Self-Regulatory Organizations; Miami International Securities Exchange, LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend its Options Regulatory Fee, 5783-5787 [2019-03032]
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Federal Register / Vol. 84, No. 36 / Friday, February 22, 2019 / Notices
VIII. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Exchange Act,101
that the proposed rule change (SR–
NYSE–2018–28), as modified by
Amendment No. 1, be, and it hereby is,
approved on an accelerated basis.
It is further ordered that, pursuant to
Rule 612(c) under Regulation NMS, that
the Exchange shall be exempt from Rule
612(a) of Regulation NMS with respect
to the operation of the Program as set
forth in Exchange Rule 107C as
described herein.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.102
Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019–03043 Filed 2–21–19; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[SEC File No. 270–122, OMB Control No.
3235–0111]
Dated: February 19, 2019.
Eduardo A. Aleman,
Deputy Secretary.
Submission for OMB Review;
Comment Request
Upon Written Request Copies Available
From: Securities and Exchange
Commission, Office of FOIA Services,
100 F Street NE, Washington, DC
20549–2736
Extension:
Form T–2
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.
Form T–2 (17 CFR 269.2) is a
statement of eligibility of an individual
trustee under the Trust Indenture Act of
1939. The information is used to
determine whether the individual is
qualified to serve as a trustee under the
indenture. Form T–2 is filed on
occasion. The information required by
Form T–2 is mandatory. This
information is publicly available on
EDGAR. Form T–2 takes approximately
9 hours per response to prepare and is
filed by approximately 9 respondents.
We estimate that 25% of the 9 hours per
response (2 hours) is prepared by the
filer for a total annual reporting burden
101 15
102 17
U.S.C. 78s(b)(2).
CFR 200.30–3(a)(12) and 17 CFR 200.30–
[FR Doc. 2019–03088 Filed 2–21–19; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–85162; File No. SR–MIAX–
2019–01]
Self-Regulatory Organizations; Miami
International Securities Exchange,
LLC; Notice of Filing and Immediate
Effectiveness of a Proposed Rule
Change To Amend its Options
Regulatory Fee
February 15, 2019.
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 1, 2019, 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
2 17
3(a)(83).
VerDate Sep<11>2014
of 18 hours (2 hours per response × 9
responses).
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:
Lindsay.M.Abate@omb.eop.gov; and (ii)
Charles Riddle, Acting Director/Chief
Information Officer, Securities and
Exchange Commission, c/o Candace
Kenner, 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.
16:52 Feb 21, 2019
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U.S.C. 78s(b)(1).
CFR 240.19b–4.
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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 amend its
Options Regulatory Fee (‘‘ORF’’).
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 the
Statutory Basis for, the Proposed Rule
Change
1. Purpose
Currently, the Exchange charges an
ORF in the amount of $0.0045 per
contract side. The Exchange proposes to
decrease this ORF to $0.0029 per
contract side. In light of historical and
projected volume changes and shifts in
the industry and on the Exchange, as
well as changes to the Exchange’s
regulatory cost structure, the Exchange
is proposing to change the amount of
ORF that will be collected by the
Exchange. The Exchange’s proposed
change to the ORF should balance the
Exchange’s regulatory revenue against
the anticipated regulatory costs.
The per-contract ORF will continue to
be assessed by MIAX Options to each
MIAX Options Member for all options
transactions, including Mini Options,
cleared or ultimately cleared by the
Member which are cleared by the
Options Clearing Corporation (‘‘OCC’’)
in the ‘‘customer’’ range, regardless of
the exchange on which the transaction
occurs. The ORF will be collected by
OCC on behalf of MIAX Options from
either (1) a Member that was the
ultimate clearing firm for the transaction
or (2) a non-Member that was the
ultimate clearing firm where a Member
was the executing clearing firm for the
transaction. The Exchange uses reports
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from OCC to determine the identity of
the executing clearing firm and ultimate
clearing firm.
To illustrate how the ORF is assessed
and collected, the Exchange provides
the following set of examples. If the
transaction is executed on the Exchange
and the ORF is assessed, if there is no
change to the clearing account of the
original transaction, then the ORF is
collected from the Member that is the
executing clearing firm for the
transaction. (The Exchange notes that,
for purposes of the Fee Schedule, when
there is no change to the clearing
account of the original transaction, the
executing clearing firm is deemed to be
the ultimate clearing firm.) If there is a
change to the clearing account of the
original transaction (i.e., the executing
clearing firm ‘‘gives-up’’ or ‘‘CMTAs’’
the transaction to another clearing firm),
then the ORF is collected from the
clearing firm that ultimately clears the
transaction- the ultimate clearing firm.
The ultimate clearing firm may be either
a Member or non-Member of the
Exchange. If the transaction is executed
on an away exchange and the ORF is
assessed, then the ORF is collected from
the ultimate clearing firm for the
transaction. Again, the ultimate clearing
firm may be either a Member or nonMember of the Exchange. The Exchange
notes, however, that when the
transaction is executed on an away
exchange, the Exchange does not assess
the ORF when neither the executing
clearing firm nor the ultimate clearing
firm is a Member (even if a Member is
‘‘given-up’’ or ‘‘CMTAed’’ and then
such Member subsequently ‘‘gives-up’’
or ‘‘CMTAs’’ the transaction to another
non-Member via a CMTA reversal).
