Notice2021-25015
Self-Regulatory Organizations; Miami International Securities Exchange, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the MIAX Options Fee Schedule
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Published
November 17, 2021
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 86 Issue 219 (Wednesday, November 17, 2021)</title>
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[Federal Register Volume 86, Number 219 (Wednesday, November 17, 2021)]
[Notices]
[Pages 64277-64280]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2021-25015]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-93550; File No. SR-MIAX-2021-56]
Self-Regulatory Organizations; Miami International Securities
Exchange, LLC; Notice of Filing and Immediate Effectiveness of Proposed
Rule Change To Amend the MIAX Options Fee Schedule
November 10, 2021.
Pursuant to 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 October 29, 2021, Miami International Securities Exchange, LLC
(``MIAX'' or ``Exchange'') filed with the Securities and Exchange
Commission (``Commission'') the 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'').
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 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: (1) Amend the
criteria for Members \3\ to receive the additional incremental MIAX
Price Improvement Mechanism (``PRIME'') Agency Order (defined below)
credit that is available for Priority Customer \4\ PRIME Agency Orders
for Members who achieve Priority Customer Rebate Program (``PCRP'')
Tier 3 or higher and who achieve over a threshold of 0.60% of national
customer volume in multiply-listed options classes listed on MIAX
during the relevant month; and (2) make a minor, non-substantive
corrective edit.
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\3\ The term ``Member'' means an individual or organization
approved to exercise the trading rights associated with a Trading
Permit. Members are deemed ``members'' under the Exchange Act. See
Exchange Rule 100.
\4\ ``Priority Customer'' means a person or entity that (i) is
not a broker or dealer in securities, and (ii) does not place more
than 390 orders in listed options per day on average during a
calendar month for its own beneficial accounts(s). A ``Priority
Customer Order'' means an order for the account of a Priority
Customer. See Exchange Rule 100.
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Background
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. The PRIME mechanism applies to orders
on the Exchange's Simple Order Book.\5\
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\5\ The ``Simple Order Book'' is the Exchange's regular
electronic book of orders and quotes. See Exchange Rule 518(a)(15).
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The Priority Customer 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
options classes listed on MIAX entered and executed over the course of
the month (excluding QCC and cQCC Orders, Priority Customer-to-Priority
Customer Orders, C2C and cC2C Orders, PRIME and cPRIME AOC Responses,
PRIME and cPRIME Contra-side Orders, and PRIME and cPRIME Orders for
[[Page 64278]]
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 transmitted and
executed electronically on MIAX from Members and their Affiliates \6\
for purposes of the thresholds described in the PCRP table.
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\6\ 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#45282028272037362d2c3505282c243d2a35312c2a2b366b262a28"><span class="__cf_email__" data-cfemail="f29f979f909780819a9b82b29f9b938a9d82869b9d9c81dc919d9f">[email 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.
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Additional Agency Order Credit for Members in PCRP Tier 3 or Higher
The Exchange proposes to amend Section 1(a)(iii) of the Fee
Schedule to amend the criteria for Members to receive the additional
PRIME Agency Order credit that is available for Priority Customer PRIME
Agency Orders for Members who achieve PCRP Tier 3 or higher and who
achieve over a threshold of 0.60% of national customer volume in
multiply-listed options classes listed on MIAX during the relevant
month. Currently, any Member or its Affiliate that qualifies for PCRP
Tier 3 or higher is credited an additional $0.01 per contract on
incremental volume for each Priority Customer order executed in the
PRIME Auction as a PRIME Agency Order over a threshold of above 0.60%
of national customer volume in multiply-listed options classes listed
on MIAX during the relevant month.\7\
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\7\ The Exchange notes that the following orders are excluded
from counting towards this threshold: QCC and cQCC Orders, mini-
options, Priority Customer-to-Priority Customer Orders, C2C and cC2C
Orders, cPRIME Agency 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 MIAX Rule 1400. See Fee
Schedule, Section 1(a)(iii).
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The Exchange proposes to amend the criteria to include an
additional requirement for Members to receive the additional PRIME
Agency Order credit that is available for Priority Customer PRIME
Agency Orders for Members who achieve PCRP Tier 3 or higher and who
achieve over a threshold of 0.60% of national customer volume in
multiply-listed options classes listed on MIAX during the relevant
month. To qualify for the additional PRIME Agency Order credit, the
Exchange proposes that Members must also achieve greater than 0.85% in
Priority Customer complex volume on MIAX during a relevant month,
represented as a percentage of the total national customer volume in
multiply-listed options classes listed on MIAX during the same month.
