Self-Regulatory Organizations: Notice of Filing and Immediate Effectiveness of a Proposed Rule Change by Miami International Securities Exchange LLC To Amend Its Fee Schedule, 62147-62151 [2022-22280]
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Federal Register / Vol. 87, No. 197 / Thursday, October 13, 2022 / Notices
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:
[FR Doc. 2022–22174 Filed 10–12–22; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
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–
FINRA–2022–028 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.
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For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.48
J. Lynn Taylor,
Assistant Secretary.
All submissions should refer to File
Number SR–FINRA–2022–028. 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–
2022–028 and should be submitted on
or before November 3, 2022.
[Release No. 34–96006; File No. SR–MIAX–
2022–35]
Self-Regulatory Organizations: Notice
of Filing and Immediate Effectiveness
of a Proposed Rule Change by Miami
International Securities Exchange LLC
To Amend Its Fee Schedule
October 7, 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 October 4, 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.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange is filing a proposal to
amend the MIAX Options Fee Schedule
(the ‘‘Fee Schedule’’).
The text of the proposed rule change
is available on the Exchange’s website at
https://www.miaxoptions.com/rulefilings, at MIAX’s principal office, and
at the Commission’s Public Reference
Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
48 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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62147
the most significant aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to amend the
Fee Schedule to (i) amend the Other
Market Participant Transaction Fees
table 3 to amend the fee applicable to the
option component of a stock-option
order; and (ii) modify the Priority
Customer Rebate Program (‘‘PCRP’’) 4 as
it pertains to per contract credits for
PRIME Agency Orders submitted by
Priority Customers.5 The Exchange
initially filed this proposal on
September 1, 2022 as SR–MIAX–2022–
28. On September 20, 2022, the
Exchange withdrew SR–MIAX–2022–28
and resubmitted the proposal as SR–
MIAX–2022–31. On September 28,
2022, the Exchange withdrew SR–
MIAX–2022–31 and resubmitted the
proposal as SR–MIAX–2022–33. On
October 4, 2022, the Exchange withdrew
SR–MIAX–2022–33 and resubmitted the
proposal as SR–MIAX–2022–35. The
proposed changes are immediately
effective.
Background
Stock-Option Orders
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-tothree (.333) and less than or equal to
three-to-one (3.00) and for the purposes
3 See Section (1)(a)(ii) of the Exchange’s Fee
Schedule.
4 Under the PCRP, MIAX Options credits each
Member the per contract amount resulting from
each Priority Customer order transmitted by that
Member which is executed electronically on the
Exchange in all multiply-listed option classes
(excluding, in simple or complex as applicable,
QCC and cQCC Orders, mini-options, Priority
Customer-to-Priority Customer Orders, C2C and
cC2C Orders, PRIME and cPRIME AOC Responses,
PRIME and cPRIME Contra-side Orders, PRIME and
cPRIME Orders for which both the Agency and
Contra-side Order are Priority Customers, and
executions related to contracts that are routed to
one or more exchanges in connection with the
Options Order Protection and Locked/Crossed
Market Plan referenced in Exchange Rule 1400),
provided the Member meets certain percentage
thresholds in a month as described in the Priority
Customer Rebate Program table. See Fee Schedule,
Section (1)(a)(iii).
5 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.
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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 ‘‘stockoption order’’ as described further, and
subject to the limitations set forth, in
Interpretations and Policies .01 of
Exchange Rule 518. 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.6
Currently, under the Other Market
Participant Transaction Fees table, the
Exchange charges Public Customers that
are not Priority Customers a fee of $0.47
per contract for executions of simple
and complex orders in Penny Classes
and $0.75 per contract for executions of
simple and complex orders in NonPenny Classes, and assesses a $0.12 per
contract surcharge for trading against a
Priority Customer complex order in
Penny and Non-Penny Classes.
The Exchange now proposes to adopt
new note ‘‘!!’’ which will be applicable
to the option component of a stockoption order and which will provide
that, any Member whose Affiliate
qualifies for Priority Customer Rebate
Program volume tier 4 in the relevant
month will be assessed a total of $0.10
per contract on the option component of
6 See
Exchange Rule 518(a)(5).
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a stock-option order for executions in
Penny or Non-Penny Classes, and the
per contract surcharge for trading
against a Priority Customer complex
order will not apply.7 Therefore, a
qualifying Member will be charged
$0.10 per contract for executions in
Penny or Non-Penny Classes, and the
$0.12 per contract surcharge for trading
against a Priority Customer Order in
Penny or Non-Penny Classes will not be
assessed.
