Self-Regulatory Organizations; MIAX PEARL, LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend the MIAX PEARL Fee Schedule, 21368-21371 [2019-09867]
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21368
Federal Register / Vol. 84, No. 93 / Tuesday, May 14, 2019 / Notices
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shareholder services. Applicants assert
that the proposed closed-end
investment company multiple class
structure does not raise the concerns
underlying section 18 of the Act to any
greater degree than open-end
investment companies’ multiple class
structures that are permitted by rule
18f–3 under the Act. Applicants state
that each Fund will comply with the
provisions of rule 18f–3 as if it were an
open-end investment company.
Early Withdrawal Charges
1. Section 23(c) of the Act provides,
in relevant part, that no registered
closed-end investment company shall
purchase securities of which it is the
issuer, except: (a) On a securities
exchange or other open market; (b)
pursuant to tenders, after reasonable
opportunity to submit tenders given to
all holders of securities of the class to
be purchased; or (c) under other
circumstances as the Commission may
permit by rules and regulations or
orders for the protection of investors.
2. Rule 23c–3 under the Act permits
a registered closed-end investment
company (an ‘‘interval fund’’) to make
repurchase offers of between five and
twenty-five percent of its outstanding
shares at net asset value at periodic
intervals pursuant to a fundamental
policy of the interval fund. Rule
23c–3(b)(1) under the Act permits an
interval fund to deduct from repurchase
proceeds only a repurchase fee, not to
exceed two percent of the proceeds, that
is paid to the interval fund and is
reasonably intended to compensate the
fund for expenses directly related to the
repurchase.
3. Section 23(c)(3) provides that the
Commission may issue an order that
would permit a closed-end investment
company to repurchase its shares in
circumstances in which the repurchase
is made in a manner or on a basis that
does not unfairly discriminate against
any holders of the class or classes of
securities to be purchased.
4. Applicants request relief under
section 6(c), discussed above, and
section 23(c)(3) from rule 23c–3 to the
extent necessary for the Funds to
impose an EWC on shares of the Funds
submitted for repurchase that have been
held for less than a specified period.
5. Applicants state that the EWCs they
intend to impose are functionally
similar to CDSLs imposed by open-end
investment companies under rule 6c–10
under the Act. Rule 6c–10 permits openend investment companies to impose
CDSLs, subject to certain conditions.
Applicants note that rule 6c–10 is
grounded in policy considerations
supporting the employment of CDSLs
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where there are adequate safeguards for
the investor and state that the same
policy considerations support
imposition of EWCs in the interval fund
context. In addition, applicants state
that EWCs may be necessary for the
distributor to recover distribution costs.
Applicants represent that any EWC
imposed by the Funds will comply with
rule 6c–10 under the Act as if the rule
were applicable to closed-end
investment companies. The Funds will
disclose EWCs in accordance with the
requirements of Form N–1A concerning
CDSLs.
Asset-Based Distribution and/or Service
Fees
1. Section 17(d) of the Act and rule
17d–1 under the Act prohibit an
affiliated person of a registered
investment company, or an affiliated
person of such person, acting as
principal, from participating in or
effecting any transaction in connection
with any joint enterprise or joint
arrangement in which the investment
company participates unless the
Commission issues an order permitting
the transaction. In reviewing
applications submitted under section
17(d) and rule 17d–1, the Commission
considers whether the participation of
the investment company in a joint
enterprise or joint arrangement is
consistent with the provisions, policies
and purposes of the Act, and the extent
to which the participation is on a basis
different from or less advantageous than
that of other participants.
2. Rule 17d–3 under the Act provides
an exemption from section 17(d) and
rule 17d–1 to permit open-end
investment companies to enter into
distribution arrangements pursuant to
rule 12b–1 under the Act. Applicants
request an order under section 17(d) and
rule 17d–1 under the Act to the extent
necessary to permit the Fund to impose
asset-based distribution and/or service
fees. Applicants have agreed to comply
with rules 12b–1 and 17d–3 as if those
rules applied to closed-end investment
companies, which they believe will
resolve any concerns that might arise in
connection with a Fund financing the
distribution of its shares through assetbased distribution and/or service fees.
For the reasons stated above,
applicants submit that the exemptions
requested under section 6(c) are
necessary and appropriate in the public
interest and are consistent with the
protection of investors and the purposes
fairly intended by the policy and
provisions of the Act. Applicants further
submit that the relief requested
pursuant to section 23(c)(3) will be
consistent with the protection of
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investors and will insure that applicants
do not unfairly discriminate against any
holders of the class of securities to be
purchased. Finally, applicants state that
the Funds’ imposition of asset-based
distribution and/or service fees is
consistent with the provisions, policies
and purposes of the Act and does not
involve participation on a basis different
from or less advantageous than that of
other participants.
