[Federal Register Volume 88, Number 30 (Tuesday, February 14, 2023)]
[Notices]
[Pages 9555-9560]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-03055]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-96835; File No. SR-MIAX-2023-03]


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

February 8, 2023.
    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 31, 2023, 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 Fee Schedule 
(the ``Fee Schedule'').
    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.

[[Page 9556]]

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 Section 1)a)iii) of the Fee Schedule 
to modify the Priority Customer Rebate Program (``PCRP'') \3\ to (i) 
reduce the per contract credit for Simple Orders \4\ in MIAX Select 
Symbols in Tier 3 of the PCRP; \5\ (ii) modify the PCRP table to 
reflect that the per contract credit for cPRIME Agency Orders will be 
based upon the per Contract Credit for cPRIME Agency Order table (to be 
renamed the ``cPRIME Agency Order Break-up Table''); (iii) modify the 
Per Contract Credit for cPRIME Agency Order table to remove the maximum 
leg size requirement; and (iv) rename the Per Contract Credit for 
cPRIME Agency Order table to the cPRIME Agency Order Break-up Table.
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    \3\ Under the PCRP, MIAX 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. 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\ The ``Simple Order Book'' is the Exchange's regular 
electronic book of orders and quotes. See Exchange Rule 518(a)(15).
    \5\ The term ``MIAX Select Symbols'' means options overlying 
AAL, AAPL, AMAT, AMD, AMZN, BA, BABA, BB, BIDU, BP, C, CAT, CLF, 
CVX, DAL, EBAY, EEM, FCX, GE, GILD, GLD, GM, GOOGL, GPRO, HAL, INTC, 
IWM, JNJ, JPM, KMI, KO, META, MO, MRK, NFLX, NOK, ORCL, PBR, PFE, 
PG, QCOM, QQQ, RIG, SPY, T, TSLA, USO, VALE, WBA, WFC, WMB, X, XHB, 
XLE, XLF, XLP, XOM and XOP. See Fee Schedule, Section 1)a)iii), note 
14.
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    The proposed changes will be effective on February 1, 2023.
Background
Priority Customer Rebate Program
    The Exchange's Fee Schedule provides for a Priority Customer Rebate 
Program, under which a Priority Customer \6\ rebate payment is 
calculated from the first executed contract at the applicable threshold 
per contract credit with rebate payments made at the highest achieved 
volume tier for each contract traded in that month. The percentage 
thresholds are calculated based on the percentage of national customer 
volume in multiply-listed option classes listed on MIAX entered and 
executed over the course of the month (excluding QCC \7\ and cQCC 
Orders,\8\ Priority Customer-to-Priority Customer Orders, C2C,\9\ and 
cC2C Orders,\10\ PRIME and cPRIME AOC Responses, PRIME and cPRIME 
Contra-side Orders, and PRIME and cPRIME Orders \11\ for which both the 
Agency and Contra-side Order are Priority Customers). Volume for 
transactions in both simple and complex orders are aggregated to 
determine the appropriate volume tier threshold applicable to each 
transaction. Volume is recorded for, and credits are delivered to, the 
Member that submits the order to MIAX. MIAX aggregates the contracts 
resulting from Priority Customer Orders \12\ transmitted and executed 
electronically on MIAX from Members and Affiliates \13\ for purposes of 
the thresholds described in the PCRP table.
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    \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 account(s). See Exchange Rule 
100.
    \7\ A Qualified Contingent Cross Order is comprised of an 
originating order to buy or sell at least 1,000 contracts, or 10,000 
mini-option contracts, that is identified as being part of a 
qualified contingent trade, as that term is defined in 
Interpretations and Policies .01 below, coupled with a contra-side 
order or orders totaling an equal number of contracts. See Exchange 
Rule 516(j).
    \8\ A Complex Qualified Contingent Cross or ``cQCC'' Order is 
comprised of an originating complex order to buy or sell where each 
component is at least 1,000 contracts that is identified as being 
part of a qualified contingent trade, as defined in Rule 516, 
Interpretations and Policies .01, coupled with a contra-side complex 
order or orders totaling an equal number of contracts. Trading of 
cQCC Orders is governed by Rule 515(h)(4). See Exchange Rule 
518(b)(6).
    \9\ A Customer Cross Order is comprised of a Priority Customer 
Order to buy and a Priority Customer Order to sell at the same price 
and for the same quantity. See Exchange Rule 516(i).
    \10\ A Complex Customer Cross or ``cC2C'' Order is comprised of 
one Priority Customer complex order to buy and one Priority Customer 
complex order to sell at the same price and for the same quantity. 
Trading of cC2C Orders is governed by Rule 515(h)(3). See Exchange 
Rule 518(b)(5).
    \11\ PRIME and cPRIME Orders are described in more detail below.
    \12\ The term ``Priority Customer Order'' means an order for the 
account of a Priority Customer. See Exchange Rule 100.
    \13\ 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 [email protected] 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. See Fee Schedule, note 1.
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    Currently, Members and their Affiliates that qualify for the PCRP 
and execute Priority Customer simple orders in MIAX Select Symbols 
receive the following rebates: (i) $0.00 per contract in Tier 1; (ii) 
$0.10 per contract in Tier 2; (iii) $0.20 per contract in Tier 3; and 
(iv) $0.24 in Tier 4. The Exchange now proposes to reduce the rebate 
provided in Tier 3 from $0.20 to $0.18. The purpose of adjusting the 
Tier 3 rebate is for business and competitive reasons.
Per Contract Credit for cPRIME Agency Orders
    Exchange Rule 518(b)(7) defines a cPRIME Order as a type of complex 
order \14\ that is submitted for participation in a cPRIME Auction and 
trading of cPRIME Orders is governed by Rule 515A, Interpretation and 
Policies .12.\15\ cPRIME Orders are

