Self-Regulatory Organizations; Miami International Securities Exchange LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Its Fee Schedule, 43226-43231 [2019-17858]

Download as PDF 43226 Federal Register / Vol. 84, No. 161 / Tuesday, August 20, 2019 / Notices jbell on DSK3GLQ082PROD with NOTICES alternative trading systems.14 The Exchange represents a small percentage of the overall market. Based on publicly available information, no single equities exchange has more than 20% market share, and no exchange group has more than 22% market share.15 Indeed, while trade through and best execution obligations may require a firm to access the Exchange, no firm is compelled to be a Member of the Exchange in order to participate in the Exchange and may freely choose to participate on the Exchange without holding a Membership. If the proposed fee is unattractive to members, it is likely that the Exchange will lose membership and market share as a result. As a result, the Exchange carefully considers any increases to its fees in concert, balancing the utility in remaining competitive with other exchanges and with alternative trading systems exempted from compliance with the statutory standards applicable to exchanges, including the requirement to regulate their members, and in covering costs described in the filing that are associated with maintaining its equities market and its regulatory programs to ensure that the Exchange remains an efficient and well-regulated marketplace. In addition to this the Exchange notes that other exchanges currently have trading rights fees in place,16 which have been previously filed with the Commission. Moreover, the Commission has repeatedly expressed its preference for competition over regulatory intervention in determining prices, products, and services in the securities markets. Specifically, in Regulation NMS, the Commission highlighted the importance of market forces in determining prices and SRO revenues and, also, recognized that current regulation of the market system ‘‘has been remarkably successful in promoting market competition in its broader forms that are most important to investors and listed companies.’’ The fact that this market is competitive has also long been recognized by the courts. In NetCoalition v. Securities and Exchange Commission, the D.C. Circuit stated as follows: ‘‘[n]o one disputes that competition for order flow is ‘fierce.’ . . . As the SEC explained, ‘[i]n the U.S. national market system, buyers and sellers of securities, and the broker14 See U.S. Securities and Exchange Commission Alternative Trading Systems (‘‘ATS’’) List (June 30, 2019), available at https://www.sec.gov/foia/docs/ atslist.htm. 15 See Cboe Global Markets U.S. Equities Market Volume Summary (July 31, 2019), available at https://markets.cboe.com/us/equities/market_share. 16 See supra note 5. VerDate Sep<11>2014 20:49 Aug 19, 2019 Jkt 247001 dealers that act as their order-routing agents, have a wide range of choices of where to route orders for execution’; [and] ‘no exchange can afford to take its market share percentages for granted’ because ‘no exchange possesses a monopoly, regulatory or otherwise, in the execution of order flow from broker dealers’. . . .’’. Accordingly, the Exchange does not believe its proposed fee change imposes any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others The Exchange neither solicited nor received comments on the proposed rule change. 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) of the Act 17 and paragraph (f) of Rule 19b–4 18 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 will institute proceedings to determine whether the proposed rule change 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– CboeEDGX–2019–050 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. 17 15 18 17 PO 00000 Fmt 4703 For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.19 Jill M. Peterson, Assistant Secretary. [FR Doc. 2019–17847 Filed 8–19–19; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–86663; File No. SR–MIAX– 2019–34] Self-Regulatory Organizations; Miami International Securities Exchange LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Its Fee Schedule August 14, 2019. Pursuant to the provisions of Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’) 1 and Rule 19b–4 19 17 U.S.C. 78s(b)(3)(A). CFR 240.19b–4(f). Frm 00128 All submissions should refer to File Number SR–CboeEDGX–2019–050. 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–CboeEDGX–2019–050 and should be submitted on or before September 10, 2019. 1 15 Sfmt 4703 E:\FR\FM\20AUN1.SGM CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 20AUN1 Federal Register / Vol. 84, No. 161 / Tuesday, August 20, 2019 / Notices thereunder,2 notice is hereby given that on July 31, 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’’). While changes to the Fee Schedule pursuant to this proposal are effective upon filing, the Exchange has designated these changes to be operative on August 1, 2019. 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 jbell on DSK3GLQ082PROD with NOTICES 1. Purpose The Exchange proposes to amend the Fee Schedule to (i) increase the amount of the per contract credit assessable to Agency Orders (defined below) in a PRIME Auction (‘‘PRIME Agency Order Credit’’) for Members 3 in Tiers 2, 3 and 4 of the Priority Customer Rebate Program (‘‘PCRP’’) 4 and (ii) lower the 2 17 CFR 240.19b–4. term ‘‘Member’’ means an individual or organization approved to exercise the trading rights associated with a Trading Permit. Members are deemed ‘‘members’’ under the Exchange Act. See Exchange Rule 100. 4 Under the PCRP, MIAX credits each Member the per contract amount resulting from each Priority 3 The VerDate Sep<11>2014 20:49 Aug 19, 2019 Jkt 247001 separate, additional PRIME Agency Order Credit that is also available for Priority Customer 5 PRIME Agency Orders executed over a monthly threshold of 0.60% of the Options Clearing Corporation (‘‘OCC’’) customer volume for Members who are in PCRP Tier 3 or higher. Background PRIME is a process by which a Member may electronically submit for execution an order it represents as agent (an ‘‘Agency Order’’) against principal interest and/or solicited interest. The Member that submits the Agency Order (‘‘Initiating Member’’) agrees to guarantee the execution of the Agency Order by submitting a contra-side order representing principal interest or solicited interest (‘‘Contra-Side Order’’). When the Exchange receives a properly designated Agency Order for Auction processing, a request for response (‘‘RFR’’) detailing the option, side, size and initiating price is broadcasted to MIAX participants up to an optional designated limit price. Members may submit responses to the RFR, which can be either an Auction or Cancel (‘‘AOC’’) order or an AOC eQuote. The PRIME mechanism is used for orders on the Exchange’s Simple Order Book.6 The Exchange notes that for Complex Customer order transmitted by that Member which is executed electronically on the Exchange in all multiply-listed option classes (excluding, in simple or complex as applicable, QCC and cQCC Orders, mini-options, Priority Customer-to-Priority Customer Orders, C2C and cC2C Orders, PRIME and cPRIME AOC Responses, PRIME and cPRIME Contra-side Orders, PRIME and cPRIME Orders for which both the Agency and Contra-side Order are Priority Customers, and executions related to contracts that are routed to one or more exchanges in connection with the Options Order Protection and Locked/Crossed Market Plan referenced in Exchange Rule 1400), provided the Member meets certain percentage thresholds in a month as described in the PCRP table. See Fee Schedule, Section (1)(a)iii. 5 ‘‘Priority Customer’’ means a person or entity that (i) is not a broker or dealer in securities, and (ii) does not place more than 390 orders in listed options per day on average during a calendar month for its own beneficial accounts(s). A ‘‘Priority Customer Order’’ means an order for the account of a Priority Customer. See Exchange Rule 100. 6 The ‘‘Simple Order Book’’ is the Exchange’s regular electronic book of orders and quotes. See Exchange Rule 518(a)(15). PO 00000 Frm 00129 Fmt 4703 Sfmt 4703 43227 Orders 7 on the Strategy Book,8 the Exchange’s cPRIME 9 mechanism operates in the same manner for processing and execution of cPRIME Orders that is used for PRIME Orders on the Simple Order Book. The Exchange is not proposing to amend the PCRP rebates for cPRIME orders at this time. The Priority Customer rebate payment is calculated from the first executed contract at the applicable threshold per contract credit with rebate payments made at the highest achieved volume tier for each contract traded in that month. The percentage thresholds are calculated based on the percentage of national customer volume in multiplylisted options classes listed on MIAX entered and executed over the course of the month (excluding QCC and cQCC Orders, Priority Customer-to-Priority Customer Orders, C2C and cC2C Orders, PRIME and cPRIME AOC Responses, PRIME and cPRIME Contra-side Orders, and PRIME and cPRIME Orders for which both the Agency and Contra-side Order are Priority Customers). Volume for transactions in both simple and complex orders are aggregated to determine the appropriate volume tier threshold applicable to each transaction. Volume is recorded for and credits are delivered to the Member that submits the order to MIAX. MIAX aggregates the contracts resulting from Priority Customer orders transmitted and executed electronically on MIAX from Members and their Affiliates for purposes of the thresholds described in the PCRP table. Proposed Rule Change Pursuant to the PCRP, the Exchanges assesses an Agency Order Credit for PRIME Agency Orders. The Exchange 7 A ‘‘complex order’’ is any order involving the concurrent purchase and/or sale of two or more different options in the same underlying security (the ‘‘legs’’ or ‘‘components’’ of the complex order), for the same account, in a ratio that is equal to or greater than one-to-three (.333) and less than or equal to three-to-one (3.00) and for the purposes of executing a particular investment strategy. Minioptions may only be part of a complex order that includes other mini-options. Only those complex orders in the classes designated by the Exchange and communicated to Members via Regulatory Circular with no more than the applicable number of legs, as determined by the Exchange on a classby-class basis and communicated to Members via Regulatory Circular, are eligible for processing. See Exchange Rule 518(a)(5). 