[Federal Register Volume 86, Number 23 (Friday, February 5, 2021)]
[Notices]
[Pages 8465-8472]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-02398]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-91030; File No. SR-EMERALD-2021-01]


Self-Regulatory Organizations; MIAX Emerald, LLC; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend 
Its Fee Schedule To Adopt a One-Time Membership Application Fee, 
Application Programming Interface (``API'') Testing and Certification 
Fees, and Network Connectivity Testing and Certification Fees

February 1, 2021.
    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 January 21, 2021, 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 establish: (1) One-time membership 
application fees for new MIAX Emerald Members; \3\ and (2) per-instance 
Application Programming Interface (``API'') Testing and Certification 
fees and Network

[[Page 8466]]

Connectivity Testing and Certification fees for Members and non-
Members.
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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 and the Definitions section of the Fee Schedule.
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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 establish: (1) 
One-time membership application fees for new MIAX Emerald Members based 
upon the applicant's status as either an Electronic Exchange Member 
(``EEM'') \4\ or as a Market Maker; \5\ and (2) per-instance API 
Testing and Certification fees and Network Connectivity Testing and 
Certification fees for Members and non-Members.
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    \4\ ``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.
    \5\ 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.
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    MIAX Emerald commenced operations as a national securities exchange 
registered under Section 6 of the Act \6\ on March 1, 2019.\7\ The 
Exchange adopted its transaction fees and certain of its non-
transaction fees in its filing SR-EMERALD-2019-15.\8\ In that filing, 
the Exchange expressly waived, among other fees, the one-time 
membership application fee and per-instance API Testing and 
Certification fees and Network Connectivity Testing and Certification 
fees, both for Members and non-Members, in order to provide an 
incentive to prospective market participants to become Exchange Members 
and for prospective Members and non-Members to connect to MIAX Emerald 
as soon as possible. At that time, the Exchange waived the one-time 
membership application fee and per-instance API Testing and 
Certification fees and Network Connectivity Testing and Certification 
fees for the Waiver Period,\9\ and stated that it would provide notice 
to market participants when the Exchange intended to terminate the 
Waiver Period.
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    \6\ 15 U.S.C. 78f.
    \7\ 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).
    \8\ 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).
    \9\ ``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.
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    On September 15, 2020, the Exchange issued a Regulatory Circular 
which announced that the Exchange would terminate the Waiver Period 
for, among other fees, the one-time membership application fee and per-
instance API Testing and Certification fees and Network Connectivity 
Testing and Certification fees for Members and non-Members, beginning 
October 1, 2020.\10\
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    \10\ 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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    The Exchange initially filed its proposals to establish the one-
time membership application fee and per-instance API Testing and 
Certification fees and Network Connectivity Testing and Certification 
fees on October 1, 2020.\11\ The First Proposed Rule Changes were 
published for comment in the Federal Register between October 20-21, 
2020.\12\ On November 25, 2020, the Exchange withdrew the First 
Proposed Rule Changes \13\ and refiled its proposal to establish the 
one-time membership application fee and per-instance API Testing and 
Certification fees and Network Connectivity Testing and Certification 
fees.\14\ The Second Proposed Rule Change was published for comment in 
the Federal Register on December 14, 2020.\15\ On January 21, 2021, the 
Exchange withdrew the Second Proposed Rule Change and refiled its 
proposal.\16\
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    \11\ See Securities Exchange Act Release Nos. 90183 (October 14, 
2020), 85 FR 66607 (October 20, 2020) (SR-EMERALD-2020-09) (Notice 
of Filing and Immediate Effectiveness of a Proposed Rule Change To 
Amend Its Fee Schedule To Adopt Application Programming Interface 
(``API'') Testing and Certification Fees and Network Connectivity 
Testing and Certification Fees); 90196 (October 15, 2020), 85 FR 
67064 (October 21, 2020) (SR-EMERALD-2020-11) (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). The Exchange's prior proposals to establish 
the one-time membership application fee and per-instance API Testing 
and Certification fees and Network Connectivity Testing and 
Certification fees are collectively referred to herein as the 
``First Proposed Rule Changes.'' The Exchange notes that it will 
refile its proposal to establish monthly Trading Permit fees in a 
separate filing.
    \12\ See id.
    \13\ See Comment Letter from Joseph W. Ferraro III, SVP, Deputy 
General Counsel, the Exchange, dated November 20, 2020, notifying 
the Commission that the Exchange will withdraw the First Proposed 
Rule Changes.
    \14\ See Securities Exchange Act Release Nos. 90597 (December 8, 
2020), 85 FR 80878 (December 14, 2020) (SR-EMERALD-2020-15) (the 
``Second Proposed Rule Change'').
    \15\ See id.
    \16\ See Comment Letter from Joseph W. Ferraro III, SVP, Deputy 
General Counsel, the Exchange, dated January 15, 2021, notifying the 
Commission that the Exchange will withdraw the Second Proposed Rule 
Change.
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One-Time 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.\17\ 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) \18\, 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) \19\ and 
Nasdaq ISE, LLC (``Nasdaq ISE'') ($7,500 per firm for a

