Self-Regulatory Organizations; Miami International Securities Exchange LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend the Professional Rebate Program, 4672-4676 [2022-01702]
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Federal Register / Vol. 87, No. 19 / Friday, January 28, 2022 / Notices
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[FR Doc. 2022–01874 Filed 1–26–22; 11:15 am]
BILLING CODE 7710–12–P
[Release No. 34–94039; File No. SR–MIAX–
2022–05]
Self-Regulatory Organizations; Miami
International Securities Exchange LLC;
Notice of Filing and Immediate
Effectiveness of a Proposed Rule
Change To Amend the Professional
Rebate Program
jspears on DSK121TN23PROD with NOTICES1
January 24, 2022.
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 January 13, 2022, 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.
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
The Exchange proposes to amend the
Fee Schedule to change the Professional
Rebate Program so that it applies only
to orders that add liquidity to the
Exchange. The Exchange initially filed
this proposal on January 3, 2022 (SR–
MIAX–2022–02) and withdrew such
filing on January 13, 2022. The
Exchange proposes to implement the fee
change effective January 13, 2022.
The Exchange notes that it 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 one of 16 registered options
exchanges competing for order flow.
Based on publicly-available
information, and excluding index-based
options, no single exchange has more
than approximately 13% of the market
share of executed volume of multiplylisted equity and exchange-traded fund
(‘‘ETF’’) options trades as of January 11,
2022, for the month of January 2022.3
Therefore, no exchange possesses
significant pricing power in the
3 See MIAX’s ‘‘The Market at a Glance’’, available
at https://www.miaxoptions.com/ (last visited
January 11, 2022).
1 15
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
18:03 Jan 27, 2022
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.
1. Purpose
SECURITIES AND EXCHANGE
COMMISSION
VerDate Sep<11>2014
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
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execution of multiply-listed equity and
ETF options order flow. More
specifically, as of January 11, 2022, the
Exchange has a total market share of
5.41% of all equity options volume, for
the month of January 2022.4
The Exchange currently offers a
Professional Rebate Program (the
‘‘Program’’) as defined in the Fee
Schedule. Under the Program, the
Exchange will credit each Member 5 the
per contract amount resulting from any
contracts executed from an order
submitted by a Member for the
account(s) of a (i) Public Customer 6 that
is not a Priority Customer; 7 (ii) NonMIAX Market Maker; (iii) Non-Member
Broker-Dealer; or (iv) Firm (for purposes
of the Professional Rebate Program,
‘‘Professional’’) which is executed
electronically on the Exchange in all
multiply-listed option classes
(excluding, in simple or complex as
applicable, mini-options, QCC 8 and
cQCC Orders,9 PRIME 10 and cPRIME
Orders,11 PRIME and cPRIME AOC
Responses,12 PRIME and cPRIME
4 See
id.
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.
6 The term ‘‘Public Customer’’ means a person
that is not a broker or dealer in securities. See
Exchange Rule 100.
7 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 390
orders in listed options per day on average during
a calendar month for its own beneficial account(s).
See Exchange Rule 100.
8 Qualified Contingent Cross Order. A Qualified
Contingent Cross Order is comprised of an
originating order to buy or sell at least 1,000
contracts, or 10,000 mini-option contracts, that is
identified as being part of a qualified contingent
trade, as that term is defined in Interpretations and
Policies .01 of Rule 516, coupled with a contra-side
order or orders totaling an equal number of
contracts. A Qualified Contingent Cross Order is not
valid during the opening rotation process described
in Rule 503. See Exchange Rule 516(j).
9 A Complex Qualified Contingent Cross or
‘‘cQCC’’ Order is comprised of an originating
complex order to buy or sell where each component
is at least 1,000 contracts that is identified as being
part of a qualified contingent trade, as defined in
Rule 516, Interpretations and Policies .01, coupled
with a contra-side complex order or orders totaling
an equal number of contracts. Trading of cQCC
Orders is governed by Rule 515(h)(4). See Exchange
Rule 518(b)(6).
10 PRIME is a process by which a Member may
electronically submit for execution (‘‘Auction’’) an
order it represents as agent (‘‘Agency Order’’)
against principal interest, and/or an Agency Order
against solicited interest. See Exchange Rule
515A(a).
11 A Complex PRIME or ‘‘cPRIME’’ Order is a
complex order (as defined in Rule 518(a)(5)) that is
submitted for participation in a cPRIME Auction.
Trading of cPRIME Orders is governed by Rule
515A, Interpretations and Policies .12. See
Exchange Rule 518(b)(7).
12 An Auction-or-Cancel or ‘‘AOC’’ order is a limit
order used to provide liquidity during a specific
5 The
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Federal Register / Vol. 87, No. 19 / Friday, January 28, 2022 / Notices
Contra-side Orders, and executions
related to contracts that are routed to
one or more exchanges in connection
with the Options Order Protection and
Locked/Crossed Market Plan referenced
in MIAX Rule 1400 (collectively, for
purposes of the Professional Rebate
Program, ‘‘Excluded Contracts’’)),
provided the Member achieves certain
Professional volume increase percentage
thresholds in the month relative to the
fourth quarter of 2015, as described in
the table above.
The percentage thresholds in each tier
are based upon the increase in the total
volume submitted by a Member and
executed for the account(s) of a
Professional on MIAX (not including
Excluded Contracts) during a particular
month as a percentage of the total
volume reported by the Options
Clearing Corporation (OCC) in MIAX
classes during the same month (the
‘‘Current Percentage’’), less the greater
of (x) total volume submitted by that
Member and executed for the account(s)
of a Professional on MIAX (not
including Excluded Contracts) during
the fourth quarter of 2015 as a
percentage of the total volume reported
by OCC in MIAX classes during the
fourth quarter of 2015, and (y) 0.065%
(the ‘‘Baseline Percentage’’). Volume for
transactions in both simple and
complex orders will be aggregated to
determine the appropriate volume tier
threshold applicable to each transaction.
