Notice2022-07338
Self-Regulatory Organizations; Miami International Securities Exchange LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Its Fee Schedule To Extend the SPIKES Options Market Maker Incentive Program Until June 30, 2022
Primary source
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Published
April 7, 2022
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 87 Issue 67 (Thursday, April 7, 2022)</title>
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[Federal Register Volume 87, Number 67 (Thursday, April 7, 2022)]
[Notices]
[Pages 20492-20495]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-07338]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-94574; File No. SR-MIAX-2022-12]
Self-Regulatory Organizations; Miami International Securities
Exchange LLC; Notice of Filing and Immediate Effectiveness of a
Proposed Rule Change To Amend Its Fee Schedule To Extend the SPIKES
Options Market Maker Incentive Program Until June 30, 2022
April 1, 2022.
Pursuant to the provisions of Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice
is hereby given that on March 23, 2022, Miami International Securities
Exchange LLC (``MIAX'' or ``Exchange'') filed with the Securities and
Exchange Commission (``Commission'') a proposed rule change as
described in Items I, II, and III below, which Items have been prepared
by the Exchange. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange is filing a proposal to amend the MIAX Options Fee
Schedule (the ``Fee Schedule'') to extend the SPIKES Options Market
Maker Incentive Program (the ``Incentive Program'') until June 30,
2022.
The text of the proposed rule change is available on the Exchange's
website at <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 extend the Incentive Program until June
30, 2022.
Background
On October 12, 2018, the Exchange received approval from the
Commission to list and trade on the Exchange options on the
SPIKES[supreg] Index, a new index that measures expected 30-day
volatility of the SPDR S&P 500 ETF Trust (commonly known and referred
to by its ticker symbol, ``SPY'').\3\ The Exchange adopted its initial
SPIKES transaction fees on February 15, 2019 and adopted a new section
of the Fee Schedule--Section 1(a)(xi), SPIKES--for
[[Page 20493]]
those fees.\4\ Options on the SPIKES Index began trading on the
Exchange on February 19, 2019.
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\3\ See Securities Exchange Act Release No. 84417 (October 12,
2018), 83 FR 52865 (October 18, 2018) (SR-MIAX-2018-14) (Order
Granting Approval of a Proposed Rule Change by Miami International
Securities Exchange, LLC to List and Trade on the Exchange Options
on the SPIKES[supreg] Index).
\4\ See Securities Exchange Release No. 85283 (March 11, 2019),
84 FR 9567 (March 15, 2019) (SR-MIAX-2019-11). The Exchange
initially filed the proposal on February 15, 2019 (SR-MIAX-2019-04).
That filing was withdrawn and replaced with SR-MIAX-2019-11. On
September 30, 2020, the Exchange filed its proposal to, among other
things, reorganize the Fee Schedule to adopt new Section 1(b),
Proprietary Products Exchange Fees, and moved the fees and rebates
for SPIKES options into new Section 1(b)(i). See Securities Exchange
Act Release No. 90146 (October 9, 2020), 85 FR 65443 (October 15,
2020) (SR-MIAX-2020-32); Securities Exchange Act Release No. 90814
(December 29, 2020), 86 FR 327 (January 5, 2021) (SR-MIAX-2020-39).
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Incentive Program Extension
On September 30, 2021, the Exchange filed its initial proposal to
implement a SPIKES Options Market Maker Incentive Program for SPIKES
options to incentivize Market Makers \5\ to improve liquidity,
available volume, and the quote spread width of SPIKES options
beginning October 1, 2021, and ending December 31, 2021.\6\ Technical
details regarding the Incentive Program were published in a Regulatory
Circular on September 30, 2021.\7\ On October 12, 2021, the Exchange
withdrew SR-MIAX-2021-45 and refiled its proposal to implement the
Incentive Program to provide additional details.\8\ In that filing, the
Exchange specifically noted that the Incentive Program would expire at
the end of the period (December 31, 2021) unless the Exchange filed
another 19b-4 Filing to amend the fees (or extend the Incentive
Program).\9\ On December 23, 2021, the Exchange filed its proposal to,
among other things, extend the Incentive Program for three months, with
the Incentive Program ending on March 31, 2022.\10\ In that filing, the
Exchange specifically noted that the Incentive Program would expire at
the end of the period (March 31, 2022) unless the Exchange filed
another 19b-4 Filing to amend the terms (or extend the Incentive
Program).\11\ The Exchange now proposes to extend the Incentive Program
for an additional three months, with the Incentive Program ending on
June 30, 2022.\12\
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\5\ The term ``Market Makers'' refers to ``Lead Market Makers'',
``Primary Lead Market Makers'' and ``Registered Market Makers''
collectively. See Exchange Rule 100.