8 The ‘‘Strategy Book’’ is the Exchange’s electronic book of complex orders and complex quotes. See Exchange Rule 518(a)(17). 9 ‘‘cPRIME’’ is the process by which a Member may electronically submit a ‘‘cPRIME Order’’ (as defined in Rule 518(b)(7)) it represents as agent (a ‘‘cPRIME Agency Order’’) against principal or solicited interest for execution (a ‘‘cPRIME Auction’’), subject to the restrictions set forth in Exchange Rule 515A, Interpretation and Policy .12. See Exchange Rule 515A. E:\FR\FM\20AUN1.SGM 20AUN1 43228 Federal Register / Vol. 84, No. 161 / Tuesday, August 20, 2019 / Notices jbell on DSK3GLQ082PROD with NOTICES currently credits each Member $0.10 per contract for each Priority Customer order submitted into the PRIME Auction as a PRIME Agency Order in all Tiers. The Exchange proposes to increase the PRIME Agency Order Credit for Members who achieve the volume thresholds applicable to Tiers 2, 3 and 4 from $0.10 to $0.11 per contract. The Exchange also proposes to lower the additional PRIME Agency Order Credit for Priority Customer PRIME Agency Orders executed over a threshold of 0.60% of OCC customer volume for Members who are in PCRP Tier 3 or higher. Currently, any Member or its Affiliate 10 that qualifies for PCRP volume Tiers 3 or higher will be credited an additional $0.02 per contract for each Priority Customer order executed in the PRIME Auction as a PRIME Agency Order over a threshold of above 0.60% of national customer volume in multiply-listed options classes listed on MIAX during the relevant month (excluding QCC and cQCC Orders, mini-options, Priority Customer-to-Priority Customer Orders, C2C and cC2C Orders, cPRIME Agency Orders, PRIME and cPRIME AOC Responses, PRIME and cPRIME Contraside Orders, PRIME and cPRIME Orders for which both the Agency and Contraside Order are Priority Customers, and 10 For purposes of the Fee Schedule, the term ‘‘Affiliate’’ means (i) an affiliate of a Member of at least 75% common ownership between the firms as reflected on each firm’s Form BD, Schedule A, (‘‘Affiliate’’), or (ii) the Appointed Market Maker of an Appointed EEM (or, conversely, the Appointed EEM of an Appointed Market Maker). An ‘‘Appointed Market Maker’’ is a MIAX Market Maker (who does not otherwise have a corporate affiliation based upon common ownership with an EEM) that has been appointed by an EEM and an ‘‘Appointed EEM’’ is an EEM (who does not otherwise have a corporate affiliation based upon common ownership with a MIAX Market Maker) that has been appointed by a MIAX Market Maker, pursuant to the following process. A MIAX Market Maker appoints an EEM and an EEM appoints a MIAX Market Maker, for the purposes of the Fee Schedule, by each completing and sending an executed Volume Aggregation Request Form by email to membership@miaxoptions.com no later than 2 business days prior to the first business day of the month in which the designation is to become effective. Transmittal of a validly completed and executed form to the Exchange along with the Exchange’s acknowledgement of the effective designation to each of the Market Maker and EEM will be viewed as acceptance of the appointment. The Exchange will only recognize one designation per Member. A Member may make a designation not more than once every 12 months (from the date of its most recent designation), which designation shall remain in effect unless or until the Exchange receives written notice submitted 2 business days prior to the first business day of the month from either Member indicating that the appointment has been terminated. Designations will become operative on the first business day of the effective month and may not be terminated prior to the end of the month. Execution data and reports will be provided to both parties. See Fee Schedule, Section (1)(a)(i). VerDate Sep<11>2014 20:49 Aug 19, 2019 Jkt 247001 executions related to contracts that are routed to one or more exchanges in connection with the Options Order Protection and Locked/Crossed Market Plan referenced in MIAX Rule 1400). Volume is recorded for and credits are delivered to the Member Firm that submits the order to MIAX. The current potential $0.02 per contract credit is in addition to the current credit of $0.10 per contract for all Tiers that applies to PRIME Agency Order transactions for Priority Customer orders. The Exchange now proposes to lower the additional PRIME Agency Order Credit for Priority Customer PRIME Agency Orders over a threshold of 0.60% of OCC customer volume for Members who are in PCRP Tier 3 or higher from $0.02 per contract to $0.01 per contract. The newly proposed additional $0.01 per contract credit, for Members that achieve PCRP Tier 3 or higher and the described threshold, will be added to the newly proposed PRIME Agency Order Credit of $0.11 per contract for Members in Tiers 3 or 4 for PRIME Agency Order transactions for Priority Customer orders. The Exchange believes these proposed changes (which increase certain credit amounts from $0.10 per contract to $0.11 per contract, and decrease the additional credit amount from $0.02 per contract to $0.01 per contract) will encourage market participants to submit more Priority Customer PRIME Agency Orders and therefore increase Priority Customer order flow, resulting in increased liquidity which benefits all Exchange participants by providing more trading opportunities and tighter spreads. The Commission has repeatedly expressed its preference for competition over regulatory intervention in determining prices, products, and services in the securities markets. In Regulation NMS, the Commission highlighted the importance of market forces in determining prices and selfregulatory organization (‘‘SRO’’) revenues and, also, recognized that current regulation of the market system ‘‘has been remarkably successful in promoting market competition in its broader forms that are most important to investors and listed companies.’’ 11 There are currently 16 registered options exchanges competing for order flow. Based on publicly-available information, and excluding index-based options, no single exchange has exceeded approximately 18% of the market share of executed volume of multiply-listed equity and exchange11 See Securities Exchange Act Release No. 51808 (June 9, 2005), 70 FR 37496 (June 29, 2005). PO 00000 Frm 00130 Fmt 4703 Sfmt 4703 traded fund (‘‘ETF’’) options trades as of July 25, 2019, for the month of July 2019.12 Therefore, no exchange possesses significant pricing power in the execution of multiply-listed equity and ETF options order flow. More specifically, for all of June 2019, the Exchange had a total market share of 3.73% of all equity options volume.13 The Exchange believes that the evershifting market shares among the exchanges from month to month demonstrates that market participants can shift order flow (as further described below), or discontinue or reduce use of certain categories of products, in response to transaction and non-transaction fee changes. For example, on March 1, 2019, the Exchange filed with the Commission an immediately effective filing to decrease certain credits assessable to Members pursuant to the PCRP.14 The Exchange experienced a decrease in total market share between the months of February and March of 2019. Accordingly, the Exchange believes that the March 1, 2019 fee change may have contributed to the decrease in the Exchange’s market share and, as such, the Exchange believes competitive forces constrain options exchange transaction and nontransaction fees. The Exchange cannot predict with certainty whether any Priority Customers would avail themselves of the proposed fee change, but the Exchange believes that between two and four Members may achieve the applicable Tier volume thresholds to receive the proposed increased PRIME Agency Order Credit for Members in Tiers 2, 3 and 4 of the PCRP. Similarly, the Exchange cannot predict with certainty whether any Member will achieve the separate, additional PRIME Agency Order Credit that is also available for Priority Customer PRIME Agency Orders executed over a monthly threshold of 0.60% of OCC customer volume for Members in PCRP Tier 3 or higher, but the Exchange believes that no Member will be currently impacted as no Member currently reaches such threshold. 