Home/Federal/Federal Register/2021-22689

Notice2021-22689

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

Primary source

Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.

Published

October 19, 2021

Issuing agencies

Securities and Exchange Commission

Full Text

<html>
<head>
<title>Federal Register, Volume 86 Issue 199 (Tuesday, October 19, 2021)</title>
</head>
<body><pre>
[Federal Register Volume 86, Number 199 (Tuesday, October 19, 2021)]
[Notices]
[Pages 57869-57874]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2021-22689]

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-93306; File No. SR-MIAX-2021-42]

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

October 13, 2021.
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 September 30, 2021, 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.
---------------------------------------------------------------------------

\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

The Exchange is filing a proposal to amend the MIAX Options Fee
Schedule (the ``Fee Schedule'').
The text of the proposed rule change is available on the Exchange's
website at <a href="http://www.miaxoptions.com/rule-filings">http://www.miaxoptions.com/rule-filings</a>, 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

[[Page 57870]]

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 the Fee Schedule to modify (i) the
MIAX Price Improvement Mechanism (``PRIME'') Fees table and
accompanying notes; and (ii) the MIAX Complex Price Improvement
Mechanism (``cPRIME'') Fees table. The Exchange proposes to implement
the fee changes effective October 1, 2021.
Background
PRIME is a process by which a Member \3\ 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 \4\ or an AOC eQuote.\5\ The PRIME mechanism is used
for orders on the Exchange's Simple Order Book.\6\ The Exchange notes
that for Complex Orders \7\ on the Strategy Book,\8\ the Exchange's
cPRIME \9\ mechanism operates in the same manner for processing and
execution of cPRIME Orders that is used for PRIME Orders on the Simple
Order Book.
---------------------------------------------------------------------------

\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\ An Auction-or-Cancel or ``AOC'' order is a limit order used
to provide liquidity during a specific Exchange process (such as the
Opening Imbalance process described in Rule 503) with a time in
force that corresponds with that event. AOC orders are not displayed
to any market participant, are not included in the MBBO and
therefore are not eligible for trading outside of the event, may not
be routed, and may not trade at a price inferior to the away
markets. See Exchange Rule 516(b)(4).
\5\ AOC eQuote An Auction or Cancel or ``AOC'' eQuote is a quote
submitted by a Market Maker to provide liquidity in a specific
Exchange process (such as the Opening Imbalance Process described in
Rule 503) with a time in force that corresponds with the duration of
that event and will automatically expire at the end of that event.
AOC eQuotes are not displayed to any market participant, are not
included in the MBBO and therefore are not eligible for trading
outside of the event. An AOC eQuote does not automatically cancel or
replace the Market Maker's previous Standard quote or eQuote. See
Exchange Rule 517(a)(2)(ii).
\6\ The ``Simple Order Book'' is the Exchange's regular
electronic book of orders and quotes. See Exchange Rule 518(a)(15).
\7\ 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. Mini-options may only be part of a complex order that
includes other mini-options. 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).
\8\ The ``Strategy Book'' is the Exchange's electronic book of
complex orders and complex quotes. See Exchange Rule 518(a)(17).
\9\ ``cPRIME'' is the process by which a Member may
electronically submit a ``cPRIME Order'' (as defined in Rule
518(b)(7)) it represents as agent (a ``cPRIME Agency Order'')
against principal or solicited interest for execution (a ``cPRIME
Auction''), subject to the restrictions set forth in Exchange Rule
515A, Interpretation and Policy .12. See Exchange Rule 515A.
---------------------------------------------------------------------------

Exchange Rule 518(b)(7) defines a cPRIME Order as a type of complex
order that is submitted for participation in a cPRIME Auction and
trading of cPRIME Orders is governed by Rule 515A, Interpretation and
Policies.12.\10\ cPRIME Orders are processed and executed in the
Exchange's PRIME [sic] mechanism, the same mechanism that the Exchange
uses to process and execute simple PRIME orders, pursuant to Exchange
Rule 515A.\11\ 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 on
the Exchange's Strategy Book, 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.
---------------------------------------------------------------------------

\10\ 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).
\11\ Id.
---------------------------------------------------------------------------

