Self-Regulatory Organizations; Miami International Securities Exchange, LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend the Fee Schedule for Purge Ports, 85958-85962 [2023-27066]
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85958
Federal Register / Vol. 88, No. 236 / Monday, December 11, 2023 / Notices
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were either
solicited or received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of
publication of this notice in the Federal
Register or within such longer period
up to 90 days (i) as the Commission may
designate if it finds such longer period
to be appropriate and publishes its
reasons for so finding or (ii) as to which
the Exchange consents, the Commission
shall: (a) by order approve or disapprove
such proposed rule change, or (b)
institute proceedings to determine
whether the proposed rule change
should be disapproved.
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–
NASDAQ–2023–045 on the subject line.
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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–NASDAQ–2023–045. 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
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For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.53
Sherry R. Haywood,
Assistant Secretary.
SECURITIES AND EXCHANGE
COMMISSION
BILLING CODE 8011–01–P
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:
17:35 Dec 08, 2023
19(b)(3)(C) of the Act, the Commission
temporarily suspended the proposed
rule change and instituted proceedings
under section 19(b)(2)(B) of the Act to
determine whether to approve or
disapprove the proposed rule change.6
On December 1, 2023, the Exchange
withdrew the proposed rule change
(SR–MEMX–2023–25).
[FR Doc. 2023–27062 Filed 12–8–23; 8:45 am]
IV. Solicitation of Comments
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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 the filing also
will be available for inspection and
copying at the principal office of the
Exchange. Do not include personal
identifiable information in submissions;
you should submit only information
that you wish to make available
publicly. We may redact in part or
withhold entirely from publication
submitted material that is obscene or
subject to copyright protection. All
submissions should refer to file number
SR–NASDAQ–2023–045 and should be
submitted on or before January 2, 2024.
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–99095; File No. SR–MEMX–
2023–25]
Self-Regulatory Organizations; MEMX
LLC; Notice of Withdrawal of a
Proposed Rule Change To Amend the
Exchange’s Fee Schedule To Establish
an Options Regulatory Fee
December 6, 2023.
On September 27, 2023, MEMX LLC
(‘‘MEMX’’ or the ‘‘Exchange’’) filed with
the Securities and Exchange
Commission (the ‘‘Commission’’),
pursuant to section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’) 1 and Rule 19b–4 thereunder,2 a
proposed rule change (File No. SR–
MEMX–2023–25) to establish an
Options Regulatory Fee.3 The proposed
rule change was immediately effective
upon filing with the Commission
pursuant to section 19(b)(3)(A) of the
Act.4 The proposed rule change was
published for comment in the Federal
Register on October 4, 2023.5 On
November 24, 2023, pursuant to section
53 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 See Securities Exchange Act Release No. 98585
(September 28, 2023), 88 FR 68692 (October 4,
2023) (‘‘Notice’’).
4 15 U.S.C. 78s(b)(3)(A). A proposed rule change
may take effect upon filing with the Commission if
it is designated by the exchange as ‘‘establishing or
changing a due, fee, or other charge imposed by the
self-regulatory organization on any person, whether
or not the person is a member of the self-regulatory
organization.’’ 15 U.S.C. 78s(b)(3)(A)(ii).
5 See Notice, supra note 3.
1 15
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For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.7
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023–27165 Filed 12–8–23; 8:45 am]
BILLING CODE 8011–01–P
[Release No. 34–99088; File No. SR–MIAX–
2023–43]
Self-Regulatory Organizations; Miami
International Securities Exchange,
LLC; Notice of Filing and Immediate
Effectiveness of a Proposed Rule
Change To Amend the Fee Schedule
for Purge Ports
December 5, 2023.
Pursuant to section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on November
22, 2023, Miami International Securities
Exchange, LLC (‘‘MIAX’’ or ‘‘Exchange’’)
filed with the Securities and Exchange
Commission (‘‘Commission’’) the
proposed rule change as described in
Items I, II, and III below, which Items
have been prepared by the Exchange.
The Commission is publishing this
notice to solicit comments on the
proposed rule change from interested
persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend the
MIAX Options Exchange Fee Schedule
(the ‘‘Fee Schedule’’) to amend fees for
Purge Ports.3
The text of the proposed rule change
is available on the Exchange’s website at
https://www.miaxglobal.com/markets/
us-options/miax-options/rule-filings, at
6 See Securities Exchange Act Release No. 99017,
88 FR 83590 (November 30, 2023).
7 17 CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 The proposed fee change is based on a recent
proposal by Nasdaq Phlx LLC (‘‘Phlx’’) to adopt fees
for purge ports. See Securities Exchange Act
Release No. 97825 (June 30, 2023), 88 FR 43405
(July 7, 2023) (SR–Phlx–2023–28).
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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
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1. Purpose
The Exchange proposes to amend the
fees for Purge Ports, which is a function
enabling Market Makers 4 to cancel all
open quotes or a subset of open quotes
through a single cancel message. The
Exchange currently provides Market
Makers the option to purchase Purge
Ports to assist in their quoting activity.
Purge Ports provide Market Makers with
the ability to send purge messages to the
Exchange System.5 Purge Ports are not
capable of sending or receiving any
other type of messages or information.
The use of Purge Ports is completely
optional and no rule or regulation
requires that a Market Maker utilize
them.
The Exchange initially filed the
proposal on September 29, 2023 (SR–
MIAX–2023–37) (the ‘‘Initial
Proposal’’).6 On November 22, 2023, the
Exchange withdrew the Initial Proposal
and replaced it with this filing.
Unlike other options exchanges that
charge fees for Purge Ports on a per port
basis,7 the Exchange assesses a flat fee
4 The term ‘‘Market Makers’’ refers to Lead Market
Makers (‘‘LMMs’’), Primary Lead Market Makers
(‘‘PLMMs’’), and Registered Market Makers
(‘‘RMMs’’) collectively. See Exchange Rule 100.
5 The term ‘‘System’’ means the automated
trading system used by the Exchange for the trading
of securities. See Exchange Rule 100.
6 See Securities Exchange Act Release No. 98732
(October 12, 2023), 88 FR 71913 (October 18, 2023)
(SR–MIAX–2023–37).
7 See Cboe BXZ Exchange, Inc. (‘‘BZX’’) Options
Fee Schedule, Options Logical Port Fees, Purge
Ports ($750 per purge port per month); Cboe EDGX
Exchange, Inc. (‘‘EDGX’’) Options Fee Schedule,
Options Logical Port Fees, Purge Ports ($750 per
purge port per month); Cboe Exchange, Inc.