[[Page 9557]]

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.\16\ 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 and 
initiating price is broadcasted to MIAX 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 participants up 
to an optional designated limit price. Such responses are defined as 
cPRIME AOC Responses or cPRIME eQuotes. The PRIME mechanism is used for 
orders on the Exchange's Simple Order Book. The cPRIME mechanism is 
used for complex orders \17\ on the Exchange's Strategy Book,\18\ with 
the cPRIME mechanism operating in the same manner for processing and 
execution of cPRIME Orders that is used for PRIME Orders on the Simple 
Order Book.
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    \14\ 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).
    \15\ 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).
    \16\ Id.
    \17\ Only those complex orders in the classes designated by the 
Exchange and communicated to Members via Regulatory Circular with no 
more than the applicable number of legs, as determined by the 
Exchange on a class-by-class basis and communicated to Members via 
Regulatory Circular, are eligible for processing. See Exchange Rule 
518(a)(5).
    \18\ The ``Strategy Book'' is the Exchange's electronic book of 
complex orders and complex quotes. See Exchange Rule 518(a)(17).
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Proposal
    Currently, Members and their Affiliates that qualify for the PCRP 
that execute cPRIME Agency Orders with a maximum leg size equal to or 
less than 1,000 contracts receive $0.10 per contract in Tier 1 through 
Tier 4, or $0.12 in Tier 4 provided certain criteria is satisfied as 
denoted by footnote ``**''.\19\ The Exchange also provides a separate 
per contract credit for cPRIME Agency Orders with a max leg size of 
more than 1,000 contracts, which is based upon the order break-up 
percentage. Specifically, the Per Contract Credit for cPRIME Agency 
Order table provides for the following rebates: (i) $0.05 when the 
order break-up percentage is 0-10%; (ii) $0.06 when the order break-up 
percentage is greater than 10%-20%; (iii) $0.07 when the order break-up 
percentage is greater than 20%-30%; (iv) $0.08 when the order break-up 
percentage is greater than 30%-40%; (v) $0.10 when the order break-up 
percentage is greater than 40%-50% (or $0.12 if the Member or their 
Affiliate qualifies for Tier 4 and satisfies the additional criteria 
denoted in footnote ``**''); \20\ (vi) $0.10 when the order break-up 
percentage is greater than 50%-60% (or $0.12 if the Member or their 
Affiliate qualifies for Tier 4 and satisfies the additional criteria 
denoted in footnote ``**''); (vii) $0.10 when the order break-up 
percentage is greater than 60%-70% (or $0.12 if the Member or their 
Affiliate qualifies for Tier 4 and satisfies the additional criteria 
denoted in footnote ``**''); (viii) $0.10 when the order break-up 
percentage is greater than 70%-80% (or $0.12 if the Member or their 
Affiliate qualifies for Tier 4 and satisfies the additional criteria 
denoted in footnote ``**''); (ix) $0.10 when the order break-up 
percentage is greater than 80%-90% (or $0.12 if the Member or their 
Affiliate qualifies for Tier 4 and satisfies the additional criteria 
denoted in footnote ``**''); and (x) $0.10 when the order break-up 
percentage is greater than 90%-100% (or $0.12 if the Member or their 
Affiliate qualifies for Tier 4 and satisfies the additional criteria 
denoted in footnote ``**'').
