Self-Regulatory Organizations: Notice of Filing and Immediate Effectiveness of a Proposed Rule Change by Miami International Securities Exchange, LLC To Implement an Equity Rights Program, 27743-27748 [2017-12484]
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Federal Register / Vol. 82, No. 115 / Friday, June 16, 2017 / Notices
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 No.
SR–BatsEDGX–2017–28. This file
number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
Internet Web site (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for Web site viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE.,
Washington, DC 20549, on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of such
filing will also be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change;
the Commission does not edit personal
identifying information from
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File No. SR–BatsEDGX–
2017–28 and should be submitted on or
before July 7, 2017.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.14
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017–12458 Filed 6–15–17; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
sradovich on DSK3GMQ082PROD with NOTICES
Proposed Collection; Comment
Request
Upon Written Request, Copies Available
From: Securities and Exchange
Commission, Office of FOIA Services,
100 F Street NE.,
Washington, DC 20549–2736.
Extension:
14 17
CFR 200.30–3(a)(12).
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Rule 15c2–5, SEC File No. 270–195 ; OMB
Control No. 3235–0198.
Notice is hereby given that pursuant
to the Paperwork Reduction Act of 1995
(‘‘PRA’’) (44 U.S.C. 3501 et seq.), the
Securities and Exchange Commission
(‘‘Commission’’) is soliciting comments
on the existing collection of information
provided for in Rule 15c2–5 (17 CFR
240.15c2–5) under the Securities
Exchange Act of 1934 (15 U.S.C. 78a et
seq.) (‘‘Exchange Act’’). The
Commission plans to submit this
existing collection of information to the
Office of Management and Budget
(‘‘OMB’’) for extension and approval.
Rule 15c2–5 prohibits a broker-dealer
from arranging or extending certain
loans to persons in connection with the
offer or sale of securities unless, before
any element of the transaction is entered
into, the broker-dealer: (1) Delivers to
the person a written statement
containing the exact nature and extent
of the person’s obligations under the
loan arrangement; the risks and
disadvantages of the loan arrangement;
and all commissions, discounts, and
other remuneration received and to be
received in connection with the
transaction by the broker-dealer or
certain related persons (unless the
person receives certain materials from
the lender or broker-dealer which
contain the required information); and
(2) obtains from the person information
on the person’s financial situation and
needs, reasonably determines that the
transaction is suitable for the person,
and retains on file and makes available
to the person on request a written
statement setting forth the brokerdealer’s basis for determining that the
transaction was suitable. The collection
of information required by Rule 15c2–5
is necessary to execute the
Commission’s mandate under the
Exchange Act to prevent fraudulent,
manipulative, and deceptive acts and
practices by broker-dealers.
The Commission estimates that there
are approximately 50 respondents that
require an aggregate total of 600 hours
to comply with Rule 15c2–5.1 Each of
these approximately 50 registered
broker-dealers makes an estimated six
annual responses, for an aggregate total
of 300 responses per year.2 Each
response takes approximately two hours
to complete. Thus, the total compliance
burden per year is 600 burden hours.3
The approximate internal compliance
1 50 respondents × 6 responses per year × 2 hours
per response = 600 hours per year.
2 50 respondents × 6 responses per year = 300
responses per year.
3 300 responses per year × 2 hours per response
= 600 hours per year.
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cost per hour is $57.00 for clerical
labor,4 resulting in a total internal
compliance cost of $34,200.5 These
reflect internal labor costs; there are no
external labor, capital, or start-up costs.
Written comments are invited on: (a)
Whether the proposed collection of
information is necessary for the proper
performance of the functions of the
agency, including whether the
information will have practical utility;
(b) the accuracy of the agency’s estimate
of the burden of the collection of
information; (c) ways to enhance the
quality, utility, and clarity of the
information collected; and (d) ways to
minimize the burden of the collection of
information on respondents, including
through the use of automated collection
techniques or other forms of information
technology. Consideration will be given
to comments and suggestions submitted
in writing within 60 days of this
publication.
An agency may not conduct or
sponsor, and a person is not required to
respond to, a collection of information
under the PRA unless it displays a
currently valid OMB control number.
Please direct your written comments
to: Pamela Dyson, Director/Chief
Information Officer, Securities and
Exchange Commission, c/o Remi PavlikSimon, 100 F Street NE., Washington,
DC 20549, or send an email to: PRA_
Mailbox@sec.gov.
Dated: June 12, 2017.
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017–12492 Filed 6–15–17; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–80909; File No. SR–MIAX–
2017–28]
Self-Regulatory Organizations: Notice
of Filing and Immediate Effectiveness
of a Proposed Rule Change by Miami
International Securities Exchange, LLC
To Implement an Equity Rights
Program
June 12, 2017.
Pursuant to the provisions of Section
19(b)(1) of the Securities Exchange Act
of 1934 (‘‘Act’’) 1 and Rule 19b–4
4 Cost per hour for a clerk is from SIFMA’s Office
Salaries in the Securities Industry 2013, modified
by Commission staff to account for an 1800-hour
work-year and multiplied by 2.93 to account for
bonuses, firm size, employee benefits and overhead.
5 600 hours per year × $57.00 per hour = $34,200
per year.
1 15 U.S.C. 78s(b)(1).
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Federal Register / Vol. 82, No. 115 / Friday, June 16, 2017 / Notices
thereunder,2 notice is hereby given that
on June 8, 2017, Miami International
Securities Exchange, LLC (‘‘MIAX
Options’’ 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
implement an equity rights program.
The text of the proposed rule change is
available on the Exchange’s Web site at
https://www.miaxoptions.com/rulefilings, at MIAX’s principal office, and
at the Commission’s Public Reference
Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
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A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to implement
an equity rights program (‘‘Program’’)
pursuant to which units representing
the right to acquire equity in the
Exchange’s parent holding company,
Miami International Holdings, Inc.
(‘‘MIH’’) would be issued to a
participating Member in exchange for
payment of an initial purchase price or
the prepayment of certain transaction
fees and the achievement of certain
liquidity volume thresholds on the
Exchange over a 42-month period. The
purpose of the Program is to promote
the long-term interests of MIAX Options
by providing incentives designed to
encourage future MIH owners and
MIAX Options market participants to
contribute to the growth and success of
MIAX Options, by being active liquidity
2 17
CFR 240.19b–4.
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providers and takers to provide
enhanced levels of trading volume to
MIAX Options’ market, through an
opportunity to increase their proprietary
interests in MIAX Options’ enterprise
value.
Members that participate in the
Program will have two options to
choose from: (i) An offering of G-Units;
and/or (ii) an offering of H-Units.3
G-Units Option
Members that participate in the GUnit option of the Program will be
issued for each unit (i) 31,407 shares of
MIH common stock and (ii) warrants to
purchase 383,254 shares of common
stock of MIH in exchange for such
participant Member’s initial cash capital
contribution of $188,442, and with such
warrants being exercisable upon the
achievement by the participating
Member of certain volume thresholds on
the Exchange during a 42-month
measurement period commencing July
3, 2017. A total of 5 G-Units will be
offered. The total equity ownership of
MIH common stock held by any one
participant Member will be subject to a
cap of 19.9%.4
The warrants will vest in eight (8)
tranches: (i) One (1) tranche, upon
initial investment; and (ii) seven (7)
tranches during a measurement period
of months 1–42 of the Program. In
addition, the participant Members may
earn or lose the right to exercise
warrants on a pro-rata basis based upon
meeting volume commitments during
3 The Program which provides equity-like
consideration in exchange for market making or the
provision of liquidity, order flow or volume is open
to market participants generally. All MIAX Options
Members may participate subject to their
satisfaction of eligibility requirements. To be
designated as a participant Member, an applicant
must: (i) Be a Member in good standing of MIAX
Options; (ii) qualify as an ‘‘accredited investor’’ as
such term is defined in Regulation D of the
Securities Act of 1933; and (iii) have executed all
required documentation for Program participation.
