Notice2022-22277
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 Waiver Period for Certain Non-Transaction Fees and To Extend the SPIKES Options Market Maker Incentive Program Until December 31, 2022
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 13, 2022
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 87 Issue 197 (Thursday, October 13, 2022)</title>
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[Federal Register Volume 87, Number 197 (Thursday, October 13, 2022)]
[Notices]
[Pages 62151-62157]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-22277]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-96007; File No. SR-MIAX-2022-32]
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 Waiver
Period for Certain Non-Transaction Fees and To Extend the SPIKES
Options Market Maker Incentive Program Until December 31, 2022
October 7, 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 September 29, 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
[[Page 62152]]
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: (1) extend the waiver period for
certain non-transaction fees applicable to Market Makers \3\ that trade
solely in Proprietary Products \4\ until December 31, 2022; and (2)
extend the SPIKES Options Market Maker Incentive Program (the
``Incentive Program'') until December 31, 2022.
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\3\ The term ``Market Makers'' refers to ``Lead Market Makers'',
``Primary Lead Market Makers'' and ``Registered Market Makers''
collectively. See Exchange Rule 100.
\4\ The term ``Proprietary Product'' means a class of options
that is listed exclusively on the Exchange. See Exchange Rule 100.
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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) extend the
waiver period for certain non-transaction fees applicable to Market
Makers that trade solely in Proprietary Products until December 31,
2022; and (2) extend the Incentive Program until December 31, 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'').\5\ The Exchange adopted its initial
SPIKES options transaction fees on February 15, 2019 and adopted a new
section of the Fee Schedule--Section (1)(a)(xi), SPIKES--for those
fees.\6\ Options on the SPIKES Index began trading on the Exchange on
February 19, 2019.
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\5\ 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).
\6\ 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 Nos. 90146 (October 9, 2020), 85 FR 65443
(October 15, 2020) (SR-MIAX-2020-32) and 90814 (December 29, 2020),
86 FR 327 (January 5, 2021) (SR-MIAX-2020-39).
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On May 31, 2019, the Exchange filed its first proposal in a series
of proposals with the Commission to amend the Fee Schedule to waive
certain non-transaction fees applicable to Market Makers that trade
solely in Proprietary Products (including options on the SPIKES Index)
beginning September 30, 2019, through September 30, 2022.\7\ In
particular, the Exchange adopted fee waivers for Membership Application
fees, monthly Market Maker Trading Permit fees, Application Programming
Interface (``API'') Testing and Certification fees for Members,\8\ and
monthly MIAX Express Interface (``MEI'') Port \9\ fees assessed to
Market Makers that trade solely in Proprietary Products (including
options on SPIKES) throughout the entire period of September 30, 2019
through September 30, 2022. The Exchange now proposes to extend the
waiver period for the same non-transaction fees applicable to Market
Makers that trade solely in Proprietary Products (including options on
SPIKES) until December 31, 2022. In particular, the Exchange proposes
to waive Membership Application fees, monthly Market Maker Trading
Permit fees, Member API Testing and Certification fees, and monthly MEI
Port fees assessed to Market Makers that trade solely in Proprietary
Products (including options on SPIKES) until December 31, 2022.
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\7\ See Securities Exchange Act Release Nos. 86109 (June 14,
2019), 84 FR 28860 (June 20, 2019) (SR-MIAX-2019-28); 87282 (October
10, 2019), 84 FR 55658 (October 17, 2019) (SR-MIAX-2019-43); 87897
(January 6, 2020), 85 FR 1346 (January 10, 2020) (SR-MIAX-2019-53);
89289 (July 10, 2020), 85 FR 43279 (July 16, 2020) (SR-MIAX-2020-
22); 90146 (October 9, 2020), 85 FR 65443 (October 15, 2020) (SR-
MIAX-2020-32); 90814 (December 29, 2020), 86 FR 327 (January 5,
2021) (SR-MIAX-2020-39); 91498 (April 7, 2021), 86 FR 19293 (April
13, 2021) (SR-MIAX-2021-06); 93881 (December 30, 2021), 87 FR 517
(January 5, 2022) (SR-MIAX-2021-63); 95259 [sic] (July 12, 2022), 87
FR 42754 (July 17 [sic], 2022) (SR-MIAX-2022-24).
\8\ 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.
