Self-Regulatory Organizations; Miami International Securities Exchange, LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Its Fee Schedule and Extend the SPIKES Options Market Maker Incentive Program

Pursuant to the provisions of Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”) and Rule 19b-4 thereunder, notice is hereby given that on September 27, 2024, 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 and II 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.

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 Fee Schedule (“Fee Schedule”) to (i) amend and extend the SPIKES options Market Maker Incentive Program (the “Incentive Program”) until January 31, 2025; and (ii) remove waivers for certain non-transaction fees applicable to Market Makers that trade solely in Proprietary Products.

The text of the proposed rule change is available on the Exchange's website at https://www.miaxglobal.com/markets/us-options/all-options-exchanges/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 (i) amend and extend the SPIKES options Market Maker Incentive Program (the “Incentive Program”) until January 31, 2025; and (ii) remove waivers for certain non-transaction fees applicable to Market Makers that trade solely in Proprietary Products.

Background

On October 12, 2018, the Exchange received approval from the U.S. Securities and Exchange Commission (“Commission”) to list and trade on the Exchange options on the SPIKES® 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”). The Exchange adopted its initial SPIKES options transaction fees on February 15, 2019 and adopted a new section of the Fee Schedule for those fees. Options on the SPIKES Index began trading on the Exchange on February 19, 2019.

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 June 1, 2019, through September 30, 2024. 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, and monthly MIAX Express Interface (“MEI”) Port fees assessed to Market Makers that trade solely in Proprietary Products (including options on SPIKES) throughout the entire period of June 1, 2019 through September 30, 2024.

On September 30, 2021, the Exchange filed its initial proposal (SR-MIAX-2021-45) to implement the 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. Technical details regarding the Incentive Program were published in a Regulatory Circular on September 30, 2021. On October 12, 2021, the Exchange withdrew SR-MIAX-2021-45 and refiled its proposal to implement the Incentive Program to provide additional details. 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).

Between December 23, 2021, and June 28, 2024, the Exchange filed several proposals to extend the Incentive Program, with the last extension period ending September 30, 2024. In each of those filings, the Exchange specifically noted that the Incentive Program would expire at the end of the then-current period unless the Exchange filed another 19b-4 Filing to amend the fees (or extend the Incentive Program).

Proposal To Amend and Extend the Incentive Program

The Exchange now proposes to amend and extend the Incentive Program for SPIKES options to continue to incentivize Market Makers to improve liquidity and available volume in SPIKES options by amending the quotes spread width requirements and the amounts of the incentive compensation pools.

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. The Exchange has devised a methodology where each qualifying Market Maker's ITM/OTM market width for eligible Incentive Program options is calculated. Eligible ITM options require a maximum quote spread width of 150 basis points (“bps”) and each eligible OTM option requires a maximum quote spread width of 100 bps. 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 and/or exceed the criteria pursuant to the Incentive Program.

The Exchange now proposes to double the maximum quote spread width parameters for both ITM options and OTM options. Specifically, the Exchange proposes to increase the maximum quote spread width from 150 bps to 300 bps for a Market Maker quoting ITM options to be eligible to participate in the Incentive Program. The Exchange also proposes to increase the maximum quote spread width from 100 bps to 200 bps for a Market Maker quoting OTM options to be eligible to participate in the Incentive Program. The Exchange will communicate the new requirements of the Incentive Program to Members via Regulatory Circular.

Currently, the first pool (Incentive 1) is capped at $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. 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. 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 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.

The Exchange now proposes to amend the terms of Incentive 1. Specifically, the Exchange proposes to reduce the total compensation pool of Incentive 1 from $40,000 per month to $10,000 per month. The Exchange also proposes to reduce the maximum amount available to each individual Market Maker for satisfying the minimum requirements of the Incentive Program from $10,000 per month to $5,000 per month. The Exchange proposes that, in the event that more than two Market Makers meet the requirements of Incentive 1, each qualifying Market Maker is entitled to receive a pro-rated share of the $10,000 monthly compensation pool dependent upon the number of qualifying Market Makers in that particular month.

Currently, the second pool (Incentive 2) 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 with the total compensation pool amount based on qualifying Market Makers' improvement value over the minimum requirement score. 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, are eligible to receive a pro-rated share of the compensation pool 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.

The Exchange now proposes to amend the terms of Incentive 2. Specifically, the Exchange proposes to reduce the total compensation pool of Incentive 2 from a maximum of $100,000 per month to a maximum of $25,000 per month. The Exchange also proposes to reduce the maximum amount available to each individual Market Maker for satisfying the requirements of Incentive 2 from $25,000 per month to $12,500 per month.

The purpose of the proposed changes is for business reasons. The Exchange proposes to lower the quoting requirements because the Exchange is no longer listing new expiration months in SPIKES options. The Exchange anticipates that there will be no expiration months available for trading following the expiration of the January 2025 SPIKES options. The Exchange believes that it is appropriate to lower the threshold of the quoting standards for the Incentive Program to further encourage more SPIKES Market Makers to participate in the Incentive Program. The Exchange also proposes to reduce the compensation pools and the maximum amount available to each individual Market Maker for satisfying and/or exceeding the minimum requirements of the Incentive Program because the Exchange proposes to lower the quoting requirements for the Incentive Program.

In addition, the Exchange proposes to extend the Incentive Program until January 31, 2025. The purpose of this extension is to continue to incentivize Market Makers to provide quotes in SPIKES options and to improve liquidity and available volume.

The Exchange will announce the amendment and extension of the Incentive Program to all Members via a Regulatory Circular.

Proposal To Remove the Fee Waivers for Market Markets That Trade Solely in Proprietary Products (Including SPIKES Options)

Currently, the Exchange offers fee waivers for (i) Membership Application fees, (ii) monthly Market Maker Trading Permit fees, (iii) Member API Testing and Certification fees, and (iv) monthly MEI Port fees, to Market Makers that trade solely in Proprietary Products (including options on SPIKES). The fee waivers for the aforementioned fees will end on September 30, 2024. The Exchange now proposes to remove the aforementioned fee waivers from the Fee Schedule once they expire on September 30, 2024.

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”). A Market Maker is assessed a one-time Membership Application fee of $3,000. However, the Exchange currently offers a waiver of the Membership Application fee for Market Makers that will trade solely in Proprietary Products. This waiver is set to expire on September 30, 2024.

The Exchange now proposes to remove 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) once it expires on September 30, 2024. The Exchange notes that the only Proprietary Product offered by the Exchange is SPIKES options. The Exchange initially waived the Membership Application fee for Market Makers that trade solely in Proprietary Products in order to attract new market participants to trade SPIKES options. Since the Exchange is no longer listing new expiration months in SPIKES options, and the Exchange anticipates that there will be no expiration months available for trading following the expiration of the January 2025 SPIKES options, the Exchange will no longer waive the Membership Application fee to attract market participants to trade SPIKES options.

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 assessed monthly Trading Permit fees as set forth in the Fee Schedule. As it relates to Market Makers, the Exchange 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. The Exchange assesses the monthly Market Maker Trading Permit fee for its Market Makers based on the greatest number of classes listed on the Exchange that the 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 Market Maker is assessed a monthly Trading Permit fee according to the following table: