[Federal Register Volume 87, Number 67 (Thursday, April 7, 2022)]
[Notices]
[Pages 20492-20495]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-07338]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-94574; File No. SR-MIAX-2022-12]


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 Extend the SPIKES 
Options Market Maker Incentive Program Until June 30, 2022

April 1, 2022.
    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 23, 2022, 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'') to extend the SPIKES Options Market 
Maker Incentive Program (the ``Incentive Program'') until June 30, 
2022.
    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 extend the Incentive Program until June 
30, 2022.
Background
    On October 12, 2018, the Exchange received approval from the 
Commission to list and trade on the Exchange options on the 
SPIKES[supreg] Index, a new index that measures expected 30-day 
volatility of the SPDR S&P 500 ETF Trust (commonly known and referred 
to by its ticker symbol, ``SPY'').\3\ The Exchange adopted its initial 
SPIKES transaction fees on February 15, 2019 and adopted a new section 
of the Fee Schedule--Section 1(a)(xi), SPIKES--for

[[Page 20493]]

those fees.\4\ Options on the SPIKES Index began trading on the 
Exchange on February 19, 2019.
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    \3\ See Securities Exchange Act Release No. 84417 (October 12, 
2018), 83 FR 52865 (October 18, 2018) (SR-MIAX-2018-14) (Order 
Granting Approval of a Proposed Rule Change by Miami International 
Securities Exchange, LLC to List and Trade on the Exchange Options 
on the SPIKES[supreg] Index).
    \4\ See Securities Exchange Release No. 85283 (March 11, 2019), 
84 FR 9567 (March 15, 2019) (SR-MIAX-2019-11). The Exchange 
initially filed the proposal on February 15, 2019 (SR-MIAX-2019-04). 
That filing was withdrawn and replaced with SR-MIAX-2019-11. On 
September 30, 2020, the Exchange filed its proposal to, among other 
things, reorganize the Fee Schedule to adopt new Section 1(b), 
Proprietary Products Exchange Fees, and moved the fees and rebates 
for SPIKES options into new Section 1(b)(i). See Securities Exchange 
Act Release No. 90146 (October 9, 2020), 85 FR 65443 (October 15, 
2020) (SR-MIAX-2020-32); Securities Exchange Act Release No. 90814 
(December 29, 2020), 86 FR 327 (January 5, 2021) (SR-MIAX-2020-39).
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Incentive Program Extension
    On September 30, 2021, the Exchange filed its initial proposal to 
implement a SPIKES Options Market Maker Incentive Program for SPIKES 
options to incentivize Market Makers \5\ to improve liquidity, 
available volume, and the quote spread width of SPIKES options 
beginning October 1, 2021, and ending December 31, 2021.\6\ Technical 
details regarding the Incentive Program were published in a Regulatory 
Circular on September 30, 2021.\7\ On October 12, 2021, the Exchange 
withdrew SR-MIAX-2021-45 and refiled its proposal to implement the 
Incentive Program to provide additional details.\8\ In that filing, the 
Exchange specifically noted that the Incentive Program would expire at 
the end of the period (December 31, 2021) unless the Exchange filed 
another 19b-4 Filing to amend the fees (or extend the Incentive 
Program).\9\ On December 23, 2021, the Exchange filed its proposal to, 
among other things, extend the Incentive Program for three months, with 
the Incentive Program ending on March 31, 2022.\10\ In that filing, the 
Exchange specifically noted that the Incentive Program would expire at 
the end of the period (March 31, 2022) unless the Exchange filed 
another 19b-4 Filing to amend the terms (or extend the Incentive 
Program).\11\ The Exchange now proposes to extend the Incentive Program 
for an additional three months, with the Incentive Program ending on 
June 30, 2022.\12\
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    \5\ The term ``Market Makers'' refers to ``Lead Market Makers'', 
``Primary Lead Market Makers'' and ``Registered Market Makers'' 
collectively. See Exchange Rule 100.
    \6\ See SR-MIAX-2021-45.
    \7\ See MIAX Options Regulatory Circular 2021-56, SPIKES Options 
Market Maker Incentive Program (September 30, 2021) available at 
https://www.miaxoptions.com/sites/default/files/circularfiles/MIAX_Options_RC_2021_56.pdf.
    \8\ See Securities Exchange Act Release No. 93424 (October 26, 
2021), 86 FR 60322 (November 1, 2021) (SR-MIAX-2021-49).
    \9\ See id., at note 4.
    \10\ See Securities Exchange Act Release No. 93881 (December 30, 
2021), 87 FR 517 (January 5, 2022) (SR-MIAX-2021-63).
    \11\ See id., at footnote 20.
    \12\ The Exchange notes that at the end of the extension period, 
the Incentive Program will expire unless the Exchange files another 
