Self-Regulatory Organizations; Miami International Securities Exchange, LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Its Fee Schedule, 57869-57874 [2021-22689]

Download as PDF Federal Register / Vol. 86, No. 199 / Tuesday, October 19, 2021 / Notices circuit breaker pilot. Thus, the proposed rule change will help to ensure consistency across market centers without implicating any competitive issues. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were either solicited or received. jspears on DSK121TN23PROD with NOTICES1 III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Because the foregoing proposed rule change does not: (i) Significantly affect the protection of investors or the public interest; (ii) impose any significant burden on competition; and (iii) become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate, it has become effective pursuant to Section 19(b)(3)(A) of the Act 19 and Rule 19b– 4(f)(6) thereunder.20 A proposed rule change filed under Rule 19b–4(f)(6) 21 normally does not become operative prior to 30 days after the date of the filing. However, pursuant to Rule 19b–4(f)(6)(iii),22 the Commission may designate a shorter time if such action is consistent with the protection of investors and the public interest. The Exchange asked that the Commission waive the 30 day operative delay so that the proposal may become operative immediately upon filing. Extending the Pilot Rules’ effectiveness to the close of business on March 18, 2022 will extend the protections provided by the Pilot Rules, which would otherwise expire in less than 30 days. Waiver of the operative delay would therefore permit uninterrupted continuation of the MWCB pilot while the Commission reviews the NYSE’s proposed rule change to make the Pilot Rules permanent. Therefore, the Commission hereby waives the 30-day operative delay and designates the proposed rule change as operative upon filing.23 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 19 15 U.S.C. 78s(b)(3)(A). CFR 240.19b–4(f)(6). 21 17 CFR 240.19b–4(f)(6). 22 17 CFR 240.19b–4(f)(6)(iii). 23 For purposes only of waiving the 30-day operative delay, the Commission has also considered the proposed rule’s impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). 20 17 VerDate Sep<11>2014 17:51 Oct 18, 2021 Jkt 256001 57869 2021–027 and should be submitted on or before November 9, 2021. 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. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.24 J. Matthew DeLesDernier, Assistant Secretary. IV. Solicitation of Comments [FR Doc. 2021–22685 Filed 10–18–21; 8:45 am] 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: BILLING CODE 8011–01–P Electronic Comments Self-Regulatory Organizations; Miami International Securities Exchange, LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Its Fee Schedule • 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– FINRA–2021–027 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–FINRA–2021–027. 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 a.m. and 3 p.m. Copies of such filing also will be available for inspection and copying at the principal office of FINRA. 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–FINRA– PO 00000 Frm 00068 Fmt 4703 Sfmt 4703 SECURITIES AND EXCHANGE COMMISSION [Release No. 34–93306; File No. SR–MIAX– 2021–42] October 13, 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 September 30, 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 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 24 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 E:\FR\FM\19OCN1.SGM 19OCN1 57870 Federal Register / Vol. 86, No. 199 / Tuesday, October 19, 2021 / Notices 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 modify (i) the MIAX Price Improvement Mechanism (‘‘PRIME’’) Fees table and accompanying notes; and (ii) the MIAX Complex Price Improvement Mechanism (‘‘cPRIME’’) Fees table. The Exchange proposes to implement the fee changes effective October 1, 2021. Background jspears on DSK121TN23PROD with NOTICES1 PRIME is a process by which a Member 3 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 4 or an AOC eQuote.5 The PRIME mechanism is used for orders on the 3 The term ‘‘Member’’ means an individual or organization approved to exercise the trading rights associated with a Trading Permit. Members are deemed ‘‘members’’ under the Exchange Act. See Exchange Rule 100. 4 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). 5 AOC eQuote 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 17:51 Oct 18, 2021 Jkt 256001 Exchange’s Simple Order Book.6 The Exchange notes that for Complex Orders 7 on the Strategy Book,8 the Exchange’s cPRIME 9 mechanism operates in the same manner for processing and execution of cPRIME Orders that is used for PRIME Orders on the Simple Order Book. Exchange Rule 518(b)(7) defines a cPRIME Order as a type of complex order that is submitted for participation in a cPRIME Auction and trading of cPRIME Orders is governed by Rule 515A, Interpretation and Policies.12.10 cPRIME Orders are processed and executed in the Exchange’s PRIME [sic] mechanism, the same mechanism that the Exchange uses to process and execute simple PRIME orders, pursuant to Exchange Rule 515A.11 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 6 The ‘‘Simple Order Book’’ is the Exchange’s regular electronic book of orders and quotes. See Exchange Rule 518(a)(15). 7 A ‘‘complex order’’ is any order involving the concurrent purchase and/or sale of two or more different options in the same underlying security (the ‘‘legs’’ or ‘‘components’’ of the complex order), for the same account, in a ratio that is equal to or greater than one-to-three (.333) and less than or equal to three-to-one (3.00) and for the purposes of executing a particular investment strategy. Minioptions may only be part of a complex order that includes other mini-options. Only those complex orders in the classes designated by the Exchange and communicated to Members via Regulatory Circular with no more than the applicable number of legs, as determined by the Exchange on a classby-class basis and communicated to Members via Regulatory Circular, are eligible for processing. See Exchange Rule 518(a)(5). 8 The ‘‘Strategy Book’’ is the Exchange’s electronic book of complex orders and complex quotes. See Exchange Rule 518(a)(17). 9 ‘‘cPRIME’’ is the process by which a Member may electronically submit a ‘‘cPRIME Order’’ (as defined in Rule 518(b)(7)) it represents as agent (a ‘‘cPRIME Agency Order’’) against principal or solicited interest for execution (a ‘‘cPRIME Auction’’), subject to the restrictions set forth in Exchange Rule 515A, Interpretation and Policy .12. See Exchange Rule 515A. 10 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). 11 Id. PO 00000 Frm 00069 Fmt 4703 Sfmt 4703 Responses or cPRIME eQuotes. The PRIME mechanism is used for orders on the Exchange’s Simple Order Book. The cPRIME mechanism is used for Complex Orders on the Exchange’s Strategy Book, 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. Responder to PRIME Auction Fee The Exchange proposes to amend the Fee Schedule to modify the transaction fees for Members that participate in the PRIME Auction. Specifically, the Exchange proposes to amend the Responder to PRIME Auction Fee, Per Contract Fee for Non-Penny Classes, in the PRIME Fees table. Currently, the Exchange charges a fee of $0.99 for all Origins (Priority Customer,12 Public Customer 13 that is not a Priority Customer, MIAX Market Maker,14 NonMIAX Market Maker, Non-Member Broker-Dealer, and Firm). The Exchange now proposes to increase the Responder fee for Non-Penny Classes from $0.99 to $1.10 per contract for all Origins in the PRIME Fees table. The purpose of adjusting the per contract Responder fee for Non-Penny Classes in the PRIME Fees table for all Origins is for business and competitive reasons. In order to attract order flow the Exchange initially set its PRIME rebates and fees so that they were meaningfully higher/lower than other options exchanges that provide a comparable price improvement mechanism. The Exchange now believes that it is appropriate to further adjust these fees so that they are more in line with other exchanges,15 but remain competitive such that it should enable the Exchange to continue to attract order 12 The term ‘‘Priority Customer’’ means a person or entity that (i) is not a broker or dealer in securities, and (ii) does not place more than 290 orders in listed options per day on average during a calendar month for its own beneficial account(s). See Exchange Rule 100. 