Self-Regulatory Organizations; Miami International Securities Exchange LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Its Fee Schedule for the Complex PRIME Agency Order Credit, 40104-40108 [2021-15809]

Download as PDF 40104 Federal Register / Vol. 86, No. 140 / Monday, July 26, 2021 / Notices 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–NYSEArca–2021–61. 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 (http://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–NYSEArca–2021–61 and should be submitted on or before August 16, 2021. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.19 J. Matthew DeLesDernier, Assistant Secretary. [FR Doc. 2021–15811 Filed 7–23–21; 8:45 am] jbell on DSKJLSW7X2PROD with NOTICES BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–92448; File No. SR–MIAX– 2021–34] Self-Regulatory Organizations; Miami International Securities Exchange LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Its Fee Schedule for the Complex PRIME Agency Order Credit July 20, 2021. Pursuant to the provisions of Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 notice is hereby given that on July 12, 2021, Miami International Securities Exchange LLC (‘‘MIAX’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’) a proposed rule change as described in Items I, II, and III below, which Items have been prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange is filing a proposal to amend the MIAX Options Fee Schedule (the ‘‘Fee Schedule’’). The text of the proposed rule change is available on the Exchange’s website at http://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. 1 15 19 17 CFR 200.30–3(a)(12). VerDate Sep<11>2014 17:10 Jul 23, 2021 2 17 Jkt 253001 PO 00000 U.S.C. 78s(b)(1). CFR 240.19b–4. Frm 00115 Fmt 4703 Sfmt 4703 A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange proposes to amend the Fee Schedule to (i) modify the Priority Customer Rebate Program (‘‘PCRP’’) 3 as it pertains to per contract credits for complex PRIME (‘‘cPRIME’’) 4 Agency Orders for Priority Customers; and (ii) to remove the per contract credit cap for cPRIME Agency Orders for Priority Customers and the associated waiver of same which was in effect until June 30, 2021. The Exchange initially filed this proposal on July 1, 2021 (SR–MIAX– 2021–33) and withdrew such filing on July 12, 2021. The Exchange proposes to implement the fee change effective July 12, 2021. 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, Interpretation and 3 Under the PCRP, MIAX Options 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 Priority Customer Rebate Program table. See Fee Schedule, Section (1)(a)iii. 4 ‘‘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. 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). E:\FR\FM\26JYN1.SGM 26JYN1 Federal Register / Vol. 86, No. 140 / Monday, July 26, 2021 / Notices 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 8 may electronically submit for execution an order it represents as agent (an ‘‘Agency Order’’) against principal interest and/or solicited interest. The Member that submits the Agency Order (‘‘Initiating Member’’) agrees to guarantee the execution of the Agency Order by submitting a contra-side order representing principal interest or solicited interest (‘‘Contra-Side Order’’). When the Exchange receives a properly designated Agency Order for Auction processing, a request for response (‘‘RFR’’) detailing the option, side, size and initiating price is broadcasted to MIAX participants up to an optional designated limit price. Members may submit responses to the RFR, which can be either an Auction or Cancel (‘‘AOC’’) order 9 or an AOC eQuote.10 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, jbell on DSKJLSW7X2PROD with NOTICES 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 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. 9 An Auction-or-Cancel or ‘‘AOC’’ order is a limit order used to provide liquidity during a specific Exchange process (such as the Opening Imbalance process described in Rule 503) with a time in force that corresponds with that event. AOC orders are not displayed to any market participant, are not included in the MBBO and therefore are not eligible for trading outside of the event, may not be routed, and may not trade at a price inferior to the away markets. See Exchange Rule 516(b)(4). 10 An Auction or Cancel or ‘‘AOC’’ eQuote is a quote submitted by a Market Maker to provide liquidity in a specific Exchange process (such as the Opening Imbalance Process described in Rule 503) with a time in force that corresponds with the duration of that event and will automatically expire at the end of that event. AOC eQuotes are not displayed to any market participant, are not included in the MBBO and therefore are not eligible for trading outside of the event. An AOC eQuote does not automatically cancel or replace the Market Maker’s previous Standard quote or eQuote. See Exchange Rule 517(a)(2)(ii). VerDate Sep<11>2014 17:10 Jul 23, 2021 Jkt 253001 the price and size of a RFR that is broadcast to MIAX 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.11 The cPRIME mechanism is used for Complex Orders 12 on the Exchange’s Strategy Book,13 with the cPRIME mechanism operating in the same manner for processing and execution of cPRIME Orders that is used for PRIME Orders on the Simple Order Book. Removal of Contract Cap In conjunction with the implementation of cPRIME Orders on the Exchange, the Exchange amended its Priority Customer Rebate Program to establish a per contract credit rate for cPRIME Agency Orders for Priority Customers.14 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 in its filing on August 1, 2018.15 On February 28, 2020, the Exchange amended the Fee Schedule to waive the 1,000 contract cap per leg for cPRIME Agency Order rebates for all tiers under the PCRP from March 1, 2020, until May 31, 2020.16 The Exchange subsequently extended the waiver from June 1, 2020, until June 30, 2021, in a series of filings beginning June 2020.17 The Exchange now 11 The ‘‘Simple Order Book’’ is the Exchange’s regular electronic book of orders and quotes. See Exchange Rule 518(a)(15). 12 See supra note 6. Mini-options may only be part of a complex order that includes other minioptions. 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). 13 The ‘‘Strategy Book’’ is the Exchange’s electronic book of complex orders and complex quotes. See Exchange Rule 518(a)(17). 14 See Securities Exchange Act Release No. 81372 (August 10, 2017) 82 FR 38964 (August 16, 2017) (SR–MIAX–2017–40). 15 See Securities Exchange Act Release No.83797 (August 8, 2018), 83 FR 40373 (August 14, 2018) (SR–MIAX–2018–22). 16 See Securities Exchange Act Release No. 88349 (March 10, 2020), 85 FR 14995 (March 16, 2020) (SR–MIAX–2020–05). 