Members may elect to participate in either or both
of the options. If either the G-Unit or the H-Unit
option is oversubscribed, the units in the
oversubscribed option will be allocated on a prorata basis that may result in a fractional allocation.
4 See Ninth Article (b)(i)(B), Amended and
Restated Certificate of Incorporation of Miami
International Holdings, Inc., effective October 16,
2015 (providing that no Exchange Member, either
alone or together with its Related Persons, may
own, directly or indirectly, of record or beneficially,
shares constituting more than twenty percent (20%)
of any class of capital stock of the Corporation).
Any purported transfer of shares or ownership of
shares in violation of the ownership cap by a
Member would be subject to the limitations of the
Certificate of Incorporation, including the nonrecognition of voting rights of shares in excess of
the cap and a redemption right by MIH for excess
shares. See Ninth Article (d) and (e), Amended and
Restated Certificate of Incorporation of Miami
International Holdings, Inc., effective October 16,
2015.
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the measurement periods, as detailed
below.
Upon the initial investment, the
participant Member would receive
common shares equal to 31,407 shares
of the common stock and 10% of the
warrants will vest. A participant
Member will be eligible to earn the
remaining warrants during
measurement periods provided that the
participant has achieved a specified
percentage of the total national average
daily volume of options contracts
reported to The Options Clearing
Corporation (‘‘OCC’’) (‘‘OCC ADV’’) on
MIAX Options of all option classes
listed on MIAX Options.5
The remaining seven (7) tranches, of
90% of the warrants, will vest during
the following measurement periods: (i)
10.90% of the warrants resulting from
months 1–6, with a volume commitment
of 0.400% of OCC ADV on MIAX
Options per G-Unit; 6 (ii) 10.90% of the
warrants resulting from months 7–12,
with a volume commitment of 0.400%
of OCC ADV on MIAX Options per GUnit; (iii) 13.64% of the warrants
resulting from months 13–18, with a
volume commitment of 0.500% of OCC
ADV on MIAX Options per G-Unit; (iv)
13.64% of the warrants resulting from
months 19–24, with a volume
commitment of 0.500% of OCC ADV on
MIAX Options per G-Unit; (v) 13.64% of
the warrants resulting from months 25–
30, with a volume commitment of
0.500% of OCC ADV on MIAX Options
per G-Unit; (vi) 13.64% of the warrants
resulting from months 31–36, with a
volume commitment of 0.500% of OCC
ADV on MIAX Options per G-Unit; and
(vii) 13.64% of the warrants resulting
from months 37–42, with a volume
5 If an options class is not listed on MIAX
Options, then the trading volume in that options
class will be omitted from the calculation of % OCC
ADV. Priority Customer-to-Priority Customer
Crossing transactions where no fees are paid to the
Exchange, special strategies, and contracts as to
which a Member acts solely as clearing agent will
not be counted in the number of option contracts
executed on the Exchange by any Member.
(Incidental Priority Customer-to-Priority Customer
transactions, that are not crossing transactions, will
be counted in the number of options contracts
executed on the Exchange by a Member.) Special
strategies for the purpose of calculating trading
volume include: (i) Dividend strategy; (ii) merger
strategy; (iii) short stock interest strategy; (iv)
reversal and conversion strategies; (v) jelly roll
strategy; and (vi) similar strategies offered by an
options exchange that are subject to a fee cap.
Trading in special strategies currently is not
available on MIAX Options. Special strategies will
be omitted from the calculation of % OCC ADV to
the extent it is possible to identify such
transactions.
6 The first measurement period will begin on July
3, 2017 and end December 29, 2017. Therefore, July
3, 2017 through December 29, 2017 will count as
months 1–6 for purposes of the measurement
period.
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Federal Register / Vol. 82, No. 115 / Friday, June 16, 2017 / Notices
commitment of 0.500% of OCC ADV on
MIAX Options per G-Unit. If a
participant Member reaches 100% of the
volume commitment during a tranche’s
measurement period, the Member will
earn 100% of the warrants applicable to
such measurement period. If a
participant Member reaches less than
100% but at least 70% of the volume
commitment during a tranche’s
measurement period, the Member will
earn a reduced amount of warrants on
a pro-rata basis applicable to such
measurement period. If a participant
Member fails to reach a minimum of
70% of the volume commitment during
a tranche’s measurement period, the
Member will lose all right to that
tranche of warrants. Notwithstanding, in
the event a participant Member has not
satisfied the volume commitment for
any one measurement period (other than
measurement period 7), the participant
Member will have an opportunity to
vest those warrants if such participant
Member applies a portion of the
Member’s overperformance from the
measurement period immediately
following the prior measurement period
to ensure a minimum of 70% of the
volume commitment in the prior period
and in addition has satisfied the volume
commitment for the measurement
period immediately following. If a
participant Member exceeds 100% of
the volume commitment during a
tranche’s measurement period, the
Member is able to earn, on a pro-rata
basis, warrants not earned by other
participant Members.
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H-Units Option
Members that participate in the HUnit option of the Program will be
issued for each unit warrants to
purchase 414,661 shares of common
stock of MIH in exchange for the
prepayment of Exchange fees in the
amount of $500,000 for the 42-month
period commencing July 3, 2017, and
with such warrants being exercisable
upon the achievement by the
participating Member of certain volume
thresholds on the Exchange during a 42month measurement period
commencing July 3, 2017. A total of 30
H-Units will be offered. The total equity
ownership of MIH common stock held
by any one participant Member will be
subject to a cap of 19.9%.
The warrants will vest in seven (7)
tranches during the following
measurement periods: (i) 12.12% of the
warrants resulting from months 1–6,
with a volume commitment of 0.400%
of OCC ADV on MIAX Options per H-
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Unit; 7 (ii) 12.12% of the warrants
resulting from months 7–12, with a
volume commitment of 0.400% of OCC
ADV on MIAX Options per H-Unit; (iii)
15.15% of the warrants resulting from
months 13–18, with a volume
commitment of 0.500% of OCC ADV on
MIAX Options per H-Unit; (iv) 15.15%
of the warrants resulting from months
19–24, with a volume commitment of
0.500% of OCC ADV on MIAX Options
per H-Unit; (v) 15.15% of the warrants
resulting from months 25–30, with a
volume commitment of 0.500% of OCC
ADV on MIAX Options per H-Unit; (vi)
15.15% of the warrants resulting from
months 31–36, with a volume
commitment of 0.500% of OCC ADV on
MIAX Options per H-Unit; and (vii)
15.16% of the warrants resulting from
months 37–42, with a volume
commitment of 0.500% of OCC ADV on
MIAX Options per H-Unit. If a
participant Member reaches 100% of the
volume commitment during any one
tranche’s measurement period, the
Member will earn 100% of the warrants
applicable to such measurement period.
If a participant Member reaches less
than 100% but at least 70% of the
volume commitment during a tranche’s
measurement period, the Member will
earn a reduced amount of warrants on
a pro-rata basis applicable to such
measurement period. If a participant
Member fails to reach a minimum of
70% of the volume commitment during
the measurement period, the Member
will lose all right to that tranche of
warrants. Notwithstanding, in the event
a participant Member has not satisfied
the volume commitment for any one
measurement period (other than
measurement period 7), the participant
Member will have an opportunity to
vest those warrants if such participant
Member applies a portion of the
Member’s overperformance from the
measurement period immediately
following the prior measurement period
to ensure a minimum of 70% of the
volume commitment in the prior period,
and in addition has satisfied the volume
commitment for the measurement
periods immediately following. If a
participant Member exceeds 100% of
the volume commitment during any one
tranche’s measurement period, the
Member is able to earn, on a pro-rata
basis, warrants not earned by other
participant Members.