For purposes of determining the
Baseline Percentage for any Member
that did not execute any contracts for
the account(s) of a Professional on
MIAX in the fourth quarter of 2015, the
Baseline Percentage shall be 0.065%.
The Member’s percentage increase
will be calculated as the Current
Percentage less the Baseline Percentage.
Members will receive rebates for
contracts submitted by such Member on
behalf of a Professional(s) that are
executed within a particular percentage
tier based upon that percentage tier
only, and will not receive a rebate for
such contracts that applies to any other
tier. The increase in volume percentage
will be recorded for, and credits will be
delivered to, the Member that submits
the order to MIAX on behalf of the
Professional. Volume for both simple
and complex orders will be aggregated
to determine the appropriate volume
tier threshold applicable to each
transaction. MIAX will aggregate the
contracts resulting from Professional
orders transmitted and executed
electronically on MIAX from Members
and their Affiliates 13 for purposes of the
thresholds described in the table above.
A Member may request to receive its
credit under the Program as a separate
direct payment.
For Simple Orders 14 the per contract
credit of $0.10 for Tier 1 will apply to
percentage thresholds from above 0.00%
up to 0.005%. Next, the per contract
credit of $0.15 for Tier 2 will apply only
to percentage thresholds from above
0.005% up to 0.020%, beginning with
the first contract executed in Tier 2, but
will not apply to contracts executed in
Tier 1, to which the $0.10 per contract
credit applied. Thereafter, the per
contract credit of $0.20 for Tier 3 will
apply to percentage thresholds from
above 0.020%, beginning with the first
contract executed in Tier 3, but will not
apply to contracts executed in Tier 1, to
which the $0.10 per contract credit
applied, and will not apply to contracts
executed in Tier 2, to which the $0.15
per contract credit applied.
For Complex Orders 15 the per
contract credit of $0.03 for Tier 1 will
apply to percentage thresholds from
above 0.00% up to 0.005%. Next, the
per contract credit of $0.05 for Tier 2
will apply only to percentage thresholds
from above 0.005% up to 0.020%,
beginning with the first contract
executed in Tier 2, but will not apply
to contracts executed in Tier 1, to which
the $0.03 per contract credit applied.
Thereafter, the per contract credit of
$0.07 for Tier 3 will apply to percentage
thresholds from above 0.020%,
beginning with the first contract
executed in Tier 3, but will not apply
to contracts executed in Tier 1, to which
the $0.03 per contract credit applied,
and will not apply to contracts executed
in Tier 2, to which the $0.05 per
contract credit applied.
The below table reflects the current
Professional Rebate Program in the Fee
Schedule.
PROFESSIONAL REBATE PROGRAM
Type of market participants eligible for rebate
Tier
jspears on DSK121TN23PROD with NOTICES1
Public Customer that is Not a Priority Customer ..............................
Non-MIAX Market Maker ..................................................................
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).
13 For purposes of the MIAX Options Fee
Schedule, the term ‘‘Affiliate’’ means (i) an affiliate
of a Member of at least 75% common ownership
between the firms as reflected on each firm’s Form
BD, Schedule A, (‘‘Affiliate’’), or (ii) the Appointed
Market Maker of an Appointed EEM (or, conversely,
the Appointed EEM of an Appointed Market
Maker). See MIAX Options Exchange Fee Schedule.
14 A Simple Order is an order on the Exchange’s
regular electronic book of orders and quotes. See
Exchange Rule 518(a)(15).
15 A ‘‘complex order’’ is any order involving the
concurrent purchase and/or sale of two or more
VerDate Sep<11>2014
18:03 Jan 27, 2022
Jkt 256001
Percentage thresholds of
volume increase
in multiply-listed
options (except
Excluded Contracts)
for the Current Month
Compared to Fourth
Quarter 2015
1
2
Above 0.00%–0.005% .....
Above 0.005%–0.020% ...
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. A
complex order can also be a ‘‘stock-option order’’
as described further, and subject to the limitations
set forth, in Interpretations and Policies .01 of this
Rule. A stock-option order is an order to buy or sell
a stated number of units of an underlying security
(stock or Exchange Traded Fund Share (‘‘ETF’’)) or
a security convertible into the underlying stock
PO 00000
Frm 00122
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Per contract
credit
(except
Excluded
Contracts)
for Simple
Orders
$0.10
0.15
Per contract
credit
(except
Excluded
Contracts)
for Complex
Orders
$0.03
0.05
(‘‘convertible security’’) coupled with the purchase
or sale of options contract(s) on the opposite side
of the market representing either (i) the same
number of units of the underlying security or
convertible security, or (ii) the number of units of
the underlying stock necessary to create a delta
neutral position, but in no case in a ratio greater
than eight-to-one (8.00), where the ratio represents
the total number of units of the underlying security
or convertible security in the option leg to the total
number of units of the underlying security or
convertible security in the stock leg. Only those
stock-option 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).
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Federal Register / Vol. 87, No. 19 / Friday, January 28, 2022 / Notices
PROFESSIONAL REBATE PROGRAM—Continued
Type of market participants eligible for rebate
Tier
jspears on DSK121TN23PROD with NOTICES1
Non-Member Broker-Dealer Firm .....................................................
The Exchange now proposes to revise
the Program to make the credit available
only to those orders (both simple and
complex) that add liquidity to the
Exchange. The purpose of this change is
to encourage Members to direct greater
Professional trade volume to the
Exchange that adds liquidity. Increased
Professional volume will provide for
greater liquidity, which benefits all
market participants. The practice of
incentivizing increased order flow in
order to attract liquidity is, and has
been, commonly practiced in the
options markets. The Program similarly
intends to attract Professional order
flow, which will increase liquidity,
thereby providing greater trading
opportunities and tighter spreads for
other market participants and causing a
corresponding increase in order flow
from such other market participants.