Finally, the Exchange will not assess the
ORF on outbound linkage trades,
whether executed at the Exchange or an
away exchange. ‘‘Linkage trades’’ are
tagged in the Exchange’s system, so the
Exchange can readily tell them apart
from other trades. A customer order
routed to another exchange results in
two customer trades, one from the
originating exchange and one from the
recipient exchange. Charging ORF on
both trades could result in doublebilling of ORF for a single customer
order, thus the Exchange will not assess
ORF on outbound linkage trades in a
linkage scenario. This assessment
practice is identical to the assessment
practice currently utilized by the
Exchange’s affiliate, MIAX PEARL, LLC
(‘‘MIAX PEARL’’).3
3 See Securities Exchange Act Release No. 80875
(June 7, 2017), 82 FR 27096 (June 13, 2017)(SR–
PEARL–2017–26).
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As a practical matter, when a
transaction that is subject to the ORF is
not executed on the Exchange, the
Exchange lacks the information
necessary to identify the order entering
member for that transaction. There are
countless order entering market
participants, and each day such
participants can and often do drop their
connection to one market center and
establish themselves as participants on
another. For these reasons, it is not
possible for the Exchange to identify,
and thus assess fees such as an ORF, on
order entering participants on away
markets on a given trading day. Clearing
members, however, are distinguished
from order entering participants because
they remain identified to the Exchange
on information the Exchange receives
from OCC regardless of the identity of
the order entering participant, their
location, and the market center on
which they execute transactions.
Therefore, the Exchange believes it is
more efficient for the operation of the
Exchange and for the marketplace as a
whole to collect the ORF from clearing
members.
The Exchange monitors the amount of
revenue collected from the ORF to
ensure that it, in combination with other
regulatory fees and fines, does not
exceed regulatory costs. In determining
whether an expense is considered a
regulatory cost, the Exchange reviews
all costs and makes determinations if
there is a nexus between the expense
and a regulatory function. The Exchange
notes that fines collected by the
Exchange in connection with a
disciplinary matter offset ORF.
As discussed below, the Exchange
believes it is appropriate to charge the
ORF only to transactions that clear as
customer at the OCC. The Exchange
believes that its broad regulatory
responsibilities with respect to a
Member’s activities supports applying
the ORF to transactions cleared but not
executed by a Member. The Exchange’s
regulatory responsibilities are the same
regardless of whether a Member enters
a transaction or clears a transaction
executed on its behalf. The Exchange
regularly reviews all such activities,
including performing surveillance for
position limit violations, manipulation,
front-running, contrary exercise advice
violations and insider trading. These
activities span across multiple
exchanges.
The ORF is designed to recover a
material portion of the costs to the
Exchange of the supervision and
regulation of Members’ customer
options business, including performing
routine surveillances and investigations,
as well as policy, rulemaking,
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interpretive and enforcement activities.
The Exchange believes that revenue
generated from the ORF, when
combined with all of the Exchange’s
other regulatory fees and fines, will
cover a material portion, but not all, of
the Exchange’s regulatory costs. The
Exchange notes that its regulatory
responsibilities with respect to Member
compliance with options sales practice
rules have been allocated to the
Financial Industry Regulatory Authority
(‘‘FINRA’’) under a 17d–2 Agreement.
The ORF is not designed to cover the
cost of options sales practice regulation.
The Exchange will continue to
monitor the amount of revenue
collected from the ORF to ensure that it,
in combination with its other regulatory
fees and fines, does not exceed the
Exchange’s total regulatory costs. The
Exchange will continue to monitor
MIAX Options regulatory costs and
revenues at a minimum on a semiannual basis. If the Exchange
determines regulatory revenues exceed
or are insufficient to cover a material
portion of its regulatory costs, the
Exchange will adjust the ORF by
submitting a fee change filing to the
Commission. The Exchange will notify
Members of adjustments to the ORF via
regulatory circular at least 30 days prior
to the effective date of the change.
The Exchange believes it is reasonable
and appropriate for the Exchange to
charge the ORF for options transactions
regardless of the exchange on which the
transactions occur. The Exchange has a
statutory obligation to enforce
compliance by Members and their
associated persons under the Act and
the rules of the Exchange and to surveil
for other manipulative conduct by
market participants (including nonMembers) trading on the Exchange. The
Exchange cannot effectively surveil for
such conduct without looking at and
evaluating activity across all options
markets. Many of the Exchange’s market
surveillance programs require the
Exchange to look at and evaluate
activity across all options markets, such
as surveillance for position limit
violations, manipulation, front-running
and contrary exercise advice violations/
expiring exercise declarations. While
much of this activity relates to the
execution of orders, the ORF is assessed
on and collected from clearing firms.
The Exchange, because it lacks access to
information on the identity of the
entering firm for executions that occur
on away markets, believes it is
appropriate to assess the ORF on its
Members’ clearing activity, based on
information the Exchange receives from
OCC, including for away market
activity. Among other reasons, doing so
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better and more accurately captures
activity that occurs away from the
Exchange over which the Exchange has
a degree of regulatory responsibility. In
so doing, the Exchange believes that
assessing ORF on Member clearing firms
equitably distributes the collection of
ORF in a fair and reasonable manner.
Also, the Exchange and the other
options exchanges are required to
populate a consolidated options audit
trail (‘‘COATS’’) 4 system in order to
surveil a Member’s activities across
markets.
In addition to its own surveillance
programs, the Exchange works with
other SROs and exchanges on
intermarket surveillance related issues.
Through its participation in the
Intermarket Surveillance Group
(‘‘ISG’’),5 the Exchange shares
information and coordinates inquiries
and investigations with other exchanges
designed to address potential
intermarket manipulation and trading
abuses. The Exchange’s participation in
ISG helps it to satisfy the requirement
that it has coordinated surveillance with
markets on which security futures are
traded and markets on which any
security underlying security futures are
traded to detect manipulation and
insider trading.6
The Exchange believes that charging
the ORF across markets avoids having
Members direct their trades to other
markets in order to avoid the fee and to
thereby avoid paying for their fair share
for regulation. If the ORF did not apply
to activity across markets then a
Member would send their orders to the
least cost, least regulated exchange.