PRIME Agency Orders
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.8
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.9 Currently, the
Exchange provides a per contract credit
for PRIME Agency Orders of $0.10 for
Priority Customer Agency Orders in Tier
1, and a per contract credit of $0.11 for
Priority Customer Agency Orders in
Tiers 2 through 4.10
Proposal
The Exchange proposes to adopt a
new table under the PCRP for PRIME
Agency Orders for Priority Customers
Origins that will provide an adjustment
to the credit provided for PRIME
Agency Orders to Priority Customers in
a tiered structure dependent upon the
break-up percentage of the order. The
Exchange proposes to adopt new note
‘‘!!!’’ to state that, for Priority Customer
PRIME Agency Orders the Exchange
will apply the per contract adjustment
to the PRIME Agency rebate provided
under the Priority Customer Rebate
Program dependent upon the order
break-up percentage as described in the
table above, (the Per Contract
7 The Exchange charges a stock-handling fee of
$0.0010 per share (capped at $50 per order, per day)
for the stock leg of stock-option orders (including
stock-option eQuotes) executed against other stockoption orders in the complex order book, which the
Exchange must route to an outside venue. In
addition, the Exchange will pass through to the
Member any fees assess by the routing broker-dealer
utilized by the Exchange with respect to the
execution of the stock leg of any such order (with
such fees to be passed through at cost). The
Exchange notes that this fee is not changing under
this proposal. See the Exchange’s Fee Schedule,
Section (1)(a)(x) on its public website (available at
https://www.miaxoptions.com/fees).
8 See Exchange Rule 515A(a).
9 See Exchange Rule 51A(a)(ii).
10 See the Exchange’s Fee Schedule, Section
(1)(a)(iii), on its public website (available at https://
www.miaxoptions.com/fees).
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Adjustment for PRIME Agency Order
table).
The proposed Per Contract
Adjustment for PRIME Agency Order
table will provide that if the PRIME
Agency Order has a break-up percentage
of 0–20% the per contract credit
provided for PRIME Agency Orders will
be reduced by $0.02. If the PRIME
Agency Order has a break-up percentage
greater than 20% and up to 40% the per
contract credit provided for PRIME
Agency Orders will be reduced by
$0.01. If the PRIME Agency Order has
a break-up percentage greater than 40%
and up to 60% no adjustment will be
applied to the per contract credit
provided for PRIME Agency Orders. If
the PRIME Agency Order has a break-up
percentage greater than 60% and up to
80% the per contract credit provided for
PRIME Agency Orders will be increased
by $0.01. If the PRIME Agency Order
has a break-up percentage greater than
80% and up to 100% the per contract
credit provided for PRIME Agency
Orders will be increased by $0.02.
Current break-up and other credits
remain unchanged and will continue to
apply.
The Exchange currently provides a
PRIME Break-up credit of $0.25 per
contract in Penny Classes and $0.60 per
contract in Non-Penny Classes.
Additionally, the Exchange provides an
enhanced PRIME break-up credit of
$0.69 per contract to the EEM that
submitted a PRIME Order in a NonPenny Class that trades with PRIME
AOC Responses and/or PRIME
participating quotes or orders, if the
PRIME Order experiences a break-up of
greater than 40%, which is not changing
under this proposal.11
The following examples are provided
to illustrate how the base agency
(unchanged under this proposal),
proposed adjustment, and break-up
credits (unchanged under this proposal),
will apply. For example, as proposed if
an Electronic Exchange Member
(‘‘EEM’’) 12 in Tier 1 submits a Priority
Customer PRIME Agency Order in a
Penny Class that trades 100% with the
contra side order, the EEM will receive
the Agency Rebate of $0.10 with the
appropriate $0.02 adjustment applied
($0.02 credit reduction) for a net credit
of $0.08. If an EEM in Tier 1 submits a
Priority Customer PRIME Agency Order
in a Penny Class that is 100% broken
11 See the Exchange’s Fee schedule, footnote ‘‘*’’
of Section (1)(a)(v), on its public website (available
at https://www.miaxoptions.com/fees).
12 The term ‘‘Electronic Exchange Member’’ or
‘‘EEM’’ means the holder of Trading Permit who is
not a Market Maker. Electronic Exchange Members
are deemed ‘‘members’’ under the Exchange Act.
See Exchange Rule 100.
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up, the EEM will receive the Agency
Rebate of $0.10 with the appropriate
$0.02 adjustment applied ($0.02
additional credit) for a net credit of
$0.12, in addition to a break-up credit
of $0.25 (which is not changing under
this proposal) 13 for a total credit of
$0.37. Similarly if the order had been
70% broken up, the EEM would receive
the Agency Rebate of $0.10 with the
appropriate $0.01 adjustment applied
($0.01 additional credit) for a net credit
of $0.11, in addition to a break-up credit
of $0.25 for a total credit of $0.36. If the
order had been 30% broken up, the EEM
would receive the Agency Rebate of
$0.10 with the appropriate $0.01
adjustment applied ($0.01 credit
reduction) for a net credit of $0.09, in
addition to a break-up credit of $0.25 for
a total credit of $0.34. The break-up
credit and its application remains
unchanged under the Exchange’s
proposal.
The Exchange is making the proposed
change for business and competitive
reasons, as the Exchange believes that
adjusting its rebates will allow the
Exchange to remain competitive and
will continue to incentivize EEMs to
submit Priority Customer PRIME
Agency Orders to the Exchange.
b. Statutory Basis
The Exchange believes that its
proposal to amend its Fee Schedule is
consistent with Section 6(b) of the Act 14
in general, and furthers the objectives of
Section 6(b)(4) of the Act 15 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 16 in that it is
designed to promote just and equitable
principles of trade, to remove
impediments to and perfect the
mechanism of a free and open market
and a national market system, and, in
general, to protect investors and the
public interest and is not designed to
permit unfair discrimination between
customers, issuers, brokers and dealers.
