Self-Regulatory Organizations; MIAX PEARL, LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend the MIAX PEARL Fee Schedule, 21855-21858 [2017-09421]
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Federal Register / Vol. 82, No. 89 / Wednesday, May 10, 2017 / Notices
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–80592; File No. SR–
PEARL–2017–19]
Self-Regulatory Organizations; MIAX
PEARL, LLC; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change To Amend the MIAX
PEARL Fee Schedule
May 4, 2017.
Pursuant to the provisions of Section
19(b)(1) of the Securities Exchange Act
of 1934 (‘‘Act’’) 1 and Rule 19b–4
thereunder,2 notice is hereby given that
on April 26, 2017, MIAX PEARL, LLC
(‘‘MIAX PEARL’’ 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 PEARL 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/rulefilings/pearl at MIAX PEARL’s principal
office, and at the Commission’s Public
Reference Room.
jstallworth on DSK7TPTVN1PROD with NOTICES
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.
1 15
2 17
U.S.C. 78s(b)(1).
CFR 240.19b–4.
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1. Purpose
The Exchange proposes to amend the
Add/Remove Tiered Rebates/Fees set
forth in Section 1(a) of the Fee Schedule
that apply to MIAX PEARL Market
Makers 3 to (i) increase the ‘‘Maker’’
rebate in Tier 3 for transactions of
options in Penny classes (as defined
below), and (ii) add a new, alternative
Volume Criteria to Tier 3 based upon
the total monthly volume executed by a
Market Maker solely in SPY options on
MIAX PEARL, expressed as a percentage
of total consolidated national volume in
SPY options. The Exchange also
proposes to make a minor, nonsubstantive technical correction to a
definition contained in the Definitions
section of the Fee Schedule, as
described below.
The Exchange currently assesses
transaction rebates and fees to all
market participants which are based
upon the total monthly volume
executed by the Member 4 on MIAX
PEARL in the relevant, respective origin
type (not including Excluded
Contracts) 5 expressed as a percentage of
TCV.6 In addition, the per contract
3 ‘‘Market Maker’’ means a Member registered
with the Exchange for the purpose of making
markets in options contracts traded on the
Exchange. See the Definitions Section of the Fee
Schedule and Exchange Rule 100.
4 ‘‘Member’’ means an individual or organization
that is registered with the Exchange pursuant to
Chapter II of the Exchange Rules for purposes of
trading on the Exchange as an ‘‘Electronic Exchange
Member’’ or ‘‘Market Maker.’’ Members are deemed
‘‘members’’ under the Exchange Act. See the
Definitions Section of the Fee Schedule and
Exchange Rule 100.
5 ‘‘Excluded Contracts’’ means any contracts
routed to an away market for execution. See the
Definitions Section of the Fee Schedule.
6 ‘‘TCV’’ means total consolidated volume
calculated as the total national volume in those
classes listed on MIAX PEARL for the month for
which the fees apply, excluding consolidated
volume executed during the period time in which
the Exchange experiences an ‘‘Exchange System
Disruption’’ (solely in the option classes of the
affected Matching Engine (as defined below)). The
term Exchange System Disruption, which is defined
in the Definitions section of the Fee Schedule,
means an outage of a Matching Engine or collective
Matching Engines for a period of two consecutive
hours or more, during trading hours. The term
Matching Engine, which is also defined in the
Definitions section of the Fee Schedule, is a part of
the MIAX PEARL electronic system that processes
options orders and trades on a symbol-by-symbol
basis. Some Matching Engines will process option
classes with multiple root symbols, and other
Matching Engines may be dedicated to one single
option root symbol (for example, options on SPY
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21855
transaction rebates and fees are applied
retroactively to all eligible volume for
that origin type once the respective
threshold tier (‘‘Tier’’) has been reached
by the Member. The Exchange
aggregates the volume of Members and
their Affiliates.7 Members that place
resting liquidity, i.e., orders resting on
the book of the MIAX PEARL System,8
are paid the specified ‘‘maker’’ rebate
(each a ‘‘Maker’’), and Members that
execute against resting liquidity are
assessed the specified ‘‘taker’’ fee (each
a ‘‘Taker’’). For opening transactions
and ABBO uncrossing transactions, per
contract transaction rebates and fees are
waived for all market participants.
Finally, Members are assessed lower
transaction fees and receive lower
rebates for order executions in standard
option classes in the Penny Pilot
Program 9 (‘‘Penny classes’’) than for
order executions in standard option
classes which are not in the Penny Pilot
Program (‘‘Non-Penny classes’’), where
Members are assessed higher transaction
fees and receive higher rebates.
