
[Federal Register Volume 81, Number 30 (Tuesday, February 16, 2016)]
[Notices]
[Pages 7877-7879]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-02989]



[[Page 7877]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-77097; File No. SR-MIAX-2016-05]


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

February 9, 2016.
    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 January 27, 2016, 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 ``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 its Fee Schedule by implementing a 
Professional Rebate Program (the ``Program''). Under the Program, the 
Exchange will credit each Member the per contract amount resulting from 
any contracts executed from an order submitted by a Member for the 
account(s) of a (i) Public Customer that is not a Priority Customer; 
(ii) Non-MIAX Market Maker; (iii) Non-Member Broker-Dealer; or (iv) 
Firm (for purposes of the Professional Rebate Program, 
``Professional'') which is executed electronically on the Exchange in 
all multiply-listed option classes (excluding mini-options, Non-
Priority Customer to Non-Priority Customer orders, QCC Orders, PRIME 
Orders, PRIME AOC Responses, PRIME Contra-side Orders, 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 MIAX Rule 1400 (collectively, for purposes of the 
Professional Rebate Program, ``Excluded Contracts'')), provided the 
Member achieves certain Professional volume increase percentage 
thresholds in the month relative to the fourth quarter of 2015.
    The percentage thresholds in each tier are based upon the increase 
in the total volume submitted by a Member and executed for the 
account(s) of a Professional on MIAX (not including Excluded Contracts) 
during a particular month as a percentage of the total volume reported 
by the Options Clearing Corporation (OCC) in MIAX classes during the 
same month (the ``Current Percentage''), less the total volume 
submitted by that Member and executed for the account(s) of a 
Professional on MIAX (not including Excluded Contracts) during the 
fourth quarter of 2015 as a percentage of the total volume reported by 
OCC in MIAX classes during the fourth quarter of 2015 (the ``Baseline 
Percentage'').
    The Member's percentage increase will be calculated as the Current 
Percentage less the Baseline Percentage. Members will receive rebates 
for contracts submitted by such Member on behalf of a Professional(s) 
that are executed within a particular percentage tier based upon that 
percentage tier only, and will not receive a rebate for such contracts 
that applies to any other tier.
    Thus, the per contract credit of $0.10 for Tier 1 will apply to 
percentage thresholds from above 0.00% up to 0.005%. Next, the per 
contract credit of $0.15 for Tier 2 will apply only to percentage 
thresholds from above 0.005% up to 0.020%, beginning with the first 
contract executed in Tier 2, but will not apply to contracts executed 
in Tier 1, to which the $0.10 per contract credit applied. Thereafter, 
the per contract credit of $0.20 for Tier 3 will apply to percentage 
thresholds from above 0.020%, beginning with the first contract 
executed in Tier 3, but will not apply to contracts executed in Tier 1, 
to which the $0.10 per contract credit applied, and will not apply to 
contracts executed in Tier 2, to which the $0.15 per contract credit 
applied.
    The below table applies to Members submitting orders for the 
account(s) of Professionals, as defined above.

------------------------------------------------------------------------
  Percentage thresholds of volume increase in multiply-
  listed options classes listed on MIAX (Current month     Per contract
           compared to prior calendar quarter)                credit
------------------------------------------------------------------------
Tier 1--Above 0.00%-0.005%..............................           $0.10
Tier 2--Above 0.005%-0.020%.............................            0.15
Tier 3--Above 0.020%....................................            0.20
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    The increase in volume will be recorded for and credits will be 
delivered to the Member Firm that submits the order to the Exchange. 
The Exchange will aggregate the contracts resulting from Professional 
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. A Member may request to receive its credit 
under the Program as a separate direct payment.
    In the event of a MIAX System outage or other interruption of 
electronic trading on MIAX, the Exchange will adjust the increase in 
volume in multiply-listed options (not including Excluded Contracts) 
for the duration of the outage.
    The purpose of the Program is to encourage Members to direct 
greater Professional trade volume to the Exchange. Increased 
Professional volume will provide for greater liquidity, which benefits 
all market participants. The practice of incentivizing increased retail 
customer order flow in order to attract liquidity is, and has been, 
commonly practiced in the options markets. As such, marketing

[[Page 7878]]