Applicants’ Condition
Applicants agree that any order
granting the requested relief will be
subject to the following condition:
Each Fund relying on the order will
comply with the provisions of rules
6c–10, 12b–1, 17d–3, 18f–3, 22d–1, and,
where applicable, 11a–3 under the Act,
as amended from time to time, as if
those rules applied to closed-end
management investment companies,
and will comply with the FINRA Sales
Charge Rule, as amended from time to
time, as if that rule applied to all closedend management investment
companies.
For the Commission, by the Division of
Investment Management, under delegated
authority.
Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019–09843 Filed 5–13–19; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–85807; File No. SR–
PEARL–2019–15]
Self-Regulatory Organizations; MIAX
PEARL, LLC; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change To Amend the MIAX
PEARL Fee Schedule
May 8, 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 April 29, 2019, MIAX PEARL, LLC
(‘‘MIAX PEARL’’ or ‘‘Exchange’’) filed
with the Securities and Exchange
Commission (‘‘Commission’’) a
proposed rule change as described in
Items I, II, and III below, which Items
have been prepared by the Exchange.
The Commission is publishing this
notice to solicit comments on the
proposed rule change from interested
persons.
1 15
2 17
U.S.C. 78s(b)(1).
CFR 240.19b–4.
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Federal Register / Vol. 84, No. 93 / Tuesday, May 14, 2019 / Notices
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange is filing a proposal to
amend the MIAX PEARL Fee Schedule
(the ‘‘Fee Schedule’’).
The text of the proposed rule change
is available on the Exchange’s website at
https://www.miaxoptions.com/rulefilings/pearl at MIAX PEARL’s principal
office, and at the Commission’s Public
Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
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
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The Exchange proposes to amend the
Add/Remove Tiered Rebates/Fees set
forth in Section (1)(a) of the Fee
Schedule to remove one of the
conditions that must be met in order for
Members 3 to qualify for an alternative
lower Taker fee for Penny classes for
their Firm Origin orders when trading
contra to Origins other than Priority
Customer 4 if certain thresholds are
satisfied by the Member.
The Exchange currently assesses
transaction rebates and fees to all
market participants which are based
upon the total monthly volume
executed by the Member on MIAX
PEARL in the relevant, respective origin
type (not including Excluded
3 ‘‘Member’’ means an individual or organization
that is registered with the Exchange pursuant to
Chapter II of the Exchange Rules for purposes of
trading on the Exchange as an ‘‘Electronic Exchange
Member’’ or ‘‘Market Maker.’’ Members are deemed
‘‘members’’ under the Exchange Act. See the
Definitions Section of the Fee Schedule and
Exchange Rule 100.
4 ‘‘Priority Customer’’ means a person or entity
that (i) is not a broker or dealer in securities, and
(ii) does not place more than 390 orders in listed
options per day on average during a calendar month
for its own beneficial account(s). See Exchange Rule
100, including Interpretations and Policies .01.
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Contracts) 5 expressed as a percentage of
TCV.6 In addition, the per contract
transaction rebates and fees are applied
retroactively to all eligible volume for
that origin type once the respective
threshold tier (‘‘Tier’’) has been reached
by the Member. The Exchange
aggregates the volume of Members and
their Affiliates.7 Members that place
resting liquidity, i.e., orders resting on
the book of the MIAX PEARL System,8
are paid the specified ‘‘maker’’ rebate
(each a ‘‘Maker’’), and Members that
execute against resting liquidity are
assessed the specified ‘‘taker’’ fee (each
a ‘‘Taker’’). For opening transactions
and ABBO 9 uncrossing transactions, per
5 ‘‘Excluded Contracts’’ means any contracts
routed to an away market for execution. See the
Definitions Section of the Fee Schedule.
6 ‘‘TCV’’ means total consolidated volume
calculated as the total national volume in those
classes listed on MIAX PEARL for the month for
which the fees apply, excluding consolidated
volume executed during the period time in which
the Exchange experiences an ‘‘Exchange System
Disruption’’ (solely in the option classes of the
affected Matching Engine (as defined below)). The
term Exchange System Disruption, which is defined
in the Definitions section of the Fee Schedule,
means an outage of a Matching Engine or collective
Matching Engines for a period of two consecutive
hours or more, during trading hours. The term
Matching Engine, which is also defined in the
Definitions section of the Fee Schedule, is a part of
the MIAX PEARL electronic system that processes
options orders and trades on a symbol-by-symbol
basis. Some Matching Engines will process option
classes with multiple root symbols, and other
Matching Engines may be dedicated to one single
option root symbol (for example, options on SPY
may be processed by one single Matching Engine
that is dedicated only to SPY). A particular root
symbol may only be assigned to a single designated
Matching Engine. A particular root symbol may not
be assigned to multiple Matching Engines. The
Exchange believes that it is reasonable and
appropriate to select two consecutive hours as the
amount of time necessary to constitute an Exchange
System Disruption, as two hours equates to
approximately 1.4% of available trading time per
month. The Exchange notes that the term
‘‘Exchange System Disruption’’ and its meaning
have no applicability outside of the Fee Schedule,
as it is used solely for purposes of calculating
volume for the threshold tiers in the Fee Schedule.