The Exchange believes its proposal
provides for the equitable allocation of
reasonable dues and fees and is not
unfairly discriminatory for the following
reasons. The Exchange operates in a
highly competitive market in which
market participants can readily direct
order flow to competing venues if they
13 See the Exchange’s Fee Schedule, Section
(1)(a)(v), on its public website (available at https://
www.miaxoptions.com/fees).
14 15 U.S.C. 78f(b).
15 15 U.S.C. 78f(b)(4).
16 15 U.S.C. 78f(b)(5).
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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 12% of the market
share of executed volume of multiplylisted equity and exchange-traded fund
(‘‘ETF’’) options trades as of August 29,
2022, for the month of August 2022.17
Therefore, no exchange possesses
significant pricing power in the
execution of multiply-listed equity and
ETF options order flow. More
specifically, as of August 29, 2022, the
Exchange has a total market share of
5.67% of all equity options volume, for
the month of August 2022.18
The Exchange believes that the evershifting market share among the
exchanges from month to month
demonstrates that market participants
can shift order flow, or discontinue use
of certain categories of products, in
response to fee changes. For example,
on March 1, 2019, the Exchange filed
with the Commission an immediately
effective filing to decrease certain
credits assessable to Members pursuant
to the PCRP.19 The Exchange
experienced a decrease in total market
share between the months of February
and March of 2019. Accordingly, the
Exchange believes that the March 1,
2019, fee change may have contributed
to the decrease in the Exchange’s market
share and, as such, the Exchange
believes competitive forces constrain
options exchange transaction and nontransaction fees.
Accordingly, competitive forces
constrain the Exchange’s transaction
fees, and market participants can readily
trade on competing venues if they deem
pricing levels at those other venues to
be more favorable. In response to the
competitive environment, the Exchange
offers specific rates and credits in its
fees schedule, like those of other
options exchanges’ fees schedules,
which the Exchange believes provides
incentives to Members to increase order
flow of certain qualifying orders.
The Exchange believes that its
proposal to modify the Other Market
Participant Transaction Fees table to
provide for a total per contract fee of
$0.10 on the option component of a
17 See MIAX’s ‘‘The market at a glance/MTD
AVERAGE’’, available at https://
www.miaxoptions.com/ (last visited August 29,
2022).
18 See id.
19 See Securities Exchange Act Release No. 85301
(March 13, 2019), 84 FR 10166 (March 19, 2019)
(SR–MIAX–2019–09).
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62149
stock-option order for qualifying
participants is consistent with Section
6(b)(4) of the Act 20 because it is
equitable and not unfairly
discriminatory as the fee is assessed
uniformly to all Public Customers that
are not Priority Customers that have an
Affiliate in Tier 4 of the PCRP for the
relevant month, that execute stockoption orders on the Exchange.
The Exchange also believes that this
proposal is consistent with Section
6(b)(5) of the Act 21 because it perfects
the mechanisms of a free and open
market and a national market system
and protects investors and the public
interest because it provides an
additional incentive for Members to
increase Priority Customer order flow to
the Exchange in order to obtain the
highest volume threshold, which
benefits all market participants by
providing more trading opportunities
and tighter spreads. Additionally, the
proposed discount encourages Members
to submit Priority Customer Orders to
the Exchange which will continue to
result in increased volume which
benefits all Exchange participants by
providing more trading opportunities.
The Exchange believes that its
proposal to adopt a tiered adjustment
table for per contract credits applied to
PRIME Agency Orders based upon
break-up percentage is consistent with
Section 6(b)(4) of the Act 22 in that the
proposal is reasonable, equitable and
not unfairly discriminatory as it applies
uniformly to all similarly situated
Members.
The Exchange believes that the
proposed incentive structure is fair,
equitable and not unreasonably
discriminatory. The PCRP is reasonably
designed because it will continue to
provide an incentive to providers of
Priority Customer order flow to send
that Priority Customer order flow to the
Exchange to receive a credit in a manner
that enables the Exchange to improve its
overall competitiveness and strengthen
its market quality for all participants.
The Exchange believes that its
proposed Per Contract Adjustment for
PRIME Agency Order table will
continue to incentivize EEMs to submit
Priority Customer PRIME Agency
Orders to the Exchange, and that the
reduction of the rebate when the breakup percentage is less than 40%, is not
so significant that it will disincentivize
EEMs from submitting Priority
Customer PRIME Agency Orders to the
Exchange. The Exchange believes that
adjusting its rebates and providing an
20 15
21 15
U.S.C. 78f(b)(4).
U.S.C. 78f(b)(1) and (b)(5).
22 Id.
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additional credit of $0.01 (when the
order break-up percentage is greater
than 60%) and an additional credit of
$0.02 (when the order break-up
percentage is greater than 80%) will
both incentivize EEMs to submit
Priority Customer PRIME Agency
Orders to the Exchange and will also
contribute to more robust PRIME
Auctions and potentially lead to greater
liquidity and price improvement for
orders submitted to the Exchange’s
PRIME. The decision to implement the
Per Contract Adjustment for PRIME
Agency Order table is based on an
analysis of current revenue and volume
levels and is designed to encourage
Priority Customer order flow to PRIME
Auctions.
