
[Federal Register Volume 84, Number 53 (Tuesday, March 19, 2019)]
[Notices]
[Pages 10166-10169]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-05085]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-85301; File No. SR-MIAX-2019-09]


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 13, 2019.
    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, 2019, Miami International 
Securities Exchange, LLC (``MIAX Options'' 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'').
    While changes to the Fee Schedule pursuant to this proposal are 
effective upon filing, the Exchange has designated these changes to be 
operative on March 1, 2019.
    The text of the proposed rule change is available on the Exchange's 
website at http://www.miaxoptions.com/rule-filings, 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 (i) decrease the 
amount of the per contract credit assessable to Agency Orders (defined 
below) in a cPRIME Auction (``cPRIME Agency Order Credit'') for Members 
\3\ in Tier 4 of the Priority Customer Rebate Program (``PCRP'') \4\ 
and (ii) establish an alternative cPRIME Agency Order Credit amount for 
cPRIME Agency Orders in Tier 4 of the PCRP, that will apply instead of 
the credit otherwise applicable to such orders, if a certain threshold 
is satisfied by the Member.
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    \3\ The term ``Member'' means an individual or organization 
approved to exercise the trading rights associated with a Trading 
Permit. Members are deemed ``members'' under the Exchange Act. See 
Exchange Rule 100.
    \4\ Under the PCRP, MIAX Options credits each Member the per 
contract amount resulting from each Priority Customer order 
transmitted by that Member which is executed electronically on the 
Exchange in all multiply-listed option classes (excluding, in simple 
or complex as applicable, QCC and cQCC Orders, mini-options, 
Priority Customer-to-Priority Customer Orders, C2C and cC2C Orders, 
PRIME and cPRIME AOC Responses, PRIME and cPRIME Contra-side Orders, 
PRIME and cPRIME Orders for which both the Agency and Contra-side 
Order are Priority Customers, 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 Exchange Rule 1400), provided the Member meets certain percentage 
thresholds in a month as described in the Priority Customer Rebate 
Program table. See Fee Schedule, Section (1)(a)(iii).
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    Exchange Rule 518(b)(7) defines a cPRIME Order as a type of complex 
order \5\ that is submitted for participation in a cPRIME Auction and 
trading of cPRIME Orders is governed by Rule 515A, Interpretations and 
Policies .12.\6\ cPRIME Orders are processed and executed in the 
Exchange's PRIME mechanism, the same mechanism that the Exchange uses 
to process and execute simple PRIME orders, pursuant to Exchange Rule 
515A.\7\ PRIME is a process by which a Member may electronically submit 
for execution an order it represents as agent (an ``Agency Order'') 
against principal interest and/or solicited interest. The Member that 
submits the Agency Order (``Initiating Member'') agrees to guarantee 
the execution of the Agency Order by submitting a contra-side order 
representing principal interest or solicited interest (``Contra-Side 
Order''). When the Exchange receives a properly designated Agency Order 
for Auction processing, a request for response (``RFR'') detailing the 
option, side, size

[[Page 10167]]