Transaction rebates and fees
applicable to all Market Makers are
currently assessed according to the
following table:
may 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. The
Exchange believes that it is reasonable and
appropriate to select two consecutive hours as the
amount of time necessary to constitute an Exchange
System Disruption, as two hours equates to
approximately 1.4% of available trading time per
month. The Exchange notes that the term
‘‘Exchange System Disruption’’ and its meaning
have no applicability outside of the Fee Schedule,
as it is used solely for purposes of calculating
volume for the threshold tiers in the Fee Schedule.
See the Definitions Section of the Fee Schedule.
7 ‘‘Affiliate’’ means (i) an affiliate of a Member of
at least 75% common ownership between the firms
as reflected on each firm’s Form BD, Schedule A,
or (ii) the Appointed Market Maker of an Appointed
EEM (or, conversely, the Appointed EEM of an
Appointed Market Maker). An ‘‘Appointed Market
Maker’’ is a MIAX PEARL Market Maker (who does
not otherwise have a corporate affiliation based
upon common ownership with an EEM) that has
been appointed by an EEM and an ‘‘Appointed
EEM’’ is an EEM (who does not otherwise have a
corporate affiliation based upon common
ownership with a MIAX PEARL Market Maker) that
has been appointed by a MIAX PEARL Market
Maker, pursuant to the process described in the Fee
Schedule. See the Definitions Section of the Fee
Schedule.
8 The term ‘‘System’’ means the automated
trading system used by the Exchange for the trading
of securities. See Exchange Rule 100.
9 See Securities Exchange Act Release No. 79778
(January 12, 2017), 82 FR 6662 (January 19, 2017)
(SR–PEARL–2016–01).
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Federal Register / Vol. 82, No. 89 / Wednesday, May 10, 2017 / Notices
Origin
Tier
Per contract rebates/fees
for Penny classes
Volume criteria
Maker
jstallworth on DSK7TPTVN1PROD with NOTICES
All MIAX ...................................
PEARL .....................................
Market ......................................
Makers .....................................
1
2
3
4
The Exchange proposes to increase
the ‘‘Maker’’ rebate amount in Tier 3 for
Penny classes from ($0.45) to ($0.47).
The purpose of increasing the amount of
the rebate is to provide a greater
incentive to Market Makers to reach Tier
3, thereby increasing the potential for
executing more volume at the Exchange
and consequently receiving a higher
rebate. The Exchange believes that
increased Maker volume by Market
Makers in Penny classes will attract
more liquidity to the Exchange, which
in turn will benefit all market
participants.
The Exchange also proposes to add a
new, alternative Volume Criteria to Tier
3 based upon the total monthly volume
executed by a Market Maker solely in
SPY options on MIAX PEARL,
expressed as a percentage of total
consolidated national volume in SPY
options. Pursuant to this alternative
Volume Criteria, a Market Maker can
now reach the Tier 3 threshold if the
Market Maker’s total executed monthly
volume in SPY options on MIAX PEARL
is above 2.0% of total consolidated
national monthly volume in SPY
options. To be clear, volume that is from
resting liquidity (Maker) and taking
liquidity (Taker) in SPY options are
counted towards this alternative
Volume Criteria. Accordingly, a Market
Maker could now qualify for Tier 3
rebates and fees which will then be
applicable to all volume executed by the
Market Maker on MIAX PEARL. The
two Volume Criteria available for Tier 3
are now based upon either: (a) The total
monthly volume executed by the Market
Maker in all options classes on MIAX
PEARL, not including Excluded
Contracts, (as the numerator), expressed
as a percentage of (divided by) TCV (as
the denominator); or (b) the total
monthly volume executed by the Market
Maker solely in SPY options on MIAX
PEARL, not including Excluded
Contracts, (as the numerator), expressed
as a percentage of (divided by) SPY TCV
(as the denominator). Once either
Volume Criteria threshold in Tier 3 is
reached by the Market Maker, the Tier
3 per contract rebates and fees will
apply to all volume in all options
classes executed by that Market Maker
on MIAX PEARL.
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0.00%–0.10% .................
Above 0.10%–0.50% .....
Above 0.50%–0.75% .....
Above 0.75% .................
($0.25)
(0.40)
(0.45)
(0.48)
In addition to modifying the MIAX
PEARL Market Maker table to insert the
new, alternative Volume Criteria
threshold in Tier 3, in order to provide
a clear explanation of the requirements
for achieving that alternative Volume
Criteria threshold in Tier 3, the
Exchange is proposing to (i) amend the
explanatory paragraph beneath the
tables in Section 1(a) of the Fee
Schedule, and (ii) add a new definition
of ‘‘SPY TCV’’ to the Definitions Section
of the Fee Schedule. The amended
explanatory paragraph will clarify that
(except as otherwise set forth in the Fee
Schedule) the existing Volume Criteria
threshold measures volume in all
options classes on MIAX PEARL, and
that the new, alternative Volume
Criteria threshold in Tier 3 for Market
Makers measures volume solely in SPY
options on MIAX PEARL. The new
definition of SPY TCV in the Definitions
Section shall provide the following:
‘‘SPY TCV’’ means total consolidated
volume in SPY calculated as the total
national volume in SPY for the month
for which the fees apply, excluding
consolidated volume executed during
the period of time in which the
Exchange experiences an Exchange
System Disruption (solely in SPY
options).
The Exchange believes that the
proposed alternative Volume Criteria
threshold in Tier 3 for Market Makers
will provide another opportunity for
those Market Makers that concentrate
their trading activity in limited options
classes such as SPY options to reach a
higher tier. The Exchange believes that
creating this alternative Volume Criteria
will extend the Tier 3 fee incentives to
Market Makers that concentrate their
trading activity by sending significant
volume in SPY options as compared to
other Market Makers that do trade in the
broad range of products listed on the
Exchange.
Finally, the Exchange is proposing to
make a minor, non-substantive technical
correction to the definition of ‘‘TCV’’ to
insert the word ‘‘of’’ in between the
words ‘‘period’’ and ‘‘time.’’ This word
was inadvertently left out of the
sentence when the definition of ‘‘TCV’’
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Sfmt 4703
Taker
Per contract rebates/fees
for Non-Penny classes
Maker
$0.50
0.48
0.47
0.47
($0.30)
(0.60)
(0.65)
(0.70)
Taker
$1.05
1.03
1.02
1.02
was initially adopted, on February 6,
2017.10
The proposed rule change is
scheduled to become operative May 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 11
in general, and furthers the objectives of
Section 6(b)(4) of the Act,12 in that it is
an equitable allocation of reasonable
fees and other charges among Exchange
members and other persons using its
facilities, and 6(b)(5) of the Act,13 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 Maker rebate increase
in Penny classes applicable to Market
Makers that reach the Tier 3 threshold
is reasonable, equitable and not unfairly
discriminatory because all similarly
situated Market Makers are subject to
the same tiered rebates and fees and
access to the Exchange is offered on
terms that are not unfairly
discriminatory. The Exchange initially
set its Maker rebates at the various
volume levels based upon business
determinations and an analysis of
current Maker rebates and volume levels
at other exchanges. For competitive and
business reasons, the Exchange believes
that a higher rebate to Market Makers
that add liquidity in Penny classes in a
higher tier will encourage Market
Makers to execute more volume as a
Maker in Penny classes. The Exchange
believes for these reasons that offering a
higher Maker rebate for transactions in
Penny classes in Tier 3 for Market
Makers is equitable, reasonable and not
10 See Securities Exchange Act Release No. 80061
(February 17, 2017), 82 FR 11676 (February 24,
2017) (SR–PEARL–2017–10).
11 15 U.S.C. 78f(b).
12 15 U.S.C. 78f(b)(4).
13 15 U.S.C. 78f(b)(1) and (b)(5).
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Federal Register / Vol. 82, No. 89 / Wednesday, May 10, 2017 / Notices
unfairly discriminatory, and thus
consistent with the Act.
Furthermore, the proposed increase to
the Maker rebate amount in Penny
classes for Market Makers that reach
Tier 3 promotes just and equitable
principles of trade, fosters cooperation
and coordination with persons engaged
in facilitating transactions in securities,
and protects investors and the public
interest because the proposed increase
in the rebate amount encourages Market
Makers to send more orders to the
Exchange which add liquidity in order
to achieve higher thresholds and
resulting higher rebates. To the extent
that order flow which adds liquidity in
Penny classes is increased by the
proposal, market participants will
increasingly compete for the
opportunity to trade on the Exchange,
including sending more orders to reach
higher tiers. The resulting increased
volume and liquidity will benefit all
Exchange participants by providing
more trading opportunities and tighter
spreads.
The Exchange’s proposal to adopt the
new, alternative Volume Criteria for
Tier 3 based on SPY volume executed
on the Exchange is reasonable,
equitable, and not unfairly
discriminatory, as it is a form of pricing
based upon trading activity in a select
symbol, which is a common practice on
many U.S. options exchanges as a
means to incentivize order flow to be
sent to an exchange for execution in
actively traded options classes. The
Exchange’s affiliate, Miami International
Securities Exchange, LLC (‘‘MIAX
Options’’), offers enhanced pricing for
transactions in options underlying
certain select symbols.14 SPY options
are the most actively traded class. Other
options exchanges’ fee schedules
distinguish by symbol and specifically
assess different fees and rebates for
transactions in select symbols and some
exclusively for transactions in SPY
options for the same market
participants.15
The Exchange is offering an
alternative Tier 3 Volume Criteria
threshold based on SPY options volume
in Tier 3 because, as previously
mentioned, SPY options are the most
actively traded options in the industry,
and therefore the Exchange believes that
incentivizing Market Makers that
concentrate their trading activity in SPY
14 See
MIAX Options Fee Schedule, Section
(1)(a)(iii).
