[Federal Register Volume 85, Number 249 (Tuesday, December 29, 2020)]
[Notices]
[Pages 85706-85709]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-28680]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-90738; File No. SR-EMERALD-2020-20]


Self-Regulatory Organizations; MIAX Emerald, LLC; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend 
Its Fee Schedule To Establish a Fee for Historical Market Data

December 21, 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 December 10, 2020, MIAX Emerald, LLC (``MIAX Emerald'' 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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

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'').
    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 new 
section 6(d), Historical Market Data, to describe the production of 
Exchange historical data and set forth the corresponding fee. The 
Exchange notes that the description of Historical Market Data and the 
proposed fee is identical to that currently charged by the Exchange's 
affiliates, the Miami International Securities Exchange LLC (``MIAX'') 
and MIAX PEARL, LLC (``MIAX PEARL'').\3\
---------------------------------------------------------------------------

    \3\ See Section 6(d) of the MIAX Fee Schedule, Section 6(c) of 
the MIAX PEARL Options Fee Schedule, and Section 3(c) of the MIAX 
PEARL Equities Fee Schedule.
---------------------------------------------------------------------------

    The Exchange proposes to offer Historical Market Data for MIAX 
Emerald, which is a data product that offers historical market data for 
orders entered on MIAX Emerald upon request. The Exchange proposes to 
charge a modest fee for the Historical Market Data, which will be based 
on the cost incurred by the Exchange in providing that data. Proposed 
Section 6(d) of the Fee Schedule describes the fee to be charged market 
participants that request Historical Market Data from MIAX Emerald. 
Historical Market Data is intended to aid market participants in 
analyzing trade and volume data, evaluating historical trends in the 
trading activity of a particular security, and enabling those market 
participants to test trading models and analytical strategies. 
Specifically, Historical Market Data includes all data that is captured 
and disseminated on the MIAX Emerald Top of Market (``ToM'') data feed, 
MIAX Emerald Complex Top of Market (``cToM'') data feed, MIAX Emerald 
Administrative Information Subscriber (``AIS'') data feed, and MIAX 
Emerald Order feed (``MOR''),\4\ and is available on a T + 1 basis.\5\
---------------------------------------------------------------------------

    \4\ See Securities Exchange Act Release No. 85207 (February 27, 
2019), 84 FR 7963 (March 5, 2019) (SR-EMERALD-2019-09) (Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To 
Establish MIAX Emerald Top of Market (``ToM'') Data Feed, MIAX 
Emerald Complex Top of Market (``cToM'') Data Feed, MIAX Emerald 
Administrative Information Subscriber (``AIS'') Data Feed, and MIAX 
Emerald Order Feed (``MOR'')).
    \5\ See Fee Schedule, proposed Section 6(d).
---------------------------------------------------------------------------

    The Exchange proposes to only assess the fee for Historical Market 
Data on a user (whether Member or non-Member) that specifically 
requests such Historical Market Data. Historical Market Data will be 
uploaded onto an Exchange-provided device, which the Exchange will 
incur a cost to procure and provide to those that request the data.
    The Exchange proposed to charge a flat fee of $500 per device 
requested. Each device shall have a maximum storage capacity of 8 
terabytes. Users may request up to six months of Historical Market Data 
per device, subject to the device's storage capacity. Historical Data 
will be made available

[[Page 85707]]

on a T + 1 basis. Only the most recent six months of Historical Market 
Data shall be available for purchase from the request date.
2. Statutory Basis
    The Exchange believes that its proposal to amend its Fee Schedule 
is consistent with Section 6(b) of the Act \6\ in general, and furthers 
the objectives of Section 6(b)(4) of the Act \7\ 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 \8\ 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.
---------------------------------------------------------------------------