See the Definitions Section of the Fee Schedule.
7 ‘‘Affiliate’’ means (i) an affiliate of a Member of
at least 75% common ownership between the firms
as reflected on each firm’s Form BD, Schedule A,
or (ii) the Appointed Market Maker of an Appointed
EEM (or, conversely, the Appointed EEM of an
Appointed Market Maker). An ‘‘Appointed Market
Maker’’ is a MIAX PEARL Market Maker (who does
not otherwise have a corporate affiliation based
upon common ownership with an EEM) that has
been appointed by an EEM and an ‘‘Appointed
EEM’’ is an EEM (who does not otherwise have a
corporate affiliation based upon common
ownership with a MIAX PEARL Market Maker) that
has been appointed by a MIAX PEARL Market
Maker, pursuant to the process described in the Fee
Schedule. See the Definitions Section of the Fee
Schedule.
8 The term ‘‘System’’ means the automated
trading system used by the Exchange for the trading
of securities. See Exchange Rule 100.
9 ‘‘ABBO’’ means the best bid(s) or offer(s)
disseminated by other Eligible Exchanges (defined
in Exchange Rule 1400(f)) and calculated by the
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21369
contract transaction rebates and fees are
waived for all market participants.
Finally, Members are assessed lower
transaction fees and receive lower
rebates for order executions in standard
option classes in the Penny Pilot
Program 10 (‘‘Penny classes’’) than for
order executions in standard option
classes which are not in the Penny Pilot
Program (‘‘Non-Penny classes’’), where
Members are assessed higher transaction
fees and receive higher rebates.
The Exchange established an
alternative lower Taker fee that
Members are able to qualify for in Penny
classes for their Firm Origin orders
when trading against Origins other than
Priority Customer if certain thresholds
are satisfied by the Member instead of
the tier rate for the same segment that
the Member would have otherwise
achieved.11 This threshold is denoted
under the footnote ‘‘◊’’ on the Fee
Schedule. Presently, Members may
qualify for an alternative lower Taker
fee of $0.48 for Penny classes for their
Firm Origin when trading against
Origins other than Priority Customer if
the Member and their Affiliates: (1)
Execute at least 2.00% of TCV in the
relevant month in the Priority Customer
Origin type, in all options classes, not
including Excluded Contracts, as
compared to TCV in all MIAX PEARL
listed option classes; and (2) reach at
least Tier 3 in the relevant month in
Non-Priority Customers, Firms, BrokerDealers and Non-MIAX PEARL Market
Makers (collectively, ‘‘Professional
Members’’) Origin types.
The Exchange proposes to remove the
second condition that must be met in
order for Members to qualify for the
alternative lower Taker fee for Penny
classes for their Firm Origin orders
when trading contra to Origins other
than Priority Customer if certain
thresholds are satisfied by the Member.
Pursuant to this proposal, the only
condition for Members to qualify for an
alternative lower Taker fee of $0.48 for
Penny classes for their Firm Origin
when trading against Origins other than
Priority Customer would be if the
Member and their Affiliates execute at
least 2.00% of TCV in the relevant
month in the Priority Customer Origin
type, in all options classes, not
including Excluded Contracts, as
Exchange based on market information received by
the Exchange from OPRA. See the Definitions
Section of the Fee Schedule. See Exchange Rule
100.
10 See Securities Exchange Act Release No. 79778
(January 12, 2017), 82 FR 6662 (January 19, 2017)
(SR–PEARL–2016–01).
11 See Securities Exchange Act Release No. 85608
(April 11, 2019), 84 FR 16073 (April 17, 2019) (SR–
PEARL–2019–13).
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Federal Register / Vol. 84, No. 93 / Tuesday, May 14, 2019 / Notices
compared to TCV in all MIAX PEARL
listed option classes. Pursuant to this
proposal, Members and their Affiliates
would no longer also be required to
reach at least Tier 3 in the relevant
month in the Professional Members
Origin types in order to receive the
alternative lower Taker fee.
The alternative lower Taker fee is
specific to the Firm Origin and volume
aggregation is based on Professional
Members for tier purposes. Other
Origins within Professional Members
still get the tier rate assigned in the
Professional Members table as set forth
in Section (1)(a) of the Fee Schedule.
The alternative lower Taker fee applies
to Taker fees for Firm Origin orders in
Penny classes in Tier 1 through Tier 4
in the relevant month in the
Professional Members Origin types, in
which Professional Members, including
Firm, in those tiers are currently
assessed a Taker fee of $0.50 for Tier 1
and Tier 2 and $0.49 for Tier 3 and Tier
4 when trading against Origins other
than Priority Customer. The alternative
lower Taker fee has no effect on Taker
fees for Firm Origin orders in Penny
classes in Tier 5 and Tier 6 in the
relevant month in the Professional
Members Origin types as the Taker fee
in those tiers is already set at $0.48
when trading against Origins other than
Priority Customer.
