Self-Regulatory Organizations; Miami International Securities Exchange, LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Its Fee Schedule, 6630-6633 [2018-02986]

Download as PDF 6630 Federal Register / Vol. 83, No. 31 / Wednesday, February 14, 2018 / Notices or credit (‘‘Credit PPA’’) to the affected DTC participant (‘‘Participant’’).8 Upon the receipt of a PPA, affected Participants would need to make adjustments to their affected customers’ accounts for any misapplied principal or income and any associated interest.9 In addition, affected Participants may need to process adjustments against any customer that traded the security after the initial payment had occurred.10 Currently, DTC does not accept a request for a PPA, regardless of whether it would be a Debit PPA or a Credit PPA, beyond 90 calendar days after the initial payment date.11 If a Paying Agent wants to make a PPA beyond 90 days, the adjustment cannot be processed through DTC.12 Instead, the Paying Agent must request from DTC a listing of all affected Participants and positions.13 Then, using that list, the Paying Agent must contact each affected Participant to make direct adjustments and/or payment arrangements outside of DTC.14 B. Proposed Timeline for Credit PPAs DTC proposes to extend the 90-day cutoff for PPA Credits to one year.15 DTC states that the new timeline for Credit PPAs would allow Paying Agents more time to correct allocations to Participants efficiently through DTC, rather than requiring the Paying Agent to make the Credit PPAs bilaterally with each Participant, outside of DTC.16 DTC states that this efficiency would allow Participants, their customers, and end investors to receive their credits more quickly.17 The proposed rule change would not alter the timeline for Debit PPAs. DTC states that Debit PPAs create significant credit risk exposure for Participants, customers, and investors as more time passes.18 DTC states that Participants have difficulty recovering debited funds from their customers that may no longer have an account, may not have available funds, or may no longer service the end investor.19 Therefore, DTC would preserve the 90-day cutoff for Debit PPAs. 8 Id. 9 Id. daltland on DSKBBV9HB2PROD with NOTICES 10 Id. 11 Id. 12 Id. C. Proposed Technical Changes to the Guide DTC also proposes some technical changes to the Guide. Specifically, DTC would modify the Guide to (i) remove an inaccurate statement that PPA adjustments appear on Participant statements—such adjustments do not appear on Participant statements; (ii) add the word ‘‘principal’’ to the list of payments that may be subject to a PPA—for consistency with the term ‘‘P&I;’’ and (iii) remove an incorrect reference to CMO/ABS securities.20 II. Discussion and Commission Findings Section 19(b)(2)(C) of the Act 21 directs the Commission to approve a proposed rule change of a selfregulatory organization if it finds that such proposed rule change is consistent with the requirements of the Act and rules and regulations thereunder applicable to such organization. The Commission finds that this proposal is consistent with Act, specifically Section 17A(b)(3)(F) of the Act.22 Section 17A(b)(3)(F) of the Act requires, in part, that the rules of the clearing agency be designed to promote the prompt and accurate clearance and settlement of securities transactions.23 By extending the cutoff period from 90 days to one year for the processing of Credit PPAs through DTC, DTC would be providing centralized processing for Credit PPAs for a longer period. Enabling Paying Agents to avail themselves of such central processing for a longer period would help the Paying Agents avoid the manual process of bilaterally processing the Credit PPAs outside of DTC after 90 days. In doing so, the proposal would enable Paying Agents to correct errors in Credit PPAs more efficiently and effectively over a longer period. Therefore, the Commission finds the proposed extension from 90 days to one year for Credit PPAs to be processed by DTC would help promote the prompt and accurate clearance and settlement of securities transactions, consistent with Section 17A(b)(3)(F) of the Act.24 The Commission also finds that DTC’s technical changes to the Guide would promote the prompt and accurate clearance and settlement of securities transactions, consistent with Section 17A(b)(3)(F) of the Act.25 Clarifying terms and descriptions in the Guide 13 Id. 14 Id. 21 15 16 Id. 22 15 17 Id. 23 Id. 18 Id. 24 Id. at 927–28. 19 Id. at 928. VerDate Sep<11>2014 22:07 Feb 13, 2018 U.S.C. 78s(b)(2)(C). U.S.C. 78q–1(b)(3)(F). 