The specific volume increase
thresholds of the Program’s tiers are not
changing under this proposal and were
set based upon business determinations
and an analysis of volume levels. The
volume increase thresholds are intended
to encourage firms that route some
Professional orders to the Exchange to
increase the number of such orders that
are sent to the Exchange to achieve the
next threshold and to provide incentive
for new participants to send
Professional orders as well. Increasing
the number of such orders sent to the
Exchange will in turn provide tighter
and more liquid markets, and therefore
attract more business overall. Similarly,
the different credit rates at the different
tier levels were based on an analysis of
revenue and volume levels and are
intended to provide increasing rewards
for increasing the volume of trades sent
to and executed on the Exchange. The
specific amounts of the tiers and rates
were set in order to encourage suppliers
of Professional order flow to reach for
higher tiers.
The purpose of calculating the
Baseline Percentage as the total volume
submitted by that Member and executed
for the account(s) of a Professional on
MIAX (not including Excluded
Contracts) during the fourth quarter of
2015 as a percentage of the total volume
VerDate Sep<11>2014
18:03 Jan 27, 2022
Jkt 256001
Percentage thresholds of
volume increase
in multiply-listed
options (except
Excluded Contracts)
for the Current Month
Compared to Fourth
Quarter 2015
3
Above 0.020% ..................
reported by OCC in MIAX classes
during the fourth quarter of 2015 is to
maintain a constant measuring
methodology based upon a sample of
the most current market conditions
available over a meaningful period of
time (e.g., three months), which should
help Members submitting orders
designated as Professional (as defined
above) better understand the volume
thresholds that will result in higher
rebate amounts.
The Exchange will continue to leave
certain Excluded Contracts (specifically,
Non-Priority Customer to Non-Priority
Customer orders, QCC Orders, PRIME
Orders, PRIME AOC Responses, and
PRIME Contra-side Orders) out of the
calculation of the Current and Baseline
percentages measuring contracts
executed on MIAX and accordingly
from the calculation of the percentage
thresholds of volume increase. The
Exchange believes that it is unnecessary
and redundant to offer an incentive
where both sides of the trade are
submitted and executed by the same
Member that submits such orders on
behalf of Professionals.
Executions related to contracts that
are routed to one or more exchanges in
connection with the Options Order
Protection and Locked/Crossed Market
Plan referenced in MIAX Rule 1400 are
excluded from the calculation because
the execution of such orders occurs on
away markets. Providing rebates to
Professional executions that occur on
other trading venues would be
inconsistent with the proposal.
Therefore, such volume is excluded
from the Program in order to promote
the underlying goal, which is to increase
liquidity and execution volume on the
Exchange.
The Exchange also excludes minioptions from the calculation of the
percentage thresholds of volume
increase. Mini-options contracts are
excluded from the Program because the
cost to the Exchange to process quotes,
orders and trades in mini-options is the
same as for standard options. This,
coupled with the lower per-contract
transaction fees charged to other market
participants, makes it impractical to
PO 00000
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Per contract
credit
(except
Excluded
Contracts)
for Simple
Orders
0.20
Per contract
credit
(except
Excluded
Contracts)
for Complex
Orders
0.07
offer Members a credit for Professional
mini-option volume that they transact.
2. Statutory Basis
The Exchange believes that its
proposal to amend its Fee Schedule is
consistent with Section 6(b) of the Act 16
in general, and furthers the objectives of
Section 6(b)(4) of the Act 17 in
particular, in that it is an equitable
allocation of reasonable dues, 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 18 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.
As discussed above 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 to be
excessive or incentives to be
insufficient, and the Exchange
represents only a small percentage of
the overall 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 self-regulatory organization
(‘‘SRO’’) revenues and, also, recognized
that current regulation of the market
system ‘‘has been remarkably successful
in promoting market competition in its
broader forms that are most important to
investors and listed companies.’’ 19
The Exchange believes that the evershifting market shares among the
exchanges from month to month
16 15
U.S.C. 78f(b).
U.S.C. 78f(b)(4).
18 15 U.S.C. 78f(b)(5).
19 See Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37496 (June 29, 2005).
17 15
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Federal Register / Vol. 87, No. 19 / Friday, January 28, 2022 / Notices
demonstrates that market participants
can shift order flow or discontinue or
reduce use of certain categories of
products, in response to transaction and
non-transaction fee changes.
Accordingly, competitive forces
constrain the Exchange’s transaction
fees and rebates, and market
participants can readily trade on
competing venues if they deem pricing
levels at those other venues to be more
favorable. The Exchange believes the
proposal reflects a reasonable and
competitive pricing structure which will
continue to incentivize market
participants to direct liquidity adding
orders to the Exchange, which the
Exchange believes would enhance
liquidity and market quality on the
exchange to the benefit of all Members.
The Exchange believes that amending
the Program to provide a per contract
rebate only to liquidity adding orders
and to no longer provide a per contract
rebate to those orders that remove
liquidity from the Exchange is
reasonable, equitable and not unfairly
discriminatory as the Program is
available to all Members and all
similarly situated market participants
are subject to the same rebate structure
under the Program, and access to the
Exchange is offered on terms that are
not unfairly discriminatory. The
Exchange’s proposal is intended to
encourage participants to submit more
orders that add liquidity to the
Exchange, thus enhancing liquidity on
the Exchange. Increased liquidity
benefits all market participants by
providing more trading opportunities
and tighter spreads. The Exchange
believes the Program, as amended, will
continue to encourage liquidity and
support the quality of price discovery,
thereby promoting market transparency
and improving investor protection.
