Self-Regulatory Organizations; Miami International Securities Exchange, LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Its Fee Schedule To Increase the Number of Additional Limited Service MIAX Express Interface Ports Available to Market Makers, 55905-55908 [2020-20021]
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Federal Register / Vol. 85, No. 176 / Thursday, September 10, 2020 / Notices
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–89765; File No. SR–CBOE–
2020–014]
Self-Regulatory Organizations; Cboe
Exchange, Inc.; Notice of Designation
of Longer Period for Commission
Action on Proceedings To Determine
Whether To Approve or Disapprove a
Proposed Rule Change To Adopt a
Delta-Adjusted at Close Order
Instruction
September 3, 2020.
On February 18, 2020, Cboe
Exchange, Inc. (‘‘Exchange’’) filed with
the Securities and Exchange
Commission (‘‘Commission’’), pursuant
to Section 19(b)(1) of the Securities
Exchange Act of 1934 (‘‘Act’’) 1 and Rule
19b–4 thereunder,2 a proposed rule
change to adopt a Delta-Adjusted at
Close order instruction that a User may
apply to an order when entering it into
the System for execution in an
electronic or open outcry auction. The
proposed rule change was published for
comment in the Federal Register on
March 9, 2020.3 On April 13, 2020, the
Commission designated a longer period
within which to approve the proposed
rule change, disapprove the proposed
rule change, or institute proceedings to
determine whether the proposed rule
change should be disapproved.4 On May
12, 2020, the Exchange submitted
Amendment No. 1 to the proposed rule
change.5 On June 3, 2020, the
Commission instituted proceedings to
determine whether to approve or
disapprove the proposed rule change, as
modified by Amendment No. 1.6 The
Commission has received one comment
on the proposed rule change.7 Section
19(b)(2) of the Act 8 provides that, after
initiating proceedings, the Commission
shall issue an order approving or
disapproving the proposed rule change
not later than 180 days after the date of
publication of notice of filing the
proposed rule change. The Commission
may extend the period for issuing an
order approving or disapproving the
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 See Securities Exchange Act Release No. 88312
(March 3, 2020), 85 FR 13686 (‘‘Notice’’).
4 See Securities Exchange Act Release No. 88622,
85 FR 21490 (April 17, 2020).
5 See https://www.sec.gov/comments/sr-cboe2020-014/srcboe2020014-7180918-216787.pdf.
6 See Securities Exchange Act Release No. 88997,
85 FR 35351 (June 9, 2020).
7 See Letter from Kurt Eckert, Partner, Wolverine
Execution Services, LLC, to Vanessa Countryman,
Secretary, Commission, dated June 24, 2020,
available at https://www.sec.gov/comments/sr-cboe2020-014/srcboe2020014-7343517-218670.pdf.
8 15 U.S.C. 78s(b)(2).
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2 17
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proposed rule change, however, by not
more than 60 days if the Commission
determines that a longer period is
appropriate and publishes the reasons
for such determination. The proposed
rule change was published for notice
and comment in the Federal Register on
March 9, 2020.9 September 5, 2020 is
180 days from that date, and November
4, 2020 is 240 days from that date.
The Commission finds it appropriate
to designate a longer period within
which to issue an order approving or
disapproving the proposed rule change
so that it has sufficient time to consider
the proposed rule change and the issues
raised in the comment letters that have
been submitted in connection therewith.
Accordingly, the Commission, pursuant
to Section 19(b)(2) of the Act,10 the
Commission designates November 4,
2020, as the date by which the
Commission shall either approve or
disapprove the proposed rule change
(File No. CBOE–2020–014).
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.11
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020–19944 Filed 9–9–20; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–89769; File No. SR–MIAX–
2020–29]
Self-Regulatory Organizations; Miami
International Securities Exchange,
LLC; Notice of Filing and Immediate
Effectiveness of a Proposed Rule
Change To Amend Its Fee Schedule To
Increase the Number of Additional
Limited Service MIAX Express
Interface Ports Available to Market
Makers
September 4, 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 August
25, 2020, Miami International Securities
Exchange, LLC (‘‘MIAX Options’’ or
‘‘Exchange’’) filed with the Securities
and Exchange Commission
(‘‘Commission’’) the 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
9 See
Notice, supra note 3.
10 Id.
11 17
CFR 200.30–3(a)(31).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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55905
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange is filing a proposal to
amend the MIAX Options Fee Schedule
(the ‘‘Fee Schedule’’) to increase the
number of additional Limited Service
MIAX Express Interface (‘‘MEI’’) Ports
available to Market Makers.3 The
Exchange does not propose to amend
the fees for additional Limited Service
MEI Ports.