13 The term ‘‘Public Customer’’ means a person that is not a broker or dealer in securities. See Exchange Rule 100. 14 The term ‘‘Market Makers’’ refers to ‘‘Lead Market Makers’’, ‘‘Primary Lead Market Makers’’ and ‘‘Registered Market Makers’’ collectively. See Exchange Rule 100. 15 The Exchange notes that BOX Options has a $1.15 responder fee in Non-Penny classes. See BOX Options Fee Schedule as of September 1, 2021, Section I. Electronic Transaction Fees, B. PIP and COPIP Transactions at https://boxoptions.com/ regulatory/fee-schedule/. The Exchange also notes that Nasdaq MRX has a responder fee of $1.10 in Non-Penny classes. See Nasdaq MRX Options 7 Pricing Schedule, Section 3. Regular Order Fees and Rebates, A. PIM Pricing for Regular and Complex Orders at https://listingcenter.nasdaq.com/ rulebook/mrx/rules/mrx-options-7. E:\FR\FM\19OCN1.SGM 19OCN1 Federal Register / Vol. 86, No. 199 / Tuesday, October 19, 2021 / Notices flow to PRIME Auctions and to also maintain market share. jspears on DSK121TN23PROD with NOTICES1 Priority Customer PRIME Break-Up Credit The Exchange proposes to amend the Fee Schedule to modify the PRIME Break-up Credit per contract credit for Non-Penny Classes for the Priority Customer Origin in PRIME. Currently, the Exchange provides Priority Customers a PRIME break-up credit of $0.60 per contract for Non-Penny Classes in a PRIME Auction. The Exchange now proposes to adopt an alternative Priority Customer PRIME break-up credit of $0.69, instead of $0.60, per contract for Non-Penny Classes when the order breakup percentage is greater than 40%. Orders in this segment with order break-up percentages of 40% or less will continue to receive the $0.60 per contract breakup credit. The Exchange proposes to add new footnote ‘‘*’’ after the PRIME Fee table that will provide the following: MIAX will apply an enhanced PRIME Break-up credit of $0.69 per contract to the EEM that submitted a PRIME Order in Non-Penny Classes that is submitted to the PRIME Auction that trades with PRIME AOC Responses and/or PRIME Participating Quotes or Orders, if the PRIME Order experiences a break-up of greater than forty percent (40%). The decision to offer an alternative enhanced Priority Customer Break-up credit is based on an analysis of current revenue and volume levels and is designed to encourage Priority Customer order flow to PRIME Auctions. Remove Discounted PRIME Response Fee for PCRP Tier 3 or Higher Next, the Exchange proposes to remove the discounted PRIME Response fee for standard options in Penny Classes and discounted PRIME Response fee for standard options in Non-Penny Classes for Members or their Affiliates that qualifies for Priority Customer Rebate Program (‘‘PCRP’’) volume tier 3 or higher. Currently MIAX will assess the Responder to PRIME Auction Fee to: (i) A PRIME AOC Response that executes against a PRIME Order, and (ii) a PRIME Participating Quote or Order that executes against a PRIME Order. MIAX will apply the PRIME Break-up credit to the EEM that submitted the PRIME Order for agency contracts that are submitted to the PRIME Auction that trade with a PRIME AOC Response or a PRIME Participating Quote or Order that trades with the PRIME Order. Transaction fees in mini-options will be 1/10th of the standard per contract fee VerDate Sep<11>2014 17:51 Oct 18, 2021 Jkt 256001 or rebate described in the table above for the PRIME Auction. MIAX will assess the standard transaction fees to a PRIME AOC Response if it executes against unrelated orders. Any Member or its Affiliate 16 that qualifies for Priority Customer Rebate Program volume tiers 3 or higher and submits a PRIME AOC Response that is received during the Response Time Interval and executed against the PRIME Order, or a PRIME Participating Quote or Order that is received during the Response Time Interval and executed against the PRIME Order, will be assessed a Discounted PRIME Response Fee of $0.46 per contract for standard options in Penny Program classes. Any Member or its Affiliate that qualifies for Priority Customer Rebate Program (‘‘PCRP’’) volume tiers 3 or higher and submits a PRIME AOC Response that is received during the Response Time Interval and executed against the PRIME Order, or a PRIME Participating Quote or Order that is received during the Response Time Interval and executed against the PRIME Order, will be assessed a Discounted PRIME Response Fee of $0.95 per contract for standard options in nonPenny Program classes. The Exchange now proposes to remove both the Discounted PRIME Response Fee of $0.46 per contract for standard options in Penny Classes and 16 The term ‘‘Affiliate’’ means (i) an affiliate of a Member of at least 75% common ownership between the firms as reflected on each firm’s Form BD, Schedule A, (‘‘Affiliate’’), or (ii) the Appointed Market Maker of an Appointed EEM (or, conversely, the Appointed EEM of an Appointed Market Maker). An ‘‘Appointed Market Maker’’ is a MIAX Market Maker (who does not otherwise have a corporate affiliation based upon common ownership with an EEM) that has been appointed by an EEM and an ‘‘Appointed EEM’’ is an EEM (who does not otherwise have a corporate affiliation based upon common ownership with a MIAX Market Maker) that has been appointed by a MIAX Market Maker, pursuant to the following process. A MIAX Market Maker appoints an EEM and an EEM appoints a MIAX Market Maker, for the purposes of the Fee Schedule, by each completing and sending an executed Volume Aggregation Request Form by email to membership@miaxoptions.com no later than 2 business days prior to the first business day of the month in which the designation is to become effective. Transmittal of a validly completed and executed form to the Exchange along with the Exchange’s acknowledgement of the effective designation to each of the Market Maker and EEM will be viewed as acceptance of the appointment. The Exchange will only recognize one designation per Member. A Member may make a designation not more than once every 12 months (from the date of its most recent designation), which designation shall remain in effect unless or until the Exchange receives written notice submitted 2 business days prior to the first business day of the month from either Member indicating that the appointment has been terminated. Designations will become operative on the first business day of the effective month and may not be terminated prior to the end of the month. Execution data and reports will be provided to both parties. See Fee Schedule, note 1. PO 00000 Frm 00070 Fmt 4703 Sfmt 4703 57871 the Discounted PRIME Response Fee of $0.95 per contract for standard options in Non-Penny Classes, and will remove the portion that describes the discounted fees from the accompanying footnotes. The purpose of this change is for business and competitive reasons. Responder to cPRIME Auction Fee The Exchange proposes to amend the Fee Schedule to modify the transaction fees for Members that participate in the cPRIME Auction. Specifically, the Exchange proposes to amend the per contract Responder fee for Non-Penny Classes in a cPRIME Auction for all Origins in the cPRIME Fees table. Currently, the Exchange charges a Responder fee of $0.99 per contract for Non-Penny Classes in all Origins for a cPRIME Auction. The Exchange now proposes to increase the Responder fee to $1.10 per contract for Non-Penny Classes for all Origins in a cPRIME Auction. The purpose of adjusting the per contract Responder fee for Non-Penny Classes for all Origins is for business and competitive reasons. In order to attract order flow the Exchange initially set its cPRIME rebates and fees so that they were meaningfully higher/lower than other options exchanges that provide a comparable complex order price improvement mechanism. The Exchange now believes that it is appropriate to further adjust these fees so that they are more in line with other exchanges,17 but will remain competitive such that it should enable the Exchange to continue to attract complex order flow to cPRIME Auctions and also maintain market share. 