19b-4 Filing to amend the terms or extend the Incentive Program.
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    The Exchange proposes to extend the Incentive Program for SPIKES 
options to continue to incentivize Market Makers to improve liquidity, 
available volume, and the quote spread width of SPIKES options. 
Currently, to be eligible to participate in the Incentive Program, a 
Market Maker must meet certain minimum requirements related to quote 
spread width in certain in-the-money (ITM) and out-of-the-money (OTM) 
options as determined by the Exchange and communicated to Members via 
Regulatory Circular.\13\ Market Makers must also satisfy a minimum time 
in the market in the front 2 expiry months of 70%, and have an average 
quote size of 25 contracts. The Exchange established two separate 
incentive compensation pools that are used to compensate Market Makers 
that satisfy the criteria pursuant to the Incentive Program.
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    \13\ See supra note 7.
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    The first pool (Incentive 1) has a total amount of $40,000 per 
month, which is allocated to Market Makers that meet the minimum 
requirements of the Incentive Program. Market Makers are required to 
meet minimum spread width requirements in a select number of ITM and 
OTM SPIKES option contracts as determined by the Exchange and 
communicated to Members via Regulatory Circular.\14\ A complete 
description of how the Exchange calculates the minimum spread width 
requirements in ITM and OTM SPIKES options can be found in the 
published Regulatory Circular.\15\ Market Makers are also required to 
maintain the minimum spread width, described above, for at least 70% of 
the time in the front two (2) SPIKES options contract expiry months and 
maintain an average quote size of at least 25 SPIKES options contracts. 
The amount available to each individual Market Maker is capped at 
$10,000 per month for satisfying the minimum requirements of the 
Incentive Program. In the event that more than four Market Makers meet 
the requirements of the Incentive Program, each qualifying Market Maker 
is entitled to receive a pro-rated share of the $40,000 monthly 
compensation pool dependent upon the number of qualifying Market Makers 
in that particular month.
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    \14\ See id.
    \15\ See id.
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    The second pool (Incentive 2 Pool) is capped at a total amount of 
$100,000 per month which is used during the Incentive Program to 
further incentivize Market Makers who meet or exceed the requirements 
of Incentive 1 (``qualifying Market Makers'') to provide tighter quote 
width spreads. The Exchange ranks each qualifying Market Maker's quote 
width spread relative to each other qualifying Market Maker's quote 
width spread. Market Makers with tighter spreads in certain strikes, as 
determined by the Exchange and communicated to Members via Regulatory 
Circular,\16\ are eligible to receive a pro-rated share of the 
compensation pool as calculated by the Exchange and communicated to 
Members via Regulatory Circular,\17\ not to exceed $25,000 per Member 
per month. Qualifying Market Makers are ranked relative to each other 
based on the quality of their spread width (i.e., tighter spreads are 
ranked higher than wider spreads) and the Market Maker with the best 
quality spread width receives the highest rebate, while other eligible 
qualifying Market Makers receive a rebate relative to their quality 
spread width.
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    \16\ See id.
    \17\ See id.
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    The Exchange now proposes to extend the Incentive Program until 
June 30, 2022. The Exchange does not propose to make any amendments to 
how it calculates any of the incentives provided for in Incentive Pools 
1 or 2. The details of the Incentive Program can continue to be found 
in the Regulatory Circular that was published on September 30, 2021 to 
all Exchange Members.\18\ The purpose of this extension is to continue 
to incentivize Market Makers to improve liquidity, available volume, 
and the quote spread width of SPIKES options. The Exchange will 
announce the extension of the Incentive Program to all Members via a 
Regulatory Circular.
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    \18\ See id.
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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 \19\ in general, and 
furthers the objectives of Section 6(b)(4) of the Act \20\ in 
particular, in that it is an equitable allocation of reasonable 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 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

