Self-Regulatory Organizations; Miami International Securities Exchange LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Its Fee Schedule, 40595-40599 [2018-17494]
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Federal Register / Vol. 83, No. 158 / Wednesday, August 15, 2018 / Notices
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were either
solicited or 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.24
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: (i) Necessary or appropriate in
the public interest; (ii) for the protection
of investors; or (iii) 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:
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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–
BX–2018–036 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–BX–2018–036. This file
number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
internet website (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for website viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE,
Washington, DC 20549 on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change.
Persons submitting comments are
cautioned that we do not redact or edit
personal identifying information from
comment submissions. You should
submit only information that you wish
to make available publicly. All
submissions should refer to File
Number SR–BX–2018–036 and should
be submitted on or before September 5,
2018.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.25
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018–17491 Filed 8–14–18; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–83813; File No. SR–MIAX–
2018–20]
Self-Regulatory Organizations; Miami
International Securities Exchange LLC;
Notice of Filing and Immediate
Effectiveness of a Proposed Rule
Change To Amend Its Fee Schedule
August 9, 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 July 31, 2018, Miami International
Securities Exchange LLC (‘‘MIAX
Options’’ or ‘‘Exchange’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’) a proposed rule change
as described in Items I, II, and III below,
which Items have been prepared by the
Exchange. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange is filing a proposal to
amend the MIAX Options Fee Schedule
25 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
24 15
U.S.C. 78s(b)(3)(A)(ii).
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40595
(the ‘‘Fee Schedule’’) to delete a fee
waiver relating to certain market data
feed products.
The text of the proposed rule change
is available on the Exchange’s website at
https://www.miaxoptions.com/rulefilings, at MIAX’s principal office, and
at the Commission’s Public Reference
Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to amend its
Fee Schedule to delete a fee waiver
relating to certain market data feed
products offered by the Exchange—
namely, the Exchange’s Administrative
Information Subscriber (‘‘AIS’’) market
data feed, and the Exchange’s Top of
Market (‘‘ToM’’) market data feed.
The ToM market data feed includes
data that is identical to the data sent to
the processor for the Options Price
Regulatory Authority (‘‘OPRA’’). ToM
provides real-time updates of the MIAX
Best Bid or Offer, or MBBO,3 price with
aggregate orders and quote size of
contracts that can be displayed, display
of Public Customer 4 interest at the
MBBO, display of Priority Customer 5
interest at the MBBO, and MIAX
Options last sale.6 The Exchange
launched ToM in early 2013,7 and
3 The term ‘‘MBBO’’ means the best bid or offer
on the Exchange. See Exchange Rule 100. See also
Exchange Rule 506(c)(2).
4 The term ‘‘Public Customer’’ means a person
that is not a broker or dealer in securities. See
Exchange Rule 100.
5 The term ‘‘Priority Customer’’ means a person
or entity that (i) is not a broker or dealer in
securities, and (ii) does not place more than 390
orders in listed options per day on average during
a calendar month for its own beneficial account(s).
See Exchange Rule 100.
6 See Securities Exchange Act Release No. 69007
(February 28, 2013), 78 FR 14617 (March 6, 2013)
(SR–MIAX–2013–05).
7 See id.
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adopted monthly fees shortly
thereafter.8 The Exchange assesses a
monthly fee of $1,250.00 for ToM
Internal Distributors and a monthly fee
of $1,750.00 for ToM External
Distributors.
The Exchange began offering its AIS
market data feed in April 2013.9 The
AIS market data feed currently includes
administrative information for both
simple and complex orders. The AIS
market data feed includes: Simple and
complex liquidity seeking event
notifications, listed series updates,
complex strategy definition updates,
system state, and underlying trading
state information. The Exchange
assesses a monthly fee of $1,250.00 for
all AIS Internal Distributors and a
monthly fee of $1,750.00 for all AIS
External Distributors. However, the
monthly fee for Distributors of AIS is
presently waived if the Distributor also
subscribes to ToM.10
Accordingly, under the present
operation of the Fee Schedule, a
subscriber who only subscribes to AIS
will be charged the AIS monthly fee
($1,250.00 for Internal Distributors and
$1,750.00 for External Distributors). A
subscriber who only subscribes to ToM
will be charged the ToM monthly fee
($1,250.00 for Internal Distributors and
$1,750.00 for External Distributors). A
subscriber who subscribes to both ToM
and AIS will be charged only the ToM
monthly fee ($1,250.00 for Internal
Distributors and $1,750.00 for External
Distributors).
The Exchange now proposes to delete
the fee waiver which entitles a
subscriber of both ToM and AIS to
receive a fee waiver for AIS.
Accordingly, pursuant to this proposal,
a subscriber to both ToM and AIS would
now be assessed a separate fee for each
of the data feeds. A subscriber who is an
Internal Distributor will now pay
$2,500.00 in the aggregate, if subscribing
to both feeds, and a subscriber who is
an External Distributor will now pay
$3,500.00 in the aggregate, if subscribing
to both feeds.