Responder to PRIME Auction Fee
The Exchange proposes to amend the Fee Schedule to modify the
transaction fees for Members that participate in the PRIME Auction.
Specifically, the Exchange proposes to amend the Responder to PRIME
Auction Fee, Per Contract Fee for Non-Penny Classes, in the PRIME Fees
table. Currently, the Exchange charges a fee of $0.99 for all Origins
(Priority Customer,\12\ Public Customer \13\ that is not a Priority
Customer, MIAX Market Maker,\14\ Non-MIAX Market Maker, Non-Member
Broker-Dealer, and Firm). The Exchange now proposes to increase the
Responder fee for Non-Penny Classes from $0.99 to $1.10 per contract
for all Origins in the PRIME Fees table.
---------------------------------------------------------------------------

\12\ 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 290 orders in listed options per day on average
during a calendar month for its own beneficial account(s). See
Exchange Rule 100.
\13\ The term ``Public Customer'' means a person that is not a
broker or dealer in securities. See Exchange Rule 100.
\14\ The term ``Market Makers'' refers to ``Lead Market
Makers'', ``Primary Lead Market Makers'' and ``Registered Market
Makers'' collectively. See Exchange Rule 100.
---------------------------------------------------------------------------

The purpose of adjusting the per contract Responder fee for Non-
Penny Classes in the PRIME Fees table for all Origins is for business
and competitive reasons. In order to attract order flow the Exchange
initially set its PRIME rebates and fees so that they were meaningfully
higher/lower than other options exchanges that provide a comparable
price improvement mechanism. The Exchange now believes that it is
appropriate to further adjust these fees so that they are more in line
with other exchanges,\15\ but remain competitive such that it should
enable the Exchange to continue to attract order

[[Page 57871]]

flow to PRIME Auctions and to also maintain market share.
---------------------------------------------------------------------------

\15\ The Exchange notes that BOX Options has a $1.15 responder
fee in Non-Penny classes. See BOX Options Fee Schedule as of
September 1, 2021, Section I. Electronic Transaction Fees, B. PIP
and COPIP Transactions at <a href="https://boxoptions.com/regulatory/fee-schedule/">https://boxoptions.com/regulatory/fee-schedule/</a>. The Exchange also notes that Nasdaq MRX has a responder
fee of $1.10 in Non-Penny classes. See Nasdaq MRX Options 7 Pricing
Schedule, Section 3. Regular Order Fees and Rebates, A. PIM Pricing
for Regular and Complex Orders at <a href="https://listingcenter.nasdaq.com/rulebook/mrx/rules/mrx-options-7">https://listingcenter.nasdaq.com/rulebook/mrx/rules/mrx-options-7</a>.
---------------------------------------------------------------------------

Priority Customer PRIME Break-Up Credit
The Exchange proposes to amend the Fee Schedule to modify the PRIME
Break-up Credit per contract credit for Non-Penny Classes for the
Priority Customer Origin in PRIME. Currently, the Exchange provides
Priority Customers a PRIME break-up credit of $0.60 per contract for
Non-Penny Classes in a PRIME Auction. The Exchange now proposes to
adopt an alternative Priority Customer PRIME break-up credit of $0.69,
instead of $0.60, per contract for Non-Penny Classes when the order
breakup percentage is greater than 40%. Orders in this segment with
order break-up percentages of 40% or less will continue to receive the
$0.60 per contract break-up credit. The Exchange proposes to add new
footnote ``*'' after the PRIME Fee table that will provide the
following: MIAX will apply an enhanced PRIME Break-up credit of $0.69
per contract to the EEM that submitted a PRIME Order in Non-Penny
Classes that is submitted to the PRIME Auction that trades with PRIME
AOC Responses and/or PRIME Participating Quotes or Orders, if the PRIME
Order experiences a break-up of greater than forty percent (40%).
The decision to offer an alternative enhanced Priority Customer
Break-up credit is based on an analysis of current revenue and volume
levels and is designed to encourage Priority Customer order flow to
PRIME Auctions.
Remove Discounted PRIME Response Fee for PCRP Tier 3 or Higher
Next, the Exchange proposes to remove the discounted PRIME Response
fee for standard options in Penny Classes and discounted PRIME Response
fee for standard options in Non-Penny Classes for Members or their
Affiliates that qualifies for Priority Customer Rebate Program
(``PCRP'') volume tier 3 or higher.
Currently MIAX will assess the Responder to PRIME Auction Fee to:
(i) A PRIME AOC Response that executes against a PRIME Order, and (ii)
a PRIME Participating Quote or Order that executes against a PRIME
Order. MIAX will apply the PRIME Break-up credit to the EEM that
submitted the PRIME Order for agency contracts that are submitted to
the PRIME Auction that trade with a PRIME AOC Response or a PRIME
Participating Quote or Order that trades with the PRIME Order.
Transaction fees in mini-options will be 1/10th of the standard per
contract fee or rebate described in the table above for the PRIME
Auction. MIAX will assess the standard transaction fees to a PRIME AOC
Response if it executes against unrelated orders. Any Member or its
Affiliate \16\ that qualifies for Priority Customer Rebate Program
volume tiers 3 or higher and submits a PRIME AOC Response that is
received during the Response Time Interval and executed against the
PRIME Order, or a PRIME Participating Quote or Order that is received
during the Response Time Interval and executed against the PRIME Order,
will be assessed a Discounted PRIME Response Fee of $0.46 per contract
for standard options in Penny Program classes. Any Member or its
Affiliate that qualifies for Priority Customer Rebate Program
(``PCRP'') volume tiers 3 or higher and submits a PRIME AOC Response
that is received during the Response Time Interval and executed against
the PRIME Order, or a PRIME Participating Quote or Order that is
received during the Response Time Interval and executed against the
PRIME Order, will be assessed a Discounted PRIME Response Fee of $0.95
per contract for standard options in non-Penny Program classes.
---------------------------------------------------------------------------

