
[Federal Register Volume 79, Number 52 (Tuesday, March 18, 2014)]
[Notices]
[Pages 15183-15185]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-05874]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-71704; File No. SR-MIAX-2014-11]


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

March 12, 2014.
    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 February 28, 2014, 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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I. Self-Regulatory Organization's Statement of the Terms of the 
Substance of the Proposed Rule Change

    The Exchange is filing a proposal to adopt a MIAX Market Maker 
sliding scale for transaction fees.
    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 amend its Fee Schedule to adopt (i) a MIAX 
Market Maker \3\ sliding scale for transaction fees; and (ii) a $0.02 
fee for Mini Option transactions by a MIAX Market Maker. Consistent 
with this change, the Exchange will delete the existing transaction 
fees that apply to MIAX Market Markers.
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    \3\ ``MIAX Market Maker'' for purposes of the proposed sliding 
scale means any MIAX Market Maker including RMM, LMM, PLMM, DLMM, 
and DPLMM.
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    The new sliding scale for MIAX Market Maker transaction fees is 
based on the substantially similar fees of the Chicago Board Options 
Exchange, Incorporated (``CBOE'').\4\ Specifically, the Exchange 
proposes to adopt a program to reduce a MIAX Market Maker's per 
contract transaction fee based on the number of contracts the MIAX 
Market Maker trades in a month, based on the following scale:
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    \4\ See Securities Exchange Act Release Nos. 55193 (January 30, 
2007), 72 FR 5476 (February 6, 2007) (SR-CBOE-2006-111); 57191 
(January 24, 2008), 73 FR 5611 (January 30, 2008); 58321 (August 6, 
2008), 73 FR 46955 (SR-CBOE-2008-78). See also CBOE Fees Schedule, 
p. 3.

------------------------------------------------------------------------
                                                 Transaction  fee per
      Tier            Contracts per month              contract
------------------------------------------------------------------------
1...............  1-750,000.................  $0.15
2...............  750,001-1,500,000.........  $0.10
3...............  1,500,001-3,000,000.......  $0.05
4...............  3,000,001+................  $0.03
------------------------------------------------------------------------

    The sliding scale would apply to all MIAX Market Makers for 
transactions in all products except Mini Options. A MIAX Market Maker's 
initial $0.15 per contract rate will be reduced if the MIAX Market 
Maker reaches the volume thresholds set forth in the sliding scale in a 
month. As a MIAX Market Maker's monthly volume increases, its per 
contract transaction fee would decrease. Under the sliding scale, the 
first 750,000 contracts traded in a month would be assessed at $0.15 
per contract. The next 750,000 contracts traded (up to 1,500,000 total 
contracts traded) would be assessed at $0.10 per contract. The next 
1,500,000 contracts traded (up to 3,000,000 total contracts traded) 
would be assessed at $0.05 per contract. All contracts above 3,000,000 
contracts traded in a month would be assessed at $0.03 per contract. 
The Exchange will

[[Page 15184]]