Other exchanges do impose a similar fee
on their members’ activity,7 including
the activity of those members on MIAX
Options and MIAX PEARL.8
4 COATS effectively enhances intermarket
options surveillance by enabling the options
exchanges to reconstruct the market promptly to
effectively surveil certain rules.
5 ISG is an industry organization formed in 1983
to coordinate intermarket surveillance among the
SROs by co-operatively sharing regulatory
information pursuant to a written agreement
between the parties. The goal of the ISG’s
information sharing is to coordinate regulatory
efforts to address potential intermarket trading
abuses and manipulations.
6 See Section 6(h)(3)(I) of the Act.
7 Similar regulatory fees have been instituted by
Nasdaq PHLX LLC (‘‘Phlx’’) (See Securities
Exchange Act Release No. 61133 (December 9,
2009), 74 FR 66715 (December 16, 2009) (SR–Phlx–
2009–100)); Nasdaq ISE, LLC (‘‘ISE’’) (See Securities
Exchange Act Release No. 61154 (December 11,
2009), 74 FR 67278 (December 18, 2009) (SR–ISE–
2009–105)); and Nasdaq GEMX, LLC (‘‘GEMX’’)
(See Securities Exchange Act Release No. 70200
(August 14, 2013) 78 FR 51242 (August 20,
2013)(SR–Topaz–2013–01)).
8 See supra note 3.
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The Exchange notes that there is
established precedent for an SRO
charging a fee across markets, namely,
FINRAs Trading Activity Fee 9 and the
NYSE American LLC (‘‘NYSE
American’’), NYSE Arca, Inc. (‘‘NYSE
Arca’’), Cboe Exchange, Inc. (‘‘CBOE’’),
Nasdaq PHLX LLC (‘‘Phlx’’), Nasdaq
ISE, LLC (‘‘ISE’’), Nasdaq GEMX, LLC
(‘‘GEMX’’) and BOX Exchange LLC
(‘‘BOX’’) ORF. While the Exchange does
not have all the same regulatory
responsibilities as FINRA, the Exchange
believes that, like other exchanges that
have adopted an ORF, its broad
regulatory responsibilities with respect
to a Member’s activities, irrespective of
where their transactions take place,
supports a regulatory fee applicable to
transactions on other markets. Unlike
FINRA’s Trading Activity Fee, the ORF
applies only to a Member’s customer
options transactions.
Additionally, the Exchange specifies
in the Fee Schedule that the Exchange
may only increase or decrease the ORF
semi-annually, and any such fee change
will be effective on the first business
day of February or August. In addition
to submitting a proposed rule change to
the Commission as required by the Act
to increase or decrease the ORF, the
Exchange will notify participants via a
Regulatory Circular of any anticipated
change in the amount of the fee at least
30 calendar days prior to the effective
date of the change. The Exchange
believes that by providing guidance on
the timing of any changes to the ORF,
the Exchange would make it easier for
participants to ensure their systems are
configured to properly account for the
ORF.
The Exchange is proposing to
decrease the ORF from $0.0045 to
$0.0029, as of February 1, 2019. In light
of recent market volumes on the
Exchange and changes to the Exchange’s
regulatory costs, the Exchange is
proposing to decrease the amount of
ORF that will be collected by the
Exchange. As noted above, the Exchange
regularly reviews its ORF to ensure that
the ORF, in combination with its other
regulatory fees and fines, does not
exceed regulatory costs. The Exchange
believes this adjustment will permit the
Exchange to cover a material portion of
its regulatory costs, while not exceeding
regulatory costs.
The Exchange notified Members via a
Regulatory Circular of the proposed
change to the ORF at least thirty (30)
calendar days prior to the proposed
9 See Securities Exchange Act Release No. 47946
(May 30, 2003), 68 FR 34021 (June 6, 2003)(SR–
NASD–2002–148).
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operative date, on December 31, 2018.10
The Exchange believes that the prior
notification to market participants will
ensure market participants are prepared
to configure their systems to properly
account for the ORF.
2. Statutory Basis
The Exchange believes that its
proposal to amend its Fee Schedule is
consistent with Section 6(b) of the Act 11
in general, and furthers the objectives of
Section 6(b)(4) of the Act 12 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 13 in that it is
designed to promote just and equitable
principles of trade, to remove
impediments to and perfect the
mechanism of a free and open market
and a national market system, and, in
general to protect investors and the
public interest and is not designed to
permit unfair discrimination between
customers, issuers, brokers and dealers.
The Exchange believes that decreasing
the ORF from $0.0045 to $0.0029, as of
February 1, 2019 is reasonable because
the Exchange’s collection of ORF needs
to be balanced against the amount of
regulatory costs incurred by the
Exchange. The Exchange believes that
the proposed adjustments noted herein
will serve to balance the Exchange’s
regulatory revenue against the
anticipated regulatory costs.
The Exchange believes that amending
the ORF from $0.0045 to $0.0029, as of
February 1, 2019 is equitable and not
unfairly discriminatory because it is
objectively allocated to Members in that
it is charged to all Members on all their
transactions that clear as customer at the
OCC. Moreover, the Exchange believes
the ORF ensures fairness by assessing
fees to those Members that are directly
based on the amount of customer
options business they conduct.