and initiating price is broadcasted to MIAX Options participants up to 
an optional designated limit price. Members may submit responses to the 
RFR, which can be either an Auction or Cancel (``AOC'') order or an AOC 
eQuote. A cPRIME Auction is the price-improvement mechanism of the 
Exchange's System pursuant to which an Initiating Member electronically 
submits a complex Agency Order into a cPRIME Auction. The Initiating 
Member, in submitting an Agency Order, must be willing to either (i) 
cross the Agency Order at a single price against principal or solicited 
interest, or (ii) automatically match against principal or solicited 
interest, the price and size of a RFR that is broadcast to MIAX Options 
participants up to an optional designated limit price. Such responses 
are defined as cPRIME AOC Responses or cPRIME eQuotes.
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    \5\ A ``complex order'' is any order involving the concurrent 
purchase and/or sale of two or more different options in the same 
underlying security (the ``legs'' or ``components'' of the complex 
order), for the same account, in a ratio that is equal to or greater 
than one-to-three (.333) and less than or equal to three-to-one 
(3.00) and for the purposes of executing a particular investment 
strategy. A complex order can also be a ``stock-option'' order, 
which is an order to buy or sell a stated number of units of an 
underlying security coupled with the purchase or sale of options 
contract(s) on the opposite side of the market, subject to certain 
contingencies set forth in the proposed rules governing complex 
orders. For a complete definition of a ``complex order,'' see 
Exchange Rule 518(a)(5). See also Securities Exchange Act Release 
No. 78620 (August 18, 2016), 81 FR 58770 (August 25, 2016) (SR-MIAX-
2016-26).
    \6\ See Securities Exchange Act Release No. 81131 (July 12, 
2017), 82 FR 32900 (July 18, 2017) (SR-MIAX-2017-19). (Order 
Granting Approval of a Proposed Rule Change to Amend MIAX Options 
Rules 515, Execution of Orders and Quotes; 515A, MIAX Price 
Improvement Mechanism (``PRIME'') and PRIME Solicitation Mechanism; 
and 518, Complex Orders).
    \7\ Id.
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cPRIME Agency Order Fees
    In the PCRP, the Exchange assesses an Agency Order Credit for 
cPRIME Agency Orders. The Exchange currently credits each Member $0.10 
per contract per leg for each Priority Customer \8\ complex order 
submitted into the cPRIME Auction as a cPRIME Agency Order in Tiers 1, 
2 and 3. The Exchange currently credits each Member $0.22 per contract 
per leg for each Priority Customer complex order submitted into the 
cPRIME Auction as a cPRIME Agency Order in Tier 4. However, no credit 
is assessed if the cPRIME Agency Order executes against a Contra-Side 
Order which is also from another a Priority Customer. Further, the per 
contract credit for cPRIME Agency Orders will continue to be assessable 
to the first 1,000 contracts per leg for each cPRIME Agency Order, 
which applies to all Tiers of the PCRP. The Exchange proposes to 
decrease the cPRIME Agency Order Credit for Members who are in Tier 4 
of the PCRP from $0.22 to $0.10. The purpose of such decrease in Tier 4 
is to align the credit offered for cPRIME Agency Orders in all Tiers to 
now be $0.10. The Exchange previously increased the cPRIME Agency Order 
Credit for Members who are in Tier 4 of the PCRP from $0.10 to $0.22 in 
order to encourage market participants to submit more Priority Customer 
cPRIME Agency Orders and therefore increase Priority Customer order 
flow.\9\ The Exchange now believes, that it is appropriate to adjust 
this credit to be consistent with the other PCRP Tiers.
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    \8\ ``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). A ``Priority 
Customer Order'' means an order for the account of a Priority 
Customer. See Exchange Rule 100.
    \9\ See Securities Exchange Act Release No. 81372 (August 10, 
2017), 82 FR 157 (August 16, 2017) (SR-MIAX-2017-40).
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Alternative Credit for cPRIME Agency Orders
    The Exchange additionally proposes to establish an alternative 
cPRIME Agency Order Credit amount for cPRIME Agency Orders in Tier 4 of 
the PCRP that will apply instead of the credit otherwise applicable to 
such orders, if a certain threshold is satisfied by the Member. 
Specifically, the Exchange proposes the following additional threshold: 
If any Member or its Affiliate \10\ that qualifies for PCRP Tier 4 
executes Priority Customer standard, non-paired complex volume at least 
equal to or greater than their Priority Customer cPRIME Agency Order 
volume, on a monthly basis, then the Member will receive a credit of 
$0.22 per contract for cPRIME Agency Orders instead of the credit 