The Exchange believes that the
proposed change to its Program is
reasonably designed to incentivize
Members to submit orders which add
liquidity to the Exchange, which
facilitates increased trading
opportunities, tighter spreads, and
overall enhanced market quality to the
benefit of all market participants. The
Exchange further believes the proposed
change is reasonable as incentive
programs have been widely adopted by
exchanges, including the Exchange, and
are reasonable, equitable, and not
unfairly discriminatory because they are
open to all members on an equal basis
and provide additional benefits or
discounts that are reasonably related to
an exchange’s market quality. In
particular, the Exchange believes its
proposal to provide a per contract credit
only to liquidity adding orders and to
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not provide a per contract credit to
liquidity removing orders is reasonable,
equitable, and not unfairly
discriminatory for these same reasons,
as it provides Members with an
additional incentive to submit liquidity
adding orders to the Exchange in order
to qualify for a rebate under the
Program.
The Exchange believes its proposal to
offer certain per contract credits to
simple and complex orders that add
liquidity under the Program is
consistent with Section 6(b)(4) of the
Act 20 because it applies equally to all
participants. The Exchange’s proposal is
intended to encourage participants to
submit more orders to the Exchange that
add liquidity, thus enhancing liquidity
and removing impediments to and
perfecting the mechanisms of a free and
open market and a national market
system. Additionally, if a Member does
not satisfy the requirements of the
Program then they will simply not
receive the rebate offered by the
Program for that month.
For the reasons discussed above, the
Exchange submits that the proposal
satisfies the requirements of Sections
6(b)(4) and 6(b)(5) of the Act 21 in that
it provides for the equitable allocation
of reasonable dues, fees and other
charges among its Members and other
persons using its facilities and is not
designed to unfairly discriminate
between customers, issuers, brokers, or
dealers.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition not
necessary or appropriate in furtherance
of the purposes of the Act. The
Exchange believes that the proposed
rule change would increase both
intermarket and intramarket
competition by incentivizing Members
to direct orders for the account(s) of
Professionals to the Exchange, which
should enhance the quality of the
Exchange’s markets and increase the
volume of contracts traded here. To the
extent that this purpose is achieved, all
the Exchange’s market participants
should benefit from the improved
market liquidity. Enhanced market
quality and increased transaction
volume that results from the anticipated
increase in order flow directed to the
Exchange will benefit all market
participants and improve competition
on the Exchange. The Exchange notes
that it operates in a highly competitive
20 15
21 15
PO 00000
U.S.C. 78f(b)(4).
U.S.C. 78f(b)(4) and (5).
Frm 00124
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4675
market in which market participants can
readily favor competing venues if they
deem fee levels at a particular venue to
be excessive. In such an environment,
the Exchange must continually adjust its
fees to remain competitive with other
exchanges and to attract order flow to
the Exchange. The Exchange believes
that the proposed rule change reflects
this competitive environment because it
encourages market participants to direct
their customer order flow, to provide
liquidity, and to attract additional
transaction volume, to the Exchange.
Given the robust competition for
volume among options markets, many of
which offer the same products,
implementing a volume based rebate
program for orders that add liquidity to
attract order flow like the one being
proposed in this filing is consistent with
the above-mentioned goals 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,22 and Rule
19b–4(f)(2) 23 thereunder. At any time
within 60 days of the filing of the
proposed rule change, the Commission
summarily may temporarily suspend
such rule change if it appears to the
Commission that such action is
necessary or appropriate in the public
interest, for the protection of investors,
or otherwise in furtherance of the
purposes of the Act. If the Commission
takes such action, the Commission shall
institute proceedings to determine
whether the proposed rule should be
approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
22 15
23 17
E:\FR\FM\28JAN1.SGM
U.S.C. 78s(b)(3)(A)(ii).
CFR 240.19b–4(f)(2).
28JAN1
4676
Federal Register / Vol. 87, No. 19 / Friday, January 28, 2022 / Notices
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
MIAX–2022–05 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–2022–05. 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–2022–05 and should
be submitted on or before February 18,
2022.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.24
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022–01702 Filed 1–27–22; 8:45 am]
jspears on DSK121TN23PROD with NOTICES1
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–94031]
Order Granting Application by The
Nasdaq Stock Market LLC for an
Exemption Pursuant to Section 36(a) of
the Exchange Act From the Rule Filing
Requirements of Section 19(b) of the
Exchange Act With Respect to Certain
Rules Incorporated by Reference
January 24, 2022.
The Nasdaq Stock Market LLC
(‘‘Nasdaq’’ or ‘‘Exchange’’) has filed
with the Securities and Exchange
Commission (‘‘Commission’’) an
application for an exemption under
Section 36(a)(1) of the Securities
Exchange Act of 1934 (‘‘Exchange
Act’’) 1 from the rule filing requirements
of Section 19(b) of the Exchange Act 2
with respect to certain rules of the
Financial Industry Regulatory
Authority, Inc. (‘‘FINRA’’), Cboe
Exchange, Inc. (‘‘Cboe’’), and New York
Stock Exchange LLC (‘‘NYSE’’), that the
Exchange seeks to incorporate by
reference.3 Section 36 of the Exchange
Act, subject to certain limitations,
authorizes the Commission to
conditionally or unconditionally
exempt any person, security, or
transaction, or any class thereof, from
any provision of the Exchange Act or
rule thereunder, if necessary or
appropriate in the public interest and
consistent with the protection of
investors.
The Exchange has requested, pursuant
to Rule 0–12 under the Exchange Act,4
that the Commission grant the Exchange
an exemption from the rule filing
requirements of Section 19(b) of the
Exchange Act for changes to the
Exchange’s rules that are effected solely
by virtue of a change to a crossreferenced FINRA, Cboe, or NYSE rule.
