
[Federal Register Volume 84, Number 58 (Tuesday, March 26, 2019)]
[Notices]
[Pages 11385-11389]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-05701]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-85371; File No. SR-MIAX-2019-13]


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 20, 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 March 8, 2019, Miami International Securities 
Exchange LLC (``MIAX

[[Page 11386]]

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'') to amend the MIAX Options Fee Schedule 
(the ``Fee Schedule'') to modify the manner in which the Exchange 
assesses its Fees for Customer Orders Routed to Another Options 
Exchange (``Routing Fees'') in order to align its Routing Fees and its 
Routing Fees rule text to the Routing Fees and Routing Fees rule text 
adopted by the Exchange's affiliate, MIAX PEARL, LLC (``MIAX 
PEARL''),\3\ and to make a non-substantive technical correction.
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    \3\ See Securities Exchange Act Release Nos. 80061 (February 17, 
2017), 82 FR 11676 (February 24, 2017) (SR-PEARL-2017-10); 82017 
(November 6, 2017), 82 FR 52342 (November 13, 2017) (SR-PEARL-2017-
36). See also SR-PEARL-2019-06 (Proposal to amend the routing fee 
table, filed on February 28, 2019).
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    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
    Currently, the Exchange assesses a Routing Fee to market 
participants on all Public Customer \4\ orders routed to and executed 
on an away market that is equal to the amount charged by the away 
market to which such orders were routed and executed. The Exchange also 
pays any rebate offered by an away market. Such market participants are 
also currently assessed a Fixed Fee Surcharge of $0.10 per contract by 
the Exchange, which is added to the fee charged, or netted against the 
rebate paid, by an away market. The Fixed Fee Surcharge applies to both 
Mini and Standard Option contracts.
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    \4\ ``Public Customer'' refers to all Members of the Exchange 
other than Priority Customers. ``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. ``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 Exchange Rule 100.
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    The Exchange proposes to modify the manner in which it assesses its 
Routing Fees. Specifically, the Exchange proposes to assess the amount 
of the applicable fee, if any, based upon (i) the origin type of the 
order, (ii) whether or not it is an order for standard option classes 
in the Penny Pilot Program \5\ (``Penny classes'') or an order for 
standard option classes which are not in the Penny Pilot Program 
(``Non-Penny classes'') (or other explicitly identified classes), and 
(iii) to which away market it is being routed. This assessment practice 
is identical to the Routing Fees assessment practice currently utilized 
by the Exchange's affiliate, MIAX PEARL. The purpose of the proposed 
rule change is to align the Routing Fees and Routing Fees rule text of 
the Exchange to the Routing Fees and Routing Fees rule text adopted by 
the Exchange's affiliate, MIAX PEARL.\6\
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    \5\ See Securities Exchange Act Release No. 84864 (December 19, 
2018), 83 FR 66778 (December 27, 2018) (SR-MIAX-2018-38) (extending 
the Penny Pilot Program from December 31, 2018 to June 30, 2019).
    \6\ See supra note 3.
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    The Exchange also proposes to assess Routing Fees to all market 
participants, not just Public Customers. The Exchange proposes to 
assess Priority Customers a lower Routing Fee than its Public 
Customers. The purpose of assessing Routing Fees to all market 
participants including Priority Customers is to recoup the costs that 
the Exchange incurs as a result of all orders which are routed away 
from the Exchange, not just those incurred from Public Customer orders.
    The Exchange proposes to assess Routing Fees to all market 
participants according to the following table:

------------------------------------------------------------------------
                           Description                             Fees
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Routed, Priority Customer, Penny Pilot, to: NYSE American, BOX,    $0.15
 Cboe, Cboe EDGX Options, Nasdaq MRX, Nasdaq PHLX (except SPY),
 Nasdaq BX Options..............................................
Routed, Priority Customer, Penny Pilot, to: NYSE Arca Options,      0.65
 Cboe BZX Options, Cboe C2, Nasdaq GEMX, Nasdaq ISE, NOM, Nasdaq
 PHLX (SPY only), MIAX Emerald, MIAX PEARL......................
Routed, Priority Customer, Non-Penny Pilot, to: NYSE American,      0.15
 BOX, Cboe, Cboe EDGX Options, Nasdaq ISE, Nasdaq MRX, Nasdaq
 PHLX, Nasdaq BX Options........................................
Routed, Priority Customer, Non-Penny Pilot, to: NYSE Arca           1.00
 Options, Cboe BZX Options, Cboe C2, MIAX PEARL, MIAX Emerald,
 Nasdaq GEMX, NOM...............................................
Routed, Public Customer that is not a Priority Customer, Penny      0.65
 Pilot, to: NYSE American, NYSE Arca Options, Cboe BZX Options,
 BOX, Cboe, Cboe C2, Cboe EDGX Options, Nasdaq GEMX, Nasdaq ISE,
 Nasdaq MRX, MIAX PEARL, MIAX Emerald, NOM, Nasdaq PHLX, Nasdaq
 BX Options.....................................................
Routed, Public Customer that is not a Priority Customer, Non-       1.00
 Penny Pilot, to: NYSE American, Cboe, Nasdaq PHLX, Nasdaq ISE,
 Cboe EDGX Options..............................................
Routed, Public Customer that is not a Priority Customer, Non-       1.15
 Penny Pilot, to: Cboe C2, BOX, Nasdaq MRX, Nasdaq BX Options,
 NOM, MIAX PEARL, MIAX Emerald..................................
Routed, Public Customer that is not a Priority Customer, Non-       1.25
 Penny Pilot, to: Cboe BZX Options, NYSE Arca Options, Nasdaq
 GEMX...........................................................
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[[Page 11387]]

