[Federal Register Volume 85, Number 139 (Monday, July 20, 2020)]
[Notices]
[Pages 43918-43921]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-15558]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-89317; File No. SR-MIAX-2020-23]
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 Increase the Number
of Additional Limited Service MIAX Express Interface Ports Available to
Market Makers
July 14, 2020.
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 June 30, 2020, Miami International Securities Exchange, LLC (``MIAX
Options'' 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'') to increase the number of additional
Limited Service MIAX Express Interface (``MEI'') Ports available to
Market Makers.\3\ The Exchange does not propose to amend the fees for
additional Limited Service MEI Ports.
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\3\ The term ``Market Makers'' refers to Lead Market Makers
(``LMMs''), Primary Lead Market Makers (``PLMMs''), and Registered
Market Makers (``RMMs'') collectively. See Exchange Rule 100.
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The text of the proposed rule change is available on the Exchange's
website at http://www.miaxoptions.com/rule-filings, at MIAX's principal
office, and at the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
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 offer two (2)
additional Limited Service MEI Ports to Market Makers. The Exchange
does not propose to amend the fees charged for the additional Limited
Service MEI Ports.
Currently, MIAX assesses monthly MEI Port Fees on Market Makers
based upon the number of MIAX matching engines \4\ used by the Market
Maker. Market Makers are allocated two (2) Full Service MEI Ports \5\
and two (2) Limited Service MEI Ports \6\ per matching engine to which
they connect. The Full Service MEI Ports, Limited Service MEI Ports,
and the additional Limited Service MEI Ports all include access to
MIAX's primary and secondary data centers and its disaster recovery
center. Market Makers may request additional Limited Service MEI Ports
for which they will be assessed the existing $100 monthly fee for each
additional port they request. This fee has been unchanged since
2016.\7\
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\4\ A ``matching engine'' is a part of the MIAX electronic
system that processes options quotes and trades on a symbol-by-
symbol basis. Some matching engines will process option classes with
multiple root symbols, and other matching engines will be dedicated
to one single option root symbol (for example, options on SPY will
be processed by one single matching engine that is dedicated only to
SPY). A particular root symbol may only be assigned to a single
designated matching engine. A particular root symbol may not be
assigned to multiple matching engines. See Fee Schedule, Section
5)d)ii), note 29.
\5\ Full Service MEI Ports provide Market Makers with the
ability to send Market Maker 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,
Section 5)d)ii), note 27.
\6\ Limited Service MEI Ports provide Market Makers with the
ability to send eQuotes and quote purge messages only, but not
Market Maker Quotes, to the MIAX System. Limited Service MEI Ports
are also capable of receiving administrative information. Market
Makers initially receive two Limited Service MEI Ports per matching
engine. See Fee Schedule, Section 5)d)ii), note 28.
\7\ See Securities Exchange Act Release No. 79666 (December 22,
2016), 81 FR 96133 (December 29, 2016) (SR-MIAX-2016-47).
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The Exchange originally added the Limited Service MEI Ports to
enhance the MEI Port connectivity made available to Market Makers, and
has subsequently made additional Limited Service MEI Ports available to
Market
[[Page 43919]]
Makers.\8\ Limited Service MEI Ports have been well received by Market
Makers since their addition. The Exchange now proposes to offer to
Market Makers the ability to purchase an additional two (2) Limited
Service MEI Ports per matching engine over and above the current six
(6) additional Limited Service MEI Ports per matching engine that are
available for purchase by Market Makers. The Exchange proposes making a
corresponding change to footnote 30 of the Exchange's Fee Schedule to
specify that Market Makers will now be limited to purchasing eight (8)
additional Limited Service MEI Ports per matching engine, for a total
of ten (10) per matching engine. All fees related to MEI Ports shall
remain unchanged and Market Makers that voluntarily purchase the
additional Limited Service MEI Ports will remain subject to the
existing $100 monthly fee per port.
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\8\ See Securities Exchange Act Release Nos. 70137 (August 8,
2013), 78 FR 49586 (August 14, 2013) (SR-MIAX-2013-39); 70903
(November 20, 2013), 78 FR 70615 (November 26, 2013) (SR-MIAX-2013-
52); 78950 (September 27, 2016), 81 FR 68084 (October 3, 2016) (SR-
MIAX-2016-33); and 79198 (October 31, 2016), 81 FR 76988 (November
4, 2016) (SR-MIAX-2016-37).