The purpose for removing the second
condition is to make it easier for
Members to qualify for the lower Taker
fee, to incentivize Members to increase
Firm Origin order flow on the Exchange.
With the proposed change, the
transaction rebates and fees in Section
(1)(a) of the Fee Schedule for
Professional Members would be the
following:
Per contract rebates/fees for penny classes
Origin
Tier
Non-Priority Customer,
Firm, BD, and NonMIAX PEARL Market
Makers.
Volume criteria
1
2
3
4
5
6
Maker ∧
Maker ∧
(contra
origins ex
priority
customer)
(contra
priority
customer
origin)
0.00%–0.15% ..............
Above 0.15%–0.40% ..
Above 0.40%–0.65% ..
Above 0.65%–1.00% ..
Above 1.00%–1.40% ..
Above 1.40% ..............
($0.25)
(0.40)
(0.40)
(0.47)
(0.48)
(0.48)
($0.23)
(0.38)
(0.38)
(0.45)
(0.46)
(0.46)
Per contract rebates/fees for
non-penny classes
Taker ◊ (contra
origins ex
priority
customer)
Taker
(contra priority
customer
origin)
$0.50
0.50
0.49
0.49
0.48
0.48
$0.50
0.50
0.50
0.50
0.50
0.50
Maker ** ∧
($0.30)
(0.30)
(0.60)
(0.65)
(0.70)
(0.85)
Taker **
$1.10
1.10
1.09
1.08
1.07
** Members may qualify for the Maker Rebate and the Taker Fee associated with the highest Tier for transactions in Non-Penny classes if the Member executes
more than 0.30% volume in Non-Penny classes, not including Excluded Contracts, as compared to the TCV in all MIAX PEARL listed option classes. For purposes of
qualifying for such rates, the Exchange will aggregate the volume transacted by Members and their Affiliates in the following Origin types in Non-Penny classes: MIAX
PEARL Market Makers, and Non-Priority Customer, Firm, BD, and Non-MIAX PEARL Market Makers.
∧ Members may qualify for Maker Rebates equal to the greater of: (A) ($0.40) for Penny Classes and ($0.65) for Non-Penny Classes, or (B) the amount set forth in
the applicable Tier reached by the Member in the relevant Origin, if the Member and their Affiliates execute at least 2.00% volume in the relevant month, in Priority
Customer Origin type, in all options classes, not including Excluded Contracts, as compared to the TCV in all MIAX PEARL listed option classes.
◊ Members may qualify for Taker Fees of $0.48 for Penny classes for their Firm Origin when trading against Origins not Priority Customer if the Member and their
Affiliates execute at least 2.00% of TCV in the relevant month in the Priority Customer Origin type, in all options classes, not including Excluded Contracts, as compared to TCV in all MIAX PEARL listed option classes.
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The proposed rule change is to
become operative May 1, 2019.
2. Statutory Basis
The Exchange believes that its
proposal to amend its Fee Schedule is
consistent with Section 6(b) of the Act 12
in general, and furthers the objectives of
Section 6(b)(4) of the Act,13 in that it is
an equitable allocation of reasonable
dues, fees and other charges among
Exchange members and issuers and
other persons using its facilities, and
6(b)(5) of the Act,14 in that it is designed
to prevent fraudulent and manipulative
acts and practices, to promote just and
equitable principles of trade, to foster
cooperation and coordination with
persons engaged in facilitating
transactions in securities, to remove
impediments to and perfect the
mechanisms of a free and open market
and a national market system and, in
general, to protect investors and the
public interest.
The Exchange’s proposal to remove
the second condition that must be met
in order for Members to qualify for the
alternative lower Taker fee for Penny
12 15
U.S.C. 78f(b).
U.S.C. 78f(b)(4).
14 15 U.S.C. 78f(b)(1) and (b)(5).
classes for their Firm Origin orders
when trading contra to Origins other
than Priority Customer if certain
thresholds are satisfied by the Member,
is consistent with Section 6(b)(4) of the
Act 15 because it applies equally to all
Members for their Firm Origin with
similar affiliated order flow. The
Exchange believes that its proposal is
fair, equitable, and not unreasonably
discriminatory because it will make it
easier for Members to qualify for the
lower Taker fee, and will encourage
Members to submit both Firm and
Priority Customer orders, which will
increase liquidity and benefit all market
participants by providing more trading
opportunities and tighter spreads. The
Exchange believes that the proposal is
reasonable because it will incentivize
providers of Priority Customer order
flow to send that Priority Customer
order flow to the Exchange in order to
obtain the highest volume threshold and
receive a Taker fee in a manner that
enables the Exchange to improve its
overall competitiveness and strengthen
its market quality for all market
participants.
13 15
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15 15
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U.S.C. 78f(b)(4).
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B. Self-Regulatory Organization’s
Statement on Burden on Competition
MIAX PEARL does not believe that
the proposed rule change will impose
any burden on competition not
necessary or appropriate in furtherance
of the purposes of the Act.
