
[Federal Register Volume 77, Number 243 (Tuesday, December 18, 2012)]
[Notices]
[Pages 74905-74907]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-30379]



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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-68415; File No. SR-MIAX-2012-01]


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

December 12, 2012.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on December 7, 2012, Miami International Securities Exchange LLC 
(``Exchange'' or ``MIAX'') 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 self-
regulatory organization. The Commission is publishing this notice to 
solicit comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange is filing a proposal to adopt the MIAX Options Fee 
Schedule (the ``Fee Schedule''). Specifically, the Fee Schedule would 
establish select transaction and regulatory fees applicable to Members 
trading options on and using services provided by MIAX.
    The text of the proposed rule change is available on the Exchange's 
Web site at http://www.miaxoptions.com/filter/wotitle/rule_filing, 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 purpose of the proposed rule change is to establish select 
transaction and regulatory fees applicable to Members trading options 
on and using services provided by the MIAX.
Marketing Fee
    MIAX will assess a Marketing Fee to all MIAX Market Makers for 
contracts they execute in their assigned classes when the contra-party 
to the execution is a Priority Customer. The Marketing Fee is charged 
only in a Market Maker's assigned classes because it is in these 
classes that the Market Maker has the general obligation to attract 
order flow to the Exchange. MIAX will, on a monthly basis, disburse 
collected Marketing Fees to specific Electronic Exchange Members in 
accordance with instructions received from the applicable Primary Lead 
Market Maker ``PLMM'' or Lead Market Maker ``LMM'' in the option class. 
The PLMM will provide instructions regarding the disbursement of 
Marketing Fees collected in those option classes in which he is the 
appointed PLMM on transactions resulting from orders that have been 
directed to him and from non-directed orders in that option class. The 
LMM will provide instructions regarding the disbursement of Marketing 
Fees collected on transactions resulting from orders that have been 
directed to him.
    Undispersed Marketing Fees will be reimbursed to Market Makers 
based upon their pro-rata portion of the entire amount of Marketing 
Fees collected on a three month rolling schedule. In order to provide 
PLMMs and LMMs flexibility in the timing of their disbursements to 
Electronic Exchange Members, PLMMs and LMMs may choose to disburse the 
Market Fees collected in one month over a three month period. 
Reimbursement of undispersed Marketing Fees will take this into 
consideration.
    The amount of the Marketing Fee would depend upon whether the 
affected option class is included in the option Penny Pilot Program. A 
Marketing Fee of $0.25 per contract will be assessed to Market Makers 
for transactions in option classes that are included in the Penny Pilot 
Program. A Marketing Fee of $0.70 per contract will be assessed to 
Market Makers for transactions in option classes that are not in the 
Penny Pilot Program. A list of option classes included in the Penny 
Pilot Program is available on the MIAX Web site. MIAX's Marketing Fees 
are the same as CBOE, ISE, NYSE Amex and PHLX for transactions in 
option classes in the Penny Pilot Program. For option classes not in 
the Penny Pilot Program, MIAX's Marketing Fees are the same as PHLX 
($0.70) and higher than CBOE, ISE and NYSE Amex ($0.65 each 
respectively).
Routing Fees
    MIAX will assess Routing Fees in order to recoup costs incurred by 
MIAX when routing to various away markets. MIAX will also pay to its 
Member any rebate it receives on transactions routed to an away market 
where there is such a rebate paid. To establish the appropriate Routing 
Fee for a particular order that is routed to, and executed on, an away 
market, MIAX will assess the transaction fee that is being assessed by 
the away market, plus a specified fixed fee, which represents the costs 
incurred by the Exchange for routing an order to an away market. The 
transaction fee portion of the routing fee will be the actual charge 
assessed by the away market at the time that the order was entered into 
the MIAX Trading System. This transaction fee will be calculated on an 
order-by-order basis since different away markets charge different 
amounts.\3\ In the case where there is no transaction fee assessed by 
the away market, the Routing Fee assessed by MIAX will be only the 
fixed rate surcharge described below.
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    \3\ This is similar to the methodologies utilized by the NASDAQ 
OMX PHLX LLC (``PHLX'') and the International Securities Exchange, 
LLC (``ISE'') in assessing Routing Fees. See PHLX's Pricing Schedule 
and ISE's Fee Schedule.
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    MIAX will assess a routing fee surcharge at a fixed rate of $0.10 
per contract for Public Customer orders that are routed to and executed 
on away markets.\4\ The routing fee surcharge represents the cost to 
MIAX for routing the order to the away market. In analyzing its costs, 
the Exchange took into account clearing costs,\5\ administrative, 
regulatory and technical costs associated with routing orders to an 
away market. The Exchange uses unaffiliated routing brokers to route 
orders to the away markets; the costs associated with the use of these 
services