2. Statutory Basis The Exchange believes that its proposal to amend its Fee Schedule is consistent with Section 6(b) of the Act 15 12 The OCC publishes options and futures volume in a variety of formats, including daily and monthly volume by exchange, available at: https:// www.theocc.com/market-data/volume/default.jsp. 13 See id. 14 See Securities Exchange Act Release No. 85301 (March 13, 2019), 84 FR 10166 (March 19, 2019) (SR–MIAX–2019–09). 15 15 U.S.C. 78f(b). E:\FR\FM\20AUN1.SGM 20AUN1 jbell on DSK3GLQ082PROD with NOTICES Federal Register / Vol. 84, No. 161 / Tuesday, August 20, 2019 / Notices in general, and furthers the objectives of Section 6(b)(4) of the Act 16 in particular, in that it is an equitable allocation of reasonable fees and other charges among its members and issuers and other persons using its facilities. The Exchange also believes the proposal furthers the objectives of Section 6(b)(5) of the Act in that it is designed to promote just and equitable principles of trade, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general to protect investors and the public interest and is not designed to permit unfair discrimination between customers, issuers, brokers and dealers. The Exchange believes its proposal to increase the PRIME Agency Order Credit for Members in Tiers 2, 3 and 4 of the PCRP and to lower the separate, additional PRIME Agency Order Credit that is also available for Priority Customer Orders executed over a monthly threshold of 0.60% of OCC customer volume for Members who are in PCRP Tier 3 or higher provides for the equitable allocation of reasonable dues and fees and is not unfairly discriminatory for the following reasons. First, the Exchange operates in a highly competitive market. The Commission has repeatedly expressed its preference for competition over regulatory intervention in determining prices, products, and services in the securities markets. In Regulation NMS, the Commission highlighted the importance of market forces in determining prices and SRO revenues and, also, recognized that current regulation of the market system ‘‘has been remarkably successful in promoting market competition in its broader forms that are most important to investors and listed companies.’’ 17 There are currently 16 registered options exchanges competing for order flow. Based on publicly-available information, and excluding index-based options, no single exchange has exceeded approximately 18% of the market share of executed volume of multiply-listed equity and ETF options trades as of July 25, 2019, for the month of July 2019.18 Therefore, no exchange possesses significant pricing power in the execution of multiply-listed equity and ETF options order flow. More specifically, for all of June 2019, the Exchange had a total market share of 3.73% for all equity options volume.19 16 15 U.S.C. 78f(b)(4) and (5). Securities Exchange Act Release No. 51808 (June 9, 2005), 70 FR 37496 (June 29, 2005). 18 See supra note 12. 19 See id. 17 See VerDate Sep<11>2014 20:49 Aug 19, 2019 Jkt 247001 The Exchange believes that the evershifting market shares among the exchanges from month to month demonstrates that market participants can shift order flow, or discontinue or reduce use of certain categories of products, in response to transaction and/or non-transaction fee changes. For example, on March 1, 2019, the Exchange filed with the Commission an immediately effective filing to decrease certain credits assessable to Members pursuant to the PCRP.20 The Exchange experienced a decrease in total market share between the months of February and March of 2019. Accordingly, the Exchange believes that the March 1, 2019 fee change may have contributed to the decrease in the Exchange’s market share and, as such, the Exchange believes competitive forces constrain options exchange transaction and nontransaction fees and market participants can shift order flow based on fee changes instituted by the exchanges. Second, the Exchange believes its proposal to increase the PRIME Agency Order Credit for Members in Tiers 2, 3 and 4 of the PCRP and to lower the additional PRIME Agency Order Credit for Priority Customer orders over a threshold of 0.60% of OCC customer volume for Members who are in PCRP Tier 3 or higher is an equitable allocation of reasonable dues and fees pursuant to Section 6(b)(4) of the Act 21 because the proposed changes are designed to incentivize overall Priority Customer order flow. The Exchange believes that with the proposed changes, providers of Priority Customer order flow will be incentivized to send that Priority Customer order flow to the Exchange in order to obtain the highest volume threshold and receive credits in a manner that enables the Exchange to improve its overall competitiveness and strengthen its market quality for all market participants. The Exchange believes that increased Priority Customer order flow will attract liquidity providers, which in turn should make the MIAX marketplace an attractive venue where Market Makers may submit narrow quotations with greater size, deepening and enhancing the quality of the MIAX marketplace. This should provide more trading opportunities and tighter spreads for other market participants and result in a corresponding increase in order flow from such other market participants. Additionally, the Exchange believes that for competitive and business reasons, it is appropriate to lower the additional PRIME Agency Order Credit for Priority PO 00000 supra note 14. U.S.C. 78f(b)(4). Customer PRIME Agency Orders over a threshold of 0.60% of OCC customer volume for Members who are in PCRP Tier 3 or higher from $0.02 to $0.01. As the Exchange previously noted, no Member currently achieves this threshold and, as such, the Exchange believes that by lowering this additional credit while increasing the PRIME Agency Order Credit for Members in Tiers 2, 3 and 4 of the PCRP, will incentivize order flow to the Exchange, providing more liquidity, to the benefit of all market participants, because it will likely result in a net increase in credits paid to Members. The Exchange believes that the proposed rule changes would be an equitable allocation of reasonable dues and fees and would not permit unfair discrimination between market participants. The Exchange cannot predict with certainty whether any Priority Customers would avail themselves of the proposed fee change, but the Exchange believes that between two and four Members may achieve the applicable Tier volume thresholds to receive the proposed increased PRIME Agency Order Credit for Members in Tiers 2, 3 and 4 of the PCRP. Similarly, the Exchange cannot predict with certainty whether any Member will achieve the separate, additional PRIME Agency Order Credit that is also available for Priority Customer PRIME Agency Orders executed over a monthly threshold of 0.60% of OCC customer volume for Members in PCRP Tier 3 or higher, but the Exchange believes that no Member will be currently impacted as no Member currently reaches such threshold. The Exchange also believes its proposal is consistent with Section 6(b)(5) of the Act 22 and is designed to prevent fraudulent and manipulative acts and practices, promotes just and equitable principles of trade, fosters cooperation and coordination with persons engaged in regulating, clearing, setting, processing information with respect to, and facilitating transaction in securities, removes impediments to and perfects the mechanism of a free and open market and a national market system, and, in general, protects investors and the public interest; and is not designed to permit unfair discrimination. This is because the Exchange believes the proposed changes will incentivize Priority Customer order flow and an increase in Priority Customer order flow will bring greater volume and liquidity, which benefits all market participants by providing more trading opportunities and tighter 20 See 21 15 Frm 00131 Fmt 4703 22 15 Sfmt 4703 43229 E:\FR\FM\20AUN1.SGM U.S.C. 78f(b)(1) and (b)(5). 20AUN1 43230 Federal Register / Vol. 84, No. 161 / Tuesday, August 20, 2019 / Notices spreads. To the extent Priority Customer order flow is increased by the proposal, market participants will increasingly compete for the opportunity to trade on the Exchange including sending more orders and providing narrower and larger-sized quotations in the effort to trade with such Priority Customer order flow. Further, based on the current Tier volume thresholds achieved by the Exchange’s Members and the potential changes going forward as a result of the proposed fee change, the Exchange believes that the proposed increase to certain credit amounts from $0.10 per contract to $0.11 per contract and proposed decrease to the additional credit amount from $0.02 per contract to $0.01 per contract may not result in any Member receiving a lower credit amount per contract, and may result in two to four Members receiving a higher credit amount per contract. jbell on DSK3GLQ082PROD with NOTICES B. Self-Regulatory Organization’s Statement on Burden on Competition In accordance with Section 6(b)(8) of the Act,23 the Exchange believes that the proposed rule change would not impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. Instead, as discussed above, the Exchange believes that the proposed changes would encourage the submission of additional liquidity to a public exchange, thereby promoting market depth, price discovery and transparency and enhancing order execution opportunities for all market participants. As a result, the Exchange believes that the proposed change