The Exchange further believes that its
proposal to remove the second
condition that must be met in order for
Members to qualify for the alternative
lower Taker fee for Penny classes for
their Firm Origin orders when trading
contra to Origins other than Priority
Customer if certain thresholds are
satisfied by the Member, that will apply
instead of the Taker fee otherwise
applicable to such orders, will not have
an impact on intra-market competition.
Specifically, the Exchange believes the
proposal for any Member to be able to
qualify for a Taker fee of $0.48 per
contract for their Firm Orders when
trading against Origins other than
Priority Customer, when Members and
their Affiliates execute at least 2.00% of
TCV in the relevant month in the
Priority Customer Origin type, in all
options classes, not including Excluded
Contracts, as compared to TCV in all
MIAX PEARL listed option classes, will
increase volume of Firm and Priority
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Federal Register / Vol. 84, No. 93 / Tuesday, May 14, 2019 / Notices
Customer order flow. The Exchange
believes that the increased order flow
will result in increased liquidity which
benefits all Exchange participants by
providing more trading opportunities
and tighter spreads. Because the
proposal makes it easier for a Member
to receive a lower Taker fee for their
Firm Origin instead of the Taker fee
otherwise applicable to such orders in
Tier 1 through Tier 4 for Professional
Members, the Exchange believes that the
proposed rule change will not impose
any burden on competition not
necessary or appropriate in furtherance
of the purposes of the Act.
The Exchange notes that it operates in
a highly competitive market in which
market participants can readily favor
competing venues if they deem fee
levels at a particular venue to be
excessive. In such an environment, the
Exchange must continually adjust its
rebates and fees to remain competitive
with other exchanges and to attract
order flow. The Exchange believes that
the proposed rule change reflects this
competitive environment because it
modifies the Exchange’s fees in a
manner that encourages market
participants to continue to provide
liquidity and to send order flow to the
Exchange.
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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,16 and Rule
19b–4(f)(2) 17 thereunder. At any time
within 60 days of the filing of the
proposed rule change, the Commission
summarily may temporarily suspend
such rule change if it appears to the
Commission that such action is
necessary or appropriate in the public
interest, for the protection of investors,
or otherwise in furtherance of the
purposes of the Act. If the Commission
takes such action, the Commission shall
institute proceedings to determine
whether the proposed rule should be
approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
PEARL–2019–15 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–PEARL–2019–15. This file
number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
internet website (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for website viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE,
Washington, DC 20549 on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change.
Persons submitting comments are
cautioned that we do not redact or edit
personal identifying information from
comment submissions. You should
submit only information that you wish
to make available publicly. All
submissions should refer to File
Number SR–PEARL–2019–15, and
should be submitted on or before June
4, 2019.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.18
Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019–09867 Filed 5–13–19; 8:45 am]
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–85808; File No. SR–MIAX–
2019–22]
Self-Regulatory Organizations; Miami
International Securities Exchange LLC;
Notice of Filing and Immediate
Effectiveness of a Proposed Rule
Change To Amend Its Fee Schedule
May 8, 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 April 29, 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.
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 adopt certain
SPIKES transaction fees.
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 adopted its initial
SPIKES transaction fees on February 15,
BILLING CODE 8011–01–P
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17 17 CFR 240.19b–4(f)(2).
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]]>Agencies
[Federal Register Volume 84, Number 93 (Tuesday, May 14, 2019)]
[Notices]
[Pages 21368-21371]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-09867]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-85807; File No. SR-PEARL-2019-15]
Self-Regulatory Organizations; MIAX PEARL, LLC; Notice of Filing
and Immediate Effectiveness of a Proposed Rule Change To Amend the MIAX
PEARL Fee Schedule
May 8, 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 April 29, 2019, MIAX PEARL, LLC (``MIAX PEARL''
or ``Exchange'') filed with the Securities and Exchange Commission
(``Commission'') a proposed rule change as described in Items I, II,
and III below, which Items have been prepared by the Exchange. The
Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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[[Page 21369]]
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange is filing a proposal to amend the MIAX PEARL Fee
Schedule (the ``Fee Schedule'').
The text of the proposed rule change is available on the Exchange's
website at https://www.miaxoptions.com/rule-filings/pearl at MIAX
PEARL's principal office, and at the Commission's Public Reference
Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend the Add/Remove Tiered Rebates/Fees
set forth in Section (1)(a) of the Fee Schedule to remove one of the
conditions that must be met in order for Members \3\ to qualify for an
alternative lower Taker fee for Penny classes for their Firm Origin
orders when trading contra to Origins other than Priority Customer \4\
if certain thresholds are satisfied by the Member.
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\3\ ``Member'' means an individual or organization that is
registered with the Exchange pursuant to Chapter II of the Exchange
Rules for purposes of trading on the Exchange as an ``Electronic
Exchange Member'' or ``Market Maker.'' Members are deemed
``members'' under the Exchange Act. See the Definitions Section of
the Fee Schedule and Exchange Rule 100.