The Exchange is not proposing to
modify any other aspect of either the
AIS market data feed product or the
ToM market data feed product. The
Exchange is solely deleting the fee
waiver which presently entitles a
8 See Securities Exchange Act Release No. 69323
(April 5, 2013), 78 FR 21677 (April 11, 2013) (SR–
MIAX–2013–14).
9 See Securities Exchange Act Release No. 69320
(April 5, 2013), 78 FR 21661 (April 11, 2013) (SR–
MIAX–2013–13).
10 See Securities Exchange Act Release No. 73326
(October 9, 2014), 79 FR 62233 (October 16, 2014)
(SR–MIAX–2014–51).
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subscriber of ToM to also receive a
subscription to AIS for free.
The proposed rule change is
scheduled to become operative on
August 1, 2018.
2. Statutory Basis
The Exchange believes that its
proposal to amend its Fee Schedule is
consistent with Section 6(b) 11 of the Act
in general, and furthers the objectives of
Section 6(b)(4) 12 of the Act, in that it is
designed to provide for an equitable
allocation of reasonable dues, fees and
other charges among Exchange
Members 13 and other persons using its
facilities, because it applies equally to
all Members and any persons using the
facilities or services of the Exchange.
The Exchange also believes that the
proposal furthers the objectives of
Section 6(b)(5) 14 of the Act in
particular, in that it is designed to
prevent fraudulent and manipulative
acts and practices, to promote just and
equitable principles of trade, to foster
cooperation and coordination with
persons engaged in facilitating
transactions in securities, to remove
impediments to and perfect the
mechanisms of a free and open market
and a national market system and, in
general, to protect investors and the
public interest, and it is not designed to
permit unfair discrimination among
customers, brokers, or dealers.
The Exchange believes that the
proposed amendment to delete a fee
waiver relating to certain market data
feed products offered by the Exchange—
namely, the Exchange’s AIS market data
feed, and the Exchange’s ToM market
data feed—is reasonable, equitable, and
not unfairly discriminatory. The
Exchange has offered an AIS fee waiver
to ToM subscribers since the inception
of AIS.15 The Exchange determined to
establish and continue the AIS fee
waiver for business and competitive
reasons, in order to encourage ToM
subscribers to subscribe to the AIS feed.
The Exchange now believes that it is
appropriate to delete the fee waiver,
based on a business determination of
the number of ToM feed and AIS feed
subscribers, with the fee waiver having
achieved the intended result.
The Exchange anticipates the changes
will result in a reasonable allocation of
its costs and expenses among its
11 15
U.S.C. 78f(b).
U.S.C. 78f(b)(4).
13 The term ‘‘Member’’ means an individual or
organization approved to exercise the trading rights
associated with a Trading Permit. Members are
deemed ‘‘members’’ under the Exchange Act. See
Exchange Rule 100.
14 15 U.S.C. 78f(b)(5).
15 See supra note 10.
12 15
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Members and other persons using its
facilities because the proposed fees
would enable the Exchange to recover
the costs associated with providing such
infrastructure, and with offering access
through the network connections and
access and services, responding to
customer requests, configuring MIAX
Options systems, and administering the
various services connectivity services.
The Exchange believes the proposed
fees are equitable and not unfairly
discriminatory because the new fee
levels result in a more reasonable and
equitable allocation of fees amongst
non-Members and Members for similar
services. Access to the Exchange is
provided on fair and non-discriminatory
terms. Moreover, the decision as to
whether or not to subscribe to AIS is
entirely optional to all parties. Potential
subscribers are not required to purchase
the AIS market data feed. 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.
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 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.16
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
16 Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37496 (June 29, 2005).
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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
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. The
Exchange believes that the amendment
to Section 19 reflects Congress’s
conclusion that the evolution of selfregulatory organization governance and
competitive market structure have
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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 fees for AIS are properly
assessed on Internal and External
Distributors.
The decision of the United States
Court of Appeals for the District of
Columbia Circuit in NetCoaliton v. SEC,
No. 09–1042 (D.C. Cir. 2010), although
reviewing a Commission decision made
prior to the effective date of the DoddFrank Act, upheld the Commission’s
reliance upon competitive markets to set
reasonable and equitably allocated fees
for market data:
‘‘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.’ ’’ 17
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
17 NetCoaltion, at 15 (quoting H.R. Rep. No. 94–
229, at 92 (1975), as reprinted in 1975 U.S.C.C.A.N.
321, 323).
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change may not be consistent with the
Act.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will result in
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act.
Notwithstanding its determination that
the Commission may rely upon
competition to establish fair and
equitably allocated fees for market data,
the NetCoalition Court found that the
Commission had not, in that case,
compiled a record that adequately
supported its conclusion that the market
for the data at issue in the case was
competitive. The Exchange believes that
a record may readily be established to
demonstrate the competitive nature of
the market in question.
The market for data products is
extremely competitive and users may
freely choose alternative venues and
data vendors based on the aggregate fees
assessed, the data offered, and the value
provided. Numerous exchanges compete
with each other for listings, trades, and
market data itself, providing virtually
limitless opportunities for entrepreneurs
who wish to produce and distribute
their own market data. Transaction
execution and proprietary data products
are complementary in that market data
is both an input and a byproduct of the
execution service. In fact, market data
and trade execution are a paradigmatic
example of joint products with joint
costs. The decision whether and on
which platform to post an order will
depend on the attributes of the platform
where the order can be posted,
including the execution fees, data
quality and price, and distribution of its
data products. Without trade
executions, exchange data products
cannot exist. Moreover, data products
are valuable to many end users only
insofar as they provide information that
end users expect will assist them or
their customers in making trading
decisions.
The costs of producing market data
include not only the costs of the data
distribution infrastructure, but also the
costs of designing, maintaining, and
operating the exchange’s transaction
execution platform and the cost of
regulating the exchange to ensure its fair
operation and maintain investor
confidence. The total return that a
trading platform earns reflects the
revenues it receives from both products
and the joint costs it incurs. Moreover,
the operation of the Exchange is
characterized by high fixed costs and
low marginal costs. This cost structure
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is common in content distribution
industries such as software, where
developing new software typically
requires a large initial investment (and
continuing large investments to upgrade
software), but once the software is
developed, the incremental cost of
providing that software to an additional
user is typically small, or even zero
(e.g., if the software can be downloaded
over the internet after being
purchased).18 In the case of any
exchange, it is costly to build and
maintain a trading platform, but the
incremental cost of trading each
additional share on an existing platform,
or distributing an additional instance of
data, is very low. Market information
and executions are each produced
jointly (in the sense that the activities of
trading and placing orders are the
source of the information that is
distributed) and are each subject to
significant scale economies.
Competition among trading platforms
can be expected to constrain the
aggregate return each platform earns
from the sale of its joint products. The
level of competition and contestability
in the market is evidence in the
numerous alternative venues that
compete for order flow, including SRO
markets, as well as internalizing BDs
and various forms of alternative trading
systems (‘‘ATSs’’), including dark pools
and electronic communication networks
(‘‘ECNs’’). Each SRO market competes to
produce transaction reports via trade
executions. It is common for BDs to
further and exploit this competition by
sending their order flow and transaction
reports to multiple markets, rather than
providing them all to a single market.
Competitive markets for order flow,
executions, and transaction reports
provide pricing discipline for the inputs
of proprietary data products. The large
number of SROs, TRFs, BDs, and ATSs
that currently produce proprietary data
or are currently capable of producing it
provides further pricing discipline for
proprietary data products. Each SRO,
TRF, ATS, and BD is currently
permitted to produce proprietary data
products, and many currently do or
have announced plans to do so,
including the Nasdaq exchanges, NYSE
exchanges, and CBOE/Bats exchanges.
In this competitive environment, an
‘‘excessive’’ price for one product will
have to be reflected in lower prices for
other products sold by the Exchange, or
otherwise the Exchange may experience
a loss in sales that may adversely affect
18 See William J. Baumol and Daniel G. Swanson,
‘‘The New Economy and Ubiquitous Competitive
Price Discrimination: Identifying Defensible Criteria
of Market Power,’’ Antitrust Law Journal, Vol. 70,
No. 3 (2003).
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its profitability. In this case, the
proposed rule change enhances
competition by providing Historical
Market Data at a fixed price. As such,
the Exchange believes that the proposed
changes will enhance, not impair,
competition in the financial markets.
The market for market data products
is competitive and inherently
contestable because there is fierce
competition for the inputs necessary to
the creation of proprietary data and
strict pricing discipline for the
proprietary products themselves.
Numerous exchanges compete with
each other for listings, trades, and
market data itself, providing virtually
limitless opportunities for entrepreneurs
who wish to produce and distribute
their own market data. This proprietary
data is produced by each individual
exchange, as well as other entities, in a
vigorously competitive market. Brokerdealers currently have numerous
alternative venues for their order flow,
including eleven existing options
markets. Each SRO market competes to
produce transaction reports via trade
executions. Competitive markets for
order flow, executions, and transaction
reports provide pricing discipline for
the inputs of proprietary data products.
The large number of SROs that currently
produce proprietary data or are
currently capable of producing it
provides further pricing discipline for
proprietary data products. Each SRO is
currently permitted to produce
proprietary data products, and many in
addition to MIAX Options currently do,
including Nasdaq, CBOE, Nasdaq ISE,
NYSE American, and NYSE Arca.
