Self-Regulatory Organizations; Miami International Securities Exchange, LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Its Fee Schedule, 36249-36252 [2020-12791]
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Federal Register / Vol. 85, No. 115 / Monday, June 15, 2020 / Notices
allow Members and Clearing Members
to immediately utilize the proposed
functionality to manage their risk. For
this reason, the Commission believes
that waiver of the 30-day operative
delay is consistent with the protection
of investors and the public interest.
Therefore, the Commission hereby
waives the operative delay and
designates the proposal as operative
upon filing.24
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is 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
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:
jbell on DSKJLSW7X2PROD with NOTICES
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–
CboeBZX–2020–044 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–CboeBZX–2020–044. 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
24 For purposes only of waiving the 30-day
operative delay, the Commission also has
considered the proposed rule’s impact on
efficiency, competition, and capital formation. See
15 U.S.C. 78c(f).
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proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for website viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE,
Washington, DC 20549 on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of such
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–CboeBZX–2020–044, and
should be submitted on or before July 6,
2020.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.25
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020–12790 Filed 6–12–20; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–89035; File No. SR–MIAX–
2020–12)
Self-Regulatory Organizations; Miami
International Securities Exchange,
LLC; Notice of Filing and Immediate
Effectiveness of a Proposed Rule
Change To Amend Its Fee Schedule
June 9, 2020.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on May 29,
2020, 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.
17 CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
25
1 15
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36249
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’’).
The text of the proposed rule change
is available on the Exchange’s website at
https://www.miaxoptions.com/rulefilings, at MIAX’s principal office, and
at the Commission’s Public Reference
Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to amend the
Fee Schedule to extend the cap waiver
of 1,000 contracts per leg for complex
PRIME (‘‘cPRIME’’) 3 Agency Order
rebates for all tiers under the Priority
Customer Rebate Program (‘‘PCRP’’) 4
until July 31, 2020.
3 ‘‘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.
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. ‘‘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
Continued
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Background
Exchange Rule 518(b)(7) defines a
cPRIME Order as a type of complex
order 5 that is submitted for
participation in a cPRIME Auction and
trading of cPRIME Orders is governed
by Rule 515A, Interpretations and
Policies .12.6 cPRIME Orders are
processed and executed in the
Exchange’s PRIME mechanism, the
same mechanism that the Exchange uses
to process and execute simple PRIME
orders, pursuant to Exchange Rule
515A.7 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 Options 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. A cPRIME Auction is the priceimprovement mechanism of the
Exchange’s System pursuant to which
an Initiating Member electronically
submits a complex Agency Order into a
cPRIME Auction. The Initiating
Member, in submitting an Agency
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.
5 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. A
complex order can also be a ‘‘stock-option’’ order,
which is an order to buy or sell a stated number
of units of an underlying security coupled with the
purchase or sale of options contract(s) on the
opposite side of the market, subject to certain
contingencies set forth in the proposed rules
governing complex orders. For a complete
definition of a ‘‘complex order,’’ see Exchange Rule
518(a)(5). See also Securities Exchange Act Release
No. 78620 (August 18, 2016), 81 FR 58770 (August
25, 2016) (SR–MIAX–2016–26).
6 See Securities Exchange Act Release No. 81131
(July 12, 2017), 82 FR 32900 (July 18, 2017) (SR–
MIAX–2017–19). (Order Granting Approval of a
Proposed Rule Change to Amend MIAX Options
Rules 515, Execution of Orders and Quotes; 515A,
MIAX Price Improvement Mechanism (‘‘PRIME’’)
and PRIME Solicitation Mechanism; and 518,
Complex Orders).
7 Id.
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Order, must be willing to either (i) cross
the Agency Order at a single price
against principal or solicited interest, or
(ii) automatically match against
principal or solicited interest, the price
and size of a RFR that is broadcast to
MIAX Options participants up to an
optional designated limit price. Such
responses are defined as cPRIME AOC
Responses or cPRIME eQuotes. The
PRIME mechanism is used for orders on
the Exchange’s Simple Order Book.8
The cPRIME mechanism is used for
Complex Orders 9 on the Exchange’s
Strategy Book,10 with the cPRIME
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 proposes to amend
footnote ‘‘*’’ in Section 1)a)iii) of the
Fee Schedule to extend the waiver of
the contracts cap per leg for cPRIME
Agency Order rebates for all tiers under
the PCRP until July 31, 2020. Prior to a
rule filing by the Exchange (described
below), the Exchange limited the
cPRIME Agency Order Credit to be
payable only to the first 1,000 contracts
per leg for each cPRIME Agency Order
in all tiers under the PCRP. On February
28, 2020, the Exchange filed, and the
Commission approved [sic], the
Exchange’s proposal to waive the 1000
contracts cap per leg for cPRIME Agency
Order rebates for all tiers under the
PCRP from March 1, 2020 until May 31,
2020.11 The Exchange now proposes to
extend the cap waiver of 1,000 contracts
per leg for cPRIME Agency Order
rebates for all tiers under the PCRP until
July 31, 2020. The purpose of this
proposed change is for business and
competitive reasons and to continue to
entice market participants to submit
larger-sized cPRIME Agency Orders.