furthers the Commission’s goal in adopting Regulation NMS of fostering integrated competition among orders. Intra-Market Competition The Exchange does not believe that other market participants at the Exchange would be placed at a relative disadvantage by the proposed changes to increase the PRIME Agency Order Credit for Members in Tiers 2, 3 and 4 of the PCRP and to lower the additional PRIME Agency Order Credit for Priority Customer PRIME Agency Orders over a threshold of 0.60% of OCC customer volume for Members who are in PCRP Tier 3 or higher. The proposed changes are designed to attract additional order flow to the Exchange. Accordingly, the Exchange believes that increasing the PRIME Agency Order Credit for Members in Tiers 2 through 4 of the PCRP and lowering the additional PRIME Agency Order Credit for Priority Customer orders over a threshold of 0.60% of OCC customer volume for Members in PCRP Tier 3 or higher will not impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act because it will continue to encourage Priority Customer order flow and an increase in Priority Customer order flow will bring greater volume and liquidity, which benefit all market participants by providing more trading opportunities and tighter spreads. Further, based on the current Tier volume thresholds achieved by the Exchange’s Members and the potential changes going forward as a result of the proposed fee change, the Exchange believes that the proposed increase to certain credit amounts from $0.10 per contract to $0.11 per contract and proposed decrease to the additional credit amount from $0.02 per contract to $0.01 per contract may not result in any Member receiving a lower credit amount per contract, and may result in two to four Members receiving a higher credit amount per contract. Inter-Market Competition The Exchange 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. There are currently 16 registered options exchanges competing for order flow. Based on publicly-available information, and excluding index-based options, no single exchange has exceeded approximately 18% of the market share of executed volume of multiply-listed equity and ETF options trades as of July 25, 2019, for the month of July 2019.24 Therefore, no exchange possesses significant pricing power in the execution of multiply-listed equity and ETF options order flow. More specifically, for all of June 2019, the Exchange had a total market share of 3.73% for all equity options volume.25 In such an environment, the Exchange must continually adjust its transaction and non-transaction fees to remain competitive with other exchanges and to attract order flow. The Exchange believes that the proposed rule changes reflect this competitive environment because they modify the Exchange’s fees in a manner that encourages market participants to provide Priority Customer liquidity and to send order flow to the Exchange. To the extent this is achieved, all the Exchange’s market participants should benefit from the improved market quality. 24 See 23 15 U.S.C. 78f(b)(8). VerDate Sep<11>2014 20:49 Aug 19, 2019 25 See Jkt 247001 PO 00000 supra note 12. id. Frm 00132 Fmt 4703 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,26 and Rule 19b–4(f)(2) 27 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– MIAX–2019–34 on the subject line. Paper Comments • Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549–1090. All submissions should refer to File Number SR–MIAX–2019–34. 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 26 15 27 17 Sfmt 4703 E:\FR\FM\20AUN1.SGM U.S.C. 78s(b)(3)(A)(ii). CFR 240.19b–4(f)(2). 20AUN1 Federal Register / Vol. 84, No. 161 / Tuesday, August 20, 2019 / Notices proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for website viewing and printing in the Commission’s Public Reference Room, 100 F Street NE, Washington, DC 20549, on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of the filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change. Persons submitting comments are cautioned that we do not redact or edit personal identifying information from comment submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR–MIAX–2019–34 and should be submitted on or before September 10, 2019. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.28 Jill M. Peterson, Assistant Secretary. [FR Doc. 2019–17858 Filed 8–19–19; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–86660; File No. SR– CboeEDGA–2019–007] Self-Regulatory Organizations; Cboe EDGA Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Relating to Clarify Portions of its Rules Under Chapter 14 (Securities Traded) Related To the Applicability of Certain Disclosure Requirements jbell on DSK3GLQ082PROD with NOTICES August 14, 2019. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the ‘‘Act’’),1 and Rule 19b–4 thereunder,2 notice is hereby given that on July 31, 2019, Cboe EDGA Exchange, Inc. (the ‘‘Exchange’’ or ‘‘EDGA’’) filed with the Securities and Exchange Commission (the ‘‘Commission’’) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by the Exchange. The Exchange filed the proposal as a ‘‘noncontroversial’’ proposed rule change pursuant to Section 19(b)(3)(A)(iii) of the Act 3 and Rule 19b–4(f)(6) 28 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 15 U.S.C. 78s(b)(3)(A)(iii). 1 15 VerDate Sep<11>2014 20:49 Aug 19, 2019 thereunder.4 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 Cboe EDGA Exchange, Inc. (the ‘‘Exchange’’ or ‘‘EDGA’’) proposes to clarify portions of its rules under Chapter 14 (Securities Traded) related to the applicability of certain disclosure requirements. The text of the proposed rule change is provided in Exhibit 5. The text of the proposed rule change is also available on the Exchange’s website (https://markets.cboe.com/us/ equities/regulation/rule_filings/edga/), at the Exchange’s Office of the Secretary, 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 clarify portions of the rules under Chapter 14 (Securities Traded) related to the applicability of certain disclosure requirements. Currently, under Rule 14.1 (Unlisted Trading Privileges), Rule 14.2 (Investment Company Units), and Rule 14.8 (Portfolio Depositary Receipts) a Member is required to provide to all purchasers a written description of the terms and characteristics of the applicable securities (or a ‘‘product description’’). In addition, Members also have a separate prospectus delivery requirement under Section 24(d) of the Investment Company Act of 1940 (‘‘1940 Act’’). A Member, however, is not required to send a Section 24(d) prospectus for a security if such security is subject of an order by the Securities and Exchange Commission 4 17 Jkt 247001 PO 00000 CFR 240.19b–4(f)(6). Frm 00133 Fmt 4703 Sfmt 4703 43231 (‘‘Commission’’) exempting it from Section 24(d) prospectus delivery requirements, and is not otherwise subject to prospectus delivery requirements under the Securities Act of 1933 (‘‘1933 Act’’). As such, the Exchange provides rules requiring Members to deliver a product description for securities exempt from the prospectus delivery requirements. The Exchange notes that a product description is a written description of the terms and characteristics of a security in a form prepared or approved by the Exchange, whereas a prospectus is a legal document required by and filed with the Commission which contains detailed disclosers about a security. Currently, Rule 14.1(c)(3)(A), Rule 14.2(d)(1), and Rule 14.8(j)(1) provide govern the written description requirements for derivative securities traded under unlisted trading privileges (‘‘UTP Derivative Securities’’), series of Investment Company Units, and series of Portfolio Depositary Receipts, respectively. As written, these subparagraphs under their respective Rules do not make it explicit to Members that the product description requirement is applicable only to prospectus-exempt products. Furthermore, current Rules 14.2(d)(1) and 14.8(j)(1) do not contain a provision (like that of 14.1(c)(3)(B)) that the Exchange will inform its Members by means of an information circular when the product description delivery requirements apply. Therefore, in order to provide Members with better understanding of the provisions in connection with these requirements, the Exchange now proposes to amend its rules to explicitly state that the product description delivery requirements apply only to the respective products that are exempt from the 1940 Act prospectus delivery requirements and are not otherwise subject to the prospectus delivery requirements under the 1933 Act. The Exchange also proposes to add language to Rule 14.2(d)(1) and Rule 14.8(j)(1) to inform Members that the Exchange will announce the applicability of the product description delivery requirements to particular series of Portfolio Depositary Receipts or Investment Company Units via information circular. This change is intended to provide clarity to Members regarding when and how the Exchange will notify Members of their product delivery obligations. The Exchange notes that Rule 14.1(c)(3)(B) currently provides that the Exchange informs its Members of the application of product description delivery requirements E:\FR\FM\20AUN1.SGM 20AUN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 84, Number 161 (Tuesday, August 20, 2019)]
[Notices]
[Pages 43226-43231]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-17858]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-86663; File No. SR-MIAX-2019-34]