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 offer two (2) additional
Limited Service MEI Ports to Market
Makers. The Exchange does not propose
to amend the fees charged for the
additional Limited Service MEI Ports.
The Exchange initially filed the
proposal to increase the number of
Limited Service MEI Ports available to
Market Makers on June 30, 2020, with
no change to the actual fee amounts
being charged.4 The First Proposed Rule
Change was published for comment in
the Federal Register on July 20, 2020.5
On August 25, 2020, the Exchange
3 The term ‘‘Market Makers’’ refers to Lead Market
Makers (‘‘LMMs’’), Primary Lead Market Makers
(‘‘PLMMs’’), and Registered Market Makers
(‘‘RMMs’’) collectively. See Exchange Rule 100.
4 See Securities Exchange Act Release No. 89317
(July 14, 2020), 85 FR 43918 (July 20, 2020) (SR–
MIAX–2020–23) (the ‘‘First Proposed Rule
Change’’).
5 Id.
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withdrew the First Proposed Rule
Change.6
The Exchange notes that the First
Proposed Rule Change did not receive
any comment letters; however, the
Exchange has determined to refile its
proposal to increase the number of
Limited Service MEI Ports available to
Market Makers (without increasing the
actual fee amounts) to provide further
clarification regarding the Exchange’s
annual cost for providing additional
Limited Service MEI Ports.
Currently, MIAX assesses monthly
MEI Port Fees on Market Makers based
upon the number of MIAX matching
engines 7 used by the Market Maker.
Market Makers are allocated two (2) Full
Service MEI Ports 8 and two (2) Limited
Service MEI Ports 9 per matching engine
to which they connect. The Full Service
MEI Ports, Limited Service MEI Ports,
and the additional Limited Service MEI
Ports all include access to MIAX’s
primary and secondary data centers and
its disaster recovery center. Market
Makers may request additional Limited
Service MEI Ports for which they will be
assessed the existing $100 monthly fee
for each additional port they request.
This fee has been unchanged since
2016.10
The Exchange originally added the
Limited Service MEI Ports to enhance
the MEI Port connectivity made
available to Market Makers, and has
subsequently made additional Limited
Service MEI Ports available to Market
6 See Comment Letter from Christopher Solgan,
VP, Senior Counsel, the Exchange, dated August 24,
2020, notifying the Commission that the Exchange
will withdraw the First Proposed Rule Change.
7 A ‘‘matching engine’’ is a part of the MIAX
electronic system that processes options quotes and
trades on a symbol-by-symbol basis. Some matching
engines will process option classes with multiple
root symbols, and other matching engines will be
dedicated to one single option root symbol (for
example, options on SPY will be processed by one
single matching engine that is dedicated only to
SPY). A particular root symbol may only be
assigned to a single designated matching engine. A
particular root symbol may not be assigned to
multiple matching engines. See Fee Schedule,
Section 5)d)ii), note 29.
8 Full Service MEI Ports provide Market Makers
with the ability to send Market Maker quotes,
eQuotes, and quote purge messages to the MIAX
System. Full Service MEI Ports are also capable of
receiving administrative information. Market
Makers are limited to two Full Service MEI Ports
per matching engine. See Fee Schedule, Section
5)d)ii), note 27.
9 Limited Service MEI Ports provide Market
Makers with the ability to send eQuotes and quote
purge messages only, but not Market Maker Quotes,
to the MIAX System. Limited Service MEI Ports are
also capable of receiving administrative
information. Market Makers initially receive two
Limited Service MEI Ports per matching engine. See
Fee Schedule, Section 5)d)ii), note 28.
10 See Securities Exchange Act Release No. 79666
(December 22, 2016), 81 FR 96133 (December 29,
2016) (SR–MIAX–2016–47).
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Makers.11 Limited Service MEI Ports
have been well received by Market
Makers since their addition. The
Exchange now proposes to offer to
Market Makers the ability to purchase
an additional two (2) Limited Service
MEI Ports per matching engine over and
above the current six (6) additional
Limited Service MEI Ports per matching
engine that are available for purchase by
Market Makers. The Exchange proposes
making a corresponding change to
footnote 30 of the Exchange’s Fee
Schedule to specify that Market Makers
will now be limited to purchasing eight
(8) additional Limited Service MEI Ports
per matching engine, for a total of ten
(10) per matching engine. All fees
related to MEI Ports shall remain
unchanged and Market Makers that
voluntarily purchase the additional
Limited Service MEI Ports will remain
subject to the existing $100 monthly fee
per port.