8 The ‘‘Simple Order Book’’ is the Exchange’s
regular electronic book of orders and quotes. See
Exchange Rule 518(a)(15).
9 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).
10 The ‘‘Strategy Book’’ is the Exchange’s
electronic book of complex orders and complex
quotes. See Exchange Rule 518(a)(17).
11 See Securities Exchange Act Release No. 88349
(March 10, 2020), 85 FR 14995 (March 15, 2020)
(SR–MIAX–2020–05).
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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.’’ 12
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 more
than approximately 14% of the market
share of executed volume of multiplylisted equity and exchange-traded fund
(‘‘ETF’’) options trades as of May 18,
2020, for the month of May 2020.13
Therefore, no exchange possesses
significant pricing power in the
execution of multiply-listed equity and
ETF options order flow. More
specifically, as of May 18, 2020 for the
month of May 2020, the Exchange had
a total market share of 5.09% of all
equity options volume.14
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.15 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.
12 See Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37496 (June 29, 2005).
13 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.
14 See id.
15 See Securities Exchange Act Release No. 85301
(March 13, 2019), 84 FR 10166 (March 19, 2019)
(SR–MIAX–2019–09).
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2. Statutory Basis
The Exchange believes that its
proposal to amend its Fee Schedule is
consistent with Section 6(b) of the Act 16
in general, and furthers the objectives of
Section 6(b)(4) of the Act 17 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
extend the waiver of the cap of 1,000
contracts per leg for cPRIME Agency
Order rebates for all tiers under the
PCRP until July 31, 2020 provides for
the equitable allocation of reasonable
dues and fees and is not unfairly
discriminatory for the following
reasons. 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.’’ 18
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 more
than approximately 14% of the market
share of executed volume of multiplylisted equity and ETF options trades as
of May 18, 2020, for the month of May
2020.19 Therefore, no exchange
possesses significant pricing power in
the execution of multiply-listed equity
and ETF options order flow. More
specifically, as of May 18, 2020 for the
month of May 2020, the Exchange had
16 15
U.S.C. 78f(b).
U.S.C. 78f(b)(4) and (5).
18 See Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37496 (June 29, 2005).
19 See supra note 13.
a total market share of 5.09% of all
equity options volume.20
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.21 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.
The Exchange believes that its
proposal to continue to waive the 1,000
contracts cap per leg for cPRIME Agency
Order rebates for all tiers in the PCRP
until July 31, 2020 is reasonable,
equitably allocated and not unfairly
discriminatory because this change is
for business and competitive reasons
and available equally to all market
participants. The Exchange cannot
predict with certainty whether any
market participant would submit
additional cPRIME Agency Orders in
excess of 1,000 contracts per leg in light
of the proposal to continue to waive the
cap of 1,000 contracts per leg for
cPRIME Agency Order rebates for all
tiers under the PCRP, but believes that
market participants would continue to
be encouraged to submit larger orders to
obtain the additional credits. The
Exchange believes that this proposed
change would encourage increased
cPRIME Agency Order flow, which will
bring greater volume and liquidity to the
Exchange, which benefits all market
participants by providing more trading
opportunities and tighter spreads.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
In accordance with Section 6(b)(8) of
the Act,22 the Exchange believes that the
proposed rule changes would not
impose any burden on competition that
are not necessary or appropriate in
furtherance of the purposes of the Act.
Instead, as discussed above, the
17 15
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id.
supra note 15.
22 15 U.S.C. 78f(b)(8).
Exchange believes that the proposed
change would continue to 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 change to
continue to waive the cap of 1,000
contracts per leg for cPRIME Agency
Order rebates for all tiers under the
PCRP until July 31, 2020. The proposed
change is designed to attract additional
order flow to the Exchange. The
Exchange believes that this proposal
will continue to encourage Members to
submit Priority Customer cPRIME
Agency Orders, which will increase
liquidity and benefit all market
participants by providing more trading
opportunities and tighter spreads.
