Self-Regulatory Organizations; MIAX PEARL, LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend the MIAX PEARL Fee Schedule, 2686-2692 [2018-00724]
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Federal Register / Vol. 83, No. 12 / Thursday, January 18, 2018 / Notices
President’s Commission on White House
Fellowships.
Elizabeth Pinkerton,
Director.
[FR Doc. 2018–00766 Filed 1–17–18; 8:45 am]
BILLING CODE 6325–44–P
POSTAL REGULATORY COMMISSION
[Docket No. T2018–1; Order No. 4368]
Income Tax Review
Postal Regulatory Commission.
ACTION: Notice.
AGENCY:
The Commission is noticing a
recent Postal Service filing concerning
the calculation of the assumed Federal
income tax on competitive products
income for Fiscal Year 2017. This notice
informs the public of the filing, invites
public comment, and takes other
administrative steps.
DATES: Comments are due: February 2,
2018.
ADDRESSES: Submit comments
electronically via the Commission’s
Filing Online system at https://
www.prc.gov. Those who cannot submit
comments electronically should contact
the person identified in the FOR FURTHER
INFORMATION CONTACT section by
telephone for advice on filing
alternatives.
FOR FURTHER INFORMATION CONTACT:
David A. Trissell, General Counsel, at
202–789–6820.
SUPPLEMENTARY INFORMATION:
SUMMARY:
Table of Contents
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I. Introduction
In accordance with 39 U.S.C. 3634
and 39 CFR 3060.40 et seq., the Postal
Service filed its calculation of the
assumed Federal income tax on
competitive products income for fiscal
year (FY) 2017.1 The calculation details
the FY 2017 competitive product
revenue and expenses, the net
competitive products income before tax,
and the assumed Federal income tax on
that income.
II. Notice of Commission Action
In accordance with 39 CFR 3060.42,
the Commission establishes Docket No.
T2018–1 to review the calculation of the
assumed Federal income tax and
supporting documentation.
1 See Notice of the United States Postal Service
of Submission of the Calculation of the FY 2017
Assumed Federal Income Tax on Competitive
Products, January 10, 2018.
18:27 Jan 17, 2018
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I. Self-Regulatory Organization’s
Statement of the Terms of the 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 website at
https://www.miaxoptions.com/rulefilings/pearl at MIAX PEARL’s principal
office, and at the Commission’s Public
Reference Room.
III. Ordering Paragraphs
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.
It is ordered:
1. The Commission establishes Docket
No. T2018–1 to consider the calculation
of the assumed Federal income tax on
competitive products for FY 2017.
2. Pursuant to 39 U.S.C. 505, Jennaca
D. Upperman is appointed to serve as an
officer of the Commission to represent
the interests of the general public in this
proceeding (Public Representative).
3. Comments are due no later than
February 2, 2018.
4. The Secretary shall arrange for
publication of this order in the Federal
Register.
By the Commission.
Stacy L. Ruble,
Secretary.
[FR Doc. 2018–00782 Filed 1–17–18; 8:45 am]
BILLING CODE 7710–FW–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–82490; File No. SR–
PEARL–2017–40]
I. Introduction
II. Notice of Commission Action
III. Ordering Paragraphs
VerDate Sep<11>2014
The Commission invites comments on
whether the Postal Service’s filing in
this docket is consistent with the
policies of 39 U.S.C. 3634 and 39 CFR
3060.40 et seq. Comments are due no
later than February 2, 2018. The Postal
Service’s filing can be accessed via the
Commission’s website (https://
www.prc.gov).
The Commission appoints Jennaca D.
Upperman to serve as Public
Representative in this docket.
Self-Regulatory Organizations; MIAX
PEARL, LLC; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change To Amend the MIAX
PEARL Fee Schedule
January 11, 2018.
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 December 29, 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.
1 15
2 17
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U.S.C. 78s(b)(1).
CFR 240.19b–4.
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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 amend the
Add/Remove Tiered Rebates/Fees set
forth in Section (1)(a) of the Fee
Schedule to (i) modify the monthly
volume thresholds that apply to MIAX
PEARL Market Makers 3 in certain tiers,
and to establish rebates and fees for new
Tier 2 and new Tier 6 applicable to
Market Makers, (ii) modify the monthly
volume thresholds that apply to MIAX
PEARL Non-Priority Customers, Firms,
Broker-Dealers and Non-MIAX PEARL
Market Makers in Tier 4, and to
establish rebates and fees for a new Tier
5 applicable to such market participants
who are not Priority Customers 4 or
MIAX PEARL Market Makers; and (iii)
offer Members 5 the Maker Rebate and
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 ‘‘Priority Customer’’ means a person or entity
that (i) is not a broker or dealer in securities, and
(ii) does not place more than 390 orders in listed
options per day on average during a calendar month
for its own beneficial accounts(s). See Exchange
Rule 100, including Interpretations and Policies .01.
5 ‘‘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
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the Taker Fee associated with the
highest Tier in Non-Penny classes (as
defined below) for transactions in NonPenny classes if such Member executes
more than 0.30% volume in Non-Penny
classes, not including Excluded
Contracts,6 as compared to the TCV 7 in
all MIAX PEARL listed option classes.
The Exchange currently assesses
transaction rebates and fees to all
market participants which are based
upon the total monthly volume
executed by the Member on MIAX
PEARL in the relevant, respective origin
type (not including Excluded Contracts)
expressed as a percentage of TCV. In
addition, the per contract transaction
rebates and fees are applied
Origin
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.8 Members that place
resting liquidity, i.e., orders resting on
the book of the MIAX PEARL System,9
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
Tier
rebates for order executions in standard
option classes in the Penny Pilot
Program 10 (‘‘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 within
the same tier.
Transaction Rebates and Fees for MIAX
PEARL Market Makers
Transaction rebates and fees
applicable to all MIAX PEARL Market
Makers are currently assessed according
to the following table:
Per contract rebates/fees
for penny classes
Volume criteria
Maker
All MIAX PEARL Market Makers ..
1
2
3
4
0.00%–0.10% ...............................
Above 0.10%–0.50% ....................
Above 0.50%–0.75% or Above
2.0% in SPY.
Above 0.75% ................................
Taker
Per contract rebates/fees
for non-penny classes
Maker
Taker
($0.25)
(0.40)
(0.47)
$0.50
0.48
0.47
($0.30)
(0.60)
(0.65)
$1.05
1.03
1.02
(0.48)
0.47
(0.70)
1.02
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The Exchange proposes to modify the
monthly volume thresholds applicable
to the Exchange’s Market Makers to
adjust the thresholds in current Tiers 1,
3 and 4 and to add a new Tier 2
threshold and corresponding Tier 2
rebates and fees, as well as to add a new
Tier 6 threshold and corresponding Tier
6 rebates and fees. Specifically, the
Exchange proposes to adjust the
calculation threshold of Tier 1’s volume
criteria from 0.00% up to 0.10% of the
total monthly volume executed by the
Member on MIAX PEARL, not including
Excluded Contracts, divided by the
TCV, to become above 0.00% up to
0.05% of the total monthly volume
executed by the Member on MIAX
PEARL, not including Excluded
Contracts, divided by the TCV. The
Exchange then proposes to add a new
Tier 2 threshold applicable to all MIAX
PEARL Market Makers. The new Tier 2
threshold volume criteria shall be
calculated as above 0.05% up to 0.25%
of the total monthly volume executed by
the Member on MIAX PEARL, not
including Excluded Contracts, divided
by the TCV.
Further, the Exchange proposes to
adjust the calculation threshold of
former Tier 2 and now Tier 3’s volume
criteria from above 0.10% up to 0.50%
of the total monthly volume executed by
the Member on MIAX PEARL, not
including Excluded Contracts, divided
by the TCV, to become above 0.25% up
to 0.50% of the total monthly volume
executed by the Member on MIAX
PEARL, not including Excluded
Contracts, divided by the TCV. Former
Tier 3 will now become Tier 4.
