[Federal Register Volume 85, Number 204 (Wednesday, October 21, 2020)]
[Notices]
[Pages 67064-67069]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-23256]



[[Page 67064]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-90196; File No. SR-EMERALD-2020-11]


Self-Regulatory Organizations; MIAX Emerald, LLC; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend 
Its Fee Schedule To Adopt One-Time Membership Application Fees and 
Monthly Trading Permit Fees

October 15, 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 October 1, 2020, MIAX Emerald, LLC (``MIAX Emerald'' 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 Emerald Fee 
Schedule (the ``Fee Schedule'') to adopt certain membership fees for 
MIAX Emerald Members,\3\ including: (1) One-time membership application 
fees and (2) monthly Trading Permit \4\ fees.
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    \3\ 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.
    \4\ The term ``Trading Permit'' means a permit issued by the 
Exchange that confers the ability to transact 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 http://www.miaxoptions.com/rule-filings/emerald, 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 adopt certain 
membership fees, including: (1) Establishing one-time membership 
application fees based upon the applicant's status as either an 
Electronic Exchange Member (``EEM'') \5\ or as a Market Maker; \6\ and 
(2) adopting monthly Trading Permit fees for EEMs and Market Makers. 
MIAX Emerald commenced operations as a national securities exchange 
registered under Section 6 of the Act \7\ on March 1, 2019.\8\ The 
Exchange adopted its transaction fees and certain of its non-
transaction fees in its filing SR-EMERALD-2019-15.\9\ In that filing, 
the Exchange expressly waived, among other fees, its membership fees, 
including its one-time membership application fees and monthly Trading 
Permit fees, to provide an incentive to prospective EEMs and Market 
Makers to become Members of the Exchange. Accordingly, since the launch 
of the Exchange, all such membership fees have been waived for the 
Waiver Period.\10\ When the Exchange adopted the framework for the 
membership fees, it stated that it would provide notice to market 
participants when the Exchange intended to terminate the Waiver Period 
for those fees. Accordingly, on September 15, 2020, the Exchange issued 
a Regulatory Circular which announced that the Exchange would be ending 
the Waiver Period for its membership fees, including the one-time 
membership application fees and monthly Trading Permit fees, among 
other non-transaction fees, beginning October 1, 2020.\11\
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    \5\ ``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 and the Definitions section of the Fee Schedule.
    \6\ The term ``Market Makers'' refers to ``Lead Market Makers'', 
``Primary Lead Market Makers'' and ``Registered Market Makers'' 
collectively. See Exchange Rule 100 and the Definitions section of 
the Fee Schedule.
    \7\ 15 U.S.C. 78f.
    \8\ See Securities Exchange Act Release No. 84891 (December 20, 
2018), 83 FR 67421 (December 28, 2018) (File No. 10-233) (order 
approving application of MIAX Emerald, LLC for registration as a 
national securities exchange).
    \9\ See Securities Exchange Act Release No. 85393 (March 21, 
2019), 84 FR 11599 (March 27, 2019) (SR-EMERALD-2019-15) (Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To 
Establish the MIAX Emerald Fee Schedule).
    \10\ ``Waiver Period'' means, for each applicable fee, the 
period of time from the initial effective date of the MIAX Emerald 
Fee Schedule until such time that the Exchange has an effective fee 
filing establishing the applicable fee. The Exchange will issue a 
Regulatory Circular announcing the establishment of an applicable 
fee that was subject to a Waiver Period at least fifteen (15) days 
prior to the termination of the Waiver Period and effective date of 
any such applicable fee. See the Definitions Section of the Fee 
Schedule.
    \11\ See MIAX Emerald Regulatory Circular 2020-41 available at 
https://www.miaxoptions.com/sites/default/files/circular-files/MIAX_Emerald_RC_2020_41.pdf.
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One-Time MIAX Emerald Membership Application Fee
    The Exchange proposes to assess a one-time membership application 
fee based upon the applicant's status as either an EEM or as a Market 
Maker. The Exchange proposes that applicants for MIAX Emerald 
Membership as an EEM will be assessed a one-time application fee of 
$2,500. The Exchange proposes that applicants for MIAX Emerald 
Membership as a Market Maker will be assessed a one-time application 
fee of $3,000. The difference in the proposed membership application 
fee to be charged to EEMs and Market Makers is because of the 
additional review and resources involved in processing a Market Maker's 
application, as Market Makers have greater and more complex obligations 
with respect to doing business on the Exchange.\12\ MIAX Emerald's 
proposed one-time membership application fees are the same as the one-
time application fees in place at the Exchange's affiliate, Miami 
International Securities Exchange, LLC (``MIAX'') ($2,500 for an EEM 
and $3,000 for a MIAX Market Maker),\13\ and similar to or less than 
application fees for the Cboe Exchange, Inc. (``Cboe'') ($3,000 for an 
individual applicant and $5,000 for an applicant organization) \14\ and 
Nasdaq ISE, LLC (``Nasdaq ISE'') ($7,500 per firm for a primary market 
maker, $5,500 per firm for a competitive market maker, and $3,500 per 
firm for an electronic access member).\15\ Below is the table showing 
the proposed one-time MIAX Emerald membership application fees for EEMs 
and Market Makers:
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    \12\ See Chapter VI of the Exchange's rules, generally.
    \13\ See MIAX Fee Schedule, Section 3)a).
    \14\ See Cboe Fees Schedule, p. 9, Cboe Trading Permit Holder 
Application Fees.
    \15\ See Nasdaq ISE, Options Rules, Options 7, Pricing Schedule, 
Section 9. Legal and Regulatory A. Application.