\9\ Full Service MEI Ports provide Market Makers with the
ability to send Market Maker simple and complex quotes, eQuotes, and
quote purge messages to the MIAX System. Full Service MEI Ports are
also capable of receiving administrative information. Market Makers
are limited to two Full Service MEI Ports per matching engine. See
Fee Schedule, note 27.
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Membership Application Fees
The Exchange currently assesses a one-time Membership Application
fee for applications of potential Members. The Exchange assesses a one-
time Membership Application fee on the earlier of (i) the date the
applicant is certified in the membership system, or (ii) once an
application for MIAX membership is finally denied. The one-time
application fee is based upon the applicant's status as either a Market
Maker or an Electronic Exchange Member (``EEM'').\10\ A Market Maker is
assessed a one-time Membership Application fee of $3,000.
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\10\ 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.
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The Exchange proposes that the waiver for the one-time Membership
Application fee of $3,000 for Market Makers that trade solely in
Proprietary Products (including options on SPIKES) will be extended
from September 30, 2022 until December 31, 2022, which the Exchange
proposes to state in the Fee Schedule. The purpose of this proposed
change is to continue to provide an incentive for potential Market
Makers to submit membership applications, which should result in an
increase of potential liquidity in Proprietary Products, including
options on SPIKES. Even though the Exchange proposes to extend the
waiver of this particular fee, the overall structure of the fee is
outlined in the Fee Schedule so that there is general awareness that
the Exchange intends to assess such a fee after December 31, 2022.
Trading Permit Fees
The Exchange issues Trading Permits that confer the ability to
transact on the Exchange. MIAX Trading Permits are issued to Market
Makers and EEMs. Members receiving Trading Permits during a particular
calendar month are
[[Page 62153]]
assessed monthly Trading Permit fees as set forth in the Fee Schedule.
As it relates to Market Makers, MIAX currently assesses a monthly
Trading Permit fee in any month the Market Maker is certified in the
membership system, is credentialed to use one or more MIAX MEI Ports in
the production environment and is assigned to quote in one or more
classes. MIAX assesses the monthly Market Maker Trading Permit fee for
its Market Makers based on the greatest number of classes listed on
MIAX that the MIAX Market Maker was assigned to quote in on any given
day within a calendar month and the applicable fee rate is the lesser
of either the per class basis or percentage of total national average
daily volume measurements. A MIAX Market Maker is assessed a monthly
Trading Permit fee according to the following table: \11\
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\11\ See Fee Schedule, Section (3)(b).
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Market maker assignments (the lesser of the applicable
Monthly MIAX measurements below) [Omega]
Type of trading permit trading permit ---------------------------------------------------------
fee % of National average daily
Per class volume
----------------------------------------------------------------------------------------------------------------
Market Maker (includes RMM, LMM, PLMM) $7,000.00 Up to 10 Classes......... Up to 20% of Classes by
volume.
12,000.00 Up to 40 Classes......... Up to 35% of Classes by
volume.
* 17,000.00 Up to 100 Classes........ Up to 50% of Classes by
volume.
* 22,000.00 Over 100 Classes......... Over 50% of Classes by volume
up to all Classes listed on
MIAX.
----------------------------------------------------------------------------------------------------------------
[Omega] Excludes Proprietary Products.
* For these Monthly MIAX Trading Permit Fee levels, if the Market Maker's total monthly executed volume during
the relevant month is less than 0.060% of the total monthly executed volume reported by OCC in the market
maker account type for MIAX-listed option classes for that month, then the fee will be $15,500 instead of the
fee otherwise applicable to such level.
MIAX proposes that the waiver for the monthly Trading Permit fee
for Market Makers that trade solely in Proprietary Products (including
options on SPIKES) will be extended from September 30, 2022, to
December 31, 2022, which the Exchange proposes to state in the Fee
Schedule. The purpose of this proposed change is to continue to provide
an incentive for Market Makers to provide liquidity in Proprietary
Products on the Exchange, which should result in increasing potential
order flow and volume in Proprietary Products, including options on
SPIKES. Even though the Exchange proposes to extend the waiver of this
particular fee, the overall structure of the fee is outlined in the Fee
Schedule so that there is general awareness to potential Members
seeking a Trading Permit that the Exchange intends to assess such a fee
after December 31, 2022.
The Exchange also proposes that Market Makers who trade Proprietary
Products (including options on SPIKES) along with multi-listed classes
will continue to not have Proprietary Products (including SPIKES)
counted toward those Market Makers' class assignment count or
percentage of total national average daily volume. This exclusion is
noted with the symbol ``[Omega]'' following the table that shows the
monthly Trading Permit fees currently assessed to Market Makers in
Section (3)(b) of the Fee Schedule.
