Self-Regulatory Organizations; MIAX PEARL, LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend the MIAX PEARL Fee Schedule, 12044-12052 [2018-05452]
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12044
Federal Register / Vol. 83, No. 53 / Monday, March 19, 2018 / Notices
under Commission service contracts
with a dollar value of $100,000 or
more.9 These subcontractors may
already be subject to similar
recordkeeping requirements as principal
contractors. Consequently, we believe
that any additional requirements
imposed on subcontractors would not
significantly add to the burden
estimates discussed above.
Estimate of Reporting Burden
With respect to the reporting burden,
we estimate that it would take all
contractors on average approximately
one hour to retrieve and submit to the
OMWI Director the documentation
specified in the proposed Contract
Standard. We expect to request
documentation from up to 100
contractors each year and therefore we
estimate the total annual reporting
burden to be 100 hours.
Written comments are invited on: (a)
Whether this collection of information
is necessary for the proper performance
of the functions of the agency, including
whether the information will have
practical utility; (b) the accuracy of the
agency’s estimate of the burden imposed
by the collection of information; (c)
ways to enhance the quality, utility, and
clarity of the information collected; and
(d) ways to minimize the burden of the
collection of information on
respondents, including through the use
of automated collection techniques or
other forms of information technology.
Consideration will be given to
comments and suggestions submitted in
writing within 60 days of this
publication. Please direct your written
comments to Pamela Dyson, Director/
Chief Information Officer, Securities
and Exchange Commission, c/o Remi
Pavlik-Simon, 100 F Street NE,
Washington, DC 20549 or send an email
to: PRA_Mailbox@sec.gov.
Dated: March 13, 2018.
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018–05430 Filed 3–16–18; 8:45 am]
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Upon Written Request Copies Available
From: Securities and Exchange
9 A search of subcontract awards on the
usaspending.gov website showed that three
subcontractors in FY 2016 and six subcontractors in
FY 2017 had subcontracts of $100K or more. See
data on subcontract awards available at https://
usaspending.gov.
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Commission, Office of FOIA Services,
100 F Street NE, Washington, DC
20549–2736.
Extension:
Regulation S–K, SEC File No. 270–002,
OMB Control No. 3235–0071.
Notice is hereby given that, pursuant
to the Paperwork Reduction Act of 1995
(44 U.S.C. 3501 et seq.), the Securities
and Exchange Commission
(‘‘Commission’’) has submitted to the
Office of Management and Budget this
request for extension of the previously
approved collection of information
discussed below.
Regulation S–K (17 CFR 229.101 et
seq.) specifies the non-financial
disclosure requirements applicable to
registration statements under the
Securities Act of 1933 (15 U.S.C. 77a et
seq.); and registration statements,
periodic reports, going-private
transaction and tender offer statements,
proxy and information statements, and
any other documents required to be
filed under Sections 12, 13, 14, and 15
of the Securities Exchange Act of 1934
(15 U.S.C. 78l, 78m, 78n, 78o(d)).
Regulation S–K is assigned one burden
hour for administrative convenience.
An agency may not conduct or
sponsor, and a person is not required to
respond to, a collection of information
unless it displays a currently valid
control number.
The public may view the background
documentation for this information
collection at the following website,
www.reginfo.gov. Comments should be
directed to: (i) Desk Officer for the
Securities and Exchange Commission,
Office of Information and Regulatory
Affairs, Office of Management and
Budget, Room 10102, New Executive
Office Building, Washington, DC 20503,
or by sending an email to: Shagufta_
Ahmed@omb.eop.gov; and (ii) Pamela
Dyson, Director/Chief Information
Officer, Securities and Exchange
Commission, c/o Remi Pavlik-Simon,
100 F Street NE, Washington, DC 20549
or send an email to: PRA_Mailbox@
sec.gov. Comments must be submitted to
OMB within 30 days of this notice.
Dated: March 14, 2018.
Eduardo A. Aleman,
Assistant Secretary.
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[Release No. 34–82867; File No. SR–
PEARL–2018–07]
Self-Regulatory Organizations; MIAX
PEARL, LLC; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change To Amend the MIAX
PEARL Fee Schedule
March 13, 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 February 28, 2018, MIAX PEARL,
LLC (‘‘MIAX PEARL’’ or ‘‘Exchange’’)
filed with the Securities and Exchange
Commission (‘‘Commission’’) a
proposed rule change as described in
Items I, II, and III below, which Items
have been prepared by the Exchange.
The Commission is publishing this
notice to solicit comments on the
proposed rule change from interested
persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange is filing a proposal to
amend the MIAX PEARL Fee Schedule
(the ‘‘Fee Schedule’’) to establish certain
non-transaction rebates and fees
applicable to participants trading
options on and/or using services
provided by MIAX PEARL.
MIAX PEARL commenced operations
as a national securities exchange
registered under Section 6 of the Act 3
on February 6, 2017.4 The Exchange
adopted its transaction fees and certain
of its non-transaction fees in its filing
SR–PEARL–2017–10.5
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.
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
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 15 U.S.C. 78f.
4 See Securities Exchange Act Release No. 79543
(December 13, 2016), 81 FR 92901 (December 20,
2016) (File No. 10–227) (order approving
application of MIAX PEARL, LLC for registration as
a national securities exchange).
5 See Securities Exchange Act Release No. 80061
(February 17, 2017), 82 FR 11676 (February 24,
2017) (SR–PEARL–2017–10).
2 17
[FR Doc. 2018–05529 Filed 3–16–18; 8:45 am]
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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 purpose of the proposed rule
change is to establish certain nontransaction rebates and fees applicable
to certain market participants trading
options on and/or using certain services
provided by the Exchange. The
Exchange introduced the structure of
certain non-transaction rebates and fees
in its filing SR–PEARL–2017–10
(without proposing actual fee amounts),
but also explicitly waived the
assessment of any such fees for the
period of time which the Exchange
defined as the ‘‘Waiver Period.’’ 6 The
Exchange now proposes to adopt certain
non-transaction fees as described below,
and thereby terminate the Waiver Period
applicable to such non-transaction fees.
In general, the Exchange proposes to
amend the Fee Schedule to: Add certain
definitions; adopt monthly trading
permit fees; adopt port fees; adopt
certain market data fees; as well as to
adopt a fee waiver for new Members,7 as
applicable to Members and nonMembers using certain services
provided by MIAX PEARL.
Definitions
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The Exchange proposes to amend the
‘‘Definitions’’ section of the Fee
Schedule to add the following new
definitions: ‘‘New Member NonTransaction Fee Waiver;’’ ‘‘NonTransaction Fees Volume-Based Tiers;’’
and ‘‘Monthly Volume Credit’’ which
6 ‘‘Waiver Period’’ means, for each applicable fee,
the period of time from the initial effective date of
the MIAX PEARL Fee Schedule until such time that
the Exchange has an effective fee filing establishing
the applicable fee. The Exchange will issue a
Regulatory Circular announcing the establishment
of an applicable fee that was subject to a Waiver
Period at least fifteen (15) days prior to the
termination of the Waiver Period and effective date
of any such applicable fee. See the Definitions
Section of the Fee Schedule.
7 ‘‘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 Exchange
Rule 100.
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are applicable to the assessment of
certain non-transaction rebates and fees.
‘‘New Member Non-Transaction Fee
Waiver’’ has the meaning described
below under ‘‘New Member NonTransaction Fee Waiver.’’
‘‘Non-Transaction Fees Volume-Based
Tiers’’ means the tier structure that is
applicable to determine certain nontransaction fees, including Monthly
Trading Permit Fees and Full Service
MEO Port Fees. The monthly volume
thresholds associated with each Tier
shall be calculated as the total volume
executed by a Member and its
Affiliates 8 on the Exchange across all
origin types, not including Excluded
Contracts,9 as compared to the TCV 10 in
all MIAX PEARL-listed options as set
forth below:
Total volume by member
as a percentage of MIAX
PEARL-listed TCV
Tier
1 ........................
2 ........................
0.00%¥0.30%.
Above 0.30%¥0.60%.
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 ‘‘Excluded Contracts’’ means any contracts
routed to an away market for execution. See the
Definitions Section of the Fee Schedule.
10 ‘‘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 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.
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Tier
3 ........................
Total volume by member
as a percentage of MIAX
PEARL-listed TCV
Above 0.60%.
‘‘Monthly Volume Credit’’ means a
credit assessable to a Member whose
executed Priority Customer 11 volume
along with that of its Affiliates, not
including Excluded Contracts, is at least
0.30% of MIAX PEARL-listed TCV, as
set forth below:
Type of member connection
Member that connects via
the FIX Interface ...............
Member that connects via
the MEO Interface * ...........
Monthly
Volume
Credit
$250
1,000
* If a Member connects via both the MEO
Interface and FIX Interface, and qualifies for
the Monthly Volume Credit based upon its Priority Customer Volume, the greater Monthly
Volume Credit shall apply to such Member.
The Monthly Volume Credit is a single, onceper-month credit towards the aggregate
monthly total of non-transaction fees assessable to a Member.
The Exchange proposes the Monthly
Volume Credit to be a single, once-permonth credit towards the aggregate
monthly total of non-transaction fees
assessable to a Member. If a Member
connects via both the MEO Interface and
FIX Interface, and qualifies for the
Monthly Volume Credit based upon its
Priority Customer Volume, the greater
Monthly Volume Credit shall apply to
such Member.
Monthly Trading Permit Fees
The Exchange previously introduced
the structure of Trading Permit fees (but
without proposing the actual fee
amounts), but also explicitly waived the
assessment of any such fees for the
Waiver Period. Trading Permits are
issued to Members who are either
Electronic Exchange Members (‘‘EEMs’’)
or Market Makers.12 MIAX PEARL now
proposes to assess fees for such Trading
Permits. Members issued Trading
Permits during a calendar month will be
assessed monthly Trading Permit Fees.
The Exchange notes that the Exchange’s
affiliate, Miami International Securities
Exchange, LLC (‘‘MIAX Options’’),
charges trading permit fees as well to its
members which are based upon the
11 ‘‘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.
12 ‘‘Market Maker’’ means a Member registered
with the Exchange for the purpose of making
markets in options contracts traded on the
Exchange. See Exchange Rule 100.
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number of assignments of option classes
or the percentage of volume in option
classes.13 However, the Exchange’s
proposed structure for its Trading
Permit fees is not identical [sic] the
structure of MIAX Options since the
market model of the Exchange is not
identical to the market model of MIAX
Options. The Exchange operates a price
time, order-driven marketplace. MIAX
Options operates a traditional, pro-rata,
quote-driven marketplace, with market
makers having affirmative quoting
obligations in their assigned classes.
However, while the market models are
not identical, the Exchange’s proposed
fee structure shares a similar
characteristic with the structure of
MIAX Options, wherein both generally
provide that, the more active user the
Member (i.e., the greater number/greater
national ADV of classes assigned to
quote), the higher the Trading Permit
fee.
The Exchange proposes to charge its
Members Trading Permit fees which are
based upon the monthly total volume
executed by the Member and its
Affiliates on the Exchange across all
origin types, not including Excluded
Contracts, as compared to the TCV in all
MIAX PEARL-listed options.
Specifically, the Exchange proposes to
adopt a tier-based fee structure based
upon the volume-based tiers detailed in
the proposed definition of ‘‘NonTransaction Fees Volume-Based Tiers’’
described above.
The Exchange proposes to charge
such Trading Permit fees based upon
the type of interface used by the
Member to connect to the Exchange—
the FIX Interface 14 and/or the MEO
Interface.15 Any Member (whether EEM
or Market Maker) can select either type
of interface (either FIX Interface or MEO
Interface). Each Member who uses the
FIX Interface to connect to the System 16
will be assessed Trading Permit fees
according to the volume-based tier that
it achieves along with that of its
Affiliates. Specifically, Members who
use the FIX Interface will be assessed
the following Trading Permit fees each
month: (i) If its volume falls within the
parameters of Tier 1 of the Non13 See the MIAX Options Fee Schedule, Section
3)b).
14 ‘‘FIX Interface’’ means the Financial
Information Exchange interface for certain order
types as set forth in Exchange Rule 516. See
Exchange Rule 100. See the Definitions Section of
the Fee Schedule.
15 ‘‘MEO Interface’’ means a binary order interface
for certain order types as set forth in Rule 516 into
the MIAX PEARL System. See Exchange Rule 100.
See the Definitions Section of the Fee Schedule.
16 The term ‘‘System’’ means the automated
trading system used by the Exchange for the trading
of securities. See Exchange Rule 100.
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Transaction Fees Volume-Based Tiers,
or volume up to 0.30%, $250, (ii) if its
volume falls within the parameters of
Tier 2 of the Non-Transaction Fees
Volume-Based Tiers, or volume above
0.30% up to 0.60%, $350, and (iii) if its
volume falls with the parameters of Tier
3 of the Non-Transaction Fees VolumeBased Tiers, or volume above 0.60%,
$450.
Each Member who uses the MEO
Interface to connect to the System will
be assessed Trading Permit fees
according to the volume-based tier
thresholds that it achieves along with
that of its Affiliates. Specifically,
Members who use the MEO Interface
will be assessed the following Trading
Permit fees each month: (i) If its volume
falls within the parameters of Tier 1 of
the Non-Transaction Fees VolumeBased Tiers, or volume up to 0.30%,
$300, (ii) if its volume falls within the
parameters of Tier 2 of the NonTransaction Fees Volume-Based Tiers,
or volume above 0.30% up to 0.60%,
$400, and (iii) if its volume falls with
the parameters of Tier 3 of the NonTransaction Fees Volume-Based Tiers,
or volume above 0.60%, $500. Members
who use the MEO Interface may also
connect to the System through the FIX
Interface as well, and vice versa. The
Exchange notes that the Trading Permit
fees for Members who connect through
the MEO Interface are higher than the
Trading Permit fees for Members who
connect through the FIX Interface, since
the FIX Interface utilizes less capacity
and resources of the Exchange. The
MEO Interface offers lower latency and
higher throughput, which utilizes
greater capacity and resources of the
Exchange, and is typically a
requirement for market makers. The Fix
Interface offers lower bandwidth
requirements and an industry-wide
uniform message format, which is
typically favored by EEMs. Both EEMs
and Market Makers may connect to the
Exchange using either interface.
The Exchange notes that other
exchanges assess their membership fees
at different rates based upon a member’s
participation on that exchange.17
The Exchange proposes that Members
who use the MEO Interface and who
also use the FIX Interface will be
assessed the rates for both types of
Trading Permits set forth above but will
receive a $100 monthly credit towards
the Trading Permit fees applicable to
17 Cboe BZX Options Exchange (‘‘BZX Options’’)
assesses the Participant Fee, which is a membership
fee, according to a member’s ADV. See Cboe BZX
Options Exchange Fee Schedule under
‘‘Membership Fees’’. The Participant Fee is $500 if
the member ADV is under 5000 and $1,000 if the
member ADV is equal to or over 5000. Id.
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such Member for MEO Interface use. For
example, a Member who reaches Tier 3
in the Non-Transaction fees VolumeBased Tiers, and who connects via a FIX
interface and a MEO Interface, would be
assessed Trading Permit fees of $450 for
FIX Interface and $500 for MEO
Interface. Since they connect via both
interfaces, they will also receive a $100
monthly credit for total cost of $850
($450 + $500 ¥ $100). The monthly
credit will not exceed the Trading
Permit fees.
Below is the proposed fee table for
Trading Permit fees:
Type of Trading Permit
Member that connects via
the FIX Interface.
Member that connects via
the MEO Interface *.
Monthly MIAX
PEARL
Trading
Permit fee
Tier
Tier
Tier
Tier
Tier
Tier
1
2
3
1
2
3
$250.
$350.
$450.
$300.
$400.
$500.
* Members who connect via the MEO Interface and that also connect via the FIX Interface will be assessed the rates for both types
of Trading Permits set forth above, but will receive a $100 credit towards the Trading Permit Fees set forth above for MEO Interface
use.
Port Fees
MIAX PEARL proposes to assess fees
for access and services used by
Members via connections known as
‘‘Ports’’. MIAX PEARL provides five (5)
Port types, including (i) the Financial
Information Exchange (‘‘FIX’’) Port,
which allows Members to electronically
send orders in all products traded on
the Exchange; (ii) the MIAX Express
Network (‘‘MEO’’) Port, which allows
EEMs and Market Makers to submit
electronic orders in all products to the
Exchange; (iii) the Clearing Trade Drop
(‘‘CTD’’) Port, which provides real-time
per-trade clearing information to the
participants on MIAX PEARL and to the
participants’ respective clearing firms;
(iv) FIX Drop Copy (‘‘FXD’’) Port, which
provides a copy of real-time trade
execution, correction, and cancellation
information through a FIX Port to any
number of FIX Ports designated by a
Member to receive such messages; and
(v) the MEO Purge Port, which is used
as a dedicated port for sending purge
messages to the Exchange.
MIAX PEARL has Primary and
Secondary Facilities and a Disaster
Recovery Facility. Each type of Port
provides access to all three facilities for
a single fee. The Exchange notes that,
unless otherwise specifically set forth in
the Fee Schedule, the Port fees include
the information communicated through
the Port. That is, unless otherwise
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specifically set forth in the Fee
Schedule, there is no additional charge
for the information that is
communicated through the Port apart
from what the user is assessed for each
Port.18
The Exchange currently offers
different options of MEO Ports
depending on the services required by
the Member, including a Full Service
MEO Port-Bulk,19 a Full Service MEO
Port-Single,20 and a Limited Service
MEO Port.21 A Member may be
allocated two (2) Full-Service MEO
Ports of either type, Bulk and/or Single,
per Matching Engine, and up to eight (8)
Limited Service MEO Ports, per
Matching Engine. The two (2) FullService MEO Ports that may be allocated
per Matching Engine to a Member
currently may consist of: (a) Two (2)
Full Service MEO Ports—Bulk; or (b)
two (2) Full Service MEO Ports—Single.
The Exchange proposes to add a third
option, option (c), which permits a
Member to have one (1) Full Service
MEO Port—Bulk, and one (1) Full
Service MEO Port—Single. If a Member
selects option (c), the Exchange will
assess the rates applicable to Full
Service MEO Port—Bulk in the Fee
Schedule, described below. The
Exchange proposes to add option (c) in
order to provide Members greater
flexibility and granularity in their
available Port connection alternatives.
MIAX PEARL proposes to assess
Members Full Service MEO Port Fees,
either for a Full Service MEO Port—
Bulk and/or for a Full Service MEO
12047
Port—Single, based upon the monthly
total volume executed by a Member and
its Affiliates on the Exchange across all
origin types, not including Excluded
Contracts, as compared to the TCV in all
MIAX PEARL-listed options.
Specifically, the Exchange proposes to
adopt a tier-based fee structure based
upon the volume-based tiers detailed in
the proposed definition of ‘‘NonTransaction Fees Volume-Based Tiers’’
described above. MIAX PEARL proposes
to assess these and other monthly Port
fees on Members in each month the
market participant is credentialed to use
a Port in the production environment.
MIAX PEARL proposes the following
Monthly Port Fees table:
Monthly Port Fees includes connectivity to the primary, secondary and
disaster recovery data centers
Type of Port
FIX Port ∧ ..................................................................................................
Full Service MEO Port—Bulk * .................................................................
Full Service MEO Port—Single * ..............................................................
Limited Service MEO Port ** ....................................................................
MEO Purge Port *** ..................................................................................
CTD Port ∧ ................................................................................................
FXD Port ∧ .................................................................................................
Per Port: 1st $275, 2nd to 5th $175, 6th or more $75.
Tier 1 $3,000.
Tier 2 $4,500.
Tier 3 $5,000.
Tier 1 $2,000.
Tier 2 $3,375.
Tier 3 $3,750.
1st to 2nd $0, 3rd to 4th $200, 5th to 6th $300, 7th to 8th $400.
$750.
Per Port: $450.
Per Port: $250.
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* The rates set forth above for Full Service MEO Ports, both Bulk and/or Single, entitle a Member to two (2) such Ports for each Matching Engine for a single port fee. If a Member selects at least one Full Service MEO Port—Bulk as part of their two (2) Ports, i.e. option (c) described
below, the rates applicable to Full Service MEO Port—Bulk set forth above apply.
** Each Limited Service MEO Port fee entitles a Member to one (1) such port for each Matching Engine. For example, the purchase of 4 Limited Service MEO Ports will allow the Member to access 4 ports per Matching Engine.
*** The MEO Purge Port fee entitles a Member to two (2) such ports for each Matching Engine for a single port fee.
∧ Each port will have access to all Matching Engines.
Other exchanges, including MIAX
Options, charge a fee for similar services
to Members.22 The Exchange’s proposed
structure for some of its Port fees is
similar to the structure of MIAX
Options, subject to a few differences as
discussed below. First, the Exchange
proposes to have two primary types of
Full Service MEO Port Fees (Bulk and
Single), whereas MIAX Options only
has one type of full service port fee (MEI
Port Fee). Second, MIAX Options
charges for its MEI port fees based on
the options class assignments, or as
measured by the national volume. Since
the market model of the Exchange is not
identical to the market model of MIAX
Options, the Exchange therefore
proposes to assess its MEO Port fees in
a different manner than is assessed by
MIAX Options for its MEI Port fees. The
Exchange operates a price time, orderdriven marketplace. MIAX Options
operates a traditional, pro-rata, quotedriven marketplace, with market makers
having affirmative quoting obligations
in their assigned classes. However,
while the market modes [sic] are not
identical, the Exchange’s proposed
structure shares a similar characteristic
with the structure of MIAX Options
wherein both generally provide that, the
more active user the Member (i.e., the
greater number/greater national ADV of
classes assigned to quote), the higher the
Port fee. Third, the amount of the CTD
Port fee assessed by MIAX Options is
based on the per executed contract side
volume of the MIAX Options member.
The Exchange proposes to assess its
CTD Port fee as a monthly per Port fee,
not tied to per executed contract side
volume of the Member. The CTD fee
structure is the same structure in place
at Nasdaq PHLX with respect to its
Clearing Trade Interface (‘‘CTI’’) port
fees.23 Finally, the amount of the Fix
Drop Copy Port fee assessed by MIAX
Options, which is a similar fee to the
FXD Port fee, is a flat monthly fee
whereas the Exchange proposes that the
FXD Port fee is per Port like it is
proposing to charge for the MEO Purge
Ports and CTD Ports and not a flat fee.
Finally, the Exchange proposes to no
longer offer Ports to non-Members.
There are no current non-Members that
connect to the Exchange via Ports, and,
based on the Exchange’s market model,
it does not envision that non-Members
18 One such example of an additional charge is a
charge for certain fee-liable market data feed
products to which the Member subscribes.