The Exchange additionally proposes
to adjust the calculation threshold of
former Tier 4 and now Tier 5’s volume
criteria from above 0.75% of the total
monthly volume executed by the
Member on MIAX PEARL, not including
Excluded Contracts, divided by the
TCV, to become above 0.75% up to
1.00% of the total monthly volume
executed by the Member on MIAX
PEARL, not including Excluded
Contracts, divided by the TCV.
The Exchange then proposes to add a
new Tier 6 threshold applicable to all
MIAX PEARL Market Makers. The new
Tier 6 threshold volume criteria shall be
calculated as above 1.00% of the total
monthly volume executed by the
Definitions Section of the Fee Schedule and
Exchange Rule 100.
6 ‘‘Excluded Contracts’’ means any contracts
routed to an away market for execution. See the
Definitions Section of the Fee Schedule.
7 ‘‘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.
8 ‘‘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.
9 The term ‘‘System’’ means the automated
trading system used by the Exchange for the trading
of securities. See Exchange Rule 100.
10 See Securities Exchange Act Release No. 82391
(December 22, 2017), 82 FR 61622 (December 28,
2017) (SR–PEARL–2017–39).
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Member on MIAX PEARL, not including
Excluded Contracts, divided by the
TCV.
Origin
The new thresholds for MIAX PEARL
Market Makers will be as set forth in the
following table:
Tier
Per contract rebates/fees
for penny classes
Volume criteria
Maker
All MIAX PEARL Market Makers ..
1
2
3
4
5
6
The Exchange believes that the
proposed new monthly volume tier and
new rebates/fees in Tier 2 should
provide incentives for the Exchange’s
Market Makers to more aggressively
provide liquidity in Penny classes so
that they can achieve the higher Maker
rebate in Penny classes with less
volume than previously required in the
former tier. The Exchange additionally
believes that the proposed new monthly
volume tier and new rebates/fees in Tier
6 should provide incentives for the
Exchange’s Market Makers to more
aggressively provide liquidity in Non-
Origin
0.00%–0.05% ...............................
Above 0.05%–0.25% ....................
Above 0.25%–0.50% ....................
Above 0.50%–0.75% or Above
2.0% in SPY.
Above 0.75%–1.00% ....................
Above 1.00% ................................
($0.30)
(0.30)
(0.60)
(0.65)
$1.05
1.05
1.03
1.02
(0.48)
(0.48)
0.47
0.47
(0.70)
(0.85)
1.02
1.02
corresponding increase in order flow
from such other market participants.
Transaction Rebates and Fees for Other
Market Participants That Are Not
Priority Customers or MIAX PEARL
Market Makers
Transaction rebates and fees
applicable to all other market
participants that are not Priority
Customers or MIAX PEARL Market
Makers are currently assessed according
to the following table:
Maker
Non-Priority Customer, Firm, BD,
and Non-MIAX PEARL Market
Makers.
1
2
3
4
The Exchange proposes to modify the
monthly volume thresholds applicable
to all Non-Priority Customers, Firms,
Broker-Dealers and Non-MIAX PEARL
Market Makers to adjust the threshold in
Tier 4 set forth above and to add a new
Tier 5 threshold and corresponding Tier
5 rebates and fees. Specifically, the
Exchange proposes to adjust the
calculation threshold of Tier 4’s volume
criteria from above 0.75% of the total
monthly volume executed by the
Origin
0.00%–0.10% ...............................
Above 0.10%–0.50% ....................
Above 0.50%–0.75% ....................
Above 0.75% ................................
Taker
($0.25)
(0.40)
(0.45)
(0.48)
Member on MIAX PEARL, not including
Excluded Contracts, divided by the
TCV, to become above 0.75% up to
1.00% of the total monthly volume
executed by the Member on MIAX
PEARL, not including Excluded
Contracts, divided by the TCV. The
rebates and fees applicable in the new
Tier 5 shall be ($0.48) and $0.48 per
contract for Penny classes, and ($0.85)
and $1.04 for Non-Penny classes.
Additionally, the Exchange proposes
to add a new Tier 5 threshold applicable
Tier
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1
2
3
4
5
0.00%–0.10% ...............................
Above 0.10%–0.50% ....................
Above 0.50%–0.75% ....................
Above 0.75%–1.00% ....................
Above 1.00% ................................
PO 00000
Frm 00074
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Per contract rebates/fees
for non-penny classes
Maker
($0.30)
(0.60)
(0.65)
(0.70)
Taker
$1.05
1.04
1.04
1.04
to all such market participants. The new
Tier 5 threshold volume criteria shall be
calculated as above 1.00% of the total
monthly volume executed by the
Member on MIAX PEARL, not including
Excluded Contracts, divided by the
TCV.
The new thresholds for Non-Priority
Customers, Firms, Broker-Dealers and
Non-MIAX PEARL Market Makers will
be as set forth in the following table:
Maker
Non-Priority Customer, Firm, BD,
and Non-MIAX PEARL Market
Makers.
$0.50
0.49
0.48
0.48
Per contract rebates/fees
for penny classes
Volume criteria
Taker
$0.50
0.50
0.48
0.47
Per contract rebates/fees
for penny classes
Volume criteria
Maker
($0.25)
(0.40)
(0.40)
(0.47)
Penny classes so that they can achieve
a higher Maker rebate in Non-Penny
classes than previously offered. The
Exchange believes that increased MIAX
PEARL Market Maker volume should
make the MIAX PEARL marketplace an
attractive venue where the Exchange’s
Market Makers are incentivized to
submit orders with narrow spreads and
with greater size, deepening and
enhancing the quality of the MIAX
PEARL marketplace. This should in turn
provide more trading opportunities and
tighter spreads for other market
participants and result in a
Tier
Taker
Per contract rebates/fees
for non-penny classes
($0.25)
(0.40)
(0.45)
(0.48)
(0.48)
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Taker
$0.50
0.49
0.48
0.48
0.48
18JAN1
Per contract rebates/fees
for non-penny classes
Maker
($0.30)
(0.60)
(0.65)
(0.70)
(0.85)
Taker
$1.05
1.04
1.04
1.04
1.04
Federal Register / Vol. 83, No. 12 / Thursday, January 18, 2018 / Notices
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The Exchange believes that the
proposed new monthly volume tier and
higher rebate in Tier 5 should provide
incentives for such market participants
to direct greater volume to the Exchange
in Non-Penny classes. The Exchange
believes that increased order flow by
these market participants should make
the MIAX PEARL marketplace an
attractive venue where these market
participants are incentivized to submit
orders with narrower spreads and with
greater size, deepening and enhancing
the quality of the MIAX PEARL
marketplace. This should in turn
provide more trading opportunities and
tighter spreads for all market
participants and result in a
corresponding increase in order flow
from all market participants.