In addition, The Exchange believes
that its proposal is consistent with
Section 6(b)(5) of the Act 23 because it
perfects the mechanisms of a free and
open market and a national market
system and protects investors and the
public interest because 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 the
proposed Per Contract Adjustment for
PRIME Agency Order table that provides
a tiered incentive structure for Priority
Customer PRIME Agency Orders based
upon order break-up percentage is
equitable and not unfairly
discriminatory because the proposed
incentive table will apply equally to all
similarly situated EEMs that submit
Priority Customer PRIME Agency
Orders to the Exchange.
The Exchange believes that providing
an adjustment to the rebate provided to
EEMs that submit Priority Customer
PRIME Agency Orders that are brokenup by a certain percentage is equitable
and not unfairly discriminatory because
the proposed Per Contract Adjustment
for PRIME Agency Order table will
apply equally to all Priority Customer
PRIME Agency Orders. The Exchange
does not believe the reduction of the
rebate will serve to disincentivize EEMs
from submitting Priority Customer
PRIME Agency Orders to the Exchange,
and believes that the enhanced rebate
23 15
U.S.C. 78f(b)(4).
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may further incentivize EEMs to submit
Priority Customer PRIME Agency
Orders to the Exchange. Further, the
Exchange believes that the application
of the Per Contract Adjustment for
PRIME Agency Order table is equitable
and not unfairly discriminatory because
Priority Customer order flow enhances
liquidity on the Exchange, in turn
providing more trading opportunities
and attracting other market participants,
thus improving liquidity and facilitating
tighter spreads, to the benefit of all
market participants.
The Commission has repeatedly
expressed its preference for competition
over regulatory intervention in
determining prices, products, and
services in the securities markets. In
Regulation NMS, the Commission
highlighted the importance of market
forces in determining prices and selfregulatory organization (‘‘SRO’’)
revenues and, also, recognized that
current regulation of the market system
‘‘has been remarkably successful in
promoting market competition in its
broader forms that are most important to
investors and listed companies.’’ 24
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
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.
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 25 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.
24 See Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37496 (June 29, 2005).
25 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 does not believe that the
proposed change in connection with
stock-option orders or Priority Customer
PRIME Agency Orders will impose any
burden on intramarket competition that
is not necessary or appropriate in
furtherance of the purposes of the Act
because the changes apply uniformly to
all similarly situated Members in a
uniform manner.
The Exchange believes that its
proposal to modify the Other Market
Participant Transaction Fees table to
provide for a total per contract fee of
$0.10 on the option component of a
stock-option order for qualifying
participants provides an additional
incentive for Members to increase
Priority Customer order flow to the
Exchange in order to obtain the highest
volume threshold, which benefits all
market participants by providing more
trading opportunities and tighter
spreads. Additionally, the proposed
discount encourages Members to submit
Priority Customer Orders to the
Exchange which will continue to result
in increased volume on the Exchange
which benefits all Exchange participants
by providing more trading
opportunities.
The Exchange believes that its
proposal to adopt a tiered adjustment
table for per contract credits applied to
PRIME Agency Orders based upon
break-up percentage will not impose a
burden on competition as it applies
uniformly to all similarly situated
Members. Similarly, the Exchange
believes the proposed Per Contract
Adjustment for PRIME Agency Order
table should continue to incentivize
EEMs to submit Priority Customer
PRIME Agency Orders to the Exchange,
and that the reduction of the rebate
when the break-up percentage is less
than 40%, is not so significant that it
will disincentivize EEMs from
submitting Priority Customer PRIME
Agency Orders to the Exchange.
These proposed changes should
enable the Exchange to continue to
attract liquidity to the Exchange and
compete for order flow with other
exchanges. However, this competition
does not create an undue burden on
competition but rather offers all market
participants the opportunity to receive
the benefit of competitive pricing. The
proposed changes are intended to keep
the Exchange’s fees and rebates highly
E:\FR\FM\13OCN1.SGM
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Federal Register / Vol. 87, No. 197 / Thursday, October 13, 2022 / Notices
khammond on DSKJM1Z7X2PROD with NOTICES
competitive with those of other
exchanges, and to encourage liquidity
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
rebates and fees to remain competitive
with other exchanges and to attract
order flow. The Exchange believes that
the proposed rule changes reflect this
competitive environment because the
proposal modifies the Exchange’s fees
and rebates in a manner that encourages
market participants to continue to
provide liquidity and to send order flow
to the Exchange.
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.’’ 26 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
stated 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’. . . .’’.27 Accordingly, the
Exchange does not believe its proposed
fee change imposes any burden on
competition that is not necessary or
appropriate in furtherance of the
purposes of the Act.
26 See Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 47396, 37499 (June 29, 2005).
27 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)).
VerDate Sep<11>2014
17:49 Oct 12, 2022
Jkt 259001
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,28 and Rule
19b–4(f)(2) 29 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
• Send an email to rule-comments@
sec.gov. Please include File SR–MIAX–
2022–35 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–2022–35. 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 such
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change.