2. Statutory Basis The Exchange believes that its proposal to amend its Fee Schedule is consistent with Section 6(b) of the Act 18 in general, and furthers the objectives of Section 6(b)(4) of the Act 19 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 17 See supra note 15. U.S.C. 78f(b). 19 15 U.S.C. 78f(b)(4) and (5). 18 15 E:\FR\FM\19OCN1.SGM 19OCN1 jspears on DSK121TN23PROD with NOTICES1 57872 Federal Register / Vol. 86, No. 199 / Tuesday, October 19, 2021 / Notices discrimination between customers, issuers, brokers and dealers. The Exchange believes that 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. The Commission has repeatedly expressed its preference for competition over regulatory intervention in determining prices, products, and services in the securities markets. In Regulation NMS, the Commission highlighted the importance of market forces in determining prices and SRO revenues and, also, recognized that current regulation of the market system ‘‘has been remarkably successful in promoting market competition in its broader forms that are most important to investors and listed companies.’’ 20 There are currently 16 registered options exchanges competing for order flow. Based on publicly-available information, and excluding index-based options, for the month of September 2021, no single exchange has more than approximately 12%–13% of the market share of executed volume of multiplylisted equity and exchange-traded fund (‘‘ETF’’) options trades as of September 21, 2021.21 Therefore, no exchange possesses significant pricing power in the execution of multiply-listed equity and ETF options order flow. More specifically, as of September 21, 2021, the Exchange had a market share of approximately 5.47% of executed volume of multiply-listed equity and ETF options for the month of September 2021.22 The Exchange believes that the evershifting market shares among the exchanges from month to month demonstrates that market participants can shift order flow, or discontinue or reduce use of certain categories of products, in response to transaction and/or non-transaction fee changes. For example, on February 28, 2019, the Exchange’s affiliate, MIAX PEARL, LLC (‘‘MIAX Pearl’’), filed with the Commission a proposal to increase Taker fees in certain Tiers for options transactions in certain Penny classes for Priority Customers and decrease Maker rebates in certain Tiers for options transactions in Penny classes for Priority Customers (which fee was to be 20 See Securities Exchange Act Release No. 51808 (June 9, 2005), 70 FR 37496 (June 29, 2005). 21 See MIAX’s ‘‘The Market at a Glance’’, available at https://www.miaxoptions.com/ (last visited September 21, 2021). 22 See id. VerDate Sep<11>2014 17:51 Oct 18, 2021 Jkt 256001 effective March 1, 2019).23 MIAX Pearl experienced a decrease in total market share between the months of February and March of 2019, after the fees were in effect. Accordingly, the Exchange believes that the MIAX Pearl March 1, 2019, fee change may have contributed to the decrease in the MIAX Pearl’s market share and, as such, the Exchange believes competitive forces constrain options exchange transaction fees and market participants can shift order flow based on fee changes instituted by the exchanges. 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 fee schedule, like those of other options exchanges’, which the Exchange believes provides incentives to Members to increase order flow of certain qualifying orders. The Exchange believes its proposal to amend its Responder fees for NonPenny Classes for all Origins in PRIME and cPRIME Auctions is reasonable, equitably allocated and not unfairly discriminatory because these changes are for business and competitive reasons. In order to attract order flow the Exchange initially set its rebates and fees for its PRIME and cPRIME Auctions so that they were meaningfully higher/ lower than other options exchanges that provide a comparable price improvement mechanisms. The Exchange now believes that it is appropriate to further adjust these fees so that they are more in line with those of other exchanges,24 but will remain competitive and should enable the Exchange to continue to attract order flow to PRIME and cPRIME Auctions and also maintain market share. The Exchange also believes that its proposal to amend the Responder fees for Non-Penny Classes for all Origins in PRIME and cPRIME Auctions is not unfairly discriminatory as all Origins that respond to a PRIME or cPRIME Auction will be assessed an identical fee and access to the Exchange is offered on terms that are not unfairly discriminatory. The Exchange believes it is equitable and not unfairly discriminatory to increase the Responder fee as certain other option exchanges that offer similar price improvement functionality charge 23 See Securities Exchange Act Release No. 85304 (March 13, 2019), 84 FR 10144 (March 19, 2019) (SR–PEARL–2019–07). 24 See supra note 15. PO 00000 Frm 00071 Fmt 4703 Sfmt 4703 similar fees.25 The Exchange believes that it is appropriate to increase the fees so that they are more in line with other exchanges,26 and will still remain competitive such that they should enable the Exchange to continue to attract order flow to its PRIME and cPRIME Auctions and maintain market share. The Exchange believes its proposal to offer an enhanced PRIME Break-up Credit for Non-Penny Classes for Priority Customers is reasonable, equitably allocated and not unfairly discriminatory because this change is for business and competitive reasons. The Exchange believes that its proposal will encourage Priority Customer order flow to PRIME 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. 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 at least one competing options exchange offers similar fees and credits in connection with similar price improvement auctions.27 The Exchange believes its proposal to remove the discounted PRIME Response fees for Penny and Non-Penny Classes for Members who achieve Tier 3 or higher in the PCRP is reasonable, equitably allocated and not unfairly discriminatory because these changes are for business and competitive reasons. In order to attract order flow, the Exchange initially set its rebates and fees so that they were meaningfully higher/lower than other options exchanges that provide a comparable price improvement mechanism. The Exchange conducted an internal review and analysis of fees and rebates and determined that it was appropriate to 25 See id. id. 27 The Cboe Exchange provides for a $0.60 per contract credit in Non-Penny classes. See Cboe Fee Schedule, ‘‘Break-Up Credits,’’ available at https:// cdn.cboe.com/resources/membership/Cboe_ FeeSchedule.pdf. 26 See E:\FR\FM\19OCN1.SGM 19OCN1 Federal Register / Vol. 86, No. 199 / Tuesday, October 19, 2021 / Notices jspears on DSK121TN23PROD with NOTICES1 remove the discounted PRIME Response fees so that all PRIME response fees are more line with other exchanges,28 but will still remain highly competitive such that it should enable the Exchange to continue to attract order flow to PRIME Auctions and also maintain market share. In addition, The Exchange believes that its proposal is consistent with Section 6(b)(5) of the Act 29 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 increasing the Responder fees for PRIME and cPRIME Auctions is equitable and not unfairly discriminatory because the proposed fees will apply equally to all Origins that respond to PRIME and cPRIME Auctions. The Exchange believes that the application of this fee is equitable and not unfairly discriminatory because the fee is identical for all market participants that respond to PRIME and cPRIME Auctions. B. Self-Regulatory Organization’s Statement on Burden on Competition In accordance with Section 6(b)(8) of the Act,30 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. 