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    \19\ Footnote ``**'' provides that, any Member or its Affiliate 
that qualifies for Priority Customer Rebate Program tier 4 and 
executes Priority Customer standard, non-paired complex volume at 
least equal to or greater than three (3) times their Priority 
Customer cPRIME Agency Order volume, on a monthly basis, will 
receive a credit of $0.12 per contract for cPRIME Agency Orders 
instead of the credit otherwise applicable to such orders in tier 4.
    \20\ Id.
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    The Exchange now proposes to provide that all cPRIME Agency Orders 
will be eligible for the per contract credit described in the Per 
Contract Credit for cPRIME Agency Order table by removing the maximum 
leg size requirement from that table. The Exchange also proposes to 
rename this table as the cPRIME Agency Order Break-up Table for 
clarity. Therefore, the Exchange proposes to remove the credit amounts 
for the per contract credits listed in the Per Contract Credit for 
cPRIME Agency Order column of the standard PCRP table in Section 
1)a)iii) of the Fee Schedule. The Exchange then proposes to direct 
market participants to the proposed ``cPRIME Agency Order Break-Up 
Table,'' which can be found in the Fee schedule below the standard PCRP 
table, by inserting the sentence, ``See cPRIME Agency Order Break-up 
Table Below'' in each row for the ``Per Contract Credit for cPRIME 
Agency Order'' in the standard PCRP table. Accordingly, with the 
proposed changes, all cPRIME Agency Orders that qualify for the PCRP 
that are submitted to the Exchange would be eligible for the per 
contract credit based upon the order break-up percentage as described 
in the above mentioned table. The Exchange conducted an internal 
analysis of fees and rebates associated with cPRIME Agency Orders and 
the proposed changes are being made for business and competitive 
reasons.
    As a result of the aforementioned proposed change, the Exchange 
also proposes to remove the following footnote ``*'' to the above 
mentioned table and to amend footnote ``**'' to clarify the operation 
of the per contract credit described in the footnote and to also amend 
footnote ``***'' to remove the maximum leg size requirement to 
accurately reflect the operation of the table.
    The Exchange currently provides a cPRIME break-up credit of $0.25 
per contract in Penny Classes \21\ and $0.60 per contract in Non-Penny 
Classes.\22\ Additionally, the Exchange provides an enhanced PRIME 
break-up credit of $0.28 per contract in Penny Classes and $0.72 per 
contract in Non-Penny Classes to the Electronic Exchange Member 
(``EEM'') \23\ that submitted a cPRIME Order that trades with cPRIME 
AOC Responses and/or cPRIME participating quotes or orders, if the 
cPRIME Order experiences a break-up of greater than 60%, which is not 
changing under this proposal.\24\
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    \21\ See Exchange Rule 510(c).
    \22\ See Section 1)a)vi) MIAX Complex Price Improvement 
Mechanism (``cPRIME'') Fees, of the Exchange's Fee Schedule.
    \23\ The term ``Electronic Exchange Member'' or ``EEM'' means 
the holder of a Trading Permit who is not a Market Maker. Electronic 
Exchange Members are deemed ``members'' under the Exchange Act. See 
Exchange Rule 100.
    \24\ See the Exchange's Fee schedule, footnote ``*'' of Section 
1)a)vi), on its public website (available at https://www.miaxoptions.com/fees).