\4\ ``Priority Customer'' means a person or entity that (i) is
not a broker or dealer in securities, and (ii) does not place more
than 390 orders in listed options per day on average during a
calendar month for its own beneficial account(s). See Exchange Rule
100, including Interpretations and Policies .01.
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The Exchange currently assesses transaction rebates and fees to all
market participants which are based upon the total monthly volume
executed by the Member on MIAX PEARL in the relevant, respective origin
type (not including Excluded Contracts) \5\ expressed as a percentage
of TCV.\6\ In addition, the per contract transaction rebates and fees
are applied retroactively to all eligible volume for that origin type
once the respective threshold tier (``Tier'') has been reached by the
Member. The Exchange aggregates the volume of Members and their
Affiliates.\7\ Members that place resting liquidity, i.e., orders
resting on the book of the MIAX PEARL System,\8\ are paid the specified
``maker'' rebate (each a ``Maker''), and Members that execute against
resting liquidity are assessed the specified ``taker'' fee (each a
``Taker''). For opening transactions and ABBO \9\ uncrossing
transactions, per contract transaction rebates and fees are waived for
all market participants. Finally, Members are assessed lower
transaction fees and receive lower rebates for order executions in
standard option classes in the Penny Pilot Program \10\ (``Penny
classes'') than for order executions in standard option classes which
are not in the Penny Pilot Program (``Non-Penny classes''), where
Members are assessed higher transaction fees and receive higher
rebates.
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\5\ ``Excluded Contracts'' means any contracts routed to an away
market for execution. See the Definitions Section of the Fee
Schedule.
\6\ ``TCV'' means total consolidated volume calculated as the
total national volume in those classes listed on MIAX PEARL for the
month for which the fees apply, excluding consolidated volume
executed during the period time in which the Exchange experiences an
``Exchange System Disruption'' (solely in the option classes of the
affected Matching Engine (as defined below)). The term Exchange
System Disruption, which is defined in the Definitions section of
the Fee Schedule, means an outage of a Matching Engine or collective
Matching Engines for a period of two consecutive hours or more,
during trading hours. The term Matching Engine, which is also
defined in the Definitions section of the Fee Schedule, is a part of
the MIAX PEARL electronic system that processes options orders and
trades on a symbol-by-symbol basis. Some Matching Engines will
process option classes with multiple root symbols, and other
Matching Engines may be dedicated to one single option root symbol
(for example, options on SPY may be processed by one single Matching
Engine that is dedicated only to SPY). A particular root symbol may
only be assigned to a single designated Matching Engine. A
particular root symbol may not be assigned to multiple Matching
Engines. The Exchange believes that it is reasonable and appropriate
to select two consecutive hours as the amount of time necessary to
constitute an Exchange System Disruption, as two hours equates to
approximately 1.4% of available trading time per month. The Exchange
notes that the term ``Exchange System Disruption'' and its meaning
have no applicability outside of the Fee Schedule, as it is used
solely for purposes of calculating volume for the threshold tiers in
the Fee Schedule. See the Definitions Section of the Fee Schedule.
\7\ ``Affiliate'' means (i) an affiliate of a Member of at least
75% common ownership between the firms as reflected on each firm's
Form BD, Schedule A, or (ii) the Appointed Market Maker of an
Appointed EEM (or, conversely, the Appointed EEM of an Appointed
Market Maker). An ``Appointed Market Maker'' is a MIAX PEARL Market
Maker (who does not otherwise have a corporate affiliation based
upon common ownership with an EEM) that has been appointed by an EEM
and an ``Appointed EEM'' is an EEM (who does not otherwise have a
corporate affiliation based upon common ownership with a MIAX PEARL
Market Maker) that has been appointed by a MIAX PEARL Market Maker,
pursuant to the process described in the Fee Schedule. See the
Definitions Section of the Fee Schedule.
\8\ The term ``System'' means the automated trading system used
by the Exchange for the trading of securities. See Exchange Rule
100.
\9\ ``ABBO'' means the best bid(s) or offer(s) disseminated by
other Eligible Exchanges (defined in Exchange Rule 1400(f)) and
calculated by the Exchange based on market information received by
the Exchange from OPRA. See the Definitions Section of the Fee
Schedule. See Exchange Rule 100.
\10\ See Securities Exchange Act Release No. 79778 (January 12,
2017), 82 FR 6662 (January 19, 2017) (SR-PEARL-2016-01).
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The Exchange established an alternative lower Taker fee that
Members are able to qualify for in Penny classes for their Firm Origin
orders when trading against Origins other than Priority Customer if
certain thresholds are satisfied by the Member instead of the tier rate
for the same segment that the Member would have otherwise achieved.\11\
This threshold is denoted under the footnote ``[diam]'' on the Fee
Schedule. Presently, Members may qualify for an alternative lower Taker
fee of $0.48 for Penny classes for their Firm Origin when trading
against Origins other than Priority Customer if the Member and their
Affiliates: (1) Execute at least 2.00% of TCV in the relevant month in
the Priority Customer Origin type, in all options classes, not
including Excluded Contracts, as compared to TCV in all MIAX PEARL
listed option classes; and (2) reach at least Tier 3 in the relevant
month in Non-Priority Customers, Firms, Broker-Dealers and Non-MIAX
PEARL Market Makers (collectively, ``Professional Members'') Origin
types.