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

August 14, 2019.
    Pursuant to the provisions of Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4

[[Page 43227]]

thereunder,\2\ notice is hereby given that on July 31, 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'').
    While changes to the Fee Schedule pursuant to this proposal are 
effective upon filing, the Exchange has designated these changes to be 
operative on August 1, 2019.
    The text of the proposed rule change is available on the Exchange's 
website at https://www.miaxoptions.com/rule-filings, at MIAX's principal 
office, and at the Commission's Public Reference Room.

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

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

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

1. Purpose
    The Exchange proposes to amend the Fee Schedule to (i) increase the 
amount of the per contract credit assessable to Agency Orders (defined 
below) in a PRIME Auction (``PRIME Agency Order Credit'') for Members 
\3\ in Tiers 2, 3 and 4 of the Priority Customer Rebate Program 
(``PCRP'') \4\ and (ii) lower the separate, additional PRIME Agency 
Order Credit that is also available for Priority Customer \5\ PRIME 
Agency Orders executed over a monthly threshold of 0.60% of the Options 
Clearing Corporation (``OCC'') customer volume for Members who are in 
PCRP Tier 3 or higher.
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    \3\ The term ``Member'' means an individual or organization 
approved to exercise the trading rights associated with a Trading 
Permit. Members are deemed ``members'' under the Exchange Act. See 
Exchange Rule 100.
    \4\ Under the PCRP, MIAX credits each Member the per contract 
amount resulting from each Priority Customer order transmitted by 
that Member which is executed electronically on the Exchange in all 
multiply-listed option classes (excluding, in simple or complex as 
applicable, QCC and cQCC Orders, mini-options, Priority Customer-to-
Priority Customer Orders, C2C and cC2C Orders, PRIME and cPRIME AOC 
Responses, PRIME and cPRIME Contra-side Orders, PRIME and cPRIME 
Orders for which both the Agency and Contra-side Order are Priority 
Customers, and executions related to contracts that are routed to 
one or more exchanges in connection with the Options Order 
Protection and Locked/Crossed Market Plan referenced in Exchange 
Rule 1400), provided the Member meets certain percentage thresholds 
in a month as described in the PCRP table. See Fee Schedule, Section 
(1)(a)iii.
    \5\ ``Priority Customer'' means a person or entity that (i) is 
not a broker or dealer in securities, and (ii) does not place more 
than 390 orders in listed options per day on average during a 
calendar month for its own beneficial accounts(s). A ``Priority 
Customer Order'' means an order for the account of a Priority 
Customer. See Exchange Rule 100.
---------------------------------------------------------------------------