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[[Page 9558]]

2. Statutory Basis
    The Exchange believes that its proposal to amend its Fee Schedule 
is consistent with section 6(b) of the Act \25\ in general, and 
furthers the objectives of section 6(b)(4) of the Act \26\ 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 \27\ 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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    \25\ 15 U.S.C. 78f(b).
    \26\ 15 U.S.C. 78f(b)(4).
    \27\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes its proposal provides for the equitable 
allocation of reasonable dues and fees and is not unfairly 
discriminatory for the following reasons. The Exchange operates in a 
highly competitive market in which market participants can readily 
direct order flow to competing venues if they deem fee levels at a 
particular venue to be excessive or incentives to be insufficient. More 
specifically, the Exchange is one of 16 registered options exchanges 
competing for order flow. Based on publicly-available information, and 
excluding index-based options, no single exchange has more than 
approximately 12-13% of the market share of executed volume of 
multiply-listed equity and exchange-traded fund (``ETF'') options 
trades as of January 26, 2023, for the month of January 2023.\28\ 
Therefore, no exchange possesses significant pricing power in the 
execution of multiply-listed equity and ETF options order flow. More 
specifically, as of January 26, 2023, the Exchange has a total market 
share of 6.45% of all equity options volume, for the month of January 
2023.\29\
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    \28\ See ``The market at a glance/MTD AVERAGE'', available at 
https://www.miaxoptions.com/ (data as of 1/1/2023-1/25/2023).
    \29\ See id.
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    The Exchange believes that the ever-shifting market share among the 
exchanges from month to month demonstrates that market participants can 
shift order flow, or discontinue use of certain categories of products, 
in response to fee changes. For example, on March 1, 2019, the Exchange 
filed with the Commission an immediately effective filing to decrease 
certain credits assessable to Members pursuant to the PCRP.\30\ The 
Exchange experienced a decrease in total market share between the 
months of February and March of 2019. Accordingly, the Exchange 
believes that the March 1, 2019, fee change may have contributed to the 
decrease in the Exchange's market share and, as such, the Exchange 
believes competitive forces constrain options exchange transaction and 
non-transaction fees.
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    \30\ See Securities Exchange Act Release No. 85301 (March 13, 
2019), 84 FR 10166 (March 19, 2019) (SR-MIAX-2019-09).
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    Accordingly, competitive forces constrain the Exchange's 
transaction fees, and market participants can readily trade on 
competing venues if they deem pricing levels at those other venues to 
be more favorable. In response to the competitive environment, the 
Exchange offers specific rates and credits in its fees schedule, like 
those of other options exchanges' fees schedules, which the Exchange 
believes provides incentives to Members to increase order flow of 
certain qualifying orders.
    The Exchange believes that the PCRP itself is reasonably designed 
because it incentivizes 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 PCRP, which provides increased incentives in 
certain tiers 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 (e.g., lower 
fees or higher rebates) to higher volume symbols.\31\
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    \31\ See Nasdaq ISE Fee Schedule, Options 7, Section 3. Regular 
Order Fees and Rebates, Select Symbols.
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    The Exchange believes that its proposal to amend the rebate 
provided for Priority Customer Orders in MIAX Select Symbols in Tier 3 
is consistent with section 6(b)(4) of the Act \32\ in that the proposal 
is reasonable, equitable and not unfairly discriminatory as it applies 
uniformly to all similarly situated participants. The Exchange believes 
the proposed change (a $0.02 decrease from the current rebate) is 
reasonable in that it represents a modest decrease from the current 
rebate provide in Tier 3. The Exchange believes that the proposed 
rebate will continue to provide an incentive to participants to submit 
Priority Customer Orders in MIAX Select Symbols. The Exchange believes 
that even with the proposed reduced credit in Tier 3, the Exchange's 
credits for the PCRP remain in line with, or higher than, competing 
exchanges' credits for similar programs.\33\ The Exchange also believes 
that its proposal is consistent with section 6(b)(5) of the Act because 
it will apply equally to all Priority Customer Orders in Tier 3. All 
similarly situated participants are subject to the same rebate 
schedule, and access to the Exchange is offered on terms that are not 
unfairly discriminatory.
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    \32\ 15 U.S.C. 78f(b)(4).
    \33\ See NYSE American Options Fee Schedule, Section I.E., 
American Customer Engagement (``ACE'') Program (providing a simple 
credit of $0.17 in Tier 3); see also Cboe Exchange, Inc. Options Fee 
Schedule, Page 3, Volume Incentive Program (``VIP'') (providing a 
simple Non-AIM rebate of $0.12 in Tier 3).
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    The Exchange believes that its proposal to provide a per contract 
credit for all cPRIME Agency Orders based upon the order break-up 
percentage will continue to encourage Priority Customer order flow to 
auctions. Increased Priority Customer order flow benefits all market 
participants because it continues to attract liquidity to the Exchange 
by providing more trading opportunities. This attracts Market Makers 
and other liquidity providers, thus, facilitating price improvement in 
the auction process, signaling additional corresponding order flow from 
other market participants, and, as a result, increasing liquidity on 
the Exchange.
    The Exchange believes that its proposal is consistent with section 
6(b)(4) of the Act \34\ in that the proposal is reasonable, equitable 
and not unfairly discriminatory as it applies uniformly to all 
similarly situated participants. The Exchange believes the PCRP is 
reasonably designed because it will provide an incentive to providers 
of Priority Customer order flow to send that Priority Customer order 
follow to the Exchange to receive a credit in a manner that enables the 
Exchange to improve its overall competiveness and strengthen its market 
quality for all participants.
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    \34\ 15 U.S.C. 78f(b)(4).
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    The Exchange's proposal to provide a per contract credit to 
eligible cPRIME Agency Orders based upon the order break-up percentage 
is consistent with section 6(b)(4) of the Act \35\ because it applies 
equally to all participants of the PCRP that submit cPRIME Agency 
Orders. The Exchange believes that the proposed rebate structure is 
fair, equitable, and not unreasonably discriminatory. The PCRP is 
reasonably designed because it will provide an incentive to providers 
of Priority Customer order flow to send that

