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 Modify the Exchange's Connectivity Fees, 96133-96136 [2016-31481]

Download as PDF Federal Register / Vol. 81, No. 250 / Thursday, December 29, 2016 / Notices coordination with persons engaged in regulating, clearing, settling, processing information with respect to, and facilitating transactions in securities, to remove impediments to, and perfect the mechanism of a free and open market and a national market system and, in general, to protect investors and the public interest. As discussed above, the proposed updates to the corporate documents and replacement of outdated or obsolete references removes impediments to and perfects the mechanism of a free and open market by removing confusion that may result from having these references in the governing documents following the Acquisition. The Exchange further believes that the proposal removes impediments to and perfects the mechanism of a free and open market by ensuring that persons subject to the Exchange’s jurisdiction, regulators, and the investing public can more easily navigate and understand the governing documents. The Exchange further believes that eliminating an obsolete reference would not be inconsistent with the public interest and the protection of investors because investors will not be harmed and in fact would benefit from increased transparency, thereby reducing potential confusion. Removing such obsolete references will also further the goal of transparency and add clarity to the Exchange’s rules. B. Self-Regulatory Organization’s Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Exchange Act. The proposed rule change is not intended to address competitive issues but rather is concerned solely with updating the Exchange’s rules to reflect the Acquisition and to remove obsolete references. asabaliauskas on DSK3SPTVN1PROD with NOTICES C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were solicited or received with respect to the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Within 45 days of the date of publication of this notice in the Federal Register or within such longer period up to 90 days (i) as the Commission may designate if it finds such longer period to be appropriate and publishes its reasons for so finding or (ii) as to which VerDate Sep<11>2014 18:41 Dec 28, 2016 Jkt 241001 96133 NYSEMKT–2016–122 and should be submitted on or before January 19, 2017. the self-regulatory organization consents, the Commission will: (A) By order approve or disapprove such proposed rule change, or (B) institute proceedings to determine whether the proposed rule change should be disapproved. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.21 Eduardo A. Aleman, Assistant Secretary. IV. Solicitation of Comments [FR Doc. 2016–31487 Filed 12–28–16; 8:45 am] Interested persons are invited to submit written data, views and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission’s Internet comment form (http://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– NYSEMKT–2016–122 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–NYSEMKT–2016–122. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission’s Internet Web site (http://www.sec.gov/ rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for Web site viewing and printing in the Commission’s Public Reference Room, 100 F Street NE., Washington, DC 20549, on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of 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– PO 00000 Frm 00178 Fmt 4703 Sfmt 4703 BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–79666; File No. SR–MIAX– 2016–47] 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 Modify the Exchange’s Connectivity Fees December 22, 2016 Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’),1 and Rule 19b–4 thereunder,2 notice is hereby given that, on December 13, 2016, Miami International Securities Exchange LLC (‘‘MIAX’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘SEC’’ or ‘‘Commission’’) the 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’’) to modify the Exchange’s connectivity fees. The text of the proposed rule change is available on the Exchange’s Web site at http://www.miaxoptions.com/filter/ wotitle/rule_filing, at MIAX’s principal office, and at the Commission’s Public Reference Room. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these 21 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 E:\FR\FM\29DEN1.SGM 29DEN1 96134 Federal Register / Vol. 81, No. 250 / Thursday, December 29, 2016 / Notices statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change asabaliauskas on DSK3SPTVN1PROD with NOTICES 1. Purpose The Exchange proposes to amend the Fee Schedule regarding connectivity to the Exchange. Network Connectivity Fees First, the Exchange proposes to amend Section 5(a) and (b) of the Fee Schedule to increase the connectivity fee for the 1 Gigabit (‘‘Gb’’) fiber connection, the 10 Gb fiber connection, and the 10 Gb ultra-low latency (‘‘ULL’’) fiber connection, which are charged to both Members 3 and Non-Members of the Exchange. The Exchange currently offers various bandwidth alternatives for connectivity to the Exchange, consisting of a 10Gb ULL fiber connection, a 10Gb fiber connection and a 1Gb fiber connection. The 10Gb ULL offering uses a new ultralow latency switch, which provides faster processing of messages sent to it in comparison to the switch used for the other types of connectivity. The Exchange currently assesses the following monthly network connectivity fees to both Members and non-Members for connectivity to the Exchange’s Primary and Secondary Facility: (a) $1,000 for the 1Gb connection; (b) $5,000 for the 10 