(‘‘Cboe’’) Fee Schedule ($850 per purge port per
month). See also Nasdaq GEMX, Options 7, Pricing
Schedule, Section 6.C.(3). Nasdaq GEMX, LLC
(‘‘Nasdaq GEMX’’) assesses its members $1,250 per
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of $1,500 per month, regardless of the
number of Purge Ports utilized by a
Market Maker. Currently, a Market
Maker may request and be allocated two
(2) Purge Ports per Matching Engine 8 to
which it connects and not all Market
Makers connect to all of the Exchange’s
Matching Engines.
The Exchange now proposes to amend
the fee for Purge Ports to align more
closely with other exchanges who
charge on a per port basis by providing
two (2) Purge Ports per Matching Engine
for a monthly flat fee of $300 per month
per Matching Engine. The only
difference with a per port structure is
that Market Makers receive two (2)
Purge Ports per Matching Engine for the
same proposed monthly fee, rather than
being charged a separate fee for each
Purge Port. The Exchange proposes to
charge the proposed fee for Purge Ports
per Matching Engine, instead on a per
Purge Port basis, due to its System
architecture which provides two (2)
Purge Ports per Matching Engine for
redundancy purposes. In addition, the
proposed fee is lower than the
comparable fee charged by competing
exchanges that also charge on a per port
basis, notwithstanding that the
Exchange is providing up to two (2)
Purge Ports for that same lower fee.9
Similar to a per port charge, Market
Makers are able to select the Matching
Engines that they want to connect to,10
based on the business needs of each
Market Maker, and pay the applicable
fee based on the number of Matching
Engines and ports utilized. The
Exchange believes that the proposed fee
provides Market Makers with flexibility
to control their Purge Port costs based
on the number of Matching Engines
each Marker Maker elects to connect to
based on each Market Maker’s business
needs.
*
*
*
*
*
SQF Purge Port per month, subject to a monthly cap
of $17,500 for SQF Purge Ports and SQF Ports,
applicable to market makers. See also Securities
Exchange Act Release No. 97825 (June 30, 2023), 88
FR 43405 (July 7, 2023) (SR–Phlx–2023–28).
8 A Matching Engine is a part of the MIAX
electronic system that processes options quotes and
trades on a symbol-by-symbol basis. Some matching
engines will process option classes with multiple
root symbols, and other matching engines will be
dedicated to one single option root symbol (for
example, options on SPY will be processed by one
single matching engine that is dedicated only to
SPY). A particular root symbol may only be
assigned to a single designated matching engine. A
particular root symbol may not be assigned to
multiple matching engines.
9 See supra note 7.
10 The Exchange notes that each Matching Engine
corresponds to a specified group of symbols.
Certain Market Makers choose to only quote in
certain symbols while other Market Makers choose
to quote the entire market.
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A logical port represents a port
established by the Exchange within the
Exchange’s System for trading and
billing purposes. Each logical port
grants a Member 11 the ability to
accomplish a specific function, such as
order entry, order cancellation, access to
execution reports, and other
administrative information.
Purge Ports are designed to assist
Market Makers 12 in the management of,
and risk control over, their quotes,
particularly if the firm is dealing with
a large number of securities. For
example, if a Market Maker detects
market indications that may influence
the execution potential of their quotes,
the Market Maker may use Purge Ports
to reduce uncertainty and to manage
risk by purging all quotes in a number
of securities. This allows Market Makers
to seamlessly avoid unintended
executions, while continuing to evaluate
the market, their positions, and their
risk levels. Purge Ports are used by
Market Makers that conduct business
activity that exposes them to a large
amount of risk across a number of
securities. Purge Ports enable Market
Makers to cancel all open quotes, or a
subset of open quotes through a single
cancel message. The Exchange notes
that Purge Ports increase efficiency of
already existing functionality enabling
the cancellation of quotes.
The Exchange operates highly
performant systems with significant
throughput and determinism which
allows participants to enter, update and
cancel quotes at high rates. Market
Makers may currently cancel individual
quotes through the existing
functionality, such as through the use of
a mass cancel message by which a
Market Maker may request that the
Exchange remove all or a subset of its
quotations and block all or a subset of
its new inbound quotations.13 Other
than Purge Ports being a dedicated line
for cancelling quotations, Purge Ports
operate in the same manner as a mass
cancel message being sent over a
different type of port. For example, like
Purge Ports, mass cancellations sent
over a logical port may be done at either
the firm or MPID level. As a result,
Market Makers can currently cancel
quotes in rapid succession across their
11 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.
12 Members seeking to become registered as a
Market Maker must comply with the applicable
requirements of Chapter VI of the Exchange’s Rules.
13 See Exchange Rule 519C(a) and (b).
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existing logical ports 14 or through a
single cancel message, all open quotes
or a subset of open quotes.
Similarly, Market Makers may also
use cancel-on-disconnect control when
they experience a disruption in
connection to the Exchange to
automatically cancel all quotes, as
configured or instructed by the Member
or Market Maker.15 In addition, the
Exchange already provides similar
ability to mass cancel quotes through
the Exchange’s risk controls, which are
offered at no charge and enables Market
Makers to establish pre-determined
levels of risk exposure, and can be used
to cancel all open quotes.16
Accordingly, the Exchange believes that
the Purge Ports provide an efficient
option as an alternative to already
available services and enhance the
Market Maker’s ability to manage their
risk.
The Exchange believes that market
participants benefit from a dedicated
purge mechanism for specific Market
Makers and to the market as a whole.
Market Makers will have the benefit of
efficient risk management and purge
tools. The market will benefit from
potential increased quoting and
liquidity as Market Makers may use
Purge Ports to manage their risk more
robustly. Only Market Makers that
request Purge Ports would be subject to
the proposed fees, and other Market
Makers can continue to operate in
exactly the same manner as they do
today without dedicated Purge Ports,
but with the additional purging
capabilities described above.
Implementation Date
The proposed fees are immediately
effective.
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2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
section 6(b) of the Act,17 in general, and
furthers the objectives of section 6(b)(5)
of the Act,18 in particular, in that it is
not designed to permit unfair
discrimination among customers,
brokers, or dealers. The Exchange also
believes that its proposed fee is
consistent with section 6(b)(4) of the
Act 19 because it represents an equitable
allocation of reasonable dues, fees and
14 Current Exchange port functionality supports
cancelation rates that exceed one thousand
messages per second and the Exchange’s research
indicates that certain market participants rely on
such functionality and at times utilize such
cancelation rates.
15 See Exchange Rule 519C(c).
16 See Exchange Rule 532.
17 15 U.S.C. 78f(b).