[[Page 20494]]

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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    \19\ 15 U.S.C. 78f(b).
    \20\ 15 U.S.C. 78f(b)(4) and (5).
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    The Exchange believes that it is reasonable, equitable, and not 
unfairly discriminatory to extend the Incentive Program for Market 
Makers in SPIKES options. The Incentive Program is reasonably designed 
because it will continue to incentivize Market Makers to provide quotes 
and increased liquidity in select SPIKES options contracts. The 
Incentive Program is reasonable, equitably allocated and not unfairly 
discriminatory because all Market Makers in SPIKES options may continue 
to qualify for Incentive 1 and Incentive 2, dependent upon each Market 
Maker's quoting in SPIKES options in a particular month. Additionally, 
if a SPIKES Market Maker does not satisfy the requirements of Incentive 
Pool 1 or 2, then it simply will not receive the rebate offered by the 
Incentive Program for that month.
    The Exchange believes that it is reasonable, equitable and not 
unfairly discriminatory to continue to offer this financial incentive 
to Market Makers in SPIKES options because it will continue to benefit 
all market participants trading in SPIKES options. SPIKES options is a 
Proprietary Product on the Exchange and the continuation of the 
Incentive Program encourages Market Makers in SPIKES options to satisfy 
a heightened quoting standard, average quote size, and time in market. 
A continued increase in quoting activity and tighter quotes may yield a 
corresponding increase in order flow from other market participants, 
which benefits all investors by deepening the Exchange's liquidity 
pool, potentially providing greater execution incentives and 
opportunities, while promoting market transparency and improving 
investor protection.
    The Exchange believes that the Incentive Program is equitable and 
not unfairly discriminatory because it will continue to promote an 
increase in SPIKES options liquidity, which may facilitate tighter 
spreads and an increase in trading opportunities to the benefit of all 
market participants. The Exchange believes it is reasonable to operate 
the Incentive Program for a continued limited period of time to 
strengthen market quality for all market participants. The resulting 
increased volume and liquidity will benefit those Members who are 
eligible to participate in the Incentive Program and will also continue 
to benefit those Members who are not eligible to participate in the 
Incentive Program 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.
Intra-Market Competition
    The Exchange believes that the proposed extension of the Incentive 
Program would continue to increase intra-market competition by 
incentivizing Market Makers to quote SPIKES options, which will 
continue to enhance the quality of quoting and increase the volume of 
contracts available to trade in SPIKES options. To the extent that this 
purpose is achieved, all the Exchange's market participants should 
benefit from the improved market liquidity for SPIKES options. Enhanced 
market quality and increased transaction volume in SPIKES options that 
results from the anticipated increase in Market Maker activity on the 
Exchange will benefit all market participants and improve competition 
on the Exchange.
Inter-Market Competition
    The Exchange does not believe that the proposed rule changes will 
impose any burden on inter-market competition that is not necessary or 
appropriate in furtherance of the purposes of the Act because the 
proposed extension of the Incentive Program applies only to the 
Exchange's Proprietary Products (including options on SPIKES), which 
are traded exclusively on 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,\21\ and Rule 19b-4(f)(2) \22\ 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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    \21\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \22\ 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 [email protected]. Please include 
File Number SR-MIAX-2022-12 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-2022-12. 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-2022-12 and should

[[Page 20495]]

be submitted on or before April 28, 2022.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\23\
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    \23\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-07338 Filed 4-6-22; 8:45 am]
BILLING CODE 8011-01-P