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 its proposal to amend its Responder fees for PRIME and cPRIME Auctions is uniform and will be applied equally to all Origins that respond to PRIME and cPRIME Auctions. The Exchange does not believes its proposal to remove the discounted PRIME Response fees for Penny and supra note 15. U.S.C. 78f(b)(4). 30 15 U.S.C. 78f(b)(8). Non-Penny Classes for Members who achieve Tier 3 or higher in the PCRP will impose any burden to intra-market competition that is not necessary or appropriate in furtherance of the purposes of the Act. The Exchange conducted an internal review and analysis of fees and rebates and determined that it was appropriate to remove the discounted PRIME Response fees so that all PRIME response fees are more line with other exchanges,31 but will still remain highly competitive such that it should enable the Exchange to continue to attract order flow to PRIME Auctions and also maintain market share. The removal of these fees will impact all Priority Customers equally. The Exchange believes its proposal to offer an enhanced PRIME Break-up Credit for Non-Penny Classes for Priority Customers is reasonable, equitably allocated and not unfairly discriminatory because this change is for business and competitive reasons. The Exchange believes that its proposal will encourage additional Priority Customer order flow to PRIME Auctions. Increased Priority Customer order flow benefits all market participants because it continues to attract liquidity to the Exchange by providing more trading opportunities and tighter spreads. The Exchange 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, other competing options exchanges currently have similar rebates in place in connection with similar price improvement auctions.32 Additionally, 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 12–13% of the market share.33 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 28 See 31 See 29 15 32 See VerDate Sep<11>2014 17:51 Oct 18, 2021 supra note 15. supra note 15. 33 See supra note 21. Jkt 256001 PO 00000 Frm 00072 Fmt 4703 Sfmt 4703 57873 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.’’ 34 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’ . . .’’ 35 Accordingly, the Exchange does not believe its proposed fee changes impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others 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,36 and Rule 19b–4(f)(2) 37 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 34 See Securities Exchange Act Release No. 51808 (June 9, 2005), 70 FR 37496, 37499 (June 29, 2005). 35 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 15 U.S.C. 78s(b)(3)(A)(ii). 37 17 CFR 240.19b–4(f)(2). E:\FR\FM\19OCN1.SGM 19OCN1 57874 Federal Register / Vol. 86, No. 199 / Tuesday, October 19, 2021 / Notices whether the proposed rule should be approved or disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission’s internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– MIAX–2021–42 on the subject line. jspears on DSK121TN23PROD with NOTICES1 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–2021–42. 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–2021–42, and should be submitted on or before November 9, 2021. 38 17 CFR 200.30–3(a)(12). VerDate Sep<11>2014 17:51 Oct 18, 2021 Jkt 256001 For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.38 J. Matthew DeLesDernier, Assistant Secretary. [FR Doc. 2021–22689 Filed 10–18–21; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–93297; File No. SR– CboeEDGX–2021–042] Self-Regulatory Organizations; Cboe EDGX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Adopt a Rule Regarding the Allowance of OffExchange Transactions by a Member Acting as Agent Otherwise Than on EDGX in Accordance With Rule 19c–1 Under the Securities Exchange Act of 1934 October 13, 2021. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the ‘‘Act’’) 1 and Rule 19b–4 thereunder,2 notice is hereby given that, on October 8, 2021, Cboe EDGX Exchange, Inc. (the ‘‘Exchange’’) filed with the Securities and Exchange Commission (the ‘‘Commission’’) the proposed rule change as described in Items I and II below, which Items have been prepared by the Exchange. The Exchange filed the proposal as a ‘‘non-controversial’’ proposed rule change pursuant to Section 19(b)(3)(A)(iii) of the Act 3 and Rule 19b–4(f)(6) thereunder.4 The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change Cboe EDGX Exchange, Inc. (the ‘‘Exchange’’ or ‘‘EDGX’’) proposes to adopt a rule regarding the allowance of off-exchange transactions by a Member acting as agent otherwise than on EDGX in accordance with Rule 19c–1 under the Securities Exchange Act of 1934 (the ‘‘Act’’).5 The text of the proposed rule change is provided in Exhibit 5. The text of the proposed rule change is also available on the Exchange’s website (https://markets.cboe.com/us/ options/regulation/rule_filings/edgx/), at the Exchange’s Office of the Secretary, and at the Commission’s Public Reference Room. U.S.C. 78s(b)(1). CFR 240.19b–4. 3 15 U.S.C. 78s(b)(3)(A)(iii). 4 17 CFR 240.19b–4(f)(6). 5 See 17 CFR 240.19c–1. 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 adopt a rule regarding off-exchange transactions by a Member acting as agent. Rule 19c– 1 and Rule 19c–3 under the Act 6 describe rule provisions that each national securities exchange must include in its Rules regarding the ability of members to engage in transactions off an exchange. While the Exchange already incorporates the required provision in Rule 19c–3 under the Act into Rule 13.6, and its stated policies and practices are consistent with these provisions of the Act, the Exchange Rules do not currently include the provisions in Rule 19c–1 under the Act. Therefore, the proposed rule change adopts this provision in new Rule 13.6(a) 7 in accordance with Rule 19c– 1 under the Act. Specifically, proposed Rule 13.6(a) (in accordance with Rule 19c–1 under the Act) provides that no rule, stated policy, or practice of this Exchange shall prohibit or condition, or be construed to prohibit or condition, or otherwise limit, directly or indirectly, the ability of any Member acting as agent to effect any transaction otherwise than on this Exchange with another person (except when such Member also is acting as agent for such other person in such transaction) in any equity security listed on this Exchange or to which unlisted trading privileges on this Exchange have been extended. 2. Statutory Basis The Exchange believes the proposed rule change is consistent with the Securities Exchange Act of 1934 (the ‘‘Act’’) and the rules and regulations thereunder applicable to the Exchange 1 15 2 17 PO 00000 Frm 00073 Fmt 4703 Sfmt 4703 6 See 17 CFR 240.19c–1 and § 240.19c–3. proposed rule change also updates the provision in current Rule 13.6 (which incorporate Rule 19c–3 under the Act) to be Rule 13.6(b). 7 The E:\FR\FM\19OCN1.SGM 19OCN1