Member Transaction Maker Rebates and
Taker Fees for Non-Penny Classes
The Exchange proposes to offer
Members transacting volume in MIAX
PEARL Market Maker, Non-Priority
Customer, Firm, Broker Dealer, and
Non-MIAX PEARL Market Maker origin
types (the ‘‘Select Origins’’) a new
method to achieve higher rebates and
lower fees for transactions in NonPenny classes. Specifically, the
Exchange proposes to offer Members
transacting volume in the Select Origins
the Maker rebate and the Taker fee
associated with the highest Tier for that
respective origin type in Non-Penny
classes for transactions in Non-Penny
classes if such Member executes more
than 0.30% volume in Non-Penny
classes, not including Excluded
Contracts, as compared to the TCV in all
MIAX PEARL listed option classes. For
example, under the proposed tiers, if a
Market Maker transacted monthly
volume of 0.45% in both Penny and
Non-Penny classes, not including
Excluded Contracts, as divided by TCV,
such Member would receive proposed
Tier 3 rebates and fees: Maker rebate of
($0.40) for orders that placed resting
liquidity on the book and Taker fee of
$0.48 for orders that removed liquidity
from the book in Penny classes; Maker
rebate of ($0.60) for orders that placed
resting liquidity on the book and Taker
fee of $1.03 for orders that removed
liquidity from the book in Non-Penny
classes. However, if such Member’s
volume was heavily concentrated in
Non-Penny classes where its Non-Penny
executed volume was above 0.30%, not
including Excluded Contracts, as
divided by TCV in all MIAX PEARL
listed options classes, such Member
would receive a Maker rebate of ($0.85)
and Taker fee of $1.02, the proposed
rates for Tier 6 in Non-Penny classes for
Market Makers. Its Maker rebate of
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($0.40) and Taker fee of $0.48 will
continue to apply for Penny classes for
Market Makers in proposed Tier 3. This
example would be similar for NonPriority Customers, Firms, Broker
Dealers, and Non-MIAX PEARL Market
Makers, except for the variations in the
rates and thresholds. For example,
under the proposed tiers, if a Member in
these origins transacted monthly
volume of 0.45% in both Penny and
Non-Penny classes, not including
Excluded Contracts, as divided by TCV,
such Member would receive Tier 2
rebates and fees: Maker rebate of ($0.40)
for orders that placed resting liquidity
on the book and Taker fee of $0.49 for
orders that removed liquidity from the
book in Penny classes; Maker rebate of
($0.60) for orders that placed resting
liquidity on the book and Taker fee of
$1.04 for orders that removed liquidity
from the book in Non-Penny classes.
However, if such Member’s volume was
heavily concentrated in Non-Penny
classes where its Non-Penny executed
volume was above 0.30%, not including
Excluded Contracts, as divided by TCV
in all MIAX PEARL listed options
classes, such Member would receive a
Maker rebate of ($0.85) and Taker fee of
$1.04, the proposed rates for Tier 5 in
Non-Penny classes for these origins. Its
Maker rebate of ($0.40) and Taker fee of
$0.49 will continue to apply for Penny
classes in that origin type in proposed
Tier 2.
Lastly, the Exchange proposes to offer
Members an alternative method to
achieve such higher rebates and lower
fees for transactions in Non-Penny
classes by permitting the Member to
aggregate its volume in Non-Penny
classes with that of its Affiliates 11 in the
11 ‘‘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
following process. A MIAX PEARL Market Maker
appoints an EEM and an EEM appoints a MIAX
PEARL 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
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Select Origins. For avoidance of doubt,
volume from Priority Customer in NonPenny classes will not be aggregated
toward the 0.30% volume threshold.
Specifically, any Member and its
Affiliates will be credited the Maker
rebate associated with the highest tier
for transactions in Non-Penny classes
and will be assessed the lowest Taker
fee associated with the highest tier for
transactions in Non-Penny classes if
such Member together with its Affiliates
in the Select Origins executes more than
0.30% volume in Non-Penny classes,
not including Excluded Contracts, as
compared to TCV in all MIAX PEARL
option classes. The Exchange believes
that these incentives will encourage
Members to transact a greater number of
contracts in Non-Penny classes on the
Exchange.
The proposed rule change is
scheduled to become operative January
2, 2018.
2. Statutory Basis
The Exchange believes that its
proposal to amend its Fee Schedule is
consistent with Section 6(b) of the Act 12
in general, and furthers the objectives of
Section 6(b)(4) of the Act,13 in that it is
an equitable allocation of reasonable
dues, fees and other charges among
Exchange members and issuers and
other persons using its facilities, and
6(b)(5) of the Act,14 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 Exchange believes that the
proposed new tier structure applicable
to the Exchange’s Market Makers is
consistent with Section 6(b)(4) of the
Act in that it is fair, equitable and not
unreasonably discriminatory and should
improve market quality for the
Exchange’s Market Makers and
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.
12 15 U.S.C. 78f(b).
13 15 U.S.C. 78f(b)(4).
14 15 U.S.C. 78f(b)(1) and (b)(5).
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consequently all market participants.
The proposed changes to the MIAX
PEARL Market Maker tier structure and
rebates and fees are fair and equitable
and not unreasonably discriminatory
because they apply equally to all MIAX
PEARL Market Maker orders. All
similarly situated MIAX PEARL Market
Maker orders are subject to the same
rebate and fee schedule, and access to
the Exchange is offered on terms that are
not unfairly discriminatory.
The Exchange believes that the
proposed rule changes applicable to
MIAX PEARL Market Makers are
consistent with Section 6(b)(5) of the
Act in that they promote equitable
access to the Exchange for all market
participants. To the extent that MIAX
PEARL Market Maker volume is
increased by the proposal, market
participants will increasingly compete
for the opportunity to trade on the
Exchange including sending more
orders that are narrower and largersized. The resulting increased volume
and liquidity will benefit all Exchange
participants by providing more trading
opportunities and tighter spreads.
The specific volume thresholds of the
Tiers and the rebates and fees set forth
in new Tiers 2 and 6 applicable to the
Exchange’s Market Makers were set
based upon business determinations
and an analysis of current volume
levels. The Exchange believes that the
proposed new monthly volume tier and
new rebates/fees in Tier 2 should
provide incentives for the Exchange’s
Market Makers to more aggressively
provide liquidity so that they can
achieve the higher Maker rebate in
Penny classes with less volume than
previously required in the former tier.
The Maker Rebates and Taker Fees set
forth in new Tier 6 are within the range
of rebates and fees at other exchanges
that have a Maker-Taker fee structure.15
The volume thresholds are intended to
incentivize MIAX PEARL Market
Makers to increase the number of orders
they send to the Exchange so that they
can achieve the next threshold, and to
encourage all market participants to
send more orders as well. Increasing the
number of orders sent to the Exchange
will in turn provide tighter and more
liquid markets, and therefore attract
more business overall. Similarly, the
different rebate rates at the different tier
levels are based on an analysis of
current revenue and volume levels and
are intended to provide increasing
incentives to MIAX PEARL Market
15 See NYSE Arca Options Fees and Charges
under ‘‘NYSE Arca Options: Trade-Related Charges
For Standard Options’’; see also Cboe BZX Options
Exchange Fee Schedule under ‘‘Transaction Fees’’.
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Makers for increasing the volume of
orders sent to, and contracts executed
on, the Exchange. The specific amounts
of the tiers and rates are set in order to
encourage MIAX PEARL Markets
Makers to reach for higher tiers.
The Exchange believes that the
proposed new tier structure applicable
to the Exchange’s other market
participants who are not Priority
Customers or MIAX PEARL Market
Makers, i.e. Non-Priority Customers,
Firms, Broker-Dealers and Non-MIAX
PEARL Market Makers, is consistent
with Section 6(b)(4) of the Act in that it
is fair, equitable and not unreasonably
discriminatory and should improve
market quality for such market
participants as well as MIAX PEARL
Market Makers and Priority Customers.
The proposed changes to the tier
structure and rebates and fees
applicable to such market participants
are fair and equitable and not
unreasonably discriminatory because
they apply equally to all orders of such
market participants. All similarly
situated orders of such market
participants are subject to the same
rebate and fee schedule, and access to
the Exchange is offered on terms that are
not unfairly discriminatory.
The Exchange believes that the
proposed rule changes applicable to
Non-Priority Customers, Firms, BrokerDealers and Non-MIAX PEARL Market
Makers are consistent with Section
6(b)(5) of the Act in that they promote
equitable access to the Exchange for all
market participants. To the extent order
flow by these market participants is
increased by the proposal, other market
participants will increasingly compete
for the opportunity to trade on the
Exchange including sending more
orders that are narrower and larger
sized. The resulting increased volume
and liquidity will benefit all Exchange
participants by providing more trading
opportunities and tighter spreads.