fee programs,\3\ and customer posting incentive programs,\4\ are based 
on attracting public customer order flow. The Program similarly intends 
to attract Professional 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.
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    \3\ See MIAX Fee Schedule, Section 1(b).
    \4\ See 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 specific volume increase thresholds of the Program's tiers were 
set based upon business determinations and an analysis of current 
volume levels. The volume increase thresholds are intended to encourage 
firms that route some Professional orders to the Exchange to increase 
the number of such orders that are sent to the Exchange to achieve the 
next threshold and to provide incentive for new participants to send 
Professional orders as well. Increasing the number of such orders sent 
to the Exchange will in turn provide tighter and more liquid markets, 
and therefore attract more business overall. Similarly, the different 
credit rates at the different tier levels were based on an analysis of 
revenue and volume levels and are intended to provide increasing 
rewards for increasing the volume of trades sent to and executed on the 
Exchange. The specific amounts of the tiers and rates were set in order 
to encourage suppliers of Professional order flow to reach for higher 
tiers.
    The purpose of calculating the Baseline Percentage as the total 
volume submitted by that Member and executed for the account(s) of a 
Professional on MIAX (not including Excluded Contracts) during the 
fourth quarter of 2015 as a percentage of the total volume reported by 
OCC in MIAX classes during the fourth quarter of 2015 is to maintain a 
constant measuring methodology based upon a sample of the most current 
market conditions available over a meaningful period of time (e.g., 
three months), which should help Members submitting orders designated 
as Professional (as defined above) better understand the volume 
thresholds that will result in higher rebate amounts. As overall market 
conditions evolve, the Exchange will analyze and re-assess the 
calculation of the Baseline Percentage, and if its analysis justifies a 
change in the calculation of the Baseline Percentage due to changing 
overall market conditions, the Exchange will submit a proposed rule 
change reflecting this.
    The Exchange proposes to leave certain Excluded Contracts 
(specifically, Non-Priority Customer to Non-Priority Customer orders, 
QCC Orders, PRIME Orders, PRIME AOC Responses, and PRIME Contra-side 
Orders) out of the calculation of the Current and Baseline percentages 
measuring contracts executed on MIAX and accordingly from the 
calculation of the percentage thresholds of volume increase. The 
Exchange believes that it is unnecessary and redundant to offer an 
incentive where both sides of the trade are submitted and executed by 
the same Member that submits such orders on behalf of Professionals.
    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 MIAX Rule 1400 would be excluded from 
the calculation because the execution of such orders occurs on away 
markets. Providing rebates to Professional executions that occur on 
other trading venues would be inconsistent with the proposal. 
Therefore, such volume is excluded from the Program in order to promote 
the underlying goal of the proposal, which is to increase liquidity and 
execution volume on the Exchange.
    The Exchange also proposes to exclude mini-options from the 
calculation of the percentage thresholds of volume increase. Mini-
options contracts are excluded from the Program because the cost to the 
Exchange to process quotes, orders and trades in mini-options is the 
same as for standard options. This, coupled with the lower per-contract 
transaction fees charged to other market participants, makes it 
impractical to offer Members a credit for Professional mini-option 
volume that they transact.
    The Exchange proposes limiting the Program to multiply-listed 
options classes on MIAX because MIAX does not compete with other 
exchanges for order flow in the proprietary, singly-listed products. In 
addition, the Exchange does not trade any singly-listed products at 
this time, but may develop such products in the future. If at such time 
the Exchange develops proprietary products, the Exchange anticipates 
having to devote a lot of resources to develop them, and therefore 
would need to retain funds collected in order to recoup those 
expenditures.
    The credits paid out as part of the program will be drawn from the 
general revenues of the Exchange.\5\ The proposed rule change is to 
take effect February 1, 2016.
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    \5\ 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 during the limited period that the Program 
will be in effect.
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2. Statutory Basis
    The Exchange believes that its proposal to amend its 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 Exchange members, and issuers and other persons using its 
facilities.
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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 believes that the proposed Program is fair, equitable 
and not unreasonably discriminatory. The Program is reasonably designed 
because it will encourage providers of Professional order flow to send 
that Professional 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 proposed Program is fair and equitable and not 
unreasonably discriminatory because it will apply equally to all 
Members submitting orders for the account(s) of Professionals. All 
similarly situated Professional orders 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 Professional order flow 
qualifies for the Program, an increase in Professional order flow will 
bring greater volume and liquidity, which benefit all market 
participants by providing more trading opportunities and tighter 
spreads. Similarly, offering increasing credits to Members for 
submitting and executing higher percentages of total national customer 
volume (increased credit rates at increased volume tiers) is equitable 
and not unfairly discriminatory because such increased rates and tiers 
encourage Members to direct increased amounts of Professional contracts 
to the Exchange.

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

    The Exchange does not believe that the proposed rule change will 
result in any burden on competition that is not necessary or 
appropriate in furtherance of the purposes of the Act. The

[[Page 7879]]

Exchange believes that the proposed rule change would increase both 
intermarket and intramarket competition by incenting Members to direct 
orders for the account(s) of Professionals to the Exchange, which 
should enhance the quality of the Exchange's markets and increase the 
volume of contracts traded here. To the extent that this purpose is 
achieved, all the Exchange's market participants should benefit from 
the improved market liquidity. 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. 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 through rebates 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 increase based rebate program to attract order flow like the one 
being proposed in this filing is consistent with the above-mentioned 
goals 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 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\ and Rule 19b-4(f)(2) \9\ thereunder. 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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    \8\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \9\ 17 CFR 240.19b-4(f)(2).
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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-2016-05 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-2016-05. 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-2016-05 and should be 
submitted on or before March 8, 2016.
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    \10\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\10\
Brent J. Fields,
Secretary.
[FR Doc. 2016-02989 Filed 2-12-16; 8:45 am]
 BILLING CODE 8011-01-P