[[Page 9559]]

Priority Customer order flow to the Exchange to receive a credit in a 
manner that enables the Exchange to improve its overall competitiveness 
and strengthen its market quality for all participants.
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    \35\ 15 U.S.C. 78f(b)(4).
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    In addition, the Exchange believes that its proposal is consistent 
with section 6(b)(5) of the Act \36\ because it perfects the mechanisms 
of a free and open market and a national market system and protects 
investors and the public interest because an increase in Priority 
Customer order flow will bring greater volume and liquidity to the 
Exchange, which benefits all market participants by providing more 
trading opportunities and tighter spreads. To the extent Priority 
Customer order flow is increased by this proposal, market participants 
will increasingly compete for the opportunity to trade on the Exchange 
including sending more orders and provided narrower and larger-sized 
quotations in the effort to trade with such Priority Customer Order 
flow.
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    \36\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that providing rebates for Priority Customers 
that submit cPRIME Agency Orders is equitable and not unfairly 
discriminatory because the proposed rebate schedule will apply equally 
to all cPRIME Agency Orders for Priority Customers. The Exchange 
believes that the application of the rebate is equitable and not 
unfairly discriminatory because, as stated above, Customer order flow 
enhances liquidity on the Exchange, in turn providing more trading 
opportunities and attracting other market participants, thus, 
facilitating tighter spreads, increased order flow and trading 
opportunities to the benefit of all market participants. Moreover, the 
options industry has a long history of providing preferential pricing 
to Priority Customer Orders, and the Exchange's current fees schedule 
currently does so in many places, as does the fee structure of at least 
one other exchange.\37\
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    \37\ See Cboe Fee Schedule, ``Break-Up Credits,'' available at 
https://cdn.cboe.com/resources/membership/Cboe_FeeSchedule.pdf.
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    As noted above, the Exchange operates in a highly competitive 
market. The Exchange is only one of several options venues to which 
market participants may direct their order flow, and it represents a 
small percentage of the overall market. The Exchange believes that the 
proposed fees are reasonable, equitable, and not unfairly 
discriminatory in that competing options exchanges offer similar fees 
and credits in connection with similar price improvement auctions.\38\
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    \38\ Id.
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    The Commission has repeatedly expressed its preference for 
competition over regulatory intervention in determining prices, 
products, and services in the securities markets. In Regulation NMS, 
the Commission highlighted the importance of market forces in 
determining prices and self-regulatory organization (``SRO'') revenues 
and, also, recognized that current regulation of the market system 
``has been remarkably successful in promoting market competition in its 
broader forms that are most important to investors and listed 
companies.'' \39\
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    \39\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496 (June 29, 2005).
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    The Exchange believes that the ever-shifting market shares among 
the exchanges from month to month demonstrates that market participants 
can shift order flow or discontinue or reduce use of certain categories 
of products, in response to transaction and non-transaction fee 
changes. Accordingly, competitive forces constrain the Exchange's 