Accordingly, the Exchange believes that
the proposed change 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 order flow,
which provides greater volume and
liquidity, benefiting all market
participants by providing more trading
opportunities and tighter spreads.
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 more
than approximately 14% of the market
share of executed volume of multiplylisted equity and ETF options trades as
of May 18, 2020, for the month of May
2020.23 Therefore, no exchange
possesses significant pricing power in
the execution of multiply-listed equity
and ETF options order flow. More
specifically, as of May 18, 2020 for the
month of May 2020, the Exchange had
a total market share of 5.09% of all
equity options volume.24 In such an
20 See
21 See
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23 See
24 See
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36251
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supra note 13.
id.
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Federal Register / Vol. 85, No. 115 / Monday, June 15, 2020 / Notices
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 change
reflects this competitive environment
because it continues to encourage
market participants to provide and 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.
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,25 and Rule
19b–4(f)(2) 26 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:
All submissions should refer to File
Number SR–MIAX–2020–12. This file
number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
internet website (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for website viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE,
Washington, DC 20549, on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change.
Persons submitting comments are
cautioned that we do not redact or edit
personal identifying information from
comment submissions. You should
submit only information that you wish
to make available publicly. All
submissions should refer to File
Number SR–MIAX–2020–12 and should
be submitted on or before July 6, 2020.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.27
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020–12791 Filed 6–12–20; 8:45 am]
BILLING CODE 8011–01–P
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
MIAX–2020–12 on the subject line.
[Release No. 34–89031; File No. SR–
CboeBYX–2020–016]
Self-Regulatory Organizations; Cboe
BYX Exchange, Inc.; Notice of Filing
and Immediate Effectiveness of a
Proposed Rule Change To Allow
Members and Clearing Members To
Establish or Adjust the Risk Settings
Set Forth in Interpretation and Policy
.03 of Exchange Rule 11.13 on a Risk
Group Identifier Basis
June 9, 2020.
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 May 28,
2020, Cboe BYX Exchange, Inc. (the
‘‘Exchange’’) filed with the Securities
and Exchange Commission (the
‘‘Commission’’) the proposed rule
change as described in Items I and II
below, which Items have been prepared
by the Exchange. The Exchange filed the
proposal as a ‘‘non-controversial’’
proposed rule change pursuant to
Section 19(b)(3)(A)(iii) of the Act 3 and
Rule 19b–4(f)(6) 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 the Substance
of the Proposed Rule Change
Cboe BYX Exchange, Inc. (‘‘BYX’’ or
the ‘‘Exchange’’) is filing with the
Securities and Exchange Commission
(the ‘‘Commission’’) a proposed rule
change to allow Members and Clearing
Members to establish or adjust the risk
settings set forth in Interpretation and
Policy .03 of Exchange Rule 11.13 on a
risk group identifier basis. 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/byx/), 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
Paper Comments
jbell on DSKJLSW7X2PROD with NOTICES
SECURITIES AND EXCHANGE
COMMISSION
• Send paper comments in triplicate
to Vanessa Countryman, Secretary,
Securities and Exchange Commission,
100 F Street NE, Washington, DC
20549–1090.
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
15 U.S.C. 78s(b)(1).
17 CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A)(iii).
4 17 CFR 240.19b–4(f)(6).
1
2
25 15
26 17
U.S.C. 78s(b)(3)(A)(ii).
CFR 240.19b–4(f)(2).
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CFR 200.30–3(a)(12).
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]]>Agencies
[Federal Register Volume 85, Number 115 (Monday, June 15, 2020)]
[Notices]
[Pages 36249-36252]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-12791]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-89035; File No. SR-MIAX-2020-12)
Self-Regulatory Organizations; Miami International Securities
Exchange, LLC; Notice of Filing and Immediate Effectiveness of a
Proposed Rule Change To Amend Its Fee Schedule
June 9, 2020.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on May 29, 2020, 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.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange is filing a proposal to amend the MIAX Options Fee
Schedule (the ``Fee Schedule'').
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 extend the cap
waiver of 1,000 contracts per leg for complex PRIME (``cPRIME'') \3\
Agency Order rebates for all tiers under the Priority Customer Rebate
Program (``PCRP'') \4\ until July 31, 2020.
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\3\ ``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.