Regulating customer trading activity is
much more labor intensive and requires
greater expenditure of human and
technical resources than regulating noncustomer trading activity, which tends
to be more automated and less laborintensive. As a result, the costs
associated with administering the
customer component of the Exchange’s
overall regulatory program are
10 See MIAX Options Regulatory Circular 2018–
74 available at https://www.miaxoptions.com/sites/
default/files/circular-files/MIAX_Options_RC_
2018_74.pdf.
11 15 U.S.C. 78f(b).
12 15 U.S.C. 78f(b)(4).
13 15 U.S.C. 78f(b)(5).
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materially higher than the costs
associated with administering the noncustomer component (e.g., Member
proprietary transactions) of its
regulatory program.
The ORF is designed to recover a
material portion of the costs of
supervising and regulating Members’
customer options business including
performing routine surveillances and
investigations, as well as policy,
rulemaking, interpretive and
enforcement activities. The Exchange
will monitor the amount of revenue
collected from the ORF to ensure that it,
in combination with its other regulatory
fees and fines, does not exceed the
Exchange’s total regulatory costs. The
Exchange has designed the ORF to
generate revenues that, when combined
with all of the Exchange’s other
regulatory fees, will be less than or
equal to the Exchange’s regulatory costs,
which is consistent with the
Commission’s view that regulatory fees
be used for regulatory purposes and not
to support the Exchange’s business side.
In this regard, the Exchange believes
that the proposed decrease to the fee is
reasonable.
The Exchange believes that
continuing to limit changes to the ORF
to twice a year on specific dates with
advance notice is reasonable because it
gives participants certainty on the
timing of changes, if any, and better
enables them to properly account for
ORF charges among their customers.
The Exchange believes that continuing
to limit changes to the ORF to twice a
year on specific dates is equitable and
not unfairly discriminatory because it
will apply in the same manner to all
Members that are subject to the ORF and
provide them with additional advance
notice of changes to that fee.
The Exchange believes that collecting
the ORF from non-Members when such
non-Members ultimately clear the
transaction (that is, when the nonMember is the ‘‘ultimate clearing firm’’
for a transaction in which a Member
was assessed the ORF) is an equitable
allocation of reasonable dues, fees, and
other charges among its members and
issuers and other persons using its
facilities. The Exchange notes that there
is a material distinction between
‘‘assessing’’ the ORF and ‘‘collecting’’
the ORF. The ORF is only assessed to
a Member with respect to a particular
transaction in which it is either the
executing clearing firm or ultimate
clearing firm. The Exchange does not
assess the ORF to non-Members. Once,
however, the ORF is assessed to a
Member for a particular transaction, the
ORF may be collected from the Member
or a non-Member, depending on how
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the transaction is cleared at OCC. If
there was no change to the clearing
account of the original transaction, the
ORF would be collected from the
Member. If there was a change to the
clearing account of the original
transaction and a non-Member becomes
the ultimate clearing firm for that
transaction, then the ORF will be
collected from that non-Member. The
Exchange believes that this collection
practice continues to be reasonable and
appropriate, and was originally
instituted for the benefit of clearing
firms that desired to have the ORF be
collected from the clearing firm that
ultimately clears the transaction.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition not
necessary or appropriate in furtherance
of the purposes of the Act. This
proposal does not create an unnecessary
or inappropriate intra-market burden on
competition because the ORF applies to
all customer activity, and is designed to
enable the Exchange to recover a
material portion of the Exchange’s cost
related to its regulatory activities. It also
supplements the regulatory revenue
derived from non-customer activity.
This proposal does not create an
unnecessary or inappropriate intermarket burden on competition because
it is a regulatory fee that supports
regulation in furtherance of the
purposes of the Act. The Exchange is
obligated to ensure that the amount of
regulatory revenue collected from the
ORF, in combination with its other
regulatory fees and fines, does not
exceed regulatory costs. Unilateral
action by MIAX Options in establishing
fees for services provided to its
Members and others using its facilities
will not have an impact on competition.
In the highly competitive environment
for equity options trading, MIAX
Options 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’s ORF, as described
herein, is comparable to fees charged by
other options exchanges for the same or
similar services. The Exchange believes
that continuing to limit the changes to
the ORF to twice a year on specific dates
with advance notice is not intended to
address a competitive issue but rather to
provide Members with better notice of
any change that the Exchange may make
to the ORF.
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C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
Written comments were neither
solicited nor received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become
effective pursuant to Section
19(b)(3)(A)(ii) of the Act,14 and Rule
19b–4(f)(2) 15 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 No. SR–
MIAX–2019–01 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 No.
SR–MIAX–2019–01. 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
14 15
15 17
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U.S.C. 78s(b)(3)(A)(ii).
CFR 240.19b–4(f)(2).
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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 No.
SR–MIAX–2019–01, and should be
submitted on or before March 15, 2019.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.16
Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019–03032 Filed 2–21–19; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–85156; File No. SR–
NASDAQ–2019–001]
Self-Regulatory Organizations; The
Nasdaq Stock Market LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change To Adopt
Listing Standards for Direct Listings
and Clarify Related Rules
February 15, 2019.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’) 1 and Rule 19b-4 thereunder,2
notice is hereby given that on February
14, 2019, The Nasdaq Stock Market LLC
(‘‘Nasdaq’’ or the ‘‘Exchange’’) filed with
the Securities and Exchange
Commission (‘‘SEC’’ or ‘‘Commission’’)
the proposed rule change as described
in Items I and II 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.
16 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b-4.
1 15
VerDate Sep<11>2014
16:52 Feb 21, 2019
Jkt 247001
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend and
clarify certain aspects of the listing
process for Direct Listings.
