
[Federal Register Volume 79, Number 52 (Tuesday, March 18, 2014)]
[Notices]
[Pages 15188-15190]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-05859]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-71700; File No. SR-MIAX-2014-13]


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

    The Exchange is filing a proposal to amend the MIAX Options Fee 
Schedule.
    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 the Priority Customer Rebate Program 
(the ``Program'') \3\ to provide for a $0.20 per contract credit for 
transactions in MIAX Select Symbols.\4\
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    \3\ See Securities Exchange Act Release Nos. 71283 (January 10, 
2014), 79 FR 2914 (January 16, 2014) (SR-MIAX-2013-63); 71009 
(December 6, 2013), 78 FR 75629 (December 12, 2013) (SR-MIAX-2013-
56).
    \4\ The term ``MIAX Select Symbols'' means options overlying 
AAPL, FB, EEM, QQQ, and IWM.
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    The Program is based on the substantially similar fees of another 
competing options exchange.\5\ Under the Program, the Exchange credits 
each Member the per contract amount set forth in the table below 
resulting from each Priority Customer \6\ order transmitted by that 
Member which is executed on the Exchange in all

[[Page 15189]]

multiply-listed option classes (excluding mini-options and executions 
related to contracts that are routed to one or more exchanges in 
connection with the Options Order Protection and Locked/Crossed Market 
Plan referenced in Rule 1400), provided the Member meets certain volume 
thresholds in a month. The volume thresholds are calculated based on 
the customer average daily volume over the course of the month. Volume 
is recorded for and credits are delivered to the Member Firm that 
submits the order to the Exchange. The Exchange aggregates the 
contracts resulting from Priority Customer orders transmitted and 
executed electronically on the Exchange from affiliated Members for 
purposes of the thresholds above, provided there is at least 75% common 
ownership between the firms as reflected on each firm's Form BD, 
Schedule A. In the event of a MIAX System outage or other interruption 
of electronic trading on MIAX, the Exchange adjusts the national 
customer volume in multiply-listed options for the duration of the 
outage. A Member may request to receive its credit under the Program as 
a separate direct payment.
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    \5\ See Chicago Board Options Exchange, Incorporated (``CBOE'') 
Fees Schedule, p. 4. See also Securities Exchange Act Release Nos. 
66054 (December 23, 2011), 76 FR 82332 (December 30, 2011) (SR-CBOE-
2011-120); 68887 (February 8, 2013), 78 FR 10647 (February 14, 2013) 
(SR-CBOE-2013-017).
    \6\ 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 accounts(s). See MIAX Rule 
100.
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    The Exchange proposes modifying the Program to provide for a $0.20 
per contract credit for transactions in MIAX Select Symbols. MIAX 
Select Symbols will initially include options overlying AAPL, FB, EEM, 
QQQ, and IWM. Thus, the Exchange will credit each Member $0.20 per 
contract resulting from each Priority Customer order transmitted by 
that Member executed on Exchange in AAPL, FB, EEM, QQQ, and IWM. The 
$0.20 per contract credit would be in lieu of the applicable credit 
that would otherwise apply to the transaction based on the volume 
thresholds. The Exchange notes that all the other aspects of the 
Program would continue to apply to the credits (e.g., the aggregation 
of volume of affiliates, exclusion of contracts that are routed to away 
exchanges, exclusion of mini-options . . . etc.).\7\
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    \7\ See MIAX Fee Schedule, Section 1 (a) iii. See also 
Securities Exchange Act Release Nos. 71283 (January 10, 2014), 79 FR 
2914 (January 16, 2014) (SR-MIAX-2013-63); 71009 (December 6, 2013), 
78 FR 75629 (December 12, 2013) (SR-MIAX-2013-56).
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    For example, if Member Firm ABC, Inc. (``ABC'') has enough Priority 
Customer contracts to achieve 0.3% of the national customer volume in 
multiply-listed option contracts during the month of October, ABC will 
receive a credit of $0.10 for each Priority Customer contract executed 
in the month of October. However, any qualifying Priority Customer 
transactions during such month that occurred in AAPL, FB, EEM, QQQ, and 
IWM would be credited at the $0.20 per contact rate versus the standard 
credit of $0.10. Similarly, if Member Firm XYZ, Inc. (``XYZ'') has 
enough Priority Customer contracts to achieve 2.5% of the national 
customer volume in multiply-listed option contracts during the month of 
October, XYZ will receive a credit of $0.18 for each Priority Customer 
contract executed in the month of October. However, any qualifying 
Priority Customer transactions during such month that occurred in AAPL, 
FB, EEM, QQQ, and IWM would be credited at the $0.20 per contact rate 
versus the standard credit of $0.18.
    The purpose of the amendment to the Program is to further encourage 
Members to direct greater Priority Customer trade volume to the 
Exchange in these high volume symbols. Increased Priority Customer 
volume will provide for greater liquidity, which benefits all market 
participants on the Exchange. The practice of incentivizing increased 
retail customer order flow in order to attract professional liquidity 
providers (Market-Makers) is, and has been, commonly practiced in the 
options markets. As such, marketing fee programs,\8\ and customer 
posting incentive programs,\9\ are based on attracting public customer 
order flow. The practice of providing additional incentives to increase 
order flow in high volume symbols is, and has been, commonly practiced 
in the options markets.\10\ The Program similarly intends to attract 
Priority Customer order flow, which will increase liquidity, thereby 
providing greater trading opportunities and tighter spreads for other 
market participants and causing a corresponding increase in order flow 
from such other market participants in these select symbols. Increasing 
the number of orders sent to the Exchange will in turn provide tighter 
and more liquid markets, and therefore attract more business overall.
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    \8\ See MIAX Fee Schedule, Section 1(b).
    \9\ See NYSE Arca, Inc. Fees Schedule, page 4 (section titled 
``Customer Monthly Posting Credit Tiers and Qualifications for 
Executions in Penny Pilot Issues'').
    \10\ See International Securities Exchange, LLC, Schedule of 
Fees, p. 6 (providing reduced fee rates for order flow in Select 
Symbols); NASDAQ OMX PHLX, Pricing Schedule, Section I (providing a 
rebate for adding liquidity in SPY); NYSE Arca, Inc. Fees Schedule, 
page 4 (section titled ``Customer Monthly Posting Credit Tiers and 
Qualifications for Executions in Penny Pilot Issues'').
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    The credits paid out as part of the program will be drawn from the 
general revenues of the Exchange.\11\ The Exchange calculates volume 
thresholds on a monthly basis.
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    \11\ Despite providing credits under the Program, the Exchange 
represents that it will continue to have adequate resources to fund 
its regulatory program and fulfill its responsibilities as a self-
regulatory organization while the Program will be in effect.
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    The Exchange proposes to implement the new transaction fees 
beginning 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 \12\ in general, and 
furthers the objectives of Section 6(b)(4) of the Act \13\ in 
particular, in that it is an equitable allocation of reasonable fees 
and other charges among Exchange members.
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    \12\ 15 U.S.C. 78f(b).
    \13\ 15 U.S.C. 78f(b)(4).
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    The Exchange believes that the proposed Priority Customer Rebate 
Program is fair, equitable and not unreasonably discriminatory. The 
Program is reasonably designed because it will incent providers of 
Priority Customer order flow to send that Priority Customer order flow 
to the Exchange in order to receive a credit in a manner that enables 
the Exchange to improve its overall competitiveness and strengthen its 
market quality for all market participants. The proposal to increase 
the incentives in the high volume select symbols is also reasonably 
designed to increase the competitiveness of the Exchange with other 
options exchanges that also offer increased incentives to higher volume 
symbols. The proposed rebate program is fair and equitable and not 
unreasonably discriminatory because it will apply equally to all 
Priority Customer orders in the select symbols. All similarly situated 
Priority Customer orders in the select symbols are subject to the same 
rebate schedule, and access to the Exchange is offered on terms that 
are not unfairly discriminatory. In addition, the Program is equitable 
and not unfairly discriminatory because, while only Priority Customer 
order flow qualifies for the Program, an increase in Priority Customer 
order flow will bring greater volume and liquidity, which benefit all 
market participants by providing more trading opportunities and tighter 
spreads.