Gb connection; and (c) $7,500.00 for the 10Gb ULL connection. The Exchange proposes to increase the monthly network connectivity fees for such connections for both Members and non-Members as follows: (a) From $1,000 to $1,100 for the 1Gb connection; (b) from $5,000 to $5,500 for the 10Gb connection; and (c) from $7,500 to $8,500 for the 10Gb ULL connection. All of the foregoing network connectivity fees will continue to be pro-rated based on the number of trading days that the Member or non-Member has been credentialed to utilize any of the Exchange APIs in a production environment through the applicable connection, divided by the total number of trading days in such month multiplied by the monthly rate. The 1Gb and 10Gb connectivity fees to the 3 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. VerDate Sep<11>2014 18:41 Dec 28, 2016 Jkt 241001 Disaster Recovery Facility assessable to both Members and non-Members shall remain unchanged. The Exchange believes that the increase in the pricing of the Exchange’s connectivity is reflective of the continued value that it provides and the increasing costs to the Exchange for providing and maintaining the necessary hardware and other infrastructure to support this technology. The Exchange notes that other exchanges have similar connectivity alternatives for their participants, including similar lowlatency connectivity. For example, NASDAQ PHLX LLC (‘‘PHLX’’), NYSE Arca, Inc. (‘‘Arca’’), NYSE MKT LLC (‘‘Amex’’) and the International Securities Exchange, LLC (‘‘ISE’’) all offer a 1Gb, 10Gb and 10Gb low latency Ethernet connectivity alternative to each of their participants.4 The Exchange further notes that PHLX, Arca and Amex each charge higher rates for such similar connectivity and that the Exchange’s proposed connectivity fees are within the range of the fees charged by the ISE for similar connectivity alternatives.5 The Exchange believes that it is appropriate to increase its fees charged for use of its connectivity to offset increasing costs associated with providing and maintaining the necessary hardware and other infrastructure to support this technology and also to more closely align its fees with the rates charged by competing options exchanges. Port Fees Second, the Exchange proposes to amend Section (5)(d)(i) of the Fee Schedule to increase the Financial Information Exchange (‘‘FIX’’) Port fees assessable to Members. A FIX Port is an interface with MIAX systems that enables the Port user to submit simple and complex orders electronically to MIAX. Currently, MIAX assesses monthly FIX Port fees on Members based upon the number of FIX Ports used by the Member submitting orders to the Exchange. The Exchange currently assesses a fee of $500 per month for the first FIX Port, $300 per month for each FIX Port 2 through 5; and $100 per month for each additional FIX Port over 5. The FIX Ports include access to MIAX’s primary and secondary data centers and its disaster recovery center. 4 See NASDAQ PHLX LLC (‘‘PHLX’’) Pricing Schedule, Section X(b); see also NYSE Amex Options (‘‘Amex’’) Fee Schedule, Section V.B, and NYSE Arca Options (‘‘Arca’’) Fees and Charges, p. 16; see further International Securities Exchange, LLC (‘‘ISE’’) Schedule of Fees, Section VI.B. 5 Id. PO 00000 Frm 00179 Fmt 4703 Sfmt 4703 Accordingly, the Exchange proposes to increase the fees charged to Members for use of FIX Ports. Specifically, the Exchange proposes to: (i) Increase the fee for the first FIX Port, from $500 to $550 per month; (ii) increase the fee for each FIX Port 2 through 5, from $300 to $350 per month; and (iii) increase the fee for each FIX Port over 5, from $100 to $150 per month. The Exchange notes that a competing exchange charges more for the use of similar ports.6 Finally, the Exchange proposes to amend Section 5(d)(ii) of the Fee Schedule to increase the fees for MIAX Express Interface (‘‘MEI’’) Ports to Market Makers assessed for additional Limited Service Ports.7 The MEI is a connection to MIAX systems that enables Market Makers to submit simple and complex electronic quotes to MIAX. Currently, MIAX assesses monthly MEI Port Fees on Market Makers based upon the number of MIAX matching engines 8 used by the Market Maker. Market Makers are allocated two (2) Full Service MEI Ports 9 and two (2) Limited Service MEI Ports per matching engine to which they connect. The Exchange currently assesses the following MEI Port fees: (i) $5,000 for Market Maker Assignments in up to 5 option classes or up to 10% of option classes by volume; (ii) $10,000 for Market Maker Assignments in up to 10 option classes or up to 20% of option classes by volume; (iii) $14,000 for Market Maker Assignments in up to 40 option classes or up to 35% of option classes by volume; (iv) $17,500 for Market Maker Assignments in up to 100 option classes 6 See NASDAQ PHLX LLC (‘‘PHLX’’) Pricing Schedule, Section VII and The NASDAQ Options Market (‘‘NOM’’) Pricing Schedule, Chapter XV, Section 3. Both PHLX and NOM assess members monthly an Order Entry Port Fee of $650 per month per mnemonic. 7 Limited Service MEI Ports provide Market Makers with the ability to send eQuotes and quote purge messages only, but not Market Maker Quotes, to the MIAX System. Limited Service MEI Ports are also capable of receiving administrative information. Market Makers initially receive two Limited Service MEI Ports per matching engine (as defined herein). 8 A ‘‘matching engine’’ is a part of the MIAX electronic system that processes options quotes and trades on a symbol-by-symbol basis. Some matching engines will process option classes with multiple root symbols, and other matching engines will be dedicated to one single option root symbol (for example, options on SPY will be processed by one single matching engine that is dedicated only to SPY). A particular root symbol may only be assigned to a single designated matching engine. A particular root symbol may not be assigned to multiple matching engines. 