Additionally, order routers and market
data vendors can facilitate single or
multiple broker-dealers’ production of
proprietary data products. The potential
sources of proprietary products are
virtually limitless.
Market data vendors provide another
form of price discipline for proprietary
data products because they control the
primary means of access to end
subscribers. Vendors impose price
restraints based upon their business
models. For example, vendors such as
Bloomberg and Thomson Reuters that
assess a surcharge on data they sell may
refuse to offer proprietary products that
end subscribers will not purchase in
sufficient numbers. Internet portals,
such as Google, impose a discipline by
providing only data that will enable
them to attract ‘‘eyeballs’’ that
contribute to their advertising revenue.
Retail broker-dealers, such as Schwab
and Fidelity, offer their customers
proprietary data only if it promotes
trading and generates sufficient
commission revenue. Although the
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business models may differ, these
vendors’ pricing discipline is the same:
they can simply refuse to purchase any
proprietary data product that fails to
provide sufficient value. The Exchange
and other producers of proprietary data
products must understand and respond
to these varying business models and
pricing disciplines in order to market
proprietary data products successfully.
In addition to the competition and
price discipline described above, the
market for proprietary data products is
also highly contestable because market
entry is rapid, inexpensive, and
profitable. The history of electronic
trading is replete with examples of
entrants that swiftly grew into some of
the largest electronic trading platforms
and proprietary data producers:
Archipelago, BATS Trading and Direct
Edge. Regulation NMS, by deregulating
the market for proprietary data, has
increased the contestability of that
market. While broker-dealers have
previously published their proprietary
data individually, Regulation NMS
encourages market data vendors and
broker-dealers to produce proprietary
products cooperatively in a manner
never before possible. Multiple market
data vendors already have the capability
to aggregate data and disseminate it on
a profitable scale, including Bloomberg,
and Thomson Reuters.
The Court in NetCoalition concluded
that the Commission had failed to
demonstrate that the market for market
data was competitive based on the
reasoning of the Commission’s
NetCoalition order because, in the
Court’s view, the Commission had not
adequately demonstrated that the
proprietary data at issue in the case is
used to attract order flow. The Exchange
believes, however, that evidence not
then before the court clearly
demonstrates that availability of data
attracts order flow. Due to competition
among platforms, the Exchange intends
to improve its platform data offerings on
a continuing basis, and to respond
promptly to customers’ data needs.
The intensity of competition for
proprietary information is significant
and the Exchange believes that this
proposal itself clearly evidences such
competition. The Exchange has offered
an AIS fee waiver to ToM subscribers
since the inception of AIS. The
Exchange now believes that it is
appropriate to delete the fee waiver,
based on a business determination of
the number of ToM feed and AIS feed
subscribers. It is entirely optional and is
geared towards attracting new Member
Applicants and customers. MIAX
Options competitors continue to create
new market data products and
E:\FR\FM\15AUN1.SGM
15AUN1
Federal Register / Vol. 83, No. 158 / Wednesday, August 15, 2018 / Notices
innovative pricing in this space. The
Exchange expects firms to make
decisions on how much and what types
of data to consume on the basis of the
total cost of interacting with MIAX
Options or other exchanges. Of course,
the explicit data fees are only one factor
in a total platform analysis. Some
competitors have lower transactions fees
and higher data fees, and others are vice
versa. The market for this proprietary
information is highly competitive and
continually evolves as products develop
and change. Additionally, respecting
intra-market competition, the AIS feed
and the ToM feed are available to all
subscribers, thus providing all
subscribers to the data products with an
even playing field with respect to
information and access to trade on
MIAX Options.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
Written comments were neither
solicited nor received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become
effective pursuant to Section
19(b)(3)(A)(ii) of the Act,19 and Rule
19b–4(f)(2) 20 thereunder. At any time
within 60 days of the filing of the
proposed rule change, the Commission
summarily may temporarily suspend
such rule change if it appears to the
Commission that such action is
necessary or appropriate in the public
interest, for the protection of investors,
or otherwise in furtherance of the
purposes of the Act. If the Commission
takes such action, the Commission shall
institute proceedings to determine
whether the proposed rule should be
approved or disapproved.
daltland on DSKBBV9HB2PROD with NOTICES
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:
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–MIAX–2018–20. This file
number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
internet website (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for website viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE,
Washington, DC 20549 on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change.
Persons submitting comments are
cautioned that we do not redact or edit
personal identifying information from
comment submissions. You should
submit only information that you wish
to make available publicly. All
submissions should refer to File
Number SR–MIAX–2018–20, and
should be submitted on or before
September 5, 2018.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.21
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018–17494 Filed 8–14–18; 8:45 am]
BILLING CODE 8011–01–P
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
MIAX–2018–20 on the subject line.