The Exchange is increasing the
number of additional Limited Service
MEI Ports because the Exchange is
expanding its network. This network
expansion is necessary due to increased
customer demand and increased
volatility in the marketplace, both of
which have translated into increased
message traffic rates across the network.
Consequently, this network expansion,
which increases the number of switches
supporting customer facing systems, is
necessary in order to provide sufficient
access to new and existing Members,12
to maintain a sufficient amount of
network capacity head-room, and to
continue to provide the same level of
service across the Exchange’s lowlatency, high-throughput technology
environment.
Currently, the Exchange has 8
network switches that support the entire
customer base of MIAX. The Exchange
plans to increase this to 10 switches,
which will increase the number of
available customer ports by 25%. This
increase in the number of available
customer ports will enable the Exchange
to continue to provide sufficient and
equal access to MIAX Systems to all
Members. Absent the proposed increase
in available MEI Ports, the Exchange
projects that its current inventory will
11 See Securities Exchange Act Release Nos.
70137 (August 8, 2013), 78 FR 49586 (August 14,
2013) (SR–MIAX–2013–39); 70903 (November 20,
2013), 78 FR 70615 (November 26, 2013) (SR–
MIAX–2013–52); 78950 (September 27, 2016), 81
FR 68084 (October 3, 2016) (SR–MIAX–2016–33);
and 79198 (October 31, 2016), 81 FR 76988
(November 4, 2016) (SR–MIAX–2016–37).
12 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.
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be depleted and it will lack sufficient
capacity to continue to meet Members’
access needs.
2. Statutory Basis
The Exchange believes that its
proposal to amend its Fee Schedule is
consistent with Section 6(b) of the Act 13
in general, and furthers the objectives of
Section 6(b)(5) of the Act 14 in that it is
designed to promote just and equitable
principles of trade, to remove
impediments to and perfect the
mechanism of a free and open market
and a national market system, and, in
general to protect investors and the
public interest and is not designed to
permit unfair discrimination between
customers, issuers, brokers and dealers.
The Exchange believes that its
proposal is consistent with the
objectives of Section 6(b)(5) of the Act 15
because the proposed additional
Limited Service MEI Ports will be
available to all Market Makers and the
current fees for the additional Limited
Service MEI Ports apply equally to all
Market Makers regardless of type, and
access to the Exchange is offered on
terms that are not unfairly
discriminatory. The Exchange is
proposing to increase the number of
available Limited Service MEI Ports
because the Exchange is expanding its
network. This network expansion is
necessary due to increased customer
demand and increased volatility in the
marketplace, both of which have
translated into increased message traffic
rates across the network. Consequently,
this network expansion, which
increases the number of switches
supporting customer facing systems, is
necessary in order to provide sufficient
and equal access to new and existing
Members, to maintain a sufficient
amount of network capacity head-room,
and to continue to provide the same
level of service across the Exchange’s
low-latency, high-throughput
technology environment.
Currently, the Exchange has 8
network switches that support the entire
customer base of MIAX. The Exchange
plans to increase this to 10 switches,
which will increase the number of
available customer ports by 25%. This
increase in the number of available
customer ports will enable the Exchange
to continue to provide sufficient and
equal access to MIAX Systems for all
Members. Absent the proposed increase
in available MEI Ports, the Exchange
projects that its current inventory will
be depleted and it will lack sufficient
13 15
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
15 15 U.S.C. 78f(b)(5).
14 15
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capacity to continue to meet Members’
access needs. Further, the Exchange
notes the decision of whether to
purchase two additional Limited
Service MEI Ports is completely
optional and it is a business decision for
each Market Maker to determine
whether the additional Limited Service
MEI Ports are necessary to meet their
business requirements.
The Exchange further believes that the
availability of the additional Limited
Service MEI Ports is equitable and not
unfairly discriminatory because it will
enable Market Makers to maintain
uninterrupted access to the MIAX
System and consequently enhance the
marketplace by helping Market Makers
to better manage risk, thus preserving
the integrity of the MIAX markets, all to
the benefit of and protection of investors
and the public as a whole.
The Exchange also believes that its
proposal is consistent with Section
6(b)(4) of the Act because only Market
Makers that voluntarily purchase the
two additional Limited Service MEI
Ports will be charged the existing $100
monthly fee per port, which has been
unchanged since 2016.16 The Exchange
does not propose to amend the fees
applicable to additional Limited Service
MEI Ports which have been previously
filed with the Commission and become
effective after notice and public
comment.17 As stated above, the
Exchange proposes to expand its
network by making available two
additional Limit Service MEI Ports due
to increased customer demand and
increased volatility in the marketplace,
both of which have translated into
increased message traffic rates across
the network. The cost to expand the
network in this manner is greater than
the revenue the Exchange anticipates
the additional Limited Service MEI
Ports will generate. Specifically, the
Exchange estimates it will incur a onetime cost of approximately $175,000 in
capital expenditures on hardware,
software, and other items to expand the
network to make available the two
additional Limited Service MEI Ports.