17 See Securities Exchange Act Release Nos. 89035 (June 9, 2020), 85 FR 36249 (June 15, 2020) (SR–MIAX–2020–12) (Extending the waiver period from June 1, 2020, until July 31, 2020); 89530 (August 12, 2020), 85 FR 50845 (August 18, 2020) (SR–MIAX–2020–26) (Extending the waiver period from July 31, 2020, until August 31, 2020); 89771 (September 4, 2020), 85 FR 55873 (September 10, 2020) (SR–MIAX–2020–28) (Extending the waiver period from August 31, 2020, until December 31, 2020); 90818 (December 29, 2020), 86 FR 350 (January 5, 2021) (SR–MIAX–2020–40) (Extending PO 00000 Frm 00116 Fmt 4703 Sfmt 4703 40105 proposes to remove footnote ‘‘*’’ in Section (1)(a)(iii) of the Fee Schedule in its entirety to remove the per contract credit cap of 1,000 contracts and to also eliminate the waiver of the contract cap per leg for cPRIME Agency Order rebates for all tiers under the PCRP. cPRIME Agency Order per Contract Credit In conjunction with the removal of the per credit cap of 1,000 contracts as described above, the Exchange now proposes to adopt a new table under the PCRP for cPRIME Agency Orders for Priority Customers where the max leg of the order is greater than 1,000 contracts. The table will provide a tiered agency credit rate for cPRIME Agency Orders for Priority Customers dependent upon the break-up percentage and the largest leg of the order being greater than 1,000 contracts for Members in PCRP Tiers 1– 4, unless the Member is eligible to receive the alternative cPRIME Agency Order Credit amount for cPRIME Agency Orders in Tier 4 of the PRCP,18 in which case those orders will earn a credit of $0.12. Orders that have a max leg size of 1,000 contracts or less will continue to receive the agency credit described in PCRP Tier 1–4, unless the Member is eligible to receive the alternative cPRIME Agency Order Credit amount for cPRIME Agency Orders in Tier 4 of the PCRP, in which case the order will earn a per contract credit of $0.12.19 The Exchange proposes to adopt new footnote ‘‘*’’ to state that for cPRIME Agency Orders with a max leg size of 1,000 contracts or less, the Exchange will assess the credits as described in the Priority Customer Rebate Program table for Tiers 1–4 regardless of the Order Break-up percentage. Additionally, the break-up credits described in section (1)(a)(vi) of the Fee Schedule will continue to apply. The table will provide a per contract agency credit based upon the break-up percentage of the order. Specifically, orders with a break-up % of 0–10% will earn a credit of $0.05 per contract; orders with a break-up percentage the waiver period from December 31, 2020, until March 31, 2021); and 91505 (April 8, 2021), 86 FR 19677 (April 14, 2021) (SR–MIAX–2021–07) (Extending the waiver period from April 1, 2021, until June 30, 2021). 18 Under the PCRP, any Member or its Affiliate that qualifies for Priority Customer Rebate Program tier 4 and executes Priority Customer standard, nonpaired complex volume at least equal to or greater than three (3) times their Priority Customer cPRIME Agency Order volume, on a monthly basis, will receive a credit of $0.12 per contract for cPRIME Agency Orders instead of the credit otherwise applicable to such orders in tier 4. 19 Id. E:\FR\FM\26JYN1.SGM 26JYN1 40106 Federal Register / Vol. 86, No. 140 / Monday, July 26, 2021 / Notices jbell on DSKJLSW7X2PROD with NOTICES greater than 10% to, and including 20%, will earn a per contract credit of $0.06; orders with a break-up percentage greater than 20% to, and including 30%, will earn a per contract credit of $0.07; orders with a break-up percentage greater than 30% to, and including 40%, will earn a per contract credit of $0.08; orders with a break-up percentage greater than 40% will earn a per contract credit of $0.10, unless the Member is eligible to receive the alternative cPRIME Agency Order Credit amount for cPRIME Agency Orders in Tier 4 of the PCRP, in which case the order will earn a per contract credit of $0.12.20 For example, if the cPRIME Agency Order has two legs (one for 400 contracts and the other for 1,200 contracts) and trades 30% with an AOC Response, the order would receive an agency credit of $0.07 per contract for all legs of the order, as the max leg of the order was greater than 1,000 contracts and 30% of the order was broken up. The portion of the order that was broken up will also receive the agency credit of $0.07 per contract. The decision to offer tiered cPRIME agency credits and to remove the credit cap is based on an analysis of current revenue and volume levels and is designed to encourage Priority Customer order flow to the Exchange. 2. Statutory Basis The Exchange believes that its proposal to amend its Fee Schedule is consistent with Section 6(b) of the Act 21 in general, and furthers the objectives of Section 6(b)(4) of the Act 22 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 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 in which market participants can readily direct 20 See supra note 18. U.S.C. 78f(b). 22 15 U.S.C. 78f(b)(4) and (5). 21 15 VerDate Sep<11>2014 17:10 Jul 23, 2021 Jkt 253001 order flow to competing venues if they deem fee levels at a particular venue to be excessive or incentives to be insufficient. More specifically, the Exchange is only one of 16 options venues to which market participants may direct their order flow. Based on publicly available information, no single options exchange has more than 16% of the market share.23 Thus, in such a lowconcentrated and highly competitive market, no single options exchange possess significant pricing power in the execution of option order flow. The Exchange believes that the evershifting market share among the exchanges from month to month demonstrates that market participants can shift order flow, or discontinue use of certain categories of products, in response to 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.24 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. Accordingly, competitive forces constrain the Exchange’s transaction fees, and market participants can readily trade on competing venues if they deem pricing levels at those other venues to be more favorable. In response to the competitive environment, the Exchange offers specific rates and credits in its fees schedule, like those of other options exchanges’ fees schedules, which the Exchange believes provides incentives to Members to increase order flow of certain qualifying orders. The Exchange believes that its proposal to remove the 1,000 contract cap limitation per leg of cPRIME Agency Orders and the associated waiver of same, and the proposed per contract credit rebate table will encourage Priority Customer order flow to auctions. Increased Priority Customer order flow benefits all market participants because it continues to attract liquidity to the Exchange by providing more trading opportunities. This attracts Market Makers and other liquidity providers, thus, facilitating 23 See https://www.cboe.com/us/options/market_ share/. 