19 ‘‘Full Service MEO Port—Bulk’’ means an MEO
port that supports all MEO input message types and
binary bulk order entry. See the Definitions Section
of the Fee Schedule.
20 ‘‘Full Service MEO Port—Single’’ means an
MEO port that supports all MEO input message
types and binary order entry on a single order-byorder basis, but not bulk orders. See the Definitions
Section of the Fee Schedule.
21 ‘‘Limited Service MEO Port’’ means an MEO
port that supports all MEO input message types, but
does not support bulk order entry and only
supports limited order types, as specified by the
Exchange via Regulatory Circular. See the
Definitions Section of the Fee Schedule.
22 See Nasdaq Phlx LLC (‘‘Phlx’’) Fee Schedule,
Section VII ‘‘Other Member Fees’’, B ‘‘Port Fees’’.
23 Id.
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would require connectivity to the
Exchange via Ports in the future.
Accordingly, the Exchange proposes to
remove all references to non-Members
from Section 5)d) (Port Fees) of the Fee
Schedule.
Market Data Fees
The Exchange proposes to assess fees
for its market data products, MIAX
PEARL Top of Market (‘‘ToM’’) and
MIAX PEARL Liquidity Feed (‘‘PLF’’). A
more detailed description of the ToM
and PLF products can be found in the
Market Data Product Filing.24 To
summarize, ToM provides market
participants with a direct data feed that
includes the Exchange’s best bid and
offer, with aggregate size, and last sale
information, based on displayable order
and quoting interest on the Exchange.
The ToM data feed includes data that is
identical to the data sent to the
processor for the Options Price
Reporting Authority (‘‘OPRA’’). ToM
also contains a feature that provides the
number of Priority Customer contracts
that are included in the size associated
with the Exchange’s best bid and offer.
PLF is a real-time full order book data
feed that provides information for
orders on the MIAX PEARL order book.
PLF provides real-time information to
enable users to keep track of the simple
order book for all symbols listed on
MIAX PEARL. PLF provides the
following real-time data to its users with
respect to each order for the entire order
book: Origin, limit price, side, size, and
time-in-force (e.g., day, GTC). It is a
compilation of data for orders residing
on the Exchange’s order book for
options traded on the Exchange that the
Exchange provides through a real-time
multi-cast data feed. The Exchange
believes the PLF is a valuable tool that
subscribers can use to gain
comprehensive insight into the limit
order book in a particular option.
The Exchange proposes to charge
monthly fees to Distributors of the ToM
and/or PLF market data products. MIAX
PEARL will assess market data fees
applicable to the market data products
to Internal and External Distributors in
each month the Distributor is
credentialed to use the applicable
market data product in the production
environment. A ‘‘Distributor’’ of MIAX
PEARL data is any entity that receives
a feed or file of data either directly from
MIAX PEARL or indirectly through
another entity and then distributes it
either internally (within that entity) or
externally (outside that entity). All
24 See Securities Exchange Act Release No. 79913
(February 1, 2017), 82 FR 9617 (February 7, 2017)
(SR–PEARL–2017–01).
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Distributors are required to execute a
MIAX PEARL Distributor Agreement.
Market data fees for ToM and PLF will
be reduced for new Distributors for the
first month during which they subscribe
to the applicable market data product,
based on the number of trading days
that have been held during the month
prior to the date on which they have
been credentialed to use the applicable
market data product in the production
environment. Such new Distributors
will be assessed a pro-rata percentage of
the fees described above, which is the
percentage of the number of trading
days remaining in the affected calendar
month as of the date on which they have
been credentialed to use the applicable
market data product in the production
environment, divided by the total
number of trading days in the affected
calendar month.
Specifically, the Exchange proposes to
assess Internal Distributors $500 per
month and External Distributors $750
per month for the ToM market data feed.
The Exchange additionally proposes to
assess Internal Distributors $1,250 per
month and External Distributors $1,500
per month for the PLF market data feed.
The Exchange notes that its data feed
prices are generally lower than most
other options exchanges’ data feed
prices for their comparable data feed
products.25
New Member Fee Waiver
The Exchange proposes to waive the
assessment of the foregoing nontransaction fees to a new Member of the
Exchange for the first calendar month
during which they are approved as a
Member and are credentialed to use the
System in the production environment,
and for the two (2) subsequent calendar
months thereafter. The Exchange
proposes to define this waiver as the
‘‘New Member Non-Transaction Fee
Waiver’’ and to add it to the Definitions
section of the Fee Schedule accordingly.
In the first month, certain of such
Members’ non-transaction fees specified
by the Exchange will not be assessed
and thereby waived for the trading days
remaining in such month after the date
that the Member was accepted by the
Exchange. Then the specified nontransaction fees for the following two (2)
calendar months will also be waived by
the Exchange for the new Member. For
example, if Member A is approved as a
Member and credentialed to use the
Exchange’s System in the production
environment on April 2, 2018, Member
A will not be assessed any Trading
Permit, Port, or Market Data fees for the
25 See NASDAQ Phlx Pricing Schedule, Section
IX, Proprietary Data Feed Fees.
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remaining days in April, and will not be
assessed any such fees for the calendar
months of May and June of 2018. For
the avoidance of doubt, a ‘‘new
Member’’ shall mean any Member who
has not previously been approved by the
Exchange and credentialed to use the
Exchange’s System in the production
environment. The Exchange believes
that this fee waiver will provide
incentive for prospective applicants to
apply for membership, and may
consequently result in increasing
potential order flow and liquidity for
the Exchange. The Exchange will submit
a rule filing with the Commission prior
to terminating the Exchange’s waiver of
such fees assessable to new Members.
The proposed rule changes will
become operative March 1, 2018. Except
as set forth above, all other fees of the
Exchange remain as set forth in the Fee
Schedule.
2. Statutory Basis
The Exchange believes that its
proposal to amend its Fee Schedule is
consistent with Section 6(b) of the Act 26
in general, and furthers the objectives of
Section 6(b)(4) of the Act 27 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.
Definitions
The Exchange believes that the
proposed new definition ‘‘New Member
Non-Transaction Fee Waiver’’ 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 participants. The
definition applies equally to all
potential Members and is intended to
add transparency to the Exchange’s
marketplace by clarifying how the
waiver of certain specified nontransaction fees will apply to new
Members.
The Exchange believes that the
proposed new definition ‘‘New Member
Non-Transaction Fee Waiver’’ is
26 15
27 15
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U.S.C. 78f(b)(4) and (5).
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consistent with Section 6(5) of the Act
in that it promotes equitable access to
the Exchange for all market participants.
To the extent that new Members are
encouraged to apply to the Exchange as
a result of the waiver of certain
specified non-transaction fees for a
limited period of time, the resulting
increased volume and liquidity from
such new Members will benefit all
Exchange participants by providing
more trading opportunities and tighter
spreads.
The Exchange believes that the
proposed new definition ‘‘NonTransaction Fees Volume-Based Tiers’’
and the associated volume-based tier
structure applicable to certain specified
non-transaction fees 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 participants. The proposed tier
structure is fair and equitable and not
unreasonably discriminatory because
the volume calculations and thresholds
are applied equally to all MIAX PEARL
Members. All similarly situated MIAX
PEARL Members are subject to the
volume thresholds, and access to the
Exchange is offered on terms that are
not unfairly discriminatory.
The Exchange believes that the
proposed new definition ‘‘NonTransaction Fees Volume-Based Tiers’’
and the associated volume-based tier
structure applicable to certain nontransaction fees is consistent with
Section 6(b)(5) of the Act in that it
promotes equitable access to the
Exchange for all market participants. To
the extent that Member volume is
increased by the proposal, the resulting
increased volume and liquidity will
benefit all Exchange participants by
providing more trading opportunities
and tighter spreads.
The Exchange believes that by
determining certain fees upon volume
will permit Member firms to have the
same access to the Exchange but pay
fees which are proportionate to their
usage of the Exchange. The fees based
upon the same volume threshold will
also be assessed to Members on an equal
basis since they are assessed based upon
the same volume and access type
provided. The specific volume
thresholds of the ‘‘Non-Transaction Fees
Volume-Based Tiers’’ were set based
upon business determinations and an
analysis of current volume levels. The
Exchange believes that the proposed
new definition of ‘‘Non-Transaction
Fees Volume-Based Tiers’’ and the
associated volume-based tier structure
applicable to certain non-transaction
fees should provide incentives for
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market participants to join and trade on
the Exchange.
The Exchange believes that the
proposed new definition ‘‘Monthly
Volume Credit’’ and the associated
monthly credit for Priority Customer
volume applicable to certain nontransaction fees is fair, equitable and not
unreasonably discriminatory, because it
applies equally to all Members. The
proposed volume credit for Priority
Customer orders is reasonably designed
because it will encourage Members to
send increased Priority Customer order
flow to the Exchange in order to receive
the applicable monthly credit. The
Exchange thus believes that the
proposed new credit should improve
market quality for all market
participants by providing more
execution opportunities. All Members
who qualify will receive the same
credit, or the greater of credits for
Members who use both FIX and MEO,
for Priority Customer volume according
to the interface that they select to use to
connect to the Exchange.
The Exchange believes that the
proposed new definition ‘‘Monthly
Volume Credit’’ and the associated
monthly credit for Priority Customer
volume is consistent with Section
6(b)(5) of the Act and it is not
discriminatory since it is available to all
Members who transact Priority
Customer volume at the specified levels.
To the extent that MIAX PEARL Priority
Customer volume is increased by the
proposal, market participants may
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.
Monthly Trading Permit Fees
The Exchange believes that the
assessment of Trading Permit fees is
reasonable, equitable, and not unfairly
discriminatory. The assessment of
Trading Permit fees is done by the
Exchange’s affiliate, MIAX Options, and
is commonly done by other exchanges
as described in the Purpose section
above. The Exchange also believes that
the proposed tier structure is fair and
equitable and not unreasonably
discriminatory because the volume
calculations and thresholds are applied
equally to all MIAX PEARL Members.
All similarly situated MIAX PEARL
Members are subject to the volume
thresholds, and access to the Exchange
is offered on terms that are not unfairly
discriminatory.
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12049
The Exchange believes that the
proposed Trading Permit Fees 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 Member
volume is increased by the proposal, 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
Trading Permit Fees were set based
upon business determinations and an
analysis of current volume levels. The
Exchange believes that by basing certain
fees upon volume, this will permit
Member firms to have the same access
to the Exchange but pay fees which are
proportionate to their usage of the
Exchange. The same fees based upon the
same volume will also be assessed to
Members on an equal basis since they
are assessed based upon the same
volume of order flow provided.
Port Fees
MIAX PEARL believes it is
reasonable, equitable and not unfairly
discriminatory to assess Port fees on
Members who use such services. In
particular, the Exchange believes that it
is reasonable, equitable, and not
unfairly discriminatory to assess Port
fees on Members since the Ports enable
Members to submit orders and to
receive information regarding
transactions. Specifically, the FIX Port
and the various MEO Ports enable
Members to submit orders electronically
to the Exchange for processing. The
Exchange believes that its proposed fees
are reasonable in that other exchanges
offer similar ports with similar services
and charge fees for the use of such ports,
including MIAX Options.