This estimated cost also includes
expense associated with providing the
necessary engineering and support
personnel to transition those Market
Makers who wish to acquire the two
additional Limited Service MEI Ports.
The Exchange projects that
approximately six or seven Market
Makers will elect to purchase the
additional Limited Service MEI Ports,
which will be subject to the existing
monthly fee of $100 per port.
16 See
17 See
supra note 10.
supra notes 10 and 11.
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16:38 Sep 09, 2020
Accordingly, the Exchange projects that
the annualized revenue from the two
additional Limited Service MEI Ports
will be approximately $16,800
(assuming that seven Market Makers
purchase the two additional Limited
Service MEI Ports). Therefore, the
Exchange’s cost in expanding its
network to provide its Members with
the two additional Limited Service MEI
Ports—approximately $175,000—is
clearly greater than the anticipated
annualized revenue the Exchange
expects to bring in from the two
additional Limited Service MEI Ports—
approximately $16,800. Further, the
Exchange anticipates it will incur
approximately $100,371 in annual
ongoing operating expense in order to
support the expanded network and the
two additional Limited Service MEI
Ports. Thus, the Exchange is not
generating a supra-competitive profit
from the provision of these two
additional Limited Service MEI Ports. In
fact, even excluding the one-time capital
expenditure cost of $175,000, the
Exchange anticipates generating an
annual loss from the provision of these
two additional Limited Service MEI
Ports of ($83,571)—that is, $16,800 in
revenue minus $100,371 in expense
equates to a loss of ($83,571) to support
the additional ports annually.
Subjecting the two additional Limited
Service MEI Ports to the existing $100
monthly fee per port is also designed to
encourage Market Makers to be efficient
with their port usage, thereby resulting
in a corresponding increase in the
efficiency that the Exchange would be
able to realize in managing its aggregate
costs for providing the two additional
ports. There is no requirement that any
Market Maker maintain a specific
number of Limited Service MEI Ports
and a Market Maker may choose to
maintain as many or as few of such
ports as each Market Maker deems
appropriate.
Finally, subjecting the two additional
Limited Service MEI Ports to the
existing $100 monthly fee will help to
encourage Limited Service MEI Port
usage in a way that aligns with the
Exchange’s regulatory obligations. As a
national securities exchange, the
Exchange is subject to Regulation
Systems Compliance and Integrity
(‘‘Reg. SCI’’).18 Reg. SCI Rule 1001(a)
requires that the Exchange establish,
maintain, and enforce written policies
and procedures reasonably designed to
ensure (among other things) that its Reg.
SCI systems have levels of capacity
adequate to maintain the Exchange’s
operational capability and promote the
18 17
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55907
maintenance of fair and orderly
markets.19 By encouraging Members to
be efficient with their usage of Limited
MEI Ports, the current fee that will
continue to apply to the proposed two
(2) additional Limited Service MEI Ports
will support the Exchange’s Reg. SCI
obligations in this regard by ensuring
that unused ports are available to be
allocated based on individual Members
needs and as the Exchange’s overall
order and trade volumes increase.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
MIAX does not believe that the
proposed rule change will result in any
burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act, as amended.
The proposed rule change will not
impose a burden on competition but
will benefit competition by enhancing
the Exchange’s ability to compete by
providing additional services to market
participants. It is not intended to
address a competitive issue. Rather, the
proposed increase in the number of
additional Limited Service MEI Ports
available per Market Maker is intended
to allow the Exchange to increase its
inventory of MEI Ports to meet
increased Member demand. The
Exchange is increasing the number of
available additional Limited Service
MEI Ports in response to Market Maker
demand for increased connectivity to
the MIAX System. The Exchange’s
current inventory may soon be
insufficient to meet those needs. Again,
the Exchange is not proposing to amend
the fees for MEI Ports, just to increase
the number of MEI Ports available per
Market Maker. The Exchange also does
not believe that the proposed rule
change will impose a burden on
intramarket competition because the
two additional Limited Service MEI
Ports will be available to all Market
Makers on an equal basis. It is a
business decision of each Market Maker
whether to pay for the additional
Limited Service MEI Ports.
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 17
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CFR 242.1001(a).