Once a participant Member has
prepaid Exchange fees for the initial 427 The first measurement period will begin on July
3, 2017 and end December 29, 2017. Therefore, July
3, 2017 through December 29, 2017 will count as
months 1–6 for purposes of the measurement
period.
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27745
month period, each month the
participant Member may execute
contracts and accumulate transaction
fees based on the prevailing MIAX
Options Fee Schedule in effect at the
time. Once an H-Unit participant
Member has executed contract volume
whereby the total accumulated
transaction fees equal the prepaid
amount, all subsequently executed
contracts will be billed and collected at
the appropriate rate as defined in the
MIAX Options Fee Schedule.
Provisions Applicable to Both G-Units
and H-Units
A Member of the Exchange and its
Affiliate as defined in the Fee Schedule
of MIAX Options 8 may together
participate in the Program as follows. In
order to participate in the Program with
a participant Member an Appointed
Market Maker or Appointed EEM must
be designated as such as of June 29,
2017 pursuant to the procedure for
appointing an Appointed Market Maker
or Appointed EEM set forth in the MIAX
Options Fee Schedule. An Appointed
Market Maker or Appointed EEM may
not otherwise be a participant Member
of the Program. Notwithstanding the
ability to change the designation of an
Appointed Market Maker or Appointed
EEM as set forth in the Fee Schedule of
8 For purposes of the MIAX Options Fee
Schedule, the term ‘‘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, (‘‘Affiliate’’), 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
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
Market Maker) that has been appointed by a MIAX
Market Maker, pursuant to the following process. A
MIAX Market Maker appoints an EEM and an EEM
appoints a MIAX Market Maker, for the purposes
of the Fee Schedule, by each completing and
sending an executed Volume Aggregation Request
Form by email to membership@miaxoptions.com no
later than 2 business days prior to the first business
day of the month in which the designation is to
become effective. Transmittal of a validly
completed and executed form to the Exchange along
with the Exchange’s acknowledgement of the
effective designation to each of the Market Maker
and EEM will be viewed as acceptance of the
appointment. The Exchange will only recognize one
designation per Member. A Member may make a
designation not more than once every 12 months
(from the date of its most recent designation), which
designation shall remain in effect unless or until the
Exchange receives written notice submitted 2
business days prior to the first business day of the
month from either Member indicating that the
appointment has been terminated. Designations will
become operative on the first business day of the
effective month and may not be terminated prior to
the end of the month. Execution data and reports
will be provided to both parties. See, MIAX Options
Fee Schedule note 1.
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Federal Register / Vol. 82, No. 115 / Friday, June 16, 2017 / Notices
MIAX Options for MIAX Options Fee
Schedule purposes, no such change in
designation may be made for purposes
of the Program and any designation of
an Appointed Market Maker or
Appointed EEM as of June 29, 2017
shall remain in effect for purposes of the
Program for the duration of the
Program.9 An Affiliate of a Member with
at least 75% common ownership
between the firms as reflected on each
firm’s Form BD, Schedule A (a
‘‘Corporate Affiliate’’), is not required to
follow the procedure set forth on the
MIAX Options Fee Schedule for
designation of an Appointed Market
Maker or Appointed EEM and will
together be deemed a participant
Member in the Program for so long as
it maintains such corporate affiliation
with the other Member. Alternatively, a
Corporate Affiliate of a Member may
directly join the Program and be a
separate participant Member of the
Program. Volume thresholds and other
aspects of the Program may be met by
the Member and its Affiliate who will
together constitute a participant
Member in the Program. In the case
where a Member and its Corporate
Affiliate separately joined the Program
as participant Members volume
thresholds and other aspects of the
Program must be met separately by the
Member and its Corporate Affiliate.
Each participant Member will have a
standard piggyback registration right to
include the common shares and the
common shares issuable upon exercise
of the warrants should MIH file a
Registration Statement under the
Securities Act of 1933. Each participant
Member will also have the right to
participate pro rata in all future
offerings of MIH securities for so long as
the participant Member holds at least
51% of the common shares purchased
by the participating Member directly or
issuable upon the exercise of warrants
included in at least one H-Unit. MIH
will have the right of first refusal to
purchase any common shares or warrant
shares that a participant Member
decides to transfer or sell. Other
participant Members will have the
secondary right of first refusal to
purchase any common shares or warrant
shares that a participant Member
decides to transfer or sell.
When a participating Member
acquires a certain number of units, the
Member can appoint one director to the
MIH Board and/or the MIAX Options
Board. The Exchange notes that the
9 A participant Member who changes a
designation of an Appointed Market Maker or
Appointed EEM during the Program will be
effective with respect to transactions on the
Exchange other than the Program.
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number of non-industry directors on the
MIAX Options Board, including at least
one independent director, must equal or
exceed the number of industry directors
and Member representatives, and that
additional new non-industry directors
and Member representative directors
will need to be added in order to
maintain this status. The Exchange also
notes that any directors that may be
selected by a participating Member
would not be counted towards the 20%
Member representative requirement on
the MIAX Options Board. In addition,
the Exchange notes that a Member is
only entitled to a new seat if they are
not currently represented on the MIAX
Options Board.
All applicants will be subject to the
same eligibility and designation criteria,
and all participant Members will
participate in the Program on the same
terms, conditions and restrictions. To be
designated as a participant Member, an
applicant must: (i) Be a Member in good
standing of MIAX Options; (ii) qualify
as an ‘‘accredited investor’’ as such term
is defined in Regulation D of the
Securities Act of 1933; 10 and (iii) have
executed all required documentation for
Program participation. Participant
Members must have executed the
definitive documentation, satisfied the
eligibility criteria required of Program
participants enumerated above, and
tendered the minimum cash investment
or prepayment of fees by June 29, 2017,
with a closing to occur on June 30, 2017.
As discussed above, the purpose of
the Program is to encourage Members to
direct greater trade volume to MIAX
Options to enhance trading volume in
MIAX Options’ market. Increased
volume will provide for greater liquidity
and enhanced price discovery, which
benefits all market participants. Other
exchanges have engaged in the practice
of incentivizing increased order flow in
order to attract liquidity providers
through equity sharing arrangements.11
In addition, the Exchange previously
10 The purpose of this criterion relates to the
ability of MIH to sell shares of common stock
pursuant to an exemption from registration under
the Securities Act of 1933. The definition of
‘‘accredited investor’’ under Rule 501(a)(1) of the
Securities Act of 1933 includes any broker or dealer
registered pursuant to Section 15 of the Act. MIAX
Options Rule 200(b) requires a Member to be
registered as a broker or dealer pursuant to Section
15 of the Act, therefore all MIAX Options Members
will satisfy this criterion.
11 See, e.g., Securities Exchange Act Release Nos.
62358 (June 22, 2010), 75 FR 37861 (June 30, 2010)
(SR–NSX–2010–06); 64742 (June 24, 2011), 76 FR
38436 (June 30, 2011) (SR–NYSEAmex–2011–018);
69200 (March 21, 2013), 78 FR 18657 (March 27,
2013) (SR–CBOE–2013–31); 74114 (January 22,
2015), 80 FR 4611 (January 28, 2015) (SR–BOX–
2015–03); and 74576 (March 25, 2015), 80 FR 17122
(March 31, 2015) (SR–BOX–2015–16).