The Exchange believes that its fees for
Ports are reasonable, equitable, and not
unfairly discriminatory in that they
apply to all Members using the
following ports: FIX, MEO, MEO Purge,
CTD or FXD equally and allow the
Exchange to recover operational and
administrative costs in developing and
maintaining such services. The
Exchange believes that assessing a per
Port fee for some Ports while assessing
a flat fee, which in the case of Full
Service MEO Ports is tiered according to
the Member’s volume, for other Ports is
reasonable and not discriminatory since
different Ports provide different
information and utility to Members. For
example, the MEO Interface offers
greater connectivity, lower latency and
higher throughput which is beneficial to
Market Maker activities and while both
EEMs and Market Makers may connect
through either the FIX or MEO
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Interfaces, Market Makers generally
elect to connect through the MEO
Interface for the greater benefits of its
connectivity which requires a MEO
Port. The Exchange expends
considerable resources to provide Port
access to its Members and certain Ports
are more costly to provide such as the
Full Service MEO Port—Bulk. The
Exchange must assess fees in order to
recoup the costs involved with
providing the appropriate access
required by the Member. The Exchange
believes that its proposed fees are
reasonable in that other exchanges
charge fees for similar services,
including MIAX Options, subject to the
differences discussed above, which the
Exchange believes are reasonable given
the different market structure between
the Exchange and MIAX Options.
The Exchange also believes the
proposed Port Fees are consistent with
Section 6(b)(5) of the Act are nondiscriminatory because they will apply
uniformly to all Members. The use and
choice of Ports are completely voluntary
and no user is required, nor are the
Members under any regulatory
obligation, to utilize them. All Members
have the option to select any
connectivity option, and fees, when
charged, are charged uniformly for the
services offered by the Exchange.
The Exchange believes that by basing
certain fees upon volume, this will
permit Member firms to have the same
access to the Exchange but pay fees
which are proportionate to their usage
of the Exchange. The same fees based
upon the same volume will also be
assessed to Members on an equal basis
since they are assessed based upon the
same volume and access type provided.
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Market Data Fees
The Exchange believes that its
proposal to assess Market Data Fees is
consistent with the provisions of
Section 6(b)(4) of the Act in that it
provides an equitable allocation of
reasonable fees among distributors of
ToM and PLF, because all Distributors
in each of the respective category of
Distributor (i.e., Internal and External)
will be assessed the same fees as other
Distributors in their category for the
applicable market data product.
In adopting Regulation NMS, the
Commission granted self-regulatory
organizations and broker-dealers
increased authority and flexibility to
offer new and unique market data to the
public. It was believed that this
authority would expand the amount of
data available to consumers, and also
spur innovation and competition for the
provision of market data:
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[E]fficiency is promoted when brokerdealers who do not need the data beyond the
prices, sizes, market center identifications of
the NBBO and consolidated last sale
information are not required to receive (and
pay for) such data when broker-dealers may
choose to receive (and pay for) additional
market data based on their own internal
analysis of the need for such data.28
By removing ‘‘unnecessary regulatory
restrictions’’ on the ability of exchanges
to sell their own data, Regulation NMS
advanced the goals of the Act and the
principles reflected in its legislative
history. If the free market should
determine whether proprietary data is
sold to broker-dealers at all, it follows
that the price at which such data is sold
should be set by the market as well.
In July, 2010, Congress adopted H.R.
4173, the Dodd-Frank Wall Street
Reform and Consumer Protection Act of
2010 (‘‘Dodd-Frank Act’’), which
amended Section 19 of the Act. Among
other things, Section 916 of the DoddFrank Act amended paragraph (A) of
Section 19(b)(3) of the Act by inserting
the phrase ‘‘on any person, whether or
not the person is a member of the selfregulatory organization’’ after ‘‘due, fee
or other charge imposed by the selfregulatory organization.’’ As a result, all
SRO rule proposals establishing or
changing dues, fees or other charges are
immediately effective upon filing
regardless of whether such dues, fees or
other charges are imposed on members
of the SRO, non-members, or both.
Section 916 further amended paragraph
(C) of Section 19(b)(3) of the Act to read,
in pertinent part, ‘‘At any time within
the 60-day period beginning on the date
of filing of such a proposed rule change
in accordance with the provisions of
paragraph (1) [of Section 19(b)], the
Commission summarily may
temporarily suspend the change in the
rules of the self-regulatory organization
made thereby, 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 this title. If the Commission
takes such action, the Commission shall
institute proceedings under paragraph
(2)(B) [of Section 19(b)] to determine
whether the proposed rule should be
approved or disapproved.’’
The Exchange believes that these
amendments to Section 19 of the Act
reflect Congress’s intent to allow the
Commission to rely upon the forces of
competition to ensure that fees for
market data are reasonable and
equitably allocated. Although Section
28 Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37496 (June 29, 2005).
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19(b) had formerly authorized
immediate effectiveness for a ‘‘due, fee
or other charge imposed by the selfregulatory organization,’’ the
Commission adopted a policy and
subsequently a rule stating that fees for
data and other products available to
persons that are not members of the selfregulatory organization must be
approved by the Commission after first
being published for comment. At the
time, the Commission supported the
adoption of the policy and the rule by
pointing out that unlike members,
whose representation in self-regulatory
organization governance was mandated
by the Act, non-members should be
given the opportunity to comment on
fees before being required to pay them,
and that the Commission should
specifically approve all such fees. MIAX
PEARL believes that the amendment to
Section 19 reflects Congress’s
conclusion that the evolution of selfregulatory organization governance and
competitive market structure have
rendered the Commission’s prior policy
on non-member fees obsolete.
Specifically, many exchanges have
evolved from member-owned, not-forprofit corporations into for-profit,
investor-owned corporations (or
subsidiaries of investor-owned
corporations). Accordingly, exchanges
no longer have narrow incentives to
manage their affairs for the exclusive
benefit of their members, but rather
have incentives to maximize the appeal
of their products to all customers,
whether members or non-members, so
as to broaden distribution and grow
revenues. Moreover, the Exchange
believes that the change also reflects an
endorsement of the Commission’s
determinations that reliance on
competitive markets is an appropriate
means to ensure equitable and
reasonable prices. Simply put, the
change reflects a presumption that all
fee changes should be permitted to take
effect immediately, since the level of all
fees are constrained by competitive
forces. The Exchange therefore believes
that the assessment of fees for the use
of ToM and PLF is proper for nonmember Distributors.
The decision of the United States
Court of Appeals for the District of
Columbia Circuit in NetCoalition v.
SEC, No. 09–1042 (DC Cir. 2010),
although reviewing a Commission
decision made prior to the effective date
of the Dodd-Frank Act, upheld the
Commission’s reliance upon
competitive markets to set reasonable
and equitably allocated fees for market
data:
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In fact, the legislative history indicates that
the Congress intended that the market system
‘evolve through the interplay of competitive
forces as unnecessary regulatory restrictions
are removed’ and that the SEC wield its
regulatory power ‘in those situations where
competition may not be sufficient,’ such as
in the creation of a ‘consolidated
transactional reporting system.’ 29
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The court’s conclusions about
Congressional intent are therefore
reinforced by the Dodd-Frank Act
amendments, which create a
presumption that exchange fees,
including Market Data Fees, may take
effect immediately, without prior
Commission approval, and that the
Commission should take action to
suspend a fee change and institute a
proceeding to determine whether the fee
change should be approved or
disapproved only where the
Commission has concerns that the
change may not be consistent with the
Act.
MIAX PEARL believes that the
assessment of the proposed Market Data
Fees for ToM and PLF is fair and
equitable in accordance with Section
6(b)(4) of the Act, and not unreasonably
discriminatory in accordance with
Section 6(b)(5) of the Act. As described
above, Market Data Fees are assessed by
other exchanges, including MIAX
Options.30 The Exchange notes that
proposed Market Data Fees for ToM are
considerably lower than those assessed
for a similar MIAX Options market data
product but believes that a lower ToM
Market Data Fee is fair and reasonable
given the recent entrance of MIAX
PEARL.
Moreover, the decision as to whether
or not to subscribe to ToM or PLF is
entirely optional to all parties. Potential
subscribers are not required to purchase
the ToM or PLF market data feed, and
MIAX PEARL is not required to make
the ToM or PLF market data feed
available without a fee. Subscribers can
discontinue their use at any time and for
any reason, including due to their
assessment of the reasonableness of fees
charged. The allocation of fees among
subscribers is fair and reasonable
because, if the market deems the
proposed fees to be unfair or
inequitable, firms can diminish or
discontinue their use of this data.
New Member Non-Transaction Fee
Waiver
MIAX PEARL believes that the New
Member Non-Transaction Fee Waiver is
consistent with Section 6(4) of the Act
29 NetCoalition, at 15 (quoting H.R. Rep. No. 94–
229, at 92 (1975), as reprinted in 1975 U.S.C.C.A.N.
321, 323).
30 See supra note 25.
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in that it is fair, reasonable and
equitable and it is consistent with
Section 6(5) of the Act in that it is not
unreasonably discriminatory to waive
the non-transaction fees assessable to
new Members who are approved by the
Exchange and credentialed to use the
System in the production environment
for a limited period since the waiver of
such fees provides incentives to
interested applicants to apply for MIAX
PEARL membership. This in turn
provides MIAX PEARL with potential
new order flow and liquidity providers
as it continues to grow its marketplace.
The waiver will apply equally to new
Members for the specified limited
period.
Finally, the Exchange notes that it
operates in a highly competitive market
in which market participants can
readily favor competing venues. In such
an environment, the Exchange must
establish fees that are competitive with
other exchanges. For the reasons
described above, the Exchange believes
that the proposed fees in the MIAX
PEARL Fee Schedule appropriately
reflect this competitive environment.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
MIAX PEARL 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. Unilateral
action by MIAX PEARL in the
assessment of certain non-transaction
fees for services provided to its
Members and others using its facilities
will not have an impact on competition.
As a more recent entrant in the already
highly competitive environment for
equity options trading, MIAX PEARL
does not have the market power
necessary to set prices for services that
are unreasonable or unfairly
discriminatory in violation of the Act.
The Exchange believes that the
proposed definitions would increase
both intermarket and intramarket
competition by encouraging Members to
direct their order flow to the Exchange,
which should enhance the quality of
quoting and increase the volume of
contracts traded on MIAX PEARL.
MIAX PEARL’s proposed nontransaction fee levels, as described
herein, are comparable to fee levels
charged by other options exchanges for
the same or similar services, including
those fees assessed by its affiliate, MIAX
Options. Further, the Exchange believes
that its waiver of the assessment of such
non-transaction fees for new Members
for the limited period specified above
will not impose any burden on
competition and in fact will encourage
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12051
competition. The Exchange believes that
by offering competitive fee rates based
upon objective criteria like volume and
quoting activity on the Exchange it will
increase competition and attract firms of
different sizes and business models to
become Members and participate on 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,31 and Rule
19b–4(f)(2) 32 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–2018–07 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–PEARL–2018–07. 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
31 15
32 17
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U.S.C. 78s(b)(3)(A)(ii).
CFR 240.19b–4(f)(2).
19MRN1
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Federal Register / Vol. 83, No. 53 / Monday, March 19, 2018 / Notices
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–2018–07 and
should be submitted on or before April
9, 2018.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.33
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018–05452 Filed 3–16–18; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
I. Clearing Agency’s Statement of the
Terms of Substance of the Proposed
Rule Change
LCH SA is proposing to amend its
CDS Clearing Procedures (the
‘‘Procedures’’) in order to implement a
new window for end of day price
contribution for CDX North American
indices and related USD denominated
single name CDS transactions at New
York close of business (the ‘‘Proposed
Rule Change’’).