18 15 U.S.C. 78f(b)(5).
19 15 U.S.C. 78f(b)(4).
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other charges among market
participants.
The Exchange supports the proposed
fee change with the below justification
because a similar justification was used
in a recent 2023 proposal filed with the
Commission by another national
securities exchange, Phlx, to adopt fees
for purge ports, which the Commission
deemed acceptable by not suspending
that filing during the applicable 60-day
review period.20 In fact, the same
justification Phlx utilized was also used
in similar recent proposals to adopt fees
for purge ports by two of Phlx’s
affiliated exchanges.21 Therefore, the
Exchange utilized the below
justification based on this recent
Commission precedent from
approximately one month ago.
The Exchange believes that the
proposed rule change would promote
just and equitable principles of trade
and remove impediments to and perfect
the mechanism of a free and open
market because offering Market Makers
optional service and flexible fee
structures which promotes choice,
flexibility, efficiency, and competition.
The Exchange believes Purge Ports
enhance Market Makers’ ability to
manage quotes, which would, in turn,
improve their risk controls to the benefit
of all market participants. The Exchange
believes that Purge Ports foster
cooperation and coordination with
persons engaged in facilitating
transactions in securities because
designating Purge Ports for purge
messages may encourage better use of
such ports. This may, concurrent with
the ports that carry quotes and other
information necessary for market
making activities, enable more efficient,
as well as fair and reasonable, use of
Market Makers’ resources. Similar
connectivity and functionality is offered
by options exchanges, including the
Exchange’s own affiliated options
exchanges, and other equities
exchanges.22 The Exchange believes that
20 See
supra note 3.
Securities Exchange Act Release Nos.
98770 (October 18, 2023), 88 FR 73065 (October 24,
2023) (SR–BX–2023–026); and 98768 (October 18,
2023), 88 FR 73056 (October 24, 2023) (SR–
NASDAQ–2023–041). While the Exchange included
a cos- based justification in a related filing to amend
fees for connectivity, it does not believe a costbased justification is require here because Purge
Ports are optional functionality and no cost-based
justification was provided by Phlx or any of its
affiliates in their same filings to adopt fees for purge
ports. Nor does the Commission Staff’s own fee
guidance include such a requirement. See Staff
Guidance on SRO Rule Filings Relating to Fees
(May 21, 2019), available at https://www.sec.gov/
tm/staff-guidance-sro-rule-filings-fees.
22 See supra notes 3 and 7. See also Securities
Exchange Act Release No. 77613 (April 13, 2016),
81 FR 23023 (April 19, 2016). See also Securities
21 See
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proper risk management, including the
ability to efficiently cancel multiple
quotes quickly when necessary, is
similarly valuable to firms that trade in
the equities market, including Market
Makers that have heightened quoting
obligations that are not applicable to
other market participants.
Purge Ports do not relieve Market
Makers of their quoting obligations or
firm quote obligations under Regulation
NMS Rule 602.23 Specifically, any
interest that is executable against a
Member’s or Market Maker’s quotes that
is received by the Exchange prior to the
time of the removal of quotes request
will automatically execute. Market
Makers that purge their quotes will not
be relieved of the obligation to provide
continuous two-sided quotes on a daily
basis, nor will it prohibit the Exchange
from taking disciplinary action against a
Market Maker for failing to meet their
continuous quoting obligation each
trading day.24
The Exchange is not the only
exchange to offer this functionality and
to charge associated fees.25 The
Exchange believes the proposed fee for
Purge Ports is reasonable because it is
lower than the fees currently charged by
other exchanges for similar port
functionality. For example, BZX and
EDGX charge a fee of $750 per purge
port per month, Cboe charges $850 per
purge port per month, Nasdaq GEMX
assesses its members $1,250 per SQF
Purge Port per month, subject to a
monthly cap of $17,500 for SQF Purge
Ports and SQF Ports.26
The Exchange believes it is reasonable
to charge $300 per month for Purge
Ports as proposed because such ports
were specially developed to allow
Market Makers to send a single message
to cancel multiple quotes, thereby
assisting firms in effectively managing
risk. The Exchange also believes that a
Member that chooses to utilize Purge
Ports may, in the future, reduce their
need for additional ports by
consolidating cancel messages to their
dedicated Purge Port and thus freeing
up some capacity of the existing logical
ports and, therefore, allowing for
increased message traffic without
paying for additional logical ports.
Purge Ports provide the ability to cancel
Exchange Act Release Nos. 79956 (February 3,
2017), 82 FR 10102 (February 9, 2017) (SR–
BatsBZX–2017–05); 79957 (February 3, 2017), 82 FR
10070 (February 9, 2017) (SR–BatsEDGX–2017–07);
83201 (May 9, 2018), 83 FR 22546 (May 15, 2018)
(SR–C2–2018–006).
23 See Exchange Rule 604. See also generally
Chapter VI of the Exchange’s Rules.
24 Id.
25 See supra notes 3 and 7.
26 See supra note 7.
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multiple quotes with a single message
over a dedicated port, and, therefore,
may create efficiencies for firms and
provide a more efficient solution for
them based on their risk management
needs. In addition, Purge Port requests
may cancel quotes submitted over
numerous ports and contain added
functionality to purge only a subset of
these quotes. Effective risk management
is important both for individual market
participants that choose to utilize risk
features provided by the Exchange, as
well as for the market in general. As a
result, the Exchange believes that it is
appropriate to charge fees for such
functionality as doing so aids in the
maintenance of a fair and orderly
market.
The Exchange also believes that its
ability to set fees for Purge Ports is
subject to significant substitution-based
forces because Market Makers are able
to rely on currently available services
both free and those they receive when
using existing trading protocols. If the
value of the efficiency introduced
through the Purge Port functionality is
not worth the proposed fees, Market
Makers will simply continue to rely on
the existing functionality and not pay
for Purge Ports. In that regard, Market
Makers may currently cancel individual
quotes through the existing
functionality, such as through the use of
a mass cancel message by which a
Market Maker may request that the
Exchange remove all or a subset of its
quotations and block all or a subset of
its new inbound quotations. Already
Market Makers can also cancel quotes
individually and by utilizing Exchange
protocols that allow them to develop
proprietary systems that can send cancel
messages at a high rate.27 In addition,
the Exchange already provides similar
ability to mass cancel quotes through
the Exchange’s risk controls, which are
offered at no charge that enables Market
Makers to establish pre-determined
levels of risk exposure, and can be used
to cancel all open quotes.28 Further, like
Purge Ports, Members may also cancel
all or a subset of its orders in the
System, by firm name or by MPID, over
their existing ports, or by requesting the
Exchange staff to effect such
cancellations.29
Similarly, Market Makers may use
cancel-on-disconnect control when they
experience a disruption in their
27 Current Exchange port functionality supports
cancelation rates that exceed one thousand
messages per second and the Exchange’s research
indicates that certain Participants rely on such
functionality and at times utilize such cancelation
rates.