9 Full Service MEI Ports provide Market Makers with the ability to send Market Maker quotes, eQuotes, and quote purge messages to the MIAX System. Full Service MEI Ports are also capable of receiving administrative information. Market Makers are limited to two Full Service MEI Ports per matching engine. E:\FR\FM\29DEN1.SGM 29DEN1 Federal Register / Vol. 81, No. 250 / Thursday, December 29, 2016 / Notices or up to 50% of option classes by volume; and (v) $20,500.00 for Market Maker Assignments in over 100 option classes or over 50% of option classes by volume up to all option classes listed on MIAX.10 The Exchange also currently charges $50 per month for each additional Limited Service MEI Port per matching engine for Market Makers over and above the two (2) Limited Service MEI Ports per matching engine that are allocated with the Full Service MEI Ports. The Full Service MEI Ports, Limited Service MEI Ports and the additional Limited Service MEI Ports all include access to MIAX’s primary and secondary data centers and its disaster recovery center. Accordingly, the Exchange proposes to increase the fees charged to Market Makers for use of additional Limited Service MEI Ports. Specifically, the Exchange proposes to increase the fee for additional Limited Service MEI Ports from $50 to $100 per month. The Exchange notes that a competing exchange charges more for the use of similar ports.11 The Exchange proposes to implement the proposed changes to the Fee Schedule effective as of January 1, 2017. 2. Statutory Basis The Exchange believes that its proposal to amend its Fee Schedule is consistent with Section 6(b) of the Act 12 in general, and furthers the objectives of Section 6(b)(4) of the Act 13 in particular, in that it provides for the equitable allocation of reasonable dues, fees and other charges among members and issuers and other persons using any facility or system which the Exchange operates or controls. The Exchange also believes the proposal furthers the objectives of Section 6(b)(5) of the Act 14 in that it is designed to promote just and equitable principles of trade, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general to protect investors and the public interest and is not designed to permit unfair discrimination between customers, issuers, brokers and dealers. asabaliauskas on DSK3SPTVN1PROD with NOTICES Network Connectivity Fees The Exchange believes that its proposal is consistent with Section 10 See MIAX Fee Schedule, Section 5(d)(ii). PHLX Pricing Schedule, Section VII. PHLX assesses specialists and market makers an Active SQF Port Fee of $1,250 per month, with such total port fees capped at $42,000 per month. See also NOM Pricing Schedule, Chapter XV, Section 3. NOM assesses Market Makers a monthly SQF Port Fee per port of $500 for the use of 21 Ports or more. 12 15 U.S.C. 78f(b). 13 15 U.S.C. 78f(b)(4). 14 15 U.S.C. 78f(b)(5). 11 See VerDate Sep<11>2014 18:41 Dec 28, 2016 Jkt 241001 6(b)(4) of the Act because the fees assessed for connectivity allow the Exchange to cover the costs associated with providing and maintaining the necessary hardware and other infrastructure to support this technology. The Exchange believes that the proposal to increase the fees for connectivity alternatives is fair, equitable and not unreasonably discriminatory because the increased fees are assessed equally among all users of the applicable connections. As discussed above, PHLX and ISE each offer different connections with respect to latency, and NYSE Arca, Inc. and NYSE Amex both offer similar connectivity alternatives.15 Despite this, PHLX, Arca and Amex charge a higher fee than the Exchange currently charges for similar connections and ISE’s fees are within the range of that of the proposed fees of the Exchange.16 For these reasons, the Exchange believes the proposed increase in the fees for the fiber connectivity to the Exchange is reasonable and not unfairly discriminatory. The Exchange also believes that its proposal is consistent with Section 6(b)(5) of the Act 17 because all MIAX participants have the opportunity to subscribe to the Exchange’s connections. There is also no differentiation among MIAX participants with regard to the fees charged for these services. Port Fees The Exchange believes that its proposal to increase the FIX Port fees is consistent with Section 6(b)(4) of the Act and is reasonable, equitable and not unfairly discriminatory because Members are free to add or remove FIX Ports and will only be charged for the amount of FIX Ports that are utilized. The proposed fee is fair and equitable and not unreasonably discriminatory because it applies equally to all Members regardless of type. The Exchange also believes that its proposal is consistent with Section 6(b)(5) of the Act 18 because all similarly situated Members, with the same number of FIX Ports, will be subject to the same fee, and access to the Exchange is offered on terms that are not unfairly discriminatory. The Exchange believes that the proposed fees are reasonable in that the rates are within the range of those charged by competing options exchanges. 