The specific volume thresholds of
Tiers 4 and 5 and the rebates and fees
set forth in new Tier 5 applicable to
Non-Priority Customers, Firms, BrokerDealers and Non-MIAX PEARL Market
Makers were set based upon business
determinations and an analysis of
current volume levels. The Maker
Rebates and Taker Fees set forth in new
Tier 5 are within the range of rebates
and fees at other exchanges that have a
Maker-Taker fee structure.16 The
volume thresholds are intended to
incentivize such market participants to
increase the number of orders they send
to the Exchange so that they can achieve
the next threshold, and to encourage all
16 Id.
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Fmt 4703
Sfmt 4703
market participants to send more orders
as well. Increasing the number of orders
sent to the Exchange will in turn
provide tighter and more liquid markets,
and therefore attract more business
overall. Similarly, the different rebate
rates at the different tier levels are based
on an analysis of current revenue and
volume levels and are intended to
provide increasing incentives to NonPriority Customers, Firms, BrokerDealers and Non-MIAX PEARL Market
Makers for increasing the volume of
orders sent to, and contracts executed
on, the Exchange. The specific amounts
of the tiers and rates are set in order to
encourage such market participants to
reach for higher tiers.
The Exchange believes that the
proposed rule change applicable to
Members’ volume in Non-Penny classes
is consistent with Section 6(b)(4) of the
Act in that it is fair, equitable and not
unreasonably discriminatory and should
improve market quality for the
Exchange’s order flow in Non-Penny
classes which will benefit all market
participants. The proposed changes are
fair and equitable and not unreasonably
discriminatory because they apply
equally to all Member orders in NonPenny classes. All similarly situated
Member orders in Non-Penny classes
are subject to the same rebates and fees
if they achieve the specified volume in
Non-Penny classes, and access to the
Exchange is offered on terms that are
not unfairly discriminatory. The
Exchange’s proposal to offer Members
and its Affiliates the opportunity to
achieve such higher rebates and lower
fees for transactions in Non-Penny
classes by permitting the Member to
aggregate its volume in Non-Penny
classes with that of its Affiliates in the
Select Origins, is equitable and not
unfairly discriminatory because the
Exchange will offer such market
participants a means to reduce
transaction fees by qualifying for higher
volume in Non-Penny classes. The
Exchange believes that offering all such
market participants the opportunity to
lower transaction fees by incentivizing
them to transact order flow in NonPenny classes in turn benefits all market
participants. To the extent that this
purpose is achieved, all 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 in
Non-Penny classes directed to the
Exchange will benefit all market
participants and improve competition
on the Exchange.
The Exchange believes that the
proposal to allow the aggregation of
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trading activity of Members and their
Affiliates for purposes of the fee
reduction is fair, equitable and not
unreasonably discriminatory. The
Exchange believes the proposed rule
change is reasonable because it would
allow aggregation of the trading activity
of Members and their Affiliates in the
Select Origins for purposes of the fee
reduction only in very narrow
circumstances, namely, where the firm
is an Affiliate as defined in the
Exchange’s Fee Schedule. Furthermore,
other exchanges, including MIAX
PEARL’s affiliate, Miami International
Securities Exchange, LLC (‘‘MIAX
Options,’’), as well as the Exchange,
have rules that permit the aggregation of
the trading activity of affiliated entities
for the purposes of calculating and
assessing certain fees.17 The Exchange
believes that offering all such market
participants the opportunity to lower
transaction fees by incentivizing them to
transact order flow in Non-Penny
classes in turn benefits all market
participants.
The Exchange believes that the
proposal, which would only include
volume transacted in Non-Penny classes
of Members and their Affiliates from the
Select Origins for purposes of the
threshold aggregation, is fair, equitable
and not unreasonably discriminatory.
The Exchange believes that not
including Priority Customer volume
transacted in Non-Penny classes is
reasonable because Priority Customers
already receive a higher level of rebates
offered by the Exchange for transactions
in Non-Penny classes, higher than the
rebate amounts proposed for the Select
Origins. In Non-Penny classes, Priority
Customers can receive Maker rebates of
between ($0.85) to ($1.05) compared to
the proposed highest tier rebate of
($0.85) for Select Origins. Other
exchanges use similar qualifications for
use in tier thresholds. For example, on
Cboe BZX, for Firm, Broker Dealer, and
Joint Back Office, a member would be
required to have an ADAV (average
daily added volume) in Non-Customer
Non-Penny Orders >=0.20% of average
OCV (OCC Customer Volume), as one of
the criteria (criteria 3) to reach tier 3 or
tier 4.18 Accordingly, the Exchange
believes that it is fair, equitable, and not
unreasonably discriminatory to not
include the Priority Customer volume of
Members and their Affiliates from the
Select Origins for purposes of the
threshold aggregation.
17 See MIAX Options Fee Schedule, Section
(1)(a)(i).
18 See Cboe BZX Options Exchange Fee Schedule
(Firm, Broker Dealer, and Joint Back Office NonPenny Pilot Add Volume Tiers).
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The Exchange believes that the
proposed rule changes applicable to
Members’ volume in Non-Penny classes
are consistent with Section 6(b)(5) of the
Act in that they to promote just and
equitable principles of trade of options
in Non-Penny classes. To the extent
Member volume in Non-Penny classes is
increased by the proposal, market
participants will increasingly compete
for the opportunity to trade on the
Exchange in Non-Penny classes which
could result in more orders that are
narrower and larger-sized. The resulting
increased volume and liquidity will
benefit all Exchange participants by
providing more trading opportunities
and tighter spreads.
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
Exchange believes that the proposed
changes would increase both
intermarket and intramarket
competition by encouraging MIAX
PEARL Market Makers as well as NonPriority Customers, Firms, BrokerDealers and Non-MIAX PEARL Market
Makers to direct their orders to the
Exchange, which should provide
liquidity to the marketplace and
increase the volume of contracts traded
on MIAX PEARL. The Exchange
believes that the proposed changes in
the tier structure for these market
participants should provide additional
liquidity that enhances the quality of
the Exchange’s markets and increases
the number of trading opportunities on
MIAX PEARL for all participants who
will be able to compete for such
opportunities. The Exchange
additionally believes that the proposed
changes in volume associated with NonPenny classes and the opportunity to
receive higher rebates and lower fees as
a result of achieving the specified
volume in Non-Penny classes should
provide additional liquidity in NonPenny classes and encourage order flow
for such classes. To the extent that there
are market participants that are not able
to aggregate order flow with Affiliates,
the Exchange believes that this should
incent such market participants 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 especially in Non-Penny
classes. This should benefit all market
participants and improve competition
on the Exchange.
PO 00000
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2691
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 all 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,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.
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–
PEARL–2017–40 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.
19 15
20 17
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CFR 240.19b–4(f)(2).
18JAN1
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All submissions should refer to File
Number SR–PEARL–2017–40. 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 website (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 website 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.
Persons submitting comments are
cautioned that we do not redact or edit
personal identifying information from
comment submissions. You should
submit only information that you wish
to make available publicly. All
submissions should refer to File
Number SR–PEARL–2017–40 and
should be submitted on or before
February 8, 2018.
‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on January 2,
2018, BOX Options Exchange LLC (the
‘‘Exchange’’) filed with the Securities
and Exchange Commission
(‘‘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.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.21
Eduardo A. Aleman,
Assistant Secretary.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
[FR Doc. 2018–00724 Filed 1–17–18; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
sradovich on DSK3GMQ082PROD with NOTICES
[Release No. 34–82491; File No. SR–BOX–
2018–01]
Self-Regulatory Organizations; BOX
Options Exchange LLC; Notice of
Filing and Immediate Effectiveness of
a Proposed Rule Change To Amend
BOX Rule 3030 To Establish Rules
Related to the Use of Floor Broker
Error Accounts
I. Self-Regulatory Organization’s
Statement of the Terms of the Substance
of the Proposed Rule Change
The Exchange proposes to amend
BOX Rule 3030 to establish rules related
to the use of Floor Broker error
accounts. The text of the proposed rule
change is available from the principal
office of the Exchange, at the
Commission’s Public Reference Room
and also on the Exchange’s internet
website at https://boxoptions.com.