28 See Exchange Rule 532.
29 See Exchange Rule 519C(a).
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connection to the Exchange and
immediately cancel all pending quotes
in the Exchange’s System.30 Finally, this
existing purging functionality will allow
Market Makers to achieve essentially the
same outcome in canceling quotes as
they would by utilizing the Purge Ports.
Accordingly, the Exchange believes that
the proposed Purge Port fee is
reasonable because it is related to the
efficiency of Purge Ports and to other
means and services already available
which are either free or already a part
of a fee assessed to the Market Maker for
existing connectivity. Accordingly,
because Purge Ports provide additional
optional functionality, excessive fees
would simply serve to reduce or
eliminate demand for this optional
product.
The Exchange also believes that
offering Purge Ports at the Matching
Engine level promotes risk management
across the industry, and thereby
facilitates investor protection. Some
market participants, in particular the
larger firms, could and do build similar
risk functionality (as described above)
in their trading systems that permit the
flexible cancellation of quotes entered
on the Exchange at a high rate. Offering
Matching Engine level protections
ensures that such functionality is
widely available to all firms, including
smaller firms that may otherwise not be
willing to incur the costs and
development work necessary to support
their own customized mass cancel
functionality.
As noted above, the Exchange is not
the only exchange to offer dedicated
Purge Ports, and the proposed rate is
lower than that charged by other
exchanges for similar functionality. The
Exchange also believes that moving to a
per Matching Engine fee is reasonable
due to the Exchange’s architecture that
provides it the ability to provide two (2)
Purge Ports per Matching Engine for a
fee that would still be lower than
competing exchanges that charge on a
per port basis. Generally speaking,
restricting the Exchange’s ability to
charge fees for these services
discourages innovation and
competition. Specifically in this case,
the Exchange’s inability to offer similar
services to those offered by other
exchanges, and charge reasonable and
equitable fees for such services, would
put the Exchange at a significant
competitive disadvantage and, therefore,
serve to restrict competition in the
market—especially when other
exchanges assess comparable fees higher
than those proposed by the Exchange.
30 See
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Exchange Rule 519C(c).
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85961
The Exchange believes that the
proposed Purge Port fees are equitable
because the proposed Purge Ports are
completely voluntary as they relate
solely to optional risk management
functionality.
The Exchange also believes that the
proposed amendments to its Fee
Schedule are not unfairly
discriminatory because they will apply
uniformly to all Market Makers that
choose to use the optional Purge Ports.
Purge Ports are completely voluntary
and, as they relate solely to optional risk
management functionality, no Market
Maker is required or under any
regulatory obligation to utilize them. All
Market Makers that voluntarily select
this service option will be charged the
same amount for the same services. All
Market Makers have the option to select
any connectivity option, and there is no
differentiation among Market Makers
with regard to the fees charged for the
services offered by the Exchange.
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. Purge Ports
are completely voluntary and are
available to all Market Makers on an
equal basis at the same cost. While the
Exchange believes that Purge Ports
provide a valuable service, Market
Makers can choose to purchase, or not
purchase, these ports based on their
own determination of the value and
their business needs. No Market Maker
is required or under any regulatory
obligation to utilize Purge Ports.
Accordingly, the Exchange believes that
Purge Ports offer appropriate risk
management functionality to firms that
trade on the Exchange without imposing
an unnecessary or inappropriate burden
on competition.
Furthermore, the Exchange operates
in a highly competitive environment,
and its ability to price the Purge Ports
is constrained by competition among
exchanges that offer similar
functionality. As discussed, there are
currently a number of similar offers
available to market participants for
higher fees at other exchanges.
Proposing fees that are excessively
higher than established fees for similar
functionality would simply serve to
reduce demand for the Purge Ports,
which as discussed, market participants
are under no obligation to utilize. It
could also cause firms to shift trading to
other exchanges that offer similar
functionality at a lower cost, adversely
impacting the overall trading on the
E:\FR\FM\11DEN1.SGM
11DEN1
85962
Federal Register / Vol. 88, No. 236 / Monday, December 11, 2023 / Notices
Exchange and reducing market share. In
this competitive environment, potential
purchasers are free to choose which, if
any, similar product to purchase to
satisfy their need for risk management.
As a result, the Exchange believes this
proposed rule change permits fair
competition among national securities
exchanges.
The Exchange also does not believe
the proposal would cause any
unnecessary or inappropriate burden on
intermarket competition as other
exchanges are free to introduce their
own purge port functionality and lower
their prices to better compete with the
Exchange’s offering. The Exchange does
not believe the proposed rule change
would cause any unnecessary or
inappropriate burden on intramarket
competition. Particularly, the proposal
would apply uniformly to any market
participant, in that it does not
differentiate between Market Makers.
The proposal would allow any
interested Market Makers to purchase
Purge Port functionality based on their
business needs.
lotter on DSK11XQN23PROD with NOTICES1
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
The Exchange received one comment
letter on the proposal.31 This comment
letter was submitted not only on this
proposal, but also the proposals by the
Exchange and its affiliates to amend fees
for 10Gb ULL connectivity and certain
ports. Overall, the Exchange believes
that the issues raised by the commenter
are not germane to this proposal because
they apply primarily to the other fee
filings. Also, the commenter’s raised
concerns with the current environment
surrounding exchange non-transaction
fee proposals that should be addressed
by the Commission through rule
making, or Congress, more holistically
and not through an individual exchange
fee filings. However, the commenter
does raise one issue that concerns this
proposal whereby it asserts that the
Exchange’s comparison to fees charged
by other exchanges for similar ports is
irrelevant and unpersuasive. The core of
the issue raised is regarding the cost to
connect to one exchange compared to
the cost to connect to others. A thorough
response to this comment would require
the Exchange to obtain competitively
sensitive information about other
exchange architecture and how their
members connect. The Exchange is not
31 See letter from Thomas M. Merritt, Deputy
General Counsel, Virtu Financial, Inc. (‘‘Virtu’’), to
Vanessa Countryman, Secretary, Commission, dated
November 8, 2023.
