
[Federal Register Volume 79, Number 157 (Thursday, August 14, 2014)]
[Notices]
[Pages 47695-47698]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-19224]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-72798; File No. SR-MIAX-2014-41]


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

August 8, 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 July 29, 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

[[Page 47696]]

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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend the Priority Customer Rebate Program 
(the ``Program'') \3\ to lower the per contract credit for transactions 
in MIAX Select Symbols \4\ for tiers 1 and 2.
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    \3\ See Securities Exchange Act Release Nos. 72356 (June 10, 
2014), 79 FR 34384 (June 16, 2014) (SR-MIAX-2014-26); 71698 (March 
12, 2014), 79 FR 15185 (March 18, 2014) (SR-MIAX-2014-12); 71700 
(March 12, 2014), 79 FR 15188 (March 18, 2014) (SR-MIAX-2014-13); 
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 AA, 
AAL, AAPL, AIG, AMZN, AZN, BP, C, CBS, CLF, CMCSA, EBAY, EEM, EFA, 
EWJ, FB, FCX, FXI, GE, GILD, GLD, GM, GOOG, GOOGL, HTZ, INTC, IWM, 
IYR, JCP, JPM, KO, MO, MRK, NFLX, NOK, NQ, PBR, PCLN, PFE, PG, QCOM, 
QQQ, S, SIRI, SPY, SUNE, T, TSLA, USO, VALE, WAG, WFC, WMB, WY, XHB, 
XLE, XLF, XLP, XLU and XOM.
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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 located in 
the Fee Schedule resulting from each Priority Customer \6\ order 
transmitted by that Member which is executed on the Exchange in all 
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. For each Priority Customer order transmitted by 
that Member which is executed electronically on the Exchange in MIAX 
Select Symbols, MIAX shall credit each member at the separate per 
contract rate for MIAX Select Symbols. 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. 3. 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 to lower the per contract credit for 
transactions in MIAX Select Symbols for tiers 1 and 2. Currently, the 
Exchange credits at the $0.20 per contract rate for qualifying Priority 
Customer transactions in MIAX Select Symbols. The $0.20 per contract 
credit is in lieu of the applicable credit that would otherwise apply 
to the transaction based on the volume thresholds. The Exchange 
proposes reducing the per contract credit to $0.00 for the tier 1 
volume threshold and to $0.10 for the tier 2 volume threshold. The 
proposed changes align the per contract credit for qualifying Priority 
Customer transactions in MIAX Select Symbols with the standard per 
contract rate for transactions in non-MIAX Select Symbols that occur in 
volume tiers 1 and 2. The $0.20 per contract credit will continue to be 
applied in lieu of the applicable credit that would otherwise apply to 
the transaction based on the volume thresholds in tiers 3, 4, and 5. 
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 Options Fee Schedule, p. 3. See also Securities 
Exchange Act Release Nos. 72356 (June 10, 2014), 79 FR 34384 (June 
16, 2014) (SR-MIAX-2014-26); 71698 (March 12, 2014), 79 FR 15185 
(March 18, 2014) (SR-MIAX-2014-12); 71700 (March 12, 2014), 79 FR 
15188 (March 18, 2014) (SR-MIAX-2014-13); 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 0.4% 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. Any qualifying Priority Customer transactions 
during such month that occurred in AA, AAL, AAPL, AIG, AMZN, AZN, BP, 
C, CBS, CLF, CMCSA, EBAY, EEM, EFA, EWJ, FB, FCX, FXI, GE, GILD, GLD, 
GM, GOOG, GOOGL, HTZ, INTC, IWM, IYR, JCP, JPM, KO, MO, MRK, NFLX, NOK, 
NQ, PBR, PCLN, PFE, PG, QCOM, QQQ, S, SIRI, SPY, SUNE, T, TSLA, USO, 
VALE, WAG, WFC, WMB, WY, XHB, XLE, XLF, XLP, XLU and XOM would be 
credited at the $0.10 per contact rate, the same as the standard credit 
of $0.10. In contrast, 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 AA, AAL, AAPL, 
AIG, AMZN, AZN, BP, C, CBS, CLF, CMCSA, EBAY, EEM, EFA, EWJ, FB, FCX, 
FXI, GE, GILD, GLD, GM, GOOG, GOOGL, HTZ, INTC, IWM, IYR, JCP, JPM, KO, 
MO, MRK, NFLX, NOK, NQ, PBR, PCLN, PFE, PG, QCOM, QQQ, S, SIRI, SPY, 
SUNE, T, TSLA, USO, VALE, WAG, WFC, WMB, WY, XHB, XLE, XLF, XLP, XLU 
and XOM would be credited at the $0.20 per contact rate versus the 
standard credit of $0.18.
    The Exchange believes the proposed changes to the Program are 
objective in that the credits are based solely on reaching stated 
volume thresholds. The specific volume thresholds of the tiers

[[Page 47697]]

were set based upon business determinations and an analysis of current 
volume levels. The specific volume thresholds and rates were set in 
order to encourage Members to reach for higher tiers. 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 August 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 proposal to modify the Program to 
lower the credit for certain transactions in MIAX Select Symbols is 
fair, equitable and not unreasonably discriminatory. The credit for 
transactions in the select symbols 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 Program which provides increased incentives in 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 
changes to the rebate Program are fair and equitable and not 
unreasonably discriminatory because they 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 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. 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

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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-2014-41 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-2014-41. 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-2014-41 and should be 
submitted on or before September 4, 2014.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-19224 Filed 8-13-14; 8:45 am]
BILLING CODE 8011-01-P