[[Page 67065]]



------------------------------------------------------------------------
                                                             Application
                    Type of membership                           fee
------------------------------------------------------------------------
Electronic Exchange Member................................     $2,500.00
Market Maker..............................................      3,000.00
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Monthly Trading Permit Fees
    The Exchange previously introduced the structure of Trading Permit 
fees (without proposing the actual fee amounts), but also explicitly 
waived the assessment of any such fees for the Waiver Period. Trading 
Permits are issued to Members who are either EEMs or Market Makers. The 
Exchange proposes to assess monthly fees for Trading Permits depending 
upon the category of Member that is issued a Trading Permit. Members 
issued Trading Permits during a calendar month will be assessed monthly 
Trading Permit Fees. The Exchange notes that the Exchange's affiliate, 
Miami International Securities Exchange, LLC (``MIAX''), charges a 
similar, fixed trading permit fee to its EEMs, and a similar, varying 
trading permit fee to its Market Makers, based upon the number of 
assignments of option classes or the percentage of volume in option 
classes.\16\
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    \16\ See the MIAX Fee Schedule, Section 3)b).
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    The Exchange proposes that monthly Trading Permit fees will be 
assessed, with respect to the calculation of such fee to EEMs (other 
than clearing firms), in any month the EEM is certified in the 
membership system and is credentialed to use one or more Financial 
Information Exchange (``FIX'') \17\ ports in the production 
environment. Further, the Exchange proposes that monthly Trading Permit 
fees will be assessed with respect to EEM clearing firms in any month 
the clearing firm is certified in the membership system to clear 
transactions on the Exchange.
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    \17\ ``FIX Port'' means an interface with MIAX Emerald systems 
that enables the Port user to submit simple and complex orders 
electronically to MIAX Emerald. See the Definitions Section of the 
Fee Schedule.
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    The Exchange proposes to assess EEMs a monthly fee of $1,000 for 
each Trading Permit. Below is the proposed table showing the Trading 
Permit fees for EEMs:

------------------------------------------------------------------------
                                                           Monthly MIAX
                 Type of trading permit                  emerald trading
                                                            permit fee
------------------------------------------------------------------------
Electronic Exchange Member.............................       $1,000.00
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    The Exchange proposes to assess monthly Trading Permit fees for 
Market Makers in any month the Market Maker (including a Registered 
Market Maker, Lead Market Maker, and Primary Lead Market Maker) is 
certified in the membership system, is credentialed to use one or more 
MIAX Emerald Express Interface (``MEI'') \18\ ports in the production 
environment and is assigned to quote in one or more classes. 
Specifically, the Exchange proposes to adopt the following Trading 
Permit fees for Market Makers: (i) $7,000 for Market Maker Assignments 
in up to 10 option classes or up to 20% of option classes by national 
average daily volume (``ADV''); (ii) $12,000 for Market Maker 
Assignments in up to 40 option classes or up to 35% of option classes 
by ADV; (iii) $17,000 for Market Maker Assignments in up to 100 option 
classes or up to 50% of option classes by ADV; and (iv) $22,000 for 
Market Maker Assignments in over 100 option classes or over 50% of 
option classes by ADV up to all option classes listed on MIAX Emerald.
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    \18\ The MEI is a connection to the MIAX Emerald System that 
enables Market Makers to submit simple and complex electronic quotes 
to MIAX Emerald. The Exchange offers Full Service MEI Ports, which 
provide Market Makers with the ability to send Market Maker simple 
and complex quotes, eQuotes, and quote purge messages to the MIAX 
Emerald 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. The Exchange also offers 
Limited Service MEI Ports, which provide Market Makers with the 
ability to send simple and complex eQuotes and quote purge messages 
only, but not Market Maker Quotes, to the MIAX Emerald 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 the Definitions 
Section of the Fee Schedule.
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    The Exchange also proposes to adopt an alternative lower Trading 
Permit fee for Market Makers who fall within the following Trading 
Permit fee levels, which represent the 3rd and 4th levels of the Market 
Maker Trading Permit fee table: (i) Market Maker Assignments in up to 
100 option classes or up to 50% of option classes by volume; and (ii) 
Market Maker Assignments in over 100 option classes or over 50% of 
option classes by volume up to all option classes listed on MIAX 
Emerald. Specifically, the Exchange proposes to adopt footnote 
``[squf]'' following the Market Maker Trading Permit fee table for 
these Monthly Trading Permit tier levels, if the Market Maker's total 
monthly executed volume during the relevant month is less than 0.025% 
of the total monthly executed volume reported by OCC in the customer 
account type for MIAX Emerald-listed option classes for that month, 
then the fee will be $15,500 instead of the fee otherwise applicable to 
such level.
    Below is the proposed table showing the Trading Permit fees for 
Market Makers:

----------------------------------------------------------------------------------------------------------------
                                                        Market Maker assignments (the lesser of the applicable
                                       Monthly MIAX                       measurements below)
       Type of trading permit             emerald    -----------------------------------------------------------
                                      trading permit                                        Percent of national
                                            fee                    Per class               average daily volume
----------------------------------------------------------------------------------------------------------------
Market Maker (includes RMM, LMM,           $7,000.00  Up to 10 Classes..................  Up to 20% of Classes
 PLMM).                                                                                    by volume.
                                           12,000.00  Up to 40 Classes..................  Up to 35% of Classes
                                                                                           by volume.
                                              [squf]  Up to 100 Classes.................  Up to 50% of Classes
                                           17,000.00                                       by volume.
                                              [squf]  Over 100 Classes..................  Over 50% of Classes by
                                           22,000.00                                       volume up to all
                                                                                           Classes listed on
                                                                                           MIAX Emerald.
----------------------------------------------------------------------------------------------------------------
[squf] For these Monthly MIAX Emerald Trading Permit tier levels, if the Market Maker's total monthly executed
  volume during the relevant month is less than 0.025% of the total monthly executed volume reported by OCC in
  the customer account type for MIAX Emerald-listed option classes for that month, then the fee will be $15,500
  instead of the fee otherwise applicable to such level.