Background
    PRIME is a process by which a Member may electronically submit for 
execution an order it represents as agent (an ``Agency Order'') against 
principal interest and/or solicited interest. The Member that submits 
the Agency Order (``Initiating Member'') agrees to guarantee the 
execution of the Agency Order by submitting a contra-side order 
representing principal interest or solicited interest (``Contra-Side 
Order''). When the Exchange receives a properly designated Agency Order 
for Auction processing, a request for response (``RFR'') detailing the 
option, side, size and initiating price is broadcasted to MIAX 
participants up to an optional designated limit price. Members may 
submit responses to the RFR, which can be either an Auction or Cancel 
(``AOC'') order or an AOC eQuote. The PRIME mechanism is used for 
orders on the Exchange's Simple Order Book.\6\ The Exchange notes that 
for Complex Orders \7\ on the Strategy Book,\8\ the Exchange's cPRIME 
\9\ mechanism operates in the same manner for processing and execution 
of cPRIME Orders that is used for PRIME Orders on the Simple Order 
Book. The Exchange is not proposing to amend the PCRP rebates for 
cPRIME orders at this time.
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    \6\ The ``Simple Order Book'' is the Exchange's regular 
electronic book of orders and quotes. See Exchange Rule 518(a)(15).
    \7\ A ``complex order'' is any order involving the concurrent 
purchase and/or sale of two or more different options in the same 
underlying security (the ``legs'' or ``components'' of the complex 
order), for the same account, in a ratio that is equal to or greater 
than one-to-three (.333) and less than or equal to three-to-one 
(3.00) and for the purposes of executing a particular investment 
strategy. Mini-options may only be part of a complex order that 
includes other mini-options. Only those complex orders in the 
classes designated by the Exchange and communicated to Members via 
Regulatory Circular with no more than the applicable number of legs, 
as determined by the Exchange on a class-by-class basis and 
communicated to Members via Regulatory Circular, are eligible for 
processing. See Exchange Rule 518(a)(5).
    \8\ The ``Strategy Book'' is the Exchange's electronic book of 
complex orders and complex quotes. See Exchange Rule 518(a)(17).
    \9\ ``cPRIME'' is the process by which a Member may 
electronically submit a ``cPRIME Order'' (as defined in Rule 
518(b)(7)) it represents as agent (a ``cPRIME Agency Order'') 
against principal or solicited interest for execution (a ``cPRIME 
Auction''), subject to the restrictions set forth in Exchange Rule 
515A, Interpretation and Policy .12. See Exchange Rule 515A.
---------------------------------------------------------------------------

    The Priority Customer rebate payment is calculated from the first 
executed contract at the applicable threshold per contract credit with 
rebate payments made at the highest achieved volume tier for each 
contract traded in that month. The percentage thresholds are calculated 
based on the percentage of national customer volume in multiply-listed 
options classes listed on MIAX entered and executed over the course of 
the month (excluding QCC and cQCC Orders, Priority Customer-to-Priority 
Customer Orders, C2C and cC2C Orders, PRIME and cPRIME AOC Responses, 
PRIME and cPRIME Contra-side Orders, and PRIME and cPRIME Orders for 
which both the Agency and Contra-side Order are Priority Customers). 
Volume for transactions in both simple and complex orders are 
aggregated to determine the appropriate volume tier threshold 
applicable to each transaction. Volume is recorded for and credits are 
delivered to the Member that submits the order to MIAX. MIAX aggregates 
the contracts resulting from Priority Customer orders transmitted and 
executed electronically on MIAX from Members and their Affiliates for 
purposes of the thresholds described in the PCRP table.
Proposed Rule Change
    Pursuant to the PCRP, the Exchanges assesses an Agency Order Credit 
for PRIME Agency Orders. The Exchange

[[Page 43228]]

currently credits each Member $0.10 per contract for each Priority 
Customer order submitted into the PRIME Auction as a PRIME Agency Order 
in all Tiers. The Exchange proposes to increase the PRIME Agency Order 
Credit for Members who achieve the volume thresholds applicable to 
Tiers 2, 3 and 4 from $0.10 to $0.11 per contract.
    The Exchange also proposes to lower the additional PRIME Agency 
Order Credit for Priority Customer PRIME Agency Orders executed over a 
threshold of 0.60% of OCC customer volume for Members who are in PCRP 
Tier 3 or higher. Currently, any Member or its Affiliate \10\ that 
qualifies for PCRP volume Tiers 3 or higher will be credited an 
additional $0.02 per contract for each Priority Customer order executed 
in the PRIME Auction as a PRIME Agency Order over a threshold of above 
0.60% of national customer volume in multiply-listed options classes 
listed on MIAX during the relevant month (excluding QCC and cQCC 
Orders, mini-options, Priority Customer-to-Priority Customer Orders, 
C2C and cC2C Orders, cPRIME Agency Orders, PRIME and cPRIME AOC 
Responses, PRIME and cPRIME Contra-side Orders, PRIME and cPRIME Orders 
for which both the Agency and Contra-side Order are Priority Customers, 
and executions related to contracts that are routed to one or more 
exchanges in connection with the Options Order Protection and Locked/
Crossed Market Plan referenced in MIAX Rule 1400). Volume is recorded 
for and credits are delivered to the Member Firm that submits the order 
to MIAX. The current potential $0.02 per contract credit is in addition 
to the current credit of $0.10 per contract for all Tiers that applies 
to PRIME Agency Order transactions for Priority Customer orders.
---------------------------------------------------------------------------

    \10\ For purposes of the Fee Schedule, the term ``Affiliate'' 
means (i) an affiliate of a Member of at least 75% common ownership 
between the firms as reflected on each firm's Form BD, Schedule A, 
(``Affiliate''), or (ii) the Appointed Market Maker of an Appointed 
EEM (or, conversely, the Appointed EEM of an Appointed Market 
Maker). An ``Appointed Market Maker'' is a MIAX Market Maker (who 
does not otherwise have a corporate affiliation based upon common 
ownership with an EEM) that has been appointed by an EEM and an 
``Appointed EEM'' is an EEM (who does not otherwise have a corporate 
affiliation based upon common ownership with a MIAX Market Maker) 
that has been appointed by a MIAX Market Maker, pursuant to the 
following process. A MIAX Market Maker appoints an EEM and an EEM 
appoints a MIAX Market Maker, for the purposes of the Fee Schedule, 
by each completing and sending an executed Volume Aggregation 
Request Form by email to [email protected] no later than 2 
business days prior to the first business day of the month in which 
the designation is to become effective. Transmittal of a validly 
completed and executed form to the Exchange along with the 
Exchange's acknowledgement of the effective designation to each of 
the Market Maker and EEM will be viewed as acceptance of the 
appointment. The Exchange will only recognize one designation per 
Member. A Member may make a designation not more than once every 12 
months (from the date of its most recent designation), which 
designation shall remain in effect unless or until the Exchange 
receives written notice submitted 2 business days prior to the first 
business day of the month from either Member indicating that the 
appointment has been terminated. Designations will become operative 
on the first business day of the effective month and may not be 
terminated prior to the end of the month. Execution data and reports 
will be provided to both parties. See Fee Schedule, Section 
(1)(a)(i).
---------------------------------------------------------------------------