24 See Securities Exchange Act Release No. 85301 (March 13, 2019), 84 FR 10166 (March 19, 2019) (SR–MIAX–2019–09). PO 00000 Frm 00117 Fmt 4703 Sfmt 4703 price improvement in the auction process, signaling additional corresponding increase in order flow from other market participants, and, as a result, increasing liquidity on the Exchange. The Exchange believes that its proposal to adopt a tiered approach to rebates for cPRIME Agency Orders for Priority Customers is consistent with Section 6(b)(4) of the Act in that the proposal is reasonable, equitable and not unfairly discriminatory. As noted above, the Exchange operates in a highly competitive market. The Exchange is only one of several options venues to which market participants may direct their order flow, and it represents a small percentage of the overall market. The Exchange believes that the proposed fees are reasonable, equitable, and not unfairly discriminatory in that competing options exchanges offer similar fees and credits in connection with similar price improvement auctions.25 cPRIME Agency Orders for Priority Customers that have a max leg size of 1,000 contracts or less will continue to receive the agency credit described in PCRP Tier 1–4, unless the Member is eligible to receive the alternative cPRIME Agency Order Credit amount for cPRIME Agency Orders in Tier 4 of the PCRP, in which case the order will earn a per contract credit of $0.12.26 The Exchange believes that establishing a 1,000 contract threshold is not new or novel as other exchanges have different pricing and rates (i.e., caps) for volume over 1,000 contracts.27 The Exchange’s proposal to adopt a new table to provide a tiered credit rate for cPRIME Agency Orders for Priority Customers whose largest leg size is greater than 1,000 contracts is consistent with Section 6(b)(4) of the Act 28 because it applies equally to all participants of the PCRP. The Exchange believes that the proposed rebate structure is fair, equitable and not unreasonably discriminatory. The PCRP is reasonably designed because it will continue to provide an incentive to providers of Priority Customer order flow to send that Priority Customer order flow to the Exchange to receive a credit in a manner that enables the Exchange to improve its overall competitiveness and strengthen its market quality for all participants. The 25 See Cboe Fee Schedule, ‘‘Break-Up Credits,’’ available at https://cdn.cboe.com/resources/ members_hip/Cboe_FeeSchedule.pdf. 26 See supra note 18. 27 See Cboe Fees Schedule, p.2; see also NYSE American Fee Schedule, p. 18, footnote 2 under Section I.G. 28 15 U.S.C. 78f(b)(4). E:\FR\FM\26JYN1.SGM 26JYN1 jbell on DSKJLSW7X2PROD with NOTICES Federal Register / Vol. 86, No. 140 / Monday, July 26, 2021 / Notices Exchange conducted an internal analysis of fees and rebates associated with cPRIME Agency Orders and determined the proposed applicable rates at each Order Break-up %. For pricing and competitive reasons the Exchange determined that the agency credit for Order Break-ups from 0%– 40% would be tiered, and that Order Break-ups of greater than 40% would receive a standard agency credit of $0.10, unless the Member is eligible to receive the alternative cPRIME Agency Order Credit amount for cPRIME Agency Orders in Tier 4 of the PCRP, in which case the order will earn a per contract credit of $0.12.29 In addition, The Exchange believes that its proposal is consistent with Section 6(b)(5) of the Act 30 because it perfects the mechanisms of a free and open market and a national market system and protects investors and the public interest because an increase in Priority Customer order flow will bring greater volume and liquidity to the Exchange, which benefits all market participants by providing more trading opportunities and tighter spreads. To the extent Priority Customer order flow is increased by this proposal, market participants will increasingly compete for the opportunity to trade on the Exchange including sending more orders and provided narrower and larger-sized quotations in the effort to trade with such Priority Customer order flow. The Exchange believes that providing rebates for Priority Customers that submit cPRIME Agency Orders is equitable and not unfairly discriminatory because the proposed rebate schedule will apply equally to all cPRIME Agency Orders for Priority Customers. The Exchange believes that the application of the rebate is equitable and not unfairly discriminatory because, as stated above, Priority Customer order flow enhances liquidity on the Exchange, in turn providing more trading opportunities and attracting other market participants, thus, facilitating tighter spreads, increased order flow and trading opportunities to the benefit of all market participants. Moreover, the options industry has a long history of providing preferential pricing to Priority Customer orders, and the Exchange’s current fees schedule currently does so in many places, as does the fee structure of at least one other exchange.31 B. Self-Regulatory Organization’s Statement on Burden on Competition In accordance with Section 6(b)(8) of the Act,32 the Exchange does not believe that the proposed rule change will impose any burden on intra-market or intra-market competition that is not necessary or appropriate in furtherance of the purposes of the Act. Rather, as discussed above, the Exchange believes that the proposed change would encourage the submission of additional liquidity to price improvement auctions, thereby promoting market depth, price discovery and transparency and enhancing order execution and price improvement opportunities for all Members. As a result, the Exchange believes that the proposed change furthers the Commission’s goal in adopting Regulation NMS of fostering competition among orders, which promotes ‘‘more efficient pricing of individual stocks for all types of orders, large and small.’’ 33 The Exchange does not believe that its proposal will impose any burden on intra-market competition that is not necessary or appropriate in furtherance of the purposes of the Act because the proposed changes will apply uniformly to all eligible Priority Customer orders. 