    For the calculation of the monthly Market Maker Trading Permit 
fees, the number of classes is defined as the greatest number of 
classes the Market Maker was assigned to quote in on any given day 
within the calendar month and the class volume percentage is based on 
the total national ADV in classes listed on MIAX Emerald in the prior 
calendar quarter. Newly listed option classes are excluded from the 
calculation of the monthly Market Maker Trading Permit 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

[[Page 67066]]

Exchange proposes to assess MIAX Emerald Market Makers the monthly 
Market Maker Trading Permit fee based on the greatest number of classes 
listed on MIAX Emerald that the 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 ADV measurement. The purpose of the alternative lower fee 
designated in proposed footnote ``[squf]'' is to provide a lower fixed 
cost to those Market Makers who are willing to quote the entire 
Exchange market (or substantial amount of the Exchange market), as 
objectively measured by either number of classes assigned or national 
ADV, but who do not otherwise execute a significant amount of volume on 
the Exchange. The Exchange believes that, by offering lower fixed costs 
to Market Makers that execute less volume, the Exchange will retain and 
attract smaller-scale Market Makers, which are an integral component of 
the option marketplace, but have been decreasing in number in recent 
years, due to industry consolidation and lower market maker 
profitability. Since these smaller-scale Market Makers utilize less 
Exchange capacity due to lower overall volume executed, the Exchange 
believes it is reasonable and equitable to offer such Market Makers a 
lower fixed cost. The Exchange notes that the Exchange's affiliate, 
MIAX, provides a similar alternative lower Trading Permit fee for 
Market Makers who quote the entire MIAX market (or substantial amount 
of the MIAX market), as objectively measured by either number of 
classes assigned or national ADV, but who do not otherwise execute a 
significant amount of volume on MIAX.\19\ The Exchange also notes that 
other options exchanges assess certain of their membership fees at 
different rates, based upon a member's participation on that 
exchange,\20\ and, as such, this concept is not new or novel. The 
proposed changes to the Trading Permit fees for Market Makers who fall 
within the 3rd and 4th levels of the fee table are based upon a 
business determination of current Market Maker assignments and trading 
volume.
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    \19\ See supra note 16.
    \20\ See e.g., NYSE Arca Options Fees and Charges, p.1 
(assessing market makers $6,000 for up to 175 option issues, an 
additional $5,000 for up to 350 option issues, an additional $4,000 
for up to 1,000 option issues, an additional $3,000 for all option 
issues on the exchange, and an additional $1,000 for the fifth 
trading permit and for each trading permit thereafter); NYSE 
American Options Fee Schedule, p. 23 (assessing market makers $8,000 
for up to 60 plus the bottom 45% of option issues, an additional 
$6,000 for up to 150 plus the bottom 45% of option issues, an 
additional $5,000 for up to 500 plus the bottom 45% of option 
issues, and additional $4,000 for up to 1,100 plus the bottom 45% of 
option issues, an additional $3,000 for all issues traded on the 
exchange, and an additional $2,000 for 6th to 9th ATPs; plus an 
addition fee for premium products). See also Cboe BZX Options 
Exchange (``BZX Options'') assesses the Participant Fee, which is a 
membership fee, according to a member's ADV. See Cboe BZX Options 
Exchange Fee Schedule under ``Membership Fees''. The Participant Fee 
is $500 if the member ADV is less than 5,000 contracts and $1,000 if 
the member ADV is equal to or greater than 5,000 contracts. Id.
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Applicability to and Impact on Participants
    The Commission has repeatedly expressed its preference for 
competition over regulatory intervention in determining prices, 
products, and services in the securities markets. In Regulation NMS, 