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\11\ See Securities Exchange Act Release No. 85608 (April 11,
2019), 84 FR 16073 (April 17, 2019) (SR-PEARL-2019-13).
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The Exchange proposes to remove the second condition that must be
met in order for Members to qualify for the alternative lower Taker fee
for Penny classes for their Firm Origin orders when trading contra to
Origins other than Priority Customer if certain thresholds are
satisfied by the Member. Pursuant to this proposal, the only condition
for Members to qualify for an alternative lower Taker fee of $0.48 for
Penny classes for their Firm Origin when trading against Origins other
than Priority Customer would be if the Member and their Affiliates
execute at least 2.00% of TCV in the relevant month in the Priority
Customer Origin type, in all options classes, not including Excluded
Contracts, as
[[Page 21370]]
compared to TCV in all MIAX PEARL listed option classes. Pursuant to
this proposal, Members and their Affiliates would no longer also be
required to reach at least Tier 3 in the relevant month in the
Professional Members Origin types in order to receive the alternative
lower Taker fee.
The alternative lower Taker fee is specific to the Firm Origin and
volume aggregation is based on Professional Members for tier purposes.
Other Origins within Professional Members still get the tier rate
assigned in the Professional Members table as set forth in Section
(1)(a) of the Fee Schedule. The alternative lower Taker fee applies to
Taker fees for Firm Origin orders in Penny classes in Tier 1 through
Tier 4 in the relevant month in the Professional Members Origin types,
in which Professional Members, including Firm, in those tiers are
currently assessed a Taker fee of $0.50 for Tier 1 and Tier 2 and $0.49
for Tier 3 and Tier 4 when trading against Origins other than Priority
Customer. The alternative lower Taker fee has no effect on Taker fees
for Firm Origin orders in Penny classes in Tier 5 and Tier 6 in the
relevant month in the Professional Members Origin types as the Taker
fee in those tiers is already set at $0.48 when trading against Origins
other than Priority Customer.
The purpose for removing the second condition is to make it easier
for Members to qualify for the lower Taker fee, to incentivize Members
to increase Firm Origin order flow on the Exchange. With the proposed
change, the transaction rebates and fees in Section (1)(a) of the Fee
Schedule for Professional Members would be the following:
--------------------------------------------------------------------------------------------------------------------------------------------------------
Per contract rebates/fees for penny classes Per contract rebates/fees for
---------------------------------------------------------------- non-penny classes
Maker Maker Taker [diam] -------------------------------
[supcaret] [supcaret] (contra Taker (contra
Origin Tier Volume criteria (contra (contra origins ex priority
origins ex priority priority customer Maker ** Taker **
priority customer customer) origin) [supcaret]
customer) origin)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Non-Priority Customer, Firm, 1 0.00%-0.15%.... ($0.25) ($0.23) $0.50 $0.50 ($0.30) $1.10
BD, and Non-MIAX PEARL 2 Above 0.15%- (0.40) (0.38) 0.50 0.50 (0.30) 1.10
Market Makers. 3 0.40%. (0.40) (0.38) 0.49 0.50 (0.60) 1.09
4 Above 0.40%- (0.47) (0.45) 0.49 0.50 (0.65)
0.65%.
Above 0.65%-
1.00%.
5 Above 1.00%- (0.48) (0.46) 0.48 0.50 (0.70) 1.08
1.40%.
6 Above 1.40%.... (0.48) (0.46) 0.48 0.50 (0.85) 1.07
--------------------------------------------------------------------------------------------------------------------------------------------------------
** Members may qualify for the Maker Rebate and the Taker Fee associated with the highest Tier for transactions in Non-Penny classes if the Member
executes more than 0.30% volume in Non-Penny classes, not including Excluded Contracts, as compared to the TCV in all MIAX PEARL listed option
classes. For purposes of qualifying for such rates, the Exchange will aggregate the volume transacted by Members and their Affiliates in the following
Origin types in Non-Penny classes: MIAX PEARL Market Makers, and Non-Priority Customer, Firm, BD, and Non-MIAX PEARL Market Makers.
[supcaret] Members may qualify for Maker Rebates equal to the greater of: (A) ($0.40) for Penny Classes and ($0.65) for Non-Penny Classes, or (B) the
amount set forth in the applicable Tier reached by the Member in the relevant Origin, if the Member and their Affiliates execute at least 2.00% volume
in the relevant month, in Priority Customer Origin type, in all options classes, not including Excluded Contracts, as compared to the TCV in all MIAX
PEARL listed option classes.