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–83809; File No. SR–
CboeBZX–2018–057)]
Self-Regulatory Organizations; Cboe
BZX Exchange, Inc.; Notice of Filing
and Immediate Effectiveness of a
Proposed Rule Change To Amend
Exchange Rule 1.5, Definitions,
Exchange Rule 14.6, Obligations for
Companies Listed on the Exchange,
and Exchange Rule 14.11, Other
Securities
August 9, 2018.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’),1 and Rule 19b-4 thereunder,2
notice is hereby given that on August 1,
2018, Cboe BZX Exchange, Inc. (the
‘‘Exchange’’ or ‘‘BZX’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I and II
below, which Items have been prepared
by the Exchange. The Exchange has
designated this proposal as a ‘‘noncontroversial’’ proposed rule change
pursuant to Section 19(b)(3)(A) of the
Act 3 and Rule 19b-4(f)(6)(iii)
thereunder,4 which renders it effective
upon filing with the Commission. 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 filed a proposal to
amend Rule 1.5(c), which defines the
After Hours Trading Session, to allow
trading until 8:00 p.m. ET.
The text of the proposed rule change
is available at the Exchange’s website at
www.markets.cboe.com, at the principal
office of the Exchange, and at the
Commission’s Public Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in Sections A, B, and C below, of
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A).
4 17 CFR 240.19b–4(f)(6)(iii).
2 17
19 15
20 17
U.S.C. 78s(b)(3)(A)(ii).
CFR 240.19b–4(f)(2).
VerDate Sep<11>2014
18:28 Aug 14, 2018
21 17
Jkt 244001
PO 00000
CFR 200.30–3(a)(12).
Frm 00101
Fmt 4703
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]]>Agencies
[Federal Register Volume 83, Number 158 (Wednesday, August 15, 2018)]
[Notices]
[Pages 40595-40599]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-17494]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-83813; File No. SR-MIAX-2018-20]
Self-Regulatory Organizations; Miami International Securities
Exchange LLC; Notice of Filing and Immediate Effectiveness of a
Proposed Rule Change To Amend Its Fee Schedule
August 9, 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 July 31, 2018, Miami International Securities
Exchange LLC (``MIAX Options'' or ``Exchange'') filed with the
Securities and Exchange Commission (``Commission'') a proposed rule
change as described in Items I, II, and III below, which Items have
been prepared by the Exchange. The Commission is publishing this notice
to solicit comments on the proposed rule change from interested
persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange is filing a proposal to amend the MIAX Options Fee
Schedule (the ``Fee Schedule'') to delete a fee waiver relating to
certain market data feed products.
The text of the proposed rule change is available on the Exchange's
website at https://www.miaxoptions.com/rule-filings, at MIAX's principal
office, and at the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend its Fee Schedule to delete a fee
waiver relating to certain market data feed products offered by the
Exchange--namely, the Exchange's Administrative Information Subscriber
(``AIS'') market data feed, and the Exchange's Top of Market (``ToM'')
market data feed.
The ToM market data feed includes data that is identical to the
data sent to the processor for the Options Price Regulatory Authority
(``OPRA''). ToM provides real-time updates of the MIAX Best Bid or
Offer, or MBBO,\3\ price with aggregate orders and quote size of
contracts that can be displayed, display of Public Customer \4\
interest at the MBBO, display of Priority Customer \5\ interest at the
MBBO, and MIAX Options last sale.\6\ The Exchange launched ToM in early
2013,\7\ and
[[Page 40596]]
adopted monthly fees shortly thereafter.\8\ The Exchange assesses a
monthly fee of $1,250.00 for ToM Internal Distributors and a monthly
fee of $1,750.00 for ToM External Distributors.
---------------------------------------------------------------------------
\3\ The term ``MBBO'' means the best bid or offer on the
Exchange. See Exchange Rule 100. See also Exchange Rule 506(c)(2).
\4\ The term ``Public Customer'' means a person that is not a
broker or dealer in securities. See Exchange Rule 100.
\5\ The term ``Priority Customer'' means a person or entity that
(i) is not a broker or dealer in securities, and (ii) does not place
more than 390 orders in listed options per day on average during a
calendar month for its own beneficial account(s). See Exchange Rule
100.
\6\ See Securities Exchange Act Release No. 69007 (February 28,
2013), 78 FR 14617 (March 6, 2013) (SR-MIAX-2013-05).
\7\ See id.
\8\ See Securities Exchange Act Release No. 69323 (April 5,
2013), 78 FR 21677 (April 11, 2013) (SR-MIAX-2013-14).
---------------------------------------------------------------------------
The Exchange began offering its AIS market data feed in April
2013.\9\ The AIS market data feed currently includes administrative
information for both simple and complex orders. The AIS market data
feed includes: Simple and complex liquidity seeking event
notifications, listed series updates, complex strategy definition
updates, system state, and underlying trading state information. The
Exchange assesses a monthly fee of $1,250.00 for all AIS Internal
Distributors and a monthly fee of $1,750.00 for all AIS External
Distributors. However, the monthly fee for Distributors of AIS is
presently waived if the Distributor also subscribes to ToM.\10\
---------------------------------------------------------------------------
\9\ See Securities Exchange Act Release No. 69320 (April 5,
2013), 78 FR 21661 (April 11, 2013) (SR-MIAX-2013-13).