the Commission highlighted the importance of market forces in 
determining prices and SRO revenues and, also, recognized that current 
regulation of the market system ``has been remarkably successful in 
promoting market competition in its broader forms that are most 
important to investors and listed companies.'' \21\
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    \21\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496 (June 29, 2005).
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    There are currently 16 registered options exchanges competing for 
order flow. Based on publicly-available information, and excluding 
index-based options, no single exchange has more than approximately 16% 
market share.\22\ Therefore, no exchange possesses significant pricing 
power. More specifically, for the month of August 2020, the Exchange 
had an approximately 3.24% market share of executed volume of multiply-
listed equity options.\23\
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    \22\ The Options Clearing Corporation (``OCC'') publishes 
options and futures volume in a variety of formats, including daily 
and monthly volume by exchange, available here: https://www.theocc.com/market-data/volume/default.jsp.
    \23\ See id.
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    The Exchange believes that the ever-shifting market share among the 
exchanges from month to month demonstrates that market participants can 
discontinue or reduce use of certain categories of products, or shift 
order flow, in response to non-transaction and transaction fee changes. 
For example, on February 28, 2019, the Exchange's affiliate, MIAX 
PEARL, LLC (``MIAX PEARL'') filed with the Commission a proposal to 
increase Taker fees in certain Tiers for options transactions in 
certain Penny classes for Priority Customers and decrease Maker rebates 
in certain Tiers for options transactions in Penny classes for Priority 
Customers (which fee was to be effective March 1, 2019).\24\ MIAX PEARL 
experienced a decrease in total market share for the month of March 
2019, after the proposal went into effect. Accordingly, the Exchange 
believes that the MIAX PEARL March 1, 2019 fee change, to increase 
certain transaction fees and decrease certain transaction rebates, may 
have contributed to the decrease in MIAX PEARL's market share and, as 
such, the Exchange believes competitive forces constrain the 
Exchange's, and other options exchanges, ability to set transaction 
fees and market participants can shift order flow based on fee changes 
instituted by the exchanges.
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    \24\ See Securities Exchange Act Release No. 85304 (March 13, 
2019), 84 FR 10144 (March 19, 2019) (SR-PEARL-2019-07).
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    The proposed adoption of a one-time membership application fee and 
monthly Trading Permit fees applicable to EEMs and Market Markers would 
be applied uniformly to each of these market participants. Further, as 
there are currently 16 registered options exchanges competing for order 
flow with no single exchange accounting for more than approximately 16% 
of market share, the Exchange cannot predict with certainty whether any 
participant is planning to become a Member and thus would be subject to 
the proposed fees.
2. Statutory Basis
    The Exchange believes that its proposal to amend its Fee Schedule 
is consistent with Section 6(b) of the Act \25\ in general, and 
furthers the objectives of Section 6(b)(4) of the Act \26\ in 
particular, in that it is an equitable allocation of reasonable dues, 
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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    \25\ 15 U.S.C. 78f(b).
    \26\ 15 U.S.C. 78f(b)(4) and (5).
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    The Exchange believes that the proposal to adopt a one-time 
membership application fee and Trading Permit fees applicable to EEMs 
and Market Markers, as described above, is reasonable in several 
respects. First, the Exchange is subject to significant competitive 
forces in the market for options transaction and non-transaction 
services that constrain its pricing