15 See supra note 4. The Exchange believes that its proposal to increase the fee for additional Limited Service MEI Ports is consistent with Section 6(b)(4) of the Act and is reasonable, equitable and not unfairly discriminatory because Market Makers are free to add or remove additional Limited Service MEI Ports and will only be charged for the number of additional Limited Service MEI Ports that are utilized. The Exchange also believes that its proposal is consistent with Section 6(b)(5) of the Act 19 because it will be uniformly applied to all Market Makers. All similarly situated Market Makers, with the same number of additional Limited Service MEI Ports, will be subject to the same fee, and access to the Exchange is offered on terms that are not unfairly discriminatory. The Exchange believes that the proposed fees are reasonable in that the rates are within the range of those charged by other competing options exchanges. 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. On the contrary, the Exchange believes that the proposed changes should increase both intermarket and intramarket competition. Specifically, the Exchange believes that the changes will promote competition by increasing the connectivity fees to become more within the range of comparable fees assessed by other competing exchanges.20 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. The Exchange believes that the proposed changes reflect this competitive environment. To the extent that this purpose is achieved, all the Exchange’s market participants should benefit from the improved market liquidity. 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. 16 Id. 17 15 18 15 PO 00000 U.S.C. 78f(b)(5). U.S.C. 78f(b)(5). Frm 00180 Fmt 4703 19 15 U.S.C. 78f(b)(5). supra notes 4, 6 and 11. 20 See Sfmt 4703 96135 E:\FR\FM\29DEN1.SGM 29DEN1 96136 Federal Register / Vol. 81, No. 250 / Thursday, December 29, 2016 / Notices 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,21 and Rule 19b–4(f)(2) 22 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: asabaliauskas on DSK3SPTVN1PROD with NOTICES Electronic Comments • Use the Commission’s Internet comment form (http://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– MIAX–2016–47 on the subject line. Paper Comments • Send paper comments in triplicate to Brent J. Fields, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090. All submissions should refer to File Number SR–MIAX–2016–47. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission’s Internet Web site (http://www.sec.gov/ rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for Web site viewing and printing in the Commission’s Public 21 15 22 17 U.S.C. 78s(b)(3)(A)(ii). CFR 240.19b–4(f)(2). VerDate Sep<11>2014 18:41 Dec 28, 2016 Jkt 241001 Reference Room, 100 F Street NE., Washington, DC 20549 on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of such filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR–MIAX– 2016–47, and should be submitted on or before January 19, 2017. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.23 Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2016–31481 Filed 12–28–16; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–79664; File No. SR– ISEGemini–2016–16] Self-Regulatory Organizations; ISE Gemini, LLC; Notice of Filing of Proposed Rule Change, as Modified by Amendment Nos. 1 and 2, To Permit Nasdaq Execution Services, LLC To Become an Affiliated Member of the Exchange To Perform Certain Routing and Other Functions December 22, 2016. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 notice is hereby given that on December 9, 2016, ISE Gemini, LLC (‘‘ISE Gemini’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change. On December 20, 2016, the Exchange filed Amendment No. 1 to the proposed rule change, which amended and replaced the Form 19b–4, and Exhibit 1 thereto, in their entirety. On December 20, 2016, the Exchange filed Amendment No. 2 to the proposed rule change.3 The proposed rule change, as modified by Amendment Nos. 1 and 2, 23 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 Amendment No. 2 amended the description of one of the inbound routing conditions that would apply. Specifically, the Exchange modified the third condition to specify that the report that FINRA will provided to the Exchange’s chief regulatory officer on a quarterly basis will quantify all alerts, of which the Exchange or FINRA (rather than solely FINRA) are aware, that identify Nasdaq Execution Services, LLC as a participant that has potentially violated Commission or Exchange rules. 1 15 PO 00000 Frm 00181 Fmt 4703 Sfmt 4703 is 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, as modified by Amendment Nos. 1 and 2, from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to (1) permit the Exchange to receive inbound orders in options routed through Nasdaq Execution Services, LLC (‘‘NES’’) from certain affiliated exchanges, as described in detail below, by establishing procedures designed to prevent potential informational advantages resulting from the affiliation with NES; and (2) grant the Exchange an exemption to permit NES, an affiliate of the Exchange, to become a Member of the Exchange in order to perform certain routing an [sic] other functions on behalf of the Exchange. 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 purpose of the filing is to permit ISE Gemini to receive inbound orders in options routed through Nasdaq Execution Services, LLC (‘‘NES’’) from certain affiliated exchanges, as described herein and establish procedures designed to prevent potential informational advantages resulting from the affiliation between ISE Gemini and NES. The Exchange requests approval to permit NES, an affiliate of the Exchange, to become a Member of the Exchange in order to perform inbound routing on behalf of the Exchange. The Exchange is also filing to permit ISE Gemini to route outbound orders through NES either directly or indirectly through a third E:\FR\FM\29DEN1.SGM 29DEN1