[[Page 8467]]

primary market maker, $5,500 per firm for a competitive market maker, 
and $3,500 per firm for an electronic access member).\20\ Below is the 
table showing the proposed one-time membership application fees for 
EEMs and Market Makers:
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    \17\ See Chapter VI of the Exchange's rules, generally.
    \18\ See MIAX Fee Schedule, Section 3(a).
    \19\ See Cboe Fees Schedule, p. 9, Cboe Trading Permit Holder 
Application Fees.
    \20\ See Nasdaq ISE, Options Rules, Options 7, Pricing Schedule, 
Section 9. Legal and Regulatory A. Application.

------------------------------------------------------------------------
                                                            Application
                   Type of membership                           fee
------------------------------------------------------------------------
Electronic Exchange Member..............................       $2,500.00
Market Maker............................................        3,000.00
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API Testing and Certification Fees for Members
    The Exchange also proposes to adopt an API Testing and 
Certification fee for Members. An API makes it possible for Member 
software to communicate with MIAX Emerald software applications, and is 
subject to Member testing with, and certification by, MIAX Emerald. API 
testing and certification includes, for EEMs, testing all available 
order types, new order entry, order management, order throughput and 
mass order cancellation. For Market Makers, API testing and 
certification also includes testing of all available quote types, quote 
throughput, quote management and cancellation, Aggregate Risk Manager 
settings and triggers, and confirmation of quotes within the trading 
engines.
    The API Testing and Certification fees for Members are based upon 
the type of interface that the Member has been credentialed to use. The 
Exchange proposes to adopt an API testing and certification fee for 
EEMs (other than Clearing Firms): (i) Initially per API for Financial 
Information Exchange (``FIX'') \21\ ports, FIX Drop Copy (``FXD'') \22\ 
ports and Clearing Trade Drop (``CTD'') \23\ ports in the month the EEM 
has been credentialed to use one or more ports in the production 
environment for the tested API, and (ii) each time an EEM initiates a 
change to its system that requires testing and certification. The 
Exchange proposes to adopt an API testing and certification fee for EEM 
Clearing Firms (i) initially per API in the month the EEM Clearing Firm 
has been credentialed to use one or more CTD Ports in the production 
environment, and (ii) each time an EEM Clearing Firm initiates a change 
to its system that requires testing and certification.
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    \21\ ``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.
    \22\ The FIX Drop Copy (``FXD'') Port is a messaging interface 
that will provide a copy of real-time trade execution, trade 
correction and trade cancellation information to FXD Port users who 
subscribe to the service. FXD Port users are those users who are 
designated by an EEM to receive the information and the information 
is restricted for use by the EEM. FXD Port Fees will be assessed in 
any month the Member is credentialed to use the FXD Port in the 
production environment. See the Definitions section of the Fee 
Schedule.
    \23\ ``CTD Port'' or ``Clearing Trade Drop Port'' provides an 
Exchange Member with a real-time clearing trade updates. The updates 
include the Member's clearing trade messages on a low latency, real-
time basis. The trade messages are routed to a Member's connection 
containing certain information. The information includes, among 
other things, the following: (i) Trade date and time; (ii) symbol 
information; (iii) trade price/size information; (iv) Member type 
(for example, and without limitation, Market Maker, Electronic 
Exchange Member, Broker-Dealer); and (v) Exchange MPID for each side 
of the transaction, including Clearing Member MPID. See the 
Definitions section of the Fee Schedule.
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    The Exchange proposes to adopt an API testing and certification fee 
for Market Makers: (i) Initially per API for CTD and MIAX Emerald 
Express Interface (``MEI'') \24\ ports in the month the Market Maker 
has been credentialed to use one or more ports in the production 
environment for the tested API and the Market Maker has been assigned 
to quote in one or more classes, and (ii) each time a Market Maker 
initiates a change to its system that requires testing and 
certification. The Exchange also proposes that API Testing and 
Certification fees will not be assessed in situations where the 
Exchange initiates a mandatory change to the Exchange's System \25\ 
that requires testing and certification. The Exchange proposes to 
assess Member API Testing and Certification fees of $1,000 for EEMs and 
$2,500 for Market Makers. Below is the proposed table for API Testing 
and Certification fees for Members:
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    \24\ 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.
    \25\ The term ``System'' means the automated trading system used 
by the Exchange for the trading of securities. See Exchange Rule 
100.