PO 00000
Frm 00072
Fmt 4703
Sfmt 4703
adopted substantially similar programs
to incentivize increased order flow in
order to attract liquidity providers
through an equity sharing
arrangement.12 The Program similarly
intends to attract order flow, which will
increase liquidity, thereby providing
greater trading opportunities and tighter
spreads for other market participants
and causing a corresponding increase in
order flow from these other market
participants. The Program will similarly
reward the liquidity providers that
provide this additional volume with a
potential proprietary interest in MIAX
Options.
The specific volume thresholds of the
Program’s measurement periods were
set based upon business determinations
and analysis of current volume levels.
The volume thresholds are intended to
incentivize firms to increase the number
of orders that are sent to MIAX Options
to achieve the next threshold. Increasing
the number of orders that are sent to
MIAX Options will in turn provide
tighter and more liquid markets, and
therefore attract more business as well.
MIAX Options will initiate the
measurement period on July 3, 2017.
The Exchange will notify Members of
the implementation of the Program and
the dates of the enrollment period by
Regulatory Circular, and will post a
copy of this rule filing on its Web site.
Any MIAX Options Member that is
interested in participating in the
Program may contact MIAX Options for
more information and legal
documentation and will be required to
enter into a nondisclosure agreement
regarding this additional Program
information.
2. Statutory Basis
The Exchange believes that its
proposed rule change is consistent with
Section 6(b) of the Act 13 in general, and
furthers the objectives of Section 6(b)(5)
of the Act 14 in particular, 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. Additionally, the
12 See Securities Exchange Act Release Nos.
70498 (September 25, 2013), 78 FR 60348 (October
1, 2013) (SR–MIAX–2013–43); 74095 (January 20,
2015), 80 FR 4011 (January 26, 2015) (SR–MIAX–
2015–02); and 74225 (February 12, 2015), 80 FR
7897 (February 12, 2015) (SR–MIAX–2015–05).
13 15 U.S.C. 78f(b).
14 15 U.S.C. 78f(b)(5).
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Exchange believes the proposed rule
change is consistent with the Section
6(b)(5) of the Act 15 requirement that the
rules of an exchange not be designed to
permit unfair discrimination between
customers, issuers, brokers, or dealers.
The Exchange also believes the
proposed rule change is consistent with
Section 6(b)(4) of the Act,16 which
requires that Exchange rules provide for
the equitable allocation of reasonable
dues, fees, and other charges among its
members and other persons using its
facilities.
In particular, the proposed rule
change is equitable and not unfairly
discriminatory, because all Members
may elect to participate (or elect to not
participate) in the Program and earn
units on the same terms and conditions,
assuming they satisfy the same
eligibility criteria as described above.
The eligibility criteria are objective;
thus, all Members have the ability to
satisfy them. The Board also has
authorized MIAX Options to offer
common shares in MIH to any Member
that requests designation to participate
in the Program and otherwise satisfies
the eligibility criteria to ensure that all
Members will have the opportunity to
own common shares and thus
participate in the Program if they so
choose. In addition, participant
Members will earn warrants on a prorata basis upon meeting fixed volume
threshold amounts during the
measurement periods that will apply to
all participant Members.
The Exchange believes that the
methodology used to calculate the
volume thresholds is fair, reasonable
and not unfairly discriminatory because
it is based on objective criteria that are
designed to omit from the calculation
functionality that is not available on the
Exchange and types of transactions that
are subject to little or no transaction
fees. Specifically, the Exchange believes
excluding Priority Customer-to-Priority
Customer Crossing transactions where
no fees are paid to the Exchange, special
strategies, and contracts as to which a
Member acts solely as clearing agent
from the number of option contracts
executed on the Exchange by any
Member is reasonable and not unfairly
discriminatory because participating
Members could otherwise game the
volume thresholds by executing excess
volumes in these types of transactions
in which either no transaction fees are
charged on the Exchange, or the
transaction is subject to a fee cap. The
Program is designed to reward
participating Members for bringing their
15 15
16 15
U.S.C. 78f(b)(5).
U.S.C. 78f(b)(4).
VerDate Sep<11>2014
17:12 Jun 15, 2017
Jkt 241001
orders and quotes to the Exchange to be
executed on the Exchange. The
Exchange believes it is appropriate to
exclude special strategies from the OCC
volume calculation since those
transactions are not executed on the
Exchange. The Exchange believes that
omitting clearing only transactions from
the calculation to be fair and reasonable
because the fact that a Member is
clearing a trade is coincidental to the
choice of where to execute that trade.
And, because clearing only transactions
are not executed on MIAX Options, they
do not fall within the intended
transactions that qualify for the
Program. In addition, if the Exchange
were to reward the party clearing a
trade, the Exchange would possibly be
double counting that trade—once for the
executing party and once for the
clearing party. Furthermore, the
Exchange believes that counting
incidental Priority Customer-to-Priority
Customer transactions, which are not
crossing transactions, in the number of
options contracts executed on the
Exchange by a Member is fair and
reasonable because in these situations
the Priority Customer is not necessarily
choosing to execute against another
Priority Customer in order to avoid a
transaction fee.
The Exchange believes that its
proposal to allow Affiliates to
participate in the Program is fair,
reasonable and not unfairly
discriminatory because it is being
offered to all Members of the Exchange
on the same terms and conditions. The
Exchange believes that allowing both
traditional Corporate Affiliates and also
Appointed Market Makers and
Appointed EEMs to participate in the
Program is reasonable and appropriate
because it will provide those
participants with a potentially greater
opportunity to achieve the volume
thresholds in the Program. Also, the
Exchange believes that allowing
Appointed Market Makers and
Appointed EEMs to participate in the
Program expands access to the Program
to Members that might not otherwise,
individually on their own, participate in
the Program, which will benefit all
market participants by providing greater
liquidity on the Exchange, all of which
perfects the mechanism for a free and
open market and national market
system.
The Exchange believes the Program is
equitable and reasonable because an
increase in volume and liquidity would
benefit all market participants by
providing more trading opportunities
and tighter spreads, even to those
market participants that do not
participate in the Program.
PO 00000
Frm 00073
Fmt 4703
Sfmt 4703
27747
Additionally, the Exchange believes the
proposed rule change is consistent with
the Act because, as described above, the
Program is designed to bring greater
volume and liquidity to the Exchange,
which will benefit all market
participants by providing tighter
quoting and better prices, all of which
perfects the mechanism for a free and
open market and national market
system.
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 not
necessary or appropriate in furtherance
of the purposes of the Act. The
Exchange believes that the proposed
rule change will improve competition
by providing market participants with
another option when determining where
to execute orders and post liquidity.
The Exchange believes that the
proposed change would increase both
intermarket and intramarket
competition by incenting participant
Members to direct their orders to the
Exchange, which will enhance the
quality of quoting and increase the
volume of contracts traded here. To the
extent that there is an additional
competitive burden on non-participant
Members, the Exchange believes that
this is appropriate because the Program
should incent Members to direct
additional order flow to the Exchange
and thus provide additional liquidity
that enhances the quality of its markets
and increases the volume of contracts
traded here. To the extent that this
purpose is achieved, all of the
Exchange’s market participants should
benefit from the improved market
liquidity. Enhanced market quality and
increased transaction volume that
results from the anticipated increase in
order flow directed to the Exchange will
benefit all market participants and
improve competition on the Exchange.