    In determining its Routing Fees, the Exchange takes into account 
transaction fees and rebates assessed by the away markets to which the 
Exchange routes orders, as well as the Exchange's clearing costs,\7\ 
administrative, regulatory, and technical costs associated with routing 
orders to an away market. The Exchange uses unaffiliated routing 
brokers to route orders to the away markets; the costs associated with 
the use of these services are included in the Routing Fees specified in 
the Fee Schedule. This Routing Fees structure is not only similar to 
the Exchange's affiliate, MIAX PEARL, but is also comparable to the 
structures in place at other exchanges, such as Cboe BZX Options 
Exchange (``BZX Options'').\8\ The BZX Options fee schedule has 
exchange groupings, whereby several exchanges are grouped into the same 
category, dependent on the order's origin type and whether it is a 
Penny or Non-Penny Pilot class. The Exchange is proposing a similar 
structure but with 8 different exchange groupings, based on the 
exchange, order type, and option class; like that of MIAX PEARL. The 
Exchange believes that, by having the same Routing Fees structure used 
by MIAX PEARL, with more groupings, it will offer the Exchange greater 
precision in covering its costs associated with routing orders to away 
markets. The per-contract transaction fee amount associated with each 
grouping closely approximates the Exchange's all-in cost (plus an 
additional, non-material amount) to execute that corresponding contract 
at that corresponding exchange. For example, to execute a Priority 
Customer order in a Penny Pilot symbol at NYSE American costs the 
Exchange approximately $0.15 a contract. Since this is also the 
approximate cost to execute that same order at BOX, the Exchange is 
able to group NYSE American and BOX together in the same grouping. The 
Exchange notes that in determining the appropriate groupings, the 
Exchange considers the transaction fees and rebates assessed by away 
markets, and groups exchanges together that assess transaction fees for 
routed orders within a similar range. This same logic and structure 
applies to all of the groupings in the Routing Fees table. The Exchange 
believes that the Exchange's current structure of simply passing on the 
actual charge plus a mark-up can be administratively burdensome, 
particularly when multiple, third-party, unaffiliated routing broker-
dealers are used to route and execute the orders at the away market. 
This is because the routing broker-dealers have different billing 
policies and practices, and it often can take several hours per month 
reconciling trades and bills at the end of each month. By utilizing the 
structure proposed by the Exchange which is currently used by MIAX 
PEARL, the Exchange will know immediately the cost of the execution and 
it can eliminate the administratively burdensome month end 
reconciliation process, as well as provide more certainty and 
transparency for execution costs to its Members for the execution of 
orders that are routed to away markets. Further, those Members which 
are Members of both the Exchange and MIAX PEARL will be assessed 
Routing Fees in the same manner, which the Exchange believes will 
minimize any confusion as to the method of assessing Routing Fees 
between the two exchanges for those Members.
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    \7\ The OCC amended its clearing fee from $0.01 per contract 
side to $0.02 per contract side. See Securities Exchange Act Release 
No. 71769 (March 21, 2014), 79 FR 17214 (March 27, 2014) (SR-OCC-
2014-05).
    \8\ This is similar to the methodologies utilized by BZX Options 
in assessing Routing Fees. See Cboe BZX Options Exchange Fee 
Schedule under ``Fee Codes and Associated Fees''.
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    Additionally, the Exchange proposes to amend the title of Section 
(1)(c) of the Fee Schedule to remove the words ``and Rebate'' from the 
title. The Exchange notes that the title of the Section currently reads 
``Fees and Rebates for Customer Orders Routed to Another Options 
Exchange.'' The routing fee table as proposed does not contain any net 
rebates, therefore, as amended, the Exchange proposes for the title of 
the Section to now read ``Fees for Customer Orders Routed to Another 
Options Exchange.'' The Exchange believes this will add clarity and 
precision with respect to the structure of its Fee Schedule.
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 dues, fees, and other 
charges among its members and issuers and other persons using its 
facilities. The Exchange also believes the proposal furthers the 
objectives of Section 6(b)(5) of the Act \11\ in that it is designed to 
promote just and equitable principles of trade, to remove impediments 
to and perfect the mechanism of a free and open market and a national 
market system, and, in general to protect investors and the public 
interest and is not designed to permit unfair discrimination between 
customers, issuers, brokers and dealers.
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    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(4).
    \11\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes the proposed modifications in the Fee 
Schedule to the Routing Fees furthers the objectives of Section 6(b)(4) 
of the Act and are equitable and reasonable and not unfairly 
discriminatory because they will apply the same manner to all Members 
that are subject to Routing Fees. The Exchange believes the proposed 
Routing Fees are equitable and reasonable since they align the 
Exchange's manner of assessing its Routing Fees with that of its 
affiliate, MIAX PEARL, and those Members which are Members of both the 
Exchange and MIAX PEARL will be assessed Routing Fees in the same 
manner, which the Exchange believes will minimize any confusion as to 
the method of assessing Routing Fees between the two exchanges for 
those Members.
    The Exchange believes that the proposed Routing Fees furthers the 
objectives of Section 6(b)(5) of the Act and are designed to promote 
just and equitable principles of trade and are not unfairly 
discriminatory because they seek to recoup costs that are incurred by 
the Exchange when routing orders to away markets on behalf of Members. 
Each destination market's transaction charge varies and there is a cost 
incurred by the Exchange when routing orders to away markets. The costs 
to the Exchange primarily include transaction fees assessed by the away 
markets to which the Exchange routes orders, in addition to the 
Exchange's clearing costs, administrative, regulatory and technical 
costs associated with routing options. The Exchange believes that the 
proposed Routing Fees would better enable the Exchange to recover the 
costs it incurs to route orders to away markets in addition to 
transaction fees assessed to market participants for the execution of 
orders by the away market. The Exchange believes the proposed changes 
are 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. In 
particular, the Exchange believes that the proposed changes will 
provide greater clarity to Members and the public regarding the 
Exchange's Rules. It is in the public

[[Page 11388]]