------------------------------------------------------------------------
                                                            API Testing
                                                                and
                     Type of member                        Certification
                                                                fee
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Electronic Exchange Member..............................       $1,000.00
Market Maker............................................        2,500.00
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API Testing and Certification Fee for Non-Members
    The Exchange proposes to adopt an API Testing and Certification fee 
for Third Party Vendors,\26\ Service Bureaus \27\ and other non-Members 
(such as clearing firms): (i) Initially per API for FIX, FXD, CTD and 
MEI ports in the month the Third Party Vendor, Service Bureau or non-
Member has been credentialed to use one or more ports in the production 
environment for the tested API, and (ii) each time a Third Party 
Vendor, Service Bureau, or other non-Member initiates a change to its 
system that requires testing and certification. The Exchange also 
proposes that API Testing and Certification fees will not be assessed 
to non-Members in situations where the Exchange initiates a mandatory 
change to the Exchange's System that requires testing and 
certification.
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    \26\ Third Party Vendors are subscribers of MIAX Emerald's 
market and other data feeds, which they in turn use for 
redistribution purposes. See the Definitions section of the Fee 
Schedule.
    \27\ ``Service Bureau'' means a technology provider that offers 
and supplies technology and technology services to a trading firm 
that does not have its own proprietary system. See the Definitions 
section of the Fee Schedule.
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    The Exchange proposes to assess non-Member API Testing and 
Certification fees of $1,200 for Third Party Vendors, Service Bureaus 
and other non-Members. Below is the proposed table for API Testing and 
Certification fees for non-Members:

------------------------------------------------------------------------
                                                         API Testing and
                       Non-Member                          Certification
                                                               fee
------------------------------------------------------------------------
Third Party Vendors and Service Bureaus and other non-        $1,200.00
 Members...............................................
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    The proposed higher fee charged to Third Party Vendors, Service 
Bureaus and non-Members reflects the greater amount of time spent by 
MIAX Emerald employees testing and certifying non-Members. It has been 
MIAX Emerald's experience that Member testing takes less time than non-
Member testing because Members have more experience testing these 
systems with exchanges, resulting in generally fewer questions and 
issues arising during the testing and certification process. Also, 
because Third Party Vendors and Service Bureaus are redistributing data 
and reselling services to other Members and

[[Page 8468]]