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

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of the purposes of the Act. The Exchange believes that the proposed 
change would increase both intermarket and intramarket competition by 
incenting Members to direct their Priority Customer orders in the 
select symbols to the Exchange, which will enhance the quality of 
quoting and increase the volume of contracts traded here in those 
symbols. To the extent that there is additional competitive burden on 
non-Priority Customers or trading in non-select symbols, the Exchange 
believes that this is appropriate because the proposed changes to the 
rebate program should incent Members to direct additional order flow to 
the Exchange and thus provide additional liquidity that enhances the 
quality of its markets and increases the volume of contracts traded 
here in those symbols. To the extent that this purpose is achieved, all 
the Exchange's market participants should benefit from the improved 
market liquidity in such select symbols. Enhanced market quality and 
increased transaction volume that results from the anticipated increase 
in order flow directed to the Exchange will benefit all market 
participants and improve competition on the Exchange in such select 
symbols. 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 to the 
Exchange. The Exchange believes that the proposed rule change reflects 
this competitive environment because it reduces the Exchange's fees in 
a manner that encourages market participants to direct their customer 
order flow, to provide liquidity, and to attract additional transaction 
volume to the Exchange. Given the robust competition for volume among 
options markets, many of which offer the same products, implementing a 
volume based customer rebate program to attract order flow like the one 
being proposed in this filing is consistent with the above-mentioned 
goals of the Act. This is especially true for the smaller options 
markets, such as MIAX, which is competing for volume with much larger 
exchanges that dominate the options trading industry. As a new 
exchange, MIAX has a nominal percentage of the average daily trading 
volume in options, so it is unlikely that the customer rebate program 
could cause any competitive harm to the options market or to market 
participants. Rather, the customer rebate program is a modest attempt 
by a small options market to attract order volume away from larger 
competitors by adopting an innovative pricing strategy. The Exchange 
notes that if the rebate program resulted in a modest percentage 
increase in the average daily trading volume in options executing on 
MIAX, while such percentage would represent a large volume increase for 
MIAX, it would represent a minimal reduction in volume of its larger 
competitors in the industry. The Exchange believes that the proposal 
will help further competition, because market participants will have 
yet another additional option in determining where to execute orders 
and post liquidity if they factor the benefits of a customer rebate 
program into the determination.

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.\14\ 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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    \14\ 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-2014-13 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-2014-13. 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 the 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-2014-13 and should be 
submitted on or before April 8, 2014.
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    \15\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-05859 Filed 3-17-14; 8:45 am]
BILLING CODE 8011-01-P