[diam] Members may qualify for Taker Fees of $0.48 for Penny classes for their Firm Origin when trading against Origins not Priority Customer if the
Member and their Affiliates execute at least 2.00% of TCV in the relevant month in the Priority Customer Origin type, in all options classes, not
including Excluded Contracts, as compared to TCV in all MIAX PEARL listed option classes.
The proposed rule change is to become operative May 1, 2019.
2. Statutory Basis
The Exchange believes that its proposal to amend its Fee Schedule
is consistent with Section 6(b) of the Act \12\ in general, and
furthers the objectives of Section 6(b)(4) of the Act,\13\ in that it
is an equitable allocation of reasonable dues, fees and other charges
among Exchange members and issuers and other persons using its
facilities, and 6(b)(5) of the Act,\14\ in that it is designed to
prevent fraudulent and manipulative acts and practices, to promote just
and equitable principles of trade, to foster cooperation and
coordination with persons engaged in facilitating transactions in
securities, to remove impediments to and perfect the mechanisms of a
free and open market and a national market system and, in general, to
protect investors and the public interest.
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\12\ 15 U.S.C. 78f(b).
\13\ 15 U.S.C. 78f(b)(4).
\14\ 15 U.S.C. 78f(b)(1) and (b)(5).
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The Exchange's proposal to remove the second condition that must be
met in order for Members to qualify for the alternative lower Taker fee
for Penny classes for their Firm Origin orders when trading contra to
Origins other than Priority Customer if certain thresholds are
satisfied by the Member, is consistent with Section 6(b)(4) of the Act
\15\ because it applies equally to all Members for their Firm Origin
with similar affiliated order flow. The Exchange believes that its
proposal is fair, equitable, and not unreasonably discriminatory
because it will make it easier for Members to qualify for the lower
Taker fee, and will encourage Members to submit both Firm and Priority
Customer orders, which will increase liquidity and benefit all market
participants by providing more trading opportunities and tighter
spreads. The Exchange believes that the proposal is reasonable because
it will incentivize providers of Priority Customer order flow to send
that Priority Customer order flow to the Exchange in order to obtain
the highest volume threshold and receive a Taker fee in a manner that
enables the Exchange to improve its overall competitiveness and
strengthen its market quality for all market participants.
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\15\ 15 U.S.C. 78f(b)(4).
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B. Self-Regulatory Organization's Statement on Burden on Competition
MIAX PEARL does not believe that the proposed rule change will
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act.
The Exchange further believes that its proposal to remove the
second condition that must be met in order for Members to qualify for
the alternative lower Taker fee for Penny classes for their Firm Origin
orders when trading contra to Origins other than Priority Customer if
certain thresholds are satisfied by the Member, that will apply instead
of the Taker fee otherwise applicable to such orders, will not have an
impact on intra-market competition. Specifically, the Exchange believes
the proposal for any Member to be able to qualify for a Taker fee of
$0.48 per contract for their Firm Orders when trading against Origins
other than Priority Customer, when Members and their Affiliates execute
at least 2.00% of TCV in the relevant month in the Priority Customer
Origin type, in all options classes, not including Excluded Contracts,
as compared to TCV in all MIAX PEARL listed option classes, will
increase volume of Firm and Priority
[[Page 21371]]
Customer order flow. The Exchange believes that the increased order
flow will result in increased liquidity which benefits all Exchange
participants by providing more trading opportunities and tighter
spreads. Because the proposal makes it easier for a Member to receive a
lower Taker fee for their Firm Origin instead of the Taker fee
otherwise applicable to such orders in Tier 1 through Tier 4 for
Professional Members, the Exchange believes that the proposed rule
change will not impose any burden on competition not necessary or
appropriate in furtherance of the purposes of the Act.
The Exchange notes that it operates in a highly competitive market
in which market participants can readily favor competing venues if they
deem fee levels at a particular venue to be excessive. In such an
environment, the Exchange must continually adjust its rebates and fees
to remain competitive with other exchanges and to attract order flow.
The Exchange believes that the proposed rule change reflects this
competitive environment because it modifies the Exchange's fees in a
manner that encourages market participants to continue to provide
liquidity and to send order flow to the Exchange.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
Written comments were neither solicited nor received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become effective pursuant to Section
19(b)(3)(A)(ii) of the Act,\16\ and Rule 19b-4(f)(2) \17\ 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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\16\ 15 U.S.C. 78s(b)(3)(A)(ii).
\17\ 17 CFR 240.19b-4(f)(2).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-PEARL-2019-15 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to File Number SR-PEARL-2019-15. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (https://www.sec.gov/rules/sro.shtml).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for website viewing and printing in
the Commission's Public Reference Room, 100 F Street NE, Washington, DC
20549 on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of the filing also will be available for inspection
and copying at the principal office of the Exchange. All comments
received will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-PEARL-2019-15, and should be submitted
on or before June 4, 2019.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\18\
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\18\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-09867 Filed 5-13-19; 8:45 am]
BILLING CODE 8011-01-P