VerDate Sep<11>2014
17:35 Dec 08, 2023
Jkt 262001
privy to this information. Further, the
commenter compares the Exchange’s
proposed rate to other exchanges that
offer purge port functionality across all
matching engines for a single fee, but
fails to provide the same comparison to
other exchanges that charge for purge
functionality like proposed here. The
Exchange does not have insight into the
technical architecture of other
exchanges so it is difficult to ascertain
the number of purge ports a firm would
need to connect to another exchanges
entire market. Therefore, the Exchange
is limited to comparing its proposed fee
to other exchanges’ purge port fees as
listed in their fee schedules.
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,32 and Rule
19b–4(f)(2) 33 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 number SR–
MIAX–2023–43 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–2023–43. This file
number should be included on the
subject line if email is used. To help the
Commission process and review your
32 15
33 17
PO 00000
U.S.C. 78s(b)(3)(A)(ii).
CFR 240.19b–4(f)(2).
Frm 00097
Fmt 4703
Sfmt 4703
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 the filing also
will be available for inspection and
copying at the principal office of the
Exchange. Do not include personal
identifiable information in submissions;
you should submit only information
that you wish to make available
publicly. We may redact in part or
withhold entirely from publication
submitted material that is obscene or
subject to copyright protection. All
submissions should refer to file number
SR–MIAX–2023–43 and should be
submitted on or before January 2, 2024.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.34
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023–27066 Filed 12–8–23; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–99082; File No. SR–
NYSEARCA–2023–70]
Self-Regulatory Organizations; NYSE
Arca, Inc.; Notice of Designation of a
Longer Period for Commission Action
on a Proposed Rule Change To List
and Trade Shares of the Grayscale
Ethereum Trust Under NYSE Arca Rule
8.201–E (Commodity-Based Trust
Shares)
December 5, 2023.
On October 10, 2023, NYSE Arca, Inc.
(‘‘Exchange’’) filed with the Securities
and Exchange Commission
(‘‘Commission’’), pursuant to section
19(b)(1) of the Securities Exchange Act
of 1934 (‘‘Act’’) 1 and Rule 19b–4
34 17
1 15
E:\FR\FM\11DEN1.SGM
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
11DEN1
]]>Agencies
[Federal Register Volume 88, Number 236 (Monday, December 11, 2023)]
[Notices]
[Pages 85958-85962]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-27066]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-99088; File No. SR-MIAX-2023-43]
Self-Regulatory Organizations; Miami International Securities
Exchange, LLC; Notice of Filing and Immediate Effectiveness of a
Proposed Rule Change To Amend the Fee Schedule for Purge Ports
December 5, 2023.
Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on November 22, 2023, Miami International Securities Exchange, LLC
(``MIAX'' or ``Exchange'') filed with the Securities and Exchange
Commission (``Commission'') the proposed rule change as described in
Items I, II, and III below, which Items have been prepared by the
Exchange. The Commission is publishing this notice to solicit comments
on the proposed rule change from interested persons.
---------------------------------------------------------------------------
\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 proposes to amend the MIAX Options Exchange Fee
Schedule (the ``Fee Schedule'') to amend fees for Purge Ports.\3\
---------------------------------------------------------------------------
\3\ The proposed fee change is based on a recent proposal by
Nasdaq Phlx LLC (``Phlx'') to adopt fees for purge ports. See
Securities Exchange Act Release No. 97825 (June 30, 2023), 88 FR
43405 (July 7, 2023) (SR-Phlx-2023-28).
---------------------------------------------------------------------------
The text of the proposed rule change is available on the Exchange's
website at https://www.miaxglobal.com/markets/us-options/miax-options/rule-filings, at
[[Page 85959]]
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 fees for Purge Ports, which is a
function enabling Market Makers \4\ to cancel all open quotes or a
subset of open quotes through a single cancel message. The Exchange
currently provides Market Makers the option to purchase Purge Ports to
assist in their quoting activity. Purge Ports provide Market Makers
with the ability to send purge messages to the Exchange System.\5\
Purge Ports are not capable of sending or receiving any other type of
messages or information. The use of Purge Ports is completely optional
and no rule or regulation requires that a Market Maker utilize them.
---------------------------------------------------------------------------
\4\ The term ``Market Makers'' refers to Lead Market Makers
(``LMMs''), Primary Lead Market Makers (``PLMMs''), and Registered
Market Makers (``RMMs'') collectively. See Exchange Rule 100.
\5\ The term ``System'' means the automated trading system used
by the Exchange for the trading of securities. See Exchange Rule
100.
---------------------------------------------------------------------------
The Exchange initially filed the proposal on September 29, 2023
(SR-MIAX-2023-37) (the ``Initial Proposal'').\6\ On November 22, 2023,
the Exchange withdrew the Initial Proposal and replaced it with this
filing.
---------------------------------------------------------------------------
\6\ See Securities Exchange Act Release No. 98732 (October 12,
2023), 88 FR 71913 (October 18, 2023) (SR-MIAX-2023-37).
---------------------------------------------------------------------------
Unlike other options exchanges that charge fees for Purge Ports on
a per port basis,\7\ the Exchange assesses a flat fee of $1,500 per
month, regardless of the number of Purge Ports utilized by a Market
Maker. Currently, a Market Maker may request and be allocated two (2)
Purge Ports per Matching Engine \8\ to which it connects and not all
Market Makers connect to all of the Exchange's Matching Engines.
---------------------------------------------------------------------------
\7\ See Cboe BXZ Exchange, Inc. (``BZX'') Options Fee Schedule,
Options Logical Port Fees, Purge Ports ($750 per purge port per
month); Cboe EDGX Exchange, Inc. (``EDGX'') Options Fee Schedule,
Options Logical Port Fees, Purge Ports ($750 per purge port per
month); Cboe Exchange, Inc. (``Cboe'') Fee Schedule ($850 per purge
port per month). See also Nasdaq GEMX, Options 7, Pricing Schedule,
Section 6.C.(3). Nasdaq GEMX, LLC (``Nasdaq GEMX'') assesses its
members $1,250 per SQF Purge Port per month, subject to a monthly
cap of $17,500 for SQF Purge Ports and SQF Ports, applicable to
market makers. See also Securities Exchange Act Release No. 97825
(June 30, 2023), 88 FR 43405 (July 7, 2023) (SR-Phlx-2023-28).
\8\ A Matching Engine is a part of the MIAX electronic system
that processes options quotes and trades on a symbol-by-symbol
basis. Some matching engines will process option classes with
multiple root symbols, and other matching engines will be dedicated
to one single option root symbol (for example, options on SPY will
be processed by one single matching engine that is dedicated only to
SPY). A particular root symbol may only be assigned to a single
designated matching engine. A particular root symbol may not be
assigned to multiple matching engines.