Agencies

[Federal Register Volume 81, Number 250 (Thursday, December 29, 2016)]
[Notices]
[Pages 96133-96136]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-31481]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-79666; File No. SR-MIAX-2016-47]


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 Modify the Exchange's 
Connectivity Fees

December 22, 2016
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that, on December 13, 2016, Miami International Securities Exchange LLC 
(``MIAX'' or ``Exchange'') filed with the Securities and Exchange 
Commission (``SEC'' or ``Commission'') the proposed rule change as 
described in Items I, II, and III below, which Items have been prepared 
by the Exchange. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange is filing a proposal to amend the MIAX Options Fee 
Schedule (the ``Fee Schedule'') to modify the Exchange's connectivity 
fees.
    The text of the proposed rule change is available on the Exchange's 
Web site at http://www.miaxoptions.com/filter/wotitle/rule_filing, at 
MIAX's principal office, and at the Commission's Public Reference Room.

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

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these

[[Page 96134]]

statements may be examined at the places specified in Item IV below. 
The Exchange has prepared summaries, set forth in sections A, B, and C 
below, of the most significant aspects of such statements.

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

1. Purpose
    The Exchange proposes to amend the Fee Schedule regarding 
connectivity to the Exchange.
Network Connectivity Fees
    First, the Exchange proposes to amend Section 5(a) and (b) of the 
Fee Schedule to increase the connectivity fee for the 1 Gigabit 
(``Gb'') fiber connection, the 10 Gb fiber connection, and the 10 Gb 
ultra-low latency (``ULL'') fiber connection, which are charged to both 
Members \3\ and Non-Members of the Exchange.
---------------------------------------------------------------------------

    \3\ 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.
---------------------------------------------------------------------------