otherwise applicable to such orders in Tier 4. The Exchange believes 
that establishing this additional threshold will encourage market 
participants to submit more complex orders and therefore increase 
Priority Customer order flow. Specifically, the Exchange believes that 
by encouraging market participants to execute Priority Customer 
standard, non-paired complex volume at least equal to or greater than 
their Priority Customer cPRIME Agency Order volume in order to receive 
a credit of $0.22 per contract for cPRIME Agency Orders instead of the 
credit otherwise applicable to such orders in Tier 4 of the PCRP will 
increase volume of Priority Customer standard, non-paired complex order 
and of Priority Customer complex orders, which will result in increased 
liquidity which benefits all Exchange participants by providing more 
trading opportunities and tighter spreads.
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    \10\ For purposes of the MIAX Options Fee Schedule, the term 
``Affiliate'' means (i) an affiliate of a Member of at least 75% 
common ownership between the firms as reflected on each firm's Form 
BD, Schedule A, (``Affiliate''), or (ii) the Appointed Market Maker 
of an Appointed EEM (or, conversely, the Appointed EEM of an 
Appointed Market Maker). An ``Appointed Market Maker'' is a MIAX 
Market Maker (who does not otherwise have a corporate affiliation 
based upon common ownership with an EEM) that has been appointed by 
an EEM and an ``Appointed EEM'' is an EEM (who does not otherwise 
have a corporate affiliation based upon common ownership with a MIAX 
Market Maker) that has been appointed by a MIAX Market Maker, 
pursuant to the following process. A MIAX Market Maker appoints an 
EEM and an EEM appoints a MIAX Market Maker, for the purposes of the 
Fee Schedule, by each completing and sending an executed Volume 
Aggregation Request Form by email to membership@miaxoptions.com no 
later than 2 business days prior to the first business day of the 
month in which the designation is to become effective. Transmittal 
of a validly completed and executed form to the Exchange along with 
the Exchange's acknowledgement of the effective designation to each 
of the Market Maker and EEM will be viewed as acceptance of the 
appointment. The Exchange will only recognize one designation per 
Member. A Member may make a designation not more than once every 12 
months (from the date of its most recent designation), which 
designation shall remain in effect unless or until the Exchange 
receives written notice submitted 2 business days prior to the first 
business day of the month from either Member indicating that the 
appointment has been terminated. Designations will become operative 
on the first business day of the effective month and may not be 
terminated prior to the end of the month. Execution data and reports 
will be provided to both parties.
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    The proposed rule change is scheduled to become operative March 1, 
2019.
2. Statutory Basis
    The Exchange believes that its proposal to amend its Fee Schedule 
is consistent with Section 6(b) of the Act \11\ in general, and 
furthers the objectives of Section 6(b)(4) of the Act,\12\ in that it 
is an equitable allocation of reasonable dues, fees and other charges 
among Exchange members and issuers and other persons using its 
facilities, and 6(b)(5) of the Act,\13\ in that it is designed to 
prevent fraudulent and manipulative acts and practices, to promote just 
and equitable principles of trade, to foster cooperation and 
coordination with persons engaged in facilitating transactions in 
securities, to remove impediments to and perfect the mechanisms of a 
free and open market and a national market system and, in general, to 
protect investors and the public interest.
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    \11\ 15 U.S.C. 78f(b).
    \12\ 15 U.S.C. 78f(b)(4).
    \13\ 15 U.S.C. 78f(b)(1) and (b)(5).
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    The Exchange's proposal to decrease the cPRIME Agency Order Credit 
assessable to Priority Customer cPRIME Agency Orders by Members in Tier 
4 of the PCRP is consistent with Section 6(b)(4) of the Act \14\ 
because it applies equally to all participants with similar order flow 
in that tier. The Exchange believes that the proposed PCRP rebate 
decrease in Tier 4 for Priority Customer orders submitted into cPRIME 
Auctions is fair, equitable, and not unreasonably discriminatory. The 
PCRP is reasonably designed because it will incentivize providers of 
Priority Customer order flow to send that Priority Customer order flow 
to the Exchange in order to obtain the highest volume threshold and 
receive credits in a manner that enables the Exchange to improve its 
overall competitiveness and strengthen its