    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(4).
    \8\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Exchange believes the proposed fee for Historical Market Data 
is a reasonable allocation of its costs and expenses among its Members 
and other persons using its facilities since it is recovering the costs 
associated with distributing such data should a Member request 
Historical Market Data. Access to the Exchange is provided on fair and 
non-discriminatory terms. The Exchange believes the proposed fee for 
Historical Market Data is equitable and not unfairly discriminatory 
because the fee level results in a reasonable and equitable allocation 
of fees amongst users for similar services. Moreover, the decision as 
to whether or not to purchase Historical Market Data is entirely 
optional to all users. Potential purchasers are not required to 
purchase the Historical Market Data, and the Exchange is not required 
to make the Historical Market Data available. Purchasers may request 
the data at any time or may decline to purchase such data. The 
allocation of fees among users is fair and reasonable because, if the 
market deems the proposed fees to be unfair or inequitable, firms can 
diminish or discontinue their use of this data.
    The Exchange believes that the proposed fee for Historical Market 
Data is consistent with Section 6(b)(4) of the Act because the proposed 
fee will permit recovery of the Exchange's costs and will not result in 
excessive or supra-competitive profit. The proposed fee for Historical 
Market Data will allow the Exchange to recover a portion (less than 
all) of the costs incurred by the Exchange associated with providing 
and maintaining the necessary hardware and other infrastructure as well 
as network monitoring and support services in order to provide 
Historical Market Data. The Exchange believes that it is reasonable and 
appropriate to establish a fee for Historical Market Data at a level 
that will partially offset the costs to the Exchange associated with 
maintaining and providing Historical Market Data. For example, 
Historical Market Data is uploaded onto an Exchange-provided device. 
Each device shall have a maximum storage capacity of 8 terabytes. The 
Exchange incurs costs in providing the device, storing the historical 
data, and utilizing resources to upload the data onto the device. 
Specifically, the device provided by the Exchange costs approximately 
$200 to $300. Moreover, the Exchange tracks the number of hours spent 
by Exchange personnel procuring Historical Data. Based on the 
Exchange's average cost per full-time employee (``FTE''), the Exchange 
represents that its cost to provide this service is reasonably related 
to (and often exceeds) the amount of the Historical Market Data fee the 
Exchange proposes to charge. Accordingly, the proposed fee would enable 
the Exchange to recover a material portion of such cost.
    The Exchange also notes that the proposed fee is identical to the 
same fee charged by its affiliate options exchanges, MIAX and MIAX 
PEARL,\9\ for options historical data and less than that charged by 
other exchanges for their own historical data. For example, all four of 
the Cboe equity exchanges charge a fee of $500 for one month of 
historical data and $2,500 for one terabyte drive of data.\10\
---------------------------------------------------------------------------

    \9\ See supra note 3.
    \10\ See, e.g., Cboe BZX Exchange, Inc. fee schedule available 
at https://markets.cboe.com/us/equities/membership/fee_schedule/bzx/.
---------------------------------------------------------------------------

    Further, in adopting Regulation NMS, the Commission granted self-
regulatory organizations and broker-dealers increased authority and 
flexibility to offer new and unique market data to the public. It was 
believed that this authority would expand the amount of data available 
to consumers, and also spur innovation and competition for the 
provision of market data:

    ``[E]fficiency is promoted when broker-dealers who do not need 
the data beyond the prices, sizes, market center identifications of 
the NBBO and consolidated last sale information are not required to 
receive (and pay for) such data when broker-dealers may choose to 
receive (and pay for) additional market data based on their own 
internal analysis of the need for such data.'' \11\
---------------------------------------------------------------------------

    \11\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496 (June 29, 2005).

    By removing ``unnecessary regulatory restrictions'' on the ability 
of exchanges to sell their own data, Regulation NMS advanced the goals 
of the Act and the principles reflected in its legislative history. If 
the free market should determine whether proprietary data is sold to 
broker-dealers at all, it follows that the price at which such data is 
sold should be set by the market as well.
    In July, 2010, Congress adopted H.R. 4173, the Dodd-Frank Wall 
Street Reform and Consumer Protection Act of 2010 (``Dodd-Frank Act''), 
which amended Section 19 of the Act. Among other things, Section 916 of 
the Dodd-Frank Act amended paragraph (A) of Section 19(b)(3) of the Act 
by inserting the phrase ``on any person, whether or not the person is a 
member of the self-regulatory organization'' after ``due, fee or other 
charge imposed by the self-regulatory organization.'' As a result, all 
SRO rule proposals establishing or changing dues, fees or other charges 
are immediately effective upon filing regardless of whether such dues, 
fees or other charges are imposed on members of the SRO, non-members, 
or both. Section 916 further amended paragraph (C) of Section 19(b)(3) 
of the Act to read, in pertinent part, ``At any time within the 60-day 
period beginning on the date of filing of such a proposed rule change 
in accordance with the provisions of paragraph (1) [of Section 19(b)], 
the Commission summarily may temporarily suspend the change in the 
rules of the self-regulatory organization made thereby, 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 this title. If the Commission takes such 
action, the Commission shall institute proceedings under paragraph 
(2)(B) [of Section 19(b)] to determine whether the proposed rule should 
be approved or disapproved.''
    The Exchange believes that these amendments to Section 19 of the 
Act reflect Congress's intent to allow the Commission to rely upon the 
forces of competition to ensure that fees for market data are 
reasonable and equitably allocated. Although Section 19(b) had formerly 
authorized immediate effectiveness for a ``due, fee or other charge 
imposed by the self-regulatory organization,'' the Commission adopted a 
policy and subsequently a rule stating that fees for