Specifically, the Exchange requests that
it be permitted to incorporate by
reference changes made to the FINRA,
Cboe, and NYSE rules that are crossreferenced in the Exchange’s rules
identified below, without the need for
the Exchange to file separately similar
proposed rule changes pursuant to
Section 19(b) of the Exchange Act: 5
• General 9, Section 1(b) (Prohibition
Against Trading Ahead of Customer
Orders) cross-references FINRA Rule
5320 (except for FINRA Rule 5320.02(b)
1 15
U.S.C. 78mm(a)(1).
U.S.C. 78s(b).
3 See Letter from Angela S. Dunn, Principal
Associate General Counsel, Nasdaq, to J. Matthew
DeLesDernier, Assistant Secretary, Commission,
dated January 20, 2022 (‘‘Exemptive Request’’).
4 17 CFR 240.0–12.
5 See Exemptive Request, supra note 3, at 5.
2 15
24 17
CFR 200.30–3(a)(12).
VerDate Sep<11>2014
18:03 Jan 27, 2022
Jkt 256001
PO 00000
Frm 00125
Fmt 4703
Sfmt 4703
and the reference to FINRA Rule 6420
in FINRA Rule 5320).
• General 9, Section 1(c) (Front
Running Policy) cross-references FINRA
Rule 5270.
• General 9, Section 1(f)
(Confirmation of Callable Common
Stock) cross-references FINRA Rule
2232.
• General 9, Section 1(h) (Interfering
With the Transfer of Customer Accounts
in the Context of Employment Disputes)
cross-references FINRA Rule 2140.
• General 9, Section 2 (Customers’
Securities or Funds) cross-references
FINRA Rule 2150.
• General 9, Section 3
(Communications with the Public)
cross-references FINRA Rule 2210
(except for FINRA Rule 2210(c)).
• General 9, Section 5
(Telemarketing) cross-references FINRA
Rule 3230.
• General 9, Section 6 (Forwarding of
Proxy and Other Issuer-Related
Materials) cross-references FINRA Rule
2251.
• General 9, Section 7 (Disclosure of
Financial Condition, Control
Relationship with Issuer and
Participation or Interest in Primary or
Secondary Distribution) cross-references
FINRA Rules 2261, 2262, and 2269.
• General 9, Section 8 (SIPC
Information) cross-references FINRA
Rule 2266.
• General 9, Section 9 (Fairness
Opinions) cross-references FINRA Rule
5150.
• General 9, Section 10(a)
(Recommendations to Customers
(Suitability)) cross-references FINRA
Rule 2111 (except for the references to
FINRA Rule 2214 in FINRA Rule 2111).
• General 9, Section 10(c) (Know
Your Customer) cross-references FINRA
Rule 2090.
• General 9, Section 11 (Best
Execution and Interpositioning) crossreferences FINRA Rule 5310 (except for
the references to FINRA Rule 2121 and
its supplementary material in FINRA
Rule 5310).
• General 9, Section 12 (Customer
Account Statements) cross-references
FINRA Rule 2231.
• General 9, Section 13 (Margin
Disclosure Statement) cross-references
FINRA Rule 2264.
• General 9, Section 14 (Approval
Procedures for Day-Trading Accounts)
cross-references FINRA Rules 2130 and
2270.
• General 9, Section 15 (Borrowing
From or Lending to Customers) crossreferences FINRA Rule 3240.
• General 9, Section 16 (Charges for
Services Performed) cross-references
FINRA Rule 2122.
E:\FR\FM\28JAN1.SGM
28JAN1
]]>Agencies
[Federal Register Volume 87, Number 19 (Friday, January 28, 2022)]
[Notices]
[Pages 4672-4676]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-01702]
=======================================================================
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-94039; File No. SR-MIAX-2022-05]
Self-Regulatory Organizations; Miami International Securities
Exchange LLC; Notice of Filing and Immediate Effectiveness of a
Proposed Rule Change To Amend the Professional Rebate Program
January 24, 2022.
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 January 13, 2022, 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 https://www.miaxoptions.com/rule-filings, at MIAX's principal
office, and at the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend the Fee Schedule to change the
Professional Rebate Program so that it applies only to orders that add
liquidity to the Exchange. The Exchange initially filed this proposal
on January 3, 2022 (SR-MIAX-2022-02) and withdrew such filing on
January 13, 2022. The Exchange proposes to implement the fee change
effective January 13, 2022.
The Exchange notes that it 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 one
of 16 registered options exchanges competing for order flow. Based on
publicly-available information, and excluding index-based options, no
single exchange has more than approximately 13% of the market share of
executed volume of multiply-listed equity and exchange-traded fund
(``ETF'') options trades as of January 11, 2022, for the month of
January 2022.\3\ Therefore, no exchange possesses significant pricing
power in the execution of multiply-listed equity and ETF options order
flow. More specifically, as of January 11, 2022, the Exchange has a
total market share of 5.41% of all equity options volume, for the month
of January 2022.\4\
---------------------------------------------------------------------------
\3\ See MIAX's ``The Market at a Glance'', available at https://www.miaxoptions.com/ (last visited January 11, 2022).
\4\ See id.