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 cPRIME Agency Orders for Priority Customers, which will increase liquidity and benefit all market participants by providing more trading opportunities and tighter spreads. The Exchange notes the fact that preferential pricing to Priority Customers is a long-standing options industry practice. The proposed rebate changes serve to enhance Priority Customer order flow to the Exchange’s Price Improvement Mechanism, which, as a result, facilitates increased liquidity and execution opportunities to the benefit of all market participants. The Exchange also does not believe that its proposal will impose any burden on inter-market competition that is not necessary or appropriate in furtherance of the purposes of the Act because, as noted above, at least one other competing options exchange 34 currently has similar rebates in place in connection with similar price improvement auctions. Additionally, and as previously discussed, the Exchange operates in a highly 32 15 U.S.C. 78f(b)(8). Securities Exchange Act Release No. 51808, 70 FR 37495, 37498–99 (June 29, 2005) (S7–10–04) (Final Rule). 34 See supra note 27. 33 See 29 See supra note 18. U.S.C. 78f(b)(4). 31 See supra note 27. 30 15 VerDate Sep<11>2014 17:10 Jul 23, 2021 Jkt 253001 PO 00000 Frm 00118 Fmt 4703 Sfmt 4703 40107 competitive market. Members have numerous alternative venues that they participate on and direct their order flow to, including 15 other options exchanges, many of which offer substantially similar price improvement auctions. Based on publicly available information, no single options exchange has more than 16% of the market share.35 Therefore, no exchange possesses significant pricing power in the execution of option order flow. Participants can readily choose to send their orders to other exchanges if they deem fee levels at those other exchanges to be more favorable. Moreover, the Commission has repeatedly expressed its preference for competition over regulatory intervention in determining prices, products, and services in the securities markets. Specifically, in Regulation NMS, the Commission highlighted the importance of market forces in determining prices and SRO revenues and, also, recognized that current regulation of the market system ‘‘has been remarkably successful in promoting market competition in its broader forms that are most important to investors and listed companies.’’ 36 The fact that this market is competitive has also long been recognized by the courts. In NetCoalition v. Securities and Exchange Commission, the D.C. Circuit states as follows: ‘‘[n]o one disputes that competition for order flow is ‘fierce.’ . . . As the SEC explained, ‘[i]n the U.S. national market system, buyers and sellers of securities, and the brokerdealers that act as their order-routing agents, have a wide range of choices of where to route orders for execution’; [and] ‘no exchange can afford to take its market share percentages for granted’ because ‘no exchange possesses a monopoly, regulatory or otherwise, in the execution of order flow from broker dealers’ . . .’’ 37 Accordingly, the Exchange does not believe its proposed fee change imposes any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. Accordingly, the Exchange believes that the proposed changes will not impose any burden on competition that is 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 35 See supra note 23. Securities Exchange Act Release No. 51808 (June 9, 2005), 70 FR 37496, 37499 (June 29, 2005). 37 NetCoalition v. SEC, 615 F.3d 525, 539 (D.C. Cir. 2010) (quoting Securities Exchange Act Release No. 59039 (December 2, 2008), 73 FR 74770, 74782– 83 (December 9, 2008) (SR–NYSEArca–2006–21)). 36 See E:\FR\FM\26JYN1.SGM 26JYN1 40108 Federal Register / Vol. 86, No. 140 / Monday, July 26, 2021 / Notices trading opportunities and tighter spreads. 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,38 and Rule 19b–4(f)(2) 39 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: jbell on DSKJLSW7X2PROD with NOTICES Electronic Comments • Use the Commission’s internet comment form (http://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– MIAX–2021–34 on the subject line. Paper Comments • Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549–1090. All submissions should refer to File Number SR–MIAX–2021–34. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission’s internet website (http://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–2021–34, and should be submitted on or before August 16, 2021. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.40 J. Matthew DeLesDernier, Assistant Secretary. [FR Doc. 2021–15809 Filed 7–23–21; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–92446; File No. SR– NYSENAT–2021–15] Self-Regulatory Organizations; NYSE National, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Amending Its Rules To Add New Subparagraph (i)(4) to Rule 7.31 July 20, 2021. Pursuant to Section 19(b)(1) 1 of the Securities Exchange Act of 1934 (the ‘‘Act’’) 2 and Rule 19b–4 thereunder,3 notice is hereby given that on July 6, 2021, NYSE National, Inc. (‘‘NYSE National’’ or the ‘‘Exchange’’) filed with the Securities and Exchange Commission (the ‘‘Commission’’) the proposed rule change as described in Items I, II and III below, which Items have been prepared by the selfregulatory organization. The Commission is publishing this notice to 40 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 15 U.S.C. 78a. 3 17 CFR 240.19b–4. 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 proposes to its rules to add new subparagraph (i)(4) to Rule 7.31 (Orders and Modifiers) regarding orders designated as ‘‘Retail Orders.’’ The proposed rule change is available on the Exchange’s website at www.nyse.com, at the principal office of the Exchange, and at the Commission’s Public Reference Room. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the self-regulatory organization 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 those 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 parts of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and the Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange proposes to amend its rules to add new subparagraph (i)(4) to Rule 7.31 (Orders and Modifiers) to add a description of a Retail Order modifier. Proposed Rule Change The Exchange proposes to amend Rule 7.31 to add new subparagraph (i)(4) to provide for ETP Holders 4 to designate an order with a retail modifier (‘‘Retail Order’’). The Exchange proposes that the new ‘‘Retail Order’’ modifier would be used only for purposes of such orders being eligible for different rates on its Schedule of Fees and Rebates (‘‘Fee Schedule’’), and is not proposing to add a retail priceimprovement program for orders designated as ‘‘Retail Orders’’ pursuant to proposed Rule 7.31(i)(4). Instead, by adding the proposed Retail Modifier to proposed Rule 7.31(i)(4) now, the Exchange will have flexibility in the future to amend its Fee Schedule to add rates designated for ‘‘Retail Orders.’’ 1 15 38 15 39 17 U.S.C. 78s(b)(3)(A)(ii). CFR 240.19b–4(f)(2). VerDate Sep<11>2014 17:10 Jul 23, 2021 Jkt 253001 PO 00000 Frm 00119 Fmt 4703 Sfmt 4703 4 See Rules 1.1(h) (definition of ETP) & (i) (definition of ETP Holder). E:\FR\FM\26JYN1.SGM 26JYN1