Agencies

[Federal Register Volume 86, Number 199 (Tuesday, October 19, 2021)]
[Notices]
[Pages 57869-57874]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-22689]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-93306; File No. SR-MIAX-2021-42]


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

 October 13, 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 September 30, 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.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

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

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

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

[[Page 57870]]

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 modify (i) the 
MIAX Price Improvement Mechanism (``PRIME'') Fees table and 
accompanying notes; and (ii) the MIAX Complex Price Improvement 
Mechanism (``cPRIME'') Fees table. The Exchange proposes to implement 
the fee changes effective October 1, 2021.
Background
    PRIME is a process by which a Member \3\ 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 \4\ or an AOC eQuote.\5\ The PRIME mechanism is used 
for orders on the Exchange's Simple Order Book.\6\ The Exchange notes 
that for Complex Orders \7\ on the Strategy Book,\8\ the Exchange's 
cPRIME \9\ mechanism operates in the same manner for processing and 
execution of cPRIME Orders that is used for PRIME Orders on the Simple 
Order Book.
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    \3\ The term ``Member'' means an individual or organization 
approved to exercise the trading rights associated with a Trading 
Permit. Members are deemed ``members'' under the Exchange Act. See 
Exchange Rule 100.
    \4\ 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).
    \5\ AOC eQuote 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).
    \6\ The ``Simple Order Book'' is the Exchange's regular 
electronic book of orders and quotes. See Exchange Rule 518(a)(15).
    \7\ A ``complex order'' is any order involving the concurrent 
purchase and/or sale of two or more different options in the same 
underlying security (the ``legs'' or ``components'' of the complex 
order), for the same account, in a ratio that is equal to or greater 
than one-to-three (.333) and less than or equal to three-to-one 
(3.00) and for the purposes of executing a particular investment 
strategy. Mini-options may only be part of a complex order that 
includes other mini-options. Only those complex orders in the 
classes designated by the Exchange and communicated to Members via 
Regulatory Circular with no more than the applicable number of legs, 
as determined by the Exchange on a class-by-class basis and 
communicated to Members via Regulatory Circular, are eligible for 
processing. See Exchange Rule 518(a)(5).
    \8\ The ``Strategy Book'' is the Exchange's electronic book of 
complex orders and complex quotes. See Exchange Rule 518(a)(17).
    \9\ ``cPRIME'' is the process by which a Member may 
electronically submit a ``cPRIME Order'' (as defined in Rule 
518(b)(7)) it represents as agent (a ``cPRIME Agency Order'') 
against principal or solicited interest for execution (a ``cPRIME 
Auction''), subject to the restrictions set forth in Exchange Rule 
515A, Interpretation and Policy .12. See Exchange Rule 515A.
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    Exchange Rule 518(b)(7) defines a cPRIME Order as a type of complex 
order that is submitted for participation in a cPRIME Auction and 
trading of cPRIME Orders is governed by Rule 515A, Interpretation and 
Policies.12.\10\ cPRIME Orders are processed and executed in the 
Exchange's PRIME [sic] mechanism, the same mechanism that the Exchange 
uses to process and execute simple PRIME orders, pursuant to Exchange 
Rule 515A.\11\ 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. The cPRIME mechanism is used for Complex Orders on 
the Exchange's Strategy Book, 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.
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    \10\ 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).
    \11\ Id.
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Responder to PRIME Auction Fee
    The Exchange proposes to amend the Fee Schedule to modify the 
transaction fees for Members that participate in the PRIME Auction. 
Specifically, the Exchange proposes to amend the Responder to PRIME 
Auction Fee, Per Contract Fee for Non-Penny Classes, in the PRIME Fees 
table. Currently, the Exchange charges a fee of $0.99 for all Origins 
(Priority Customer,\12\ Public Customer \13\ that is not a Priority 
Customer, MIAX Market Maker,\14\ Non-MIAX Market Maker, Non-Member 
Broker-Dealer, and Firm). The Exchange now proposes to increase the 
Responder fee for Non-Penny Classes from $0.99 to $1.10 per contract 
for all Origins in the PRIME Fees table.
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    \12\ The term ``Priority Customer'' means a person or entity 
that (i) is not a broker or dealer in securities, and (ii) does not 
place more than 290 orders in listed options per day on average 
during a calendar month for its own beneficial account(s). See 
Exchange Rule 100.
    \13\ The term ``Public Customer'' means a person that is not a 
broker or dealer in securities. See Exchange Rule 100.
    \14\ The term ``Market Makers'' refers to ``Lead Market 
Makers'', ``Primary Lead Market Makers'' and ``Registered Market 
Makers'' collectively. See Exchange Rule 100.
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    The purpose of adjusting the per contract Responder fee for Non-
Penny Classes in the PRIME Fees table for all Origins is for business 
and competitive reasons. In order to attract order flow the Exchange 
initially set its PRIME rebates and fees so that they were meaningfully 
higher/lower than other options exchanges that provide a comparable 
price improvement mechanism. The Exchange now believes that it is 
appropriate to further adjust these fees so that they are more in line 
with other exchanges,\15\ but remain competitive such that it should 
enable the Exchange to continue to attract order

