
[Federal Register Volume 78, Number 77 (Monday, April 22, 2013)]
[Notices]
[Pages 23806-23810]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-09340]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-69381; File No. SR-MIAX-2013-16 ]


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

April 16, 2013.
    Pursuant to the provisions of Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice 
is hereby given that on April 5, 2013, Miami International Securities 
Exchange LLC (``MIAX'' or ``Exchange'') filed with the Securities and 
Exchange Commission (``Commission'') a proposed rule change as 
described in Items I, II, and III below, which Items have been prepared 
by the Exchange. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.

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[[Page 23807]]

I. Self-Regulatory Organization's Statement of the Terms of the 
Substance of the Proposed Rule Change

    The Exchange is filing a proposal to modify the MIAX Fee Schedule 
(``Fee Schedule'') to establish fees for option contracts overlying 10 
shares of a security (``Mini Options''). The Exchange proposes to 
implement these fee changes to coincide with the Exchange's listing and 
trading of Mini Options on April 17, 2013.
    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 Exchange proposes to modify the Fee Schedule to establish fees 
for Mini Options. The Exchange represented in its filing with the 
Securities and Exchange Commission (``SEC'' or the ``Commission'') to 
establish Mini Options that, ``the current schedule of Fees will not 
apply to the trading of mini-options contracts. The Exchange will not 
commence trading of mini-option contracts until specific fees for mini-
options contracts trading have been filed with the Commission.'' \3\ As 
the Exchange intends to begin trading Mini Options on April 17, 2013 it 
is submitting this filing to describe the transaction fees that will be 
applicable to the trading of Mini Options.
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    \3\ See Securities Exchange Act Release No. 69136 (March 14, 
2013), 78 FR 17259 (March 20, 2013) (SR-MIAX-2013-06). The 
Commission notes that the actual language from the Exchange's filing 
is: ``the current MIAX Fee Schedule will not apply to the trading of 
mini-option contracts. The Exchange will not commence trading of 
mini-option contracts until specific fees for mini-option contracts 
trading have been filed with the Commission.''
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    Mini Options have a smaller exercise and assignment value due to 
the reduced number of shares they deliver as compared to standard 
option contracts. As such, the Exchange is proposing generally lower 
per contract fees as compared to standard option contracts, with some 
exceptions to be fully described below. Despite the smaller exercise 
and assignment value of a Mini Option, the cost to the Exchange to 
process quotes and orders in Mini Options, perform regulatory 
surveillance and retain quotes and orders for archival purposes is the 
same as for a standard contract. This leaves the Exchange in a position 
of trying to strike the right balance of fees applicable to Mini 
Options--too low and the costs of processing Mini Options quotes and 
orders will necessarily cause the Exchange to either raise fees for 
everyone or only for participants trading Mini Options; too high and 
participants may be deterred from trading Mini Options, leaving the 
Exchange less able to recoup costs associated with development of the 
product, which is designed to offer investors a way to take less risk 
in high dollar securities. The Exchange, therefore, believes that 
adopting fees for Mini Options that are in some cases lower than fees 
for standard contracts, and in other cases the same as for standard 
contracts, is appropriate, not unreasonable, not unfairly 
discriminatory and not burdensome on competition between participants, 
or between the Exchange and other exchanges in the listed options 
market place.
Exchange Transaction Fees
    The Exchange proposes establishing Mini Options transaction fees 
for all Market Makers and other market participants that would be 10% 
of the fee associated with standard options. The Mini Options 
transaction fee, as its standard option counterpart, would apply per 
executed contract to Registered Market Makers, Lead Market Makers, 
Directed Order-Lead Market Makers, Primary Lead Market Makers, Directed 
Order-Primary Lead Market Makers, Public Customers that are not 
Priority Customers, Non-MIAX Market Makers, Non-Member Broker-Dealers, 
and Firms. Below is a chart providing a comparison of the transaction 
fees for standard options and to the proposed fees for Mini Options:

------------------------------------------------------------------------
                                   Standard options      Mini options
                                    transaction fee     transaction fee
    Type of MIAX Market Maker        (per executed       (per executed
                                       contract)           contract)
------------------------------------------------------------------------
Registered Market Maker.........               $0.23              $0.023
Lead Market Maker...............                0.20               0.020
Directed Order--Lead Market                     0.18               0.018
 Maker..........................
Primary Lead Market Maker.......                0.18               0.018
Directed Order--Primary Lead                    0.16               0.016
 Market Maker...................
Priority Customer...............                0.00               0.000
Public Customer that is Not a                   0.25               0.025
 Priority Customer..............
Non-MIAX Market Maker...........                0.45               0.045
Non-Member Broker-Dealer........                0.45               0.045
Firm............................                0.25               0.025
------------------------------------------------------------------------

    In proposing Mini Options transaction fees that are 10% of the 
related standard option transaction fee, the Exchange acknowledges and 
takes into account that Mini Options have a smaller exercise and 
assignment value due to the reduced number of shares to be delivered as 
compared to standard option contracts. The Mini Options transaction fee 
charged to Priority Customers \4\ would remain at $0.00

[[Page 23808]]

because the transaction fee for standard options, currently set at 
$0.00, cannot be reduced any lower.
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    \4\ The term ``Priority Customer'' means a person or entity that 
(i) is not a broker or dealer in securities, and (ii) does not place 
more than 390 orders in listed options per day on average during a 
calendar month for its own beneficial account(s). See Exchange Rule 
100.
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Marketing Fee
    Currently, the Exchange assesses a Marketing Fee to all Market 
Makers for contracts they execute in their assigned classes when the 
contra-party to the execution is a Priority Customer. The Exchange 
proposes assessing a Marketing Fee for applicable transactions in Mini 
Options and setting the fee to be 10% of the associated fee for 
standard options. As noted above, the Exchange bases this proposal on 
the smaller exercise and assignment value due to the reduced number of 
shares to be delivered with Mini Options as compared to standard option 
contracts. Below is a chart providing a comparison of the Marketing 
Fees for standard options and to the proposed fees for Mini Options:

------------------------------------------------------------------------
 Amount of marketing fee assessed              Option classes
------------------------------------------------------------------------
$0.70 (per contract)..............  Transactions in Standard Option
                                     Classes that are not in the Penny
                                     Pilot Program.
$0.25 (per contract)..............  Transactions in Standard Option
                                     Classes that are in the Penny Pilot
                                     Program.
$0.070 (per contract).............  Transactions in Mini Options where
                                     the corresponding Standard Option
                                     is not in the Penny Pilot Program.
$0.025 (per contract).............  Transactions in Mini Options where
                                     the corresponding Standard Option
                                     is in the Penny Pilot Program
------------------------------------------------------------------------