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Federal Register / Vol. 85, No. 176 / Thursday, September 10, 2020 / Notices
19(b)(3)(A)(ii) of the Act,20 and Rule
19b–4(f)(2) 21 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:
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Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
MIAX–2020–29 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–2020–29. 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–2020–29, and
should be submitted on or before
October 1, 2020.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.22
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020–20021 Filed 9–9–20; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–89760; File No. SR–LCH
SA–2020–004]
Self-Regulatory Organizations; LCH
SA; Notice of Filing of Proposed Rule
Change Relating to the Clearing of
Single Name Credit Default Swaps
Referencing Monoline Insurance
Companies and the Amendment of
LCH SA’s Rules in Accordance With its
Risk Policies
September 3, 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 August
28, 2020, Banque Centrale de
Compensation, which conducts
business under the name LCH SA (‘‘LCH
SA’’), filed with the Securities and
Exchange Commission (‘‘Commission’’)
the proposed rule change described in
Items I, II and III below, which Items
have been prepared primarily by LCH
SA. The Commission is publishing this
notice to solicit comments on the
proposed rule change from interested
persons.
I. Clearing Agency’s Statement of the
Terms of Substance of the Proposed
Rule Change
Banque Centrale de Compensation,
which conducts business under the
name LCH SA (‘‘LCH SA’’), is proposing
to amend its rules to permit the clearing
of single name credit default swaps
(‘‘CDS’’) referencing monoline insurance
companies. LCH SA is also proposing to
22 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
20 15
U.S.C. 78s(b)(3)(A)(ii).
21 17 CFR 240.19b–4(f)(2).
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revise a number of its rules to
incorporate new terms and to make
conforming and clarifying amendments
in order to implement a number of
changes required by LCH Group
Holdings Limited (‘‘LCH Group’’) Risk
Policies to which LCH SA adheres. The
text of the proposed rule change has
been annexed as Exhibit 5.
II. Clearing Agency’s Statement of the
Purpose of, and Statutory Basis for, the
Proposed Rule Change
In its filing with the Commission,
LCH SA 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. LCH SA has prepared
summaries, set forth in sections A, B,
and C below, of the most significant
aspects of these statements.
A. Clearing Agency’s Statement of the
Purpose of, and Statutory Basis for, the
Proposed Rule Change
1. Purpose
The Proposed Rule Change will
permit LCH SA to clear single name
CDS referencing monoline insurance
companies, i.e. an insurance company
that provides coverage for a specific
kind of insurable risk. Separately, by
revising a number of LCH SA’s rules to
incorporate new terms and to make
conforming and clarifying amendments,
the Proposed Rule Change will
implement a number of changes
required by LCH Group Holdings
Limited (‘‘LCH Group’’) Risk Policies to
which LCH SA adheres and further
enhance certain aspects of the CDS
Clearing Service, including the CDS
Default Management Process.3
The LCH Group Risk Policies also
include a few changes that apply only
to LCH Ltd and because of that, those
changes are not describes in this
narrative.
(i) Single Name CDS Referencing a
Monoline Insurance Company
LCH SA is proposing to introduce
clearing of single name CDS
transactions referencing monoline
insurance companies. Although indices
(e.g. CDX.NA.IG and CDS.NA.HY) that
3 The proposed amendments are set out in in the
following: (i) CDS Clearing Rule Book (‘‘Rule
Book’’); (ii) CDS Clearing Supplement
(‘‘Supplement’’); (iii) CDS Clearing Procedures
(‘‘Procedures’’); (iv) Reference Guide: CDS Margin
Framework; and (v) CDSClear Default Fund
Methodology (together with the Reference Guide:
CDS Margin Framework, the ‘‘CDSClear Risk
Methodology’’). All capitalized terms not defined
herein have the same definition as the Rule Book,
Supplement or Procedures, as applicable.
E:\FR\FM\10SEN1.SGM
10SEN1
]]>Agencies
[Federal Register Volume 85, Number 176 (Thursday, September 10, 2020)]
[Notices]
[Pages 55905-55908]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-20021]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-89769; File No. SR-MIAX-2020-29]
Self-Regulatory Organizations; Miami International Securities
Exchange, LLC; Notice of Filing and Immediate Effectiveness of a
Proposed Rule Change To Amend Its Fee Schedule To Increase the Number
of Additional Limited Service MIAX Express Interface Ports Available to
Market Makers
September 4, 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 August 25, 2020, Miami International Securities Exchange, LLC
(``MIAX Options'' or ``Exchange'') filed with the Securities and
Exchange Commission (``Commission'') the 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'') to increase the number of additional
Limited Service MIAX Express Interface (``MEI'') Ports available to
Market Makers.\3\ The Exchange does not propose to amend the fees for
additional Limited Service MEI Ports.