[[Page 57871]]

flow to PRIME Auctions and to also maintain market share.
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    \15\ The Exchange notes that BOX Options has a $1.15 responder 
fee in Non-Penny classes. See BOX Options Fee Schedule as of 
September 1, 2021, Section I. Electronic Transaction Fees, B. PIP 
and COPIP Transactions at https://boxoptions.com/regulatory/fee-schedule/. The Exchange also notes that Nasdaq MRX has a responder 
fee of $1.10 in Non-Penny classes. See Nasdaq MRX Options 7 Pricing 
Schedule, Section 3. Regular Order Fees and Rebates, A. PIM Pricing 
for Regular and Complex Orders at https://listingcenter.nasdaq.com/rulebook/mrx/rules/mrx-options-7.
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Priority Customer PRIME Break-Up Credit
    The Exchange proposes to amend the Fee Schedule to modify the PRIME 
Break-up Credit per contract credit for Non-Penny Classes for the 
Priority Customer Origin in PRIME. Currently, the Exchange provides 
Priority Customers a PRIME break-up credit of $0.60 per contract for 
Non-Penny Classes in a PRIME Auction. The Exchange now proposes to 
adopt an alternative Priority Customer PRIME break-up credit of $0.69, 
instead of $0.60, per contract for Non-Penny Classes when the order 
breakup percentage is greater than 40%. Orders in this segment with 
order break-up percentages of 40% or less will continue to receive the 
$0.60 per contract break-up credit. The Exchange proposes to add new 
footnote ``*'' after the PRIME Fee table that will provide the 
following: MIAX will apply an enhanced PRIME Break-up credit of $0.69 
per contract to the EEM that submitted a PRIME Order in Non-Penny 
Classes that is submitted to the PRIME Auction that trades with PRIME 
AOC Responses and/or PRIME Participating Quotes or Orders, if the PRIME 
Order experiences a break-up of greater than forty percent (40%).
    The decision to offer an alternative enhanced Priority Customer 
Break-up credit is based on an analysis of current revenue and volume 
levels and is designed to encourage Priority Customer order flow to 
PRIME Auctions.
Remove Discounted PRIME Response Fee for PCRP Tier 3 or Higher
    Next, the Exchange proposes to remove the discounted PRIME Response 
fee for standard options in Penny Classes and discounted PRIME Response 
fee for standard options in Non-Penny Classes for Members or their 
Affiliates that qualifies for Priority Customer Rebate Program 
(``PCRP'') volume tier 3 or higher.
    Currently MIAX will assess the Responder to PRIME Auction Fee to: 
(i) A PRIME AOC Response that executes against a PRIME Order, and (ii) 
a PRIME Participating Quote or Order that executes against a PRIME 
Order. MIAX will apply the PRIME Break-up credit to the EEM that 
submitted the PRIME Order for agency contracts that are submitted to 
the PRIME Auction that trade with a PRIME AOC Response or a PRIME 
Participating Quote or Order that trades with the PRIME Order. 
Transaction fees in mini-options will be 1/10th of the standard per 
contract fee or rebate described in the table above for the PRIME 
Auction. MIAX will assess the standard transaction fees to a PRIME AOC 
Response if it executes against unrelated orders. Any Member or its 
Affiliate \16\ that qualifies for Priority Customer Rebate Program 
volume tiers 3 or higher and submits a PRIME AOC Response that is 
received during the Response Time Interval and executed against the 
PRIME Order, or a PRIME Participating Quote or Order that is received 
during the Response Time Interval and executed against the PRIME Order, 
will be assessed a Discounted PRIME Response Fee of $0.46 per contract 
for standard options in Penny Program classes. Any Member or its 
Affiliate that qualifies for Priority Customer Rebate Program 
(``PCRP'') volume tiers 3 or higher and submits a PRIME AOC Response 
that is received during the Response Time Interval and executed against 
the PRIME Order, or a PRIME Participating Quote or Order that is 
received during the Response Time Interval and executed against the 
PRIME Order, will be assessed a Discounted PRIME Response Fee of $0.95 
per contract for standard options in non-Penny Program classes.
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    \16\ The term ``Affiliate'' means (i) an affiliate of a Member 
of at least 75% common ownership between the firms as reflected on 
each firm's Form BD, Schedule A, (``Affiliate''), or (ii) the 
Appointed Market Maker of an Appointed EEM (or, conversely, the 
Appointed EEM of an Appointed Market Maker). An ``Appointed Market 
Maker'' is a MIAX Market Maker (who does not otherwise have a 
corporate affiliation based upon common ownership with an EEM) that 
has been appointed by an EEM and an ``Appointed EEM'' is an EEM (who 
does not otherwise have a corporate affiliation based upon common 
ownership with a MIAX Market Maker) that has been appointed by a 
MIAX Market Maker, pursuant to the following process. A MIAX Market 
Maker appoints an EEM and an EEM appoints a MIAX Market Maker, for 
the purposes of the Fee Schedule, by each completing and sending an 
executed Volume Aggregation Request Form by email to 
[email protected] no later than 2 business days prior to 
the first business day of the month in which the designation is to 
become effective. Transmittal of a validly completed and executed 
form to the Exchange along with the Exchange's acknowledgement of 
the effective designation to each of the Market Maker and EEM will 
be viewed as acceptance of the appointment. The Exchange will only 
recognize one designation per Member. A Member may make a 
designation not more than once every 12 months (from the date of its 
most recent designation), which designation shall remain in effect 
unless or until the Exchange receives written notice submitted 2 
business days prior to the first business day of the month from 
either Member indicating that the appointment has been terminated. 
Designations will become operative on the first business day of the 
effective month and may not be terminated prior to the end of the 
month. Execution data and reports will be provided to both parties. 
See Fee Schedule, note 1.
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    The Exchange now proposes to remove both the Discounted PRIME 
Response Fee of $0.46 per contract for standard options in Penny 
Classes and the Discounted PRIME Response Fee of $0.95 per contract for 
standard options in Non-Penny Classes, and will remove the portion that 
describes the discounted fees from the accompanying footnotes. The 
purpose of this change is for business and competitive reasons.
Responder to cPRIME Auction Fee
    The Exchange proposes to amend the Fee Schedule to modify the 
transaction fees for Members that participate in the cPRIME Auction. 
Specifically, the Exchange proposes to amend the per contract Responder 
fee for Non-Penny Classes in a cPRIME Auction for all Origins in the 
cPRIME Fees table. Currently, the Exchange charges a Responder fee of 
$0.99 per contract for Non-Penny Classes in all Origins for a cPRIME 
Auction. The Exchange now proposes to increase the Responder fee to 
$1.10 per contract for Non-Penny Classes for all Origins in a cPRIME 
Auction.
    The purpose of adjusting the per contract Responder fee for Non-
Penny Classes for all Origins is for business and competitive reasons. 
In order to attract order flow the Exchange initially set its cPRIME 
rebates and fees so that they were meaningfully higher/lower than other 
options exchanges that provide a comparable complex order price 
improvement mechanism. The Exchange now believes that it is appropriate 
to further adjust these fees so that they are more in line with other 
exchanges,\17\ but will remain competitive such that it should enable 
the Exchange to continue to attract complex order flow to cPRIME 
Auctions and also maintain market share.
---------------------------------------------------------------------------