The text of the proposed rule change
has been annexed as Exhibit 5.
II. Clearing Agency’s Statement of the
Purpose of, and Statutory Basis for, the
Proposed Rule Change
In its filing with the Commission,
LCH SA 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. LCH SA has prepared
summaries, set forth in sections A, B,
and C below, of the most significant
aspects of these statements.
A. Clearing Agency’s Statement of the
Purpose of, and Statutory Basis for, the
Proposed Rule Change
[Release No. 34–82863; File No. SR–LCH
SA–2018–002]
Self-Regulatory Organizations; LCH
SA; Notice of Filing and Immediate
Effectiveness of a Proposed Rule
Change Relating to End of Day Price
Contribution
March 13, 2018.
sradovich on DSK3GMQ082PROD with NOTICES
business under the name LCH SA (‘‘LCH
SA’’), filed with the Securities and
Exchange Commission (‘‘Commission’’)
the proposed rule change described in
Items I, II and III below, which Items
have been prepared primarily by LCH
SA. LCH SA has filed the proposed rule
change pursuant to Section 19(b)(3)(A) 4
of the Act and Rule 19b–4(f)(4) 5
thereunder, so that the proposal was
effective upon filing with the
Commission. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
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 March 8,
2018,3 Banque Centrale de
Compensation, which conducts
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 This notice supersedes and replaces the notice
of this proposed rule change previously made
public on the Commission’s website on March 5,
2018.
1. Purpose
In connection with the clearing of
CDX North American indices and
related USD denominated single name
CDS transactions, LCH SA proposes to
modify the end of day price
contribution process by changing the
following timelines for a CDS
Contractual Currency 6 in US Dollar:
—The daily Price Requirement Files
availability for download from
between 14:30 and 15:00 GMT to from
14:30 New York City local time except
33 17
1 15
VerDate Sep<11>2014
16:43 Mar 16, 2018
Jkt 244001
4 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(4).
6 Capitalized terms not defined herein are defined
in LCH SA’s Rulebook, available at: https://
www.lch.com/resources/rules-and-regulations/sarulebooks.
5 17
PO 00000
Frm 00099
Fmt 4703
Sfmt 4703
when the Price Contribution Day
occurs on the Price Contribution Day
immediately preceding 1st January,
4th July or 25th December for which
the files may be available earlier as
notified by LCH SA in advance;
—The daily Market Data submission by
Price Contribution Participants from
between 16:00 and 16:35 GMT to
between 16:30 and 16:35 New York
City local time, except when the Price
Contribution Day occurs on the Price
Contribution Day immediately
preceding 1st January, 4th July or 25th
December for which the files may be
available earlier as notified by LCH
SA in advance;
—The fallback to composite spread/
prices from 17:15 GMT to 17:15 New
York City local time;
—The disclosure of the occurrence of a
Firm Day to Price Contribution
Participants from promptly after the
closure of the submission window at
16:35 GMT to promptly after the
closure of the submission window at
16:35 New York City local time;
—The execution of a CDS Cross Trade
by Price Contribution Participants on
a Firm Day from prior to 18:30 GMT
to prior to 17:30 New York City local
time;
—The notification of execution of Cross
Trades on a Firm Day by a Price
Contribution Participant to LCH SA
from before 18:30 GMT to before
17:30 New York City local time.
LCH SA is also taking this
opportunity to make the following
amendments to Section 5 of the
Procedures with respect to the timeline
of the end of day price contribution
process for a CDS with a CDS
Contractual Currency in Euro and an
Index Swaption:
—The daily Price Requirement Files
availability for download from
between 14:30 and 15:00 GMT to from
13:15 GMT, except when the Price
Contribution Day occurs on the Price
Contribution Day immediately
preceding 1st January or 25th
December for which the files may be
available earlier as notified by LCH
SA in advance;
—The daily Market Data submission by
Price Contribution Participants from
between 16:00 and 16:35 GMT to
between 16:30 and 16:35 GMT, except
when the Price Contribution Day
occurs on the Price Contribution Day
immediately preceding 1st January or
25th December for which the files
may be available earlier as notified by
LCH SA in advance.
The main purpose of the Proposed
Rule Change is to allow LCH SA to mark
to market USD denominated index and
E:\FR\FM\19MRN1.SGM
19MRN1
]]>Agencies
[Federal Register Volume 83, Number 53 (Monday, March 19, 2018)]
[Notices]
[Pages 12044-12052]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-05452]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-82867; File No. SR-PEARL-2018-07]
Self-Regulatory Organizations; MIAX PEARL, LLC; Notice of Filing
and Immediate Effectiveness of a Proposed Rule Change To Amend the MIAX
PEARL Fee Schedule
March 13, 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 February 28, 2018, 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 Substance
of the Proposed Rule Change
The Exchange is filing a proposal to amend the MIAX PEARL Fee
Schedule (the ``Fee Schedule'') to establish certain non-transaction
rebates and fees applicable to participants trading options on and/or
using services provided by MIAX PEARL.
MIAX PEARL commenced operations as a national securities exchange
registered under Section 6 of the Act \3\ on February 6, 2017.\4\ The
Exchange adopted its transaction fees and certain of its non-
transaction fees in its filing SR-PEARL-2017-10.\5\
---------------------------------------------------------------------------
\3\ 15 U.S.C. 78f.
\4\ See Securities Exchange Act Release No. 79543 (December 13,
2016), 81 FR 92901 (December 20, 2016) (File No. 10-227) (order
approving application of MIAX PEARL, LLC for registration as a
national securities exchange).
\5\ See Securities Exchange Act Release No. 80061 (February 17,
2017), 82 FR 11676 (February 24, 2017) (SR-PEARL-2017-10).
---------------------------------------------------------------------------
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
[[Page 12045]]
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 purpose of the proposed rule change is to establish certain
non-transaction rebates and fees applicable to certain market
participants trading options on and/or using certain services provided
by the Exchange. The Exchange introduced the structure of certain non-
transaction rebates and fees in its filing SR-PEARL-2017-10 (without
proposing actual fee amounts), but also explicitly waived the
assessment of any such fees for the period of time which the Exchange
defined as the ``Waiver Period.'' \6\ The Exchange now proposes to
adopt certain non-transaction fees as described below, and thereby
terminate the Waiver Period applicable to such non-transaction fees. In
general, the Exchange proposes to amend the Fee Schedule to: Add
certain definitions; adopt monthly trading permit fees; adopt port
fees; adopt certain market data fees; as well as to adopt a fee waiver
for new Members,\7\ as applicable to Members and non-Members using
certain services provided by MIAX PEARL.
---------------------------------------------------------------------------
\6\ ``Waiver Period'' means, for each applicable fee, the period
of time from the initial effective date of the MIAX PEARL Fee
Schedule until such time that the Exchange has an effective fee
filing establishing the applicable fee. The Exchange will issue a
Regulatory Circular announcing the establishment of an applicable
fee that was subject to a Waiver Period at least fifteen (15) days
prior to the termination of the Waiver Period and effective date of
any such applicable fee. See the Definitions Section of the Fee
Schedule.
\7\ ``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 Exchange Rule 100.
---------------------------------------------------------------------------
Definitions
The Exchange proposes to amend the ``Definitions'' section of the
Fee Schedule to add the following new definitions: ``New Member Non-
Transaction Fee Waiver;'' ``Non-Transaction Fees Volume-Based Tiers;''
and ``Monthly Volume Credit'' which are applicable to the assessment of
certain non-transaction rebates and fees.
``New Member Non-Transaction Fee Waiver'' has the meaning described
below under ``New Member Non-Transaction Fee Waiver.''
``Non-Transaction Fees Volume-Based Tiers'' means the tier
structure that is applicable to determine certain non-transaction fees,
including Monthly Trading Permit Fees and Full Service MEO Port Fees.
The monthly volume thresholds associated with each Tier shall be
calculated as the total volume executed by a Member and its Affiliates
\8\ on the Exchange across all origin types, not including Excluded
Contracts,\9\ as compared to the TCV \10\ in all MIAX PEARL-listed
options as set forth below:
---------------------------------------------------------------------------
\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\ ``Excluded Contracts'' means any contracts routed to an away
market for execution. See the Definitions Section of the Fee
Schedule.
\10\ ``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 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.
------------------------------------------------------------------------
Total volume by member as a
Tier percentage of MIAX PEARL-listed
TCV
------------------------------------------------------------------------
1..................................... 0.00%-0.30%.
2..................................... Above 0.30%-0.60%.
3..................................... Above 0.60%.
------------------------------------------------------------------------
``Monthly Volume Credit'' means a credit assessable to a Member
whose executed Priority Customer \11\ volume along with that of its
Affiliates, not including Excluded Contracts, is at least 0.30% of MIAX
PEARL-listed TCV, as set forth below:
---------------------------------------------------------------------------
\11\ ``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.
------------------------------------------------------------------------
Monthly
Type of member connection Volume Credit
------------------------------------------------------------------------
Member that connects via the FIX Interface.............. $250
Member that connects via the MEO Interface *............ 1,000
------------------------------------------------------------------------
* If a Member connects via both the MEO Interface and FIX Interface, and
qualifies for the Monthly Volume Credit based upon its Priority
Customer Volume, the greater Monthly Volume Credit shall apply to such
Member. The Monthly Volume Credit is a single, once-per-month credit
towards the aggregate monthly total of non-transaction fees assessable
to a Member.
The Exchange proposes the Monthly Volume Credit to be a single,
once-per-month credit towards the aggregate monthly total of non-
transaction fees assessable to a Member. If a Member connects via both
the MEO Interface and FIX Interface, and qualifies for the Monthly
Volume Credit based upon its Priority Customer Volume, the greater
Monthly Volume Credit shall apply to such Member.
Monthly Trading Permit Fees
The Exchange previously introduced the structure of Trading Permit
fees (but without proposing the actual fee amounts), but also
explicitly waived the assessment of any such fees for the Waiver
Period. Trading Permits are issued to Members who are either Electronic
Exchange Members (``EEMs'') or Market Makers.\12\ MIAX PEARL now
proposes to assess fees for such Trading Permits. Members issued
Trading Permits during a calendar month will be assessed monthly
Trading Permit Fees. The Exchange notes that the Exchange's affiliate,
Miami International Securities Exchange, LLC (``MIAX Options''),
charges trading permit fees as well to its members which are based upon
the
[[Page 12046]]
number of assignments of option classes or the percentage of volume in
option classes.\13\ However, the Exchange's proposed structure for its
Trading Permit fees is not identical [sic] the structure of MIAX
Options since the market model of the Exchange is not identical to the
market model of MIAX Options. The Exchange operates a price time,
order-driven marketplace. MIAX Options operates a traditional, pro-
rata, quote-driven marketplace, with market makers having affirmative
quoting obligations in their assigned classes. However, while the
market models are not identical, the Exchange's proposed fee structure
shares a similar characteristic with the structure of MIAX Options,
wherein both generally provide that, the more active user the Member
(i.e., the greater number/greater national ADV of classes assigned to
quote), the higher the Trading Permit fee.
---------------------------------------------------------------------------
\12\ ``Market Maker'' means a Member registered with the
Exchange for the purpose of making markets in options contracts
traded on the Exchange. See Exchange Rule 100.
\13\ See the MIAX Options Fee Schedule, Section 3)b).