    The Exchange now proposes to lower the additional PRIME Agency 
Order Credit for Priority Customer PRIME Agency Orders over a threshold 
of 0.60% of OCC customer volume for Members who are in PCRP Tier 3 or 
higher from $0.02 per contract to $0.01 per contract. The newly 
proposed additional $0.01 per contract credit, for Members that achieve 
PCRP Tier 3 or higher and the described threshold, will be added to the 
newly proposed PRIME Agency Order Credit of $0.11 per contract for 
Members in Tiers 3 or 4 for PRIME Agency Order transactions for 
Priority Customer orders.
    The Exchange believes these proposed changes (which increase 
certain credit amounts from $0.10 per contract to $0.11 per contract, 
and decrease the additional credit amount from $0.02 per contract to 
$0.01 per contract) will encourage market participants to submit more 
Priority Customer PRIME Agency Orders and therefore increase Priority 
Customer order flow, resulting in increased liquidity which benefits 
all Exchange participants by providing more trading opportunities and 
tighter spreads.
    The Commission has repeatedly expressed its preference for 
competition over regulatory intervention in determining prices, 
products, and services in the securities markets. In Regulation NMS, 
the Commission highlighted the importance of market forces in 
determining prices and self-regulatory organization (``SRO'') revenues 
and, also, recognized that current regulation of the market system 
``has been remarkably successful in promoting market competition in its 
broader forms that are most important to investors and listed 
companies.'' \11\ There are currently 16 registered options exchanges 
competing for order flow. Based on publicly-available information, and 
excluding index-based options, no single exchange has exceeded 
approximately 18% of the market share of executed volume of multiply-
listed equity and exchange-traded fund (``ETF'') options trades as of 
July 25, 2019, for the month of July 2019.\12\ Therefore, no exchange 
possesses significant pricing power in the execution of multiply-listed 
equity and ETF options order flow. More specifically, for all of June 
2019, the Exchange had a total market share of 3.73% of all equity 
options volume.\13\ The Exchange believes that the ever-shifting market 
shares among the exchanges from month to month demonstrates that market 
participants can shift order flow (as further described below), or 
discontinue or reduce use of certain categories of products, in 
response to transaction and non-transaction fee changes. For example, 
on March 1, 2019, the Exchange filed with the Commission an immediately 
effective filing to decrease certain credits assessable to Members 
pursuant to the PCRP.\14\ The Exchange experienced a decrease in total 
market share between the months of February and March of 2019. 
Accordingly, the Exchange believes that the March 1, 2019 fee change 
may have contributed to the decrease in the Exchange's market share 
and, as such, the Exchange believes competitive forces constrain 
options exchange transaction and non-transaction fees.
---------------------------------------------------------------------------

    \11\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496 (June 29, 2005).
    \12\ The OCC publishes options and futures volume in a variety 
of formats, including daily and monthly volume by exchange, 
available at: https://www.theocc.com/market-data/volume/default.jsp.
    \13\ See id.
    \14\ See Securities Exchange Act Release No. 85301 (March 13, 
2019), 84 FR 10166 (March 19, 2019) (SR-MIAX-2019-09).
---------------------------------------------------------------------------

    The Exchange cannot predict with certainty whether any Priority 
Customers would avail themselves of the proposed fee change, but the 
Exchange believes that between two and four Members may achieve the 
applicable Tier volume thresholds to receive the proposed increased 
PRIME Agency Order Credit for Members in Tiers 2, 3 and 4 of the PCRP. 
Similarly, the Exchange cannot predict with certainty whether any 
Member will achieve the separate, additional PRIME Agency Order Credit 
that is also available for Priority Customer PRIME Agency Orders 
executed over a monthly threshold of 0.60% of OCC customer volume for 
Members in PCRP Tier 3 or higher, but the Exchange believes that no 
Member will be currently impacted as no Member currently reaches such 
threshold.
2. Statutory Basis
    The Exchange believes that its proposal to amend its Fee Schedule 
is consistent with Section 6(b) of the Act \15\

[[Page 43229]]

in general, and furthers the objectives of Section 6(b)(4) of the Act 
\16\ in particular, in that it is an equitable allocation of reasonable 
fees and other charges among its members and issuers and other persons 
using its facilities. The Exchange also believes the proposal furthers 
the objectives of Section 6(b)(5) of the Act in that it is designed to 
promote just and equitable principles of trade, to remove impediments 
to and perfect the mechanism of a free and open market and a national 
market system, and, in general to protect investors and the public 
interest and is not designed to permit unfair discrimination between 
customers, issuers, brokers and dealers.
---------------------------------------------------------------------------

    \15\ 15 U.S.C. 78f(b).
    \16\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------

    The Exchange believes its proposal to increase the PRIME Agency 
Order Credit for Members in Tiers 2, 3 and 4 of the PCRP and to lower 
the separate, additional PRIME Agency Order Credit that is also 
available for Priority Customer Orders executed over a monthly 
threshold of 0.60% of OCC customer volume for Members who are in PCRP 
Tier 3 or higher provides for the equitable allocation of reasonable 
dues and fees and is not unfairly discriminatory for the following 
reasons. First, the Exchange operates in a highly competitive market. 
The Commission has repeatedly expressed its preference for competition 
over regulatory intervention in determining prices, products, and 
services in the securities markets. In Regulation NMS, the Commission 
highlighted the importance of market forces in determining prices and 
SRO revenues and, also, recognized that current regulation of the 
market system ``has been remarkably successful in promoting market 
competition in its broader forms that are most important to investors 
and listed companies.'' \17\ There are currently 16 registered options 
exchanges competing for order flow. Based on publicly-available 
information, and excluding index-based options, no single exchange has 
exceeded approximately 18% of the market share of executed volume of 
multiply-listed equity and ETF options trades as of July 25, 2019, for 
the month of July 2019.\18\ Therefore, no exchange possesses 
significant pricing power in the execution of multiply-listed equity 
and ETF options order flow. More specifically, for all of June 2019, 
the Exchange had a total market share of 3.73% for all equity options 
volume.\19\
---------------------------------------------------------------------------

    \17\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496 (June 29, 2005).
    \18\ See supra note 12.
    \19\ See id.
---------------------------------------------------------------------------

    The Exchange believes that the ever-shifting market shares among 
the exchanges from month to month demonstrates that market participants 
can shift order flow, or discontinue or reduce use of certain 
categories of products, in response to transaction and/or non-
transaction fee changes.
    For example, on March 1, 2019, the Exchange filed with the 
Commission an immediately effective filing to decrease certain credits 
assessable to Members pursuant to the PCRP.\20\ The Exchange 
experienced a decrease in total market share between the months of 
February and March of 2019. Accordingly, the Exchange believes that the 
March 1, 2019 fee change may have contributed to the decrease in the 
Exchange's market share and, as such, the Exchange believes competitive 
forces constrain options exchange transaction and non-transaction fees 
and market participants can shift order flow based on fee changes 
instituted by the exchanges.
---------------------------------------------------------------------------

    \20\ See supra note 14.
---------------------------------------------------------------------------

    Second, the Exchange believes its proposal to increase the PRIME 
Agency Order Credit for Members in Tiers 2, 3 and 4 of the PCRP and to 
lower the additional PRIME Agency Order Credit for Priority Customer 
orders over a threshold of 0.60% of OCC customer volume for Members who 
are in PCRP Tier 3 or higher is an equitable allocation of reasonable 
dues and fees pursuant to Section 6(b)(4) of the Act \21\ because the 
proposed changes are designed to incentivize overall Priority Customer 
order flow. The Exchange believes that with the proposed changes, 
providers of Priority Customer order flow will be incentivized to send 
that Priority Customer order flow to the Exchange in order to obtain 
the highest volume threshold and receive credits in a manner that 
enables the Exchange to improve its overall competitiveness and 
strengthen its market quality for all market participants. The Exchange 
believes that increased Priority Customer order flow will attract 
liquidity providers, which in turn should make the MIAX marketplace an 
attractive venue where Market Makers may submit narrow quotations with 
greater size, deepening and enhancing the quality of the MIAX 
marketplace. This should provide more trading opportunities and tighter 
spreads for other market participants and result in a corresponding 
increase in order flow from such other market participants. 
Additionally, the Exchange believes that for competitive and business 
reasons, it is appropriate to lower the additional PRIME Agency Order 
Credit for Priority Customer PRIME Agency Orders over a threshold of 
0.60% of OCC customer volume for Members who are in PCRP Tier 3 or 
higher from $0.02 to $0.01. As the Exchange previously noted, no Member 
currently achieves this threshold and, as such, the Exchange believes 
that by lowering this additional credit while increasing the PRIME 
Agency Order Credit for Members in Tiers 2, 3 and 4 of the PCRP, will 
incentivize order flow to the Exchange, providing more liquidity, to 
the benefit of all market participants, because it will likely result 
in a net increase in credits paid to Members.
---------------------------------------------------------------------------