Fixed Fee Surcharge
    In order to comply with the requirements of the Distributive 
Linkage Plan,\5\ the Exchange uses various means of accessing better 
priced interest located on other exchanges. Presently, the Exchange 
charges a Fixed Fee Surcharge of $0.10 per contract plus a pass through 
of the fees associated with the execution of the routed order on the 
other exchanges. The $0.10 is designed to recover the Exchange's costs 
in routing orders to the other exchanges. Those costs include clearance 
charges imposed by The Options Clearing Corporation (``OCC'') and per 
contract routing fees charged by the broker dealers who charge the 
Exchange for the use of their systems to route orders to other 
exchanges. It is the Exchange's understanding that both the OCC and the 
broker dealers have kept their charges applicable to Mini Options the 
same as for standard option contracts, as their cost to process a 
contract (i.e., routing or clearing) is the same irrespective of the 
exercise and assignment value of the contract. As such, the Exchange 
intends to charge the same Fixed Fee Surcharge for Mini Options as it 
presently does for standard options, as described in Section (1)(c) of 
the current Fee Schedule. The Exchange notes that participants can 
avoid the Fixed Fee Surcharge in several ways. First, they can simply 
route to the exchange with the best priced interest. The Exchange, in 
recognition of the fact that markets can move while orders are in 
flight, also offers participants the ability to utilize an order type 
that does not route to other exchanges. Specifically, the Do Not Route 
(``DNR'') order modifier is one such order that would never route to 
another exchange. Given this ability to avoid the Fixed Fee Surcharge, 
coupled with the fixed third-party costs associated with routing, the 
Exchange believes it is reasonable to charge the same Routing Surcharge 
for Mini Options that is charged for standard option contracts.
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    \5\ See Exchange Rule 529.
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Options Regulatory Fee
    Presently the Exchange charges an Options Regulatory Fee (``ORF'') 
of $0.004 per contract. The ORF is assessed on each MIAX Member for all 
options transactions executed or cleared by the MIAX Member that are 
cleared by the OCC in the customer range, regardless of the exchange on 
which the transaction occurs. The Exchange is proposing to charge the 
same rate for transactions in Mini Options, $0.004 per contract, since, 
as noted, the costs to the Exchange to process quotes, orders, trades 
and the necessary regulatory surveillance programs and procedures in 
Mini Options are the same as for standard option contracts. As such, 
the Exchange feels that it is appropriate to charge the ORF at the same 
rate as the standard option contract.
2. Statutory Basis
    MIAX believes that its proposal to amend fee schedule is consistent 
with Section 6(b) of the Act \6\ in general, and furthers the 
objectives of Section 6(b)(4) of the Act \7\ in particular, in that it 
is an equitable allocation of reasonable fees and other charges among 
its members, issuers and other persons using its facilities and does 
not unfairly discriminate between customers, issuers, brokers or 
dealers.
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    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(4).
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    The Exchange noted earlier that, while Mini Options have a smaller 
exercise and assignment value due to the reduced number of shares to be 
delivered as compared to standard option contracts, and despite the 
smaller exercise and assignment value of a Mini Option, the cost to the 
Exchange to process quotes and orders in Mini Options, perform 
regulatory surveillance and retain quotes and orders for archival 
purposes is the same as for a standard contract. This leaves the 
Exchange in a position of trying to strike the right balance of fees 
applicable to Mini Options--too low and the costs of processing Mini 
Options quotes and orders will necessarily cause the Exchange to either 
raise fees for everyone or only for participants trading Mini Options; 
too high and participants may be deterred from trading Mini Options, 
leaving the Exchange less able to recoup costs associated with 
development of the product, which is designed to offer investors a way 
to take less risk in high dollar securities. Given these realities, the 
Exchange believes that adopting fees for Mini Options that are in some 
cases lower than standard contracts, and in other cases the same as for 
standard contracts, is appropriate, not unreasonable, not unfairly 
discriminatory and not burdensome on competition between participants, 
or between the Exchange and other exchanges in the listed options 
market place.
    In the case of most trade related charges, the Exchange has decided 
to offer lower per contract fees to participants as part of trying to 
strike the right balance between recovering costs associated with 
trading Mini Options and encouraging use of the new Mini Option 
contracts, which are designed to allow investors to reduce risk in high 
dollar underlying securities.
    The Exchange proposal to establish transaction fees applicable to 
Market Makers and all other participants to be 10% of the fee charged 
for standard options is reasonable in light of the fact that the Mini 
Options do have a smaller exercise and assignment value, specifically 
1/10th that of a standard

[[Page 23809]]