\6\ See SR-MIAX-2021-45.
\7\ See MIAX Options Regulatory Circular 2021-56, SPIKES Options
Market Maker Incentive Program (September 30, 2021) available at
<a href="https://www.miaxoptions.com/sites/default/files/circularfiles/MIAX_Options_RC_2021_56.pdf">https://www.miaxoptions.com/sites/default/files/circularfiles/MIAX_Options_RC_2021_56.pdf</a>.
\8\ See Securities Exchange Act Release No. 93424 (October 26,
2021), 86 FR 60322 (November 1, 2021) (SR-MIAX-2021-49).
\9\ See id., at note 4.
\10\ See Securities Exchange Act Release No. 93881 (December 30,
2021), 87 FR 517 (January 5, 2022) (SR-MIAX-2021-63).
\11\ See id., at footnote 20.
\12\ The Exchange notes that at the end of the extension period,
the Incentive Program will expire unless the Exchange files another
19b-4 Filing to amend the terms or extend the Incentive Program.
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The Exchange proposes to extend the Incentive Program for SPIKES
options to continue to incentivize Market Makers to improve liquidity,
available volume, and the quote spread width of SPIKES options.
Currently, to be eligible to participate in the Incentive Program, a
Market Maker must meet certain minimum requirements related to quote
spread width in certain in-the-money (ITM) and out-of-the-money (OTM)
options as determined by the Exchange and communicated to Members via
Regulatory Circular.\13\ Market Makers must also satisfy a minimum time
in the market in the front 2 expiry months of 70%, and have an average
quote size of 25 contracts. The Exchange established two separate
incentive compensation pools that are used to compensate Market Makers
that satisfy the criteria pursuant to the Incentive Program.
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\13\ See supra note 7.
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The first pool (Incentive 1) has a total amount of $40,000 per
month, which is allocated to Market Makers that meet the minimum
requirements of the Incentive Program. Market Makers are required to
meet minimum spread width requirements in a select number of ITM and
OTM SPIKES option contracts as determined by the Exchange and
communicated to Members via Regulatory Circular.\14\ A complete
description of how the Exchange calculates the minimum spread width
requirements in ITM and OTM SPIKES options can be found in the
published Regulatory Circular.\15\ Market Makers are also required to
maintain the minimum spread width, described above, for at least 70% of
the time in the front two (2) SPIKES options contract expiry months and
maintain an average quote size of at least 25 SPIKES options contracts.
The amount available to each individual Market Maker is capped at
$10,000 per month for satisfying the minimum requirements of the
Incentive Program. In the event that more than four Market Makers meet
the requirements of the Incentive Program, each qualifying Market Maker
is entitled to receive a pro-rated share of the $40,000 monthly
compensation pool dependent upon the number of qualifying Market Makers
in that particular month.
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\14\ See id.
\15\ See id.
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The second pool (Incentive 2 Pool) is capped at a total amount of
$100,000 per month which is used during the Incentive Program to
further incentivize Market Makers who meet or exceed the requirements
of Incentive 1 (``qualifying Market Makers'') to provide tighter quote
width spreads. The Exchange ranks each qualifying Market Maker's quote
width spread relative to each other qualifying Market Maker's quote
width spread. Market Makers with tighter spreads in certain strikes, as
determined by the Exchange and communicated to Members via Regulatory
Circular,\16\ are eligible to receive a pro-rated share of the
compensation pool as calculated by the Exchange and communicated to
Members via Regulatory Circular,\17\ not to exceed $25,000 per Member
per month. Qualifying Market Makers are ranked relative to each other
based on the quality of their spread width (i.e., tighter spreads are
ranked higher than wider spreads) and the Market Maker with the best
quality spread width receives the highest rebate, while other eligible
qualifying Market Makers receive a rebate relative to their quality
spread width.
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\16\ See id.
\17\ See id.
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The Exchange now proposes to extend the Incentive Program until
June 30, 2022. The Exchange does not propose to make any amendments to
how it calculates any of the incentives provided for in Incentive Pools
1 or 2. The details of the Incentive Program can continue to be found
in the Regulatory Circular that was published on September 30, 2021 to
all Exchange Members.\18\ The purpose of this extension is to continue
to incentivize Market Makers to improve liquidity, available volume,
and the quote spread width of SPIKES options. The Exchange will
announce the extension of the Incentive Program to all Members via a
Regulatory Circular.
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\18\ See id.