---------------------------------------------------------------------------
The Exchange proposes to charge its Members Trading Permit fees
which are based upon the monthly total volume executed by the Member
and its Affiliates on the Exchange across all origin types, not
including Excluded Contracts, as compared to the TCV in all MIAX PEARL-
listed options. Specifically, the Exchange proposes to adopt a tier-
based fee structure based upon the volume-based tiers detailed in the
proposed definition of ``Non-Transaction Fees Volume-Based Tiers''
described above.
The Exchange proposes to charge such Trading Permit fees based upon
the type of interface used by the Member to connect to the Exchange--
the FIX Interface \14\ and/or the MEO Interface.\15\ Any Member
(whether EEM or Market Maker) can select either type of interface
(either FIX Interface or MEO Interface). Each Member who uses the FIX
Interface to connect to the System \16\ will be assessed Trading Permit
fees according to the volume-based tier that it achieves along with
that of its Affiliates. Specifically, Members who use the FIX Interface
will be assessed the following Trading Permit fees each month: (i) If
its volume falls within the parameters of Tier 1 of the Non-Transaction
Fees Volume-Based Tiers, or volume up to 0.30%, $250, (ii) if its
volume falls within the parameters of Tier 2 of the Non-Transaction
Fees Volume-Based Tiers, or volume above 0.30% up to 0.60%, $350, and
(iii) if its volume falls with the parameters of Tier 3 of the Non-
Transaction Fees Volume-Based Tiers, or volume above 0.60%, $450.
---------------------------------------------------------------------------
\14\ ``FIX Interface'' means the Financial Information Exchange
interface for certain order types as set forth in Exchange Rule 516.
See Exchange Rule 100. See the Definitions Section of the Fee
Schedule.
\15\ ``MEO Interface'' means a binary order interface for
certain order types as set forth in Rule 516 into the MIAX PEARL
System. See Exchange Rule 100. See the Definitions Section of the
Fee Schedule.
\16\ The term ``System'' means the automated trading system used
by the Exchange for the trading of securities. See Exchange Rule
100.
---------------------------------------------------------------------------
Each Member who uses the MEO Interface to connect to the System
will be assessed Trading Permit fees according to the volume-based tier
thresholds that it achieves along with that of its Affiliates.
Specifically, Members who use the MEO Interface will be assessed the
following Trading Permit fees each month: (i) If its volume falls
within the parameters of Tier 1 of the Non-Transaction Fees Volume-
Based Tiers, or volume up to 0.30%, $300, (ii) if its volume falls
within the parameters of Tier 2 of the Non-Transaction Fees Volume-
Based Tiers, or volume above 0.30% up to 0.60%, $400, and (iii) if its
volume falls with the parameters of Tier 3 of the Non-Transaction Fees
Volume-Based Tiers, or volume above 0.60%, $500. Members who use the
MEO Interface may also connect to the System through the FIX Interface
as well, and vice versa. The Exchange notes that the Trading Permit
fees for Members who connect through the MEO Interface are higher than
the Trading Permit fees for Members who connect through the FIX
Interface, since the FIX Interface utilizes less capacity and resources
of the Exchange. The MEO Interface offers lower latency and higher
throughput, which utilizes greater capacity and resources of the
Exchange, and is typically a requirement for market makers. The Fix
Interface offers lower bandwidth requirements and an industry-wide
uniform message format, which is typically favored by EEMs. Both EEMs
and Market Makers may connect to the Exchange using either interface.
The Exchange notes that other exchanges assess their membership
fees at different rates based upon a member's participation on that
exchange.\17\
---------------------------------------------------------------------------
\17\ Cboe BZX Options Exchange (``BZX Options'') assesses the
Participant Fee, which is a membership fee, according to a member's
ADV. See Cboe BZX Options Exchange Fee Schedule under ``Membership
Fees''. The Participant Fee is $500 if the member ADV is under 5000
and $1,000 if the member ADV is equal to or over 5000. Id.
---------------------------------------------------------------------------
The Exchange proposes that Members who use the MEO Interface and
who also use the FIX Interface will be assessed the rates for both
types of Trading Permits set forth above but will receive a $100
monthly credit towards the Trading Permit fees applicable to such
Member for MEO Interface use. For example, a Member who reaches Tier 3
in the Non-Transaction fees Volume-Based Tiers, and who connects via a
FIX interface and a MEO Interface, would be assessed Trading Permit
fees of $450 for FIX Interface and $500 for MEO Interface. Since they
connect via both interfaces, they will also receive a $100 monthly
credit for total cost of $850 ($450 + $500 - $100). The monthly credit
will not exceed the Trading Permit fees.
Below is the proposed fee table for Trading Permit fees:
------------------------------------------------------------------------
Monthly MIAX PEARL Trading
Type of Trading Permit Permit fee
------------------------------------------------------------------------
Member that connects via the FIX Tier 1 $250.
Interface. Tier 2 $350.
Tier 3 $450.
Member that connects via the MEO Tier 1 $300.
Interface *. Tier 2 $400.
Tier 3 $500.
------------------------------------------------------------------------
* Members who connect via the MEO Interface and that also connect via
the FIX Interface will be assessed the rates for both types of Trading
Permits set forth above, but will receive a $100 credit towards the
Trading Permit Fees set forth above for MEO Interface use.
Port Fees
MIAX PEARL proposes to assess fees for access and services used by
Members via connections known as ``Ports''. MIAX PEARL provides five
(5) Port types, including (i) the Financial Information Exchange
(``FIX'') Port, which allows Members to electronically send orders in
all products traded on the Exchange; (ii) the MIAX Express Network
(``MEO'') Port, which allows EEMs and Market Makers to submit
electronic orders in all products to the Exchange; (iii) the Clearing
Trade Drop (``CTD'') Port, which provides real-time per-trade clearing
information to the participants on MIAX PEARL and to the participants'
respective clearing firms; (iv) FIX Drop Copy (``FXD'') Port, which
provides a copy of real-time trade execution, correction, and
cancellation information through a FIX Port to any number of FIX Ports
designated by a Member to receive such messages; and (v) the MEO Purge
Port, which is used as a dedicated port for sending purge messages to
the Exchange.
MIAX PEARL has Primary and Secondary Facilities and a Disaster
Recovery Facility. Each type of Port provides access to all three
facilities for a single fee. The Exchange notes that, unless otherwise
specifically set forth in the Fee Schedule, the Port fees include the
information communicated through the Port. That is, unless otherwise
[[Page 12047]]
specifically set forth in the Fee Schedule, there is no additional
charge for the information that is communicated through the Port apart
from what the user is assessed for each Port.\18\
---------------------------------------------------------------------------
\18\ One such example of an additional charge is a charge for
certain fee-liable market data feed products to which the Member
subscribes.
---------------------------------------------------------------------------
The Exchange currently offers different options of MEO Ports
depending on the services required by the Member, including a Full
Service MEO Port-Bulk,\19\ a Full Service MEO Port-Single,\20\ and a
Limited Service MEO Port.\21\ A Member may be allocated two (2) Full-
Service MEO Ports of either type, Bulk and/or Single, per Matching
Engine, and up to eight (8) Limited Service MEO Ports, per Matching
Engine. The two (2) Full-Service MEO Ports that may be allocated per
Matching Engine to a Member currently may consist of: (a) Two (2) Full
Service MEO Ports--Bulk; or (b) two (2) Full Service MEO Ports--Single.
The Exchange proposes to add a third option, option (c), which permits
a Member to have one (1) Full Service MEO Port--Bulk, and one (1) Full
Service MEO Port--Single. If a Member selects option (c), the Exchange
will assess the rates applicable to Full Service MEO Port--Bulk in the
Fee Schedule, described below. The Exchange proposes to add option (c)
in order to provide Members greater flexibility and granularity in
their available Port connection alternatives.
---------------------------------------------------------------------------
\19\ ``Full Service MEO Port--Bulk'' means an MEO port that
supports all MEO input message types and binary bulk order entry.
See the Definitions Section of the Fee Schedule.
\20\ ``Full Service MEO Port--Single'' means an MEO port that
supports all MEO input message types and binary order entry on a
single order-by-order basis, but not bulk orders. See the
Definitions Section of the Fee Schedule.
\21\ ``Limited Service MEO Port'' means an MEO port that
supports all MEO input message types, but does not support bulk
order entry and only supports limited order types, as specified by
the Exchange via Regulatory Circular. See the Definitions Section of
the Fee Schedule.
---------------------------------------------------------------------------
MIAX PEARL proposes to assess Members Full Service MEO Port Fees,
either for a Full Service MEO Port--Bulk and/or for a Full Service MEO
Port--Single, based upon the monthly total volume executed by a Member
and its Affiliates on the Exchange across all origin types, not
including Excluded Contracts, as compared to the TCV in all MIAX PEARL-
listed options. Specifically, the Exchange proposes to adopt a tier-
based fee structure based upon the volume-based tiers detailed in the
proposed definition of ``Non-Transaction Fees Volume-Based Tiers''
described above. MIAX PEARL proposes to assess these and other monthly
Port fees on Members in each month the market participant is
credentialed to use a Port in the production environment. MIAX PEARL
proposes the following Monthly Port Fees table:
------------------------------------------------------------------------
Monthly Port Fees includes
connectivity to the primary,
Type of Port secondary and disaster recovery
data centers
------------------------------------------------------------------------
FIX Port [supcaret].................... Per Port: 1st $275, 2nd to 5th
$175, 6th or more $75.
Full Service MEO Port--Bulk *.......... Tier 1 $3,000.
Tier 2 $4,500.
Tier 3 $5,000.
Full Service MEO Port--Single *........ Tier 1 $2,000.
Tier 2 $3,375.
Tier 3 $3,750.
Limited Service MEO Port **............ 1st to 2nd $0, 3rd to 4th $200,
5th to 6th $300, 7th to 8th
$400.
MEO Purge Port ***..................... $750.
CTD Port [supcaret].................... Per Port: $450.
FXD Port [supcaret].................... Per Port: $250.
------------------------------------------------------------------------
* The rates set forth above for Full Service MEO Ports, both Bulk and/or
Single, entitle a Member to two (2) such Ports for each Matching
Engine for a single port fee. If a Member selects at least one Full
Service MEO Port--Bulk as part of their two (2) Ports, i.e. option (c)
described below, the rates applicable to Full Service MEO Port--Bulk
set forth above apply.
** Each Limited Service MEO Port fee entitles a Member to one (1) such
port for each Matching Engine. For example, the purchase of 4 Limited
Service MEO Ports will allow the Member to access 4 ports per Matching
Engine.
*** The MEO Purge Port fee entitles a Member to two (2) such ports for
each Matching Engine for a single port fee.
[supcaret] Each port will have access to all Matching Engines.
Other exchanges, including MIAX Options, charge a fee for similar
services to Members.\22\ The Exchange's proposed structure for some of
its Port fees is similar to the structure of MIAX Options, subject to a
few differences as discussed below. First, the Exchange proposes to
have two primary types of Full Service MEO Port Fees (Bulk and Single),
whereas MIAX Options only has one type of full service port fee (MEI
Port Fee). Second, MIAX Options charges for its MEI port fees based on
the options class assignments, or as measured by the national volume.
Since the market model of the Exchange is not identical to the market
model of MIAX Options, the Exchange therefore proposes to assess its
MEO Port fees in a different manner than is assessed by MIAX Options
for its MEI Port fees. The Exchange operates a price time, order-driven
marketplace. MIAX Options operates a traditional, pro-rata, quote-
driven marketplace, with market makers having affirmative quoting
obligations in their assigned classes. However, while the market modes
[sic] are not identical, the Exchange's proposed structure shares a
similar characteristic with the structure of MIAX Options wherein both
generally provide that, the more active user the Member (i.e., the
greater number/greater national ADV of classes assigned to quote), the
higher the Port fee. Third, the amount of the CTD Port fee assessed by
MIAX Options is based on the per executed contract side volume of the
MIAX Options member. The Exchange proposes to assess its CTD Port fee
as a monthly per Port fee, not tied to per executed contract side
volume of the Member. The CTD fee structure is the same structure in
place at Nasdaq PHLX with respect to its Clearing Trade Interface
(``CTI'') port fees.\23\ Finally, the amount of the Fix Drop Copy Port
fee assessed by MIAX Options, which is a similar fee to the FXD Port
fee, is a flat monthly fee whereas the Exchange proposes that the FXD
Port fee is per Port like it is proposing to charge for the MEO Purge
Ports and CTD Ports and not a flat fee.
---------------------------------------------------------------------------
\22\ See Nasdaq Phlx LLC (``Phlx'') Fee Schedule, Section VII
``Other Member Fees'', B ``Port Fees''.
\23\ Id.
---------------------------------------------------------------------------
Finally, the Exchange proposes to no longer offer Ports to non-
Members. There are no current non-Members that connect to the Exchange
via Ports, and, based on the Exchange's market model, it does not
envision that non-Members
[[Page 12048]]
would require connectivity to the Exchange via Ports in the future.
Accordingly, the Exchange proposes to remove all references to non-
Members from Section 5)d) (Port Fees) of the Fee Schedule.
Market Data Fees
The Exchange proposes to assess fees for its market data products,
MIAX PEARL Top of Market (``ToM'') and MIAX PEARL Liquidity Feed
(``PLF''). A more detailed description of the ToM and PLF products can
be found in the Market Data Product Filing.\24\ To summarize, ToM
provides market participants with a direct data feed that includes the
Exchange's best bid and offer, with aggregate size, and last sale
information, based on displayable order and quoting interest on the
Exchange. The ToM data feed includes data that is identical to the data
sent to the processor for the Options Price Reporting Authority
(``OPRA''). ToM also contains a feature that provides the number of
Priority Customer contracts that are included in the size associated
with the Exchange's best bid and offer.
---------------------------------------------------------------------------
\24\ See Securities Exchange Act Release No. 79913 (February 1,
2017), 82 FR 9617 (February 7, 2017) (SR-PEARL-2017-01).
---------------------------------------------------------------------------
PLF is a real-time full order book data feed that provides
information for orders on the MIAX PEARL order book. PLF provides real-
time information to enable users to keep track of the simple order book
for all symbols listed on MIAX PEARL. PLF provides the following real-
time data to its users with respect to each order for the entire order
book: Origin, limit price, side, size, and time-in-force (e.g., day,
GTC). It is a compilation of data for orders residing on the Exchange's
order book for options traded on the Exchange that the Exchange
provides through a real-time multi-cast data feed. The Exchange
believes the PLF is a valuable tool that subscribers can use to gain
comprehensive insight into the limit order book in a particular option.
The Exchange proposes to charge monthly fees to Distributors of the
ToM and/or PLF market data products. MIAX PEARL will assess market data
fees applicable to the market data products to Internal and External
Distributors in each month the Distributor is credentialed to use the
applicable market data product in the production environment. A
``Distributor'' of MIAX PEARL data is any entity that receives a feed
or file of data either directly from MIAX PEARL or indirectly through
another entity and then distributes it either internally (within that
entity) or externally (outside that entity). All Distributors are
required to execute a MIAX PEARL Distributor Agreement. Market data
fees for ToM and PLF will be reduced for new Distributors for the first
month during which they subscribe to the applicable market data
product, based on the number of trading days that have been held during
the month prior to the date on which they have been credentialed to use
the applicable market data product in the production environment. Such
new Distributors will be assessed a pro-rata percentage of the fees
described above, which is the percentage of the number of trading days
remaining in the affected calendar month as of the date on which they
have been credentialed to use the applicable market data product in the
production environment, divided by the total number of trading days in
the affected calendar month.
Specifically, the Exchange proposes to assess Internal Distributors
$500 per month and External Distributors $750 per month for the ToM
market data feed. The Exchange additionally proposes to assess Internal
Distributors $1,250 per month and External Distributors $1,500 per
month for the PLF market data feed. The Exchange notes that its data
feed prices are generally lower than most other options exchanges' data
feed prices for their comparable data feed products.\25\
---------------------------------------------------------------------------
\25\ See NASDAQ Phlx Pricing Schedule, Section IX, Proprietary
Data Feed Fees.
---------------------------------------------------------------------------
New Member Fee Waiver
The Exchange proposes to waive the assessment of the foregoing non-
transaction fees to a new Member of the Exchange for the first calendar
month during which they are approved as a Member and are credentialed
to use the System in the production environment, and for the two (2)
subsequent calendar months thereafter. The Exchange proposes to define
this waiver as the ``New Member Non-Transaction Fee Waiver'' and to add
it to the Definitions section of the Fee Schedule accordingly. In the
first month, certain of such Members' non-transaction fees specified by
the Exchange will not be assessed and thereby waived for the trading
days remaining in such month after the date that the Member was
accepted by the Exchange. Then the specified non-transaction fees for
the following two (2) calendar months will also be waived by the
Exchange for the new Member. For example, if Member A is approved as a
Member and credentialed to use the Exchange's System in the production
environment on April 2, 2018, Member A will not be assessed any Trading
Permit, Port, or Market Data fees for the remaining days in April, and
will not be assessed any such fees for the calendar months of May and
June of 2018. For the avoidance of doubt, a ``new Member'' shall mean
any Member who has not previously been approved by the Exchange and
credentialed to use the Exchange's System in the production
environment. The Exchange believes that this fee waiver will provide
incentive for prospective applicants to apply for membership, and may
consequently result in increasing potential order flow and liquidity
for the Exchange. The Exchange will submit a rule filing with the
Commission prior to terminating the Exchange's waiver of such fees
assessable to new Members.
The proposed rule changes will become operative March 1, 2018.
Except as set forth above, all other fees of the Exchange remain as set
forth in the Fee Schedule.
2. Statutory Basis
The Exchange believes that its proposal to amend its Fee Schedule
is consistent with Section 6(b) of the Act \26\ in general, and
furthers the objectives of Section 6(b)(4) of the Act \27\ 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.
---------------------------------------------------------------------------
\26\ 15 U.S.C. 78f(b).
\27\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------
Definitions
The Exchange believes that the proposed new definition ``New Member
Non-Transaction Fee Waiver'' 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
participants. The definition applies equally to all potential Members
and is intended to add transparency to the Exchange's marketplace by
clarifying how the waiver of certain specified non-transaction fees
will apply to new Members.
The Exchange believes that the proposed new definition ``New Member
Non-Transaction Fee Waiver'' is
[[Page 12049]]
consistent with Section 6(5) of the Act in that it promotes equitable
access to the Exchange for all market participants. To the extent that
new Members are encouraged to apply to the Exchange as a result of the
waiver of certain specified non-transaction fees for a limited period
of time, the resulting increased volume and liquidity from such new
Members will benefit all Exchange participants by providing more
trading opportunities and tighter spreads.
The Exchange believes that the proposed new definition ``Non-
Transaction Fees Volume-Based Tiers'' and the associated volume-based
tier structure applicable to certain specified non-transaction fees 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 participants. The proposed tier
structure is fair and equitable and not unreasonably discriminatory
because the volume calculations and thresholds are applied equally to
all MIAX PEARL Members. All similarly situated MIAX PEARL Members are
subject to the volume thresholds, and access to the Exchange is offered
on terms that are not unfairly discriminatory.
The Exchange believes that the proposed new definition ``Non-
Transaction Fees Volume-Based Tiers'' and the associated volume-based
tier structure applicable to certain non-transaction fees is consistent
with Section 6(b)(5) of the Act in that it promotes equitable access to
the Exchange for all market participants. To the extent that Member
volume is increased by the proposal, the resulting increased volume and
liquidity will benefit all Exchange participants by providing more
trading opportunities and tighter spreads.
The Exchange believes that by determining certain fees upon volume
will permit Member firms to have the same access to the Exchange but
pay fees which are proportionate to their usage of the Exchange. The
fees based upon the same volume threshold will also be assessed to
Members on an equal basis since they are assessed based upon the same
volume and access type provided. The specific volume thresholds of the
``Non-Transaction Fees Volume-Based Tiers'' were set based upon
business determinations and an analysis of current volume levels. The
Exchange believes that the proposed new definition of ``Non-Transaction
Fees Volume-Based Tiers'' and the associated volume-based tier
structure applicable to certain non-transaction fees should provide
incentives for market participants to join and trade on the Exchange.
The Exchange believes that the proposed new definition ``Monthly
Volume Credit'' and the associated monthly credit for Priority Customer
volume applicable to certain non-transaction fees is fair, equitable
and not unreasonably discriminatory, because it applies equally to all
Members. The proposed volume credit for Priority Customer orders is
reasonably designed because it will encourage Members to send increased
Priority Customer order flow to the Exchange in order to receive the
applicable monthly credit. The Exchange thus believes that the proposed
new credit should improve market quality for all market participants by
providing more execution opportunities. All Members who qualify will
receive the same credit, or the greater of credits for Members who use
both FIX and MEO, for Priority Customer volume according to the
interface that they select to use to connect to the Exchange.
The Exchange believes that the proposed new definition ``Monthly
Volume Credit'' and the associated monthly credit for Priority Customer
volume is consistent with Section 6(b)(5) of the Act and it is not
discriminatory since it is available to all Members who transact
Priority Customer volume at the specified levels. To the extent that
MIAX PEARL Priority Customer volume is increased by the proposal,
market participants may 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.
Monthly Trading Permit Fees
The Exchange believes that the assessment of Trading Permit fees is
reasonable, equitable, and not unfairly discriminatory. The assessment
of Trading Permit fees is done by the Exchange's affiliate, MIAX
Options, and is commonly done by other exchanges as described in the
Purpose section above. The Exchange also believes that the proposed
tier structure is fair and equitable and not unreasonably
discriminatory because the volume calculations and thresholds are
applied equally to all MIAX PEARL Members. All similarly situated MIAX
PEARL Members are subject to the volume thresholds, and access to the
Exchange is offered on terms that are not unfairly discriminatory.
The Exchange believes that the proposed Trading Permit Fees 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 Member volume is increased by the proposal, 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 Trading Permit Fees were set
based upon business determinations and an analysis of current volume
levels. The Exchange believes that by basing certain fees upon volume,
this will permit Member firms to have the same access to the Exchange
but pay fees which are proportionate to their usage of the Exchange.
The same fees based upon the same volume will also be assessed to
Members on an equal basis since they are assessed based upon the same
volume of order flow provided.
Port Fees
MIAX PEARL believes it is reasonable, equitable and not unfairly
discriminatory to assess Port fees on Members who use such services. In
particular, the Exchange believes that it is reasonable, equitable, and
not unfairly discriminatory to assess Port fees on Members since the
Ports enable Members to submit orders and to receive information
regarding transactions. Specifically, the FIX Port and the various MEO
Ports enable Members to submit orders electronically to the Exchange
for processing. The Exchange believes that its proposed fees are
reasonable in that other exchanges offer similar ports with similar
services and charge fees for the use of such ports, including MIAX
Options.