15 See Chicago Board Options Exchange
Incorporated (‘‘CBOE’’) Fees Schedule; see also
NASDAQ PHLX LLC (‘‘PHLX’’) Pricing Schedule,
Chapter B, Section I; see further International
Securities Exchange LLC (‘‘ISE’’) Fee Schedule,
Sections I and II.
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18:36 May 09, 2017
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options will consequently increase
order flow sent to the Exchange, which
will benefit all market participants
through increased liquidity, tighter
markets and order interaction.
The Exchange believes that the
proposed non-substantive, technical
correction will promote just and
equitable principles of trade, remove
impediments to and perfect the
mechanism of a free and open market
and a national market system because it
will improve the readability of the rules.
The proposed change does not alter the
application of the rule. As such, the
proposed change would foster
cooperation and coordination with
persons engaged in facilitating
transactions in securities and would
remove impediments to and perfect the
mechanism of a free and open market
and a national market system. In
particular, the Exchange believes that
the proposed rule change will provide
greater clarity to Members and the
public regarding the Exchange’s Rules,
and it is in the public interest for rules
to be accurate and concise so as to
eliminate the potential for confusion.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
MIAX PEARL does not believe that
the proposed rule changes will impose
any burden on competition not
necessary or appropriate in furtherance
of the purposes of the Act. The
proposed Maker rebate increase is
intended to encourage the posting of
liquidity. The proposed rule change
should enable the Exchange to attract
and compete for order flow with other
exchanges and the greater rebate for
adding liquidity will encourage Market
Makers to submit more order flow that
adds liquidity, not removes it. The
Exchange also believes that paying
greater rebates may create competition
among market participants. However,
this competition does not create an
undue burden on competition but rather
offers all market participants the
opportunity to receive the benefit of the
enhanced pricing.
Further, the Exchange believes that
the proposed alternative Volume
Criteria threshold in Tier 3 based on
SPY options volume applicable to
Market Makers provides greater
incentives to those Market Makers that
concentrate their trading activity in SPY
options to send additional SPY orders
and creates additional opportunity for
additional liquidity to the market.
The Exchange does not believe that
the proposed rule change to make a
technical correction to its rules will
impose any burden on competition not
necessary or appropriate in furtherance
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21857
of the purposes of the Act. The
proposed rule change is not designed to
address any competitive issues but
rather is designed to add additional
clarity and to remedy a minor, nonsubstantive issue in the text of a
definition in the Fee Schedule.
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
rebates and 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,16 and Rule
19b–4(f)(2) 17 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
16 15
17 17
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U.S.C. 78s(b)(3)(A)(ii).
CFR 240.19b–4(f)(2).
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Federal Register / Vol. 82, No. 89 / Wednesday, May 10, 2017 / Notices
• Send an email to rulecomments@sec.gov. Please include File
Number SR–PEARL–2017–19 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–PEARL–2017–19. This file
number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
Internet Web site (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for Web site viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE.,
Washington, DC 20549, on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of 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–
PEARL–2017–19 and should be
submitted on or before May 31, 2017.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.18
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017–09421 Filed 5–9–17; 8:45 am]
jstallworth on DSK7TPTVN1PROD with NOTICES
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–80594; File No. SR–BX–
2017–021]
Self-Regulatory Organizations;
NASDAQ BX, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Amend Rule 4703
(Order Attributes)
May 4, 2017.
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 April 21,
2017, NASDAQ BX, Inc. (‘‘BX’’ or
‘‘Exchange’’) filed with the Securities
and Exchange Commission (‘‘SEC’’ or
‘‘Commission’’) the proposed rule
change as described in Items I and II
below, which Items have been prepared
by the Exchange. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend
Rule 4703 (Order Attributes) to specify
the behavior of Orders with Midpoint
Pegging after initial entry and posting to
the Exchange Book when the market is
crossed, or when there is no best bid
and/or offer. The Exchange also
proposes to change a reference to
cancelling or rejecting orders in Rule
4703.
The text of the proposed rule change
is available on the Exchange’s Web site
at https://nasdaqbx.cchwallstreet.com/,
at the principal office of the Exchange,
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.
1 15
18 17
CFR 200.30–3(a)(12).
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2 17
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U.S.C. 78s(b)(1).
CFR 240.19b–4.
Frm 00070
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Sfmt 4703
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
BX proposes to amend Rule 4703
(Order Attributes) to specify the
behavior of Orders with Midpoint
Pegging that are cancelled or rejected
when the market is crossed, or when
there is no best bid and/or offer after
initial entry and posting to the Exchange
Book. BX also proposes to change a
reference to cancelling or rejecting
orders in Rule 4703.