\10\ See Securities Exchange Act Release No. 73326 (October 9,
2014), 79 FR 62233 (October 16, 2014) (SR-MIAX-2014-51).
---------------------------------------------------------------------------
Accordingly, under the present operation of the Fee Schedule, a
subscriber who only subscribes to AIS will be charged the AIS monthly
fee ($1,250.00 for Internal Distributors and $1,750.00 for External
Distributors). A subscriber who only subscribes to ToM will be charged
the ToM monthly fee ($1,250.00 for Internal Distributors and $1,750.00
for External Distributors). A subscriber who subscribes to both ToM and
AIS will be charged only the ToM monthly fee ($1,250.00 for Internal
Distributors and $1,750.00 for External Distributors).
The Exchange now proposes to delete the fee waiver which entitles a
subscriber of both ToM and AIS to receive a fee waiver for AIS.
Accordingly, pursuant to this proposal, a subscriber to both ToM and
AIS would now be assessed a separate fee for each of the data feeds. A
subscriber who is an Internal Distributor will now pay $2,500.00 in the
aggregate, if subscribing to both feeds, and a subscriber who is an
External Distributor will now pay $3,500.00 in the aggregate, if
subscribing to both feeds.
The Exchange is not proposing to modify any other aspect of either
the AIS market data feed product or the ToM market data feed product.
The Exchange is solely deleting the fee waiver which presently entitles
a subscriber of ToM to also receive a subscription to AIS for free.
The proposed rule change is scheduled to become operative on August
1, 2018.
2. Statutory Basis
The Exchange believes that its proposal to amend its Fee Schedule
is consistent with Section 6(b) \11\ of the Act in general, and
furthers the objectives of Section 6(b)(4) \12\ of the Act, in that it
is designed to provide for an equitable allocation of reasonable dues,
fees and other charges among Exchange Members \13\ and other persons
using its facilities, because it applies equally to all Members and any
persons using the facilities or services of the Exchange. The Exchange
also believes that the proposal furthers the objectives of Section
6(b)(5) \14\ of the Act in particular, in that it is designed to
prevent fraudulent and manipulative acts and practices, to promote just
and equitable principles of trade, to foster cooperation and
coordination with persons engaged in facilitating transactions in
securities, to remove impediments to and perfect the mechanisms of a
free and open market and a national market system and, in general, to
protect investors and the public interest, and it is not designed to
permit unfair discrimination among customers, brokers, or dealers.
---------------------------------------------------------------------------
\11\ 15 U.S.C. 78f(b).
\12\ 15 U.S.C. 78f(b)(4).
\13\ The term ``Member'' means an individual or organization
approved to exercise the trading rights associated with a Trading
Permit. Members are deemed ``members'' under the Exchange Act. See
Exchange Rule 100.
\14\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
The Exchange believes that the proposed amendment to delete a fee
waiver relating to certain market data feed products offered by the
Exchange--namely, the Exchange's AIS market data feed, and the
Exchange's ToM market data feed--is reasonable, equitable, and not
unfairly discriminatory. The Exchange has offered an AIS fee waiver to
ToM subscribers since the inception of AIS.\15\ The Exchange determined
to establish and continue the AIS fee waiver for business and
competitive reasons, in order to encourage ToM subscribers to subscribe
to the AIS feed. The Exchange now believes that it is appropriate to
delete the fee waiver, based on a business determination of the number
of ToM feed and AIS feed subscribers, with the fee waiver having
achieved the intended result.
---------------------------------------------------------------------------
\15\ See supra note 10.
---------------------------------------------------------------------------
The Exchange anticipates the changes will result in a reasonable
allocation of its costs and expenses among its Members and other
persons using its facilities because the proposed fees would enable the
Exchange to recover the costs associated with providing such
infrastructure, and with offering access through the network
connections and access and services, responding to customer requests,
configuring MIAX Options systems, and administering the various
services connectivity services. The Exchange believes the proposed fees
are equitable and not unfairly discriminatory because the new fee
levels result in a more reasonable and equitable allocation of fees
amongst non-Members and Members for similar services. Access to the
Exchange is provided on fair and non-discriminatory terms. Moreover,
the decision as to whether or not to subscribe to AIS is entirely
optional to all parties. Potential subscribers are not required to
purchase the AIS market data feed. 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.
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.\16\
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\16\ 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
[[Page 40597]]
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. The
Exchange 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 fees for AIS are properly assessed on Internal and External
Distributors.