Accordingly, with the proposed change, Members will be eligible to
receive the additional PRIME Agency Order credit of $0.01 per contract
for their incremental Priority Customer PRIME Agency Orders if the
Member executes over a monthly threshold of 0.60% of national customer
volume in multiply-listed options classes listed on MIAX during the
relevant month, the Member achieves PCRP Tier 3 or higher, and the
Member achieves greater than 0.85% in Priority Customer complex volume
on MIAX during a particular month, represented as a percentage of
national customer volume in multiply-listed options classes listed on
MIAX during the relevant month.
Fee Schedule Cleanup Item
The Exchange also proposes to amend Section 1(a)(iv) of the Fee
Schedule to make a minor, non-substantive corrective edit. In
particular, the Exchange proposes to amend the explanatory paragraph
immediately below the table in Section 1(a)(iv) of the Fee Schedule to
delete the phrase ``Non-Priority Customer-to-Non-Priority Customer
Orders.'' The purpose of this change is to remove an order type that
does not exist on the Exchange, which will provide clarity to all
market participants that the Fee Schedule is accurate and concise.
Implementation
The proposed changes will become effective on November 1, 2021.
2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
the Act and the rules and regulations thereunder applicable to the
Exchange and, in particular, the requirements of Section 6(b) of the
Act.\8\ Specifically, the Exchange believes the proposed rule change is
consistent with the Section 6(b)(5) \9\ requirements that the rules of
an exchange be designed to prevent fraudulent and manipulative acts and
practices, to promote just and equitable principles of trade, to foster
cooperation and coordination with persons engaged in regulating,
clearing, settling, processing information with respect to, and
facilitating transactions in securities, 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.
Additionally, the Exchange believes the proposed rule change is
consistent with the Section 6(b)(5) \10\ requirement that the rules of
an exchange not be designed to permit unfair discrimination between
customers, issuers, brokers, or dealers.
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\8\ 15 U.S.C. 78f(b).
\9\ 15 U.S.C. 78f(b)(5).
\10\ Id.
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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.'' \11\ There are currently
16 registered options exchanges competing for order flow. Based on
publicly-available information, and excluding index-based options, as
of October 20, 2021, no
[[Page 64279]]
single exchange has more than approximately 12% of the market share of
executed volume of multiply-listed equity and exchange-traded fund
(``ETF'') options trades, for the month of October 2021.\12\ Therefore,
no exchange possesses significant pricing power in the execution of
multiply-listed equity and ETF options order flow. More specifically,
as of October 20, 2021, the Exchange had a market share of
approximately 5.87% of executed volume of multiply-listed equity and
ETF options for the month of October 2021.\13\
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\11\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496 (June 29, 2005).
\12\ See MIAX's ``The Market at a Glance'', available at <a href="https://www.miaxoptions.com/">https://www.miaxoptions.com/</a> (last visited October 20, 2021).
\13\ See id.
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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/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).\14\ 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.
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\14\ See Securities Exchange Act Release No. 85304 (March 13,
2019), 84 FR 10144 (March 19, 2019) (SR-PEARL-2019-07).
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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 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 the criteria for
Members to receive the additional PRIME Agency Order credit that is
available for Priority Customer PRIME Agency Orders for Members who
achieve PCRP Tier 3 or higher to include an additional requirement is
reasonable, equitably allocated and not unfairly discriminatory because
this change is for business and competitive reasons.
The Exchange believes its proposal is consistent with Section
6(b)(4) of the Act \15\ because it applies equally to all participants
with similar order flow who reach Tier 3 of the PCRP or higher. The
Exchange believes that the proposed new requirement to achieve the
additional PRIME Agency Order credit will encourage market participants
to execute greater Priority Customer complex volume in order to receive
the additional PRIME Agency Order credit. The Exchange believes this
will result in increased liquidity that benefits all Exchange
participants by providing more trading opportunities and tighter
spreads.
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\15\ 15 U.S.C. 78f(b)(4).
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Further, the Exchange believes that its proposal will continue to
encourage 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. This attracts Market Makers and other liquidity
providers, thus, facilitating price improvement in the auction process,
signaling additional corresponding increase in order flow from other
market participants, and, as a result, increasing liquidity on the
Exchange. The PCRP 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 obtain the highest
volume threshold and receive a credit in a manner that enables the
Exchange to improve its overall competitiveness and strengthen its
market quality for all market participants.