Rule 4703(d) describes the Pegging
Order Attribute, including Midpoint
Pegging. Pegging is an Order Attribute
that allows an Order to have its price
automatically set with reference to the
NBBO. Midpoint Pegging means Pegging
with reference to the midpoint between
the Inside Bid and the Inside Offer (the
‘‘Midpoint’’).3 An Order with Midpoint
Pegging is not displayed.
BX recently proposed changes to
Orders with Midpoint Pegging, which
were approved by the SEC on November
10, 2016.4 With this change, if the
Inside Bid and Inside Offer are crossed
or if there is no Insider Bid and Inside
Offer, any existing Order with Midpoint
Pegging would be cancelled and any
new Order with Midpoint Pegging
would be rejected.5
BX now proposes to add language to
Rule 4703(d) to specify the treatment of
Orders with Midpoint Pegging after
initial entry and posting to the Exchange
Book when the Inside Bid and Inside
Offer are subsequently crossed, or if
there is subsequently no Inside Bid and/
or Inside Offer. Specifically, for Orders
with Midpoint Pegging entered through
RASH or FIX, if the Order is on the
Exchange Book and subsequently the
Inside Bid and Inside Offer become
crossed, or if there is no Inside Bid and/
or Inside Offer, the Order will be
removed from the Exchange Book and
will be re-entered at the new midpoint
once there is a valid Inside Bid and
Inside Offer that is not crossed.
As stated in the filing proposing the
new Midpoint Pegging functionality, BX
believes that the midpoint of a crossed
market, or where there is no Inside Bid
and Inside Offer, is not a clear and
accurate indication of a valid price, and
may produce sub-optimal execution
3 Thus, if the Inside Bid was $11 and the Inside
Offer was $11.06, an Order with Midpoint Pegging
would be priced at $11.03.
4 See Securities Exchange Act Release No. 79290
(November 10, 2016), 81 FR 81184 (November 17,
2016) (SR–BX–2016–046).
5 Id.
E:\FR\FM\10MYN1.SGM
10MYN1
]]>Agencies
[Federal Register Volume 82, Number 89 (Wednesday, May 10, 2017)]
[Notices]
[Pages 21855-21858]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-09421]
[[Page 21855]]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-80592; File No. SR-PEARL-2017-19]
Self-Regulatory Organizations; MIAX PEARL, LLC; Notice of Filing
and Immediate Effectiveness of a Proposed Rule Change To Amend the MIAX
PEARL Fee Schedule
May 4, 2017.
Pursuant to the provisions of Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice
is hereby given that on April 26, 2017, MIAX PEARL, LLC (``MIAX PEARL''
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 PEARL 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/rule-filings/pearl at MIAX
PEARL's principal office, and at the Commission's Public Reference
Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend the Add/Remove Tiered Rebates/Fees
set forth in Section 1(a) of the Fee Schedule that apply to MIAX PEARL
Market Makers \3\ to (i) increase the ``Maker'' rebate in Tier 3 for
transactions of options in Penny classes (as defined below), and (ii)
add a new, alternative Volume Criteria to Tier 3 based upon the total
monthly volume executed by a Market Maker solely in SPY options on MIAX
PEARL, expressed as a percentage of total consolidated national volume
in SPY options. The Exchange also proposes to make a minor, non-
substantive technical correction to a definition contained in the
Definitions section of the Fee Schedule, as described below.
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\3\ ``Market Maker'' means a Member registered with the Exchange
for the purpose of making markets in options contracts traded on the
Exchange. See the Definitions Section of the Fee Schedule and
Exchange Rule 100.
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The Exchange currently assesses transaction rebates and fees to all
market participants which are based upon the total monthly volume
executed by the Member \4\ on MIAX PEARL in the relevant, respective
origin type (not including Excluded Contracts) \5\ expressed as a
percentage of TCV.\6\ In addition, the per contract transaction rebates
and fees are applied retroactively to all eligible volume for that
origin type once the respective threshold tier (``Tier'') has been
reached by the Member. The Exchange aggregates the volume of Members
and their Affiliates.\7\ Members that place resting liquidity, i.e.,
orders resting on the book of the MIAX PEARL System,\8\ are paid the
specified ``maker'' rebate (each a ``Maker''), and Members that execute
against resting liquidity are assessed the specified ``taker'' fee
(each a ``Taker''). For opening transactions and ABBO uncrossing
transactions, per contract transaction rebates and fees are waived for
all market participants. Finally, Members are assessed lower
transaction fees and receive lower rebates for order executions in
standard option classes in the Penny Pilot Program \9\ (``Penny
classes'') than for order executions in standard option classes which
are not in the Penny Pilot Program (``Non-Penny classes''), where
Members are assessed higher transaction fees and receive higher
rebates.