---------------------------------------------------------------------------
The Exchange currently offers a Professional Rebate Program (the
``Program'') as defined in the Fee Schedule. Under the Program, the
Exchange will credit each Member \5\ the per contract amount resulting
from any contracts executed from an order submitted by a Member for the
account(s) of a (i) Public Customer \6\ that is not a Priority
Customer; \7\ (ii) Non-MIAX Market Maker; (iii) Non-Member Broker-
Dealer; or (iv) Firm (for purposes of the Professional Rebate Program,
``Professional'') which is executed electronically on the Exchange in
all multiply-listed option classes (excluding, in simple or complex as
applicable, mini-options, QCC \8\ and cQCC Orders,\9\ PRIME \10\ and
cPRIME Orders,\11\ PRIME and cPRIME AOC Responses,\12\ PRIME and cPRIME
[[Page 4673]]
Contra-side Orders, and executions related to contracts that are routed
to one or more exchanges in connection with the Options Order
Protection and Locked/Crossed Market Plan referenced in MIAX Rule 1400
(collectively, for purposes of the Professional Rebate Program,
``Excluded Contracts'')), provided the Member achieves certain
Professional volume increase percentage thresholds in the month
relative to the fourth quarter of 2015, as described in the table
above.
---------------------------------------------------------------------------
\5\ 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.
\6\ The term ``Public Customer'' means a person that is not a
broker or dealer in securities. See Exchange Rule 100.
\7\ 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 390 orders in listed options per day on average during a
calendar month for its own beneficial account(s). See Exchange Rule
100.
\8\ Qualified Contingent Cross Order. A Qualified Contingent
Cross Order is comprised of an originating order to buy or sell at
least 1,000 contracts, or 10,000 mini-option contracts, that is
identified as being part of a qualified contingent trade, as that
term is defined in Interpretations and Policies .01 of Rule 516,
coupled with a contra-side order or orders totaling an equal number
of contracts. A Qualified Contingent Cross Order is not valid during
the opening rotation process described in Rule 503. See Exchange
Rule 516(j).
\9\ A Complex Qualified Contingent Cross or ``cQCC'' Order is
comprised of an originating complex order to buy or sell where each
component is at least 1,000 contracts that is identified as being
part of a qualified contingent trade, as defined in Rule 516,
Interpretations and Policies .01, coupled with a contra-side complex
order or orders totaling an equal number of contracts. Trading of
cQCC Orders is governed by Rule 515(h)(4). See Exchange Rule
518(b)(6).
\10\ PRIME is a process by which a Member may electronically
submit for execution (``Auction'') an order it represents as agent
(``Agency Order'') against principal interest, and/or an Agency
Order against solicited interest. See Exchange Rule 515A(a).
\11\ A Complex PRIME or ``cPRIME'' Order is a complex order (as
defined in Rule 518(a)(5)) that is submitted for participation in a
cPRIME Auction. Trading of cPRIME Orders is governed by Rule 515A,
Interpretations and Policies .12. See Exchange Rule 518(b)(7).
\12\ 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).
---------------------------------------------------------------------------
The percentage thresholds in each tier are based upon the increase
in the total volume submitted by a Member and executed for the
account(s) of a Professional on MIAX (not including Excluded Contracts)
during a particular month as a percentage of the total volume reported
by the Options Clearing Corporation (OCC) in MIAX classes during the
same month (the ``Current Percentage''), less the greater of (x) total
volume submitted by that Member and executed for the account(s) of a
Professional on MIAX (not including Excluded Contracts) during the
fourth quarter of 2015 as a percentage of the total volume reported by
OCC in MIAX classes during the fourth quarter of 2015, and (y) 0.065%
(the ``Baseline Percentage''). Volume for transactions in both simple
and complex orders will be aggregated to determine the appropriate
volume tier threshold applicable to each transaction. For purposes of
determining the Baseline Percentage for any Member that did not execute
any contracts for the account(s) of a Professional on MIAX in the
fourth quarter of 2015, the Baseline Percentage shall be 0.065%.
The Member's percentage increase will be calculated as the Current
Percentage less the Baseline Percentage. Members will receive rebates
for contracts submitted by such Member on behalf of a Professional(s)
that are executed within a particular percentage tier based upon that
percentage tier only, and will not receive a rebate for such contracts
that applies to any other tier. The increase in volume percentage will
be recorded for, and credits will be delivered to, the Member that
submits the order to MIAX on behalf of the Professional. Volume for
both simple and complex orders will be aggregated to determine the
appropriate volume tier threshold applicable to each transaction. MIAX
will aggregate the contracts resulting from Professional orders
transmitted and executed electronically on MIAX from Members and their
Affiliates \13\ for purposes of the thresholds described in the table
above. A Member may request to receive its credit under the Program as
a separate direct payment.
---------------------------------------------------------------------------
\13\ For purposes of the MIAX Options Fee Schedule, the term
``Affiliate'' means (i) an affiliate of a Member of at least 75%
common ownership between the firms as reflected on each firm's Form
BD, Schedule A, (``Affiliate''), or (ii) the Appointed Market Maker
of an Appointed EEM (or, conversely, the Appointed EEM of an
Appointed Market Maker). See MIAX Options Exchange Fee Schedule.
---------------------------------------------------------------------------
For Simple Orders \14\ the per contract credit of $0.10 for Tier 1
will apply to percentage thresholds from above 0.00% up to 0.005%.
Next, the per contract credit of $0.15 for Tier 2 will apply only to
percentage thresholds from above 0.005% up to 0.020%, beginning with
the first contract executed in Tier 2, but will not apply to contracts
executed in Tier 1, to which the $0.10 per contract credit applied.
Thereafter, the per contract credit of $0.20 for Tier 3 will apply to
percentage thresholds from above 0.020%, beginning with the first
contract executed in Tier 3, but will not apply to contracts executed
in Tier 1, to which the $0.10 per contract credit applied, and will not
apply to contracts executed in Tier 2, to which the $0.15 per contract
credit applied.
---------------------------------------------------------------------------
\14\ A Simple Order is an order on the Exchange's regular
electronic book of orders and quotes. See Exchange Rule 518(a)(15).