Persons submitting comments are
cautioned that we do not redact or edit
personal identifying information from
comment submissions. You should
submit only information that you wish
to make available publicly. All
submissions should refer to File
Number SR–MIAX–2022–35 and should
be submitted on or before November 3,
2022.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.30
J. Lynn Taylor,
Assistant Secretary.
[FR Doc. 2022–22280 Filed 10–12–22; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–96007; File No. SR–MIAX–
2022–32]
Self-Regulatory Organizations; Miami
International Securities Exchange LLC;
Notice of Filing and Immediate
Effectiveness of a Proposed Rule
Change To Amend Its Fee Schedule To
Extend the Waiver Period for Certain
Non-Transaction Fees and To Extend
the SPIKES Options Market Maker
Incentive Program Until December 31,
2022
October 7, 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 September 29, 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
30 17
28 15
U.S.C. 78s(b)(3)(A)(ii).
29 17 CFR 240.19b–4(f)(2).
PO 00000
Frm 00086
Fmt 4703
Sfmt 4703
62151
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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]]>Agencies
[Federal Register Volume 87, Number 197 (Thursday, October 13, 2022)]
[Notices]
[Pages 62147-62151]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-22280]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-96006; File No. SR-MIAX-2022-35]
Self-Regulatory Organizations: Notice of Filing and Immediate
Effectiveness of a Proposed Rule Change by Miami International
Securities Exchange LLC To Amend Its Fee Schedule
October 7, 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 October 4, 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 (i) amend the
Other Market Participant Transaction Fees table \3\ to amend the fee
applicable to the option component of a stock-option order; and (ii)
modify the Priority Customer Rebate Program (``PCRP'') \4\ as it
pertains to per contract credits for PRIME Agency Orders submitted by
Priority Customers.\5\ The Exchange initially filed this proposal on
September 1, 2022 as SR-MIAX-2022-28. On September 20, 2022, the
Exchange withdrew SR-MIAX-2022-28 and resubmitted the proposal as SR-
MIAX-2022-31. On September 28, 2022, the Exchange withdrew SR-MIAX-
2022-31 and resubmitted the proposal as SR-MIAX-2022-33. On October 4,
2022, the Exchange withdrew SR-MIAX-2022-33 and resubmitted the
proposal as SR-MIAX-2022-35. The proposed changes are immediately
effective.
---------------------------------------------------------------------------
\3\ See Section (1)(a)(ii) of the Exchange's Fee Schedule.
\4\ Under the PCRP, MIAX Options credits each Member the per
contract amount resulting from each Priority Customer order
transmitted by that Member which is executed electronically on the
Exchange in all multiply-listed option classes (excluding, in simple
or complex as applicable, QCC and cQCC Orders, mini-options,
Priority Customer-to-Priority Customer Orders, C2C and cC2C Orders,
PRIME and cPRIME AOC Responses, PRIME and cPRIME Contra-side Orders,
PRIME and cPRIME Orders for which both the Agency and Contra-side
Order are Priority Customers, and executions related to contracts
that are routed to one or more exchanges in connection with the
Options Order Protection and Locked/Crossed Market Plan referenced
in Exchange Rule 1400), provided the Member meets certain percentage
thresholds in a month as described in the Priority Customer Rebate
Program table. See Fee Schedule, Section (1)(a)(iii).
\5\ 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.
---------------------------------------------------------------------------
Background
Stock-Option Orders
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
[[Page 62148]]
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 Exchange Rule 518. 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.\6\
---------------------------------------------------------------------------
\6\ See Exchange Rule 518(a)(5).
---------------------------------------------------------------------------
Currently, under the Other Market Participant Transaction Fees
table, the Exchange charges Public Customers that are not Priority
Customers a fee of $0.47 per contract for executions of simple and
complex orders in Penny Classes and $0.75 per contract for executions
of simple and complex orders in Non-Penny Classes, and assesses a $0.12
per contract surcharge for trading against a Priority Customer complex
order in Penny and Non-Penny Classes.
The Exchange now proposes to adopt new note ``!!'' which will be
applicable to the option component of a stock-option order and which
will provide that, any Member whose Affiliate qualifies for Priority
Customer Rebate Program volume tier 4 in the relevant month will be
assessed a total of $0.10 per contract on the option component of a
stock-option order for executions in Penny or Non-Penny Classes, and
the per contract surcharge for trading against a Priority Customer
complex order will not apply.\7\ Therefore, a qualifying Member will be
charged $0.10 per contract for executions in Penny or Non-Penny
Classes, and the $0.12 per contract surcharge for trading against a
Priority Customer Order in Penny or Non-Penny Classes will not be
assessed.
---------------------------------------------------------------------------
\7\ The Exchange charges a stock-handling fee of $0.0010 per
share (capped at $50 per order, per day) for the stock leg of stock-
option orders (including stock-option eQuotes) executed against
other stock-option orders in the complex order book, which the
Exchange must route to an outside venue. In addition, the Exchange
will pass through to the Member any fees assess by the routing
broker-dealer utilized by the Exchange with respect to the execution
of the stock leg of any such order (with such fees to be passed
through at cost). The Exchange notes that this fee is not changing
under this proposal. See the Exchange's Fee Schedule, Section
(1)(a)(x) on its public website (available at https://www.miaxoptions.com/fees).