    The Exchange currently offers various bandwidth alternatives for 
connectivity to the Exchange, consisting of a 10Gb ULL fiber 
connection, a 10Gb fiber connection and a 1Gb fiber connection. The 
10Gb ULL offering uses a new ultra-low latency switch, which provides 
faster processing of messages sent to it in comparison to the switch 
used for the other types of connectivity. The Exchange currently 
assesses the following monthly network connectivity fees to both 
Members and non-Members for connectivity to the Exchange's Primary and 
Secondary Facility: (a) $1,000 for the 1Gb connection; (b) $5,000 for 
the 10 Gb connection; and (c) $7,500.00 for the 10Gb ULL connection.
    The Exchange proposes to increase the monthly network connectivity 
fees for such connections for both Members and non-Members as follows: 
(a) From $1,000 to $1,100 for the 1Gb connection; (b) from $5,000 to 
$5,500 for the 10Gb connection; and (c) from $7,500 to $8,500 for the 
10Gb ULL connection. All of the foregoing network connectivity fees 
will continue to be pro-rated based on the number of trading days that 
the Member or non-Member has been credentialed to utilize any of the 
Exchange APIs in a production environment through the applicable 
connection, divided by the total number of trading days in such month 
multiplied by the monthly rate. The 1Gb and 10Gb connectivity fees to 
the Disaster Recovery Facility assessable to both Members and non-
Members shall remain unchanged.
    The Exchange believes that the increase in the pricing of the 
Exchange's connectivity is reflective of the continued value that it 
provides and the increasing costs to the Exchange for providing and 
maintaining the necessary hardware and other infrastructure to support 
this technology. The Exchange notes that other exchanges have similar 
connectivity alternatives for their participants, including similar 
low-latency connectivity. For example, NASDAQ PHLX LLC (``PHLX''), NYSE 
Arca, Inc. (``Arca''), NYSE MKT LLC (``Amex'') and the International 
Securities Exchange, LLC (``ISE'') all offer a 1Gb, 10Gb and 10Gb low 
latency Ethernet connectivity alternative to each of their 
participants.\4\ The Exchange further notes that PHLX, Arca and Amex 
each charge higher rates for such similar connectivity and that the 
Exchange's proposed connectivity fees are within the range of the fees 
charged by the ISE for similar connectivity alternatives.\5\ The 
Exchange believes that it is appropriate to increase its fees charged 
for use of its connectivity to offset increasing costs associated with 
providing and maintaining the necessary hardware and other 
infrastructure to support this technology and also to more closely 
align its fees with the rates charged by competing options exchanges.
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    \4\ See NASDAQ PHLX LLC (``PHLX'') Pricing Schedule, Section 
X(b); see also NYSE Amex Options (``Amex'') Fee Schedule, Section 
V.B, and NYSE Arca Options (``Arca'') Fees and Charges, p. 16; see 
further International Securities Exchange, LLC (``ISE'') Schedule of 
Fees, Section VI.B.
    \5\ Id.
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Port Fees
    Second, the Exchange proposes to amend Section (5)(d)(i) of the Fee 
Schedule to increase the Financial Information Exchange (``FIX'') Port 
fees assessable to Members. A FIX Port is an interface with MIAX 
systems that enables the Port user to submit simple and complex orders 
electronically to MIAX.
    Currently, MIAX assesses monthly FIX Port fees on Members based 
upon the number of FIX Ports used by the Member submitting orders to 
the Exchange. The Exchange currently assesses a fee of $500 per month 
for the first FIX Port, $300 per month for each FIX Port 2 through 5; 
and $100 per month for each additional FIX Port over 5. The FIX Ports 
include access to MIAX's primary and secondary data centers and its 
disaster recovery center.
    Accordingly, the Exchange proposes to increase the fees charged to 
Members for use of FIX Ports. Specifically, the Exchange proposes to: 
(i) Increase the fee for the first FIX Port, from $500 to $550 per 
month; (ii) increase the fee for each FIX Port 2 through 5, from $300 
to $350 per month; and (iii) increase the fee for each FIX Port over 5, 
from $100 to $150 per month. The Exchange notes that a competing 
exchange charges more for the use of similar ports.\6\
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    \6\ See NASDAQ PHLX LLC (``PHLX'') Pricing Schedule, Section VII 
and The NASDAQ Options Market (``NOM'') Pricing Schedule, Chapter 
XV, Section 3. Both PHLX and NOM assess members monthly an Order 
Entry Port Fee of $650 per month per mnemonic.
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    Finally, the Exchange proposes to amend Section 5(d)(ii) of the Fee 
Schedule to increase the fees for MIAX Express Interface (``MEI'') 
Ports to Market Makers assessed for additional Limited Service 
Ports.\7\ The MEI is a connection to MIAX systems that enables Market 
Makers to submit simple and complex electronic quotes to MIAX.
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    \7\ Limited Service MEI Ports provide Market Makers with the 
ability to send eQuotes and quote purge messages only, but not 
Market Maker Quotes, to the MIAX System. Limited Service MEI Ports 
are also capable of receiving administrative information. Market 
Makers initially receive two Limited Service MEI Ports per matching 
engine (as defined herein).
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    Currently, MIAX assesses monthly MEI Port Fees on Market Makers 
based upon the number of MIAX matching engines \8\ used by the Market 
Maker. Market Makers are allocated two (2) Full Service MEI Ports \9\ 
and two (2) Limited Service MEI Ports per matching engine to which they 
connect. The Exchange currently assesses the following MEI Port fees: 
(i) $5,000 for Market Maker Assignments in up to 5 option classes or up 
to 10% of option classes by volume; (ii) $10,000 for Market Maker 
Assignments in up to 10 option classes or up to 20% of option classes 
by volume; (iii) $14,000 for Market Maker Assignments in up to 40 
option classes or up to 35% of option classes by volume; (iv) $17,500 
for Market Maker Assignments in up to 100 option classes