[[Page 10168]]

market quality for all market participants. Additionally, the Exchange 
believes that for competitive and business reasons, it is now 
appropriate to decrease the cPRIME Agency Order Credit in PCRP Tier 4 
to be aligned with existing cPRIME Agency Order Credits in PRCP Tiers 
1, 2 and 3.
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    \14\ 15 U.S.C. 78f(b)(4).
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    In addition, the proposal is also consistent with Section 6(b)(5) 
of the Act \15\ because it perfects the mechanisms of a free and open 
market and a national market system and protects investors and the 
public interest because, by aligning the credit offered to Members in 
Tier 4 to the credits offered for the same types of orders in Tiers 1, 
2 and 3, Priority Customer order flow will be increased and 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. To the extent Priority 
Customer order flow is increased by the proposal, market participants 
will increasingly compete for the opportunity to trade on the Exchange 
including sending more orders and providing narrower and larger-sized 
quotations in the effort to trade with such Priority Customer order 
flow.
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    \15\ 15 U.S.C. 78f(b)(1) and (b)(5).
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    The Exchange's proposal to establish an alternative cPRIME Agency 
Order Credit amount for cPRIME Agency Orders in Tier 4 of the PCRP that 
will apply instead of the credit otherwise applicable to such orders, 
if a certain threshold is satisfied by the Member is consistent with 
Section 6(b)(4) of the Act \16\ because it applies equally to all 
participants with similar order flow in that tier. The Exchange 
believes that the proposed alternative threshold by which any Member or 
its Affiliate that qualifies for PCRP volume Tier 4 and executes 
Priority Customer standard, non-paired complex volume at least equal to 
or greater than their Priority Customer cPRIME Agency Order volume, on 
a monthly basis, receives a credit of $0.22 per contract for cPRIME 
Agency Orders instead of the credit otherwise applicable to such orders 
in Tier 4 is fair, equitable, and not unreasonably discriminatory 
because it will encourage Members to submit both Priority Customer 
standard, non-paired complex orders and Priority Customer complex 
orders, which will increase liquidity, which benefit all market 
participants by providing more trading opportunities and tighter 
spreads. The PCRP is reasonably designed because it will incentivize 
providers of Priority Customer order flow to send that Priority 
Customer order flow to the Exchange in order to obtain the highest 
volume threshold and receive a credit in a manner that enables the 
Exchange to improve its overall competitiveness and strengthen its 
market quality for all market participants.
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    \16\ 15 U.S.C. 78f(b)(4).
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    In addition, the proposal is also consistent with Section 6(b)(5) 
of the Act \17\ because it perfects the mechanisms of a free and open 
market and a national market system and protects investors and the 
public interest because, while only certain Priority Customer order 
flow qualifies for the rebate program under the PCRP and specifically 
only order flow by Members in Tier 4 of the PCRP that meet the 
additional threshold will receive the greater rebate, 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. To the extent Priority Customer 
order flow is increased by the proposal, market participants will 
increasingly compete for the opportunity to trade on the Exchange 
including sending more orders and providing narrower and larger-sized 
quotations in the effort to trade with such Priority Customer order 
flow.
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    \17\ 15 U.S.C. 78f(b)(1) and (b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    MIAX Options 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 decrease to the cPRIME Agency Order Credit assessable to 
cPRIME Agency Orders by Members in Tier 4 of the PCRP is intended to 
promote consistency across all cPRIME Agency Order tiers of the PCRP. 
The Exchange believes that aligning the cPRIME credits assessable to 
cPRIME Agency Orders in all tiers will not impose any burden on 
competition not necessary or appropriate in furtherance of the purposes 
of the Act because it will continue to encourage Priority Customer 
order flow and 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. The Exchange 
further believes that its proposal to establish an alternative cPRIME 
Agency Order Credit amount for cPRIME Agency Orders in Tier 4 of the 
PCRP that will apply instead of the credit otherwise applicable to such 
orders, if a certain threshold is satisfied by the Member will not have 
an impact on intra-market competition. Specifically, the Exchange 
believes that the proposal to establish an additional threshold by 
which any Member or its Affiliate that qualifies for PCRP Tier 4 and 
executes Priority Customer standard, non-paired complex volume at least 
equal to or greater than their Priority Customer cPRIME Agency Order 
volume, on a monthly basis, receives a credit of $0.22 per contract for 
cPRIME Agency Orders instead of the credit otherwise applicable to such 
orders in Tier 4, will encourage Members to submit both Priority 
Customer standard, non-paired complex orders and Priority Customer 
complex orders, which will increase liquidity, which benefits all 
market participants by providing more trading opportunities and tighter 
spreads. Because the proposal offers an additional threshold by which a 
Member can receive a higher credit for cPRIME Agency Orders instead of 
the credit otherwise applicable to such orders in Tier 4, and aligns 
the credits otherwise offered for such orders in all tiers, the 
Exchange believes that the proposed rule change will not 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 they modify 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,\18\ and Rule

[[Page 10169]]

19b-4(f)(2) \19\ 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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    \18\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \19\ 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-2019-09 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-2019-09. 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 website (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 website 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. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-MIAX-2019-09 and should be submitted on 
or before April 9, 2019.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\20\
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    \20\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-05085 Filed 3-18-19; 8:45 am]
BILLING CODE 8011-01-P