---------------------------------------------------------------------------
PRIME Agency Orders
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.\8\ 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.\9\ Currently, the Exchange provides a per
contract credit for PRIME Agency Orders of $0.10 for Priority Customer
Agency Orders in Tier 1, and a per contract credit of $0.11 for
Priority Customer Agency Orders in Tiers 2 through 4.\10\
---------------------------------------------------------------------------
\8\ See Exchange Rule 515A(a).
\9\ See Exchange Rule 51A(a)(ii).
\10\ See the Exchange's Fee Schedule, Section (1)(a)(iii), on
its public website (available at https://www.miaxoptions.com/fees).
---------------------------------------------------------------------------
Proposal
The Exchange proposes to adopt a new table under the PCRP for PRIME
Agency Orders for Priority Customers Origins that will provide an
adjustment to the credit provided for PRIME Agency Orders to Priority
Customers in a tiered structure dependent upon the break-up percentage
of the order. The Exchange proposes to adopt new note ``!!!'' to state
that, for Priority Customer PRIME Agency Orders the Exchange will apply
the per contract adjustment to the PRIME Agency rebate provided under
the Priority Customer Rebate Program dependent upon the order break-up
percentage as described in the table above, (the Per Contract
Adjustment for PRIME Agency Order table).
The proposed Per Contract Adjustment for PRIME Agency Order table
will provide that if the PRIME Agency Order has a break-up percentage
of 0-20% the per contract credit provided for PRIME Agency Orders will
be reduced by $0.02. If the PRIME Agency Order has a break-up
percentage greater than 20% and up to 40% the per contract credit
provided for PRIME Agency Orders will be reduced by $0.01. If the PRIME
Agency Order has a break-up percentage greater than 40% and up to 60%
no adjustment will be applied to the per contract credit provided for
PRIME Agency Orders. If the PRIME Agency Order has a break-up
percentage greater than 60% and up to 80% the per contract credit
provided for PRIME Agency Orders will be increased by $0.01. If the
PRIME Agency Order has a break-up percentage greater than 80% and up to
100% the per contract credit provided for PRIME Agency Orders will be
increased by $0.02. Current break-up and other credits remain unchanged
and will continue to apply.
The Exchange currently provides a PRIME Break-up credit of $0.25
per contract in Penny Classes and $0.60 per contract in Non-Penny
Classes. Additionally, the Exchange provides an enhanced PRIME break-up
credit of $0.69 per contract to the EEM that submitted a PRIME Order in
a Non-Penny Class that trades with PRIME AOC Responses and/or PRIME
participating quotes or orders, if the PRIME Order experiences a break-
up of greater than 40%, which is not changing under this proposal.\11\
---------------------------------------------------------------------------
\11\ See the Exchange's Fee schedule, footnote ``*'' of Section
(1)(a)(v), on its public website (available at https://www.miaxoptions.com/fees).
---------------------------------------------------------------------------
The following examples are provided to illustrate how the base
agency (unchanged under this proposal), proposed adjustment, and break-
up credits (unchanged under this proposal), will apply. For example, as
proposed if an Electronic Exchange Member (``EEM'') \12\ in Tier 1
submits a Priority Customer PRIME Agency Order in a Penny Class that
trades 100% with the contra side order, the EEM will receive the Agency
Rebate of $0.10 with the appropriate $0.02 adjustment applied ($0.02
credit reduction) for a net credit of $0.08. If an EEM in Tier 1
submits a Priority Customer PRIME Agency Order in a Penny Class that is
100% broken
[[Page 62149]]
up, the EEM will receive the Agency Rebate of $0.10 with the
appropriate $0.02 adjustment applied ($0.02 additional credit) for a
net credit of $0.12, in addition to a break-up credit of $0.25 (which
is not changing under this proposal) \13\ for a total credit of $0.37.
Similarly if the order had been 70% broken up, the EEM would receive
the Agency Rebate of $0.10 with the appropriate $0.01 adjustment
applied ($0.01 additional credit) for a net credit of $0.11, in
addition to a break-up credit of $0.25 for a total credit of $0.36. If
the order had been 30% broken up, the EEM would receive the Agency
Rebate of $0.10 with the appropriate $0.01 adjustment applied ($0.01
credit reduction) for a net credit of $0.09, in addition to a break-up
credit of $0.25 for a total credit of $0.34. The break-up credit and
its application remains unchanged under the Exchange's proposal.
---------------------------------------------------------------------------
\12\ The term ``Electronic Exchange Member'' or ``EEM'' means
the holder of Trading Permit who is not a Market Maker. Electronic
Exchange Members are deemed ``members'' under the Exchange Act. See
Exchange Rule 100.
\13\ See the Exchange's Fee Schedule, Section (1)(a)(v), on its
public website (available at https://www.miaxoptions.com/fees).