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\3\ The term ``Market Makers'' refers to Lead Market Makers
(``LMMs''), Primary Lead Market Makers (``PLMMs''), and Registered
Market Makers (``RMMs'') collectively. See Exchange Rule 100.
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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 offer two (2)
additional Limited Service MEI Ports to Market Makers. The Exchange
does not propose to amend the fees charged for the additional Limited
Service MEI Ports.
The Exchange initially filed the proposal to increase the number of
Limited Service MEI Ports available to Market Makers on June 30, 2020,
with no change to the actual fee amounts being charged.\4\ The First
Proposed Rule Change was published for comment in the Federal Register
on July 20, 2020.\5\ On August 25, 2020, the Exchange
[[Page 55906]]
withdrew the First Proposed Rule Change.\6\
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\4\ See Securities Exchange Act Release No. 89317 (July 14,
2020), 85 FR 43918 (July 20, 2020) (SR-MIAX-2020-23) (the ``First
Proposed Rule Change'').
\5\ Id.
\6\ See Comment Letter from Christopher Solgan, VP, Senior
Counsel, the Exchange, dated August 24, 2020, notifying the
Commission that the Exchange will withdraw the First Proposed Rule
Change.
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The Exchange notes that the First Proposed Rule Change did not
receive any comment letters; however, the Exchange has determined to
refile its proposal to increase the number of Limited Service MEI Ports
available to Market Makers (without increasing the actual fee amounts)
to provide further clarification regarding the Exchange's annual cost
for providing additional Limited Service MEI Ports.
Currently, MIAX assesses monthly MEI Port Fees on Market Makers
based upon the number of MIAX matching engines \7\ used by the Market
Maker. Market Makers are allocated two (2) Full Service MEI Ports \8\
and two (2) Limited Service MEI Ports \9\ per matching engine to which
they connect. The Full Service MEI Ports, Limited Service MEI Ports,
and the additional Limited Service MEI Ports all include access to
MIAX's primary and secondary data centers and its disaster recovery
center. Market Makers may request additional Limited Service MEI Ports
for which they will be assessed the existing $100 monthly fee for each
additional port they request. This fee has been unchanged since
2016.\10\
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\7\ A ``matching engine'' is a part of the MIAX electronic
system that processes options quotes and trades on a symbol-by-
symbol basis. Some matching engines will process option classes with
multiple root symbols, and other matching engines will be dedicated
to one single option root symbol (for example, options on SPY will
be processed by one single matching engine that is dedicated only to
SPY). A particular root symbol may only be assigned to a single
designated matching engine. A particular root symbol may not be
assigned to multiple matching engines. See Fee Schedule, Section
5)d)ii), note 29.
\8\ Full Service MEI Ports provide Market Makers with the
ability to send Market Maker quotes, eQuotes, and quote purge
messages to the MIAX System. Full Service MEI Ports are also capable
of receiving administrative information. Market Makers are limited
to two Full Service MEI Ports per matching engine. See Fee Schedule,
Section 5)d)ii), note 27.
\9\ Limited Service MEI Ports provide Market Makers with the
ability to send eQuotes and quote purge messages only, but not
Market Maker Quotes, to the MIAX System. Limited Service MEI Ports
are also capable of receiving administrative information. Market
Makers initially receive two Limited Service MEI Ports per matching
engine. See Fee Schedule, Section 5)d)ii), note 28.
\10\ See Securities Exchange Act Release No. 79666 (December 22,
2016), 81 FR 96133 (December 29, 2016) (SR-MIAX-2016-47).
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The Exchange originally added the Limited Service MEI Ports to
enhance the MEI Port connectivity made available to Market Makers, and
has subsequently made additional Limited Service MEI Ports available to
Market Makers.\11\ Limited Service MEI Ports have been well received by
Market Makers since their addition. The Exchange now proposes to offer
to Market Makers the ability to purchase an additional two (2) Limited
Service MEI Ports per matching engine over and above the current six
(6) additional Limited Service MEI Ports per matching engine that are
available for purchase by Market Makers. The Exchange proposes making a
corresponding change to footnote 30 of the Exchange's Fee Schedule to
specify that Market Makers will now be limited to purchasing eight (8)
additional Limited Service MEI Ports per matching engine, for a total
of ten (10) per matching engine. All fees related to MEI Ports shall
remain unchanged and Market Makers that voluntarily purchase the
additional Limited Service MEI Ports will remain subject to the
existing $100 monthly fee per port.