The decision of the United States Court of Appeals for the District
of Columbia Circuit in NetCoaliton v. SEC, No. 09-1042 (D.C. 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:
``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.' '' \17\
---------------------------------------------------------------------------
\17\ NetCoaltion, 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.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
result in any burden on competition that is not necessary or
appropriate in furtherance of the purposes of the Act. Notwithstanding
its determination that the Commission may rely upon competition to
establish fair and equitably allocated fees for market data, the
NetCoalition Court found that the Commission had not, in that case,
compiled a record that adequately supported its conclusion that the
market for the data at issue in the case was competitive. The Exchange
believes that a record may readily be established to demonstrate the
competitive nature of the market in question.
The market for data products is extremely competitive and users may
freely choose alternative venues and data vendors based on the
aggregate fees assessed, the data offered, and the value provided.
Numerous exchanges compete with each other for listings, trades, and
market data itself, providing virtually limitless opportunities for
entrepreneurs who wish to produce and distribute their own market data.
Transaction execution and proprietary data products are complementary
in that market data is both an input and a byproduct of the execution
service. In fact, market data and trade execution are a paradigmatic
example of joint products with joint costs. The decision whether and on
which platform to post an order will depend on the attributes of the
platform where the order can be posted, including the execution fees,
data quality and price, and distribution of its data products. Without
trade executions, exchange data products cannot exist. Moreover, data
products are valuable to many end users only insofar as they provide
information that end users expect will assist them or their customers
in making trading decisions.
The costs of producing market data include not only the costs of
the data distribution infrastructure, but also the costs of designing,
maintaining, and operating the exchange's transaction execution
platform and the cost of regulating the exchange to ensure its fair
operation and maintain investor confidence. The total return that a
trading platform earns reflects the revenues it receives from both
products and the joint costs it incurs. Moreover, the operation of the
Exchange is characterized by high fixed costs and low marginal costs.
This cost structure
[[Page 40598]]
is common in content distribution industries such as software, where
developing new software typically requires a large initial investment
(and continuing large investments to upgrade software), but once the
software is developed, the incremental cost of providing that software
to an additional user is typically small, or even zero (e.g., if the
software can be downloaded over the internet after being
purchased).\18\ In the case of any exchange, it is costly to build and
maintain a trading platform, but the incremental cost of trading each
additional share on an existing platform, or distributing an additional
instance of data, is very low. Market information and executions are
each produced jointly (in the sense that the activities of trading and
placing orders are the source of the information that is distributed)
and are each subject to significant scale economies.
---------------------------------------------------------------------------
\18\ See William J. Baumol and Daniel G. Swanson, ``The New
Economy and Ubiquitous Competitive Price Discrimination: Identifying
Defensible Criteria of Market Power,'' Antitrust Law Journal, Vol.
70, No. 3 (2003).
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Competition among trading platforms can be expected to constrain
the aggregate return each platform earns from the sale of its joint
products. The level of competition and contestability in the market is
evidence in the numerous alternative venues that compete for order
flow, including SRO markets, as well as internalizing BDs and various
forms of alternative trading systems (``ATSs''), including dark pools
and electronic communication networks (``ECNs''). Each SRO market
competes to produce transaction reports via trade executions. It is
common for BDs to further and exploit this competition by sending their
order flow and transaction reports to multiple markets, rather than
providing them all to a single market. Competitive markets for order
flow, executions, and transaction reports provide pricing discipline
for the inputs of proprietary data products. The large number of SROs,
TRFs, BDs, and ATSs that currently produce proprietary data or are
currently capable of producing it provides further pricing discipline
for proprietary data products. Each SRO, TRF, ATS, and BD is currently
permitted to produce proprietary data products, and many currently do
or have announced plans to do so, including the Nasdaq exchanges, NYSE
exchanges, and CBOE/Bats exchanges.
In this competitive environment, an ``excessive'' price for one
product will have to be reflected in lower prices for other products
sold by the Exchange, or otherwise the Exchange may experience a loss
in sales that may adversely affect its profitability. In this case, the
proposed rule change enhances competition by providing Historical
Market Data at a fixed price. As such, the Exchange believes that the
proposed changes will enhance, not impair, competition in the financial
markets.
The market for market data products is competitive and inherently
contestable because there is fierce competition for the inputs
necessary to the creation of proprietary data and strict pricing
discipline for the proprietary products themselves. Numerous exchanges
compete with each other for listings, trades, and market data itself,
providing virtually limitless opportunities for entrepreneurs who wish
to produce and distribute their own market data. This proprietary data
is produced by each individual exchange, as well as other entities, in
a vigorously competitive market. Broker-dealers currently have numerous
alternative venues for their order flow, including eleven existing
options markets. Each SRO market competes to produce transaction
reports via trade executions. Competitive markets for order flow,
executions, and transaction reports provide pricing discipline for the
inputs of proprietary data products. The large number of SROs that
currently produce proprietary data or are currently capable of
producing it provides further pricing discipline for proprietary data
products. Each SRO is currently permitted to produce proprietary data
products, and many in addition to MIAX Options currently do, including
Nasdaq, CBOE, Nasdaq ISE, NYSE American, and NYSE Arca. Additionally,
order routers and market data vendors can facilitate single or multiple
broker-dealers' production of proprietary data products. The potential
sources of proprietary products are virtually limitless.