---------------------------------------------------------------------------
The Exchange is making the proposed change for business and
competitive reasons, as the Exchange believes that adjusting its
rebates will allow the Exchange to remain competitive and will continue
to incentivize EEMs to submit Priority Customer PRIME Agency Orders to
the Exchange.
b. Statutory Basis
The Exchange believes that its proposal to amend its Fee Schedule
is consistent with Section 6(b) of the Act \14\ in general, and
furthers the objectives of Section 6(b)(4) of the Act \15\ 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 \16\ 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.
---------------------------------------------------------------------------
\14\ 15 U.S.C. 78f(b).
\15\ 15 U.S.C. 78f(b)(4).
\16\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
The Exchange believes its proposal provides for the equitable
allocation of reasonable dues and fees and is not unfairly
discriminatory for the following reasons. The Exchange operates in a
highly competitive market in which market participants can readily
direct order flow to competing venues if they deem fee levels at a
particular venue to be excessive or incentives to be insufficient. More
specifically, the Exchange is 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 12% of the market share of executed volume of multiply-
listed equity and exchange-traded fund (``ETF'') options trades as of
August 29, 2022, for the month of August 2022.\17\ Therefore, no
exchange possesses significant pricing power in the execution of
multiply-listed equity and ETF options order flow. More specifically,
as of August 29, 2022, the Exchange has a total market share of 5.67%
of all equity options volume, for the month of August 2022.\18\
---------------------------------------------------------------------------
\17\ See MIAX's ``The market at a glance/MTD AVERAGE'',
available at https://www.miaxoptions.com/ (last visited August 29,
2022).
\18\ See id.
---------------------------------------------------------------------------
The Exchange believes that the ever-shifting market share among the
exchanges from month to month demonstrates that market participants can
shift order flow, or discontinue use of certain categories of products,
in response to fee changes. For example, on March 1, 2019, the Exchange
filed with the Commission an immediately effective filing to decrease
certain credits assessable to Members pursuant to the PCRP.\19\ The
Exchange experienced a decrease in total market share between the
months of February and March of 2019. Accordingly, the Exchange
believes that the March 1, 2019, fee change may have contributed to the
decrease in the Exchange's market share and, as such, the Exchange
believes competitive forces constrain options exchange transaction and
non-transaction fees.
---------------------------------------------------------------------------
\19\ See Securities Exchange Act Release No. 85301 (March 13,
2019), 84 FR 10166 (March 19, 2019) (SR-MIAX-2019-09).
---------------------------------------------------------------------------
Accordingly, competitive forces constrain the Exchange's
transaction fees, and market participants can readily trade on
competing venues if they deem pricing levels at those other venues to
be more favorable. In response to the competitive environment, the
Exchange offers specific rates and credits in its fees schedule, like
those of other options exchanges' fees schedules, which the Exchange
believes provides incentives to Members to increase order flow of
certain qualifying orders.
The Exchange believes that its proposal to modify the Other Market
Participant Transaction Fees table to provide for a total per contract
fee of $0.10 on the option component of a stock-option order for
qualifying participants is consistent with Section 6(b)(4) of the Act
\20\ because it is equitable and not unfairly discriminatory as the fee
is assessed uniformly to all Public Customers that are not Priority
Customers that have an Affiliate in Tier 4 of the PCRP for the relevant
month, that execute stock-option orders on the Exchange.
---------------------------------------------------------------------------
\20\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------
The Exchange also believes that this proposal is consistent with
Section 6(b)(5) of the Act \21\ because it perfects the mechanisms of a
free and open market and a national market system and protects
investors and the public interest because it provides an additional
incentive for Members to increase Priority Customer order flow to the
Exchange in order to obtain the highest volume threshold, which
benefits all market participants by providing more trading
opportunities and tighter spreads. Additionally, the proposed discount
encourages Members to submit Priority Customer Orders to the Exchange
which will continue to result in increased volume which benefits all
Exchange participants by providing more trading opportunities.
---------------------------------------------------------------------------
\21\ 15 U.S.C. 78f(b)(1) and (b)(5).
---------------------------------------------------------------------------
The Exchange believes that its proposal to adopt a tiered
adjustment table for per contract credits applied to PRIME Agency
Orders based upon break-up percentage is consistent with Section
6(b)(4) of the Act \22\ in that the proposal is reasonable, equitable
and not unfairly discriminatory as it applies uniformly to all
similarly situated Members.
---------------------------------------------------------------------------
\22\ Id.
---------------------------------------------------------------------------
The Exchange believes that the proposed incentive structure is
fair, equitable and not unreasonably discriminatory. The PCRP is
reasonably designed because it will continue to provide an incentive to
providers of Priority Customer order flow to send that Priority
Customer order flow to the Exchange to receive a credit in a manner
that enables the Exchange to improve its overall competitiveness and
strengthen its market quality for all participants.