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
self-regulatory organization included
statements concerning the purpose of,
and basis for, the proposed rule change
and discussed any comments it received
on the proposed rule change. The text
of these statements may be examined at
the places specified in Item IV below.
The self-regulatory organization has
prepared summaries, set forth in
Sections A, B, and C below, of the most
significant aspects of such statements.
1. Purpose
The Exchange proposes to amend
BOX Rule 3030 to establish rules related
to the use of Floor Broker error
accounts. First, the Exchange proposes
that each Participant who conducts a
business as a Floor Broker on the
Exchange and who is not self-clearing
must establish and maintain an account
with a clearing Participant of the
Exchange, for the sole purpose of
carrying positions resulting from bona
fide errors made in the course of its
floor brokerage business.3 Further, with
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 A ‘‘Bona fide Error’’ is defined as (i) the
inaccurate conveyance or execution of any term of
an order including, but not limited to, price,
number of shares or other unit of trading;
identification of the security; identification of the
account for which securities are purchased or sold;
2 17
January 11, 2018.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
21 17
CFR 200.30–3(a)(12).
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18:27 Jan 17, 2018
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respect to Floor Brokers only, such an
account for option transactions must be
maintained with an entity that is also a
member of the Options Clearing
Corporation.
In practice, a Floor Broker will
remedy a bona fide error by entering a
subsequent trade on behalf of the
customer on the correct terms of the
original order. These types of
transactions are transactions which
broker-dealers place to remedy the
execution of customer orders that have
been placed in error or mishandled due
to an error involving any term of an
order, including but not limited to, for
example, price, number of contracts,
identification of security, or execution
of a transaction on the wrong side of the
market.
Next, the Exchange proposes that each
Participant which conducts business as
a Floor Broker must make available to
the Exchange, upon request, accurate
and complete records of all trades
cleared in such Participant’s error
account. These records must include the
following audit trail data elements: (1)
Name or identifying symbol of the
security; (2) number of shares or
quantity of security; (3) transaction
price; (4) time of trade execution; (5)
executing Floor Broker badge number,
or alpha symbol as may be used from
time to time, in regard to its side of the
contract; (6) executing Floor Broker
badge number, or alpha symbol as may
be used from time to time, of the contra
side to the contract; (7) clearing firm
number, or alpha symbol as may be
used from time to time, in regard to its
side of the contract; (8) clearing firm
number, or alpha symbol as may be
used from time to time, in regard to the
contra side of the contract; (9)
designation of whether the account for
which the order was executed was that
of a Participant; (10) the nature and
amount of the error; (11) the Participant
that cleared the error trade on the
Participant’s behalf; (12) an explanation
of the means by which the Participant
resolved the error; (13) the aggregate
amount of liability that the Participant
lost or otherwise misplaced order tickets; short
sales that were instead sold long or vice versa; or
the execution of an order on the wrong side of a
market; (ii) the unauthorized or unintended
purchase, sale, or allocation of securities, or the
failure to follow specific client instructions; (iii) the
incorrect entry of data into relevant systems,
including reliance on incorrect cash positions,
withdrawals, or securities positions reflected in an
account; or (iv) a delay, outage, or failure of a
communication system used to transmit market
data prices or to facilitate the delivery or execution
of an order. See Securities Exchange Act Release
No. 55884 (June 8, 2007), 72 FR 32926 (June 14,
2007) (Order Exempting Certain Error Correction
Transactions from Rule 611 of Regulation NMS
under the Securities Exchange Act of 1934).
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]]>Agencies
[Federal Register Volume 83, Number 12 (Thursday, January 18, 2018)]
[Notices]
[Pages 2686-2692]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-00724]
=======================================================================
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-82490; File No. SR-PEARL-2017-40]
Self-Regulatory Organizations; MIAX PEARL, LLC; Notice of Filing
and Immediate Effectiveness of a Proposed Rule Change To Amend the MIAX
PEARL Fee Schedule
January 11, 2018.
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 December 29, 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.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of the
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
website 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 to (i) modify the
monthly volume thresholds that apply to MIAX PEARL Market Makers \3\ in
certain tiers, and to establish rebates and fees for new Tier 2 and new
Tier 6 applicable to Market Makers, (ii) modify the monthly volume
thresholds that apply to MIAX PEARL Non-Priority Customers, Firms,
Broker-Dealers and Non-MIAX PEARL Market Makers in Tier 4, and to
establish rebates and fees for a new Tier 5 applicable to such market
participants who are not Priority Customers \4\ or MIAX PEARL Market
Makers; and (iii) offer Members \5\ the Maker Rebate and
[[Page 2687]]
the Taker Fee associated with the highest Tier in Non-Penny classes (as
defined below) for transactions in Non-Penny classes if such Member
executes more than 0.30% volume in Non-Penny classes, not including
Excluded Contracts,\6\ as compared to the TCV \7\ in all MIAX PEARL
listed option classes.
---------------------------------------------------------------------------
\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\ ``Priority Customer'' means a person or entity that (i) is
not a broker or dealer in securities, and (ii) does not place more
than 390 orders in listed options per day on average during a
calendar month for its own beneficial accounts(s). See Exchange Rule
100, including Interpretations and Policies .01.
\5\ ``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.
\6\ ``Excluded Contracts'' means any contracts routed to an away
market for execution. See the Definitions Section of the Fee
Schedule.
\7\ ``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.
---------------------------------------------------------------------------
The Exchange currently assesses transaction rebates and fees to all
market participants which are based upon the total monthly volume
executed by the Member on MIAX PEARL in the relevant, respective origin
type (not including Excluded Contracts) expressed as a percentage of
TCV. 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.\8\ Members that place resting liquidity, i.e., orders
resting on the book of the MIAX PEARL System,\9\ 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 \10\ (``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 within the same tier.
---------------------------------------------------------------------------
\8\ ``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.
\9\ The term ``System'' means the automated trading system used
by the Exchange for the trading of securities. See Exchange Rule
100.
\10\ See Securities Exchange Act Release No. 82391 (December 22,
2017), 82 FR 61622 (December 28, 2017) (SR-PEARL-2017-39).
---------------------------------------------------------------------------
Transaction Rebates and Fees for MIAX PEARL Market Makers
Transaction rebates and fees applicable to all MIAX PEARL Market
Makers are currently assessed according to the following table:
----------------------------------------------------------------------------------------------------------------
Per contract rebates/ Per contract rebates/
fees for penny classes fees for non-penny
Origin Tier Volume criteria -------------------------- classes
-------------------------
Maker Taker Maker Taker
----------------------------------------------------------------------------------------------------------------
All MIAX PEARL Market Makers. 1 0.00%-0.10%..... ($0.25) $0.50 ($0.30) $1.05
2 Above 0.10%- (0.40) 0.48 (0.60) 1.03
0.50%.
3 Above 0.50%- (0.47) 0.47 (0.65) 1.02
0.75% or Above
2.0% in SPY.
4 Above 0.75%..... (0.48) 0.47 (0.70) 1.02
----------------------------------------------------------------------------------------------------------------
The Exchange proposes to modify the monthly volume thresholds
applicable to the Exchange's Market Makers to adjust the thresholds in
current Tiers 1, 3 and 4 and to add a new Tier 2 threshold and
corresponding Tier 2 rebates and fees, as well as to add a new Tier 6
threshold and corresponding Tier 6 rebates and fees. Specifically, the
Exchange proposes to adjust the calculation threshold of Tier 1's
volume criteria from 0.00% up to 0.10% of the total monthly volume
executed by the Member on MIAX PEARL, not including Excluded Contracts,
divided by the TCV, to become above 0.00% up to 0.05% of the total
monthly volume executed by the Member on MIAX PEARL, not including
Excluded Contracts, divided by the TCV. The Exchange then proposes to
add a new Tier 2 threshold applicable to all MIAX PEARL Market Makers.