market participants, the number and types of scenarios that need to be 
tested are more numerous and complex than those tested and certified 
for a single Member.
    The Exchange believes it is necessary to charge an API Testing and 
Certification fee to Members and non-Members because of the time and 
resources spent to ensure that Member and non-Member APIs function 
correctly to prevent any System malfunction. Further, the Exchange 
believes the price differential in API Testing and Certification fees 
for Members and non-Members is not unfairly discriminatory because, in 
the Exchange's experience, Member testing takes less time than non-
Member testing as Members have more experience testing these systems 
with exchanges, resulting generally in fewer questions and issues 
arising during the testing and certification process.
Network Connectivity Testing and Certification Fee for Members
    The Exchange established electronic communication connections with 
Members and now proposes to assess Members a Network Connectivity 
Testing and Certification fee for each 1 Gigabit (``Gb'') connection 
and 10 Gb ultra-low-latency (``ULL'') connection. The Exchange proposes 
to assess a Member Network Connectivity Testing and Certification fee: 
(i) Initially per connection in the month the Individual Firm has been 
credentialed to use any API or market data feeds in the production 
environment utilizing the tested network connection, and (ii) each time 
an individual firm initiates a change to its system that requires 
network connectivity testing and certification. Network Connectivity 
Testing and Certification fees will not be assessed in situations where 
the Exchange initiates a mandatory change to the Exchange's system that 
requires testing and certification. Member Network Connectivity Testing 
and Certification fees will not be assessed for testing and 
certification of connectivity to the Exchange's Disaster Recovery 
Facility.
    The Exchange proposes to assess Members a Network Connectivity 
Testing and Certification Fee of $1,000 per 1Gb connection and $4,000 
per 10Gb ULL connection. Below is the proposed table for Member Network 
Connectivity Testing and Certification fees:

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                                                                  1 Gigabit fee per      10 Gigabit ULL fee per
                       Type of member                                connection                connection
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Individual Firm.............................................                $1,000.00                 $4,000.00
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    The proposed fee amounts are identical to the fees currently 
assessed for the same services at the Exchange's affiliate options 
exchanges, MIAX and MIAX PEARL, LLC (``MIAX PEARL''). The Exchange 
notes that the Emerald Express Network Interconnect (``EENI'') \28\ is 
a network infrastructure which provides Members and non-Members network 
connectivity to the trading platforms, market data systems, test 
systems, and disaster recovery facility of the Exchange. When utilizing 
a Shared \29\ cross-connect, the EENI can also be configured to offer 
network connectivity to the trading platforms, market data systems, 
test systems, and disaster recovery facilities of the Exchange's 
affiliate options exchanges, MIAX and MIAX PEARL. Members utilizing a 
single, Shared cross-connect to connect to the trading platforms, 
market data systems, test systems, and disaster recovery facilities of 
the Exchange, MIAX and MIAX PEARL will only be assessed one Network 
Connectivity Testing and Certification fee per connection tested, 
regardless of the trading platforms, market data systems, test systems, 
and disaster recovery facilities accessed via such connection.
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    \28\ ``EENI'' means the Emerald Express Network Interconnect, 
which is a network infrastructure which provides Members and non-
Members network connectivity to the trading platforms, market data 
systems, test systems, and disaster recovery facilities of MIAX 
Emerald. When utilizing a Shared cross-connect, the EENI can also be 
configured to offer network connectivity to the trading platforms, 
market data systems, test systems, and disaster recovery facilities 
of MIAX and MIAX PEARL. When utilizing a Dedicated cross-connect, 
the EENI can only be configured to offer network connectivity to the 
trading platforms, market data systems, and test systems of MIAX 
Emerald. The EENI consists of the low latency and ultra-low latency 
connectivity options set forth in the Exchange's Fee Schedule. See 
the Definitions section of the Fee Schedule.
    \29\ ``Shared'' (cross-connect) means cross-connect that 
provides network connectivity to the trading platforms, market data 
systems, test systems, and/or disaster recovery facilities of MIAX 
Emerald, MIAX and MIAX PEARL via a single, shared connection. The 
following connections can be Shared across MIAX Emerald, MIAX and 
MIAX PEARL: 1 Gigabit, 1 Gigabit Disaster Recovery, and 10 Gigabit 
Disaster Recovery. See the Definitions section of the Fee Schedule.
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Network Connectivity Testing and Certification Fee for Non-Members
    MIAX Emerald established electronic communication connections with 
Service Bureaus, Extranet Providers and other non-Members, and now 
proposes to assess a Network Connectivity Testing and Certification fee 
for each 1Gb connection and 10Gb ULL connection. The Exchange proposes 
to assess a non-Member Network Connectivity Testing and Certification 
fee: (i) Initially per connection in the month the Service Bureau, 
Extranet Provider or other non-Member has been credentialed to use any 
API or market data feeds in the production environment using the tested 
network connection, and (ii) each time the Service Bureau, Extranet 
Provider or other non-Member initiates a change to its system that 
requires network connectivity testing and certification. Network 
Connectivity Testing and Certification fees will not be assessed in 
situations where the Exchange initiates a mandatory change to the 
Exchange's system that requires testing and certification. Non-Member 
Network Connectivity Testing and Certification fees will not be 
assessed for testing and certification of connectivity to the 
Exchange's Disaster Recovery Facility.
    The Exchange proposes to assess non-Members a Network Connectivity 
Testing and Certification Fee of $1,200 per 1Gb connection and $4,200 
per 10Gb ULL connection. Below is the proposed table for non-Member 
Network Connectivity Testing and Certification fees:

----------------------------------------------------------------------------------------------------------------
                                                                  1 Gigabit fee per      10 Gigabit ULL fee per
                         Non-Member                                  connection                connection
----------------------------------------------------------------------------------------------------------------
Service Bureau/Extranet Provider and other non-Members......                $1,200.00                 $4,200.00
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[[Page 8469]]

    The EENI is also available to non-Member subscribers. For non-
Member subscribers, when utilizing a Shared cross-connect, the EENI can 
also be configured to offer network connectivity to the trading 
platforms, market data systems, test systems, and disaster recovery 
facilities of the Exchange's affiliate options exchanges, MIAX and MIAX 
PEARL. Accordingly, non-Members utilizing Shared cross-connects to 
connect to the trading platforms, market data systems, test systems, 
and disaster recovery facilities of the Exchange and its affiliates, 
MIAX and MIAX PEARL, will only be assessed one Network Connectivity 
Testing and Certification fee per connection tested, regardless of the 
trading platforms, market data systems, test systems, and disaster 
recovery facilities accessed via such connection. The Member and non-
Member Network Testing and Certification fees represent installation 
and support costs incurred by the Exchange as it works with each Member 
and non-Member to make sure there are appropriate electronic 
communication connections with MIAX Emerald. The Exchange's affiliate 
options exchanges, MIAX and MIAX PEARL, charge the same fees for the 
same services for their Members and non-Members.\30\ The Exchange 
proposes to assess a higher Network Connectivity Testing and 
Certification fee to non-Members than to Members, similar to how MIAX 
and MIAX PEARL assesses such fees to their Members and non-Members. The 
proposed higher fee charged to non-Members reflects the greater amount 
of time spent by MIAX Emerald employees testing and certifying non-
Members. It has been MIAX Emerald's experience that Member network 
connectivity testing takes less time than non-Member network 
connectivity testing because Members have more experience testing these 
systems with exchanges as generally fewer questions and issues arise 
during the testing and certification process.
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    \30\ See MIAX Fee Schedule, Sections 4(c) and 4(d); see also 
MIAX PEARL Fee Schedule, Sections 4(c) and 4(d).
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2. Statutory Basis
    The Exchange believes that its proposal to amend its Fee Schedule 
is consistent with Section 6(b) of the Act \31\ in general, and 
furthers the objectives of Section 6(b)(4) of the Act \32\ 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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    \31\ 15 U.S.C. 78f(b).
    \32\ 15 U.S.C. 78f(b)(4) and (5).
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    The Exchange launched trading on March 1, 2019. For the month of 
December 2020, the Exchange had only a 3.58% market share of the U.S. 
options industry.\33\ The Exchange is not aware of any evidence that a 
market share of approximately 3% provides the Exchange with anti-
competitive pricing power. If the Exchange were to attempt to establish 
unreasonable pricing, then no market participant would apply to become 
a Member of the Exchange, or test and certify with the Exchange's 
trading System.
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    \33\ See 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.
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    The Exchange believes the proposed one-time membership application 