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\4\ ``Member'' means an individual or organization that is
registered with the Exchange pursuant to Chapter II of the Exchange
Rules for purposes of trading on the Exchange as an ``Electronic
Exchange Member'' or ``Market Maker.'' Members are deemed
``members'' under the Exchange Act. See the Definitions Section of
the Fee Schedule and Exchange Rule 100.
\5\ ``Excluded Contracts'' means any contracts routed to an away
market for execution. See the Definitions Section of the Fee
Schedule.
\6\ ``TCV'' means total consolidated volume calculated as the
total national volume in those classes listed on MIAX PEARL for the
month for which the fees apply, excluding consolidated volume
executed during the period time in which the Exchange experiences an
``Exchange System Disruption'' (solely in the option classes of the
affected Matching Engine (as defined below)). The term Exchange
System Disruption, which is defined in the Definitions section of
the Fee Schedule, means an outage of a Matching Engine or collective
Matching Engines for a period of two consecutive hours or more,
during trading hours. The term Matching Engine, which is also
defined in the Definitions section of the Fee Schedule, is a part of
the MIAX PEARL electronic system that processes options orders and
trades on a symbol-by-symbol basis. Some Matching Engines will
process option classes with multiple root symbols, and other
Matching Engines may be dedicated to one single option root symbol
(for example, options on SPY may 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. The Exchange believes that it is reasonable and appropriate
to select two consecutive hours as the amount of time necessary to
constitute an Exchange System Disruption, as two hours equates to
approximately 1.4% of available trading time per month. The Exchange
notes that the term ``Exchange System Disruption'' and its meaning
have no applicability outside of the Fee Schedule, as it is used
solely for purposes of calculating volume for the threshold tiers in
the Fee Schedule. See the Definitions Section of the Fee Schedule.
\7\ ``Affiliate'' means (i) an affiliate of a Member of at least
75% common ownership between the firms as reflected on each firm's
Form BD, Schedule A, or (ii) the Appointed Market Maker of an
Appointed EEM (or, conversely, the Appointed EEM of an Appointed
Market Maker). An ``Appointed Market Maker'' is a MIAX PEARL Market
Maker (who does not otherwise have a corporate affiliation based
upon common ownership with an EEM) that has been appointed by an EEM
and an ``Appointed EEM'' is an EEM (who does not otherwise have a
corporate affiliation based upon common ownership with a MIAX PEARL
Market Maker) that has been appointed by a MIAX PEARL Market Maker,
pursuant to the process described in the Fee Schedule. See the
Definitions Section of the Fee Schedule.
\8\ The term ``System'' means the automated trading system used
by the Exchange for the trading of securities. See Exchange Rule
100.
\9\ See Securities Exchange Act Release No. 79778 (January 12,
2017), 82 FR 6662 (January 19, 2017) (SR-PEARL-2016-01).
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Transaction rebates and fees applicable to all Market Makers are
currently assessed according to the following table:
[[Page 21856]]
--------------------------------------------------------------------------------------------------------------------------------------------------------
Per contract rebates/fees for Per contract rebates/fees for
Penny classes Non-Penny classes
Origin Tier Volume criteria ---------------------------------------------------------------
Maker Taker Maker Taker
--------------------------------------------------------------------------------------------------------------------------------------------------------
All MIAX.......................... 1 0.00%-0.10%......................... ($0.25) $0.50 ($0.30) $1.05
PEARL............................. 2 Above 0.10%-0.50%................... (0.40) 0.48 (0.60) 1.03
Market........................... 3 Above 0.50%-0.75%................... (0.45) 0.47 (0.65) 1.02
Makers............................ 4 Above 0.75%......................... (0.48) 0.47 (0.70) 1.02
--------------------------------------------------------------------------------------------------------------------------------------------------------
The Exchange proposes to increase the ``Maker'' rebate amount in
Tier 3 for Penny classes from ($0.45) to ($0.47). The purpose of
increasing the amount of the rebate is to provide a greater incentive
to Market Makers to reach Tier 3, thereby increasing the potential for
executing more volume at the Exchange and consequently receiving a
higher rebate. The Exchange believes that increased Maker volume by
Market Makers in Penny classes will attract more liquidity to the
Exchange, which in turn will benefit all market participants.
The Exchange also proposes to add a new, alternative Volume
Criteria to Tier 3 based upon the total monthly volume executed by a
Market Maker solely in SPY options on MIAX PEARL, expressed as a
percentage of total consolidated national volume in SPY options.