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\11\ See Securities Exchange Act Release Nos. 70137 (August 8,
2013), 78 FR 49586 (August 14, 2013) (SR-MIAX-2013-39); 70903
(November 20, 2013), 78 FR 70615 (November 26, 2013) (SR-MIAX-2013-
52); 78950 (September 27, 2016), 81 FR 68084 (October 3, 2016) (SR-
MIAX-2016-33); and 79198 (October 31, 2016), 81 FR 76988 (November
4, 2016) (SR-MIAX-2016-37).
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The Exchange is increasing the number of additional Limited Service
MEI Ports because the Exchange is expanding its network. This network
expansion is necessary due to increased customer demand and increased
volatility in the marketplace, both of which have translated into
increased message traffic rates across the network. Consequently, this
network expansion, which increases the number of switches supporting
customer facing systems, is necessary in order to provide sufficient
access to new and existing Members,\12\ to maintain a sufficient amount
of network capacity head-room, and to continue to provide the same
level of service across the Exchange's low-latency, high-throughput
technology environment.
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\12\ 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.
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Currently, the Exchange has 8 network switches that support the
entire customer base of MIAX. The Exchange plans to increase this to 10
switches, which will increase the number of available customer ports by
25%. This increase in the number of available customer ports will
enable the Exchange to continue to provide sufficient and equal access
to MIAX Systems to all Members. Absent the proposed increase in
available MEI Ports, the Exchange projects that its current inventory
will be depleted and it will lack sufficient capacity to continue to
meet Members' access needs.
2. Statutory Basis
The Exchange believes that its proposal to amend its Fee Schedule
is consistent with Section 6(b) of the Act \13\ in general, and
furthers the objectives of Section 6(b)(5) of the Act \14\ 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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\13\ 15 U.S.C. 78f(b).
\14\ 15 U.S.C. 78f(b)(5).
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The Exchange believes that its proposal is consistent with the
objectives of Section 6(b)(5) of the Act \15\ because the proposed
additional Limited Service MEI Ports will be available to all Market
Makers and the current fees for the additional Limited Service MEI
Ports apply equally to all Market Makers regardless of type, and access
to the Exchange is offered on terms that are not unfairly
discriminatory. The Exchange is proposing to increase the number of
available Limited Service MEI Ports because the Exchange is expanding
its network. This network expansion is necessary due to increased
customer demand and increased volatility in the marketplace, both of
which have translated into increased message traffic rates across the
network. Consequently, this network expansion, which increases the
number of switches supporting customer facing systems, is necessary in
order to provide sufficient and equal access to new and existing
Members, to maintain a sufficient amount of network capacity head-room,
and to continue to provide the same level of service across the
Exchange's low-latency, high-throughput technology environment.
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\15\ 15 U.S.C. 78f(b)(5).
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Currently, the Exchange has 8 network switches that support the
entire customer base of MIAX. The Exchange plans to increase this to 10
switches, which will increase the number of available customer ports by
25%. This increase in the number of available customer ports will
enable the Exchange to continue to provide sufficient and equal access
to MIAX Systems for all Members. Absent the proposed increase in
available MEI Ports, the Exchange projects that its current inventory
will be depleted and it will lack sufficient
[[Page 55907]]
capacity to continue to meet Members' access needs. Further, the
Exchange notes the decision of whether to purchase two additional
Limited Service MEI Ports is completely optional and it is a business
decision for each Market Maker to determine whether the additional
Limited Service MEI Ports are necessary to meet their business
requirements.
The Exchange further believes that the availability of the
additional Limited Service MEI Ports is equitable and not unfairly
discriminatory because it will enable Market Makers to maintain
uninterrupted access to the MIAX System and consequently enhance the
marketplace by helping Market Makers to better manage risk, thus
preserving the integrity of the MIAX markets, all to the benefit of and
protection of investors and the public as a whole.
The Exchange also believes that its proposal is consistent with
Section 6(b)(4) of the Act because only Market Makers that voluntarily
purchase the two additional Limited Service MEI Ports will be charged
the existing $100 monthly fee per port, which has been unchanged since
2016.\16\ The Exchange does not propose to amend the fees applicable to
additional Limited Service MEI Ports which have been previously filed
with the Commission and become effective after notice and public
comment.\17\ As stated above, the Exchange proposes to expand its
network by making available two additional Limit Service MEI Ports due
to increased customer demand and increased volatility in the
marketplace, both of which have translated into increased message
traffic rates across the network. The cost to expand the network in
this manner is greater than the revenue the Exchange anticipates the
additional Limited Service MEI Ports will generate. Specifically, the
Exchange estimates it will incur a one-time cost of approximately
$175,000 in capital expenditures on hardware, software, and other items
to expand the network to make available the two additional Limited
Service MEI Ports. This estimated cost also includes expense associated
with providing the necessary engineering and support personnel to
transition those Market Makers who wish to acquire the two additional
Limited Service MEI Ports.