API Testing and Certification Fee
The Exchange assesses an API Testing and Certification fee to all
Members depending upon Membership type. An API makes it possible for
Members' software to communicate with MIAX software applications, and
is subject to Members testing with, and certification by, MIAX. The
Exchange offers four types of interfaces: (i) the Financial Information
Exchange Port (``FIX Port''),\12\ which enables the FIX Port user
(typically an EEM or a Market Maker) to submit simple and complex
orders electronically to MIAX; (ii) the MEI Port, which enables Market
Makers to submit simple and complex electronic quotes to MIAX; (iii)
the Clearing Trade Drop Port (``CTD Port''),\13\ which provides real-
time trade clearing information to the participants to a trade on MIAX
and to the participants' respective clearing firms; and (iv) the FIX
Drop Copy Port (``FXD Port''),\14\ which provides a copy of real-time
trade execution, correction and cancellation information through a FIX
Port to any number of FIX Ports designated by an EEM to receive such
messages.
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\12\ A FIX Port is an interface with MIAX systems that enables
the Port user (typically an Electronic Exchange Member or a Market
Maker) to submit simple and complex orders electronically to MIAX.
See Fee Schedule, note 24.
\13\ Clearing Trade Drop (``CTD'') provides Exchange members
with real-time clearing trade updates. The updates include the
Member's clearing trade messages on a low latency, real-time basis.
The trade messages are routed to a Member's connection containing
certain information. The information includes, among other things,
the following: (i) trade date and time; (ii) symbol information;
(iii) trade price/size information; (iv) Member type (for example,
and without limitation, Market Maker, Electronic Exchange Member,
Broker-Dealer); (v) Exchange Member Participant Identifier
(``MPID'') for each side of the transaction, including Clearing
Member MPID; and (vi) strategy specific information for complex
transactions. CTD Port Fees will be assessed in any month the Member
is credentialed to use the CTD Port in the production environment.
See Fee Schedule, Section (5)(d)iii.
\14\ The FIX Drop Copy Port (``FXD'') is a messaging interface
that will provide a copy of real-time trade execution, trade
correction and trade cancellation information for simple and complex
orders to FIX Drop Copy Port users who subscribe to the service. FIX
Drop Copy Port users are those users who are designated by an EEM to
receive the information and the information is restricted for use by
the EEM only. FXD Port Fees will be assessed in any month the Member
is credentialed to use the FXD Port in the production environment.
See Fee Schedule, Section (5)(d)iv.
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API Testing and Certification fees for Market Makers are assessed
(i) initially per API for CTD and MEI ports in the month the Market
Maker has been credentialed to use one or more ports in the production
environment for the tested API and the Market Maker has been assigned
to quote in one or more classes, and (ii) each time a Market Maker
initiates a change to its system that requires testing and
certification. API Testing and Certification fees will not be assessed
in situations where the Exchange initiates a mandatory change to the
Exchange's system that requires testing and certification. The Exchange
currently assesses a Market Maker an API Testing and Certification fee
of $2,500. The API Testing and Certification fees represent costs
incurred by the Exchange as it works with each Member for testing and
certifying that the Member's software systems communicate properly with
MIAX's interfaces.
MIAX proposes to extend the waiver of the API Testing and
Certification fee for Market Makers that trade solely in Proprietary
Products (including options on SPIKES) from September 30, 2022 until
December 31, 2022, which the
[[Page 62154]]
Exchange proposes to state in the Fee Schedule. The purpose of this
proposed change is to continue to provide an incentive for potential
Market Makers to develop software applications to trade in Proprietary
Products, including options on SPIKES. Even though the Exchange
proposes to extend the waiver of this particular fee, the overall
structure of the fee is outlined in the Fee Schedule so that there is
general awareness that the Exchange intends to assess such a fee after
December 31, 2022.
MEI Port Fees
MIAX assesses monthly MEI Port fees to Market Makers in each month
the Member has been credentialed to use the MEI Port in the production
environment and has been assigned to quote in at least one class. The
amount of the monthly MEI Port fee is based upon the number of classes
in which the Market Maker was assigned to quote on any given day within
the calendar month, and upon the class volume percentages set forth in
the Fee Schedule. The class volume percentage is based on the total
national average daily volume in classes listed on MIAX in the prior
calendar quarter. Newly listed option classes are excluded from the
calculation of the monthly MEI Port fee until the calendar quarter
following their listing, at which time the newly listed option classes
will be included in both the per class count and the percentage of
total national average daily volume. The Exchange assesses MIAX Market
Makers the monthly MEI Port fee based on the greatest number of classes
listed on MIAX that the MIAX Market Maker was assigned to quote in on
any given day within a calendar month and the applicable fee rate that
is the lesser of either the per class basis or percentage of total
national average daily volume measurement. MIAX assesses MEI Port fees
on Market Makers according to the following table: \15\
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\15\ See Fee Schedule (5)(d)(ii).
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Market maker assignments (the lesser of
the applicable measurements below)
[Omega]
Monthly MIAX MEI fees -----------------------------------------
% of National average
Per class daily volume
------------------------------------------------------------------------
$5,000.00..................... Up to 5 Classes.. Up to 10% of Classes
by volume.
$10,000.00.................... Up to 10 Classes. Up to 20% of Classes
by volume.
$14,000.00.................... Up to 40 Classes. Up to 35% of Classes
by volume.
$17,500.00 *.................. Up to 100 Classes Up to 50% of Classes
by volume.
$20,500.00 *.................. Over 100 Classes. Over 50% of Classes
by volume up to all
Classes listed on
MIAX.
------------------------------------------------------------------------
[Omega] Excludes Proprietary Products.
* For these Monthly MIAX MEI Fees levels, if the Market Maker's total
monthly executed volume during the relevant month is less than 0.060%
of the total monthly executed volume reported by OCC in the market
maker account type for MIAX-listed option classes for that month, then
the fee will be $14,500 instead of the fee otherwise applicable to
such level.
MIAX proposes to extend the waiver of the monthly MEI Port fee for
Market Makers that trade solely in Proprietary Products (including
options on SPIKES) from September 30, 2022 until December 31, 2022,
which the Exchange proposes to state in the Fee Schedule. The purpose
of this proposal is to continue to provide an incentive to Market
Makers to connect to MIAX through the MEI Port such that they will be
able to trade in MIAX Proprietary Products. Even though the Exchange
proposes to extend the waiver of this particular fee, the overall
structure of the fee is outlined in the Fee Schedule so that there is
general awareness that the Exchange intends to assess such a fee after
December 31, 2022.
The Exchange notes that for the purposes of this proposed change,
other Market Makers who trade MIAX Proprietary Products (including
options on SPIKES) along with multi-listed classes will continue to not
have Proprietary Products (including SPIKES) counted toward those
Market Makers' class assignment count or percentage of total national
average daily volume. This exclusion is noted by the symbol ``[Omega]''
following the table that shows the monthly MEI Port Fees currently
assessed for Market Makers in Section (5)(d)(ii) of the Fee Schedule.
The proposed extension of the fee waivers are targeted at market
participants, particularly market makers, who are not currently members
of MIAX, who may be interested in being a Market Maker in Proprietary
Products on the Exchange. The Exchange estimates that there are fewer
than ten (10) such market participants that could benefit from the
extension of these fee waivers. The proposed extension of the fee
waivers does not apply differently to different sizes of market
participants, however the fee waivers do only apply to Market Makers
(and not EEMs).
Market Makers, unlike other market participants, take on a number
of obligations, including quoting obligations that other market
participants do not have. Further, Market Makers have added market
making and regulatory requirements, which normally do not apply to
other market participants. For example, Market Makers have obligations
to maintain continuous markets, engage in a course of dealings
reasonably calculated to contribute to the maintenance of a fair and
orderly market, and to not make bids or offers or enter into
transactions that are inconsistent with a course of dealing.
Accordingly, the Exchange believes it is reasonable and not unfairly
discriminatory to continue to offer the fee waivers to Market Makers
because the Exchange is seeking additional liquidity providers for
Proprietary Products, in order to enhance liquidity and spreads in
Proprietary Products, which is traditionally provided by Market Makers,
as opposed to EEMs.
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 to improve liquidity, available
volume, and the quote spread width of SPIKES options beginning October
1, 2021, and ending December 31, 2021.\16\ Technical details regarding
the Incentive Program were
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\16\ See SR-MIAX-2021-45.