[[Page 96135]]

or up to 50% of option classes by volume; and (v) $20,500.00 for Market 
Maker Assignments in over 100 option classes or over 50% of option 
classes by volume up to all option classes listed on MIAX.\10\ The 
Exchange also currently charges $50 per month for each additional 
Limited Service MEI Port per matching engine for Market Makers over and 
above the two (2) Limited Service MEI Ports per matching engine that 
are allocated with the Full Service MEI Ports. The Full Service MEI 
Ports, Limited Service MEI Ports and the additional Limited Service MEI 
Ports all include access to MIAX's primary and secondary data centers 
and its disaster recovery center.
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    \8\ A ``matching engine'' is a part of the MIAX electronic 
system that processes options quotes and trades on a symbol-by-
symbol basis. Some matching engines will process option classes with 
multiple root symbols, and other matching engines will be dedicated 
to one single option root symbol (for example, options on SPY will 
be processed by one single matching engine that is dedicated only to 
SPY). A particular root symbol may only be assigned to a single 
designated matching engine. A particular root symbol may not be 
assigned to multiple matching engines.
    \9\ Full Service MEI Ports provide Market Makers with the 
ability to send Market Maker quotes, eQuotes, and quote purge 
messages to the MIAX System. Full Service MEI Ports are also capable 
of receiving administrative information. Market Makers are limited 
to two Full Service MEI Ports per matching engine.
    \10\ See MIAX Fee Schedule, Section 5(d)(ii).
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    Accordingly, the Exchange proposes to increase the fees charged to 
Market Makers for use of additional Limited Service MEI Ports. 
Specifically, the Exchange proposes to increase the fee for additional 
Limited Service MEI Ports from $50 to $100 per month. The Exchange 
notes that a competing exchange charges more for the use of similar 
ports.\11\
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    \11\ See PHLX Pricing Schedule, Section VII. PHLX assesses 
specialists and market makers an Active SQF Port Fee of $1,250 per 
month, with such total port fees capped at $42,000 per month. See 
also NOM Pricing Schedule, Chapter XV, Section 3. NOM assesses 
Market Makers a monthly SQF Port Fee per port of $500 for the use of 
21 Ports or more.
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    The Exchange proposes to implement the proposed changes to the Fee 
Schedule effective as of January 1, 2017.
2. Statutory Basis
    The Exchange believes that its proposal to amend its Fee Schedule 
is consistent with Section 6(b) of the Act \12\ in general, and 
furthers the objectives of Section 6(b)(4) of the Act \13\ in 
particular, in that it provides for the equitable allocation of 
reasonable dues, fees and other charges among members and issuers and 
other persons using any facility or system which the Exchange operates 
or controls. The Exchange also believes the proposal furthers the 
objectives of Section 6(b)(5) of the Act \14\ in that it is designed to 
promote just and equitable principles of trade, to remove impediments 
to and perfect the mechanism of a free and open market and a national 
market system, and, in general to protect investors and the public 
interest and is not designed to permit unfair discrimination between 
customers, issuers, brokers and dealers.
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    \12\ 15 U.S.C. 78f(b).
    \13\ 15 U.S.C. 78f(b)(4).
    \14\ 15 U.S.C. 78f(b)(5).
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Network Connectivity Fees
    The Exchange believes that its proposal is consistent with Section 
6(b)(4) of the Act because the fees assessed for connectivity allow the 
Exchange to cover the costs associated with providing and maintaining 
the necessary hardware and other infrastructure to support this 
technology. The Exchange believes that the proposal to increase the 
fees for connectivity alternatives is fair, equitable and not 
unreasonably discriminatory because the increased fees are assessed 
equally among all users of the applicable connections.
    As discussed above, PHLX and ISE each offer different connections 
with respect to latency, and NYSE Arca, Inc. and NYSE Amex both offer 
similar connectivity alternatives.\15\ Despite this, PHLX, Arca and 
Amex charge a higher fee than the Exchange currently charges for 
similar connections and ISE's fees are within the range of that of the 
proposed fees of the Exchange.\16\ For these reasons, the Exchange 
believes the proposed increase in the fees for the fiber connectivity 
to the Exchange is reasonable and not unfairly discriminatory.
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    \15\ See supra note 4.