Agencies

[Federal Register Volume 86, Number 140 (Monday, July 26, 2021)]
[Notices]
[Pages 40104-40108]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-15809]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-92448; File No. SR-MIAX-2021-34]


Self-Regulatory Organizations; Miami International Securities 
Exchange LLC; Notice of Filing and Immediate Effectiveness of a 
Proposed Rule Change To Amend Its Fee Schedule for the Complex PRIME 
Agency Order Credit

July 20, 2021.
    Pursuant to the provisions of Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice 
is hereby given that on July 12, 2021, Miami International Securities 
Exchange LLC (``MIAX'' or ``Exchange'') filed with the Securities and 
Exchange Commission (``Commission'') a proposed rule change as 
described in Items I, II, and III below, which Items have been prepared 
by the Exchange. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange is filing a proposal to amend the MIAX Options Fee 
Schedule (the ``Fee Schedule'').
    The text of the proposed rule change is available on the Exchange's 
website at http://www.miaxoptions.com/rule-filings, at MIAX's principal 
office, and at the Commission's Public Reference Room.

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

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

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

1. Purpose
    The Exchange proposes to amend the Fee Schedule to (i) modify the 
Priority Customer Rebate Program (``PCRP'') \3\ as it pertains to per 
contract credits for complex PRIME (``cPRIME'') \4\ Agency Orders for 
Priority Customers; and (ii) to remove the per contract credit cap for 
cPRIME Agency Orders for Priority Customers and the associated waiver 
of same which was in effect until June 30, 2021. The Exchange initially 
filed this proposal on July 1, 2021 (SR-MIAX-2021-33) and withdrew such 
filing on July 12, 2021. The Exchange proposes to implement the fee 
change effective July 12, 2021.
---------------------------------------------------------------------------

    \3\ Under the PCRP, MIAX Options 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 Priority Customer Rebate 
Program table. See Fee Schedule, Section (1)(a)iii.
    \4\ ``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.
---------------------------------------------------------------------------

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, Interpretation and

[[Page 40105]]

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 \8\ may electronically 
submit for execution an order it represents as agent (an ``Agency 
Order'') against principal interest and/or solicited interest. The 
Member that submits the Agency Order (``Initiating Member'') agrees to 
guarantee the execution of the Agency Order by submitting a contra-side 
order representing principal interest or solicited interest (``Contra-
Side Order''). When the Exchange receives a properly designated Agency 
Order for Auction processing, a request for response (``RFR'') 
detailing the option, side, size and initiating price is broadcasted to 
MIAX participants up to an optional designated limit price. Members may 
submit responses to the RFR, which can be either an Auction or Cancel 
(``AOC'') order \9\ or an AOC eQuote.\10\ 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 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.\11\ The cPRIME mechanism is used for 
Complex Orders \12\ on the Exchange's Strategy Book,\13\ with the 
cPRIME mechanism operating in the same manner for processing and 
execution of cPRIME Orders that is used for PRIME Orders on the Simple 
Order Book.
---------------------------------------------------------------------------

    \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 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.
    \9\ An Auction-or-Cancel or ``AOC'' order is a limit order used 
to provide liquidity during a specific Exchange process (such as the 
Opening Imbalance process described in Rule 503) with a time in 
force that corresponds with that event. AOC orders are not displayed 
to any market participant, are not included in the MBBO and 
therefore are not eligible for trading outside of the event, may not 
be routed, and may not trade at a price inferior to the away 
markets. See Exchange Rule 516(b)(4).
    \10\ An Auction or Cancel or ``AOC'' eQuote is a quote submitted 
by a Market Maker to provide liquidity in a specific Exchange 
process (such as the Opening Imbalance Process described in Rule 
503) with a time in force that corresponds with the duration of that 
event and will automatically expire at the end of that event. AOC 
eQuotes are not displayed to any market participant, are not 
included in the MBBO and therefore are not eligible for trading 
outside of the event. An AOC eQuote does not automatically cancel or 
replace the Market Maker's previous Standard quote or eQuote. See 
Exchange Rule 517(a)(2)(ii).
    \11\ The ``Simple Order Book'' is the Exchange's regular 
electronic book of orders and quotes. See Exchange Rule 518(a)(15).
    \12\ See supra note 6. 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).
    \13\ The ``Strategy Book'' is the Exchange's electronic book of 
complex orders and complex quotes. See Exchange Rule 518(a)(17).
---------------------------------------------------------------------------