Given the robust competition for
volume among options markets, many of
which offer the same products,
implementing a program to attract order
flow like the one being proposed in this
filing is consistent with the abovementioned goals of the Act. This is
especially true for the smaller options
markets, such as MIAX Options, which
is competing for volume with much
larger exchanges that dominate the
options trading industry. MIAX Options
has a modest percentage of the average
daily trading volume in options, so it is
unlikely that the Program could cause
any competitive harm to the options
market or to market participants. Rather,
the Program is an attempt by a small
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16JNN1
27748
Federal Register / Vol. 82, No. 115 / Friday, June 16, 2017 / Notices
options market to attract order volume
away from larger competitors by
adopting an innovative pricing strategy,
as evidenced by the volume thresholds
of the Program that represent fractions
of 1% of OCC ADV. The Exchange notes
that if the Program resulted in a modest
percentage increase in the average daily
trading volume in options executing on
MIAX Options, while such percentage
would represent a large volume increase
for MIAX Options, it would represent a
minimal reduction in volume of its
larger competitors in the industry. The
Exchange believes that the Program will
help further competition, because
market participants will have yet
another option in determining where to
execute orders and post liquidity if they
factor the benefits of MIAX Options
equity participation into the
determination. The Exchange notes that
other exchanges have engaged in the
practice of incentivizing increased order
flow in order to attract liquidity
providers through equity sharing
arrangements.17 In addition, the
Exchange previously adopted
substantially similar programs to
incentivize increased order flow in
order to attract liquidity providers
through an equity sharing
arrangement.18
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.
sradovich on DSK3GMQ082PROD with 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,19 and Rule
19b–4(f)(2) 20 thereunder. At any time
within 60 days of the filing of the
proposed rule change, the Commission
summarily may temporarily suspend
such rule change if it appears to the
Commission that such action is
necessary or appropriate in the public
interest, for the protection of investors,
or otherwise in furtherance of the
purposes of the Act. If the Commission
takes such action, the Commission shall
institute proceedings to determine
whether the proposed rule should be
approved or disapproved.
17 See
supra note 11.
supra note 12.
19 15 U.S.C. 78s(b)(3)(A)(ii).
20 17 CFR 240.19b–4(f)(2).
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
17:12 Jun 15, 2017
[FR Doc. 2017–12484 Filed 6–15–17; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
MIAX–2017–28 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE.,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–MIAX–2017–28. This file
number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
Internet Web site (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–MIAX–2017–28 and should
be submitted on or before July 7, 2017.
18 See
VerDate Sep<11>2014
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.21
Eduardo A. Aleman,
Assistant Secretary.
[Release No. 34–80905; File No. SR–IEX–
2017–14]
Self-Regulatory Organizations;
Investors Exchange LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change Related to
Continued Listing Standards for
Exchange Traded Products
June 12, 2017.
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934 (the
‘‘Act’’) 2 and Rule 19b–4 thereunder,3
notice is hereby given that, on June 5,
2017, the Investors Exchange LLC
(‘‘IEX’’ or the ‘‘Exchange’’) filed with the
Securities and Exchange Commission
(the ‘‘Commission’’) the proposed rule
change as described in Items I and II
below, which Items have been prepared
by the self-regulatory organization. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
Pursuant to the provisions of Section
19(b)(1) under the Securities Exchange
Act of 1934 (‘‘Act’’), and Rule 19b–4
thereunder, Investors Exchange LLC
(‘‘IEX’’ or ‘‘Exchange’’) is filing with the
Commission a proposed rule change to
amend Chapter 16 of IEX Rules to add
additional continued listing
requirements for exchange traded
products (‘‘ETP’’) listed under those
rules, as well as a related amendment to
IEX Rule 14.501 (Notification of
Deficiency by IEX Regulation), and
several clarifying and conforming
changes to IEX Rules 14.101, 14.500,
14.501 and 14.505. The Exchange is also
proposing various housekeeping
changes throughout Chapter 16 for
improved clarity. In addition, the
Exchange is proposing to revise certain
of the initial and continued listing
standards applicable to Linked
Securities and Index-Linked
Exchangeable Notes in Rules 16.110 and
16.111 respectively. The Exchange has
1 15
U.S.C. 78s(b)(1).
U.S.C. 78a.
3 17 CFR 240.19b–4.
2 15
21 17
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]]>Agencies
[Federal Register Volume 82, Number 115 (Friday, June 16, 2017)]
[Notices]
[Pages 27743-27748]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-12484]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-80909; File No. SR-MIAX-2017-28]
Self-Regulatory Organizations: Notice of Filing and Immediate
Effectiveness of a Proposed Rule Change by Miami International
Securities Exchange, LLC To Implement an Equity Rights Program
June 12, 2017.
Pursuant to the provisions of Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4
[[Page 27744]]
thereunder,\2\ notice is hereby given that on June 8, 2017, Miami
International Securities Exchange, LLC (``MIAX Options'' or
``Exchange'') filed with the Securities and Exchange Commission
(``Commission'') a proposed rule change as described in Items I, II,
and III below, which Items have been prepared by the Exchange. The
Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange is filing a proposal to implement an equity rights
program. The text of the proposed rule change is available on the
Exchange's Web site at https://www.miaxoptions.com/rule-filings, at
MIAX's principal office, and at the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to implement an equity rights program
(``Program'') pursuant to which units representing the right to acquire
equity in the Exchange's parent holding company, Miami International
Holdings, Inc. (``MIH'') would be issued to a participating Member in
exchange for payment of an initial purchase price or the prepayment of
certain transaction fees and the achievement of certain liquidity
volume thresholds on the Exchange over a 42-month period. The purpose
of the Program is to promote the long-term interests of MIAX Options by
providing incentives designed to encourage future MIH owners and MIAX
Options market participants to contribute to the growth and success of
MIAX Options, by being active liquidity providers and takers to provide
enhanced levels of trading volume to MIAX Options' market, through an
opportunity to increase their proprietary interests in MIAX Options'
enterprise value.
Members that participate in the Program will have two options to
choose from: (i) An offering of G-Units; and/or (ii) an offering of H-
Units.\3\
---------------------------------------------------------------------------
\3\ The Program which provides equity-like consideration in
exchange for market making or the provision of liquidity, order flow
or volume is open to market participants generally. All MIAX Options
Members may participate subject to their satisfaction of eligibility
requirements. To be designated as a participant Member, an applicant
must: (i) Be a Member in good standing of MIAX Options; (ii) qualify
as an ``accredited investor'' as such term is defined in Regulation
D of the Securities Act of 1933; and (iii) have executed all
required documentation for Program participation. Members may elect
to participate in either or both of the options. If either the G-
Unit or the H-Unit option is oversubscribed, the units in the
oversubscribed option will be allocated on a pro-rata basis that may
result in a fractional allocation.
---------------------------------------------------------------------------
G-Units Option
Members that participate in the G-Unit option of the Program will
be issued for each unit (i) 31,407 shares of MIH common stock and (ii)
warrants to purchase 383,254 shares of common stock of MIH in exchange
for such participant Member's initial cash capital contribution of
$188,442, and with such warrants being exercisable upon the achievement
by the participating Member of certain volume thresholds on the
Exchange during a 42-month measurement period commencing July 3, 2017.
A total of 5 G-Units will be offered. The total equity ownership of MIH
common stock held by any one participant Member will be subject to a
cap of 19.9%.\4\
---------------------------------------------------------------------------
\4\ See Ninth Article (b)(i)(B), Amended and Restated
Certificate of Incorporation of Miami International Holdings, Inc.,
effective October 16, 2015 (providing that no Exchange Member,
either alone or together with its Related Persons, may own, directly
or indirectly, of record or beneficially, shares constituting more
than twenty percent (20%) of any class of capital stock of the
Corporation). Any purported transfer of shares or ownership of
shares in violation of the ownership cap by a Member would be
subject to the limitations of the Certificate of Incorporation,
including the non-recognition of voting rights of shares in excess
of the cap and a redemption right by MIH for excess shares. See
Ninth Article (d) and (e), Amended and Restated Certificate of
Incorporation of Miami International Holdings, Inc., effective
October 16, 2015.