\16\ 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
<a href="/cdn-cgi/l/email-protection#4d2028202f283f3e25243d0d20242c35223d392422233e632e2220"><span class="__cf_email__" data-cfemail="bad7dfd7d8dfc8c9d2d3cafad7d3dbc2d5caced3d5d4c994d9d5d7">[email&#160;protected]</span></a> 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.
---------------------------------------------------------------------------

The Exchange now proposes to remove both the Discounted PRIME
Response Fee of $0.46 per contract for standard options in Penny
Classes and the Discounted PRIME Response Fee of $0.95 per contract for
standard options in Non-Penny Classes, and will remove the portion that
describes the discounted fees from the accompanying footnotes. The
purpose of this change is for business and competitive reasons.
Responder to cPRIME Auction Fee
The Exchange proposes to amend the Fee Schedule to modify the
transaction fees for Members that participate in the cPRIME Auction.
Specifically, the Exchange proposes to amend the per contract Responder
fee for Non-Penny Classes in a cPRIME Auction for all Origins in the
cPRIME Fees table. Currently, the Exchange charges a Responder fee of
$0.99 per contract for Non-Penny Classes in all Origins for a cPRIME
Auction. The Exchange now proposes to increase the Responder fee to
$1.10 per contract for Non-Penny Classes for all Origins in a cPRIME
Auction.
The purpose of adjusting the per contract Responder fee for Non-
Penny Classes for all Origins is for business and competitive reasons.
In order to attract order flow the Exchange initially set its cPRIME
rebates and fees so that they were meaningfully higher/lower than other
options exchanges that provide a comparable complex order price
improvement mechanism. The Exchange now believes that it is appropriate
to further adjust these fees so that they are more in line with other
exchanges,\17\ but will remain competitive such that it should enable
the Exchange to continue to attract complex order flow to cPRIME
Auctions and also maintain market share.
---------------------------------------------------------------------------

\17\ See supra note 15.
---------------------------------------------------------------------------

2. Statutory Basis
The Exchange believes that its proposal to amend its Fee Schedule
is consistent with Section 6(b) of the Act \18\ in general, and
furthers the objectives of Section 6(b)(4) of the Act \19\ 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 open market and a national
market system, and, in general to protect investors and the public
interest and is not designed to permit unfair

[[Page 57872]]

discrimination between customers, issuers, brokers and dealers.
---------------------------------------------------------------------------

\18\ 15 U.S.C. 78f(b).
\19\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------

The Exchange believes that 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. 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 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.'' \20\ There are currently
16 registered options exchanges competing for order flow. Based on
publicly-available information, and excluding index-based options, for
the month of September 2021, 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 September 21, 2021.\21\ Therefore, no exchange possesses
significant pricing power in the execution of multiply-listed equity
and ETF options order flow. More specifically, as of September 21,
2021, the Exchange had a market share of approximately 5.47% of
executed volume of multiply-listed equity and ETF options for the month
of September 2021.\22\
---------------------------------------------------------------------------