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\16\ See supra note 10.
\17\ See supra notes 10 and 11.
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The Exchange projects that approximately six or seven Market Makers
will elect to purchase the additional Limited Service MEI Ports, which
will be subject to the existing monthly fee of $100 per port.
Accordingly, the Exchange projects that the annualized revenue from the
two additional Limited Service MEI Ports will be approximately $16,800
(assuming that seven Market Makers purchase the two additional Limited
Service MEI Ports). Therefore, the Exchange's cost in expanding its
network to provide its Members with the two additional Limited Service
MEI Ports--approximately $175,000--is clearly greater than the
anticipated annualized revenue the Exchange expects to bring in from
the two additional Limited Service MEI Ports--approximately $16,800.
Further, the Exchange anticipates it will incur approximately $100,371
in annual ongoing operating expense in order to support the expanded
network and the two additional Limited Service MEI Ports. Thus, the
Exchange is not generating a supra-competitive profit from the
provision of these two additional Limited Service MEI Ports. In fact,
even excluding the one-time capital expenditure cost of $175,000, the
Exchange anticipates generating an annual loss from the provision of
these two additional Limited Service MEI Ports of ($83,571)--that is,
$16,800 in revenue minus $100,371 in expense equates to a loss of
($83,571) to support the additional ports annually.
Subjecting the two additional Limited Service MEI Ports to the
existing $100 monthly fee per port is also designed to encourage Market
Makers to be efficient with their port usage, thereby resulting in a
corresponding increase in the efficiency that the Exchange would be
able to realize in managing its aggregate costs for providing the two
additional ports. There is no requirement that any Market Maker
maintain a specific number of Limited Service MEI Ports and a Market
Maker may choose to maintain as many or as few of such ports as each
Market Maker deems appropriate.
Finally, subjecting the two additional Limited Service MEI Ports to
the existing $100 monthly fee will help to encourage Limited Service
MEI Port usage in a way that aligns with the Exchange's regulatory
obligations. As a national securities exchange, the Exchange is subject
to Regulation Systems Compliance and Integrity (``Reg. SCI'').\18\ Reg.
SCI Rule 1001(a) requires that the Exchange establish, maintain, and
enforce written policies and procedures reasonably designed to ensure
(among other things) that its Reg. SCI systems have levels of capacity
adequate to maintain the Exchange's operational capability and promote
the maintenance of fair and orderly markets.\19\ By encouraging Members
to be efficient with their usage of Limited MEI Ports, the current fee
that will continue to apply to the proposed two (2) additional Limited
Service MEI Ports will support the Exchange's Reg. SCI obligations in
this regard by ensuring that unused ports are available to be allocated
based on individual Members needs and as the Exchange's overall order
and trade volumes increase.
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\18\ 17 CFR 242.1000-1007.
\19\ 17 CFR 242.1001(a).
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B. Self-Regulatory Organization's Statement on Burden on Competition
MIAX does not believe that the proposed rule change will result in
any burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act, as amended. The proposed rule
change will not impose a burden on competition but will benefit
competition by enhancing the Exchange's ability to compete by providing
additional services to market participants. It is not intended to
address a competitive issue. Rather, the proposed increase in the
number of additional Limited Service MEI Ports available per Market
Maker is intended to allow the Exchange to increase its inventory of
MEI Ports to meet increased Member demand. The Exchange is increasing
the number of available additional Limited Service MEI Ports in
response to Market Maker demand for increased connectivity to the MIAX
System. The Exchange's current inventory may soon be insufficient to
meet those needs. Again, the Exchange is not proposing to amend the
fees for MEI Ports, just to increase the number of MEI Ports available
per Market Maker. The Exchange also does not believe that the proposed
rule change will impose a burden on intramarket competition because the
two additional Limited Service MEI Ports will be available to all
Market Makers on an equal basis. It is a business decision of each
Market Maker whether to pay for the additional Limited Service MEI
Ports.
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
[[Page 55908]]
19(b)(3)(A)(ii) of the Act,\20\ and Rule 19b-4(f)(2) \21\ 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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\20\ 15 U.S.C. 78s(b)(3)(A)(ii).
\21\ 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-2020-29 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-2020-29. 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-2020-29, and should be submitted on
or before October 1, 2020.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\22\
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\22\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-20021 Filed 9-9-20; 8:45 am]
BILLING CODE 8011-01-P