fee is reasonable, equitable and not unfairly discriminatory because it 
is a one-time fee that is reasonably related to (and designed to 
recover) the Exchange's cost associated with reviewing and approving 
membership applications, which consists primarily of the time and 
resources of Exchange personnel to process the membership application 
and conduct the new member on-boarding process. The Exchange's process 
for reviewing and approving potential new Members involves several 
steps and participation from personnel in multiple Exchange 
departments, as follows: (i) Reviewing prospective Member information 
provided in various membership forms, including, where necessary, 
possibly consulting with FINRA, pursuant to the Exchange's Regulatory 
Services Agreement; (ii) the on-boarding process, where Exchange 
personnel contacts the firm for an introductory meeting with the 
Exchange's Business Team to discuss goals, answer questions and 
schedule the technical on-boarding meeting; (iii) the technical on-
boarding meeting, where the Exchange's on-boarding team and Trading 
Operations Team guides the firm through the on-boarding process with 
Exchange personnel available to discuss network connectivity, APIs, 
Exchange functionality and operational issues; and (iv) follow-ups with 
the Trading Operations Team to coordinate testing, as necessary, until 
the firm is active in the Exchange's live trading environment.\34\
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    \34\ See the Exchange's Membership and Technical Onboarding 
process, available at https://www.miaxoptions.com/membership/emerald.
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    The Exchange tracks the number of hours spent by Exchange personnel 
providing the aforementioned services per membership application. Based 
on the average number of person hours spent by the Exchange on 
processing a typical membership application, and based on the 
Exchange's average cost per full-time employee (``FTE'') of 
approximately $250,000 (inclusive of all compensation and employee 
benefits) per year, the Exchange represents that its cost to provide 
this service is reasonably related to (and often exceeds) the amount of 
the membership application fee the Exchange proposes to charge for such 
service. In particular, it takes approximately 40 person hours to 
review, on-board and approve a membership application. Therefore, the 
cost to the Exchange for the review, on-boarding, and approval of each 
application is, on average, approximately $4,000-$5,000 (with EEM 
application costs closer to $4,000, versus Market Maker application 
costs closer to $5,000). Accordingly, the proposed one-time membership 
application fee would enable the Exchange to recover a material portion 
of such cost. The Exchange believes this is a conservative cost 
allocation because the Exchange is not allocating any additional costs 
beyond the employee compensation costs for employees directly involved 
in this process, such as costs associated with management review and 
sign off, compliance team reviews, technology costs of employees, 
office space costs of employees, costs associated with supporting 
departments' time for things such as internal meetings, project 
management coordination among the individuals who indirectly support 
the membership approval and on-boarding processes, and various other 
indirectly-related costs.
    The Exchange also points out that it is not seeking to recoup any 
of its past costs associated with reviewing membership applications 
that took place during the Waiver Period. The Exchange currently has 35 
Members,\35\ all of whom did not pay the one-time membership 
application fee, as it was waived for the Waiver Period when these 
firms all became Members of the Exchange. Further, the majority of 
firms