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The Exchange is increasing the number of additional Limited Service
MEI Ports because the Exchange is expanding its network. This network
expansion is necessary due to increased customer demand and increased
volatility in the marketplace, both of which have translated into
increased message traffic rates across the network. Consequently, this
network expansion, which increases the number of switches supporting
customer facing systems, is necessary in order to provide sufficient
access to new and existing Members,\9\ to maintain a sufficient amount
of network capacity head-room, and to continue to provide the same
level of service across the Exchange's low-latency, high-throughput
technology environment.
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\9\ 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.
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Currently, the Exchange has 8 network switches that support the
entire customer base of MIAX Options and MIAX PEARL. The Exchange plans
to increase this to 10 switches, which will increase the number of
available customer ports by 25%. This increase in the number of
available customer ports will enable the Exchange to continue to
provide sufficient and equal access to MIAX Systems to all Members.
Absent the proposed increase in available MEI Ports, the Exchange
projects that its current inventory will be depleted and it will lack
sufficient capacity to continue to meet Members' access needs.
2. Statutory Basis
The Exchange believes that its proposal to amend its Fee Schedule
is consistent with Section 6(b) of the Act \10\ in general, and
furthers the objectives of Section 6(b)(5) of the Act \11\ 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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\10\ 15 U.S.C. 78f(b).
\11\ 15 U.S.C. 78f(b)(5).
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The Exchange believes that its proposal is consistent with the
objectives of Section 6(b)(5) of the Act \12\ because the proposed
additional Limited Service MEI Ports will be available to all Market
Makers and the current fees for the additional Limited Service MEI
Ports apply equally to all Market Makers regardless of type, and access
to the Exchange is offered on terms that are not unfairly
discriminatory. The Exchange is proposing to increase the number of
available Limited Service MEI Ports because the Exchange is expanding
its network. This network expansion is necessary due to increased
customer demand and increased volatility in the marketplace, both of
which have translated into increased message traffic rates across the
network. Consequently, this network expansion, which increases the
number of switches supporting customer facing systems, is necessary in
order to provide sufficient and equal access to new and existing
Members, to maintain a sufficient amount of network capacity head-room,
and to continue to provide the same level of service across the
Exchange's low-latency, high-throughput technology environment.
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\12\ 15 U.S.C. 78f(b)(5).
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Currently, the Exchange has 8 network switches that support the
entire customer base of MIAX Options and MIAX PEARL. The Exchange plans
to increase this to 10 switches, which will increase the number of
available customer ports by 25%. This increase in the number of
available customer ports will enable the Exchange to continue to
provide sufficient and equal access to MIAX Systems for all Members.
Absent the proposed increase in available MEI Ports, the Exchange
projects that its current inventory will be depleted and it will lack
sufficient capacity to continue to meet Members' access needs. Further,
the Exchange notes the decision of whether to purchase two additional
Limited Service MEI Ports is completely optional and it is a business
decision for each Market Maker to determine whether the additional
Limited Service MEI Ports are necessary to meet their business
requirements.
The Exchange further believes that the availability of the
additional Limited Service MEI Ports is equitable and not unfairly
discriminatory because it will enable Market Makers to maintain
uninterrupted access to the MIAX System and consequently enhance the
marketplace by helping Market Makers to better manage risk, thus
preserving the integrity of the MIAX markets, all to the benefit of and
protection of investors and the public as a whole.
The Exchange also believes that its proposal is consistent with
Section 6(b)(4) of the Act because only Market Makers that voluntarily
purchase the two additional Limited Service MEI Ports will be charged
the existing $100 monthly fee per port, which has been unchanged since
2016.\13\ The Exchange does not propose to amend the fees applicable to
additional Limited Service MEI Ports which have been previously filed
with the Commission and become effective after notice and public
comment.\14\ As stated above, the Exchange proposes to expand its
network by making available two additional Limit Service MEI Ports due
to increased customer demand and increased volatility in the
marketplace, both of which have translated into increased message
traffic rates across the network. The cost to expand the network in
this manner is greater than the revenue the Exchange anticipates the
additional Limited Service MEI Ports will generate. Specifically, the
Exchange estimates it will cost approximately $350,000 in capital
expenditures on hardware, software, and other items to expand the
network to make available the two additional Limited Service MEI Ports.