[[Page 85708]]

data and other products available to persons that are not members of 
the self-regulatory organization must be approved by the Commission 
after first being published for comment. At the time, the Commission 
supported the adoption of the policy and the rule by pointing out that 
unlike members, whose representation in self-regulatory organization 
governance was mandated by the Act, non-members should be given the 
opportunity to comment on fees before being required to pay them, and 
that the Commission should specifically approve all such fees. The 
Exchange believes that the amendment to Section 19 reflects Congress's 
conclusion that the evolution of self-regulatory organization 
governance and competitive market structure have rendered the 
Commission's prior policy on non-member fees obsolete. Specifically, 
many exchanges have evolved from member-owned, not-for-profit 
corporations into for-profit, investor-owned corporations (or 
subsidiaries of investor-owned corporations). Accordingly, exchanges no 
longer have narrow incentives to manage their affairs for the exclusive 
benefit of their members, but rather have incentives to maximize the 
appeal of their products to all customers, whether members or non-
members, so as to broaden distribution and grow revenues. Moreover, the 
Exchange believes that the change also reflects an endorsement of the 
Commission's determinations that reliance on competitive markets is an 
appropriate means to ensure equitable and reasonable prices. Simply 
put, the change reflects a presumption that all fee changes should be 
permitted to take effect immediately, since the level of all fees are 
constrained by competitive forces.
    Selling proprietary market data, such as Historical Data, is a 
means by which exchanges compete to attract business. To the extent 
that exchanges are successful in such competition, they earn trading 
revenues and also enhance the value of their data products by 
increasing the amount of data they provide. The need to compete for 
business places substantial pressure upon exchanges to keep their fees 
for both executions and data reasonable.\12\ The Exchange therefore 
believes that the fees for Historical Data are properly assessed on 
Members and Non-Member users.
---------------------------------------------------------------------------

    \12\ See Sec. Indus. Fin. Mkts. Ass'n (SIFMA), Initial Decision 
Release No. 1015, 2016 SEC LEXIS 2278 (ALJ June 1, 2016) (finding 
the existence of vigorous competition with respect to non-core 
market data).
---------------------------------------------------------------------------

    The decision of the United States Court of Appeals for the District 
of Columbia Circuit in NetCoalition v. SEC, No. 09-1042 (D.C. Cir. 
2010), although reviewing a Commission decision made prior to the 
effective date of the Dodd-Frank Act, upheld the Commission's reliance 
upon competitive markets to set reasonable and equitably allocated fees 
for market data:

    ``In fact, the legislative history indicates that the Congress 
intended that the market system `evolve through the interplay of 
competitive forces as unnecessary regulatory restrictions are 
removed' and that the SEC wield its regulatory power `in those 
situations where competition may not be sufficient,' such as in the 
creation of a `consolidated transactional reporting system.' '' \13\
---------------------------------------------------------------------------

    \13\ NetCoalition, at 15 (quoting H.R. Rep. No. 94-229, at 92 
(1975), as reprinted in 1975 U.S.C.C.A.N. 321, 323).

    The court's conclusions about Congressional intent are therefore 
reinforced by the Dodd-Frank Act amendments, which create a presumption 
that exchange fees, including market data fees, may take effect 
immediately, without prior Commission approval, and that the Commission 
should take action to suspend a fee change and institute a proceeding 
to determine whether the fee change should be approved or disapproved 
only where the Commission has concerns that the change may not be 
consistent with the Act.

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.
    The Exchange believes that the proposed Historical Market Data fee 
does not place certain market participants at a relative disadvantage 
to other market participants because the pricing of the proposed fee 
will allow the Exchange to recover a portion (less than all) of the 
costs incurred by the Exchange associated with providing and 
maintaining the necessary hardware and other infrastructure as well as 
network monitoring and support services in order to provide Historical 
Data, and will not impose a barrier to entry to smaller participants. 
The Exchange believes the proposed fee does not favor certain 
categories of market participants in a manner that would impose a 
burden on competition; rather, the allocation of the proposed fee 
reflects the Exchange's costs in providing the device, storing the 
historical data, and utilizing resources to upload the data onto the 
device. Specifically, the device provided by the Exchange costs 
approximately $200 to $300 and the proposed fee represents this cost 
plus the Exchange's average cost per FTE to procure the Historical Data 
and send it to the recipient, regardless of the category of market 
participant.
    The Exchange believes the proposed fee does not place an undue 
burden on competition on other SROs that is not necessary or 
appropriate. MIAX Emerald launched trading operations on March 1, 2019 
and has a market share of approximately 3-4%, with significantly less 
members than other SROs. The Exchange's affiliate options exchanges, 
MIAX and MIAX PEARL, charge the same price that the Exchange proposes 
to charge for their historical data.\14\ Additionally, other exchanges 
have similar historical data products, but with much higher rates.\15\ 
The Exchange is also unaware of any assertion that the proposed fee 
would somehow unduly impair its competition with other exchanges. To 
the contrary, if the fees charged are deemed too high by market 
participants, they can simply not request historical data from the 
Exchange.
---------------------------------------------------------------------------

    \14\ See supra note 3.
    \15\ See supra note 10.
---------------------------------------------------------------------------

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,\16\ and Rule 19b-4(f)(2) \17\ 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.
---------------------------------------------------------------------------

    \16\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \17\ 17 CFR 240.19b-4(f)(2).

---------------------------------------------------------------------------

[[Page 85709]]

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-2020-20 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-2020-20. 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-EMERALD-2020-20, and should be submitted 
on or before January 19, 2021.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
---------------------------------------------------------------------------

    \18\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-28680 Filed 12-28-20; 8:45 am]
BILLING CODE 8011-01-P