[[Page 67067]]

determinations in that market. The Commission has repeatedly expressed 
its preference for competition over regulatory intervention in 
determining prices, products, and services in the securities markets. 
In Regulation NMS, the Commission highlighted the importance of market 
forces in determining prices and SRO revenues and, also, recognized 
that current regulation of the market system ``has been remarkably 
successful in promoting market competition in its broader forms that 
are most important to investors and listed companies.'' \27\
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    \27\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496 (June 29, 2005).
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    Numerous indicia demonstrate the competitive nature of this market. 
For example, clear substitutes to the Exchange exist in the market for 
options transaction services. The Exchange is one of several options 
venues to which market participants may direct their order flow, and it 
represents a small percentage of the overall market. Within this 
environment, market participants can freely and often do shift their 
order flow among the Exchange and competing venues in response to 
changes in their respective pricing schedules. There are currently 16 
registered options exchanges competing for order flow. Based on 
publicly-available information, and excluding index-based options, no 
single exchange has more than approximately 16% of the market share of 
executed volume of multiply-listed equity and ETF options.\28\ 
Therefore, no exchange possesses significant pricing power. More 
specifically, for the month of August 2020, the Exchange had an 
approximately 3.24% market share of executed volume of multiply-listed 
equity options.\29\
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    \28\ See supra note 22.
    \29\ See id.
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    The Exchange also believes that the ever-shifting market share 
among the exchanges from month to month demonstrates that market 
participants can discontinue or reduce use of certain categories of 
products, or shift order flow, in response to non-transaction and 
transaction fee changes. For example, on February 28, 2019, the 
Exchange's affiliate, MIAX PEARL, filed with the Commission a proposal 
to increase Taker fees in certain Tiers for options transactions in 
certain Penny classes for Priority Customers and decrease Maker rebates 
in certain Tiers for options transactions in Penny classes for Priority 
Customers (which fee was to be effective March 1, 2019).\30\ MIAX PEARL 
experienced a decrease in total market share for the month of March 
2019, after the proposal went into effect. Accordingly, the Exchange 
believes that the MIAX PEARL March 1, 2019 fee change, to increase 
certain transaction fees and decrease certain transaction rebates, may 
have contributed to the decrease in MIAX PEARL's market share and, as 
such, the Exchange believes competitive forces constrain the 
Exchange's, and other options exchanges, ability to set transaction 
fees and market participants can shift order flow based on fee changes 
instituted by the exchanges.
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    \30\ See supra note 24.
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    Further, the Exchange no longer believes it is necessary to waive 
these fees to attract market participants to the MIAX Emerald market 
since this market is now established and MIAX Emerald no longer needs 
to rely on such waivers to attract market participants. The Exchange 
believes that the proposal is equitable and not unfairly discriminatory 
because the elimination of the fee waiver for one-time membership 
application fees and monthly Trading Permit fees will uniformly apply 
to all EEMs and Market Makers seeking to become Members of the 
Exchange. Additionally, the Exchange believes its proposal for a one-
time membership application fees applicable to EEMs and Market Markers 
is reasonable and well within the range of fees assessed among other 
exchanges, including the Exchange's affiliate, MIAX.\31\ The Exchange 
also notes that the Exchange's affiliate, MIAX, charges a similar, 
fixed trading permit fee to its EEMs, and a similar, varying trading 
permit fee to its Market Makers, based upon the number of assignments 
of option classes or the percentage of volume in option classes.\32\
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    \31\ See supra notes 13, 14 and 15.
    \32\ See supra note 16.
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    The Exchange believes its one-time membership application fees are 
reasonable, equitable and not unfairly discriminatory. As described 
above, the one-time application fees are similar to the application 
fees in place at other options exchanges,\33\ and are associated with 
the time and resources of processing of such applications. The Exchange 
believes that it is reasonable, equitable, and not unfairly 
discriminatory that Market Maker applicants are charged slightly more 
than EEM applicants because of the additional review and resources 
involved in processing a Market Maker's application, as Market Makers 
have greater and more complex obligations with respect to doing 
business on the Exchange.\34\
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    \33\ See supra notes 14 and 15.
    \34\ See supra note 12.
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    The Exchange believes that the proposed monthly Trading Permit fees 
are reasonable, equitable and not unfairly discriminatory because they 
are within the range of comparable fees at other competing options 
exchanges.\35\ As such, the proposal is reasonably designed to continue 
to compete with other options exchange by incentivizing market 
participants to register as Market Makers on the Exchange in a manner 
that enables the Exchange to improve its overall competitiveness and 
strengthen its market quality for all market participants. The proposed 
fees are fair and equitable and not unreasonably discriminatory because 
they 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 designed the fee rates in order to provide 
objective criteria for Market Makers of different sizes and business 
models to be assessed a Trading Permit Fee that best matches their 
quoting activity on the Exchange. The Exchange notes that trading 
volume and quoting activity in the options market tends to be 
concentrated in the top ranked options classes; with the vast majority 
of options classes being thinly quoted and traded. The Exchange 
believes that the proposed fee rates and criteria provide an objective 
and flexible framework that will encourage Market Makers to be assigned 
and quote in option classes with lower total national average daily 
volume while also equitably allocating the fees in a reasonable manner 
amongst Market Maker assignments to account for quoting and trading 
activity.
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    \35\ See supra note 20.
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    Finally, the Exchange notes that it operates in a highly 
competitive market in which market participants can readily favor 
competing venues if they deem fee levels at a particular venue to be 
excessive. In such an environment, the Exchange must continually adjust 
its fees for services and products, in addition to order flow, to 
remain competitive with other exchanges. The Exchange believes that the 
proposed changes reflect this competitive environment.

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.