\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. ``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.
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[[Page 36250]]
Background
Exchange Rule 518(b)(7) defines a cPRIME Order as a type of complex
order \5\ that is submitted for participation in a cPRIME Auction and
trading of cPRIME Orders is governed by Rule 515A, Interpretations and
Policies .12.\6\ cPRIME Orders are processed and executed in the
Exchange's PRIME mechanism, the same mechanism that the Exchange uses
to process and execute simple PRIME orders, pursuant to Exchange Rule
515A.\7\ 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 Options
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. A cPRIME Auction is the price-
improvement mechanism of the Exchange's System pursuant to which an
Initiating Member electronically submits a complex Agency Order into a
cPRIME Auction. The Initiating Member, in submitting an Agency Order,
must be willing to either (i) cross the Agency Order at a single price
against principal or solicited interest, or (ii) automatically match
against principal or solicited interest, the price and size of a RFR
that is broadcast to MIAX Options participants up to an optional
designated limit price. Such responses are defined as cPRIME AOC
Responses or cPRIME eQuotes. The PRIME mechanism is used for orders on
the Exchange's Simple Order Book.\8\ The cPRIME mechanism is used for
Complex Orders \9\ on the Exchange's Strategy Book,\10\ with the cPRIME
mechanism operates in the same manner for processing and execution of
cPRIME Orders that is used for PRIME Orders on the Simple Order Book.
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\5\ 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. A complex order can also be a ``stock-option'' order,
which is an order to buy or sell a stated number of units of an
underlying security coupled with the purchase or sale of options
contract(s) on the opposite side of the market, subject to certain
contingencies set forth in the proposed rules governing complex
orders. For a complete definition of a ``complex order,'' see
Exchange Rule 518(a)(5). See also Securities Exchange Act Release
No. 78620 (August 18, 2016), 81 FR 58770 (August 25, 2016) (SR-MIAX-
2016-26).
\6\ See Securities Exchange Act Release No. 81131 (July 12,
2017), 82 FR 32900 (July 18, 2017) (SR-MIAX-2017-19). (Order
Granting Approval of a Proposed Rule Change to Amend MIAX Options
Rules 515, Execution of Orders and Quotes; 515A, MIAX Price
Improvement Mechanism (``PRIME'') and PRIME Solicitation Mechanism;
and 518, Complex Orders).
\7\ Id.
\8\ The ``Simple Order Book'' is the Exchange's regular
electronic book of orders and quotes. See Exchange Rule 518(a)(15).
\9\ 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).
\10\ The ``Strategy Book'' is the Exchange's electronic book of
complex orders and complex quotes. See Exchange Rule 518(a)(17).
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The Exchange proposes to amend footnote ``*'' in Section 1)a)iii)
of the Fee Schedule to extend the waiver of the contracts cap per leg
for cPRIME Agency Order rebates for all tiers under the PCRP until July
31, 2020. Prior to a rule filing by the Exchange (described below), the
Exchange limited the cPRIME Agency Order Credit to be payable only to
the first 1,000 contracts per leg for each cPRIME Agency Order in all
tiers under the PCRP. On February 28, 2020, the Exchange filed, and the
Commission approved [sic], the Exchange's proposal to waive the 1000
contracts cap per leg for cPRIME Agency Order rebates for all tiers
under the PCRP from March 1, 2020 until May 31, 2020.\11\ The Exchange
now proposes to extend the cap waiver of 1,000 contracts per leg for
cPRIME Agency Order rebates for all tiers under the PCRP until July 31,
2020. The purpose of this proposed change is for business and
competitive reasons and to continue to entice market participants to
submit larger-sized cPRIME Agency Orders.
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\11\ See Securities Exchange Act Release No. 88349 (March 10,
2020), 85 FR 14995 (March 15, 2020) (SR-MIAX-2020-05).
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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.'' \12\ 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 more than
approximately 14% of the market share of executed volume of multiply-
listed equity and exchange-traded fund (``ETF'') options trades as of
May 18, 2020, for the month of May 2020.\13\ Therefore, no exchange
possesses significant pricing power in the execution of multiply-listed
equity and ETF options order flow. More specifically, as of May 18,
2020 for the month of May 2020, the Exchange had a total market share
of 5.09% of all equity options volume.\14\
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\12\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496 (June 29, 2005).
\13\ 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.
\14\ See id.
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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.\15\ 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.
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\15\ See Securities Exchange Act Release No. 85301 (March 13,
2019), 84 FR 10166 (March 19, 2019) (SR-MIAX-2019-09).
