Miami International Holdings, Inc. (MIH), owner of Miami International Securities Exchange, LLC (MIAX®), MIAX PEARL, LLC (MIAX Pearl®), MIAX Emerald, LLC (MIAX Emerald®), Minneapolis Grain Exchange, LLC (MGEXTM), LedgerX LLC (LedgerX), The Bermuda Stock Exchange (BSX), and Dorman Trading LLC today announced that MGEX has filed a petition for panel rehearing and rehearing en banc of the U.S. Court of Appeals for the District of Columbia’s July 28, 2023 decision to vacate the U.S. Security and Exchange Commission’s Exemptive Order related to SPIKES® Volatility Index Futures (the “Order”). The Order permits the listing of SPIKES Futures as a futures contract on MGEX, which serves as the exclusive market for this contract.

As a result of MGEX’s petition, the original date on which the Court’s vacatur was to go into effect – November 1, 2023 – no longer applies. If the petition is denied, then the new date for the vacatur is three months after the end of the month in which such denial is issued. If the petition is granted, then the Order would remain in effect until the Court hears the matter again and/or issues a new opinion. Accordingly, the earliest date on which SPIKES Futures will be required to cease trading on MGEX is January 1, 2024.

“We have worked closely with our market makers and liquidity providers to create a volatility trading ecosystem that offers members competitive alternatives to existing products,” said Thomas P. Gallagher, Chairman and CEO of MIH. “We have strong support from a broad range of market participants seeking greater choice when trading volatility and believe SPIKES Futures meets their needs for an innovative product that can help lower trading costs and enhance their volatility trading strategies. We and our customers are acutely aware that Cboe’s monopoly on volatility products allows it to charge much higher transaction fees for its proprietary products, thereby allowing Cboe to subsidize transaction fees for its multi-list option products.”

Mr. Gallagher added, “The January 2021 lawsuit by Cboe against the SEC’s issuance of the Exemptive Order created market uncertainty and has discouraged the competition expected by the SEC since the launch of SPIKES Futures. Despite the uncertainty, SPIKES Futures trading volume has grown faster in its first two and one-half years than VIX futures volume did in its comparable initial period and we are very proud of this growth.”

“Despite the Order establishing how the product worked and why a limited exemption for it was appropriate, the Court disregarded the SEC’s reasoning and instead became a tool to perpetuate a government sanctioned monopoly. Worse, in doing so, the Court has now created a potential for significant market disruption and investor harm,” said Tyler Gellasch, President and CEO of the Healthy Markets Association.

In discussing the Court’s decision, Mr. Gellasch went on to cite an excerpt from the SEC’s November 24, 2020 Exemptive Order that stated in part the following:

“The Commission believes that permitting the Product to trade as a futures contract, as opposed to as a security future, should foster competition as it could serve as an alternative to the only comparable incumbent volatility product in the market. Facilitating greater competition among these types of products should provide market participants with access to a wider range of financial instruments to trade on and hedge against volatility in the markets, particularly the S&P 500. In addition, the introduction of an additional volatility product in the market should lower transaction costs for market participants. Further, because SPY options are traded on 16 different national securities exchanges, the Commission would expect there to be a large number of market participants able to act as market makers in the Product. Moreover, the fact that SPY options are multi-listed should provide resiliency by reducing the likelihood that a disruption on one or more options exchanges could lead to a disruption in trading in the Product.”

Mr. Gellasch continued, “The team from MIAX and MGEX should be applauded for filing this Petition, but the ball is now also in the SEC’s court. Many investors – including those who aren’t actively trading SPIKES Futures – are depending upon the SEC to move quickly and carefully to consider a new Order to keep these markets functioning properly. The SEC has the information it needs to promote competition and protect investors, and now is the time for it to act.”

Source: MIAX