The new Tier 2 threshold volume criteria shall be calculated as above
0.05% up to 0.25% of the total monthly volume executed by the Member on
MIAX PEARL, not including Excluded Contracts, divided by the TCV.
Further, the Exchange proposes to adjust the calculation threshold
of former Tier 2 and now Tier 3's volume criteria from above 0.10% up
to 0.50% of the total monthly volume executed by the Member on MIAX
PEARL, not including Excluded Contracts, divided by the TCV, to become
above 0.25% up to 0.50% of the total monthly volume executed by the
Member on MIAX PEARL, not including Excluded Contracts, divided by the
TCV. Former Tier 3 will now become Tier 4.
The Exchange additionally proposes to adjust the calculation
threshold of former Tier 4 and now Tier 5's volume criteria from above
0.75% of the total monthly volume executed by the Member on MIAX PEARL,
not including Excluded Contracts, divided by the TCV, to become above
0.75% up to 1.00% of the total monthly volume executed by the Member on
MIAX PEARL, not including Excluded Contracts, divided by the TCV.
The Exchange then proposes to add a new Tier 6 threshold applicable
to all MIAX PEARL Market Makers. The new Tier 6 threshold volume
criteria shall be calculated as above 1.00% of the total monthly volume
executed by the
[[Page 2688]]
Member on MIAX PEARL, not including Excluded Contracts, divided by the
TCV.
The new thresholds for MIAX PEARL Market Makers will be as set
forth in the following table:
----------------------------------------------------------------------------------------------------------------
Per contract rebates/ Per contract rebates/
fees for penny classes fees for non-penny
Origin Tier Volume criteria -------------------------- classes
-------------------------
Maker Taker Maker Taker
----------------------------------------------------------------------------------------------------------------
All MIAX PEARL Market Makers. 1 0.00%-0.05%..... ($0.25) $0.50 ($0.30) $1.05
2 Above 0.05%- (0.40) 0.50 (0.30) 1.05
0.25%.
3 Above 0.25%- (0.40) 0.48 (0.60) 1.03
0.50%.
4 Above 0.50%- (0.47) 0.47 (0.65) 1.02
0.75% or Above
2.0% in SPY.
5 Above 0.75%- (0.48) 0.47 (0.70) 1.02
1.00%.
6 Above 1.00%..... (0.48) 0.47 (0.85) 1.02
----------------------------------------------------------------------------------------------------------------
The Exchange believes that the proposed new monthly volume tier and
new rebates/fees in Tier 2 should provide incentives for the Exchange's
Market Makers to more aggressively provide liquidity in Penny classes
so that they can achieve the higher Maker rebate in Penny classes with
less volume than previously required in the former tier. The Exchange
additionally believes that the proposed new monthly volume tier and new
rebates/fees in Tier 6 should provide incentives for the Exchange's
Market Makers to more aggressively provide liquidity in Non-Penny
classes so that they can achieve a higher Maker rebate in Non-Penny
classes than previously offered. The Exchange believes that increased
MIAX PEARL Market Maker volume should make the MIAX PEARL marketplace
an attractive venue where the Exchange's Market Makers are incentivized
to submit orders with narrow spreads and with greater size, deepening
and enhancing the quality of the MIAX PEARL marketplace. This should in
turn provide more trading opportunities and tighter spreads for other
market participants and result in a corresponding increase in order
flow from such other market participants.
Transaction Rebates and Fees for Other Market Participants That Are Not
Priority Customers or MIAX PEARL Market Makers
Transaction rebates and fees applicable to all other market
participants that are not Priority Customers or MIAX PEARL Market
Makers are currently assessed according to the following table:
----------------------------------------------------------------------------------------------------------------
Per contract rebates/ Per contract rebates/
fees for penny classes fees for non-penny
Origin Tier Volume criteria -------------------------- classes
-------------------------
Maker Taker Maker Taker
----------------------------------------------------------------------------------------------------------------
Non-Priority Customer, Firm, 1 0.00%-0.10%..... ($0.25) $0.50 ($0.30) $1.05
BD, and Non-MIAX PEARL 2 Above 0.10%- (0.40) 0.49 (0.60) 1.04
Market Makers. 3 0.50%. (0.45) 0.48 (0.65) 1.04
Above 0.50%-
0.75%.
4 Above 0.75%..... (0.48) 0.48 (0.70) 1.04
----------------------------------------------------------------------------------------------------------------
The Exchange proposes to modify the monthly volume thresholds
applicable to all Non-Priority Customers, Firms, Broker-Dealers and
Non-MIAX PEARL Market Makers to adjust the threshold in Tier 4 set
forth above and to add a new Tier 5 threshold and corresponding Tier 5
rebates and fees. Specifically, the Exchange proposes to adjust the
calculation threshold of Tier 4's volume criteria from above 0.75% of
the total monthly volume executed by the Member on MIAX PEARL, not
including Excluded Contracts, divided by the TCV, to become above 0.75%
up to 1.00% of the total monthly volume executed by the Member on MIAX
PEARL, not including Excluded Contracts, divided by the TCV. The
rebates and fees applicable in the new Tier 5 shall be ($0.48) and
$0.48 per contract for Penny classes, and ($0.85) and $1.04 for Non-
Penny classes.
Additionally, the Exchange proposes to add a new Tier 5 threshold
applicable to all such market participants. The new Tier 5 threshold
volume criteria shall be calculated as above 1.00% of the total monthly
volume executed by the Member on MIAX PEARL, not including Excluded
Contracts, divided by the TCV.
The new thresholds for Non-Priority Customers, Firms, Broker-
Dealers and Non-MIAX PEARL Market Makers will be as set forth in the
following table:
----------------------------------------------------------------------------------------------------------------
Per contract rebates/ Per contract rebates/
fees for penny classes fees for non-penny
Origin Tier Volume criteria -------------------------- classes
-------------------------
Maker Taker Maker Taker
----------------------------------------------------------------------------------------------------------------
Non-Priority Customer, Firm, 1 0.00%-0.10%..... ($0.25) $0.50 ($0.30) $1.05
BD, and Non-MIAX PEARL 2 Above 0.10%- (0.40) 0.49 (0.60) 1.04
Market Makers. 3 0.50%. (0.45) 0.48 (0.65) 1.04
Above 0.50%-
0.75%.
4 Above 0.75%- (0.48) 0.48 (0.70) 1.04
1.00%.
5 Above 1.00%..... (0.48) 0.48 (0.85) 1.04
----------------------------------------------------------------------------------------------------------------
[[Page 2689]]
The Exchange believes that the proposed new monthly volume tier and
higher rebate in Tier 5 should provide incentives for such market
participants to direct greater volume to the Exchange in Non-Penny
classes. The Exchange believes that increased order flow by these
market participants should make the MIAX PEARL marketplace an
attractive venue where these market participants are incentivized to
submit orders with narrower spreads and with greater size, deepening
and enhancing the quality of the MIAX PEARL marketplace. This should in
turn provide more trading opportunities and tighter spreads for all
market participants and result in a corresponding increase in order
flow from all market participants.