The Exchange believes that its proposed Per Contract Adjustment for
PRIME Agency Order table will continue to incentivize EEMs to submit
Priority Customer PRIME Agency Orders to the Exchange, and that the
reduction of the rebate when the break-up percentage is less than 40%,
is not so significant that it will disincentivize EEMs from submitting
Priority Customer PRIME Agency Orders to the Exchange. The Exchange
believes that adjusting its rebates and providing an
[[Page 62150]]
additional credit of $0.01 (when the order break-up percentage is
greater than 60%) and an additional credit of $0.02 (when the order
break-up percentage is greater than 80%) will both incentivize EEMs to
submit Priority Customer PRIME Agency Orders to the Exchange and will
also contribute to more robust PRIME Auctions and potentially lead to
greater liquidity and price improvement for orders submitted to the
Exchange's PRIME. The decision to implement the Per Contract Adjustment
for PRIME Agency Order table is based on an analysis of current revenue
and volume levels and is designed to encourage Priority Customer order
flow to PRIME Auctions.
In addition, The Exchange believes that its proposal is consistent
with Section 6(b)(5) of the Act \23\ because it perfects the mechanisms
of a free and open market and a national market system and protects
investors and the public interest because 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.
---------------------------------------------------------------------------
\23\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------
The Exchange believes that the proposed Per Contract Adjustment for
PRIME Agency Order table that provides a tiered incentive structure for
Priority Customer PRIME Agency Orders based upon order break-up
percentage is equitable and not unfairly discriminatory because the
proposed incentive table will apply equally to all similarly situated
EEMs that submit Priority Customer PRIME Agency Orders to the Exchange.
The Exchange believes that providing an adjustment to the rebate
provided to EEMs that submit Priority Customer PRIME Agency Orders that
are broken-up by a certain percentage is equitable and not unfairly
discriminatory because the proposed Per Contract Adjustment for PRIME
Agency Order table will apply equally to all Priority Customer PRIME
Agency Orders. The Exchange does not believe the reduction of the
rebate will serve to disincentivize EEMs from submitting Priority
Customer PRIME Agency Orders to the Exchange, and believes that the
enhanced rebate may further incentivize EEMs to submit Priority
Customer PRIME Agency Orders to the Exchange. Further, the Exchange
believes that the application of the Per Contract Adjustment for PRIME
Agency Order table is equitable and not unfairly discriminatory because
Priority Customer order flow enhances liquidity on the Exchange, in
turn providing more trading opportunities and attracting other market
participants, thus improving liquidity and facilitating tighter
spreads, to the benefit of all market participants.
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.'' \24\
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\24\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496 (June 29, 2005).
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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 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.
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 \25\ 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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\25\ 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 does not believe
that the proposed change in connection with stock-option orders or
Priority Customer PRIME Agency Orders will impose any burden on
intramarket competition that is not necessary or appropriate in
furtherance of the purposes of the Act because the changes apply
uniformly to all similarly situated Members in a uniform manner.
The Exchange believes that its proposal to modify the Other Market
Participant Transaction Fees table to provide for a total per contract
fee of $0.10 on the option component of a stock-option order for
qualifying participants provides an additional incentive for Members to
increase Priority Customer order flow to the Exchange in order to
obtain the highest volume threshold, which benefits all market
participants by providing more trading opportunities and tighter
spreads. Additionally, the proposed discount encourages Members to
submit Priority Customer Orders to the Exchange which will continue to
result in increased volume on the Exchange which benefits all Exchange
participants by providing more trading opportunities.
The Exchange believes that its proposal to adopt a tiered
adjustment table for per contract credits applied to PRIME Agency
Orders based upon break-up percentage will not impose a burden on
competition as it applies uniformly to all similarly situated Members.
Similarly, the Exchange believes the proposed Per Contract Adjustment
for PRIME Agency Order table should continue to incentivize EEMs to
submit Priority Customer PRIME Agency Orders to the Exchange, and that
the reduction of the rebate when the break-up percentage is less than
40%, is not so significant that it will disincentivize EEMs from
submitting Priority Customer PRIME Agency Orders to the Exchange.
These proposed changes should enable the Exchange to continue to
attract liquidity to the Exchange and compete for order flow with other
exchanges. However, this competition does not create an undue burden on
competition but rather offers all market participants the opportunity
to receive the benefit of competitive pricing. The proposed changes are
intended to keep the Exchange's fees and rebates highly
[[Page 62151]]
competitive with those of other exchanges, and to encourage liquidity
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 rebates and fees to remain competitive with other exchanges and to
attract order flow. The Exchange believes that the proposed rule
changes reflect this competitive environment because the proposal
modifies the Exchange's fees and rebates in a manner that encourages
market participants to continue to provide liquidity and to send order
flow to the Exchange.
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.'' \26\ 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 stated 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'. . . .''.\27\
Accordingly, the Exchange does not believe its proposed fee change
imposes any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act.
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\26\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 47396, 37499 (June 29, 2005).
\27\ 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,\28\ and Rule 19b-4(f)(2) \29\ 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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\28\ 15 U.S.C. 78s(b)(3)(A)(ii).
\29\ 17 CFR 240.19b-4(f)(2).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File SR-MIAX-2022-35 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-2022-35. 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 such filing also will be available for inspection
and copying at the principal office of the Exchange. All comments
received will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-MIAX-2022-35 and should be submitted on
or before November 3, 2022.
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\30\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\30\
J. Lynn Taylor,
Assistant Secretary.
[FR Doc. 2022-22280 Filed 10-12-22; 8:45 am]
BILLING CODE 8011-01-P