---------------------------------------------------------------------------
The warrants will vest in eight (8) tranches: (i) One (1) tranche,
upon initial investment; and (ii) seven (7) tranches during a
measurement period of months 1-42 of the Program. In addition, the
participant Members may earn or lose the right to exercise warrants on
a pro-rata basis based upon meeting volume commitments during the
measurement periods, as detailed below.
Upon the initial investment, the participant Member would receive
common shares equal to 31,407 shares of the common stock and 10% of the
warrants will vest. A participant Member will be eligible to earn the
remaining warrants during measurement periods provided that the
participant has achieved a specified percentage of the total national
average daily volume of options contracts reported to The Options
Clearing Corporation (``OCC'') (``OCC ADV'') on MIAX Options of all
option classes listed on MIAX Options.\5\
---------------------------------------------------------------------------
\5\ If an options class is not listed on MIAX Options, then the
trading volume in that options class will be omitted from the
calculation of % OCC ADV. Priority Customer-to-Priority Customer
Crossing transactions where no fees are paid to the Exchange,
special strategies, and contracts as to which a Member acts solely
as clearing agent will not be counted in the number of option
contracts executed on the Exchange by any Member. (Incidental
Priority Customer-to-Priority Customer transactions, that are not
crossing transactions, will be counted in the number of options
contracts executed on the Exchange by a Member.) Special strategies
for the purpose of calculating trading volume include: (i) Dividend
strategy; (ii) merger strategy; (iii) short stock interest strategy;
(iv) reversal and conversion strategies; (v) jelly roll strategy;
and (vi) similar strategies offered by an options exchange that are
subject to a fee cap. Trading in special strategies currently is not
available on MIAX Options. Special strategies will be omitted from
the calculation of % OCC ADV to the extent it is possible to
identify such transactions.
---------------------------------------------------------------------------
The remaining seven (7) tranches, of 90% of the warrants, will vest
during the following measurement periods: (i) 10.90% of the warrants
resulting from months 1-6, with a volume commitment of 0.400% of OCC
ADV on MIAX Options per G-Unit; \6\ (ii) 10.90% of the warrants
resulting from months 7-12, with a volume commitment of 0.400% of OCC
ADV on MIAX Options per G-Unit; (iii) 13.64% of the warrants resulting
from months 13-18, with a volume commitment of 0.500% of OCC ADV on
MIAX Options per G-Unit; (iv) 13.64% of the warrants resulting from
months 19-24, with a volume commitment of 0.500% of OCC ADV on MIAX
Options per G-Unit; (v) 13.64% of the warrants resulting from months
25-30, with a volume commitment of 0.500% of OCC ADV on MIAX Options
per G-Unit; (vi) 13.64% of the warrants resulting from months 31-36,
with a volume commitment of 0.500% of OCC ADV on MIAX Options per G-
Unit; and (vii) 13.64% of the warrants resulting from months 37-42,
with a volume
[[Page 27745]]
commitment of 0.500% of OCC ADV on MIAX Options per G-Unit. If a
participant Member reaches 100% of the volume commitment during a
tranche's measurement period, the Member will earn 100% of the warrants
applicable to such measurement period. If a participant Member reaches
less than 100% but at least 70% of the volume commitment during a
tranche's measurement period, the Member will earn a reduced amount of
warrants on a pro-rata basis applicable to such measurement period. If
a participant Member fails to reach a minimum of 70% of the volume
commitment during a tranche's measurement period, the Member will lose
all right to that tranche of warrants. Notwithstanding, in the event a
participant Member has not satisfied the volume commitment for any one
measurement period (other than measurement period 7), the participant
Member will have an opportunity to vest those warrants if such
participant Member applies a portion of the Member's overperformance
from the measurement period immediately following the prior measurement
period to ensure a minimum of 70% of the volume commitment in the prior
period and in addition has satisfied the volume commitment for the
measurement period immediately following. If a participant Member
exceeds 100% of the volume commitment during a tranche's measurement
period, the Member is able to earn, on a pro-rata basis, warrants not
earned by other participant Members.
---------------------------------------------------------------------------
\6\ The first measurement period will begin on July 3, 2017 and
end December 29, 2017. Therefore, July 3, 2017 through December 29,
2017 will count as months 1-6 for purposes of the measurement
period.
---------------------------------------------------------------------------
H-Units Option
Members that participate in the H-Unit option of the Program will
be issued for each unit warrants to purchase 414,661 shares of common
stock of MIH in exchange for the prepayment of Exchange fees in the
amount of $500,000 for the 42-month period commencing July 3, 2017, and
with such warrants being exercisable upon the achievement by the
participating Member of certain volume thresholds on the Exchange
during a 42-month measurement period commencing July 3, 2017. A total
of 30 H-Units will be offered. The total equity ownership of MIH common
stock held by any one participant Member will be subject to a cap of
19.9%.
The warrants will vest in seven (7) tranches during the following
measurement periods: (i) 12.12% of the warrants resulting from months
1-6, with a volume commitment of 0.400% of OCC ADV on MIAX Options per
H-Unit; \7\ (ii) 12.12% of the warrants resulting from months 7-12,
with a volume commitment of 0.400% of OCC ADV on MIAX Options per H-
Unit; (iii) 15.15% of the warrants resulting from months 13-18, with a
volume commitment of 0.500% of OCC ADV on MIAX Options per H-Unit; (iv)
15.15% of the warrants resulting from months 19-24, with a volume
commitment of 0.500% of OCC ADV on MIAX Options per H-Unit; (v) 15.15%
of the warrants resulting from months 25-30, with a volume commitment
of 0.500% of OCC ADV on MIAX Options per H-Unit; (vi) 15.15% of the
warrants resulting from months 31-36, with a volume commitment of
0.500% of OCC ADV on MIAX Options per H-Unit; and (vii) 15.16% of the
warrants resulting from months 37-42, with a volume commitment of
0.500% of OCC ADV on MIAX Options per H-Unit. If a participant Member
reaches 100% of the volume commitment during any one tranche's
measurement period, the Member will earn 100% of the warrants
applicable to such measurement period. If a participant Member reaches
less than 100% but at least 70% of the volume commitment during a
tranche's measurement period, the Member will earn a reduced amount of
warrants on a pro-rata basis applicable to such measurement period. If
a participant Member fails to reach a minimum of 70% of the volume
commitment during the measurement period, the Member will lose all
right to that tranche of warrants. Notwithstanding, in the event a
participant Member has not satisfied the volume commitment for any one
measurement period (other than measurement period 7), the participant
Member will have an opportunity to vest those warrants if such
participant Member applies a portion of the Member's overperformance
from the measurement period immediately following the prior measurement
period to ensure a minimum of 70% of the volume commitment in the prior
period, and in addition has satisfied the volume commitment for the
measurement periods immediately following. If a participant Member
exceeds 100% of the volume commitment during any one tranche's
measurement period, the Member is able to earn, on a pro-rata basis,
warrants not earned by other participant Members.
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\7\ The first measurement period will begin on July 3, 2017 and
end December 29, 2017. Therefore, July 3, 2017 through December 29,
2017 will count as months 1-6 for purposes of the measurement
period.
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Once a participant Member has prepaid Exchange fees for the initial
42-month period, each month the participant Member may execute
contracts and accumulate transaction fees based on the prevailing MIAX
Options Fee Schedule in effect at the time. Once an H-Unit participant
Member has executed contract volume whereby the total accumulated
transaction fees equal the prepaid amount, all subsequently executed
contracts will be billed and collected at the appropriate rate as
defined in the MIAX Options Fee Schedule.