\20\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496 (June 29, 2005).
\21\ See MIAX's ``The Market at a Glance'', available at <a href="https://www.miaxoptions.com/">https://www.miaxoptions.com/</a> (last visited September 21, 2021).
\22\ See id.
---------------------------------------------------------------------------

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/or non-
transaction fee changes. For example, on February 28, 2019, the
Exchange's affiliate, MIAX PEARL, LLC (``MIAX Pearl''), filed with the
Commission a proposal to increase Taker fees in certain Tiers for
options transactions in certain Penny classes for Priority Customers
and decrease Maker rebates in certain Tiers for options transactions in
Penny classes for Priority Customers (which fee was to be effective
March 1, 2019).\23\ MIAX Pearl experienced a decrease in total market
share between the months of February and March of 2019, after the fees
were in effect. Accordingly, the Exchange believes that the MIAX Pearl
March 1, 2019, fee change may have contributed to the decrease in the
MIAX Pearl's market share and, as such, the Exchange believes
competitive forces constrain options exchange transaction fees and
market participants can shift order flow based on fee changes
instituted by the exchanges.
---------------------------------------------------------------------------

\23\ See Securities Exchange Act Release No. 85304 (March 13,
2019), 84 FR 10144 (March 19, 2019) (SR-PEARL-2019-07).
---------------------------------------------------------------------------

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 fee schedule, like
those of other options exchanges', which the Exchange believes provides
incentives to Members to increase order flow of certain qualifying
orders.
The Exchange believes its proposal to amend its Responder fees for
Non-Penny Classes for all Origins in PRIME and cPRIME Auctions is
reasonable, equitably allocated and not unfairly discriminatory because
these changes are for business and competitive reasons. In order to
attract order flow the Exchange initially set its rebates and fees for
its PRIME and cPRIME Auctions so that they were meaningfully higher/
lower than other options exchanges that provide a comparable price
improvement mechanisms. The Exchange now believes that it is
appropriate to further adjust these fees so that they are more in line
with those of other exchanges,\24\ but will remain competitive and
should enable the Exchange to continue to attract order flow to PRIME
and cPRIME Auctions and also maintain market share.
---------------------------------------------------------------------------

\24\ See supra note 15.
---------------------------------------------------------------------------

The Exchange also believes that its proposal to amend the Responder
fees for Non-Penny Classes for all Origins in PRIME and cPRIME Auctions
is not unfairly discriminatory as all Origins that respond to a PRIME
or cPRIME Auction will be assessed an identical fee and access to the
Exchange is offered on terms that are not unfairly discriminatory. The
Exchange believes it is equitable and not unfairly discriminatory to
increase the Responder fee as certain other option exchanges that offer
similar price improvement functionality charge similar fees.\25\ The
Exchange believes that it is appropriate to increase the fees so that
they are more in line with other exchanges,\26\ and will still remain
competitive such that they should enable the Exchange to continue to
attract order flow to its PRIME and cPRIME Auctions and maintain market
share.
---------------------------------------------------------------------------

\25\ See id.
\26\ See id.
---------------------------------------------------------------------------

\27\ The Cboe Exchange provides for a $0.60 per contract credit
in Non-Penny classes. See Cboe Fee Schedule, ``Break-Up Credits,''
available at <a href="https://cdn.cboe.com/resources/membership/Cboe_FeeSchedule.pdf">https://cdn.cboe.com/resources/membership/Cboe_FeeSchedule.pdf</a>.
---------------------------------------------------------------------------

The Exchange believes its proposal to remove the discounted PRIME
Response fees for Penny and Non-Penny Classes for Members who achieve
Tier 3 or higher in the PCRP is reasonable, equitably allocated and not
unfairly discriminatory because these changes are for business and
competitive reasons. In order to attract order flow, the Exchange
initially set its rebates and fees so that they were meaningfully
higher/lower than other options exchanges that provide a comparable
price improvement mechanism. The Exchange conducted an internal review
and analysis of fees and rebates and determined that it was appropriate
to