Pursuant to this alternative Volume Criteria, a Market Maker can now
reach the Tier 3 threshold if the Market Maker's total executed monthly
volume in SPY options on MIAX PEARL is above 2.0% of total consolidated
national monthly volume in SPY options. To be clear, volume that is
from resting liquidity (Maker) and taking liquidity (Taker) in SPY
options are counted towards this alternative Volume Criteria.
Accordingly, a Market Maker could now qualify for Tier 3 rebates and
fees which will then be applicable to all volume executed by the Market
Maker on MIAX PEARL. The two Volume Criteria available for Tier 3 are
now based upon either: (a) The total monthly volume executed by the
Market Maker in all options classes on MIAX PEARL, not including
Excluded Contracts, (as the numerator), expressed as a percentage of
(divided by) TCV (as the denominator); or (b) the total monthly volume
executed by the Market Maker solely in SPY options on MIAX PEARL, not
including Excluded Contracts, (as the numerator), expressed as a
percentage of (divided by) SPY TCV (as the denominator). Once either
Volume Criteria threshold in Tier 3 is reached by the Market Maker, the
Tier 3 per contract rebates and fees will apply to all volume in all
options classes executed by that Market Maker on MIAX PEARL.
In addition to modifying the MIAX PEARL Market Maker table to
insert the new, alternative Volume Criteria threshold in Tier 3, in
order to provide a clear explanation of the requirements for achieving
that alternative Volume Criteria threshold in Tier 3, the Exchange is
proposing to (i) amend the explanatory paragraph beneath the tables in
Section 1(a) of the Fee Schedule, and (ii) add a new definition of
``SPY TCV'' to the Definitions Section of the Fee Schedule. The amended
explanatory paragraph will clarify that (except as otherwise set forth
in the Fee Schedule) the existing Volume Criteria threshold measures
volume in all options classes on MIAX PEARL, and that the new,
alternative Volume Criteria threshold in Tier 3 for Market Makers
measures volume solely in SPY options on MIAX PEARL. The new definition
of SPY TCV in the Definitions Section shall provide the following:
``SPY TCV'' means total consolidated volume in SPY calculated as the
total national volume in SPY for the month for which the fees apply,
excluding consolidated volume executed during the period of time in
which the Exchange experiences an Exchange System Disruption (solely in
SPY options).
The Exchange believes that the proposed alternative Volume Criteria
threshold in Tier 3 for Market Makers will provide another opportunity
for those Market Makers that concentrate their trading activity in
limited options classes such as SPY options to reach a higher tier. The
Exchange believes that creating this alternative Volume Criteria will
extend the Tier 3 fee incentives to Market Makers that concentrate
their trading activity by sending significant volume in SPY options as
compared to other Market Makers that do trade in the broad range of
products listed on the Exchange.
Finally, the Exchange is proposing to make a minor, non-substantive
technical correction to the definition of ``TCV'' to insert the word
``of'' in between the words ``period'' and ``time.'' This word was
inadvertently left out of the sentence when the definition of ``TCV''
was initially adopted, on February 6, 2017.\10\
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\10\ See Securities Exchange Act Release No. 80061 (February 17,
2017), 82 FR 11676 (February 24, 2017) (SR-PEARL-2017-10).
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The proposed rule change is scheduled to become operative May 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 \11\ in general, and
furthers the objectives of Section 6(b)(4) of the Act,\12\ in that it
is an equitable allocation of reasonable fees and other charges among
Exchange members and other persons using its facilities, and 6(b)(5) of
the Act,\13\ in that it is designed to prevent fraudulent and
manipulative acts and practices, to promote just and equitable
principles of trade, to foster cooperation and coordination with
persons engaged in facilitating transactions in securities, to remove
impediments to and perfect the mechanisms of a free and open market and
a national market system and, in general, to protect investors and the
public interest.
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\11\ 15 U.S.C. 78f(b).
\12\ 15 U.S.C. 78f(b)(4).
\13\ 15 U.S.C. 78f(b)(1) and (b)(5).
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The proposed Maker rebate increase in Penny classes applicable to
Market Makers that reach the Tier 3 threshold is reasonable, equitable
and not unfairly discriminatory because all similarly situated Market
Makers are subject to the same tiered rebates and fees and access to
the Exchange is offered on terms that are not unfairly discriminatory.
The Exchange initially set its Maker rebates at the various volume
levels based upon business determinations and an analysis of current
Maker rebates and volume levels at other exchanges. For competitive and
business reasons, the Exchange believes that a higher rebate to Market
Makers that add liquidity in Penny classes in a higher tier will
encourage Market Makers to execute more volume as a Maker in Penny
classes. The Exchange believes for these reasons that offering a higher
Maker rebate for transactions in Penny classes in Tier 3 for Market
Makers is equitable, reasonable and not
[[Page 21857]]
unfairly discriminatory, and thus consistent with the Act.