Market data vendors provide another form of price discipline for
proprietary data products because they control the primary means of
access to end subscribers. Vendors impose price restraints based upon
their business models. For example, vendors such as Bloomberg and
Thomson Reuters that assess a surcharge on data they sell may refuse to
offer proprietary products that end subscribers will not purchase in
sufficient numbers. Internet portals, such as Google, impose a
discipline by providing only data that will enable them to attract
``eyeballs'' that contribute to their advertising revenue. Retail
broker-dealers, such as Schwab and Fidelity, offer their customers
proprietary data only if it promotes trading and generates sufficient
commission revenue. Although the business models may differ, these
vendors' pricing discipline is the same: they can simply refuse to
purchase any proprietary data product that fails to provide sufficient
value. The Exchange and other producers of proprietary data products
must understand and respond to these varying business models and
pricing disciplines in order to market proprietary data products
successfully.
In addition to the competition and price discipline described
above, the market for proprietary data products is also highly
contestable because market entry is rapid, inexpensive, and profitable.
The history of electronic trading is replete with examples of entrants
that swiftly grew into some of the largest electronic trading platforms
and proprietary data producers: Archipelago, BATS Trading and Direct
Edge. Regulation NMS, by deregulating the market for proprietary data,
has increased the contestability of that market. While broker-dealers
have previously published their proprietary data individually,
Regulation NMS encourages market data vendors and broker-dealers to
produce proprietary products cooperatively in a manner never before
possible. Multiple market data vendors already have the capability to
aggregate data and disseminate it on a profitable scale, including
Bloomberg, and Thomson Reuters.
The Court in NetCoalition concluded that the Commission had failed
to demonstrate that the market for market data was competitive based on
the reasoning of the Commission's NetCoalition order because, in the
Court's view, the Commission had not adequately demonstrated that the
proprietary data at issue in the case is used to attract order flow.
The Exchange believes, however, that evidence not then before the court
clearly demonstrates that availability of data attracts order flow. Due
to competition among platforms, the Exchange intends to improve its
platform data offerings on a continuing basis, and to respond promptly
to customers' data needs.
The intensity of competition for proprietary information is
significant and the Exchange believes that this proposal itself clearly
evidences such competition. The Exchange has offered an AIS fee waiver
to ToM subscribers since the inception of AIS. The Exchange now
believes that it is appropriate to delete the fee waiver, based on a
business determination of the number of ToM feed and AIS feed
subscribers. It is entirely optional and is geared towards attracting
new Member Applicants and customers. MIAX Options competitors continue
to create new market data products and
[[Page 40599]]
innovative pricing in this space. The Exchange expects firms to make
decisions on how much and what types of data to consume on the basis of
the total cost of interacting with MIAX Options or other exchanges. Of
course, the explicit data fees are only one factor in a total platform
analysis. Some competitors have lower transactions fees and higher data
fees, and others are vice versa. The market for this proprietary
information is highly competitive and continually evolves as products
develop and change. Additionally, respecting intra-market competition,
the AIS feed and the ToM feed are available to all subscribers, thus
providing all subscribers to the data products with an even playing
field with respect to information and access to trade on MIAX Options.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
Written comments were neither solicited nor received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become effective pursuant to Section
19(b)(3)(A)(ii) of the Act,\19\ and Rule 19b-4(f)(2) \20\ thereunder.
At any time within 60 days of the filing of the proposed rule change,
the Commission summarily may temporarily suspend such rule change if it
appears to the Commission that such action is necessary or appropriate
in the public interest, for the protection of investors, or otherwise
in furtherance of the purposes of the Act. If the Commission takes such
action, the Commission shall institute proceedings to determine whether
the proposed rule should be approved or disapproved.
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\19\ 15 U.S.C. 78s(b)(3)(A)(ii).
\20\ 17 CFR 240.19b-4(f)(2).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-MIAX-2018-20 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to File Number SR-MIAX-2018-20. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (https://www.sec.gov/rules/sro.shtml).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for website viewing and printing in
the Commission's Public Reference Room, 100 F Street NE, Washington, DC
20549 on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of the filing also will be available for inspection
and copying at the principal office of the Exchange. All comments
received will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-MIAX-2018-20, and should be submitted on
or before September 5, 2018.
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\21\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\21\
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-17494 Filed 8-14-18; 8:45 am]
BILLING CODE 8011-01-P