Member Transaction Maker Rebates and Taker Fees for Non-Penny Classes
The Exchange proposes to offer Members transacting volume in MIAX
PEARL Market Maker, Non-Priority Customer, Firm, Broker Dealer, and
Non-MIAX PEARL Market Maker origin types (the ``Select Origins'') a new
method to achieve higher rebates and lower fees for transactions in
Non-Penny classes. Specifically, the Exchange proposes to offer Members
transacting volume in the Select Origins the Maker rebate and the Taker
fee associated with the highest Tier for that respective origin type in
Non-Penny classes for transactions in Non-Penny classes if such Member
executes more than 0.30% volume in Non-Penny classes, not including
Excluded Contracts, as compared to the TCV in all MIAX PEARL listed
option classes. For example, under the proposed tiers, if a Market
Maker transacted monthly volume of 0.45% in both Penny and Non-Penny
classes, not including Excluded Contracts, as divided by TCV, such
Member would receive proposed Tier 3 rebates and fees: Maker rebate of
($0.40) for orders that placed resting liquidity on the book and Taker
fee of $0.48 for orders that removed liquidity from the book in Penny
classes; Maker rebate of ($0.60) for orders that placed resting
liquidity on the book and Taker fee of $1.03 for orders that removed
liquidity from the book in Non-Penny classes. However, if such Member's
volume was heavily concentrated in Non-Penny classes where its Non-
Penny executed volume was above 0.30%, not including Excluded
Contracts, as divided by TCV in all MIAX PEARL listed options classes,
such Member would receive a Maker rebate of ($0.85) and Taker fee of
$1.02, the proposed rates for Tier 6 in Non-Penny classes for Market
Makers. Its Maker rebate of ($0.40) and Taker fee of $0.48 will
continue to apply for Penny classes for Market Makers in proposed Tier
3. This example would be similar for Non-Priority Customers, Firms,
Broker Dealers, and Non-MIAX PEARL Market Makers, except for the
variations in the rates and thresholds. For example, under the proposed
tiers, if a Member in these origins transacted monthly volume of 0.45%
in both Penny and Non-Penny classes, not including Excluded Contracts,
as divided by TCV, such Member would receive Tier 2 rebates and fees:
Maker rebate of ($0.40) for orders that placed resting liquidity on the
book and Taker fee of $0.49 for orders that removed liquidity from the
book in Penny classes; Maker rebate of ($0.60) for orders that placed
resting liquidity on the book and Taker fee of $1.04 for orders that
removed liquidity from the book in Non-Penny classes. However, if such
Member's volume was heavily concentrated in Non-Penny classes where its
Non-Penny executed volume was above 0.30%, not including Excluded
Contracts, as divided by TCV in all MIAX PEARL listed options classes,
such Member would receive a Maker rebate of ($0.85) and Taker fee of
$1.04, the proposed rates for Tier 5 in Non-Penny classes for these
origins. Its Maker rebate of ($0.40) and Taker fee of $0.49 will
continue to apply for Penny classes in that origin type in proposed
Tier 2.
Lastly, the Exchange proposes to offer Members an alternative
method to achieve such higher rebates and lower fees for transactions
in Non-Penny classes by permitting the Member to aggregate its volume
in Non-Penny classes with that of its Affiliates \11\ in the Select
Origins. For avoidance of doubt, volume from Priority Customer in Non-
Penny classes will not be aggregated toward the 0.30% volume threshold.
Specifically, any Member and its Affiliates will be credited the Maker
rebate associated with the highest tier for transactions in Non-Penny
classes and will be assessed the lowest Taker fee associated with the
highest tier for transactions in Non-Penny classes if such Member
together with its Affiliates in the Select Origins executes more than
0.30% volume in Non-Penny classes, not including Excluded Contracts, as
compared to TCV in all MIAX PEARL option classes. The Exchange believes
that these incentives will encourage Members to transact a greater
number of contracts in Non-Penny classes on the Exchange.
---------------------------------------------------------------------------
\11\ ``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 following process. A MIAX PEARL Market Maker
appoints an EEM and an EEM appoints a MIAX PEARL Market Maker, for
the purposes of the Fee Schedule, by each completing and sending an
executed Volume Aggregation Request Form by email to
[email protected] 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.
---------------------------------------------------------------------------
The proposed rule change is scheduled to become operative January
2, 2018.
2. Statutory Basis
The Exchange believes that its proposal to amend its Fee Schedule
is consistent with Section 6(b) of the Act \12\ in general, and
furthers the objectives of Section 6(b)(4) of the Act,\13\ in that it
is an equitable allocation of reasonable dues, fees and other charges
among Exchange members and issuers and other persons using its
facilities, and 6(b)(5) of the Act,\14\ 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.
---------------------------------------------------------------------------
\12\ 15 U.S.C. 78f(b).
\13\ 15 U.S.C. 78f(b)(4).
\14\ 15 U.S.C. 78f(b)(1) and (b)(5).
---------------------------------------------------------------------------
The Exchange believes that the proposed new tier structure
applicable to the Exchange's Market Makers is consistent with Section
6(b)(4) of the Act in that it is fair, equitable and not unreasonably
discriminatory and should improve market quality for the Exchange's
Market Makers and
[[Page 2690]]
consequently all market participants. The proposed changes to the MIAX
PEARL Market Maker tier structure and rebates and fees are fair and
equitable and not unreasonably discriminatory because they apply
equally to all MIAX PEARL Market Maker orders. All similarly situated
MIAX PEARL Market Maker orders are subject to the same rebate and fee
schedule, and access to the Exchange is offered on terms that are not
unfairly discriminatory.
The Exchange believes that the proposed rule changes applicable to
MIAX PEARL Market Makers are consistent with Section 6(b)(5) of the Act
in that they promote equitable access to the Exchange for all market
participants. To the extent that MIAX PEARL Market Maker volume is
increased by the proposal, market participants will increasingly
compete for the opportunity to trade on the Exchange including sending
more orders that are narrower and larger-sized. The resulting increased
volume and liquidity will benefit all Exchange participants by
providing more trading opportunities and tighter spreads.
The specific volume thresholds of the Tiers and the rebates and
fees set forth in new Tiers 2 and 6 applicable to the Exchange's Market
Makers were set based upon business determinations and an analysis of
current volume levels. The Exchange believes that the proposed new
monthly volume tier and new rebates/fees in Tier 2 should provide
incentives for the Exchange's Market Makers to more aggressively
provide liquidity so that they can achieve the higher Maker rebate in
Penny classes with less volume than previously required in the former
tier. The Maker Rebates and Taker Fees set forth in new Tier 6 are
within the range of rebates and fees at other exchanges that have a
Maker-Taker fee structure.\15\ The volume thresholds are intended to
incentivize MIAX PEARL Market Makers to increase the number of orders
they send to the Exchange so that they can achieve the next threshold,
and to encourage all market participants to send more orders as well.
Increasing the number of orders sent to the Exchange will in turn
provide tighter and more liquid markets, and therefore attract more
business overall. Similarly, the different rebate rates at the
different tier levels are based on an analysis of current revenue and
volume levels and are intended to provide increasing incentives to MIAX
PEARL Market Makers for increasing the volume of orders sent to, and
contracts executed on, the Exchange. The specific amounts of the tiers
and rates are set in order to encourage MIAX PEARL Markets Makers to
reach for higher tiers.
---------------------------------------------------------------------------
\15\ See NYSE Arca Options Fees and Charges under ``NYSE Arca
Options: Trade-Related Charges For Standard Options''; see also Cboe
BZX Options Exchange Fee Schedule under ``Transaction Fees''.
---------------------------------------------------------------------------
The Exchange believes that the proposed new tier structure
applicable to the Exchange's other market participants who are not
Priority Customers or MIAX PEARL Market Makers, i.e. Non-Priority
Customers, Firms, Broker-Dealers and Non-MIAX PEARL Market Makers, is
consistent with Section 6(b)(4) of the Act in that it is fair,
equitable and not unreasonably discriminatory and should improve market
quality for such market participants as well as MIAX PEARL Market
Makers and Priority Customers. The proposed changes to the tier
structure and rebates and fees applicable to such market participants
are fair and equitable and not unreasonably discriminatory because they
apply equally to all orders of such market participants. All similarly
situated orders of such market participants are subject to the same
rebate and fee schedule, and access to the Exchange is offered on terms
that are not unfairly discriminatory.