25 Id. Jkt 244001 PO 00000 III. Conclusion On the basis of the foregoing, the Commission finds that the proposal is consistent with the requirements of the Act, in particular the requirements of Section 17A of the Act 27 and the rules and regulations thereunder. It is therefore ordered, pursuant to Section 19(b)(2) of the Act, that proposed rule change SR–DTC–2017– 023 be, and hereby is, approved.28 For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.29 Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2018–02978 Filed 2–13–18; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–82673; File No. SR–MIAX– 2018–02] Self-Regulatory Organizations; Miami International Securities Exchange, LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Its Fee Schedule February 8, 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 January 30, 2018, Miami International Securities Exchange, LLC (‘‘MIAX Options’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’) a proposed rule change as described in Items I, II, and III below, which Items have been prepared by the Exchange. The Commission is publishing this notice to solicit comments on the 26 Id. 27 15 U.S.C. 78q–1. approving the proposed rule change, the Commission considered the proposals’ impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f). 29 17 CFR 200.30–3(a)(12). 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 28 In 20 Id. 15 Id. would help make the Guide more accurate and clear. Maintaining an accurate and clear Guide would enable Participants and other stakeholders to better understand their respective rights and obligations. Accordingly, the Commission finds that the proposed change to make technical changes to the Guide would promote the prompt and accurate clearance and settlement of securities transactions, consistent with the requirements of Section 17A(b)(3)(F) of the Act.26 Frm 00124 Fmt 4703 Sfmt 4703 E:\FR\FM\14FEN1.SGM 14FEN1 Federal Register / Vol. 83, No. 31 / Wednesday, February 14, 2018 / Notices proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange is filing a proposal to amend the MIAX Options Fee Schedule (the ‘‘Fee Schedule’’). The text of the proposed rule change is available on the Exchange’s website at https://www.miaxoptions.com/rulefilings, at MIAX’s principal office, and at the Commission’s Public Reference Room. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change daltland on DSKBBV9HB2PROD with NOTICES 1. Purpose The Exchange proposes to amend Section (1)(a)(iii) of the Fee Schedule to modify the volume threshold calculation methodology, in connection with the additional $0.02 per contract rebate offered to Members 3 for Priority Customer 4 orders executed in the PRIME 5 Auction as a PRIME Agency Order, pursuant to the Priority Customer Rebate Program.6 3 The term ‘‘Member’’ means an individual or organization approved to exercise the trading rights associated with a Trading Permit. Members are deemed ‘‘members’’ under the Exchange Act. See Exchange Rule 100. 4 The term ‘‘Priority Customer’’ means a person or entity that (i) is not a broker or dealer in securities, and (ii) does not place more than 390 orders in listed options per day on average during a calendar month for its own beneficial account(s). See Exchange Rule 100. 5 The MIAX Options Price Improvement Mechanism (‘‘PRIME’’) is a process by which a Member may electronically submit for execution (‘‘Auction’’) an order it represents as agent (‘‘Agency Order’’) against principal interest, and/or an Agency Order against solicited interest. For a complete description of PRIME and of PRIME order types and responses, see Exchange Rule 515A. 6 Under the Priority Customer Rebate Program, MIAX Options credits each Member the per contract amount resulting from each Priority Customer order transmitted by that Member which is executed electronically on the Exchange in all VerDate Sep<11>2014 22:07 Feb 13, 2018 Jkt 244001 The Exchange currently offers Members the opportunity to qualify for an additional $0.02 per contract rebate in connection with certain types of executions on the Exchange if the Member or its Affiliates 7 meets certain qualifications. Specifically, any Member or its Affiliate that qualifies for Priority Customer Rebate Program volume tiers 3 or higher is credited an additional $0.02 per contract for each Priority Customer order executed in the PRIME Auction as a PRIME Agency Order, over a threshold of 1,500,000 contracts in a month. Volume is recorded for and credits are delivered to the Member that submits the order to the Exchange. The Exchange proposes to modify the volume threshold calculation methodology in connection with that additional $0.02 per contract rebate. The Exchange proposes to change the volume threshold calculation methodology from a fixed number of contracts per month (1,500,000 per month) to a percentage of national customer volume in multiply-listed options classes listed on MIAX Options per month. The proposed threshold is above 0.60% of national customer volume in multiply-listed options classes listed on MIAX Options during the relevant month. National customer volume is the total volume reported by the Options Clearing Corporation (‘‘OCC’’) in MIAX Options classes in the ‘‘customer’’ range. Specifically, the Exchange proposes that any Member or its Affiliate that qualifies for Priority Customer Rebate Program volume tiers 3 or higher will be credited an additional $0.02 per contract for each Priority Customer order executed in the PRIME Auction as a PRIME Agency Order over a threshold of above 0.60% of national customer volume in multiply-listed options classes listed on MIAX Options during the relevant month. multiply-listed option classes (excluding certain orders specified in Section (1)(a)(iii) of the Fee Schedule), provided the Member meets certain percentage thresholds in a month as described in the Priority Customer Rebate Program table. See Section (1)(a)(iii) of the Fee Schedule. 