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are included in the fixed fee surcharge. The Exchange analyzed its 
potential costs in determining to assess a fixed fee surcharge of $0.10 
per contract to represent the overall cost to the Exchange for 
technical, administrative, clearing, regulatory, compliance and other 
costs, which is in addition to the transaction fee assessed by the away 
market. The routing fee surcharge of $0.10 is the same as the fixed fee 
charged by PHLX for orders routed to exchanges other than NASDAQ OMX 
BX, Inc. (``BX'') and NASDAQ Options Market (``NOM'').\6\
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    \4\ The Commission notes that, under the MIAX routing rules, 
orders other than Public Customer orders are not routed to away 
markets. See Securities Exchange Act Release No. 68341 (December 3, 
2012), 77 FR 73065, at 73086 (December 7, 2012).
    \5\ The Options Clearing Corporation (``OCC'') recently amended 
its clearing fee from $0.03 per contract side to $0.01 per contract 
side. See Securities Exchange Act Release No. 68025 (October 10, 
2012), 77 FR 63398 (October 16, 2012) (SR-OCC-2012-18).
    \6\ See Securities Exchange Act Release No. 68213 (November 13, 
2012), 77 FR 69530 (November 19, 2012) (SR-PHLX-2012-129).
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    MIAX is also proposing to pay a market participant any rebate 
offered by an away market where there is such a rebate paid. Any rebate 
paid would be netted against the fixed fee surcharge assessed by MIAX. 
For example, if a Public Customer order is routed to BOX Options 
Exchange, LLC (``BOX''), and BOX offers a customer rebate of $0.20 per 
contract, MIAX would deduct its fixed fee surcharge of $0.10 per 
contract from the rebate and pay the $0.10 per contract rebate to the 
market participant for the customer order that was routed.
Regulatory Fees