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2. Statutory Basis
The Exchange believes that its proposal to amend its Fee Schedule
is consistent with Section 6(b) of the Act \19\ in general, and
furthers the objectives of Section 6(b)(4) of the Act \20\ in
particular, in that it is an equitable allocation of reasonable fees
and other charges among its members and issuers and other persons using
its facilities. The Exchange also believes the proposal furthers the
objectives of Section 6(b)(5) of the Act in that it is designed to
promote just and equitable principles of trade, to remove impediments
to and perfect the mechanism of a free and
[[Page 20494]]
open market and a national market system, and, in general to protect
investors and the public interest and is not designed to permit unfair
discrimination between customers, issuers, brokers and dealers.
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\19\ 15 U.S.C. 78f(b).
\20\ 15 U.S.C. 78f(b)(4) and (5).
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The Exchange believes that it is reasonable, equitable, and not
unfairly discriminatory to extend the Incentive Program for Market
Makers in SPIKES options. The Incentive Program is reasonably designed
because it will continue to incentivize Market Makers to provide quotes
and increased liquidity in select SPIKES options contracts. The
Incentive Program is reasonable, equitably allocated and not unfairly
discriminatory because all Market Makers in SPIKES options may continue
to qualify for Incentive 1 and Incentive 2, dependent upon each Market
Maker's quoting in SPIKES options in a particular month. Additionally,
if a SPIKES Market Maker does not satisfy the requirements of Incentive
Pool 1 or 2, then it simply will not receive the rebate offered by the
Incentive Program for that month.
The Exchange believes that it is reasonable, equitable and not
unfairly discriminatory to continue to offer this financial incentive
to Market Makers in SPIKES options because it will continue to benefit
all market participants trading in SPIKES options. SPIKES options is a
Proprietary Product on the Exchange and the continuation of the
Incentive Program encourages Market Makers in SPIKES options to satisfy
a heightened quoting standard, average quote size, and time in market.
A continued increase in quoting activity and tighter quotes may yield a
corresponding increase in order flow from other market participants,
which benefits all investors by deepening the Exchange's liquidity
pool, potentially providing greater execution incentives and
opportunities, while promoting market transparency and improving
investor protection.
The Exchange believes that the Incentive Program is equitable and
not unfairly discriminatory because it will continue to promote an
increase in SPIKES options liquidity, which may facilitate tighter
spreads and an increase in trading opportunities to the benefit of all
market participants. The Exchange believes it is reasonable to operate
the Incentive Program for a continued limited period of time to
strengthen market quality for all market participants. The resulting
increased volume and liquidity will benefit those Members who are
eligible to participate in the Incentive Program and will also continue
to benefit those Members who are not eligible to participate in the
Incentive Program by providing more trading opportunities and tighter
spreads.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act.
Intra-Market Competition
The Exchange believes that the proposed extension of the Incentive
Program would continue to increase intra-market competition by
incentivizing Market Makers to quote SPIKES options, which will
continue to enhance the quality of quoting and increase the volume of
contracts available to trade in SPIKES options. To the extent that this
purpose is achieved, all the Exchange's market participants should
benefit from the improved market liquidity for SPIKES options. Enhanced
market quality and increased transaction volume in SPIKES options that
results from the anticipated increase in Market Maker activity on the
Exchange will benefit all market participants and improve competition
on the Exchange.
Inter-Market Competition
The Exchange does not believe that the proposed rule changes will
impose any burden on inter-market competition that is not necessary or
appropriate in furtherance of the purposes of the Act because the
proposed extension of the Incentive Program applies only to the
Exchange's Proprietary Products (including options on SPIKES), which
are traded exclusively on the Exchange.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
Written comments were neither solicited nor received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become effective pursuant to Section
19(b)(3)(A)(ii) of the Act,\21\ and Rule 19b-4(f)(2) \22\ thereunder.
At any time within 60 days of the filing of the proposed rule change,
the Commission summarily may temporarily suspend such rule change if it
appears to the Commission that such action is necessary or appropriate
in the public interest, for the protection of investors, or otherwise
in furtherance of the purposes of the Act. If the Commission takes such
action, the Commission shall institute proceedings to determine whether
the proposed rule should be approved or disapproved.
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\21\ 15 U.S.C. 78s(b)(3)(A)(ii).
\22\ 17 CFR 240.19b-4(f)(2).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
<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#a8daddc4cd85cbc7c5c5cdc6dcdbe8dbcdcb86cfc7de"><span class="__cf_email__" data-cfemail="5022253c357d333f3d3d353e2423102335337e373f26">[email protected]</span></a>. Please include
File Number SR-MIAX-2022-12 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-2022-12. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (<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-2022-12 and should
[[Page 20495]]
be submitted on or before April 28, 2022.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\23\
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\23\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-07338 Filed 4-6-22; 8:45 am]
BILLING CODE 8011-01-P
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