7 ‘‘Affiliate’’ means (i) an affiliate of a Member of at least 75% common ownership between the firms as reflected on each firm’s Form BD, Schedule A, (‘‘Affiliate’’), or (ii) the Appointed Market Maker of an Appointed EEM (or, conversely, the Appointed EEM of an Appointed Market Maker). An ‘‘Appointed Market Maker’’ is a MIAX Market Maker (who does not otherwise have a corporate affiliation based upon common ownership with an EEM) that has been appointed by an EEM and an ‘‘Appointed EEM’’ is an EEM (who does not otherwise have a corporate affiliation based upon common ownership with a MIAX Market Maker) that has been appointed by a MIAX Market Maker, pursuant to the process described in the Fee Schedule. See Section (1)(a)(i) of the Fee Schedule. PO 00000 Frm 00125 Fmt 4703 Sfmt 4703 6631 There are no other changes to this rebate program. In particular, the Exchange currently excludes from the calculation certain types of orders, and those same types of orders will continue to be excluded using the new calculation methodology. Specifically, the Exchange excludes orders executed as QCC and cQCC Orders, mini-options, Priority Customer-to-Priority Customer Orders, C2C and cC2C Orders, cPRIME Agency Orders, PRIME and cPRIME AOC Responses, PRIME and cPRIME Contra-side Orders, PRIME and cPRIME Orders for which both the Agency and Contra-side Order are Priority Customers, and executions related to contracts that are routed to one or more exchanges in connection with the Options Order Protection and Locked/ Crossed Market Plan referenced in MIAX Options Rule 1400. The Exchange will continue to exclude those same orders from this rebate program. The Exchange further notes that these exclusions are identical to the exclusions that apply to other aspects of the Priority Customer Rebate Program as well. There is also no change to the additional rebate amount of $0.02 per contract. The Exchange believes that changing the volume threshold calculation methodology from a fixed number of contracts per month (1,500,000 per month) to a percentage of national customer volume in multiply-listed options classes listed on MIAX Options per month (above 0.60% of national customer volume in multiply-listed options classes listed on MIAX Options during the relevant month) will result in a threshold that is more consistently proportional to national customer volume executed during the relevant month, as actual national customer volume often changes on a month-tomonth basis. Since the Priority Customer Rebate Program is designed to encourage Members to execute greater Priority Customer volume on the Exchange, having a more consistent proportional measure in relation to the number of national customer volume executed in a given month will better align this particular rebate program to the core purpose of the Priority Customer Rebate Program. In turn, the Exchange believes that this change will further incentivize Members to execute a greater number of Priority Customer orders in the Exchange’s PRIME Auction mechanism. The Exchange believes that increased PRIME and Priority Customer volume will attract more liquidity to the Exchange, which benefits all market participants. Increased PRIME and Priority Customer order flow should E:\FR\FM\14FEN1.SGM 14FEN1 6632 Federal Register / Vol. 83, No. 31 / Wednesday, February 14, 2018 / Notices daltland on DSKBBV9HB2PROD with NOTICES attract liquidity providers, which in turn should make the MIAX Options marketplace an attractive venue where Market Makers may submit narrow quotations with greater size, deepening and enhancing the quality of the MIAX Options marketplace. This should 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. The credits paid out as part of the Priority Customer Rebate Program are drawn from the general revenues of the Exchange.8 The Exchange calculates volume thresholds on a monthly basis. The proposed rule change is scheduled to become operative on February 1, 2018. 2. Statutory Basis The Exchange believes that its proposal to amend its Fee Schedule is consistent with Section 6(b) of the Act in general, and furthers the objectives of Section 6(b)(4) of the Act in particular, in that it is an equitable allocation of reasonable dues, fees, and other charges among its members and issuers and other persons using its facilities. The Exchange also believes the proposal furthers the objectives of Section 6(b)(5) of the Act in that it is designed to promote just and equitable principles of trade, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general to protect investors and the public interest and is not designed to permit unfair discrimination between customers, issuers, brokers and dealers. The Exchange believes that changing the volume threshold calculation methodology from a fixed number of contracts per month (1,500,000 per month) to a percentage of national customer volume in multiply-listed options classes listed on MIAX Options per month (above 0.60% of national customer volume in multiply-listed options classes listed on MIAX Options during the relevant month) in the Priority Customer Rebate Program for the additional $0.02 rebate for Priority Customer orders submitted into PRIME as PRIME Agency is consistent with Section 6(b)(4) of the Act in that it is fair, equitable and not unreasonably discriminatory. The rebate program is reasonably designed because it 8 Despite providing credits under the Priority Customer Rebate Program, the Exchange represents that it will continue to have adequate resources to fund its regulatory program and fulfill its responsibilities as a self-regulatory organization while the Priority Customer Rebate Program is in effect. VerDate Sep<11>2014 22:07 Feb 13, 2018 Jkt 244001 incentivizes providers of Priority Customer order flow to send order flow to the Exchange and, upon meeting certain volume criteria, enables them to receive the credit in a manner that enables the Exchange to improve its overall competitiveness and strengthen its market quality for all market participants. The proposed change to the volume threshold calculation methodology is fair, equitable, and not unreasonably discriminatory because they will apply equally to all Priority Customer orders submitted as a PRIME Agency Order. All similarly situated Priority Customer orders are subject to the same rebate and volume calculations, and access to the Exchange is offered on terms that are not unfairly discriminatory. In addition, the proposed volume threshold calculation is equitable and not unfairly discriminatory because, while only Priority Customer order flow that is submitted as a PRIME Agency Order over the proposed threshold qualifies for the rebate, an increase in overall Priority Customer order flow will bring greater volume and liquidity, which benefits all market participants by providing more trading opportunities and tighter spreads. Market participants want to trade with Priority Customer order flow. To the extent Priority Customer order flow is increased by the proposal, market participants will increasingly compete for the opportunity to trade on the Exchange including sending more orders and providing narrower and larger sized quotations in the effort to trade with such Priority Customer order flow. The Exchange believes that the proposed rule change modifying the volume threshold calculation methodology for the $0.02 rebate from a fixed number of contracts per month (1,500,000 per month) to a percentage of national customer volume in multiplylisted options classes listed on MIAX Options per month (above 0.60% of national customer volume in multiplylisted options classes listed on MIAX Options during the relevant month) is consistent with Section 6(b)(5) of the Act in that it promotes just and equitable principles of trade since the Exchange believes that it will result in a threshold that is more consistently proportional to national customer volume executed during the relevant month, as actual national customer volume often changes on a month-tomonth basis. To the extent Member volume in Priority Customer orders and PRIME Agency Orders is increased by the proposal, market participants will increasingly compete for the PO 00000 Frm 00126 Fmt 4703 Sfmt 4703 opportunity to trade on the Exchange which could result in more liquidity on the Exchange. The Exchange believes that offering all such market participants the opportunity to lower transaction fees by incentivizing them to transact Priority Customer order flow in turn benefits all market participants. B. Self-Regulatory Organization’s Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act. The Exchange believes the proposal is consistent with robust competition by increasing the intermarket competition for order flow from market participants. To the extent that there is additional competitive burden on market participants without Priority Customer order flow and those market participants that are not able to aggregate order flow with Affiliates, the Exchange believes that this should incent Members to direct volume to the Exchange in order to provide additional liquidity that enhances the quality of its markets and increases the volume of contracts traded here. To the extent that this purpose is achieved, all the Exchange’s market participants should benefit from the improved market liquidity. Enhanced market quality and increased transaction volume that results from the anticipated increase in order flow directed to the Exchange will benefit all market participants and improve competition on the Exchange. The Exchange notes that it operates in a highly competitive market in which market participants can readily favor competing venues if they deem fee levels at a particular venue to be excessive. In such an environment, the Exchange must continually adjust its fees to remain competitive with other exchanges and to attract order flow. The Exchange believes that the proposal reflects this competitive environment. 