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[[Page 62155]]
published in a Regulatory Circular on September 30, 2021.\17\ On
October 12, 2021, the Exchange withdrew SR-MIAX-2021-45 and refiled its
proposal to implement the Incentive Program to provide additional
details.\18\ 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).\19\
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\17\ 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>.
\18\ See Securities Exchange Act Release No. 93424 (October 26,
2021), 86 FR 60322 (November 1, 2021) (SR-MIAX-2021-49).
\19\ See id., at note 4.
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On December 23, 2021, the Exchange filed its proposal to extend the
Incentive Program until March 31, 2022.\20\ 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 fees (or extend the Incentive
Program).\21\ On March 23, 2022, the Exchange filed its proposal to
extend the Incentive Program until June 30, 2022.\22\ In that filing,
the Exchange specifically noted that the Incentive Program would expire
at the end of the period (June 30, 2022) unless the Exchange filed
another 19b-4 Filing to amend the fees (or extend the Incentive
Program).\23\ On June 29, 2022, the Exchange filed its proposal to
extend the Incentive Program until September 30, 2022.\24\ In that
filing, the Exchange specifically noted that the Incentive Program
would expire at the end of the period (September 30, 2022) unless the
Exchange filed another 19b-4 Filing to amend the fees (or extend the
Incentive Program).\25\ The Exchange now proposes to extend the
Incentive Program for three months, with the Incentive Program ending
on December 31, 2022.\26\
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\20\ See Securities Exchange Act Release No. 93881 (December 30,
2021), 87 FR 517 (January 5, 2022) (SR-MIAX-2021-63).
\21\ See id., at note 20.
\22\ See Securities Exchange Act Release No. 94574 (April 1,
2022), 87 FR 20492 (April 7, 2022) (SR-MIAX-2022-12).
\23\ See id., at note 12.
\24\ See Securities Exchange Act Release No. 95259 [sic] (July
12, 2022), 87 FR 42754 (July 17 [sic], 2022) (SR-MIAX-2022-24).
\25\ See id., at note 24.
\26\ 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.\27\ 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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\27\ See supra note 17.
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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.\28\ 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.\29\ 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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\28\ See id.
\29\ 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,\30\ are eligible to receive a pro-rated share of the
compensation pool as calculated by the Exchange and communicated to
Members via Regulatory Circular,\31\ 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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\30\ See id.
\31\ See id.
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The Exchange proposes to extend the Incentive Program until
December 31, 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.\32\ 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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\32\ 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 \33\ in general, and
furthers the objectives of Section 6(b)(4) of the Act \34\ 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 discrimination between
customers, issuers, brokers and dealers.
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\33\ 15 U.S.C. 78f(b).
\34\ 15 U.S.C. 78f(b)(4) and (5).
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The Exchange believes that the proposal to extend the fee waiver
period for certain non-transaction fees for
[[Page 62156]]
Market Makers that trade solely in Proprietary Products is an equitable
allocation of reasonable fees because the proposal continues to waive
non-transaction fees for a limited period of time in order to enable
the Exchange to improve its overall competitiveness and strengthen its
market quality for all market participants in MIAX's Proprietary
Products, including options on SPIKES. The Exchange believe the
proposed extension of the fee waivers is fair and equitable and not
unreasonably discriminatory because it applies to all market
participants not currently registered as Market Makers at the Exchange.
Any market participant may choose to satisfy the additional
requirements and obligations of being a Market Maker and trade solely
in Proprietary Products in order to qualify for the fee waivers.
The Exchange believes that the proposed extension of the fee
waivers is equitable and not unfairly discriminatory for Market Makers
as compared to EEMs because Market Makers, unlike other market
participants, take on a number of obligations, including quoting
obligations that other market participants do not have. Further, Market
Makers have added market making and regulatory requirements, which
normally do not apply to other market participants. For example, Market
Makers have obligations to maintain continuous markets, engage in a
course of dealings reasonably calculated to contribute to the
maintenance of a fair and orderly market, and to not make bids or
offers or enter into transactions that are inconsistent with a course
of dealing.
The Exchange believes it is reasonable and equitable to continue to
waive the one-time Membership Application Fee, monthly Trading Permit
Fee, API Testing and Certification Fee, and monthly MEI Port Fee for
Market Makers that trade solely in Proprietary Products (including
options on SPIKES) until December 31, 2022, since the waiver of such
fees provides incentives to interested market participants to trade in
Proprietary Products. This should result in increasing potential order
flow and liquidity in MIAX Proprietary Products, including options on
SPIKES.