transaction fees and rebates, and market participants can readily trade 
on competing venues if they deem pricing levels at those other venues 
to be more favorable. The Exchange believes the proposal reflects a 
reasonable and competitive pricing structure which will continue to 
incentivize market participants to direct Priority Customer Orders to 
the Exchange, which the Exchange believes will enhance liquidity and 
market quality on the exchange to the benefit of all Members.
    For the reasons discussed above, the Exchange submits that the 
proposal satisfies the requirements of sections 6(b)(4) and 6(b)(5) of 
the Act \40\ in that it provides for the equitable allocation of 
reasonable dues, fees and other charges among its Members and other 
persons using its facilities and is not designed to unfairly 
discriminate between customers, issuers, brokers, or dealers.
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    \40\ 15 U.S.C. 78f(b)(4) and (5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    In accordance with section 6(b)(8) of the Act,\41\ the Exchange 
does not believe that the proposed rule change will impose any burden 
on intra-market or intra-market competition that is not necessary or 
appropriate in furtherance of the purposes of the Act. Rather, as 
discussed above, the Exchange believes that the proposed changes will 
encourage the submission of additional liquidity to price improvement 
auctions, thereby promoting market depth, price discovery, 
transparency, and enhanced order execution and price improvement 
opportunities for all Members. As a result, the Exchange believes that 
the proposed change furthers the Commission's goal in adopting 
Regulation NMS of fostering competition among orders, which promotes 
``more efficient pricing of individual stocks for all types of orders, 
large and small.'' \42\
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    \41\ 15 U.S.C. 78f(b)(8).
    \42\ See Securities Exchange Act Release No. 51808, 70 FR 37495, 
37498-99 (June 29, 2005) (S7-10-04) (Final Rule).
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    The Exchange does not believe that its proposal will impose any 
burden on intra-market competition that is not necessary or appropriate 
in furtherance of the purposes of the Act because the proposed changes 
will apply uniformly to all eligible Priority Customers. The Exchange 
believes that this proposal will continue to encourage Members to 
submit cPRIME Agency Orders for Priority Customers, which will increase 
liquidity and benefit all market participants by providing more trading 
opportunities and tighter spreads. The Exchange notes the fact that 
preferential pricing to Priority Customers is a long-standing options 
industry practice. The proposed rebate changes serve to enhance 
Priority Customer order flow to the Exchange's Price Improvement 
Mechanism, which, as a result, facilitates increased liquidity and 
execution opportunities to the benefit of all market participants.
    Additionally, the Exchange does not believe its proposal to reduce 
the Tier 3 rebate for MIAX Select Symbols will impose any burden on 
intra-market competition that is not necessary or appropriate in 
furtherance of the purposes of the Act because the proposed change will 
apply uniformly to all similarly situated participants.
    The Exchange also does not believe that its proposal will impose 
any burden on inter-market competition that is not necessary or 
appropriate in furtherance of the purposes of the Act because, as noted 
above, at least one other competing options exchange \43\ has similar 
rebates in place in connection with similar price improvement auctions. 
Additionally, and as previously discussed, the Exchange operates in a 
highly competitive market. Members have numerous alternative venues 
that they participate on and direct their order flow to, including 15 
other options exchanges, many of which offer substantially similar 
price improvement auctions. Based on publicly available information, no 
single options exchange has more than