---------------------------------------------------------------------------
For Complex Orders \15\ the per contract credit of $0.03 for Tier 1
will apply to percentage thresholds from above 0.00% up to 0.005%.
Next, the per contract credit of $0.05 for Tier 2 will apply only to
percentage thresholds from above 0.005% up to 0.020%, beginning with
the first contract executed in Tier 2, but will not apply to contracts
executed in Tier 1, to which the $0.03 per contract credit applied.
Thereafter, the per contract credit of $0.07 for Tier 3 will apply to
percentage thresholds from above 0.020%, beginning with the first
contract executed in Tier 3, but will not apply to contracts executed
in Tier 1, to which the $0.03 per contract credit applied, and will not
apply to contracts executed in Tier 2, to which the $0.05 per contract
credit applied.
---------------------------------------------------------------------------
\15\ 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. A complex order can also be a ``stock-option order'' as
described further, and subject to the limitations set forth, in
Interpretations and Policies .01 of this Rule. A stock-option order
is an order to buy or sell a stated number of units of an underlying
security (stock or Exchange Traded Fund Share (``ETF'')) or a
security convertible into the underlying stock (``convertible
security'') coupled with the purchase or sale of options contract(s)
on the opposite side of the market representing either (i) the same
number of units of the underlying security or convertible security,
or (ii) the number of units of the underlying stock necessary to
create a delta neutral position, but in no case in a ratio greater
than eight-to-one (8.00), where the ratio represents the total
number of units of the underlying security or convertible security
in the option leg to the total number of units of the underlying
security or convertible security in the stock leg. Only those stock-
option 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).
---------------------------------------------------------------------------
The below table reflects the current Professional Rebate Program in
the Fee Schedule.
Professional Rebate Program
----------------------------------------------------------------------------------------------------------------
Percentage thresholds of volume Per contract Per contract
increase in multiply-listed credit (except credit (except
Type of market participants Tier options (except Excluded Excluded Excluded
eligible for rebate Contracts) for the Current Month Contracts) for Contracts) for
Compared to Fourth Quarter 2015 Simple Orders Complex Orders
----------------------------------------------------------------------------------------------------------------
Public Customer that is Not a 1 Above 0.00%-0.005%................ $0.10 $0.03
Priority Customer.
Non-MIAX Market Maker.......... 2 Above 0.005%-0.020%............... 0.15 0.05
[[Page 4674]]
Non-Member Broker-Dealer Firm.. 3 Above 0.020%...................... 0.20 0.07
----------------------------------------------------------------------------------------------------------------
The Exchange now proposes to revise the Program to make the credit
available only to those orders (both simple and complex) that add
liquidity to the Exchange. The purpose of this change is to encourage
Members to direct greater Professional trade volume to the Exchange
that adds liquidity. Increased Professional volume will provide for
greater liquidity, which benefits all market participants. The practice
of incentivizing increased order flow in order to attract liquidity is,
and has been, commonly practiced in the options markets. The Program
similarly intends to attract Professional order flow, which will
increase liquidity, thereby providing greater trading opportunities and
tighter spreads for other market participants and causing a
corresponding increase in order flow from such other market
participants.
The specific volume increase thresholds of the Program's tiers are
not changing under this proposal and were set based upon business
determinations and an analysis of volume levels. The volume increase
thresholds are intended to encourage firms that route some Professional
orders to the Exchange to increase the number of such orders that are
sent to the Exchange to achieve the next threshold and to provide
incentive for new participants to send Professional orders as well.
Increasing the number of such orders sent to the Exchange will in turn
provide tighter and more liquid markets, and therefore attract more
business overall. Similarly, the different credit rates at the
different tier levels were based on an analysis of revenue and volume
levels and are intended to provide increasing rewards for increasing
the volume of trades sent to and executed on the Exchange. The specific
amounts of the tiers and rates were set in order to encourage suppliers
of Professional order flow to reach for higher tiers.
The purpose of calculating the Baseline Percentage as the total
volume submitted by that Member and executed for the account(s) of a
Professional on MIAX (not including Excluded Contracts) during the
fourth quarter of 2015 as a percentage of the total volume reported by
OCC in MIAX classes during the fourth quarter of 2015 is to maintain a
constant measuring methodology based upon a sample of the most current
market conditions available over a meaningful period of time (e.g.,
three months), which should help Members submitting orders designated
as Professional (as defined above) better understand the volume
thresholds that will result in higher rebate amounts.
The Exchange will continue to leave certain Excluded Contracts
(specifically, Non-Priority Customer to Non-Priority Customer orders,
QCC Orders, PRIME Orders, PRIME AOC Responses, and PRIME Contra-side
Orders) out of the calculation of the Current and Baseline percentages
measuring contracts executed on MIAX and accordingly from the
calculation of the percentage thresholds of volume increase. The
Exchange believes that it is unnecessary and redundant to offer an
incentive where both sides of the trade are submitted and executed by
the same Member that submits such orders on behalf of Professionals.
Executions related to contracts that are routed to one or more
exchanges in connection with the Options Order Protection and Locked/
Crossed Market Plan referenced in MIAX Rule 1400 are excluded from the
calculation because the execution of such orders occurs on away
markets. Providing rebates to Professional executions that occur on
other trading venues would be inconsistent with the proposal.
Therefore, such volume is excluded from the Program in order to promote
the underlying goal, which is to increase liquidity and execution
volume on the Exchange.
The Exchange also excludes mini-options from the calculation of the
percentage thresholds of volume increase. Mini-options contracts are
excluded from the Program because the cost to the Exchange to process
quotes, orders and trades in mini-options is the same as for standard
options. This, coupled with the lower per-contract transaction fees
charged to other market participants, makes it impractical to offer
Members a credit for Professional mini-option volume that they
transact.