In addition, the Exchange believes that its proposal is consistent
with Section 6(b)(5) of the Act \16\ 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 and complex 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 and/or complex order flow.
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\16\ 15 U.S.C. 78f(b)(4).
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The Exchange believes the proposed change to remove the incorrect
phrase regarding a certain order type promotes just and equitable
principles of trade and removes impediments to and perfects the
mechanism of a free and open market and a national market system
because the proposed change makes a clarifying, non-substantive edit to
the Fee Schedule. The Exchange believes that this proposed change will
provide greater clarity to Members and the public regarding the
Exchange's Fee Schedule and that it is in the public interest for the
Fee Schedule to be accurate and concise so as to eliminate the
potential for confusion.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
result in any burden on competition that is not necessary or
appropriate in furtherance of the purposes of the Act.
Intra-Market Competition
The Exchange does not believe that other market participants at the
Exchange would be placed at a relative disadvantage by the proposed
change to amend the criteria for Members to receive the additional
PRIME Agency Order credit that is available for Priority Customer PRIME
Agency Orders for Members who achieve PCRP Tier 3 or higher to include
an additional requirement. The proposed change is designed to attract
additional order flow to the Exchange. Accordingly, the Exchange
believes that the proposal will not impose any burden on competition
not necessary or appropriate in furtherance of the purposes of the Act
because it will continue to encourage Priority Customer order flow and
an increase in Priority Customer order flow will bring greater volume
and liquidity, which benefits all market participants by providing more
trading opportunities and tighter spreads.
Inter-Market Competition
The Exchange operates in a highly competitive market in which
market participants can readily favor competing venues if they deem fee
levels at a particular venue to be excessive. There are currently 16
registered options exchanges competing for order flow. Based on
publicly-available
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information, and excluding index-based options, no single exchange has
exceeded approximately 12% of the market share of executed volume of
multiply-listed equity and ETF options trades as of October 20, 2021,
for the month of October 2021.\17\ Therefore, no exchange possesses
significant pricing power in the execution of multiply-listed equity
and ETF options order flow. More specifically, as of October 20, 2021,
the Exchange had a market share of approximately 5.87% of executed
volume of multiply-listed equity and ETF options for the month of
October 2021. In such an environment, the Exchange must continually
adjust its transaction and non-transaction fees to remain competitive
with other exchanges and to attract order flow. The Exchange believes
that the proposed rule changes reflect this competitive environment
because they modify the Exchange's fees in a manner that encourages
market participants to provide Priority Customer liquidity and to send
order flow to the Exchange. To the extent this is achieved, all the
Exchange's market participants should benefit from the improved market
quality.
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\17\ See supra note 12.
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Fee Schedule Cleanup Item
The Exchange believes that the proposed change to remove an
incorrect order type will not result in any burden on competition that
is not necessary or appropriate in furtherance of the purposes of the
Act. The proposed rule change is not a competitive filing but rather is
designed to remedy a minor non-substantive issue and provide added
clarity to the Fee Schedule in order to avoid potential confusion on
the part of market participants. In addition, the Exchange does not
believe the proposal will impose any burden on inter-market competition
as the proposal does not address any competitive issues and is intended
to protect investors by providing further transparency regarding the
Exchange's Fee Schedule.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
Written comments were neither solicited nor received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become effective pursuant to Section
19(b)(3)(A)(ii) of the Act,\18\ and Rule 19b-4(f)(2) \19\ thereunder.
At any time within 60 days of the filing of the proposed rule change,
the Commission summarily may temporarily suspend such rule change if it
appears to the Commission that such action is necessary or appropriate
in the public interest, for the protection of investors, or otherwise
in furtherance of the purposes of the Act. If the Commission takes such
action, the Commission shall institute proceedings to determine whether
the proposed rule should be approved or disapproved.
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\18\ 15 U.S.C. 78s(b)(3)(A)(ii).
\19\ 17 CFR 240.19b-4(f)(2).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
<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#8cfef9e0e9a1efe3e1e1e9e2f8ffccffe9efa2ebe3fa"><span class="__cf_email__" data-cfemail="0e7c7b626b236d6163636b607a7d4e7d6b6d20696178">[email protected]</span></a>. Please include
File Number SR-MIAX-2021-56 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-2021-56. 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-2021-56, and should be submitted on
or before December 8, 2021.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\20\
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\20\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-25015 Filed 11-16-21; 8:45 am]
BILLING CODE 8011-01-P
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