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,9 and Rule 9 15 E:\FR\FM\14FEN1.SGM U.S.C. 78s(b)(3)(A)(ii). 14FEN1 Federal Register / Vol. 83, No. 31 / Wednesday, February 14, 2018 / Notices 19b–4(f)(2) 10 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: 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–MIAX–2018–02 and should be submitted on or before March 7, 2018. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.11 Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2018–02986 Filed 2–13–18; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION daltland on DSKBBV9HB2PROD with NOTICES Electronic Comments • Use the Commission’s internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– MIAX–2018–02 on the subject line. [Release No. 34–82674; File No. SR–NSCC– 2018–001] Paper Comments • Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549–1090. All submissions should refer to File Number SR–MIAX–2018–02. 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 February 8, 2018. 10 17 CFR 240.19b–4(f)(2). VerDate Sep<11>2014 22:07 Feb 13, 2018 Jkt 244001 Self-Regulatory Organizations; National Securities Clearing Corporation; Notice of Filing of Proposed Rule Change To Amend the By-Laws and Make Other Changes Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’),1 and Rule 19b–4 thereunder,2 notice is hereby given that on February 2, 2018, National Securities Clearing Corporation (‘‘NSCC’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change as described in Items I, II and III below, which Items have been prepared by the clearing agency. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Clearing Agency’s Statement of the Terms of Substance of the Proposed Rule Change The proposed rule change would amend the NSCC By-Laws (‘‘By-Laws’’) to (i) revise titles or offices and the powers and duties of the Board of Directors (‘‘Board’’) and certain designated officers of NSCC, (ii) revise the section describing the compensation of officers, and (iii) make certain technical changes and corrections.3 The 11 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 The By-Laws and the Certificate of Incorporation would each be incorporated by reference into NSCC’s Rules & Procedures (‘‘Rules’’). No changes have been made to NSCC’s Certificate of Incorporation since the most recently filed version of the Certificate of Incorporation. See Securities Exchange Act Release No. 13407 (March 1 15 PO 00000 Frm 00127 Fmt 4703 Sfmt 4703 6633 Rules 4 would also be amended to incorporate by reference the By-Laws and the Certificate of Incorporation of NSCC. II. Clearing Agency’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the clearing agency 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 clearing agency has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. (A) Clearing Agency’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose In NSCC’s review of the By-Laws, NSCC has identified and is proposing the following changes to the By-Laws: (i) Revising certain Board and designated officer titles or offices and updating the related powers and duties, (ii) revising the section describing the compensation of officers, and (iii) making certain technical changes and corrections. Specifically, regarding the proposed changes to the Board and designated officer titles or offices and updating the related powers and duties, NSCC is proposing to: (1) Change the title of Chairman of the Board to NonExecutive Chairman of the Board and update the related powers and duties associated with that role due to personnel changes in NSCC’s management, (2) add the office of the Chief Executive Officer (‘‘CEO’’), combine the office of the President and the office of the Chief Executive Officer into one office (President and Chief Executive Officer) and update the related powers and duties to reflect that the two positions are now combined and are held by one individual, (3) add the office of the Chief Financial Officer (‘‘CFO’’) and delete the office of the Comptroller, (4) delete the office of the Chief Operating Officer (‘‘COO’’), (5) change the title of Vice President to Executive Director and update the related powers and duties, and (6) make other changes related to certain powers and duties of the Board and various 25, 1977), 42 FR 17928 (April 4, 1977) (SR–NSCC– 77–3). 4 The Rules are available at https://www.dtcc.com/ legal/rules-and-procedures. The By-Laws and the Certificate of Incorporation would be available at https://www.dtcc.com/legal/rules-and-procedures. E:\FR\FM\14FEN1.SGM 14FEN1