The text of the proposed rule change
is available on the Exchange’s website at
https://nasdaq.cchwallstreet.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
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
Nasdaq recognizes that some
companies that have sold common
equity securities in private placements,
which have not been listed on a national
securities exchange or traded in the
over-the-counter market pursuant to
FINRA Form 211 immediately prior to
the initial pricing, may wish to list those
securities to allow existing shareholders
to sell their shares. In particular, a
company whose stock is not previously
registered under the Exchange Act may
wish to list on the Nasdaq Global Select
Market without a related underwritten
offering upon effectiveness of a
registration statement registering only
the resale of shares sold by the company
in earlier private placements. The
proposed Listing Rule IM–5315–1 sets
forth listing requirements for such
securities (a ‘‘Direct Listing’’) and
describes how the Exchange will
calculate compliance with the Nasdaq
Global Select Market initial listing
standards related to the requirements
based on the price of a security,
including the bid price, market
capitalization and Market Value of
Publicly Held Shares.
Nasdaq also proposes to modify
Nasdaq Rule 4753 to more clearly
describe the role of a broker-dealer
serving as a financial advisor to the
PO 00000
Frm 00128
Fmt 4703
Sfmt 4703
5787
issuer of a security listing on the Nasdaq
Global Select Market under proposed
Rule IM–5315–1.
Calculation of Price-Based Initial Listing
Requirements
Direct Listings are subject to all initial
listing requirements applicable to equity
securities and, subject to applicable
exemptions, the corporate governance
requirements set forth in the Rule 5600
Series. To provide transparency to the
initial listing process, the Exchange
proposes to adopt Listing Rule IM–
5315–1, which will state how the
Exchange calculates the initial listing
requirements based on the price of a
security, including the bid price, market
capitalization and market value of
publicly held shares for a Direct Listing
on the Nasdaq Global Select Market.3
Nasdaq also proposes to require that
a company that lists on the Nasdaq
Global Select Market through a Direct
Listing do so at the time of effectiveness
of a registration statement filed under
the Securities Act of 1933 solely for the
purpose of allowing existing
shareholders to sell their shares. This
interpretative material would describe
when a company whose stock is not
previously registered under the
Exchange Act may list on the Nasdaq
Global Select Market, where such
company is listing without a related
underwritten offering upon
effectiveness of a registration statement
registering only the resale of shares sold
by the company in earlier private
placements.
Under IM–5315–1, Nasdaq would
require that a company listing on the
Nasdaq Global Select Market through a
Direct Listing provide Nasdaq an
independent third-party valuation (a
‘‘Valuation’’). Any Valuation used for
this purpose must be provided by an
entity that has significant experience
and demonstrable competence in the
provision of such valuations. The
Valuation must be of a recent date as of
the time of the approval of the company
for listing and the evaluator must have
considered, among other factors, the
annual financial statements required to
be included in the registration
statement, along with financial
statements for any completed fiscal
3 This rule filing affects only companies listing on
the Nasdaq Global Select Market. Nasdaq intends to
subsequently file a proposed rule change under
Section 19(b) of the Act to adopt requirements for
the Nasdaq Capital and Global Markets applicable
to companies which have not been listed on a
national securities exchange or traded in the overthe-counter market pursuant to FINRA Form 211
immediately prior to the initial pricing and wish to
list their securities to allow existing shareholders to
sell their shares and clarify the use of the IPO Cross
for initial pricing of such securities.
E:\FR\FM\22FEN1.SGM
22FEN1
]]>Agencies
[Federal Register Volume 84, Number 36 (Friday, February 22, 2019)]
[Notices]
[Pages 5783-5787]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-03032]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-85162; File No. SR-MIAX-2019-01]
Self-Regulatory Organizations; Miami International Securities
Exchange, LLC; Notice of Filing and Immediate Effectiveness of a
Proposed Rule Change To Amend its Options Regulatory Fee
February 15, 2019.
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 1, 2019, 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 amend its Options Regulatory Fee
(``ORF'').
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 the
Statutory Basis for, the Proposed Rule Change
1. Purpose
Currently, the Exchange charges an ORF in the amount of $0.0045 per
contract side. The Exchange proposes to decrease this ORF to $0.0029
per contract side. In light of historical and projected volume changes
and shifts in the industry and on the Exchange, as well as changes to
the Exchange's regulatory cost structure, the Exchange is proposing to
change the amount of ORF that will be collected by the Exchange. The
Exchange's proposed change to the ORF should balance the Exchange's
regulatory revenue against the anticipated regulatory costs.
The per-contract ORF will continue to be assessed by MIAX Options
to each MIAX Options Member for all options transactions, including
Mini Options, cleared or ultimately cleared by the Member which are
cleared by the Options Clearing Corporation (``OCC'') in the
``customer'' range, regardless of the exchange on which the transaction
occurs. The ORF will be collected by OCC on behalf of MIAX Options from
either (1) a Member that was the ultimate clearing firm for the
transaction or (2) a non-Member that was the ultimate clearing firm
where a Member was the executing clearing firm for the transaction. The
Exchange uses reports
[[Page 5784]]
from OCC to determine the identity of the executing clearing firm and
ultimate clearing firm.