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[[Page 36251]]
2. Statutory Basis
The Exchange believes that its proposal to amend its Fee Schedule
is consistent with Section 6(b) of the Act \16\ in general, and
furthers the objectives of Section 6(b)(4) of the Act \17\ 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.
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\16\ 15 U.S.C. 78f(b).
\17\ 15 U.S.C. 78f(b)(4) and (5).
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The Exchange believes its proposal to extend the waiver of the cap
of 1,000 contracts per leg for cPRIME Agency Order rebates for all
tiers under the PCRP until July 31, 2020 provides for the equitable
allocation of reasonable dues and fees and is not unfairly
discriminatory for the following reasons. 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.'' \18\ 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 more than approximately 14% of the market share of
executed volume of multiply-listed equity and ETF options trades as of
May 18, 2020, for the month of May 2020.\19\ Therefore, no exchange
possesses significant pricing power in the execution of multiply-listed
equity and ETF options order flow. More specifically, as of May 18,
2020 for the month of May 2020, the Exchange had a total market share
of 5.09% of all equity options volume.\20\
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\18\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496 (June 29, 2005).
\19\ See supra note 13.
\20\ See id.
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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.\21\ 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.
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\21\ See supra note 15.
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The Exchange believes that its proposal to continue to waive the
1,000 contracts cap per leg for cPRIME Agency Order rebates for all
tiers in the PCRP until July 31, 2020 is reasonable, equitably
allocated and not unfairly discriminatory because this change is for
business and competitive reasons and available equally to all market
participants. The Exchange cannot predict with certainty whether any
market participant would submit additional cPRIME Agency Orders in
excess of 1,000 contracts per leg in light of the proposal to continue
to waive the cap of 1,000 contracts per leg for cPRIME Agency Order
rebates for all tiers under the PCRP, but believes that market
participants would continue to be encouraged to submit larger orders to
obtain the additional credits. The Exchange believes that this proposed
change would encourage increased cPRIME Agency Order flow, which will
bring greater volume and liquidity to the Exchange, which benefits all
market participants by providing more trading opportunities and tighter
spreads.
B. Self-Regulatory Organization's Statement on Burden on Competition
In accordance with Section 6(b)(8) of the Act,\22\ the Exchange
believes that the proposed rule changes would not impose any burden on
competition that are not necessary or appropriate in furtherance of the
purposes of the Act. Instead, as discussed above, the Exchange believes
that the proposed change would continue to 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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\22\ 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
change to continue to waive the cap of 1,000 contracts per leg for
cPRIME Agency Order rebates for all tiers under the PCRP until July 31,
2020. The proposed change is designed to attract additional order flow
to the Exchange. The Exchange believes that this proposal will continue
to encourage Members to submit Priority Customer cPRIME Agency Orders,
which will increase liquidity and benefit all market participants by
providing more trading opportunities and tighter spreads. Accordingly,
the Exchange believes that the proposed change 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 order
flow, which provides greater volume and liquidity, benefiting all
market participants by providing more trading opportunities and tighter
spreads.
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 more than approximately 14% of the market share of
executed volume of multiply-listed equity and ETF options trades as of
May 18, 2020, for the month of May 2020.\23\ Therefore, no exchange
possesses significant pricing power in the execution of multiply-listed
equity and ETF options order flow. More specifically, as of May 18,
2020 for the month of May 2020, the Exchange had a total market share
of 5.09% of all equity options volume.\24\ In such an
[[Page 36252]]
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 change
reflects this competitive environment because it continues to encourage
market participants to provide and 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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\23\ See supra note 13.
\24\ 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,\25\ and Rule 19b-4(f)(2) \26\ 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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\25\ 15 U.S.C. 78s(b)(3)(A)(ii).
\26\ 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-2020-12 on the subject line.
Paper Comments
Send paper comments in triplicate to Vanessa Countryman,
Secretary, Securities and Exchange Commission, 100 F Street NE,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-MIAX-2020-12. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (https://www.sec.gov/rules/sro.shtml).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for website viewing and printing in
the Commission's Public Reference Room, 100 F Street NE, Washington, DC
20549, on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of the filing also will be available for inspection
and copying at the principal office of the Exchange. All comments
received will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-MIAX-2020-12 and should be submitted on
or before July 6, 2020.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\27\
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\27\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-12791 Filed 6-12-20; 8:45 am]
BILLING CODE 8011-01-P