Agencies

[Federal Register Volume 83, Number 31 (Wednesday, February 14, 2018)]
[Notices]
[Pages 6630-6633]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-02986]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-82673; File No. SR-MIAX-2018-02]


Self-Regulatory Organizations; Miami International Securities 
Exchange, LLC; Notice of Filing and Immediate Effectiveness of a 
Proposed Rule Change To Amend Its Fee Schedule

February 8, 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 January 30, 2018, Miami International 
Securities Exchange, LLC (``MIAX Options'' or ``Exchange'') filed with 
the Securities and Exchange Commission (``Commission'') a proposed rule 
change as described in Items I, II, and III below, which Items have 
been prepared by the Exchange. The Commission is publishing this notice 
to solicit comments on the

[[Page 6631]]

proposed rule change from interested persons.
---------------------------------------------------------------------------

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

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

    The Exchange is filing a proposal to amend the MIAX Options Fee 
Schedule (the ``Fee Schedule'').
    The text of the proposed rule change is available on the Exchange's 
website at https://www.miaxoptions.com/rule-filings, at MIAX's principal 
office, and at the Commission's Public Reference Room.

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

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

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

1. Purpose
    The Exchange proposes to amend Section (1)(a)(iii) of the Fee 
Schedule to modify the volume threshold calculation methodology, in 
connection with the additional $0.02 per contract rebate offered to 
Members \3\ for Priority Customer \4\ orders executed in the PRIME \5\ 
Auction as a PRIME Agency Order, pursuant to the Priority Customer 
Rebate Program.\6\
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    \3\ The term ``Member'' means an individual or organization 
approved to exercise the trading rights associated with a Trading 
Permit. Members are deemed ``members'' under the Exchange Act. See 
Exchange Rule 100.
    \4\ The term ``Priority Customer'' means a person or entity that 
(i) is not a broker or dealer in securities, and (ii) does not place 
more than 390 orders in listed options per day on average during a 
calendar month for its own beneficial account(s). See Exchange Rule 
100.
    \5\ The MIAX Options Price Improvement Mechanism (``PRIME'') is 
a process by which a Member may electronically submit for execution 
(``Auction'') an order it represents as agent (``Agency Order'') 
against principal interest, and/or an Agency Order against solicited 
interest. For a complete description of PRIME and of PRIME order 
types and responses, see Exchange Rule 515A.
    \6\ Under the Priority Customer Rebate Program, MIAX Options 
credits each Member the per contract amount resulting from each 
Priority Customer order transmitted by that Member which is executed 
electronically on the Exchange in all multiply-listed option classes 
(excluding certain orders specified in Section (1)(a)(iii) of the 
Fee Schedule), provided the Member meets certain percentage 
thresholds in a month as described in the Priority Customer Rebate 
Program table. See Section (1)(a)(iii) of the Fee Schedule.
---------------------------------------------------------------------------

    The Exchange currently offers Members the opportunity to qualify 
for an additional $0.02 per contract rebate in connection with certain 
types of executions on the Exchange if the Member or its Affiliates \7\ 
meets certain qualifications. Specifically, any Member or its Affiliate 
that qualifies for Priority Customer Rebate Program volume tiers 3 or 
higher is credited an additional $0.02 per contract for each Priority 
Customer order executed in the PRIME Auction as a PRIME Agency Order, 
over a threshold of 1,500,000 contracts in a month. Volume is recorded 
for and credits are delivered to the Member that submits the order to 
the Exchange.
---------------------------------------------------------------------------

    \7\ ``Affiliate'' means (i) an affiliate of a Member of at least 
75% common ownership between the firms as reflected on each firm's 
Form BD, Schedule A, (``Affiliate''), or (ii) the Appointed Market 
Maker of an Appointed EEM (or, conversely, the Appointed EEM of an 
Appointed Market Maker). An ``Appointed Market Maker'' is a MIAX 
Market Maker (who does not otherwise have a corporate affiliation 
based upon common ownership with an EEM) that has been appointed by 
an EEM and an ``Appointed EEM'' is an EEM (who does not otherwise 
have a corporate affiliation based upon common ownership with a MIAX 
Market Maker) that has been appointed by a MIAX Market Maker, 
pursuant to the process described in the Fee Schedule. See Section 
(1)(a)(i) of the Fee Schedule.
---------------------------------------------------------------------------