To illustrate how the ORF is assessed and collected, the Exchange
provides the following set of examples. If the transaction is executed
on the Exchange and the ORF is assessed, if there is no change to the
clearing account of the original transaction, then the ORF is collected
from the Member that is the executing clearing firm for the
transaction. (The Exchange notes that, for purposes of the Fee
Schedule, when there is no change to the clearing account of the
original transaction, the executing clearing firm is deemed to be the
ultimate clearing firm.) If there is a change to the clearing account
of the original transaction (i.e., the executing clearing firm ``gives-
up'' or ``CMTAs'' the transaction to another clearing firm), then the
ORF is collected from the clearing firm that ultimately clears the
transaction- the ultimate clearing firm. The ultimate clearing firm may
be either a Member or non-Member of the Exchange. If the transaction is
executed on an away exchange and the ORF is assessed, then the ORF is
collected from the ultimate clearing firm for the transaction. Again,
the ultimate clearing firm may be either a Member or non-Member of the
Exchange. The Exchange notes, however, that when the transaction is
executed on an away exchange, the Exchange does not assess the ORF when
neither the executing clearing firm nor the ultimate clearing firm is a
Member (even if a Member is ``given-up'' or ``CMTAed'' and then such
Member subsequently ``gives-up'' or ``CMTAs'' the transaction to
another non-Member via a CMTA reversal). Finally, the Exchange will not
assess the ORF on outbound linkage trades, whether executed at the
Exchange or an away exchange. ``Linkage trades'' are tagged in the
Exchange's system, so the Exchange can readily tell them apart from
other trades. A customer order routed to another exchange results in
two customer trades, one from the originating exchange and one from the
recipient exchange. Charging ORF on both trades could result in double-
billing of ORF for a single customer order, thus the Exchange will not
assess ORF on outbound linkage trades in a linkage scenario. This
assessment practice is identical to the assessment practice currently
utilized by the Exchange's affiliate, MIAX PEARL, LLC (``MIAX
PEARL'').\3\
---------------------------------------------------------------------------
\3\ See Securities Exchange Act Release No. 80875 (June 7,
2017), 82 FR 27096 (June 13, 2017)(SR-PEARL-2017-26).
---------------------------------------------------------------------------
As a practical matter, when a transaction that is subject to the
ORF is not executed on the Exchange, the Exchange lacks the information
necessary to identify the order entering member for that transaction.
There are countless order entering market participants, and each day
such participants can and often do drop their connection to one market
center and establish themselves as participants on another. For these
reasons, it is not possible for the Exchange to identify, and thus
assess fees such as an ORF, on order entering participants on away
markets on a given trading day. Clearing members, however, are
distinguished from order entering participants because they remain
identified to the Exchange on information the Exchange receives from
OCC regardless of the identity of the order entering participant, their
location, and the market center on which they execute transactions.
Therefore, the Exchange believes it is more efficient for the operation
of the Exchange and for the marketplace as a whole to collect the ORF
from clearing members.
The Exchange monitors the amount of revenue collected from the ORF
to ensure that it, in combination with other regulatory fees and fines,
does not exceed regulatory costs. In determining whether an expense is
considered a regulatory cost, the Exchange reviews all costs and makes
determinations if there is a nexus between the expense and a regulatory
function. The Exchange notes that fines collected by the Exchange in
connection with a disciplinary matter offset ORF.
As discussed below, the Exchange believes it is appropriate to
charge the ORF only to transactions that clear as customer at the OCC.
The Exchange believes that its broad regulatory responsibilities with
respect to a Member's activities supports applying the ORF to
transactions cleared but not executed by a Member. The Exchange's
regulatory responsibilities are the same regardless of whether a Member
enters a transaction or clears a transaction executed on its behalf.
The Exchange regularly reviews all such activities, including
performing surveillance for position limit violations, manipulation,
front-running, contrary exercise advice violations and insider trading.
These activities span across multiple exchanges.
The ORF is designed to recover a material portion of the costs to
the Exchange of the supervision and regulation of Members' customer
options business, including performing routine surveillances and
investigations, as well as policy, rulemaking, interpretive and
enforcement activities. The Exchange believes that revenue generated
from the ORF, when combined with all of the Exchange's other regulatory
fees and fines, will cover a material portion, but not all, of the
Exchange's regulatory costs. The Exchange notes that its regulatory
responsibilities with respect to Member compliance with options sales
practice rules have been allocated to the Financial Industry Regulatory
Authority (``FINRA'') under a 17d-2 Agreement. The ORF is not designed
to cover the cost of options sales practice regulation.
The Exchange will continue to monitor the amount of revenue
collected from the ORF to ensure that it, in combination with its other
regulatory fees and fines, does not exceed the Exchange's total
regulatory costs. The Exchange will continue to monitor MIAX Options
regulatory costs and revenues at a minimum on a semi-annual basis. If
the Exchange determines regulatory revenues exceed or are insufficient
to cover a material portion of its regulatory costs, the Exchange will
adjust the ORF by submitting a fee change filing to the Commission. The
Exchange will notify Members of adjustments to the ORF via regulatory
circular at least 30 days prior to the effective date of the change.
The Exchange believes it is reasonable and appropriate for the
Exchange to charge the ORF for options transactions regardless of the
exchange on which the transactions occur. The Exchange has a statutory
obligation to enforce compliance by Members and their associated
persons under the Act and the rules of the Exchange and to surveil for
other manipulative conduct by market participants (including non-
Members) trading on the Exchange. The Exchange cannot effectively
surveil for such conduct without looking at and evaluating activity
across all options markets. Many of the Exchange's market surveillance
programs require the Exchange to look at and evaluate activity across
all options markets, such as surveillance for position limit
violations, manipulation, front-running and contrary exercise advice
violations/expiring exercise declarations. While much of this activity
relates to the execution of orders, the ORF is assessed on and
collected from clearing firms. The Exchange, because it lacks access to
information on the identity of the entering firm for executions that
occur on away markets, believes it is appropriate to assess the ORF on
its Members' clearing activity, based on information the Exchange
receives from OCC, including for away market activity. Among other
reasons, doing so
[[Page 5785]]
better and more accurately captures activity that occurs away from the
Exchange over which the Exchange has a degree of regulatory
responsibility. In so doing, the Exchange believes that assessing ORF
on Member clearing firms equitably distributes the collection of ORF in
a fair and reasonable manner. Also, the Exchange and the other options
exchanges are required to populate a consolidated options audit trail
(``COATS'') \4\ system in order to surveil a Member's activities across
markets.