Provisions Applicable to Both G-Units and H-Units
A Member of the Exchange and its Affiliate as defined in the Fee
Schedule of MIAX Options \8\ may together participate in the Program as
follows. In order to participate in the Program with a participant
Member an Appointed Market Maker or Appointed EEM must be designated as
such as of June 29, 2017 pursuant to the procedure for appointing an
Appointed Market Maker or Appointed EEM set forth in the MIAX Options
Fee Schedule. An Appointed Market Maker or Appointed EEM may not
otherwise be a participant Member of the Program. Notwithstanding the
ability to change the designation of an Appointed Market Maker or
Appointed EEM as set forth in the Fee Schedule of
[[Page 27746]]
MIAX Options for MIAX Options Fee Schedule purposes, no such change in
designation may be made for purposes of the Program and any designation
of an Appointed Market Maker or Appointed EEM as of June 29, 2017 shall
remain in effect for purposes of the Program for the duration of the
Program.\9\ An Affiliate of a Member with at least 75% common ownership
between the firms as reflected on each firm's Form BD, Schedule A (a
``Corporate Affiliate''), is not required to follow the procedure set
forth on the MIAX Options Fee Schedule for designation of an Appointed
Market Maker or Appointed EEM and will together be deemed a participant
Member in the Program for so long as it maintains such corporate
affiliation with the other Member. Alternatively, a Corporate Affiliate
of a Member may directly join the Program and be a separate participant
Member of the Program. Volume thresholds and other aspects of the
Program may be met by the Member and its Affiliate who will together
constitute a participant Member in the Program. In the case where a
Member and its Corporate Affiliate separately joined the Program as
participant Members volume thresholds and other aspects of the Program
must be met separately by the Member and its Corporate Affiliate.
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\8\ For purposes of the MIAX Options Fee Schedule, the term
``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, (``Affiliate''), 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
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
Market Maker) that has been appointed by a MIAX Market Maker,
pursuant to the following process. A MIAX Market Maker appoints an
EEM and an EEM appoints a MIAX Market Maker, for the purposes of the
Fee Schedule, by each completing and sending an executed Volume
Aggregation Request Form by email to membership@miaxoptions.com no
later than 2 business days prior to the first business day of the
month in which the designation is to become effective. Transmittal
of a validly completed and executed form to the Exchange along with
the Exchange's acknowledgement of the effective designation to each
of the Market Maker and EEM will be viewed as acceptance of the
appointment. The Exchange will only recognize one designation per
Member. A Member may make a designation not more than once every 12
months (from the date of its most recent designation), which
designation shall remain in effect unless or until the Exchange
receives written notice submitted 2 business days prior to the first
business day of the month from either Member indicating that the
appointment has been terminated. Designations will become operative
on the first business day of the effective month and may not be
terminated prior to the end of the month. Execution data and reports
will be provided to both parties. See, MIAX Options Fee Schedule
note 1.
\9\ A participant Member who changes a designation of an
Appointed Market Maker or Appointed EEM during the Program will be
effective with respect to transactions on the Exchange other than
the Program.
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Each participant Member will have a standard piggyback registration
right to include the common shares and the common shares issuable upon
exercise of the warrants should MIH file a Registration Statement under
the Securities Act of 1933. Each participant Member will also have the
right to participate pro rata in all future offerings of MIH securities
for so long as the participant Member holds at least 51% of the common
shares purchased by the participating Member directly or issuable upon
the exercise of warrants included in at least one H-Unit. MIH will have
the right of first refusal to purchase any common shares or warrant
shares that a participant Member decides to transfer or sell. Other
participant Members will have the secondary right of first refusal to
purchase any common shares or warrant shares that a participant Member
decides to transfer or sell.
When a participating Member acquires a certain number of units, the
Member can appoint one director to the MIH Board and/or the MIAX
Options Board. The Exchange notes that the number of non-industry
directors on the MIAX Options Board, including at least one independent
director, must equal or exceed the number of industry directors and
Member representatives, and that additional new non-industry directors
and Member representative directors will need to be added in order to
maintain this status. The Exchange also notes that any directors that
may be selected by a participating Member would not be counted towards
the 20% Member representative requirement on the MIAX Options Board. In
addition, the Exchange notes that a Member is only entitled to a new
seat if they are not currently represented on the MIAX Options Board.
All applicants will be subject to the same eligibility and
designation criteria, and all participant Members will participate in
the Program on the same terms, conditions and restrictions. To be
designated as a participant Member, an applicant must: (i) Be a Member
in good standing of MIAX Options; (ii) qualify as an ``accredited
investor'' as such term is defined in Regulation D of the Securities
Act of 1933; \10\ and (iii) have executed all required documentation
for Program participation. Participant Members must have executed the
definitive documentation, satisfied the eligibility criteria required
of Program participants enumerated above, and tendered the minimum cash
investment or prepayment of fees by June 29, 2017, with a closing to
occur on June 30, 2017.
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\10\ The purpose of this criterion relates to the ability of MIH
to sell shares of common stock pursuant to an exemption from
registration under the Securities Act of 1933. The definition of
``accredited investor'' under Rule 501(a)(1) of the Securities Act
of 1933 includes any broker or dealer registered pursuant to Section
15 of the Act. MIAX Options Rule 200(b) requires a Member to be
registered as a broker or dealer pursuant to Section 15 of the Act,
therefore all MIAX Options Members will satisfy this criterion.
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As discussed above, the purpose of the Program is to encourage
Members to direct greater trade volume to MIAX Options to enhance
trading volume in MIAX Options' market. Increased volume will provide
for greater liquidity and enhanced price discovery, which benefits all
market participants. Other exchanges have engaged in the practice of
incentivizing increased order flow in order to attract liquidity
providers through equity sharing arrangements.\11\ In addition, the
Exchange previously adopted substantially similar programs to
incentivize increased order flow in order to attract liquidity
providers through an equity sharing arrangement.\12\ The Program
similarly intends to attract order flow, which will increase liquidity,
thereby providing greater trading opportunities and tighter spreads for
other market participants and causing a corresponding increase in order
flow from these other market participants. The Program will similarly
reward the liquidity providers that provide this additional volume with
a potential proprietary interest in MIAX Options.
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\11\ See, e.g., Securities Exchange Act Release Nos. 62358 (June
22, 2010), 75 FR 37861 (June 30, 2010) (SR-NSX-2010-06); 64742 (June
24, 2011), 76 FR 38436 (June 30, 2011) (SR-NYSEAmex-2011-018); 69200
(March 21, 2013), 78 FR 18657 (March 27, 2013) (SR-CBOE-2013-31);
74114 (January 22, 2015), 80 FR 4611 (January 28, 2015) (SR-BOX-
2015-03); and 74576 (March 25, 2015), 80 FR 17122 (March 31, 2015)
(SR-BOX-2015-16).
\12\ See Securities Exchange Act Release Nos. 70498 (September
25, 2013), 78 FR 60348 (October 1, 2013) (SR-MIAX-2013-43); 74095
(January 20, 2015), 80 FR 4011 (January 26, 2015) (SR-MIAX-2015-02);
and 74225 (February 12, 2015), 80 FR 7897 (February 12, 2015) (SR-
MIAX-2015-05).
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The specific volume thresholds of the Program's measurement periods
were set based upon business determinations and analysis of current
volume levels. The volume thresholds are intended to incentivize firms
to increase the number of orders that are sent to MIAX Options to
achieve the next threshold. Increasing the number of orders that are
sent to MIAX Options will in turn provide tighter and more liquid
markets, and therefore attract more business as well.
MIAX Options will initiate the measurement period on July 3, 2017.
The Exchange will notify Members of the implementation of the Program
and the dates of the enrollment period by Regulatory Circular, and will
post a copy of this rule filing on its Web site. Any MIAX Options
Member that is interested in participating in the Program may contact
MIAX Options for more information and legal documentation and will be
required to enter into a nondisclosure agreement regarding this
additional Program information.