option contract. The Exchange's proposal is based on the already 
established classification of Market Makers and other market 
participants for standard option contracts, which is an effective fee 
on the Exchange and has not been determined to be inequitable or 
unfairly discriminatory. Therefore, the Exchange believes the proposed 
pricing for Mini Options to be equitable and not unfairly 
discriminatory as it would apply to all members of a given class (i.e., 
the Mini Options transaction fee for Register Market Makers would apply 
to all Register Market Makers).
    The Exchange believes the proposal to charge Priority Customers 
$.00 per contract to be reasonable, as Priority Customers have traded 
for free all options on the Exchange since the inception of the 
Exchange. The ability to trade for free attracts Priority Customer 
order flow to the Exchange, which is beneficial to all other 
participants on the Exchange who generally seek to trade with Priority 
Customer order flow. The proposed fee of $.00 per contract is the same 
fee charged to Priority Customer orders in standard option contracts, 
which is an effective fee on the Exchange and has not been determined 
to be inequitable or unfairly discriminatory. Therefore, the proposed 
Priority Customer pricing for Mini Options would be equitable and not 
unfairly discriminatory.
    The Exchange believes its proposal to assess a Marketing Fee to all 
Market Makers for Mini Options contracts they execute in their assigned 
classes when the contra-party to the execution is a Priority Customer 
with such Marketing Fee set at 10% of the related fee charged for 
standard options to be reasonable in light of the fact that the Minis 
do have a smaller exercise and assignment value, specifically 1/10th 
that of a standard contract. The Exchange does not believe its proposal 
to be unfairly discriminatory because it applies to all applicable 
Market Makers evenly.
    The Exchange proposal to treat Mini Options the same as standard 
options for purposes of the Fixed Fee Surcharge is reasonable, 
equitable and not unfairly discriminatory for the following reasons. 
Presently, the Exchange charges a Routing Surcharge of $0.10 per 
contract plus a pass through of the fees associated with the execution 
of the routed order on the other exchanges. The $0.10 is designed to 
recover the Exchange's costs in routing orders to the other exchanges. 
Those costs include clearance charges imposed by the OCC and per 
contract routing fees charged by the broker dealers who charge the 
Exchange for the use of their systems to route orders to other 
exchanges. The Exchange understands that both the OCC and the broker 
dealers have kept their charges applicable to Mini Options the same as 
for standard option contracts, as their cost to process a contract 
(i.e., routing or clearing) is the same irrespective of the exercise 
and assignment value of the contract. As such, the Exchange intends to 
charge the same Fixed Fee Surcharge for Mini Options as it presently 
does for standard options, as described in Section (1)(c) of the 
current Fee Schedule. The Exchange notes that participants can avoid 
the Fixed Fee Surcharge in several ways. First they can simply route to 
the exchange with the best priced interest. The Exchange, in 
recognition of the fact that markets can move while orders are in 
flight, also offers participants the ability to utilize an order type 
that does not route to other exchanges. Specifically, the DNR order 
type is an order that would never route to another exchange. Given this 
ability to avoid the Fixed Fee Surcharge, coupled with the fixed third 
party costs associated with routing, the Exchange feels it is 
reasonable and equitable to charge the same Fixed Fee Surcharge for 
Mini Options that is charged for standard option contracts. Since the 
Fixed Fee Surcharge will apply to all participants in Mini Options as 
it is applied for standard options, and because such surcharge has not 
previously been found to be unreasonable, inequitable or unfairly 
discriminatory, the Exchange believes it is the case for Mini Options 
as well.
    The Exchange notes, particularly in the context of the ORF, that 
the cost to perform surveillance to ensure compliance with various 
Exchange and industry-wide rules is no different for a Mini Option than 
it is for a standard option contract. Reducing the ORF for Mini options 
could result in a higher ORF for standard options. Such an outcome 
would arguably be discriminatory towards investors in standard options 
for the benefit of investors in Minis. As such, the appropriate 
approach is to treat both Mini Options and standard options the same 
with respect to the amount of the ORF that is being charged.

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

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act. The proposed change designed to 
provide greater specificity and precision within the Fee Schedule with 
respect to the fees that will be applicable to Mini Options when they 
begin trading on the Exchange on or about April 17, 2013.
    The Exchange believes that adopting fees for Mini Options that are 
in some cases lower than for standard contracts, but in other cases the 
same as for standard contracts, strikes the appropriate balance between 
fees applicable to standard contracts versus fees applicable to Mini 
Options, and will not impose a burden on competition among various 
market participants on the Exchange, or between the Exchange and other 
exchanges in the listed options market place, not necessary or 
appropriate in furtherance of the purposes of the Act. In this regard, 
as Mini Options are a new product being introduced into the listed 
options marketplace, the Exchange is unable at this time to absolutely 
determine the impact that the fees proposed herein will have on trading 
in Mini Options. That said, however, the Exchange believes that the 
rates proposed for Mini Options, would not impose any burden on 
competition that is not necessary or appropriate in furtherance of the 
purposes of the Act.
    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 continually 
review, and consider adjusting, its fees and credits to remain 
competitive with other exchanges. For the reasons described above, the 
Exchange believes that the proposed rule change reflects this 
competitive environment.

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

    Written comments were neither solicited nor received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A)(ii) of the Act.\8\ At any time within 60 days of the filing 
of the proposed rule change, the Commission summarily may temporarily 
suspend such rule change if it appears to the Commission that such 
action is necessary or appropriate in the public interest, for the 
protection of investors, or otherwise in furtherance of the purposes of 
the Act. If the Commission takes such action, the Commission shall 
institute proceedings to determine

[[Page 23810]]

whether the proposed rule should be approved or disapproved.
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    \8\ 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-2013-16 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-2013-16. 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 available publicly. All 
submissions should refer to File Number SR-MIAX-2013-16, and should be 
submitted on or before May 13, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(12).
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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2013-09340 Filed 4-19-13; 8:45 am]
BILLING CODE 8011-01-P