2. Statutory Basis
The Exchange believes that its proposal to amend its Fee Schedule
is consistent with Section 6(b) of the Act \16\ in general, and
furthers the objectives of Section 6(b)(4) of the Act \17\ in
particular, in that it is an equitable allocation of reasonable dues,
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 \18\ 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.
---------------------------------------------------------------------------
\16\ 15 U.S.C. 78f(b).
\17\ 15 U.S.C. 78f(b)(4).
\18\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
As discussed above 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 to be excessive or incentives
to be insufficient, and the Exchange represents only a small percentage
of the overall 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 self-regulatory organization (``SRO'') revenues
and, also, recognized that current regulation of the market system
``has been remarkably successful in promoting market competition in its
broader forms that are most important to investors and listed
companies.'' \19\
---------------------------------------------------------------------------
\19\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496 (June 29, 2005).
---------------------------------------------------------------------------
The Exchange believes that the ever-shifting market shares among
the exchanges from month to month
[[Page 4675]]
demonstrates that market participants can shift order flow or
discontinue or reduce use of certain categories of products, in
response to transaction and non-transaction fee changes. Accordingly,
competitive forces constrain the Exchange's transaction fees and
rebates, and market participants can readily trade on competing venues
if they deem pricing levels at those other venues to be more favorable.
The Exchange believes the proposal reflects a reasonable and
competitive pricing structure which will continue to incentivize market
participants to direct liquidity adding orders to the Exchange, which
the Exchange believes would enhance liquidity and market quality on the
exchange to the benefit of all Members.
The Exchange believes that amending the Program to provide a per
contract rebate only to liquidity adding orders and to no longer
provide a per contract rebate to those orders that remove liquidity
from the Exchange is reasonable, equitable and not unfairly
discriminatory as the Program is available to all Members and all
similarly situated market participants are subject to the same rebate
structure under the Program, and access to the Exchange is offered on
terms that are not unfairly discriminatory. The Exchange's proposal is
intended to encourage participants to submit more orders that add
liquidity to the Exchange, thus enhancing liquidity on the Exchange.
Increased liquidity benefits all market participants by providing more
trading opportunities and tighter spreads. The Exchange believes the
Program, as amended, will continue to encourage liquidity and support
the quality of price discovery, thereby promoting market transparency
and improving investor protection.
The Exchange believes that the proposed change to its Program is
reasonably designed to incentivize Members to submit orders which add
liquidity to the Exchange, which facilitates increased trading
opportunities, tighter spreads, and overall enhanced market quality to
the benefit of all market participants. The Exchange further believes
the proposed change is reasonable as incentive programs have been
widely adopted by exchanges, including the Exchange, and are
reasonable, equitable, and not unfairly discriminatory because they are
open to all members on an equal basis and provide additional benefits
or discounts that are reasonably related to an exchange's market
quality. In particular, the Exchange believes its proposal to provide a
per contract credit only to liquidity adding orders and to not provide
a per contract credit to liquidity removing orders is reasonable,
equitable, and not unfairly discriminatory for these same reasons, as
it provides Members with an additional incentive to submit liquidity
adding orders to the Exchange in order to qualify for a rebate under
the Program.
The Exchange believes its proposal to offer certain per contract
credits to simple and complex orders that add liquidity under the
Program is consistent with Section 6(b)(4) of the Act \20\ because it
applies equally to all participants. The Exchange's proposal is
intended to encourage participants to submit more orders to the
Exchange that add liquidity, thus enhancing liquidity and removing
impediments to and perfecting the mechanisms of a free and open market
and a national market system. Additionally, if a Member does not
satisfy the requirements of the Program then they will simply not
receive the rebate offered by the Program for that month.
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\20\ 15 U.S.C. 78f(b)(4).
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For the reasons discussed above, the Exchange submits that the
proposal satisfies the requirements of Sections 6(b)(4) and 6(b)(5) of
the Act \21\ in that it provides for the equitable allocation of
reasonable dues, fees and other charges among its Members and other
persons using its facilities and is not designed to unfairly
discriminate between customers, issuers, brokers, or dealers.
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\21\ 15 U.S.C. 78f(b)(4) and (5).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act. The Exchange believes that the
proposed rule change would increase both intermarket and intramarket
competition by incentivizing Members to direct orders for the
account(s) of Professionals to the Exchange, which should enhance the
quality of the Exchange's markets and increase the volume of contracts
traded here. To the extent that this purpose is achieved, all the
Exchange's market participants should benefit from the improved market
liquidity. Enhanced market quality and increased transaction volume
that results from the anticipated increase in order flow directed to
the Exchange will benefit all market participants and improve
competition on the Exchange. The Exchange notes that it operates in a
highly competitive market in which market participants can readily
favor competing venues if they deem fee levels at a particular venue to
be excessive. In such an environment, the Exchange must continually
adjust its fees to remain competitive with other exchanges and to
attract order flow to the Exchange. The Exchange believes that the
proposed rule change reflects this competitive environment because it
encourages market participants to direct their customer order flow, to
provide liquidity, and to attract additional transaction volume, to the
Exchange. Given the robust competition for volume among options
markets, many of which offer the same products, implementing a volume
based rebate program for orders that add liquidity to attract order
flow like the one being proposed in this filing is consistent with the
above-mentioned goals 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,\22\ and Rule 19b-4(f)(2) \23\ 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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\22\ 15 U.S.C. 78s(b)(3)(A)(ii).
\23\ 17 CFR 240.19b-4(f)(2).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
[[Page 4676]]
Send an email to [email protected]. Please include
File Number SR-MIAX-2022-05 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-2022-05. 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-2022-05 and should be submitted on
or before February 18, 2022.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\24\
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\24\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-01702 Filed 1-27-22; 8:45 am]
BILLING CODE 8011-01-P