---------------------------------------------------------------------------
\4\ COATS effectively enhances intermarket options surveillance
by enabling the options exchanges to reconstruct the market promptly
to effectively surveil certain rules.
---------------------------------------------------------------------------
In addition to its own surveillance programs, the Exchange works
with other SROs and exchanges on intermarket surveillance related
issues. Through its participation in the Intermarket Surveillance Group
(``ISG''),\5\ the Exchange shares information and coordinates inquiries
and investigations with other exchanges designed to address potential
intermarket manipulation and trading abuses. The Exchange's
participation in ISG helps it to satisfy the requirement that it has
coordinated surveillance with markets on which security futures are
traded and markets on which any security underlying security futures
are traded to detect manipulation and insider trading.\6\
---------------------------------------------------------------------------
\5\ ISG is an industry organization formed in 1983 to coordinate
intermarket surveillance among the SROs by co-operatively sharing
regulatory information pursuant to a written agreement between the
parties. The goal of the ISG's information sharing is to coordinate
regulatory efforts to address potential intermarket trading abuses
and manipulations.
\6\ See Section 6(h)(3)(I) of the Act.
---------------------------------------------------------------------------
The Exchange believes that charging the ORF across markets avoids
having Members direct their trades to other markets in order to avoid
the fee and to thereby avoid paying for their fair share for
regulation. If the ORF did not apply to activity across markets then a
Member would send their orders to the least cost, least regulated
exchange. Other exchanges do impose a similar fee on their members'
activity,\7\ including the activity of those members on MIAX Options
and MIAX PEARL.\8\
---------------------------------------------------------------------------
\7\ Similar regulatory fees have been instituted by Nasdaq PHLX
LLC (``Phlx'') (See Securities Exchange Act Release No. 61133
(December 9, 2009), 74 FR 66715 (December 16, 2009) (SR-Phlx-2009-
100)); Nasdaq ISE, LLC (``ISE'') (See Securities Exchange Act
Release No. 61154 (December 11, 2009), 74 FR 67278 (December 18,
2009) (SR-ISE-2009-105)); and Nasdaq GEMX, LLC (``GEMX'') (See
Securities Exchange Act Release No. 70200 (August 14, 2013) 78 FR
51242 (August 20, 2013)(SR-Topaz-2013-01)).
\8\ See supra note 3.
---------------------------------------------------------------------------
The Exchange notes that there is established precedent for an SRO
charging a fee across markets, namely, FINRAs Trading Activity Fee \9\
and the NYSE American LLC (``NYSE American''), NYSE Arca, Inc. (``NYSE
Arca''), Cboe Exchange, Inc. (``CBOE''), Nasdaq PHLX LLC (``Phlx''),
Nasdaq ISE, LLC (``ISE''), Nasdaq GEMX, LLC (``GEMX'') and BOX Exchange
LLC (``BOX'') ORF. While the Exchange does not have all the same
regulatory responsibilities as FINRA, the Exchange believes that, like
other exchanges that have adopted an ORF, its broad regulatory
responsibilities with respect to a Member's activities, irrespective of
where their transactions take place, supports a regulatory fee
applicable to transactions on other markets. Unlike FINRA's Trading
Activity Fee, the ORF applies only to a Member's customer options
transactions.
---------------------------------------------------------------------------
\9\ See Securities Exchange Act Release No. 47946 (May 30,
2003), 68 FR 34021 (June 6, 2003)(SR-NASD-2002-148).
---------------------------------------------------------------------------
Additionally, the Exchange specifies in the Fee Schedule that the
Exchange may only increase or decrease the ORF semi-annually, and any
such fee change will be effective on the first business day of February
or August. In addition to submitting a proposed rule change to the
Commission as required by the Act to increase or decrease the ORF, the
Exchange will notify participants via a Regulatory Circular of any
anticipated change in the amount of the fee at least 30 calendar days
prior to the effective date of the change. The Exchange believes that
by providing guidance on the timing of any changes to the ORF, the
Exchange would make it easier for participants to ensure their systems
are configured to properly account for the ORF.
The Exchange is proposing to decrease the ORF from $0.0045 to
$0.0029, as of February 1, 2019. In light of recent market volumes on
the Exchange and changes to the Exchange's regulatory costs, the
Exchange is proposing to decrease the amount of ORF that will be
collected by the Exchange. As noted above, the Exchange regularly
reviews its ORF to ensure that the ORF, in combination with its other
regulatory fees and fines, does not exceed regulatory costs. The
Exchange believes this adjustment will permit the Exchange to cover a
material portion of its regulatory costs, while not exceeding
regulatory costs.
The Exchange notified Members via a Regulatory Circular of the
proposed change to the ORF at least thirty (30) calendar days prior to
the proposed operative date, on December 31, 2018.\10\ The Exchange
believes that the prior notification to market participants will ensure
market participants are prepared to configure their systems to properly
account for the ORF.
---------------------------------------------------------------------------
\10\ See MIAX Options Regulatory Circular 2018-74 available at
https://www.miaxoptions.com/sites/default/files/circular-files/MIAX_Options_RC_2018_74.pdf.