2. Statutory Basis
The Exchange believes that its proposed rule change is consistent
with Section 6(b) of the Act \13\ in general, and furthers the
objectives of Section 6(b)(5) of the Act \14\ in particular, 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. Additionally,
the
[[Page 27747]]
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) of the Act \15\ requirement that the rules of an
exchange not be designed to permit unfair discrimination between
customers, issuers, brokers, or dealers. The Exchange also believes the
proposed rule change is consistent with Section 6(b)(4) of the Act,\16\
which requires that Exchange rules provide for the equitable allocation
of reasonable dues, fees, and other charges among its members and other
persons using its facilities.
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\13\ 15 U.S.C. 78f(b).
\14\ 15 U.S.C. 78f(b)(5).
\15\ 15 U.S.C. 78f(b)(5).
\16\ 15 U.S.C. 78f(b)(4).
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In particular, the proposed rule change is equitable and not
unfairly discriminatory, because all Members may elect to participate
(or elect to not participate) in the Program and earn units on the same
terms and conditions, assuming they satisfy the same eligibility
criteria as described above. The eligibility criteria are objective;
thus, all Members have the ability to satisfy them. The Board also has
authorized MIAX Options to offer common shares in MIH to any Member
that requests designation to participate in the Program and otherwise
satisfies the eligibility criteria to ensure that all Members will have
the opportunity to own common shares and thus participate in the
Program if they so choose. In addition, participant Members will earn
warrants on a pro-rata basis upon meeting fixed volume threshold
amounts during the measurement periods that will apply to all
participant Members.
The Exchange believes that the methodology used to calculate the
volume thresholds is fair, reasonable and not unfairly discriminatory
because it is based on objective criteria that are designed to omit
from the calculation functionality that is not available on the
Exchange and types of transactions that are subject to little or no
transaction fees. Specifically, the Exchange believes excluding
Priority Customer-to-Priority Customer Crossing transactions where no
fees are paid to the Exchange, special strategies, and contracts as to
which a Member acts solely as clearing agent from the number of option
contracts executed on the Exchange by any Member is reasonable and not
unfairly discriminatory because participating Members could otherwise
game the volume thresholds by executing excess volumes in these types
of transactions in which either no transaction fees are charged on the
Exchange, or the transaction is subject to a fee cap. The Program is
designed to reward participating Members for bringing their orders and
quotes to the Exchange to be executed on the Exchange. The Exchange
believes it is appropriate to exclude special strategies from the OCC
volume calculation since those transactions are not executed on the
Exchange. The Exchange believes that omitting clearing only
transactions from the calculation to be fair and reasonable because the
fact that a Member is clearing a trade is coincidental to the choice of
where to execute that trade. And, because clearing only transactions
are not executed on MIAX Options, they do not fall within the intended
transactions that qualify for the Program. In addition, if the Exchange
were to reward the party clearing a trade, the Exchange would possibly
be double counting that trade--once for the executing party and once
for the clearing party. Furthermore, the Exchange believes that
counting incidental Priority Customer-to-Priority Customer
transactions, which are not crossing transactions, in the number of
options contracts executed on the Exchange by a Member is fair and
reasonable because in these situations the Priority Customer is not
necessarily choosing to execute against another Priority Customer in
order to avoid a transaction fee.
The Exchange believes that its proposal to allow Affiliates to
participate in the Program is fair, reasonable and not unfairly
discriminatory because it is being offered to all Members of the
Exchange on the same terms and conditions. The Exchange believes that
allowing both traditional Corporate Affiliates and also Appointed
Market Makers and Appointed EEMs to participate in the Program is
reasonable and appropriate because it will provide those participants
with a potentially greater opportunity to achieve the volume thresholds
in the Program. Also, the Exchange believes that allowing Appointed
Market Makers and Appointed EEMs to participate in the Program expands
access to the Program to Members that might not otherwise, individually
on their own, participate in the Program, which will benefit all market
participants by providing greater liquidity on the Exchange, all of
which perfects the mechanism for a free and open market and national
market system.
The Exchange believes the Program is equitable and reasonable
because an increase in volume and liquidity would benefit all market
participants by providing more trading opportunities and tighter
spreads, even to those market participants that do not participate in
the Program. Additionally, the Exchange believes the proposed rule
change is consistent with the Act because, as described above, the
Program is designed to bring greater volume and liquidity to the
Exchange, which will benefit all market participants by providing
tighter quoting and better prices, all of which perfects the mechanism
for a free and open market and national market system.
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 not necessary or appropriate in
furtherance of the purposes of the Act. The Exchange believes that the
proposed rule change will improve competition by providing market
participants with another option when determining where to execute
orders and post liquidity.
The Exchange believes that the proposed change would increase both
intermarket and intramarket competition by incenting participant
Members to direct their orders to the Exchange, which will enhance the
quality of quoting and increase the volume of contracts traded here. To
the extent that there is an additional competitive burden on non-
participant Members, the Exchange believes that this is appropriate
because the Program should incent Members to direct additional order
flow to the Exchange and thus provide additional liquidity that
enhances the quality of its markets and increases the volume of
contracts traded here. To the extent that this purpose is achieved, all
of the Exchange's market participants should benefit from the improved
market liquidity. Enhanced market quality and increased transaction
volume that results from the anticipated increase in order flow
directed to the Exchange will benefit all market participants and
improve competition on the Exchange.
Given the robust competition for volume among options markets, many
of which offer the same products, implementing a program to attract
order flow like the one being proposed in this filing is consistent
with the above-mentioned goals of the Act. This is especially true for
the smaller options markets, such as MIAX Options, which is competing
for volume with much larger exchanges that dominate the options trading
industry. MIAX Options has a modest percentage of the average daily
trading volume in options, so it is unlikely that the Program could
cause any competitive harm to the options market or to market
participants. Rather, the Program is an attempt by a small
[[Page 27748]]
options market to attract order volume away from larger competitors by
adopting an innovative pricing strategy, as evidenced by the volume
thresholds of the Program that represent fractions of 1% of OCC ADV.
The Exchange notes that if the Program resulted in a modest percentage
increase in the average daily trading volume in options executing on
MIAX Options, while such percentage would represent a large volume
increase for MIAX Options, it would represent a minimal reduction in
volume of its larger competitors in the industry. The Exchange believes
that the Program will help further competition, because market
participants will have yet another option in determining where to
execute orders and post liquidity if they factor the benefits of MIAX
Options equity participation into the determination. The Exchange notes
that other exchanges have engaged in the practice of incentivizing
increased order flow in order to attract liquidity providers through
equity sharing arrangements.\17\ In addition, the Exchange previously
adopted substantially similar programs to incentivize increased order
flow in order to attract liquidity providers through an equity sharing
arrangement.\18\
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\17\ See supra note 11.
\18\ See supra note 12.
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C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
Written comments were neither solicited nor received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become effective pursuant to Section
19(b)(3)(A)(ii) of the Act,\19\ and Rule 19b-4(f)(2) \20\ thereunder.
At any time within 60 days of the filing of the proposed rule change,
the Commission summarily may temporarily suspend such rule change if it
appears to the Commission that such action is necessary or appropriate
in the public interest, for the protection of investors, or otherwise
in furtherance of the purposes of the Act. If the Commission takes such
action, the Commission shall institute proceedings to determine whether
the proposed rule should be approved or disapproved.
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\19\ 15 U.S.C. 78s(b)(3)(A)(ii).
\20\ 17 CFR 240.19b-4(f)(2).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to rule-comments@sec.gov. Please include
File Number SR-MIAX-2017-28 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-MIAX-2017-28. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (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-MIAX-2017-28 and
should be submitted on or before July 7, 2017.
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\21\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\21\
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-12484 Filed 6-15-17; 8:45 am]
BILLING CODE 8011-01-P