The Exchange believes that the proposed rule changes applicable to
Non-Priority Customers, Firms, Broker-Dealers and Non-MIAX PEARL Market
Makers are consistent with Section 6(b)(5) of the Act in that they
promote equitable access to the Exchange for all market participants.
To the extent order flow by these market participants is increased by
the proposal, other market participants will increasingly compete for
the opportunity to trade on the Exchange including sending more orders
that are narrower and larger sized. The resulting increased volume and
liquidity will benefit all Exchange participants by providing more
trading opportunities and tighter spreads.
The specific volume thresholds of Tiers 4 and 5 and the rebates and
fees set forth in new Tier 5 applicable to Non-Priority Customers,
Firms, Broker-Dealers and Non-MIAX PEARL Market Makers were set based
upon business determinations and an analysis of current volume levels.
The Maker Rebates and Taker Fees set forth in new Tier 5 are within the
range of rebates and fees at other exchanges that have a Maker-Taker
fee structure.\16\ The volume thresholds are intended to incentivize
such market participants to increase the number of orders they send to
the Exchange so that they can achieve the next threshold, and to
encourage all market participants to send more orders as well.
Increasing the number of orders sent to the Exchange will in turn
provide tighter and more liquid markets, and therefore attract more
business overall. Similarly, the different rebate rates at the
different tier levels are based on an analysis of current revenue and
volume levels and are intended to provide increasing incentives to Non-
Priority Customers, Firms, Broker-Dealers and Non-MIAX PEARL Market
Makers for increasing the volume of orders sent to, and contracts
executed on, the Exchange. The specific amounts of the tiers and rates
are set in order to encourage such market participants to reach for
higher tiers.
---------------------------------------------------------------------------
\16\ Id.
---------------------------------------------------------------------------
The Exchange believes that the proposed rule change applicable to
Members' volume in Non-Penny classes is consistent with Section 6(b)(4)
of the Act in that it is fair, equitable and not unreasonably
discriminatory and should improve market quality for the Exchange's
order flow in Non-Penny classes which will benefit all market
participants. The proposed changes are fair and equitable and not
unreasonably discriminatory because they apply equally to all Member
orders in Non-Penny classes. All similarly situated Member orders in
Non-Penny classes are subject to the same rebates and fees if they
achieve the specified volume in Non-Penny classes, and access to the
Exchange is offered on terms that are not unfairly discriminatory. The
Exchange's proposal to offer Members and its Affiliates the opportunity
to achieve such higher rebates and lower fees for transactions in Non-
Penny classes by permitting the Member to aggregate its volume in Non-
Penny classes with that of its Affiliates in the Select Origins, is
equitable and not unfairly discriminatory because the Exchange will
offer such market participants a means to reduce transaction fees by
qualifying for higher volume in Non-Penny classes. The Exchange
believes that offering all such market participants the opportunity to
lower transaction fees by incentivizing them to transact order flow in
Non-Penny classes in turn benefits all market participants. To the
extent that this purpose is achieved, all 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 in Non-Penny classes
directed to the Exchange will benefit all market participants and
improve competition on the Exchange.
The Exchange believes that the proposal to allow the aggregation of
[[Page 2691]]
trading activity of Members and their Affiliates for purposes of the
fee reduction is fair, equitable and not unreasonably discriminatory.
The Exchange believes the proposed rule change is reasonable because it
would allow aggregation of the trading activity of Members and their
Affiliates in the Select Origins for purposes of the fee reduction only
in very narrow circumstances, namely, where the firm is an Affiliate as
defined in the Exchange's Fee Schedule. Furthermore, other exchanges,
including MIAX PEARL's affiliate, Miami International Securities
Exchange, LLC (``MIAX Options,''), as well as the Exchange, have rules
that permit the aggregation of the trading activity of affiliated
entities for the purposes of calculating and assessing certain
fees.\17\ The Exchange believes that offering all such market
participants the opportunity to lower transaction fees by incentivizing
them to transact order flow in Non-Penny classes in turn benefits all
market participants.
---------------------------------------------------------------------------
\17\ See MIAX Options Fee Schedule, Section (1)(a)(i).
---------------------------------------------------------------------------
The Exchange believes that the proposal, which would only include
volume transacted in Non-Penny classes of Members and their Affiliates
from the Select Origins for purposes of the threshold aggregation, is
fair, equitable and not unreasonably discriminatory. The Exchange
believes that not including Priority Customer volume transacted in Non-
Penny classes is reasonable because Priority Customers already receive
a higher level of rebates offered by the Exchange for transactions in
Non-Penny classes, higher than the rebate amounts proposed for the
Select Origins. In Non-Penny classes, Priority Customers can receive
Maker rebates of between ($0.85) to ($1.05) compared to the proposed
highest tier rebate of ($0.85) for Select Origins. Other exchanges use
similar qualifications for use in tier thresholds. For example, on Cboe
BZX, for Firm, Broker Dealer, and Joint Back Office, a member would be
required to have an ADAV (average daily added volume) in Non-Customer
Non-Penny Orders >=0.20% of average OCV (OCC Customer Volume), as one
of the criteria (criteria 3) to reach tier 3 or tier 4.\18\
Accordingly, the Exchange believes that it is fair, equitable, and not
unreasonably discriminatory to not include the Priority Customer volume
of Members and their Affiliates from the Select Origins for purposes of
the threshold aggregation.
---------------------------------------------------------------------------
\18\ See Cboe BZX Options Exchange Fee Schedule (Firm, Broker
Dealer, and Joint Back Office Non-Penny Pilot Add Volume Tiers).
---------------------------------------------------------------------------
The Exchange believes that the proposed rule changes applicable to
Members' volume in Non-Penny classes are consistent with Section
6(b)(5) of the Act in that they to promote just and equitable
principles of trade of options in Non-Penny classes. To the extent
Member volume in Non-Penny classes is increased by the proposal, market
participants will increasingly compete for the opportunity to trade on
the Exchange in Non-Penny classes which could result in more orders
that are narrower and larger-sized. The resulting increased volume and
liquidity will benefit all Exchange participants by providing more
trading opportunities and tighter spreads.
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 Exchange believes that the
proposed changes would increase both intermarket and intramarket
competition by encouraging MIAX PEARL Market Makers as well as Non-
Priority Customers, Firms, Broker-Dealers and Non-MIAX PEARL Market
Makers to direct their orders to the Exchange, which should provide
liquidity to the marketplace and increase the volume of contracts
traded on MIAX PEARL. The Exchange believes that the proposed changes
in the tier structure for these market participants should provide
additional liquidity that enhances the quality of the Exchange's
markets and increases the number of trading opportunities on MIAX PEARL
for all participants who will be able to compete for such
opportunities. The Exchange additionally believes that the proposed
changes in volume associated with Non-Penny classes and the opportunity
to receive higher rebates and lower fees as a result of achieving the
specified volume in Non-Penny classes should provide additional
liquidity in Non-Penny classes and encourage order flow for such
classes. To the extent that there are market participants that are not
able to aggregate order flow with Affiliates, the Exchange believes
that this should incent such market participants 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 especially in Non-Penny classes. This should
benefit all market participants and improve competition on the
Exchange.
The Exchange notes that it operates in a highly competitive market
in which market participants can readily favor competing venues if they
deem fee levels at a particular venue to be excessive. In such an
environment, the Exchange must continually adjust its 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 all 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,\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 [email protected]. Please include
File Number SR-PEARL-2017-40 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.
[[Page 2692]]
All submissions should refer to File Number SR-PEARL-2017-40. 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 website (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 website 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. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-PEARL-2017-40 and should be submitted on
or before February 8, 2018.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\21\
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\21\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-00724 Filed 1-17-18; 8:45 am]
BILLING CODE 8011-01-P