A. Sales Value Fee

    The Sales Value Fee \7\ is assessed by the Exchange to each Member 
for sales on the Exchange with respect to which the Exchange is 
obligated to pay a fee to the Commission pursuant to Section 31 of the 
Exchange Act. The Sales Value Fee is equal to the Section 31 fee rate 
multiplied by the Member's aggregate dollar amount of covered sales 
resulting from options transactions occurring on the Exchange during 
any computational period. To the extent there may be any excess monies 
collected under this rule, the Exchange may retain those monies to help 
fund general operating expenses. The sales transactions to which the 
fee applies are sales of options (other than options on a security 
index) and the sales of securities resulting from the exercise of 
physical-delivery options. The fee is collected indirectly from Members 
through their clearing firms by The Options Clearing Corporation on 
behalf of MIAX with respect to option sales and options exercises.
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    \7\ See Exchange Rule 1207.
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B. Web CRD \8\ Fees
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    \8\ FINRA operates the Web Central Registration Depository 
(CRD[supreg]), the central licensing and registration system for the 
U.S. securities industry and its regulators. It contains the 
registration records of more than 6,800 registered broker-dealers 
and the qualification, employment, and disclosure histories of more 
than 660,000 active registered individuals.
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    Financial Industry Regulatory Authority (``FINRA''), through the 
Web CRD\SM\ registration system for the registration of associated 
persons of Electronic Exchange Member and Market Maker organizations 
that are not also FINRA members, collects from those MIAX Members 
general registration fees and fingerprint processing fees. The MIAX 
Options Fee Schedule sets forth both the Web CRD Fees FINRA is 
currently charging and the new Web CRD Fees it will begin charging 
January 2, 2013.
 2. Statutory Basis
    The Exchange believes that its proposal to adopt its Fee Schedule 
for select transaction and regulatory fees is consistent with Section 
6(b) of the Act \9\ in general, and furthers the objectives of Section 
6(b)(4) of the Act \10\ in particular, in that it is an equitable 
allocation of reasonable fees and other charges among Exchange members 
and other persons using its facilities.
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    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(4).
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    The Exchange believes the fees proposed for transactions on MIAX 
are reasonable. MIAX will operate within a highly competitive market in 
which market participants can readily send order flow to any of ten 
other competing venues if they deem fees at a particular venue to be 
excessive. The proposed fee structure is intended to attract order flow 
to MIAX by offering market participants incentives to submit their 
orders to MIAX.
    MIAX notes that the U.S. options markets are highly competitive, 
and the Marketing Fee is intended to provide an incentive for PLLMs and 
LMMs to enter into marketing agreements with Electronic Exchange 
Members so that they will provide order flow to MIAX. The Marketing Fee 
is charged only in a Market Maker's assigned classes because it is in 
these classes that the Market Maker has the general obligation to 
attract order flow to the Exchange. MIAX believes that its program of 
Marketing Fees, which is similar to marketing fee programs that have 
previously been implemented on other options exchanges,\11\ will 
enhance the MIAX's competitive position and will result in increased 
liquidity on the MIAX, thereby providing more of an opportunity for 
customers to receive best executions on MIAX. MIAX believes that its 
Marketing Fee is reasonable since the amount of MIAX's Marketing Fee is 
the same as other exchanges for options classes in the Penny Pilot 
Program and slightly higher than some of the other exchanges and the 
same as two of the exchanges for options classes not in the Penny Pilot 
Program.
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    \11\ See e.g., Securities Exchange Act Release Nos. 53969 (June 
9, 2006), 71 FR 34973 (June 16, 2006) (SR-CBOE-2006-53); 55265 
(February 9, 2007), 72 FR 7697 (February 16, 2007) (SR-CBOE-2007-
11); 55271 (February 12, 2007), 72 FR 7699 (February 16, 2007) (SR-
ISE-2007-08); and 54152 (July 14, 2006), 71 FR 41488 (July 21, 
2006). See also, Securities Exchange Act Release Nos. 53841 (May 19, 
2006), 71 FR 30461 (May 26, 2006) (SR-Phlx-2006-33); 54297 (August 
9, 2006), 71 FR 47280 (August 16, 2006) (SR-Phlx-2006-47); 54485 
(September 22, 2006), 71 FR 57017 (September 28, 2006) (SR-Phlx-
2006-56); 55290 (February 13, 2007), 72 FR 8051 (February 22, 2007) 
(SR-Phlx- 2007-05); and 55473 (March 14, 2007), 72 FR 13338 (March 
21, 2007) (SR-Phlx- 2007-12).
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    The Exchange believes that the proposed Routing Fees are reasonable 
because they seek to recoup costs that are incurred by the Exchange 
when routing Public Customer orders to away markets on behalf of 
members. Each destination market's transaction charge varies and there 
is a cost incurred by the Exchange when routing orders to away markets. 
The costs to the Exchange include clearing costs, administrative, 
regulatory and technical costs associated with routing options. The 
Exchange believes that the proposed Routing Fees would enable the 
Exchange to recover the costs it incurs to route orders to away markets 
in addition to transaction fees assessed to market participants for the 
execution of Public Customer orders by the away market. The Exchange 
believes that it is reasonable for it to recoup its actual costs 
associated with routing orders to away markets. Also, market 
participants whose orders routed to away markets will be entitled to 
receive rebates offered by the away markets, which rebates will net 
against fees assessed by the Exchange for routing orders. The Exchange 
believes that the opportunity to collect a rebate will reduce Routing 
Fees.
    MIAX also believes that it is equitable and not unfairly 
discriminatory for market participants to receive rebates on orders 
routed to away markets that pay rebates. MIAX would pay rebates offered 
by away markets uniformly to market participants when their orders are 
routed to a destination market that offers a rebate.
    The proposed Sales Value Fee allows the Exchange to offset the cost 
it incurs in payment to the Commission of a transaction fee that is 
designed to recover the costs related to the government's supervision 
and regulation of the securities markets and securities professionals. 
The amount of the fee is the same amount assessed to

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the Exchange pursuant to Section 31 of the Exchange Act. The Exchange 
believes it is reasonable to recover the actual costs associated with 
the payment of Section 31 fees.
    Finally, the Exchange believes it is reasonable, equitable and not 
unfairly discriminatory for the FINRA fees to be included on the Fee 
Schedule because these fees are not being assessed or set by MIAX, but 
by FINRA, and will be assessed to broker-dealers that register 
associated persons through FINRA's WebCRD system.
    Finally, the Exchange notes that it operates in a highly 
competitive market in which market participants can readily favor 
competing venues. In such an environment, the Exchange must establish 
fees that are competitive with other exchanges. For the reasons 
described above, the Exchange believes that the proposed MIAX Options 
Fee Schedule for select transaction and regulatory fees appropriately 
reflects this competitive environment.

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.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    Written comments were neither solicited or 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.\12\ 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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    \12\ 15 U.S.C. 78s(b)(3)(A)(ii).
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-MIAX-2012-01 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-MIAX-2012-01. 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 Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for Web site 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; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make publicly available. All 
submissions should refer to File Number SR-MIAX-2012-01 and should be 
submitted on or before January 8, 2013.
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    \13\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-30379 Filed 12-17-12; 8:45 am]
BILLING CODE 8011-01-P