aggregate the trading activity of separate MIAX Market Maker firms for 
the purposes of the sliding scale if there is at least 75% common 
ownership between the firms as reflected on each firm's Form BD, 
Schedule A.\5\
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    \5\ A MIAX Market Maker's monthly contract volume would be 
determined at the firm affiliated level. E.g., if five MIAX Market 
Maker individuals are affiliated with member firm ABC as reflected 
by Exchange records for the entire month, all the volume from those 
five individual MIAX Market Makers will count towards firm ABC's 
sliding scale transaction fees for that month. CBOE also aggregates 
volume of market maker firms with at least 75% common ownership 
between the firms. See Securities Exchange Act Release No. 55193 
(January 30, 2007), 72 FR 5476 (February 6, 2007) (SR-CBOE-2006-
111). See also CBOE Fees Schedule, p. 3.
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    The Exchange believes the proposed sliding scale is objective in 
that the fee reductions are based solely on reaching stated volume 
thresholds. The Exchange believes that the implementation of a tiered 
fee schedule may incent firms to display their orders on the Exchange 
and increase the volume of contracts traded here.
    As mentioned above, the Exchange notes that the proposed sliding 
fee scale for MIAX Market Makers structured on contract volume 
thresholds is based on the substantially similar fees of the CBOE.\6\ 
The Exchange also notes that a number of other exchanges have tiered 
fee schedules which offer different transaction fee rates depending on 
the monthly ADV of liquidity providing executions on their 
facilities.\7\
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    \6\ See Securities Exchange Act Release Nos. 55193 (January 30, 
2007), 72 FR 5476 (February 6, 2007) (SR-CBOE-2006-111); 58321 
(August 6, 2008), 73 FR 46955 (SR-CBOE-2008-78); 71295 (January 14, 
2014), 79 FR 3443 (January 21, 2014) (SR-CBOE-2013-129).
    \7\ See, e.g., International Securities Exchange, LLC, Schedule 
of Fees, Section VI, C; NASDAQ Options Market, Chapter XV, Section 
2.
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    In addition, the Exchange proposes to assess MIAX Market Makers a 
$0.02 fee for Mini Option transactions. The new transaction fee for 
Mini Options is identical to that charged by CBOE.\8\ The Exchange 
notes that it is difficult to compare the proposed $0.02 amount to the 
amount assessed to MIAX Market Makers for standard options 
transactions, as that amount can differ depending on which tier each 
MIAX Market-Maker reaches in the MIAX Market Maker sliding scale 
(though it is less than 1/10th [sic] the fee assessed at the first tier 
of the MIAX Market Maker sliding scale for standard options 
transactions). The Exchange wishes to assess a $0.02 fee to MIAX Market 
Makers in order to encourage them to quote often and aggressively in 
Mini Options.
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    \8\ See Securities Exchange Act Release No. 69258 (March 29, 
2013), 78 FR 69258 (April 4, 2013) (SR-CBOE-2013-038). See also CBOE 
Fees Schedule, p. 2.
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    The Exchange notes that Mini Options have a smaller exercise and 
assignment value due to the reduced number of shares they deliver as 
compared to standard option contracts. 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 Option 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, 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 
marketplace.
    Consistent with the adoption of the new sliding fee scale and the 
$0.02 fee for transactions in Mini Options for MIAX Market Makers, the 
Exchange proposes to delete the existing transaction fees that 
currently apply to MIAX Market Markers. Specifically, the Exchange will 
no longer charge: (i) RMMs $0.08 per contract for standard options or 
$.008 for Mini Options; (ii) LMMs $0.08 per contract for standard 
options or $0.008 for Mini Options; (iii) DLMMs and PLMMs $0.08 per 
contract for standard options or $0.008 for Mini Options; and (iv) 
DPLMMs $0.08 per contract for standard options or $0.008 for Mini 
Options. The Exchange notes that the new sliding scale for MIAX Market 
Makers will increase transaction fees for all Market Markers for the 
first 1,500,000 contracts traded per month in standard option 
contracts. The Exchange also notes that the new Mini Option fee for 
MIAX Market Makers will increase transaction fees for all Market Makers 
in Mini Options.
    The proposed changes will become operative on March 1, 2014.
2. Statutory Basis
    The Exchange believes that its proposal to amend its fee schedule 
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.
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    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(4).
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    The proposed volume based discount fee structure is not 
discriminatory in that all MIAX Market Makers are eligible to submit 
(or not submit) liquidity, and may do so at their discretion in the 
daily volumes they choose during the course of the billing period. All 
similarly situated MIAX Market Makers are subject to the same fee 
structure, and access to the Exchange is offered on terms that are not 
unfairly discriminatory. Volume based discounts have been widely 
adopted by options and equities markets, and are equitable because they 
are open to all MIAX Market Makers on an equal basis and provide 
discounts that are reasonably related to the value of an exchange's 
market quality associated with higher volumes. The proposed fee levels 
and volume thresholds are reasonably designed to be comparable to those 
of other options exchanges and to attract additional liquidity and 
order flow to the Exchange.
    The Exchange believes that the proposal to assess MIAX Market 
Makers a $0.02 fee for Mini Option transactions is reasonable. It is 
difficult to compare the proposed $0.02 amount to the amount assessed 
to MIAX Market Makers for standard options transactions, as that amount 
can differ depending on which tier each MIAX Market Maker reaches in 
the MIAX Market Maker sliding scale. However, $0.02 is less than 1/10th 
[sic] the fee assessed at the first tier of the MIAX Market Maker 
sliding scale for standard options transactions. The Exchange believes 
that these MIAX Market Maker Mini Option fees are equitable and not 
unfairly discriminatory for a number of reasons. First, they will apply 
equally to all MIAX Market Makers. Second, the Exchange believes that 
it is equitable and not unfairly discriminatory to assess lower fee 
amounts to MIAX Market Makers than to some other market participants 
because MIAX Market Makers have obligations, such as quoting 
obligations, that other market participants do not possess. Further, 
these lower fees are intended to encourage Market Makers to quote

[[Page 15185]]

aggressively and more often, which provides more trading opportunities 
for all market participants.

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

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act. The Exchange notes that it 
operates in a highly competitive market in which market participants 
can readily favor competing venues if they deem fee levels at a 
particular venue to be excessive. In such an environment, the Exchange 
must continually adjust its fees to remain competitive with other 
exchanges and to attract order flow. The Exchange believes that the 
proposed rule change reflects this competitive environment because it 
modifies the Exchange's fees in a manner that encourages market 
participants to provide liquidity and to send order flow to the 
Exchange.

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.\11\ 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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    \11\ 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-2014-11 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-2014-11. 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-2014-11, and should be 
submitted on or before April 8, 2014.
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    \12\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-05874 Filed 3-17-14; 8:45 am]
BILLING CODE 8011-01-P