---------------------------------------------------------------------------
2. Statutory Basis
The Exchange believes that its proposal to amend its Fee Schedule
is consistent with Section 6(b) of the Act \11\ in general, and
furthers the objectives of Section 6(b)(4) of the Act \12\ 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 \13\ 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.
---------------------------------------------------------------------------
\11\ 15 U.S.C. 78f(b).
\12\ 15 U.S.C. 78f(b)(4).
\13\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
The Exchange believes that decreasing the ORF from $0.0045 to
$0.0029, as of February 1, 2019 is reasonable because the Exchange's
collection of ORF needs to be balanced against the amount of regulatory
costs incurred by the Exchange. The Exchange believes that the proposed
adjustments noted herein will serve to balance the Exchange's
regulatory revenue against the anticipated regulatory costs.
The Exchange believes that amending the ORF from $0.0045 to
$0.0029, as of February 1, 2019 is equitable and not unfairly
discriminatory because it is objectively allocated to Members in that
it is charged to all Members on all their transactions that clear as
customer at the OCC. Moreover, the Exchange believes the ORF ensures
fairness by assessing fees to those Members that are directly based on
the amount of customer options business they conduct. Regulating
customer trading activity is much more labor intensive and requires
greater expenditure of human and technical resources than regulating
non-customer trading activity, which tends to be more automated and
less labor-intensive. As a result, the costs associated with
administering the customer component of the Exchange's overall
regulatory program are
[[Page 5786]]
materially higher than the costs associated with administering the non-
customer component (e.g., Member proprietary transactions) of its
regulatory program.
The ORF is designed to recover a material portion of the costs of
supervising and regulating Members' customer options business including
performing routine surveillances and investigations, as well as policy,
rulemaking, interpretive and enforcement activities. The Exchange will
monitor the amount of revenue collected from the ORF to ensure that it,
in combination with its other regulatory fees and fines, does not
exceed the Exchange's total regulatory costs. The Exchange has designed
the ORF to generate revenues that, when combined with all of the
Exchange's other regulatory fees, will be less than or equal to the
Exchange's regulatory costs, which is consistent with the Commission's
view that regulatory fees be used for regulatory purposes and not to
support the Exchange's business side. In this regard, the Exchange
believes that the proposed decrease to the fee is reasonable.
The Exchange believes that continuing to limit changes to the ORF
to twice a year on specific dates with advance notice is reasonable
because it gives participants certainty on the timing of changes, if
any, and better enables them to properly account for ORF charges among
their customers. The Exchange believes that continuing to limit changes
to the ORF to twice a year on specific dates is equitable and not
unfairly discriminatory because it will apply in the same manner to all
Members that are subject to the ORF and provide them with additional
advance notice of changes to that fee.
The Exchange believes that collecting the ORF from non-Members when
such non-Members ultimately clear the transaction (that is, when the
non-Member is the ``ultimate clearing firm'' for a transaction in which
a Member was assessed the ORF) is an equitable allocation of reasonable
dues, fees, and other charges among its members and issuers and other
persons using its facilities. The Exchange notes that there is a
material distinction between ``assessing'' the ORF and ``collecting''
the ORF. The ORF is only assessed to a Member with respect to a
particular transaction in which it is either the executing clearing
firm or ultimate clearing firm. The Exchange does not assess the ORF to
non-Members. Once, however, the ORF is assessed to a Member for a
particular transaction, the ORF may be collected from the Member or a
non-Member, depending on how the transaction is cleared at OCC. If
there was no change to the clearing account of the original
transaction, the ORF would be collected from the Member. If there was a
change to the clearing account of the original transaction and a non-
Member becomes the ultimate clearing firm for that transaction, then
the ORF will be collected from that non-Member. The Exchange believes
that this collection practice continues to be reasonable and
appropriate, and was originally instituted for the benefit of clearing
firms that desired to have the ORF be collected from the clearing firm
that ultimately clears the transaction.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act. This proposal does not create
an unnecessary or inappropriate intra-market burden on competition
because the ORF applies to all customer activity, and is designed to
enable the Exchange to recover a material portion of the Exchange's
cost related to its regulatory activities. It also supplements the
regulatory revenue derived from non-customer activity. This proposal
does not create an unnecessary or inappropriate inter-market burden on
competition because it is a regulatory fee that supports regulation in
furtherance of the purposes of the Act. The Exchange is obligated to
ensure that the amount of regulatory revenue collected from the ORF, in
combination with its other regulatory fees and fines, does not exceed
regulatory costs. Unilateral action by MIAX Options in establishing
fees for services provided to its Members and others using its
facilities will not have an impact on competition. In the highly
competitive environment for equity options trading, MIAX Options 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's ORF, as described herein, is comparable to fees charged by
other options exchanges for the same or similar services. The Exchange
believes that continuing to limit the changes to the ORF to twice a
year on specific dates with advance notice is not intended to address a
competitive issue but rather to provide Members with better notice of
any change that the Exchange may make to the ORF.
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,\14\ and Rule 19b-4(f)(2) \15\ 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.
---------------------------------------------------------------------------
\14\ 15 U.S.C. 78s(b)(3)(A)(ii).
\15\ 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 rule-comments@sec.gov. Please include
File No. SR-MIAX-2019-01 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 No. SR-MIAX-2019-01. 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
[[Page 5787]]
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 No. SR-MIAX-2019-01, and should be
submitted on or before March 15, 2019.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\16\
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\16\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-03032 Filed 2-21-19; 8:45 am]
BILLING CODE 8011-01-P
