
of the various percentage volume thresholds is intended to encourage 
participants 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 Exchange notes that the proposed per contract credits for the 
PCRP are higher for complex orders than they are for simple orders, and 
the per contract credits for the PRP are lower for complex orders than 
they are for simple orders. The Exchange believes that this is 
equitable and reasonable because the nature of the two rebate programs 
(PCRP and PRP) is fundamentally different in structure and purpose.
    On the one hand, the PCRP rewards executed Priority Customer volume 
from ``contract-one.'' \35\ This structure is designed to enable the 
Exchange to compete with the multitude of Priority Customer payment 
programs, such as maker-taker rebates and payment for order flow 
programs that are established in the industry. By offering an 
aggressive incentive for Priority Customer volume beginning on day one, 
the Exchange believes it can best compete for order flow in complex 
orders as soon as they become available on the Exchange.
---------------------------------------------------------------------------

    \35\ The Priority Customer rebate payment will be calculated 
from the first executed contract at the applicable threshold per 
contract credit with rebate payments made at the highest achieved 
volume tier for each contract traded in that month. See Fee 
Schedule, Section 1)a)iii.
---------------------------------------------------------------------------

    On the other hand, the PRP credit is aimed at Professional volume 
executed on the Exchange on an incremental basis. The PRP credit is 
based on a volume increase above and beyond an established baseline. 
Because the trading of complex orders on the Exchange represents new 
functionality and new volume to the Exchange, all complex order volume 
executed on the Exchange is by its nature incremental. As such, the 
Exchange believes it is not necessary to provide rewards at the same 
level to Professional complex orders that it provides for Professional 
simple orders.
    The Exchange's proposal to establish and assess a surcharge of 
$0.08 per contract for Market Makers and other participants for 
removing liquidity by trading against a Priority Customer order on the 
Strategy Book is consistent with Section 6(b)(4) of the Act \36\ 
because it applies equally to all participants that remove Priority 
Customer liquidity from the Strategy Book, and does not apply to 
participants whose orders or quotes resting on the Strategy Book are 
executed against Priority Customer complex orders on the Strategy Book. 
This incentive for providing resting liquidity applies to all 
participants. Assessing the surcharge to market participants who take 
liquidity from Priority Customers is reasonable and not unfairly 
discriminatory because it will provide MIAX Market Makers with equal 
surcharges for removing

[[Page 75893]]

liquidity, and no surcharge for resting liquidity. As stated above, 
this is substantially similar to a surcharge assessed on another 
exchange.\37\ The Exchange notes that, although its base fee is 
slightly higher (with a similar complex fee approach), the Exchange 
believes that this is fair and equitable because the Exchange offers 
technology with unique risk mitigation features not available 
elsewhere, such as the Implied Away Best Bid or Offer (``ixABBO'') 
Price Protection. See Exchange Rule 518.05(d).
---------------------------------------------------------------------------

    \36\ 15 U.S.C. 78f(b)(4).
    \37\ See supra note 16.
---------------------------------------------------------------------------

    The Exchange's proposal to assess the $.08 surcharge is also 
consistent with Section 6(b)(5) of the Act \38\ because it perfects the 
mechanisms of a free and open market and a national market system and 
protect investors and the public interest by encouraging participants 
to provide liquidity on the Strategy Book, which the Exchange believes 
is an important competitive tool that directly or indirectly can 
provide better prices for investors. The proposed fee structure may 
narrow the MIAX Bid and Offer (``MBBO'') because not charging the $0.08 
surcharge to participants with resting liquidity on the Strategy Book 
effectively subsidizes, and thus encourages, the posting of liquidity 
on MIAX. Giving greater incentive for Market Makers to either match or 
improve upon the best price displayed on MIAX benefits investors and 
the public by improving execution prices.
---------------------------------------------------------------------------

    \38\ 15 U.S.C. 78f(b)(1) and (b)(5).
---------------------------------------------------------------------------

    Non-Priority Customers, non-MIAX Market Makers, broker-dealers and 
Firms that use sophisticated trading systems will be able to remove 
liquidity quickly from the Strategy Book, and thus the Exchange 
believes that assessing the surcharge to participants who remove 
liquidity, and not assessing the surcharge to participants with complex 
orders resting on the Strategy Book is reasonable and not unfairly 
discriminatory. Moreover, the proposed surcharge is substantially 
similar to the surcharge on CBOE,\39\ and has been accepted as not 
unfairly discriminatory under the Act.\40\ The Exchange believes for 
these reasons that the surcharge is equitable, reasonable and not 
unfairly discriminatory, and thus consistent with the Act.
---------------------------------------------------------------------------

    \39\ See supra notes 16, 37.
    \40\ See CBOE Fees Schedule Complex Taker Fee, (describing a per 
contract, per side surcharge at note 35); see also International 
Securities Exchange (``ISE'') Schedule of Fees, Section II. ISE's 
fee structure does not include a specific ``taker surcharge'' in the 
same manner as CBOE (and which is also proposed by the Exchange) but 
instead includes a higher taker fee for complex transactions that 
remove liquidity from the complex order book.
---------------------------------------------------------------------------

    The proposed assessment of the Marketing Fee for all complex order 
transactions that are executed by a Market Maker in their assigned 
classes when the contra-party to the trade is a Priority Customer is 
equitable and not unfairly discriminatory because the fee will apply 
equally to all Market Makers in their assigned classes. Further, the 
assessment of a Marketing Fee for complex transactions is a common 
practice of other exchanges.\41\ Attracting more order flow to the 
Exchange will bring greater volume and liquidity which in turn benefits 
all market participants by providing more trading opportunities and 
tighter spreads.
---------------------------------------------------------------------------

    \41\ See CBOE Fees Schedule, p. 4; see also Phlx Pricing 
Schedule, Section II.
---------------------------------------------------------------------------

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 fee structure for complex order transactions 
is intended to promote narrower spreads and greater liquidity at the 
best prices. The fee-based incentives for market participants to 
provide liquidity by submitting complex orders to the Exchange, and 
thereafter to improve the MBBO to ensure participation, should enable 
the Exchange to attract order flow and compete with other exchanges 
which also provide such incentives to their market participants for 
similar transactions.\42\
---------------------------------------------------------------------------

    \42\ See, e.g., Phlx Pricing Schedule, Section B (Customer 
Rebate Program).
---------------------------------------------------------------------------

    The Exchange believes that increased complex order flow will bring 
greater volume and liquidity which in turn benefits all market 
participants by providing more trading opportunities and tighter 
spreads. Therefore, any potential effects that the adoption of the 
complex transaction fees may have on intra-market competition are 
justifiable due to the reasons stated above.
    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. 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,\43\ and Rule 19b-4(f)(2) \44\ 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.
---------------------------------------------------------------------------

    \43\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \44\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-MIAX-2016-38 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-MIAX-2016-38. 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

[[Page 75894]]

with respect to the proposed rule change that are filed with the 
Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for Web site viewing and printing in 
the Commission's Public Reference Room, 100 F Street NE., Washington, 
DC 20549, on official business days between the hours of 10:00 a.m. and 
3:00 p.m. Copies of the filing also will be available for inspection 
and copying at the principal office of the Exchange. All comments 
received will be posted without change; the Commission does not edit 
personal identifying information from submissions. You should submit 
only information that you wish to make available publicly. All 
submissions should refer to File Number SR-MIAX-2016-38, and should be 
submitted on or before November 22, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\45\
---------------------------------------------------------------------------

    \45\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Brent J. Fields,
Secretary.
[FR Doc. 2016-26297 Filed 10-31-16; 8:45 am]
 BILLING CODE 8011-01-P

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