Furthermore, the proposed increase to the Maker rebate amount in
Penny classes for Market Makers that reach Tier 3 promotes just and
equitable principles of trade, fosters cooperation and coordination
with persons engaged in facilitating transactions in securities, and
protects investors and the public interest because the proposed
increase in the rebate amount encourages Market Makers to send more
orders to the Exchange which add liquidity in order to achieve higher
thresholds and resulting higher rebates. To the extent that order flow
which adds liquidity in Penny classes is increased by the proposal,
market participants will increasingly compete for the opportunity to
trade on the Exchange, including sending more orders to reach higher
tiers. The resulting increased volume and liquidity will benefit all
Exchange participants by providing more trading opportunities and
tighter spreads.
The Exchange's proposal to adopt the new, alternative Volume
Criteria for Tier 3 based on SPY volume executed on the Exchange is
reasonable, equitable, and not unfairly discriminatory, as it is a form
of pricing based upon trading activity in a select symbol, which is a
common practice on many U.S. options exchanges as a means to
incentivize order flow to be sent to an exchange for execution in
actively traded options classes. The Exchange's affiliate, Miami
International Securities Exchange, LLC (``MIAX Options''), offers
enhanced pricing for transactions in options underlying certain select
symbols.\14\ SPY options are the most actively traded class. Other
options exchanges' fee schedules distinguish by symbol and specifically
assess different fees and rebates for transactions in select symbols
and some exclusively for transactions in SPY options for the same
market participants.\15\
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\14\ See MIAX Options Fee Schedule, Section (1)(a)(iii).
\15\ See Chicago Board Options Exchange Incorporated (``CBOE'')
Fees Schedule; see also NASDAQ PHLX LLC (``PHLX'') Pricing Schedule,
Chapter B, Section I; see further International Securities Exchange
LLC (``ISE'') Fee Schedule, Sections I and II.
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The Exchange is offering an alternative Tier 3 Volume Criteria
threshold based on SPY options volume in Tier 3 because, as previously
mentioned, SPY options are the most actively traded options in the
industry, and therefore the Exchange believes that incentivizing Market
Makers that concentrate their trading activity in SPY options will
consequently increase order flow sent to the Exchange, which will
benefit all market participants through increased liquidity, tighter
markets and order interaction.
The Exchange believes that the proposed non-substantive, technical
correction will promote just and equitable principles of trade, remove
impediments to and perfect the mechanism of a free and open market and
a national market system because it will improve the readability of the
rules. The proposed change does not alter the application of the rule.
As such, the proposed change would foster cooperation and coordination
with persons engaged in facilitating transactions in securities and
would remove impediments to and perfect the mechanism of a free and
open market and a national market system. In particular, the Exchange
believes that the proposed rule change will provide greater clarity to
Members and the public regarding the Exchange's Rules, and it is in the
public interest for rules to be accurate and concise so as to eliminate
the potential for confusion.
B. Self-Regulatory Organization's Statement on Burden on Competition
MIAX PEARL does not believe that the proposed rule changes will
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act. The proposed Maker rebate
increase is intended to encourage the posting of liquidity. The
proposed rule change should enable the Exchange to attract and compete
for order flow with other exchanges and the greater rebate for adding
liquidity will encourage Market Makers to submit more order flow that
adds liquidity, not removes it. The Exchange also believes that paying
greater rebates may create competition among market participants.
However, this competition does not create an undue burden on
competition but rather offers all market participants the opportunity
to receive the benefit of the enhanced pricing.
Further, the Exchange believes that the proposed alternative Volume
Criteria threshold in Tier 3 based on SPY options volume applicable to
Market Makers provides greater incentives to those Market Makers that
concentrate their trading activity in SPY options to send additional
SPY orders and creates additional opportunity for additional liquidity
to the market.
The Exchange does not believe that the proposed rule change to make
a technical correction to its rules will impose any burden on
competition not necessary or appropriate in furtherance of the purposes
of the Act. The proposed rule change is not designed to address any
competitive issues but rather is designed to add additional clarity and
to remedy a minor, non-substantive issue in the text of a definition in
the Fee Schedule.
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 rebates and 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,\16\ and Rule 19b-4(f)(2) \17\ 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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\16\ 15 U.S.C. 78s(b)(3)(A)(ii).
\17\ 17 CFR 240.19b-4(f)(2).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
[[Page 21858]]
Send an email to rule-comments@sec.gov. Please include
File Number SR-PEARL-2017-19 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-PEARL-2017-19. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for Web site viewing and
printing in the Commission's Public Reference Room, 100 F Street NE.,
Washington, DC 20549, on official business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available
for inspection and copying at the principal office of 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-PEARL-2017-19 and should be
submitted on or before May 31, 2017.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\18\
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\18\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-09421 Filed 5-9-17; 8:45 am]
BILLING CODE 8011-01-P