This estimated cost also includes providing the necessary engineering
and support personnel to transition those Market Makers who wish to
acquire the two additional Limited Service MEI Ports.
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\13\ See supra note 7.
\14\ See supra notes 7 and 8.
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The Exchange projects that approximately six or seven Market Makers
will elect to purchase the additional Limited Service MEI Ports, which
will be subject to the existing monthly fee of $100 per port.
Accordingly, the Exchange projects that
[[Page 43920]]
the annualized revenue from the two additional Limited Service MEI
Ports will be approximately $16,800 (assuming that seven Market Makers
purchase the two additional Limited Service MEI Ports). Therefore, the
Exchange's cost in expanding its network to provide its Members with
the two additional Limited Service MEI Ports--approximately $350,000--
is clearly greater than the anticipated annualized revenue the Exchange
expects to bring in from the two additional Limited Service MEI Ports--
approximately $16,800. Thus, the Exchange is not generating a supra-
competitive profit from the provision of these two additional Limited
Service MEI Ports.
Subjecting the two additional Limited Service MEI Ports to the
existing $100 monthly fee per port is also designed to encourage Market
Makers to be efficient with their port usage, thereby resulting in a
corresponding increase in the efficiency that the Exchange would be
able to realize in managing its aggregate costs for providing the two
additional ports. There is no requirement that any Market Maker
maintain a specific number of Limited Service MEI Ports and a Market
Maker may choose to maintain as many or as few of such ports as each
Market Maker deems appropriate.
Finally, subjecting the two additional Limited Service MEI Ports to
the existing $100 monthly fee will help to encourage Limited Service
MEI Port usage in a way that aligns with the Exchange's regulatory
obligations. As a national securities exchange, the Exchange is subject
to Regulation Systems Compliance and Integrity (``Reg. SCI'').\15\ Reg.
SCI Rule 1001(a) requires that the Exchange establish, maintain, and
enforce written policies and procedures reasonably designed to ensure
(among other things) that its Reg. SCI systems have levels of capacity
adequate to maintain the Exchange's operational capability and promote
the maintenance of fair and orderly markets.\16\ By encouraging Members
to be efficient with their usage of Limited MEI Ports, the current fee
that will continue to apply to the proposed two (2) additional Limited
Service MEI Ports will support the Exchange's Reg. SCI obligations in
this regard by ensuring that unused ports are available to be allocated
based on individual Members needs and as the Exchange's overall order
and trade volumes increase.
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\15\ 17 CFR 242.1000-1007.
\16\ 17 CFR 242.1001(a).
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B. Self-Regulatory Organization's Statement on Burden on Competition
MIAX 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, as amended. The proposed rule
change will not impose a burden on competition but will benefit
competition by enhancing the Exchange's ability to compete by providing
additional services to market participants. It is not intended to
address a competitive issue. Rather, the proposed increase in the
number of additional Limited Service MEI Ports available per Market
Maker is intended to allow the Exchange to increase its inventory of
MEI Ports to meet increased Member demand. The Exchange is increasing
the number of available additional Limited Service MEI Ports in
response to Market Maker demand for increased connectivity to the MIAX
System. The Exchange's current inventory may soon be insufficient to
meet those needs. Again, the Exchange is not proposing to amend the
fees for MEI Ports, just to increase the number of MEI Ports available
per Market Maker. The Exchange also does not believe that the proposed
rule change will impose a burden on intramarket competition because the
two additional Limited Service MEI Ports will be available to all
Market Makers on an equal basis. It is a business decision of each
Market Maker whether to pay for the additional Limited Service MEI
Ports.
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,\17\ and Rule 19b-4(f)(2) \18\ 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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\17\ 15 U.S.C. 78s(b)(3)(A)(ii).
\18\ 17 CFR 240.19b-4(f)(2).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-MIAX-2020-23 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to File Number SR-MIAX-2020-23. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (http://www.sec.gov/rules/sro.shtml).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for website viewing and printing in
the Commission's Public Reference Room, 100 F Street NE, Washington, DC
20549 on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of 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-2020-23, and should be submitted on
or before August 10, 2020.
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For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\19\
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\19\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-15558 Filed 7-17-20; 8:45 am]
BILLING CODE 8011-01-P