---------------------------------------------------------------------------
The Exchange now proposes to amend the fee for Purge Ports to align
more closely with other exchanges who charge on a per port basis by
providing two (2) Purge Ports per Matching Engine for a monthly flat
fee of $300 per month per Matching Engine. The only difference with a
per port structure is that Market Makers receive two (2) Purge Ports
per Matching Engine for the same proposed monthly fee, rather than
being charged a separate fee for each Purge Port. The Exchange proposes
to charge the proposed fee for Purge Ports per Matching Engine, instead
on a per Purge Port basis, due to its System architecture which
provides two (2) Purge Ports per Matching Engine for redundancy
purposes. In addition, the proposed fee is lower than the comparable
fee charged by competing exchanges that also charge on a per port
basis, notwithstanding that the Exchange is providing up to two (2)
Purge Ports for that same lower fee.\9\
---------------------------------------------------------------------------
\9\ See supra note 7.
---------------------------------------------------------------------------
Similar to a per port charge, Market Makers are able to select the
Matching Engines that they want to connect to,\10\ based on the
business needs of each Market Maker, and pay the applicable fee based
on the number of Matching Engines and ports utilized. The Exchange
believes that the proposed fee provides Market Makers with flexibility
to control their Purge Port costs based on the number of Matching
Engines each Marker Maker elects to connect to based on each Market
Maker's business needs.
---------------------------------------------------------------------------
\10\ The Exchange notes that each Matching Engine corresponds to
a specified group of symbols. Certain Market Makers choose to only
quote in certain symbols while other Market Makers choose to quote
the entire market.
---------------------------------------------------------------------------
* * * * *
A logical port represents a port established by the Exchange within
the Exchange's System for trading and billing purposes. Each logical
port grants a Member \11\ the ability to accomplish a specific
function, such as order entry, order cancellation, access to execution
reports, and other administrative information.
---------------------------------------------------------------------------
\11\ 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.
---------------------------------------------------------------------------
Purge Ports are designed to assist Market Makers \12\ in the
management of, and risk control over, their quotes, particularly if the
firm is dealing with a large number of securities. For example, if a
Market Maker detects market indications that may influence the
execution potential of their quotes, the Market Maker may use Purge
Ports to reduce uncertainty and to manage risk by purging all quotes in
a number of securities. This allows Market Makers to seamlessly avoid
unintended executions, while continuing to evaluate the market, their
positions, and their risk levels. Purge Ports are used by Market Makers
that conduct business activity that exposes them to a large amount of
risk across a number of securities. Purge Ports enable Market Makers to
cancel all open quotes, or a subset of open quotes through a single
cancel message. The Exchange notes that Purge Ports increase efficiency
of already existing functionality enabling the cancellation of quotes.
---------------------------------------------------------------------------
\12\ Members seeking to become registered as a Market Maker must
comply with the applicable requirements of Chapter VI of the
Exchange's Rules.
---------------------------------------------------------------------------
The Exchange operates highly performant systems with significant
throughput and determinism which allows participants to enter, update
and cancel quotes at high rates. Market Makers may currently cancel
individual quotes through the existing functionality, such as through
the use of a mass cancel message by which a Market Maker may request
that the Exchange remove all or a subset of its quotations and block
all or a subset of its new inbound quotations.\13\ Other than Purge
Ports being a dedicated line for cancelling quotations, Purge Ports
operate in the same manner as a mass cancel message being sent over a
different type of port. For example, like Purge Ports, mass
cancellations sent over a logical port may be done at either the firm
or MPID level. As a result, Market Makers can currently cancel quotes
in rapid succession across their
[[Page 85960]]
existing logical ports \14\ or through a single cancel message, all
open quotes or a subset of open quotes.
---------------------------------------------------------------------------
\13\ See Exchange Rule 519C(a) and (b).
\14\ Current Exchange port functionality supports cancelation
rates that exceed one thousand messages per second and the
Exchange's research indicates that certain market participants rely
on such functionality and at times utilize such cancelation rates.
---------------------------------------------------------------------------
Similarly, Market Makers may also use cancel-on-disconnect control
when they experience a disruption in connection to the Exchange to
automatically cancel all quotes, as configured or instructed by the
Member or Market Maker.\15\ In addition, the Exchange already provides
similar ability to mass cancel quotes through the Exchange's risk
controls, which are offered at no charge and enables Market Makers to
establish pre-determined levels of risk exposure, and can be used to
cancel all open quotes.\16\ Accordingly, the Exchange believes that the
Purge Ports provide an efficient option as an alternative to already
available services and enhance the Market Maker's ability to manage
their risk.
---------------------------------------------------------------------------
\15\ See Exchange Rule 519C(c).
\16\ See Exchange Rule 532.
---------------------------------------------------------------------------
The Exchange believes that market participants benefit from a
dedicated purge mechanism for specific Market Makers and to the market
as a whole. Market Makers will have the benefit of efficient risk
management and purge tools. The market will benefit from potential
increased quoting and liquidity as Market Makers may use Purge Ports to
manage their risk more robustly. Only Market Makers that request Purge
Ports would be subject to the proposed fees, and other Market Makers
can continue to operate in exactly the same manner as they do today
without dedicated Purge Ports, but with the additional purging
capabilities described above.
Implementation Date
The proposed fees are immediately effective.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with section 6(b) of the Act,\17\ in general, and furthers the
objectives of section 6(b)(5) of the Act,\18\ in particular, in that it
is not designed to permit unfair discrimination among customers,
brokers, or dealers. The Exchange also believes that its proposed fee
is consistent with section 6(b)(4) of the Act \19\ because it
represents an equitable allocation of reasonable dues, fees and other
charges among market participants.
---------------------------------------------------------------------------
\17\ 15 U.S.C. 78f(b).
\18\ 15 U.S.C. 78f(b)(5).
\19\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------
The Exchange supports the proposed fee change with the below
justification because a similar justification was used in a recent 2023
proposal filed with the Commission by another national securities
exchange, Phlx, to adopt fees for purge ports, which the Commission
deemed acceptable by not suspending that filing during the applicable
60-day review period.\20\ In fact, the same justification Phlx utilized
was also used in similar recent proposals to adopt fees for purge ports
by two of Phlx's affiliated exchanges.\21\ Therefore, the Exchange
utilized the below justification based on this recent Commission
precedent from approximately one month ago.
---------------------------------------------------------------------------
\20\ See supra note 3.