The Exchange believes it is reasonable and equitable to continue to
waive the API Testing and Certification fee assessable to Market Makers
that trade solely in Proprietary Products (including options on SPIKES)
until December 31, 2022, since the waiver of such fees provides
incentives to interested Members to develop and test their APIs sooner.
Determining system operability with the Exchange's system will in turn
provide MIAX with potential order flow and liquidity providers in
Proprietary Products.
The Exchange believes it is reasonable, equitable and not unfairly
discriminatory that Market Makers who trade in Proprietary Products
along with multi-listed classes will continue to not have Proprietary
Products counted toward those Market Makers' class assignment count or
percentage of total national average daily volume for monthly Trading
Permit Fees and monthly MEI Port Fees in order to incentivize existing
Market Makers who currently trade in multi-listed classes to also trade
in Proprietary Products, without incurring certain additional fees.
The Exchange believes that the proposed extension of the fee
waivers constitutes an equitable allocation of reasonable fees and
other charges among its Members and issuers and other persons using its
facilities. The proposed extension of the fee waivers means that all
prospective market makers that wish to become Market Maker Members of
the Exchange and quote solely in Proprietary Products may do so and
have the above-mentioned fees waived until December 31, 2022. The
proposed extension of the fee waivers will continue to not apply to
potential EEMs because the Exchange is seeking to enhance the quality
of its markets in Proprietary Products through introducing more
competition among Market Makers in Proprietary Products. In order to
increase the competition, the Exchange believes that it must continue
to waive entry type fees for such Market Makers. EEMs do not provide
the benefit of enhanced liquidity which is provided by Market Makers,
therefore the Exchange believes it is reasonable and not unfairly
discriminatory to continue to only offer the proposed fee waivers to
Market Makers (and not EEMs). Further, the Exchange believes it is
reasonable and not unfairly discriminatory to continue to exclude
Proprietary Products from an existing Market Maker's permit fees and
port fees, in order to incentive such Market Makers to quote in
Proprietary Products. The amount of a Market Maker's permit and port
fee is determined by the number of classes quoted and volume of the
Market Maker. By excluding Proprietary Products from such fees, the
Exchange is able to incentivize Market Makers to quote in Proprietary
Products. EEMs do not pay permit and port fees based on the classes
traded or volume, so the Exchange believes it is reasonable, equitable,
and not unfairly discriminatory to only offer the exclusion to Market
Makers (and not EEMs).
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 SPIKES Market Makers 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 SPIKES Market Makers 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.
[[Page 62157]]
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 proposal to extend certain of the
non-transaction fee waivers until December 31, 2022 for Market Makers
that trade solely in Proprietary Products would increase intra-market
competition by incentivizing new potential Market Makers to quote in
Proprietary Products, which will enhance the quality of quoting and
increase the volume of contracts in Proprietary Products traded on
MIAX, including options on SPIKES. To the extent that this purpose is
achieved, all the Exchange's market participants should benefit from
the improved market liquidity for the Exchange's Proprietary Products.
Enhanced market quality and increased transaction volume in Proprietary
Products that results from the anticipated increase in Market Maker
activity on the Exchange will benefit all market participants and
improve competition on the Exchange.
The Exchange does not believe that the proposed rule change 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 for each separate type of market participant (new
Market Makers and existing Market Makers) will be assessed equally to
all such market participants. While different fees are assessed to
different market participants in some circumstances, these different
market participants have different obligations and different
circumstances as discussed above. For example, Market Makers have
quoting obligations that other market participants (such as EEMs) do
not have.
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 fee waivers and the extension of the
Incentive Program apply 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,\35\ and Rule 19b-4(f)(2) \36\ 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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\35\ 15 U.S.C. 78s(b)(3)(A)(ii).
\36\ 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#3745425b521a54585a5a525943447744525419505841"><span class="__cf_email__" data-cfemail="d6a4a3bab3fbb5b9bbbbb3b8a2a596a5b3b5f8b1b9a0">[email protected]</span></a>. Please include
File Number SR-MIAX-2022-32 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-2022-32. 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-2022-32 and should be submitted on
or before November 3, 2022.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\37\
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\37\ 17 CFR 200.30-3(a)(12).
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J. Lynn Taylor,
Assistant Secretary.
[FR Doc. 2022-22277 Filed 10-12-22; 8:45 am]
BILLING CODE 8011-01-P
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