    The Exchange proposes to modify the volume threshold calculation 
methodology in connection with that additional $0.02 per contract 
rebate. The Exchange proposes to change the volume threshold 
calculation methodology from a fixed number of contracts per month 
(1,500,000 per month) to a percentage of national customer volume in 
multiply-listed options classes listed on MIAX Options per month. The 
proposed threshold is above 0.60% of national customer volume in 
multiply-listed options classes listed on MIAX Options during the 
relevant month. National customer volume is the total volume reported 
by the Options Clearing Corporation (``OCC'') in MIAX Options classes 
in the ``customer'' range. Specifically, the Exchange proposes that any 
Member or its Affiliate that qualifies for Priority Customer Rebate 
Program volume tiers 3 or higher will be credited an additional $0.02 
per contract for each Priority Customer order executed in the PRIME 
Auction as a PRIME Agency Order over a threshold of above 0.60% of 
national customer volume in multiply-listed options classes listed on 
MIAX Options during the relevant month.
    There are no other changes to this rebate program. In particular, 
the Exchange currently excludes from the calculation certain types of 
orders, and those same types of orders will continue to be excluded 
using the new calculation methodology. Specifically, the Exchange 
excludes orders executed as QCC and cQCC Orders, mini-options, Priority 
Customer-to-Priority Customer Orders, C2C and cC2C Orders, cPRIME 
Agency Orders, PRIME and cPRIME AOC Responses, PRIME and cPRIME Contra-
side Orders, PRIME and cPRIME Orders for which both the Agency and 
Contra-side Order are Priority Customers, and executions related to 
contracts that are routed to one or more exchanges in connection with 
the Options Order Protection and Locked/Crossed Market Plan referenced 
in MIAX Options Rule 1400. The Exchange will continue to exclude those 
same orders from this rebate program. The Exchange further notes that 
these exclusions are identical to the exclusions that apply to other 
aspects of the Priority Customer Rebate Program as well. There is also 
no change to the additional rebate amount of $0.02 per contract.
    The Exchange believes that changing the volume threshold 
calculation methodology from a fixed number of contracts per month 
(1,500,000 per month) to a percentage of national customer volume in 
multiply-listed options classes listed on MIAX Options per month (above 
0.60% of national customer volume in multiply-listed options classes 
listed on MIAX Options during the relevant month) will result in a 
threshold that is more consistently proportional to national customer 
volume executed during the relevant month, as actual national customer 
volume often changes on a month-to-month basis. Since the Priority 
Customer Rebate Program is designed to encourage Members to execute 
greater Priority Customer volume on the Exchange, having a more 
consistent proportional measure in relation to the number of national 
customer volume executed in a given month will better align this 
particular rebate program to the core purpose of the Priority Customer 
Rebate Program. In turn, the Exchange believes that this change will 
further incentivize Members to execute a greater number of Priority 
Customer orders in the Exchange's PRIME Auction mechanism.
    The Exchange believes that increased PRIME and Priority Customer 
volume will attract more liquidity to the Exchange, which benefits all 
market participants. Increased PRIME and Priority Customer order flow 
should

[[Page 6632]]

attract liquidity providers, which in turn should make the MIAX Options 
marketplace an attractive venue where Market Makers may submit narrow 
quotations with greater size, deepening and enhancing the quality of 
the MIAX Options marketplace. This should 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.
    The credits paid out as part of the Priority Customer Rebate 
Program are drawn from the general revenues of the Exchange.\8\ The 
Exchange calculates volume thresholds on a monthly basis. The proposed 
rule change is scheduled to become operative on February 1, 2018.
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    \8\ Despite providing credits under the Priority Customer Rebate 
Program, the Exchange represents that it will continue to have 
adequate resources to fund its regulatory program and fulfill its 
responsibilities as a self-regulatory organization while the 
Priority Customer Rebate Program is in effect.
---------------------------------------------------------------------------