Removal of Contract Cap
    In conjunction with the implementation of cPRIME Orders on the 
Exchange, the Exchange amended its Priority Customer Rebate Program to 
establish a per contract credit rate for cPRIME Agency Orders for 
Priority Customers.\14\ 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 in its filing on August 
1, 2018.\15\ On February 28, 2020, the Exchange amended the Fee 
Schedule to waive the 1,000 contract cap per leg for cPRIME Agency 
Order rebates for all tiers under the PCRP from March 1, 2020, until 
May 31, 2020.\16\ The Exchange subsequently extended the waiver from 
June 1, 2020, until June 30, 2021, in a series of filings beginning 
June 2020.\17\ The Exchange now proposes to remove footnote ``*'' in 
Section (1)(a)(iii) of the Fee Schedule in its entirety to remove the 
per contract credit cap of 1,000 contracts and to also eliminate the 
waiver of the contract cap per leg for cPRIME Agency Order rebates for 
all tiers under the PCRP.
---------------------------------------------------------------------------

    \14\ See Securities Exchange Act Release No. 81372 (August 10, 
2017) 82 FR 38964 (August 16, 2017) (SR-MIAX-2017-40).
    \15\ See Securities Exchange Act Release No.83797 (August 8, 
2018), 83 FR 40373 (August 14, 2018) (SR-MIAX-2018-22).
    \16\ See Securities Exchange Act Release No. 88349 (March 10, 
2020), 85 FR 14995 (March 16, 2020) (SR-MIAX-2020-05).
    \17\ See Securities Exchange Act Release Nos. 89035 (June 9, 
2020), 85 FR 36249 (June 15, 2020) (SR-MIAX-2020-12) (Extending the 
waiver period from June 1, 2020, until July 31, 2020); 89530 (August 
12, 2020), 85 FR 50845 (August 18, 2020) (SR-MIAX-2020-26) 
(Extending the waiver period from July 31, 2020, until August 31, 
2020); 89771 (September 4, 2020), 85 FR 55873 (September 10, 2020) 
(SR-MIAX-2020-28) (Extending the waiver period from August 31, 2020, 
until December 31, 2020); 90818 (December 29, 2020), 86 FR 350 
(January 5, 2021) (SR-MIAX-2020-40) (Extending the waiver period 
from December 31, 2020, until March 31, 2021); and 91505 (April 8, 
2021), 86 FR 19677 (April 14, 2021) (SR-MIAX-2021-07) (Extending the 
waiver period from April 1, 2021, until June 30, 2021).
---------------------------------------------------------------------------

cPRIME Agency Order per Contract Credit
    In conjunction with the removal of the per credit cap of 1,000 
contracts as described above, the Exchange now proposes to adopt a new 
table under the PCRP for cPRIME Agency Orders for Priority Customers 
where the max leg of the order is greater than 1,000 contracts. The 
table will provide a tiered agency credit rate for cPRIME Agency Orders 
for Priority Customers dependent upon the break-up percentage and the 
largest leg of the order being greater than 1,000 contracts for Members 
in PCRP Tiers 1-4, unless the Member is eligible to receive the 
alternative cPRIME Agency Order Credit amount for cPRIME Agency Orders 
in Tier 4 of the PRCP,\18\ in which case those orders will earn a 
credit of $0.12.
---------------------------------------------------------------------------

    \18\ Under the PCRP, any Member or its Affiliate that qualifies 
for Priority Customer Rebate Program tier 4 and executes Priority 
Customer standard, non-paired complex volume at least equal to or 
greater than three (3) times their Priority Customer cPRIME Agency 
Order volume, on a monthly basis, will receive a credit of $0.12 per 
contract for cPRIME Agency Orders instead of the credit otherwise 
applicable to such orders in tier 4.
---------------------------------------------------------------------------

    Orders that have a max leg size of 1,000 contracts or less will 
continue to receive the agency credit described in PCRP Tier 1-4, 
unless the Member is eligible to receive the alternative cPRIME Agency 
Order Credit amount for cPRIME Agency Orders in Tier 4 of the PCRP, in 
which case the order will earn a per contract credit of $0.12.\19\ The 
Exchange proposes to adopt new footnote ``*'' to state that for cPRIME 
Agency Orders with a max leg size of 1,000 contracts or less, the 
Exchange will assess the credits as described in the Priority Customer 
Rebate Program table for Tiers 1-4 regardless of the Order Break-up 
percentage. Additionally, the break-up credits described in section 
(1)(a)(vi) of the Fee Schedule will continue to apply.
---------------------------------------------------------------------------

    \19\ Id.
---------------------------------------------------------------------------

    The table will provide a per contract agency credit based upon the 
break-up percentage of the order. Specifically, orders with a break-up 
% of 0-10% will earn a credit of $0.05 per contract; orders with a 
break-up percentage

[[Page 40106]]

greater than 10% to, and including 20%, will earn a per contract credit 
of $0.06; orders with a break-up percentage greater than 20% to, and 
including 30%, will earn a per contract credit of $0.07; orders with a 
break-up percentage greater than 30% to, and including 40%, will earn a 
per contract credit of $0.08; orders with a break-up percentage greater 
than 40% will earn a per contract credit of $0.10, unless the Member is 
eligible to receive the alternative cPRIME Agency Order Credit amount 
for cPRIME Agency Orders in Tier 4 of the PCRP, in which case the order 
will earn a per contract credit of $0.12.\20\
---------------------------------------------------------------------------

    \20\ See supra note 18.
---------------------------------------------------------------------------

    For example, if the cPRIME Agency Order has two legs (one for 400 
contracts and the other for 1,200 contracts) and trades 30% with an AOC 
Response, the order would receive an agency credit of $0.07 per 
contract for all legs of the order, as the max leg of the order was 
greater than 1,000 contracts and 30% of the order was broken up. The 
portion of the order that was broken up will also receive the agency 
credit of $0.07 per contract.
    The decision to offer tiered cPRIME agency credits and to remove 
the credit cap is based on an analysis of current revenue and volume 
levels and is designed to encourage Priority Customer order flow to the 
Exchange.
2. Statutory Basis
    The Exchange believes that its proposal to amend its Fee Schedule 
is consistent with Section 6(b) of the Act \21\ in general, and 
furthers the objectives of Section 6(b)(4) of the Act \22\ 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.
---------------------------------------------------------------------------