[[Page 67068]]

Intra-Market Competition
    The Exchange does not believe that the proposed rule change would 
place certain market participants at the Exchange at a relative 
disadvantage compared to other market participants or affect the 
ability of such market participants to compete. Unilateral action by 
MIAX Emerald in the assessment of certain non-transaction fees for 
services provided to its Members and others using its facilities will 
not have an impact on competition. As a more recent entrant in the 
already highly competitive environment for equity options trading, MIAX 
Emerald does not have the market power necessary to set prices for 
services that are unreasonable or unfairly discriminatory in violation 
of the Act. MIAX Emerald's proposed one-time membership application 
fees and monthly Trading Permit fees, as described herein, are 
comparable to fees charged by other options exchanges for the same or 
similar services, including those fees assessed by the Exchange's 
affiliate, MIAX.\36\
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    \36\ See supra notes 13, 14 and 15.
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    The Exchange believes that the proposed one-time membership 
application fees and monthly Trading Permit fees do not place certain 
market participants at a relative disadvantage to other market 
participants because the pricing is associated with the Exchange's time 
and resources to process such applications. The proposed one-time 
membership application fees do not apply unequally to different size 
market participants, but instead would allow the Exchange to charge for 
reviewing and processing Market Maker and EEM membership applications. 
Accordingly, the proposed one-time membership application fees do not 
favor certain categories of market participants in a manner that would 
impose a burden on competition.
    Further, the Exchange believes that the proposed rule change will 
promote transparency by making it clear to EEMs and Market Makers the 
fees that MIAX Emerald will assess for Membership application to MIAX 
Emerald. This will permit EEMs and Market Makers to more accurately 
anticipate and account for the costs of one-time membership application 
in order to become Members of the Exchange, which promotes consistency.
    The Exchange believes that the proposal increases intra-market 
competition by enabling Market Makers to qualify for lower Trading 
Permit fee rates on the Exchange in a manner that is designed to 
provide objective criteria for Market Makers of different sizes and 
business models to be assessed a Trading Permit fee that best matches 
their quoting activity on the Exchange yet still be in the range of 
comparable fees on other exchanges. The Exchange believes that the 
proposal will increase competition amongst Market Makers of different 
sizes and business models by encouraging Market Makers to be assigned 
and quote in option classes with lower total national average daily 
volume.
Inter-Market Competition
    The Exchange believes the proposed one-time membership application 
fees and monthly Trading Permit fees do not place an undue burden on 
competition on other SROs that is not necessary or appropriate. The 
Exchange operates in a highly competitive market in which market 
participants can readily favor one of the 16 competing options venues 
if they deem fee levels at a particular venue to be excessive. Based on 
publicly-available information, and excluding index-based options, no 
single exchange has more than 16% market share. Therefore, no exchange 
possesses significant pricing power in the execution of multiply-listed 
equity and ETF options order flow. For the month of August 2020, the 
Exchange had an approximately 3.24% market share of executed volume of 
multiply-listed equity options,\37\ and the Exchange believes that the 
ever-shifting market share among exchanges from month to month 
demonstrates that market participants can discontinue or reduce use of 
certain categories of products, or shift order flow, in response to fee 
changes. In such an environment, the Exchange must continually adjust 
its fees and fee waivers to remain competitive with other exchanges and 
to attract order flow to the Exchange. The Exchange believes that the 
proposal reflects this competitive environment because it modify the 
Exchange's fees in a manner that continues to encourage market 
participants to register as Market Makers on the Exchange, to provide 
liquidity, and to attract order flow. To the extent that this purpose 
is achieved, all the Exchange's market participants should benefit from 
the improved market liquidity.
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    \37\ See supra note 22.
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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,\38\ and Rule 19b-4(f)(2) \39\ 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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    \38\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \39\ 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 rule-comments@sec.gov. Please include 
File Number SR-EMERALD-2020-11 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-EMERALD-2020-11. 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

[[Page 67069]]

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-
EMERALD-2020-11 and should be submitted on or before November 12, 2020.
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    \40\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\40\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-23256 Filed 10-20-20; 8:45 am]
BILLING CODE 8011-01-P