\21\ See Securities Exchange Act Release Nos. 98770 (October 18,
2023), 88 FR 73065 (October 24, 2023) (SR-BX-2023-026); and 98768
(October 18, 2023), 88 FR 73056 (October 24, 2023) (SR-NASDAQ-2023-
041). While the Exchange included a cos- based justification in a
related filing to amend fees for connectivity, it does not believe a
cost-based justification is require here because Purge Ports are
optional functionality and no cost-based justification was provided
by Phlx or any of its affiliates in their same filings to adopt fees
for purge ports. Nor does the Commission Staff's own fee guidance
include such a requirement. See Staff Guidance on SRO Rule Filings
Relating to Fees (May 21, 2019), available at https://www.sec.gov/tm/staff-guidance-sro-rule-filings-fees.
---------------------------------------------------------------------------
The Exchange believes that the proposed rule change would promote
just and equitable principles of trade and remove impediments to and
perfect the mechanism of a free and open market because offering Market
Makers optional service and flexible fee structures which promotes
choice, flexibility, efficiency, and competition. The Exchange believes
Purge Ports enhance Market Makers' ability to manage quotes, which
would, in turn, improve their risk controls to the benefit of all
market participants. The Exchange believes that Purge Ports foster
cooperation and coordination with persons engaged in facilitating
transactions in securities because designating Purge Ports for purge
messages may encourage better use of such ports. This may, concurrent
with the ports that carry quotes and other information necessary for
market making activities, enable more efficient, as well as fair and
reasonable, use of Market Makers' resources. Similar connectivity and
functionality is offered by options exchanges, including the Exchange's
own affiliated options exchanges, and other equities exchanges.\22\ The
Exchange believes that proper risk management, including the ability to
efficiently cancel multiple quotes quickly when necessary, is similarly
valuable to firms that trade in the equities market, including Market
Makers that have heightened quoting obligations that are not applicable
to other market participants.
---------------------------------------------------------------------------
\22\ See supra notes 3 and 7. See also Securities Exchange Act
Release No. 77613 (April 13, 2016), 81 FR 23023 (April 19, 2016).
See also Securities Exchange Act Release Nos. 79956 (February 3,
2017), 82 FR 10102 (February 9, 2017) (SR-BatsBZX-2017-05); 79957
(February 3, 2017), 82 FR 10070 (February 9, 2017) (SR-BatsEDGX-
2017-07); 83201 (May 9, 2018), 83 FR 22546 (May 15, 2018) (SR-C2-
2018-006).
---------------------------------------------------------------------------
Purge Ports do not relieve Market Makers of their quoting
obligations or firm quote obligations under Regulation NMS Rule
602.\23\ Specifically, any interest that is executable against a
Member's or Market Maker's quotes that is received by the Exchange
prior to the time of the removal of quotes request will automatically
execute. Market Makers that purge their quotes will not be relieved of
the obligation to provide continuous two-sided quotes on a daily basis,
nor will it prohibit the Exchange from taking disciplinary action
against a Market Maker for failing to meet their continuous quoting
obligation each trading day.\24\
---------------------------------------------------------------------------
\23\ See Exchange Rule 604. See also generally Chapter VI of the
Exchange's Rules.
\24\ Id.
---------------------------------------------------------------------------
The Exchange is not the only exchange to offer this functionality
and to charge associated fees.\25\ The Exchange believes the proposed
fee for Purge Ports is reasonable because it is lower than the fees
currently charged by other exchanges for similar port functionality.
For example, BZX and EDGX charge a fee of $750 per purge port per
month, Cboe charges $850 per purge port per month, Nasdaq GEMX assesses
its members $1,250 per SQF Purge Port per month, subject to a monthly
cap of $17,500 for SQF Purge Ports and SQF Ports.\26\
---------------------------------------------------------------------------
\25\ See supra notes 3 and 7.
\26\ See supra note 7.
---------------------------------------------------------------------------
The Exchange believes it is reasonable to charge $300 per month for
Purge Ports as proposed because such ports were specially developed to
allow Market Makers to send a single message to cancel multiple quotes,
thereby assisting firms in effectively managing risk. The Exchange also
believes that a Member that chooses to utilize Purge Ports may, in the
future, reduce their need for additional ports by consolidating cancel
messages to their dedicated Purge Port and thus freeing up some
capacity of the existing logical ports and, therefore, allowing for
increased message traffic without paying for additional logical ports.
Purge Ports provide the ability to cancel
[[Page 85961]]
multiple quotes with a single message over a dedicated port, and,
therefore, may create efficiencies for firms and provide a more
efficient solution for them based on their risk management needs. In
addition, Purge Port requests may cancel quotes submitted over numerous
ports and contain added functionality to purge only a subset of these
quotes. Effective risk management is important both for individual
market participants that choose to utilize risk features provided by
the Exchange, as well as for the market in general. As a result, the
Exchange believes that it is appropriate to charge fees for such
functionality as doing so aids in the maintenance of a fair and orderly
market.
The Exchange also believes that its ability to set fees for Purge
Ports is subject to significant substitution-based forces because
Market Makers are able to rely on currently available services both
free and those they receive when using existing trading protocols. If
the value of the efficiency introduced through the Purge Port
functionality is not worth the proposed fees, Market Makers will simply
continue to rely on the existing functionality and not pay for Purge
Ports. In that regard, Market Makers may currently cancel individual
quotes through the existing functionality, such as through the use of a
mass cancel message by which a Market Maker may request that the
Exchange remove all or a subset of its quotations and block all or a
subset of its new inbound quotations. Already Market Makers can also
cancel quotes individually and by utilizing Exchange protocols that
allow them to develop proprietary systems that can send cancel messages
at a high rate.\27\ In addition, the Exchange already provides similar
ability to mass cancel quotes through the Exchange's risk controls,
which are offered at no charge that enables Market Makers to establish
pre-determined levels of risk exposure, and can be used to cancel all
open quotes.\28\ Further, like Purge Ports, Members may also cancel all
or a subset of its orders in the System, by firm name or by MPID, over
their existing ports, or by requesting the Exchange staff to effect
such cancellations.\29\
---------------------------------------------------------------------------
\27\ Current Exchange port functionality supports cancelation
rates that exceed one thousand messages per second and the
Exchange's research indicates that certain Participants rely on such
functionality and at times utilize such cancelation rates.
\28\ See Exchange Rule 532.
\29\ See Exchange Rule 519C(a).
---------------------------------------------------------------------------
Similarly, Market Makers may use cancel-on-disconnect control when
they experience a disruption in their connection to the Exchange and
immediately cancel all pending quotes in the Exchange's System.\30\
Finally, this existing purging functionality will allow Market Makers
to achieve essentially the same outcome in canceling quotes as they
would by utilizing the Purge Ports. Accordingly, the Exchange believes
that the proposed Purge Port fee is reasonable because it is related to
the efficiency of Purge Ports and to other means and services already
available which are either free or already a part of a fee assessed to
the Market Maker for existing connectivity. Accordingly, because Purge
Ports provide additional optional functionality, excessive fees would
simply serve to reduce or eliminate demand for this optional product.