    \21\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

    The Exchange believes that the proposed rule changes would be an 
equitable allocation of reasonable dues and fees and would not permit 
unfair discrimination between market participants. The Exchange cannot 
predict with certainty whether any Priority Customers would avail 
themselves of the proposed fee change, but the Exchange believes that 
between two and four Members may achieve the applicable Tier volume 
thresholds to receive the proposed increased PRIME Agency Order Credit 
for Members in Tiers 2, 3 and 4 of the PCRP. Similarly, the Exchange 
cannot predict with certainty whether any Member will achieve the 
separate, additional PRIME Agency Order Credit that is also available 
for Priority Customer PRIME Agency Orders executed over a monthly 
threshold of 0.60% of OCC customer volume for Members in PCRP Tier 3 or 
higher, but the Exchange believes that no Member will be currently 
impacted as no Member currently reaches such threshold.
    The Exchange also believes its proposal is consistent with Section 
6(b)(5) of the Act \22\ and is designed to prevent fraudulent and 
manipulative acts and practices, promotes just and equitable principles 
of trade, fosters cooperation and coordination with persons engaged in 
regulating, clearing, setting, processing information with respect to, 
and facilitating transaction in securities, removes impediments to and 
perfects the mechanism of a free and open market and a national market 
system, and, in general, protects investors and the public interest; 
and is not designed to permit unfair discrimination. This is because 
the Exchange believes the proposed changes will incentivize Priority 
Customer order flow and an increase in Priority Customer order flow 
will bring greater volume and liquidity, which benefits all market 
participants by providing more trading opportunities and tighter

[[Page 43230]]

spreads. To the extent Priority Customer order flow is increased by the 
proposal, market participants will increasingly compete for the 
opportunity to trade on the Exchange including sending more orders and 
providing narrower and larger-sized quotations in the effort to trade 
with such Priority Customer order flow. Further, based on the current 
Tier volume thresholds achieved by the Exchange's Members and the 
potential changes going forward as a result of the proposed fee change, 
the Exchange believes that the proposed increase to certain credit 
amounts from $0.10 per contract to $0.11 per contract and proposed 
decrease to the additional credit amount from $0.02 per contract to 
$0.01 per contract may not result in any Member receiving a lower 
credit amount per contract, and may result in two to four Members 
receiving a higher credit amount per contract.
---------------------------------------------------------------------------

    \22\ 15 U.S.C. 78f(b)(1) and (b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    In accordance with Section 6(b)(8) of the Act,\23\ the Exchange 
believes that the proposed rule change would not impose any burden on 
competition that is not necessary or appropriate in furtherance of the 
purposes of the Act. Instead, as discussed above, the Exchange believes 
that the proposed changes would encourage the submission of additional 
liquidity to a public exchange, thereby promoting market depth, price 
discovery and transparency and enhancing order execution opportunities 
for all market participants. As a result, the Exchange believes that 
the proposed change furthers the Commission's goal in adopting 
Regulation NMS of fostering integrated competition among orders.
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    \23\ 15 U.S.C. 78f(b)(8).
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Intra-Market Competition
    The Exchange does not believe that other market participants at the 
Exchange would be placed at a relative disadvantage by the proposed 
changes to increase the PRIME Agency Order Credit for Members in Tiers 
2, 3 and 4 of the PCRP and to lower the additional PRIME Agency Order 
Credit for Priority Customer PRIME Agency Orders over a threshold of 
0.60% of OCC customer volume for Members who are in PCRP Tier 3 or 
higher. The proposed changes are designed to attract additional order 
flow to the Exchange. Accordingly, the Exchange believes that 
increasing the PRIME Agency Order Credit for Members in Tiers 2 through 
4 of the PCRP and lowering the additional PRIME Agency Order Credit for 
Priority Customer orders over a threshold of 0.60% of OCC customer 
volume for Members in PCRP Tier 3 or higher will not impose any burden 
on competition not necessary or appropriate in furtherance of the 
purposes of the Act because it will continue to encourage Priority 
Customer order flow and an increase in Priority Customer order flow 
will bring greater volume and liquidity, which benefit all market 
participants by providing more trading opportunities and tighter 
spreads. Further, based on the current Tier volume thresholds achieved 
by the Exchange's Members and the potential changes going forward as a 
result of the proposed fee change, the Exchange believes that the 
proposed increase to certain credit amounts from $0.10 per contract to 
$0.11 per contract and proposed decrease to the additional credit 
amount from $0.02 per contract to $0.01 per contract may not result in 
any Member receiving a lower credit amount per contract, and may result 
in two to four Members receiving a higher credit amount per contract.
Inter-Market Competition
    The Exchange 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. There are currently 16 
registered options exchanges competing for order flow. Based on 
publicly-available information, and excluding index-based options, no 
single exchange has exceeded approximately 18% of the market share of 
executed volume of multiply-listed equity and ETF options trades as of 
July 25, 2019, for the month of July 2019.\24\ Therefore, no exchange 
possesses significant pricing power in the execution of multiply-listed 
equity and ETF options order flow. More specifically, for all of June 
2019, the Exchange had a total market share of 3.73% for all equity 
options volume.\25\ In such an environment, the Exchange must 
continually adjust its transaction and non-transaction fees to remain 
competitive with other exchanges and to attract order flow. The 
Exchange believes that the proposed rule changes reflect this 
competitive environment because they modify the Exchange's fees in a 
manner that encourages market participants to provide Priority Customer 
liquidity and to send order flow to the Exchange. To the extent this is 
achieved, all the Exchange's market participants should benefit from 
the improved market quality.
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    \24\ See supra note 12.
    \25\ See id.
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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,\26\ and Rule 19b-4(f)(2) \27\ 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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    \26\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \27\ 17 CFR 240.19b-4(f)(2).
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IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-MIAX-2019-34 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-MIAX-2019-34. 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 43231]]

proposed rule change between the Commission and any person, other than 
those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for website viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE, 
Washington, DC 20549, on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available 
for inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change. Persons submitting 
comments are cautioned that we do not redact or edit personal 
identifying information from comment submissions. You should submit 
only information that you wish to make available publicly. All 
submissions should refer to File Number SR-MIAX-2019-34 and should be 
submitted on or before September 10, 2019.
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    \28\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\28\
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-17858 Filed 8-19-19; 8:45 am]
BILLING CODE 8011-01-P

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