The Exchange believes that its fees for Ports are reasonable,
equitable, and not unfairly discriminatory in that they apply to all
Members using the following ports: FIX, MEO, MEO Purge, CTD or FXD
equally and allow the Exchange to recover operational and
administrative costs in developing and maintaining such services. The
Exchange believes that assessing a per Port fee for some Ports while
assessing a flat fee, which in the case of Full Service MEO Ports is
tiered according to the Member's volume, for other Ports is reasonable
and not discriminatory since different Ports provide different
information and utility to Members. For example, the MEO Interface
offers greater connectivity, lower latency and higher throughput which
is beneficial to Market Maker activities and while both EEMs and Market
Makers may connect through either the FIX or MEO
[[Page 12050]]
Interfaces, Market Makers generally elect to connect through the MEO
Interface for the greater benefits of its connectivity which requires a
MEO Port. The Exchange expends considerable resources to provide Port
access to its Members and certain Ports are more costly to provide such
as the Full Service MEO Port--Bulk. The Exchange must assess fees in
order to recoup the costs involved with providing the appropriate
access required by the Member. The Exchange believes that its proposed
fees are reasonable in that other exchanges charge fees for similar
services, including MIAX Options, subject to the differences discussed
above, which the Exchange believes are reasonable given the different
market structure between the Exchange and MIAX Options.
The Exchange also believes the proposed Port Fees are consistent
with Section 6(b)(5) of the Act are non-discriminatory because they
will apply uniformly to all Members. The use and choice of Ports are
completely voluntary and no user is required, nor are the Members under
any regulatory obligation, to utilize them. All Members have the option
to select any connectivity option, and fees, when charged, are charged
uniformly for the services offered by the Exchange.
The Exchange believes that by basing certain fees upon volume, this
will permit Member firms to have the same access to the Exchange but
pay fees which are proportionate to their usage of the Exchange. The
same fees based upon the same volume will also be assessed to Members
on an equal basis since they are assessed based upon the same volume
and access type provided.
Market Data Fees
The Exchange believes that its proposal to assess Market Data Fees
is consistent with the provisions of Section 6(b)(4) of the Act in that
it provides an equitable allocation of reasonable fees among
distributors of ToM and PLF, because all Distributors in each of the
respective category of Distributor (i.e., Internal and External) will
be assessed the same fees as other Distributors in their category for
the applicable market data product.
In adopting Regulation NMS, the Commission granted self-regulatory
organizations and broker-dealers increased authority and flexibility to
offer new and unique market data to the public. It was believed that
this authority would expand the amount of data available to consumers,
and also spur innovation and competition for the provision of market
data:
[E]fficiency is promoted when broker-dealers who do not need the
data beyond the prices, sizes, market center identifications of the
NBBO and consolidated last sale information are not required to
receive (and pay for) such data when broker-dealers may choose to
receive (and pay for) additional market data based on their own
internal analysis of the need for such data.\28\
---------------------------------------------------------------------------
\28\ Securities Exchange Act Release No. 51808 (June 9, 2005),
70 FR 37496 (June 29, 2005).
By removing ``unnecessary regulatory restrictions'' on the ability
of exchanges to sell their own data, Regulation NMS advanced the goals
of the Act and the principles reflected in its legislative history. If
the free market should determine whether proprietary data is sold to
broker-dealers at all, it follows that the price at which such data is
sold should be set by the market as well.
In July, 2010, Congress adopted H.R. 4173, the Dodd-Frank Wall
Street Reform and Consumer Protection Act of 2010 (``Dodd-Frank Act''),
which amended Section 19 of the Act. Among other things, Section 916 of
the Dodd-Frank Act amended paragraph (A) of Section 19(b)(3) of the Act
by inserting the phrase ``on any person, whether or not the person is a
member of the self-regulatory organization'' after ``due, fee or other
charge imposed by the self-regulatory organization.'' As a result, all
SRO rule proposals establishing or changing dues, fees or other charges
are immediately effective upon filing regardless of whether such dues,
fees or other charges are imposed on members of the SRO, non-members,
or both. Section 916 further amended paragraph (C) of Section 19(b)(3)
of the Act to read, in pertinent part, ``At any time within the 60-day
period beginning on the date of filing of such a proposed rule change
in accordance with the provisions of paragraph (1) [of Section 19(b)],
the Commission summarily may temporarily suspend the change in the
rules of the self-regulatory organization made thereby, 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 this title. If the Commission takes such
action, the Commission shall institute proceedings under paragraph
(2)(B) [of Section 19(b)] to determine whether the proposed rule should
be approved or disapproved.''
The Exchange believes that these amendments to Section 19 of the
Act reflect Congress's intent to allow the Commission to rely upon the
forces of competition to ensure that fees for market data are
reasonable and equitably allocated. Although Section 19(b) had formerly
authorized immediate effectiveness for a ``due, fee or other charge
imposed by the self-regulatory organization,'' the Commission adopted a
policy and subsequently a rule stating that fees for data and other
products available to persons that are not members of the self-
regulatory organization must be approved by the Commission after first
being published for comment. At the time, the Commission supported the
adoption of the policy and the rule by pointing out that unlike
members, whose representation in self-regulatory organization
governance was mandated by the Act, non-members should be given the
opportunity to comment on fees before being required to pay them, and
that the Commission should specifically approve all such fees. MIAX
PEARL believes that the amendment to Section 19 reflects Congress's
conclusion that the evolution of self-regulatory organization
governance and competitive market structure have rendered the
Commission's prior policy on non-member fees obsolete. Specifically,
many exchanges have evolved from member-owned, not-for-profit
corporations into for-profit, investor-owned corporations (or
subsidiaries of investor-owned corporations). Accordingly, exchanges no
longer have narrow incentives to manage their affairs for the exclusive
benefit of their members, but rather have incentives to maximize the
appeal of their products to all customers, whether members or non-
members, so as to broaden distribution and grow revenues. Moreover, the
Exchange believes that the change also reflects an endorsement of the
Commission's determinations that reliance on competitive markets is an
appropriate means to ensure equitable and reasonable prices. Simply
put, the change reflects a presumption that all fee changes should be
permitted to take effect immediately, since the level of all fees are
constrained by competitive forces. The Exchange therefore believes that
the assessment of fees for the use of ToM and PLF is proper for non-
member Distributors.
The decision of the United States Court of Appeals for the District
of Columbia Circuit in NetCoalition v. SEC, No. 09-1042 (DC Cir. 2010),
although reviewing a Commission decision made prior to the effective
date of the Dodd-Frank Act, upheld the Commission's reliance upon
competitive markets to set reasonable and equitably allocated fees for
market data:
[[Page 12051]]
In fact, the legislative history indicates that the Congress
intended that the market system `evolve through the interplay of
competitive forces as unnecessary regulatory restrictions are
removed' and that the SEC wield its regulatory power `in those
situations where competition may not be sufficient,' such as in the
creation of a `consolidated transactional reporting system.' \29\
---------------------------------------------------------------------------
\29\ NetCoalition, at 15 (quoting H.R. Rep. No. 94-229, at 92
(1975), as reprinted in 1975 U.S.C.C.A.N. 321, 323).
The court's conclusions about Congressional intent are therefore
reinforced by the Dodd-Frank Act amendments, which create a presumption
that exchange fees, including Market Data Fees, may take effect
immediately, without prior Commission approval, and that the Commission
should take action to suspend a fee change and institute a proceeding
to determine whether the fee change should be approved or disapproved
only where the Commission has concerns that the change may not be
consistent with the Act.
MIAX PEARL believes that the assessment of the proposed Market Data
Fees for ToM and PLF is fair and equitable in accordance with Section
6(b)(4) of the Act, and not unreasonably discriminatory in accordance
with Section 6(b)(5) of the Act. As described above, Market Data Fees
are assessed by other exchanges, including MIAX Options.\30\ The
Exchange notes that proposed Market Data Fees for ToM are considerably
lower than those assessed for a similar MIAX Options market data
product but believes that a lower ToM Market Data Fee is fair and
reasonable given the recent entrance of MIAX PEARL.
---------------------------------------------------------------------------
\30\ See supra note 25.
---------------------------------------------------------------------------
Moreover, the decision as to whether or not to subscribe to ToM or
PLF is entirely optional to all parties. Potential subscribers are not
required to purchase the ToM or PLF market data feed, and MIAX PEARL is
not required to make the ToM or PLF market data feed available without
a fee. Subscribers can discontinue their use at any time and for any
reason, including due to their assessment of the reasonableness of fees
charged. The allocation of fees among subscribers is fair and
reasonable because, if the market deems the proposed fees to be unfair
or inequitable, firms can diminish or discontinue their use of this
data.
New Member Non-Transaction Fee Waiver
MIAX PEARL believes that the New Member Non-Transaction Fee Waiver
is consistent with Section 6(4) of the Act in that it is fair,
reasonable and equitable and it is consistent with Section 6(5) of the
Act in that it is not unreasonably discriminatory to waive the non-
transaction fees assessable to new Members who are approved by the
Exchange and credentialed to use the System in the production
environment for a limited period since the waiver of such fees provides
incentives to interested applicants to apply for MIAX PEARL membership.
This in turn provides MIAX PEARL with potential new order flow and
liquidity providers as it continues to grow its marketplace. The waiver
will apply equally to new Members for the specified limited period.
Finally, the Exchange notes that it operates in a highly
competitive market in which market participants can readily favor
competing venues. In such an environment, the Exchange must establish
fees that are competitive with other exchanges. For the reasons
described above, the Exchange believes that the proposed fees in the
MIAX PEARL Fee Schedule appropriately reflect this competitive
environment.
B. Self-Regulatory Organization's Statement on Burden on Competition
MIAX PEARL 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. Unilateral action by MIAX PEARL
in the assessment of certain non-transaction fees for services provided
to its Members and others using its facilities will not have an impact
on competition. As a more recent entrant in the already highly
competitive environment for equity options trading, MIAX PEARL does not
have the market power necessary to set prices for services that are
unreasonable or unfairly discriminatory in violation of the Act. The
Exchange believes that the proposed definitions would increase both
intermarket and intramarket competition by encouraging Members to
direct their order flow to the Exchange, which should enhance the
quality of quoting and increase the volume of contracts traded on MIAX
PEARL. MIAX PEARL's proposed non-transaction fee levels, as described
herein, are comparable to fee levels charged by other options exchanges
for the same or similar services, including those fees assessed by its
affiliate, MIAX Options. Further, the Exchange believes that its waiver
of the assessment of such non-transaction fees for new Members for the
limited period specified above will not impose any burden on
competition and in fact will encourage competition. The Exchange
believes that by offering competitive fee rates based upon objective
criteria like volume and quoting activity on the Exchange it will
increase competition and attract firms of different sizes and business
models to become Members and participate on 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,\31\ and Rule 19b-4(f)(2) \32\ 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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\31\ 15 U.S.C. 78s(b)(3)(A)(ii).
\32\ 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-PEARL-2018-07 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to File Number SR-PEARL-2018-07. 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
[[Page 12052]]
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-2018-07 and should be submitted on or before April 9, 2018.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\33\
Eduardo A. Aleman,
Assistant Secretary.
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\33\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 2018-05452 Filed 3-16-18; 8:45 am]
BILLING CODE 8011-01-P