    \17\ See supra note 15.
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2. Statutory Basis
    The Exchange believes that its proposal to amend its Fee Schedule 
is consistent with Section 6(b) of the Act \18\ in general, and 
furthers the objectives of Section 6(b)(4) of the Act \19\ 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

[[Page 57872]]

discrimination between customers, issuers, brokers and dealers.
---------------------------------------------------------------------------

    \18\ 15 U.S.C. 78f(b).
    \19\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------

    The Exchange believes that 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. The Commission has repeatedly expressed its 
preference for competition over regulatory intervention in determining 
prices, products, and services in the securities markets. In Regulation 
NMS, the Commission highlighted the importance of market forces in 
determining prices and SRO revenues and, also, recognized that current 
regulation of the market system ``has been remarkably successful in 
promoting market competition in its broader forms that are most 
important to investors and listed companies.'' \20\ There are currently 
16 registered options exchanges competing for order flow. Based on 
publicly-available information, and excluding index-based options, for 
the month of September 2021, no single exchange has more than 
approximately 12%-13% of the market share of executed volume of 
multiply-listed equity and exchange-traded fund (``ETF'') options 
trades as of September 21, 2021.\21\ Therefore, no exchange possesses 
significant pricing power in the execution of multiply-listed equity 
and ETF options order flow. More specifically, as of September 21, 
2021, the Exchange had a market share of approximately 5.47% of 
executed volume of multiply-listed equity and ETF options for the month 
of September 2021.\22\
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    \20\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496 (June 29, 2005).
    \21\ See MIAX's ``The Market at a Glance'', available at https://www.miaxoptions.com/ (last visited September 21, 2021).
    \22\ See id.
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    The Exchange believes that the ever-shifting market shares among 
the exchanges from month to month demonstrates that market participants 
can shift order flow, or discontinue or reduce use of certain 
categories of products, in response to transaction and/or non-
transaction fee changes. For example, on February 28, 2019, the 
Exchange's affiliate, MIAX PEARL, LLC (``MIAX Pearl''), filed with the 
Commission a proposal to increase Taker fees in certain Tiers for 
options transactions in certain Penny classes for Priority Customers 
and decrease Maker rebates in certain Tiers for options transactions in 
Penny classes for Priority Customers (which fee was to be effective 
March 1, 2019).\23\ MIAX Pearl experienced a decrease in total market 
share between the months of February and March of 2019, after the fees 
were in effect. Accordingly, the Exchange believes that the MIAX Pearl 
March 1, 2019, fee change may have contributed to the decrease in the 
MIAX Pearl's market share and, as such, the Exchange believes 
competitive forces constrain options exchange transaction fees and 
market participants can shift order flow based on fee changes 
instituted by the exchanges.
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    \23\ See Securities Exchange Act Release No. 85304 (March 13, 
2019), 84 FR 10144 (March 19, 2019) (SR-PEARL-2019-07).
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    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 fee schedule, like 
those of other options exchanges', which the Exchange believes provides 
incentives to Members to increase order flow of certain qualifying 
orders.
    The Exchange believes its proposal to amend its Responder fees for 
Non-Penny Classes for all Origins in PRIME and cPRIME Auctions is 
reasonable, equitably allocated and not unfairly discriminatory because 
these changes are for business and competitive reasons. In order to 
attract order flow the Exchange initially set its rebates and fees for 
its PRIME and cPRIME Auctions so that they were meaningfully higher/
lower than other options exchanges that provide a comparable price 
improvement mechanisms. The Exchange now believes that it is 
appropriate to further adjust these fees so that they are more in line 
with those of other exchanges,\24\ but will remain competitive and 
should enable the Exchange to continue to attract order flow to PRIME 
and cPRIME Auctions and also maintain market share.
---------------------------------------------------------------------------