[[Page 57873]]

remove the discounted PRIME Response fees so that all PRIME response
fees are more line with other exchanges,\28\ but will still remain
highly competitive such that it should enable the Exchange to continue
to attract order flow to PRIME Auctions and also maintain market share.
---------------------------------------------------------------------------

\28\ See supra note 15.
---------------------------------------------------------------------------

In addition, The Exchange believes that its proposal is consistent
with Section 6(b)(5) of the Act \29\ 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.
---------------------------------------------------------------------------

\29\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

The Exchange believes that increasing the Responder fees for PRIME
and cPRIME Auctions is equitable and not unfairly discriminatory
because the proposed fees will apply equally to all Origins that
respond to PRIME and cPRIME Auctions. The Exchange believes that the
application of this fee is equitable and not unfairly discriminatory
because the fee is identical for all market participants that respond
to PRIME and cPRIME Auctions.

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

In accordance with Section 6(b)(8) of the Act,\30\ 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. 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 its proposal to amend its Responder
fees for PRIME and cPRIME Auctions is uniform and will be applied
equally to all Origins that respond to PRIME and cPRIME Auctions.
---------------------------------------------------------------------------

\30\ 15 U.S.C. 78f(b)(8).
---------------------------------------------------------------------------

The Exchange does not believes its proposal to remove the
discounted PRIME Response fees for Penny and Non-Penny Classes for
Members who achieve Tier 3 or higher in the PCRP will impose any burden
to intra-market competition that is not necessary or appropriate in
furtherance of the purposes of the Act. The Exchange conducted an
internal review and analysis of fees and rebates and determined that it
was appropriate to remove the discounted PRIME Response fees so that
all PRIME response fees are more line with other exchanges,\31\ but
will still remain highly competitive such that it should enable the
Exchange to continue to attract order flow to PRIME Auctions and also
maintain market share. The removal of these fees will impact all
Priority Customers equally.
---------------------------------------------------------------------------

\31\ See supra note 15.
---------------------------------------------------------------------------

The Exchange believes its proposal to offer an enhanced PRIME
Break-up Credit for Non-Penny Classes for Priority Customers is
reasonable, equitably allocated and not unfairly discriminatory because
this change is for business and competitive reasons. The Exchange
believes that its proposal will encourage additional Priority Customer
order flow to PRIME Auctions. Increased Priority Customer order flow
benefits all market participants because it continues to attract
liquidity to the Exchange by providing more trading opportunities and
tighter spreads.
The Exchange 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,
other competing options exchanges currently have similar rebates in
place in connection with similar price improvement auctions.\32\
Additionally, 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 12-13% of the market share.\33\ 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.'' \34\ 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' . . .'' \35\
Accordingly, the Exchange does not believe its proposed fee changes
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act.
---------------------------------------------------------------------------

\32\ See supra note 15.
\33\ See supra note 21.
\34\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496, 37499 (June 29, 2005).
\35\ 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)).
---------------------------------------------------------------------------

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,\36\ and Rule 19b-4(f)(2) \37\ 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

[[Page 57874]]

whether the proposed rule should be approved or disapproved.
---------------------------------------------------------------------------

\36\ 15 U.S.C. 78s(b)(3)(A)(ii).
\37\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------

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

<bullet> Use the Commission's internet comment form (<a href="http://www.sec.gov/rules/sro.shtml">http://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#96e4e3faf3bbf5f9fbfbf3f8e2e5d6e5f3f5b8f1f9e0"><span class="__cf_email__" data-cfemail="86f4f3eae3abe5e9ebebe3e8f2f5c6f5e3e5a8e1e9f0">[email&#160;protected]</span></a>. Please include
File Number SR-MIAX-2021-42 on the subject line.

Paper Comments

<bullet> 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-2021-42. 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 (<a href="http://www.sec.gov/rules/sro.shtml">http://www.sec.gov/rules/sro.shtml</a>).
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-2021-42, and should be submitted on
or before November 9, 2021.
---------------------------------------------------------------------------

\38\ 17 CFR 200.30-3(a)(12).

For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\38\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-22689 Filed 10-18-21; 8:45 am]
BILLING CODE 8011-01-P

</pre><script data-cfasync="false" src="/cdn-cgi/scripts/5c5dd728/cloudflare-static/email-decode.min.js"></script></body>
</html>

View on FederalRegister.gov →Plain-text source

Indexed from Federal Register on October 19, 2021.

This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.