2. Statutory Basis
    The Exchange believes that its proposal to amend its Fee Schedule 
is consistent with Section 6(b) of the Act in general, and furthers the 
objectives of Section 6(b)(4) of the Act in particular, in that it is 
an equitable allocation of reasonable dues, fees, and other charges 
among its members and issuers and other persons using its facilities. 
The Exchange also believes the proposal furthers the objectives of 
Section 6(b)(5) of the Act in that it is designed to promote just and 
equitable principles of trade, to remove impediments to and perfect the 
mechanism of a free and open market and a national market system, and, 
in general to protect investors and the public interest and is not 
designed to permit unfair discrimination between customers, issuers, 
brokers and dealers.
    The Exchange believes that changing the volume threshold 
calculation methodology from a fixed number of contracts per month 
(1,500,000 per month) to a percentage of national customer volume in 
multiply-listed options classes listed on MIAX Options per month (above 
0.60% of national customer volume in multiply-listed options classes 
listed on MIAX Options during the relevant month) in the Priority 
Customer Rebate Program for the additional $0.02 rebate for Priority 
Customer orders submitted into PRIME as PRIME Agency is consistent with 
Section 6(b)(4) of the Act in that it is fair, equitable and not 
unreasonably discriminatory. The rebate program is reasonably designed 
because it incentivizes providers of Priority Customer order flow to 
send order flow to the Exchange and, upon meeting certain volume 
criteria, enables them to receive the credit in a manner that enables 
the Exchange to improve its overall competitiveness and strengthen its 
market quality for all market participants. The proposed change to the 
volume threshold calculation methodology is fair, equitable, and not 
unreasonably discriminatory because they will apply equally to all 
Priority Customer orders submitted as a PRIME Agency Order. All 
similarly situated Priority Customer orders are subject to the same 
rebate and volume calculations, and access to the Exchange is offered 
on terms that are not unfairly discriminatory. In addition, the 
proposed volume threshold calculation is equitable and not unfairly 
discriminatory because, while only Priority Customer order flow that is 
submitted as a PRIME Agency Order over the proposed threshold qualifies 
for the rebate, an increase in overall Priority Customer order flow 
will bring greater volume and liquidity, which benefits all market 
participants by providing more trading opportunities and tighter 
spreads. Market participants want to trade with Priority Customer order 
flow. To the extent Priority Customer order flow is increased by the 
proposal, market participants will increasingly compete for the 
opportunity to trade on the Exchange including sending more orders and 
providing narrower and larger sized quotations in the effort to trade 
with such Priority Customer order flow.
    The Exchange believes that the proposed rule change modifying the 
volume threshold calculation methodology for the $0.02 rebate from a 
fixed number of contracts per month (1,500,000 per month) to a 
percentage of national customer volume in multiply-listed options 
classes listed on MIAX Options per month (above 0.60% of national 
customer volume in multiply-listed options classes listed on MIAX 
Options during the relevant month) is consistent with Section 6(b)(5) 
of the Act in that it promotes just and equitable principles of trade 
since the Exchange believes that it will result in a threshold that is 
more consistently proportional to national customer volume executed 
during the relevant month, as actual national customer volume often 
changes on a month-to-month basis. To the extent Member volume in 
Priority Customer orders and PRIME Agency Orders is increased by the 
proposal, market participants will increasingly compete for the 
opportunity to trade on the Exchange which could result in more 
liquidity on the Exchange. The Exchange believes that offering all such 
market participants the opportunity to lower transaction fees by 
incentivizing them to transact Priority Customer order flow in turn 
benefits all market participants.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act. The Exchange believes the 
proposal is consistent with robust competition by increasing the 
intermarket competition for order flow from market participants. To the 
extent that there is additional competitive burden on market 
participants without Priority Customer order flow and those market 
participants that are not able to aggregate order flow with Affiliates, 
the Exchange believes that this should incent Members to direct volume 
to the Exchange in order to provide additional liquidity that enhances 
the quality of its markets and increases the volume of contracts traded 
here. To the extent that this purpose is achieved, all the Exchange's 
market participants should benefit from the improved market liquidity. 
Enhanced market quality and increased transaction volume that results 
from the anticipated increase in order flow directed to the Exchange 
will benefit all market participants and improve competition on the 
Exchange. The Exchange notes that it operates in a highly competitive 
market in which market participants can readily favor competing venues 
if they deem fee levels at a particular venue to be excessive. In such 
an environment, the Exchange must continually adjust its fees to remain 
competitive with other exchanges and to attract order flow. The 
Exchange believes that the proposal reflects this competitive 
environment.

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,\9\ and Rule

[[Page 6633]]

19b-4(f)(2) \10\ 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.
---------------------------------------------------------------------------

    \9\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \10\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------

IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-MIAX-2018-02 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-MIAX-2018-02. 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-MIAX-2018-02 and should be submitted on 
or before March 7, 2018.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
---------------------------------------------------------------------------

    \11\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-02986 Filed 2-13-18; 8:45 am]
 BILLING CODE 8011-01-P
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