    \21\ 15 U.S.C. 78f(b).
    \22\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------

    The Exchange believes its proposal 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 in which market participants can readily 
direct order flow to competing venues if they deem fee levels at a 
particular venue to be excessive or incentives to be insufficient. More 
specifically, the Exchange is only one of 16 options venues to which 
market participants may direct their order flow. Based on publicly 
available information, no single options exchange has more than 16% of 
the market share.\23\ Thus, in such a low-concentrated and highly 
competitive market, no single options exchange possess significant 
pricing power in the execution of option order flow.
---------------------------------------------------------------------------

    \23\ See https://www.cboe.com/us/options/market_share/.
---------------------------------------------------------------------------

    The Exchange believes that the ever-shifting market share among the 
exchanges from month to month demonstrates that market participants can 
shift order flow, or discontinue use of certain categories of products, 
in response to 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.\24\ 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.
---------------------------------------------------------------------------

    \24\ See Securities Exchange Act Release No. 85301 (March 13, 
2019), 84 FR 10166 (March 19, 2019) (SR-MIAX-2019-09).
---------------------------------------------------------------------------

    Accordingly, competitive forces constrain the Exchange's 
transaction fees, and market participants can readily trade on 
competing venues if they deem pricing levels at those other venues to 
be more favorable. In response to the competitive environment, the 
Exchange offers specific rates and credits in its fees schedule, like 
those of other options exchanges' fees schedules, which the Exchange 
believes provides incentives to Members to increase order flow of 
certain qualifying orders.
    The Exchange believes that its proposal to remove the 1,000 
contract cap limitation per leg of cPRIME Agency Orders and the 
associated waiver of same, and the proposed per contract credit rebate 
table will encourage Priority Customer order flow to auctions. 
Increased Priority Customer order flow benefits all market participants 
because it continues to attract liquidity to the Exchange by providing 
more trading opportunities. This attracts Market Makers and other 
liquidity providers, thus, facilitating price improvement in the 
auction process, signaling additional corresponding increase in order 
flow from other market participants, and, as a result, increasing 
liquidity on the Exchange.
    The Exchange believes that its proposal to adopt a tiered approach 
to rebates for cPRIME Agency Orders for Priority Customers is 
consistent with Section 6(b)(4) of the Act in that the proposal is 
reasonable, equitable and not unfairly discriminatory. As noted above, 
the Exchange operates in a highly competitive market. The Exchange is 
only one of several options venues to which market participants may 
direct their order flow, and it represents a small percentage of the 
overall market. The Exchange believes that the proposed fees are 
reasonable, equitable, and not unfairly discriminatory in that 
competing options exchanges offer similar fees and credits in 
connection with similar price improvement auctions.\25\
---------------------------------------------------------------------------

    \25\ See Cboe Fee Schedule, ``Break-Up Credits,'' available at 
https://cdn.cboe.com/resources/members_hip/Cboe_FeeSchedule.pdf.
---------------------------------------------------------------------------

    cPRIME Agency Orders for Priority Customers that have a max leg 
size of 1,000 contracts or less will continue to receive the agency 
credit described in PCRP Tier 1-4, unless the Member is eligible to 
receive the alternative cPRIME Agency Order Credit amount for cPRIME 
Agency Orders in Tier 4 of the PCRP, in which case the order will earn 
a per contract credit of $0.12.\26\ The Exchange believes that 
establishing a 1,000 contract threshold is not new or novel as other 
exchanges have different pricing and rates (i.e., caps) for volume over 
1,000 contracts.\27\
---------------------------------------------------------------------------

    \26\ See supra note 18.
    \27\ See Cboe Fees Schedule, p.2; see also NYSE American Fee 
Schedule, p. 18, footnote 2 under Section I.G.
---------------------------------------------------------------------------

    The Exchange's proposal to adopt a new table to provide a tiered 
credit rate for cPRIME Agency Orders for Priority Customers whose 
largest leg size is greater than 1,000 contracts is consistent with 
Section 6(b)(4) of the Act \28\ because it applies equally to all 
participants of the PCRP. The Exchange believes that the proposed 
rebate structure is fair, equitable and not unreasonably 
discriminatory. The PCRP is reasonably designed because it will 
continue to provide an incentive to providers of Priority Customer 
order flow to send that Priority Customer order flow to the Exchange to 
receive a credit in a manner that enables the Exchange to improve its 
overall competitiveness and strengthen its market quality for all 
participants. The

[[Page 40107]]

Exchange conducted an internal analysis of fees and rebates associated 
with cPRIME Agency Orders and determined the proposed applicable rates 
at each Order Break-up %. For pricing and competitive reasons the 
Exchange determined that the agency credit for Order Break-ups from 0%-
40% would be tiered, and that Order Break-ups of greater than 40% would 
receive a standard agency credit of $0.10, unless the Member is 
eligible to receive the alternative cPRIME Agency Order Credit amount 
for cPRIME Agency Orders in Tier 4 of the PCRP, in which case the order 
will earn a per contract credit of $0.12.\29\
---------------------------------------------------------------------------

    \28\ 15 U.S.C. 78f(b)(4).
    \29\ See supra note 18.
---------------------------------------------------------------------------

    In addition, The Exchange believes that its proposal is consistent 
with Section 6(b)(5) of the Act \30\ because it perfects the mechanisms 
of a free and open market and a national market system and protects 
investors and the public interest because an increase in Priority 
Customer order flow will bring greater volume and liquidity to the 
Exchange, which benefits all market participants by providing more 
trading opportunities and tighter spreads. To the extent Priority 
Customer order flow is increased by this proposal, market participants 
will increasingly compete for the opportunity to trade on the Exchange 
including sending more orders and provided narrower and larger-sized 
quotations in the effort to trade with such Priority Customer order 
flow.
---------------------------------------------------------------------------