    \16\ Id.
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    The Exchange also believes that its proposal is consistent with 
Section 6(b)(5) of the Act \17\ because all MIAX participants have the 
opportunity to subscribe to the Exchange's connections. There is also 
no differentiation among MIAX participants with regard to the fees 
charged for these services.
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    \17\ 15 U.S.C. 78f(b)(5).
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Port Fees
    The Exchange believes that its proposal to increase the FIX Port 
fees is consistent with Section 6(b)(4) of the Act and is reasonable, 
equitable and not unfairly discriminatory because Members are free to 
add or remove FIX Ports and will only be charged for the amount of FIX 
Ports that are utilized. The proposed fee is fair and equitable and not 
unreasonably discriminatory because it applies equally to all Members 
regardless of type.
    The Exchange also believes that its proposal is consistent with 
Section 6(b)(5) of the Act \18\ because all similarly situated Members, 
with the same number of FIX Ports, will be subject to the same fee, and 
access to the Exchange is offered on terms that are not unfairly 
discriminatory. The Exchange believes that the proposed fees are 
reasonable in that the rates are within the range of those charged by 
competing options exchanges.
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    \18\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that its proposal to increase the fee for 
additional Limited Service MEI Ports is consistent with Section 6(b)(4) 
of the Act and is reasonable, equitable and not unfairly discriminatory 
because Market Makers are free to add or remove additional Limited 
Service MEI Ports and will only be charged for the number of additional 
Limited Service MEI Ports that are utilized.
    The Exchange also believes that its proposal is consistent with 
Section 6(b)(5) of the Act \19\ because it will be uniformly applied to 
all Market Makers. All similarly situated Market Makers, with the same 
number of additional Limited Service MEI Ports, will be subject to the 
same fee, and access to the Exchange is offered on terms that are not 
unfairly discriminatory. The Exchange believes that the proposed fees 
are reasonable in that the rates are within the range of those charged 
by other competing options exchanges.
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    \19\ 15 U.S.C. 78f(b)(5).
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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. On the contrary, 
the Exchange believes that the proposed changes should increase both 
intermarket and intramarket competition. Specifically, the Exchange 
believes that the changes will promote competition by increasing the 
connectivity fees to become more within the range of comparable fees 
assessed by other competing exchanges.\20\
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    \20\ See supra notes 4, 6 and 11.
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    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. The Exchange believes that the 
proposed changes reflect this competitive environment. To the extent 
that this purpose is achieved, all the Exchange's market participants 
should benefit from the improved market liquidity.

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.

[[Page 96136]]

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,\21\ and Rule 19b-4(f)(2) \22\ thereunder. 
At any time within 60 days of the filing of the proposed rule change, 
the Commission summarily may temporarily suspend such rule change if it 
appears to the Commission that such action is necessary or appropriate 
in the public interest, for the protection of investors, or otherwise 
in furtherance of the purposes of the Act. If the Commission takes such 
action, the Commission shall institute proceedings to determine whether 
the proposed rule should be approved or disapproved.
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    \21\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \22\ 17 CFR 240.19b-4(f)(2).
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IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-MIAX-2016-47 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-MIAX-2016-47. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE., 
Washington, DC 20549 on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of such filing also will be available 
for inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-MIAX-2016-47, and should be 
submitted on or before January 19, 2017.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\23\
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    \23\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2016-31481 Filed 12-28-16; 8:45 am]
 BILLING CODE 8011-01-P