[[Page 9560]]

approximately 12-13% of the equity options market share.\44\ Therefore, 
no exchange possesses significant pricing power in the execution of 
option order flow. Participants can readily choose to send their orders 
to other exchanges if they deem fee levels at those other exchanges to 
be more favorable. Moreover, the Commission has repeatedly expressed 
its preference for competition over regulatory intervention in 
determining prices, products, and services in the securities markets. 
Specifically, in Regulation NMS, the Commission highlighted the 
importance of market forces in determining prices and SRO revenues and, 
also, recognized that current regulation of the market system ``has 
been remarkably successful in promoting market competition in its 
broader forms that are most important to investors and listed 
companies.'' \45\ The fact that this market is competitive has also 
long been recognized by the courts. In NetCoalition v. Securities and 
Exchange Commission, the D.C. Circuit states as follows: ``[n]o one 
disputes that competition for order flow is `fierce.' . . . As the SEC 
explained, `[i]n the U.S. national market system, buyers and sellers of 
securities, and the broker-dealers that act as their order-routing 
agents, have a wide range of choices of where to route orders for 
execution'; [and] `no exchange can afford to take its market share 
percentages for granted' because `no exchange possesses a monopoly, 
regulatory or otherwise, in the execution of order flow from broker 
dealers' . . .'' \46\ Accordingly, the Exchange does not believe its 
proposed fee change imposes any burden on competition that is not 
necessary or appropriate in furtherance of the purposes of the Act.
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    \43\ See supra note 37.
    \44\ See supra note 28.
    \45\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005).
    \46\ NetCoalition v. SEC, 615 F.3d 525, 539 (D.C. Cir. 2010) 
(quoting Securities Exchange Act Release No. 59039 (December 2, 
2008), 73 FR 74770, 74782-83 (December 9, 2008) (SR-NYSEArca-2006-
21)).
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    Accordingly, the Exchange believes that the proposed changes will 
not impose any burden on competition that is not necessary or 
appropriate in furtherance of the purposes of the Act because it will 
continue to encourage order flow, which provides greater volume and 
liquidity, benefiting all market participants by providing more trading 
opportunities and tighter spreads.

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,\47\ and Rule 19b-4(f)(2) \48\ 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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    \47\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \48\ 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-2023-03 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-2023-03. 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 such 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-2023-03 and should be submitted on 
or before March 7, 2023.
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    \49\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\49\
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-03055 Filed 2-13-23; 8:45 am]
BILLING CODE 8011-01-P