interest for rules to be accurate and concise so as to eliminate the 
potential for confusion. By utilizing the structure proposed by the 
Exchange, the Exchange will know immediately the cost of the execution 
and it can eliminate the administratively burdensome month end 
reconciliation process, as well as provide more certainty and 
transparency for execution costs to its Members for the execution of 
orders that are routed to away markets. Further, those Members which 
are Members of both the Exchange and MIAX PEARL will be assessed 
Routing Fees in the same manner which the Exchange believes will 
minimize any confusion as to the method of assessing Routing Fees 
between the two exchanges for those Members.
    Further, the Exchange believes that modifying the manner in which 
it assesses its Routing Fees by grouping exchanges together that assess 
transaction fees and rebates for routed orders within a similar range 
is reasonable and not unfairly discriminatory. Specifically, the 
Exchange believes that the Exchange's current structure of assessing a 
Fixed Fee Surcharge of $0.10 per contract by the Exchange, which is 
added to the fee charged, or netted against the rebate paid, by an away 
market can be administratively burdensome, particularly when multiple, 
third-party, unaffiliated routing broker-dealers are used to route and 
execute the orders at the away market. This is because the routing 
broker-dealers have different billing policies and practices, and it 
often can take several hours per month reconciling trades and bills at 
the end of each month. By utilizing the structure proposed by the 
Exchange which is currently used by MIAX PEARL, the Exchange will know 
immediately the cost of the execution and it can eliminate the 
administratively burdensome month end reconciliation process, as well 
as provide more certainty and transparency for execution costs to its 
Members for the execution of orders that are routed to away markets. 
The Exchange believes it is reasonable, equitable, and not unfairly 
discriminatory to eliminate passing through any rebate amount (that is, 
netting the rebate against the Exchange's $0.10 charge), as the amount 
of any such rebate was negligible. The Exchange notes that because the 
amount of volume that the Exchange routes to away markets is de 
minimis, the Exchange does not receive the higher rebate amounts 
offered in the higher tiers of the away markets. Therefore, eliminating 
that rebate is reasonable because the amount was immaterial. Further, 
those Members which are Members of both the Exchange and MIAX PEARL 
will be assessed Routing Fees in the same manner, which the Exchange 
believes will minimize any confusion as to the method of assessing 
Routing Fees between the two exchanges for those Members. Additionally, 
the Exchange notes that it will continue to monitor the transaction 
fees and rebates assessed by the away market to determine the 
appropriate exchange groupings within which to group the away markets.
    In addition, the Exchange believes that it is equitable and not 
unfairly discriminatory to assess lower routing fees to Priority 
Customer orders than to Public Customer orders. A Priority Customer is 
by definition not a broker or dealer in securities, and does not place 
more than 390 orders in listed options per day on average during a 
calendar month for its own beneficial account(s). The routing fees for 
Priority Customer orders are based on the fees charged by the away 
market for the execution of such orders, therefore it is reasonable and 
appropriate for the routing fees to be lower than the routing fees for 
Public Customer orders, as this is the fee construct at the away 
markets.
    Lastly, the Exchange believes that the proposed non-substantive, 
technical correction furthers the objectives of Section 6(b)(4) of the 
Act and 6(b)(5) of the Act in that the change is equitable and 
reasonable and not unfairly discriminatory because this proposal is 
intended only as a technical correction to update to the title of 
Section (1)(c) of the Fee Schedule to accurately reflect that this 
Section is a fee and not a rebate, which does not have any substantive 
impact on the Routing Fees. The Exchange believes making this technical 
correction promotes just and equitable principles of trade, fosters 
cooperation and coordination with persons engaged in facilitating 
transactions in securities, and protects investors and the public 
interest, because it would eliminate any potential confusion as a 
result of wording that is no longer applicable. It is in the public 
interest for rules to be accurate and concise so as to eliminate the 
potential for confusion.

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's proposed Routing 
Fees are similar in structure to those assessed by its affiliate, MIAX 
PEARL, and are similar in structure and are comparable to routing fees 
charged by other options exchanges.\12\ 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 rebates and 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 continue to provide liquidity and to send order flow to 
the Exchange. Further, the Exchange does not believe that the technical 
correction to the routing fee table will impose any burden on 
competition not necessary or appropriate in furtherance of the purposes 
of the Act because the proposal is intended to eliminate any potential 
confusion as a result of wording that is no longer applicable. In doing 
so, the proposed rule change will also serve to promote clarity and 
consistency in the Exchange's Fee Schedule.
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    \12\ See supra note 8.
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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,\13\ and Rule 19b-4(f)(2) \14\ 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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    \13\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \14\ 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,

[[Page 11389]]

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-2019-13 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-2019-13. 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 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-2019-13 and should be submitted on 
or before April 16, 2019.

    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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Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-05701 Filed 3-25-19; 8:45 am]
BILLING CODE 8011-01-P