    \24\ See supra note 15.
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    The Exchange also believes that its proposal to amend the Responder 
fees for Non-Penny Classes for all Origins in PRIME and cPRIME Auctions 
is not unfairly discriminatory as all Origins that respond to a PRIME 
or cPRIME Auction will be assessed an identical fee and access to the 
Exchange is offered on terms that are not unfairly discriminatory. The 
Exchange believes it is equitable and not unfairly discriminatory to 
increase the Responder fee as certain other option exchanges that offer 
similar price improvement functionality charge similar fees.\25\ The 
Exchange believes that it is appropriate to increase the fees so that 
they are more in line with other exchanges,\26\ and will still remain 
competitive such that they should enable the Exchange to continue to 
attract order flow to its PRIME and cPRIME Auctions and maintain market 
share.
---------------------------------------------------------------------------

    \25\ See id.
    \26\ See id.
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    The Exchange believes its proposal to offer an enhanced PRIME 
Break-up Credit for Non-Penny Classes for Priority Customers is 
reasonable, equitably allocated and not unfairly discriminatory because 
this change is for business and competitive reasons. The Exchange 
believes that its proposal will encourage Priority Customer order flow 
to PRIME 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.
    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 at least one competing options exchange offers 
similar fees and credits in connection with similar price improvement 
auctions.\27\
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    \27\ The Cboe Exchange provides for a $0.60 per contract credit 
in Non-Penny classes. See Cboe Fee Schedule, ``Break-Up Credits,'' 
available at https://cdn.cboe.com/resources/membership/Cboe_FeeSchedule.pdf.
---------------------------------------------------------------------------

    The Exchange believes its proposal to remove the discounted PRIME 
Response fees for Penny and Non-Penny Classes for Members who achieve 
Tier 3 or higher in the PCRP is reasonable, equitably allocated and not 
unfairly discriminatory because these changes are for business and 
competitive reasons. In order to attract order flow, the Exchange 
initially set its rebates and fees so that they were meaningfully 
higher/lower than other options exchanges that provide a comparable 
price improvement mechanism. The Exchange conducted an internal review 
and analysis of fees and rebates and determined that it was appropriate 
to

[[Page 57873]]

remove the discounted PRIME Response fees so that all PRIME response 
fees are more line with other exchanges,\28\ but will still remain 
highly competitive such that it should enable the Exchange to continue 
to attract order flow to PRIME Auctions and also maintain market share.
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    \28\ See supra note 15.
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    In addition, The Exchange believes that its proposal is consistent 
with Section 6(b)(5) of the Act \29\ 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.
---------------------------------------------------------------------------

    \29\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

    The Exchange believes that increasing the Responder fees for PRIME 
and cPRIME Auctions is equitable and not unfairly discriminatory 
because the proposed fees will apply equally to all Origins that 
respond to PRIME and cPRIME Auctions. The Exchange believes that the 
application of this fee is equitable and not unfairly discriminatory 
because the fee is identical for all market participants that respond 
to PRIME and cPRIME Auctions.

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

    In accordance with Section 6(b)(8) of the Act,\30\ 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. 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 its proposal to amend its Responder 
fees for PRIME and cPRIME Auctions is uniform and will be applied 
equally to all Origins that respond to PRIME and cPRIME Auctions.
---------------------------------------------------------------------------

    \30\ 15 U.S.C. 78f(b)(8).
---------------------------------------------------------------------------

    The Exchange does not believes its proposal to remove the 
discounted PRIME Response fees for Penny and Non-Penny Classes for 
Members who achieve Tier 3 or higher in the PCRP will impose any burden 
to intra-market competition that is not necessary or appropriate in 
furtherance of the purposes of the Act. The Exchange conducted an 
internal review and analysis of fees and rebates and determined that it 
was appropriate to remove the discounted PRIME Response fees so that 
all PRIME response fees are more line with other exchanges,\31\ but 
will still remain highly competitive such that it should enable the 
Exchange to continue to attract order flow to PRIME Auctions and also 
maintain market share. The removal of these fees will impact all 
Priority Customers equally.
---------------------------------------------------------------------------

    \31\ See supra note 15.
---------------------------------------------------------------------------

    The Exchange believes its proposal to offer an enhanced PRIME 
Break-up Credit for Non-Penny Classes for Priority Customers is 
reasonable, equitably allocated and not unfairly discriminatory because 
this change is for business and competitive reasons. The Exchange 
believes that its proposal will encourage additional Priority Customer 
order flow to PRIME Auctions. Increased Priority Customer order flow 
benefits all market participants because it continues to attract 
liquidity to the Exchange by providing more trading opportunities and 
tighter spreads.
    The Exchange 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, 
other competing options exchanges currently have similar rebates in 
place in connection with similar price improvement auctions.\32\ 
Additionally, 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 12-13% of the market share.\33\ 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.'' \34\ 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' . . .'' \35\ 
Accordingly, the Exchange does not believe its proposed fee changes 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act.
---------------------------------------------------------------------------

    \32\ See supra note 15.
    \33\ See supra note 21.
    \34\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005).
    \35\ 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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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,\36\ and Rule 19b-4(f)(2) \37\ 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

[[Page 57874]]

whether the proposed rule should be approved or disapproved.
---------------------------------------------------------------------------

    \36\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \37\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------

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-2021-42 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-2021-42. 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-2021-42, and should be submitted on 
or before November 9, 2021.
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    \38\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\38\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-22689 Filed 10-18-21; 8:45 am]
BILLING CODE 8011-01-P
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