    \30\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

    The Exchange believes that providing rebates for Priority Customers 
that submit cPRIME Agency Orders is equitable and not unfairly 
discriminatory because the proposed rebate schedule will apply equally 
to all cPRIME Agency Orders for Priority Customers. The Exchange 
believes that the application of the rebate is equitable and not 
unfairly discriminatory because, as stated above, Priority Customer 
order flow enhances liquidity on the Exchange, in turn providing more 
trading opportunities and attracting other market participants, thus, 
facilitating tighter spreads, increased order flow and trading 
opportunities to the benefit of all market participants. Moreover, the 
options industry has a long history of providing preferential pricing 
to Priority Customer orders, and the Exchange's current fees schedule 
currently does so in many places, as does the fee structure of at least 
one other exchange.\31\
---------------------------------------------------------------------------

    \31\ See supra note 27.
---------------------------------------------------------------------------

B. Self-Regulatory Organization's Statement on Burden on Competition

    In accordance with Section 6(b)(8) of the Act,\32\ the Exchange 
does not believe that the proposed rule change will impose any burden 
on intra-market or intra-market competition that is not necessary or 
appropriate in furtherance of the purposes of the Act. Rather, as 
discussed above, the Exchange believes that the proposed change would 
encourage the submission of additional liquidity to price improvement 
auctions, thereby promoting market depth, price discovery and 
transparency and enhancing order execution and price improvement 
opportunities for all Members. As a result, the Exchange believes that 
the proposed change furthers the Commission's goal in adopting 
Regulation NMS of fostering competition among orders, which promotes 
``more efficient pricing of individual stocks for all types of orders, 
large and small.'' \33\
---------------------------------------------------------------------------

    \32\ 15 U.S.C. 78f(b)(8).
    \33\ See Securities Exchange Act Release No. 51808, 70 FR 37495, 
37498-99 (June 29, 2005) (S7-10-04) (Final Rule).
---------------------------------------------------------------------------

    The Exchange does not believe that its proposal will impose any 
burden on intra-market competition that is not necessary or appropriate 
in furtherance of the purposes of the Act because the proposed changes 
will apply uniformly to all eligible Priority Customer orders. 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 cPRIME Agency Orders for Priority 
Customers, which will increase liquidity and benefit all market 
participants by providing more trading opportunities and tighter 
spreads. The Exchange notes the fact that preferential pricing to 
Priority Customers is a long-standing options industry practice. The 
proposed rebate changes serve to enhance Priority Customer order flow 
to the Exchange's Price Improvement Mechanism, which, as a result, 
facilitates increased liquidity and execution opportunities to the 
benefit of all market participants.
    The Exchange also does not believe that its proposal will impose 
any burden on inter-market competition that is not necessary or 
appropriate in furtherance of the purposes of the Act because, as noted 
above, at least one other competing options exchange \34\ currently has 
similar rebates in place in connection with similar price improvement 
auctions. Additionally, and as previously discussed, the Exchange 
operates in a highly competitive market. Members have numerous 
alternative venues that they participate on and direct their order flow 
to, including 15 other options exchanges, many of which offer 
substantially similar price improvement auctions. Based on publicly 
available information, no single options exchange has more than 16% of 
the market share.\35\ Therefore, no exchange possesses significant 
pricing power in the execution of option order flow. Participants can 
readily choose to send their orders to other exchanges if they deem fee 
levels at those other exchanges to be more favorable. Moreover, the 
Commission has repeatedly expressed its preference for competition over 
regulatory intervention in determining prices, products, and services 
in the securities markets. Specifically, in Regulation NMS, the 
Commission highlighted the importance of market forces in determining 
prices and SRO revenues and, also, recognized that current regulation 
of the market system ``has been remarkably successful in promoting 
market competition in its broader forms that are most important to 
investors and listed companies.'' \36\ The fact that this market is 
competitive has also long been recognized by the courts. In 
NetCoalition v. Securities and Exchange Commission, the D.C. Circuit 
states as follows: ``[n]o one disputes that competition for order flow 
is `fierce.' . . . As the SEC explained, `[i]n the U.S. national market 
system, buyers and sellers of securities, and the broker-dealers that 
act as their order-routing agents, have a wide range of choices of 
where to route orders for execution'; [and] `no exchange can afford to 
take its market share percentages for granted' because `no exchange 
possesses a monopoly, regulatory or otherwise, in the execution of 
order flow from broker dealers' . . .'' \37\ Accordingly, the Exchange 
does not believe its proposed fee change imposes any burden on 
competition that is not necessary or appropriate in furtherance of the 
purposes of the Act.
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    \34\ See supra note 27.
    \35\ See supra note 23.
    \36\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005).
    \37\ NetCoalition v. SEC, 615 F.3d 525, 539 (D.C. Cir. 2010) 
(quoting Securities Exchange Act Release No. 59039 (December 2, 
2008), 73 FR 74770, 74782-83 (December 9, 2008) (SR-NYSEArca-2006-
21)).
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    Accordingly, the Exchange believes that the proposed changes will 
not impose any burden on competition that is 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

[[Page 40108]]

trading opportunities and tighter spreads.

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,\38\ and Rule 19b-4(f)(2) \39\ 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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    \38\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \39\ 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 (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-MIAX-2021-34 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-MIAX-2021-34. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (http://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-2021-34, and should be submitted on 
or before August 16, 2021.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\40\
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    \40\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-15809 Filed 7-23-21; 8:45 am]
BILLING CODE 8011-01-P