---------------------------------------------------------------------------
\30\ See Exchange Rule 519C(c).
---------------------------------------------------------------------------
The Exchange also believes that offering Purge Ports at the
Matching Engine level promotes risk management across the industry, and
thereby facilitates investor protection. Some market participants, in
particular the larger firms, could and do build similar risk
functionality (as described above) in their trading systems that permit
the flexible cancellation of quotes entered on the Exchange at a high
rate. Offering Matching Engine level protections ensures that such
functionality is widely available to all firms, including smaller firms
that may otherwise not be willing to incur the costs and development
work necessary to support their own customized mass cancel
functionality.
As noted above, the Exchange is not the only exchange to offer
dedicated Purge Ports, and the proposed rate is lower than that charged
by other exchanges for similar functionality. The Exchange also
believes that moving to a per Matching Engine fee is reasonable due to
the Exchange's architecture that provides it the ability to provide two
(2) Purge Ports per Matching Engine for a fee that would still be lower
than competing exchanges that charge on a per port basis. Generally
speaking, restricting the Exchange's ability to charge fees for these
services discourages innovation and competition. Specifically in this
case, the Exchange's inability to offer similar services to those
offered by other exchanges, and charge reasonable and equitable fees
for such services, would put the Exchange at a significant competitive
disadvantage and, therefore, serve to restrict competition in the
market--especially when other exchanges assess comparable fees higher
than those proposed by the Exchange.
The Exchange believes that the proposed Purge Port fees are
equitable because the proposed Purge Ports are completely voluntary as
they relate solely to optional risk management functionality.
The Exchange also believes that the proposed amendments to its Fee
Schedule are not unfairly discriminatory because they will apply
uniformly to all Market Makers that choose to use the optional Purge
Ports. Purge Ports are completely voluntary and, as they relate solely
to optional risk management functionality, no Market Maker is required
or under any regulatory obligation to utilize them. All Market Makers
that voluntarily select this service option will be charged the same
amount for the same services. All Market Makers have the option to
select any connectivity option, and there is no differentiation among
Market Makers with regard to the fees charged for the services offered
by the Exchange.
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. Purge Ports are completely
voluntary and are available to all Market Makers on an equal basis at
the same cost. While the Exchange believes that Purge Ports provide a
valuable service, Market Makers can choose to purchase, or not
purchase, these ports based on their own determination of the value and
their business needs. No Market Maker is required or under any
regulatory obligation to utilize Purge Ports. Accordingly, the Exchange
believes that Purge Ports offer appropriate risk management
functionality to firms that trade on the Exchange without imposing an
unnecessary or inappropriate burden on competition.
Furthermore, the Exchange operates in a highly competitive
environment, and its ability to price the Purge Ports is constrained by
competition among exchanges that offer similar functionality. As
discussed, there are currently a number of similar offers available to
market participants for higher fees at other exchanges. Proposing fees
that are excessively higher than established fees for similar
functionality would simply serve to reduce demand for the Purge Ports,
which as discussed, market participants are under no obligation to
utilize. It could also cause firms to shift trading to other exchanges
that offer similar functionality at a lower cost, adversely impacting
the overall trading on the
[[Page 85962]]
Exchange and reducing market share. In this competitive environment,
potential purchasers are free to choose which, if any, similar product
to purchase to satisfy their need for risk management. As a result, the
Exchange believes this proposed rule change permits fair competition
among national securities exchanges.
The Exchange also does not believe the proposal would cause any
unnecessary or inappropriate burden on intermarket competition as other
exchanges are free to introduce their own purge port functionality and
lower their prices to better compete with the Exchange's offering. The
Exchange does not believe the proposed rule change would cause any
unnecessary or inappropriate burden on intramarket competition.
Particularly, the proposal would apply uniformly to any market
participant, in that it does not differentiate between Market Makers.
The proposal would allow any interested Market Makers to purchase Purge
Port functionality based on their business needs.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
The Exchange received one comment letter on the proposal.\31\ This
comment letter was submitted not only on this proposal, but also the
proposals by the Exchange and its affiliates to amend fees for 10Gb ULL
connectivity and certain ports. Overall, the Exchange believes that the
issues raised by the commenter are not germane to this proposal because
they apply primarily to the other fee filings. Also, the commenter's
raised concerns with the current environment surrounding exchange non-
transaction fee proposals that should be addressed by the Commission
through rule making, or Congress, more holistically and not through an
individual exchange fee filings. However, the commenter does raise one
issue that concerns this proposal whereby it asserts that the
Exchange's comparison to fees charged by other exchanges for similar
ports is irrelevant and unpersuasive. The core of the issue raised is
regarding the cost to connect to one exchange compared to the cost to
connect to others. A thorough response to this comment would require
the Exchange to obtain competitively sensitive information about other
exchange architecture and how their members connect. The Exchange is
not privy to this information. Further, the commenter compares the
Exchange's proposed rate to other exchanges that offer purge port
functionality across all matching engines for a single fee, but fails
to provide the same comparison to other exchanges that charge for purge
functionality like proposed here. The Exchange does not have insight
into the technical architecture of other exchanges so it is difficult
to ascertain the number of purge ports a firm would need to connect to
another exchanges entire market. Therefore, the Exchange is limited to
comparing its proposed fee to other exchanges' purge port fees as
listed in their fee schedules.
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\31\ See letter from Thomas M. Merritt, Deputy General Counsel,
Virtu Financial, Inc. (``Virtu''), to Vanessa Countryman, Secretary,
Commission, dated November 8, 2023.
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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,\32\ and Rule 19b-4(f)(2) \33\ 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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\32\ 15 U.S.C. 78s(b)(3)(A)(ii).
\33\ 17 CFR 240.19b-4(f)(2).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
file number SR-MIAX-2023-43 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-2023-43. 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 the filing also will be available for
inspection and copying at the principal office of the Exchange. Do not
include personal identifiable information in submissions; you should
submit only information that you wish to make available publicly. We
may redact in part or withhold entirely from publication submitted
material that is obscene or subject to copyright protection. All
submissions should refer to file number SR-MIAX-2023-43 and should be
submitted on or before January 2, 2024.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\34\
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\34\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-27066 Filed 12-8-23; 8:45 am]
BILLING CODE 8011-01-P