[[Page 8470]]

that are Members of the Exchange's affiliate options exchanges, MIAX 
and MIAX PEARL, also became Members of those exchanges during similar 
Waiver Periods for the MIAX and MIAX PEARL one-time membership 
application fees. Accordingly, the Exchange (and MIAX and MIAX PEARL) 
have assumed approximately 100% of the costs associated with processing 
membership applications for the majority of Member firms approved by 
the Exchange, MIAX, and MIAX PEARL. Accordingly, the Exchange believes 
that it is reasonable, equitable, and not unfairly discriminatory to 
now adopt a one-time membership application fee that is reasonably 
related to (and designed to recover) the Exchange's cost associated 
with reviewing and approving membership applications.
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    \35\ See https://www.miaxoptions.com/exchange-members/emerald.
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    The Exchange believes the proposed API Testing and Certification 
fees and Network Connectivity Testing and Certification fees are 
reasonable, equitable and not unfairly discriminatory. The Exchange 
tracks the number of hours spent by Exchange personnel providing API 
testing and certification services per billable instance. Based on the 
average number of person hours spent by the Exchange on API testing and 
certification services, and based on the Exchange's average cost per 
FTE of approximately $250,000 (inclusive of all compensation and 
employee benefits) per year, the Exchange represents that its costs to 
provide these services are reasonably related to (and often exceed) the 
amount of the respective testing and certification fees the Exchange 
proposes to charge for such services. In particular, it takes 
approximately 20 person hours to complete the API testing and 
certification process. Therefore, the cost to the Exchange to provide 
API testing and certification services is, on average, approximately 
$2,500 per instance (with EEM and non-Member testing and certification 
costs closer to $2,000, versus Market Maker testing and certification 
costs closer to $3,000). Accordingly, the proposed API Testing and 
Certification fees would enable the Exchange to recover a material 
portion of such costs. The Exchange believes this is a conservative 
cost allocation because the Exchange is not allocating any additional 
costs beyond the employee compensation costs for employees directly 
involved in this process, such as management review and sign off, 
technology costs of employees, office space costs of employees, costs 
associated with supporting departments' time for things such as 
internal meetings, project management coordination among the 
individuals who indirectly support the testing and certification 
process, and various other indirectly-related costs.
    The Exchange also points out that it is not seeking to recoup any 
of its past costs associated with conducting API testing and 
certification that took place during the Waiver Period. The Exchange 
currently has 35 Members,\36\ all of whom did not pay the API testing 
and certification fee, as it was waived for the Waiver Period when 
these firms all became Members of the Exchange. Further, the majority 
of firms that are Members of the Exchange's affiliate options 
exchanges, MIAX and MIAX PEARL, also became Members of those exchanges 
during similar Waiver Periods for the MIAX and MIAX PEARL API Testing 
and Certification fees. Accordingly, the Exchange (and MIAX and MIAX 
PEARL) have assumed approximately 100% of the costs associated with 
conducting API testing and certification for the majority of Member 
firms approved by the Exchange, MIAX, and MIAX PEARL. Accordingly, the 
Exchange believes that it is reasonable, equitable, and not unfairly 
discriminatory to now adopt a per-instance fee that is reasonably 
related to (and designed to recover) the Exchange's cost associated 
with conducting API testing and certification.
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    \36\ See id.
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    The Exchange also tracks the number of hours spent by Exchange 
personnel providing network connectivity testing and certification 
services per billable instance. Based on the average number of person 
hours spent by the Exchange on network connectivity testing and 
certification services, and based on the Exchange's average cost per 
FTE of approximately $250,000 (inclusive of all compensation and 
employee benefits) per year, the Exchange represents that its costs to 
provide these services are reasonably related to (and often exceed) the 
amount of the respective testing and certification fees the Exchange 
proposes to charge for such services. In particular, it takes 
approximately 20 person hours to complete the network testing and 
certification process for 1 Gigabit connections, and approximately 40 
person hours to complete the network testing and certification process 
for 10 Gigabit ULL connections. Therefore, the cost to the Exchange to 
provide network connectivity testing and certification services is, on 
average, approximately $2,500 per instance for 1 Gigabit connections, 
and approximately $5,000 per instance for 10 Gigabit ULL connections. 
Accordingly, the proposed Network Connectivity Testing and 
Certification fees would enable the Exchange to recover a material 
portion of such costs. The Exchange believes this is a conservative 
cost allocation because the Exchange is not allocating any additional 
costs beyond the employee compensation costs for employees directly 
involved in this process, such as management review and sign off, 
technology costs of employees, office space costs of employees, costs 
associated with supporting departments' time for things such as 
internal meetings, project management coordination among the 
individuals who indirectly support the testing and certification 
process, and various other indirectly-related costs.
    The Exchange believes the difference in the proposed membership 
application fee to be charged to EEMs and Market Makers is an equitable 
allocation of reasonable dues and fees pursuant to Section 6(b)(4) of 
the Act \37\ because of the additional review and resources involved in 
processing a Market Maker's application as opposed to an EEM's 
application, as Market Makers have greater and more complex obligations 
with respect to doing business on the Exchange.\38\
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    \37\ 15 U.S.C. 78f(b)(4).
    \38\ See supra note 17.
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    The Exchange believes its proposal to adopt API Testing and 
Certification fees and Network Connectivity Testing and Certification 
fees for Members and non-Members is an equitable allocation of 
reasonable dues and fees pursuant to Section 6(b)(4) of the Act \39\ 
because it is a per-instance fee that is reasonably related to (and 
designed to recover) the Exchange's cost associated with providing such 
API Testing and Certification services and Network Connectivity Testing 
and Certification services, which consists primarily of the time and 
resources spent to ensure that Member and non-Member APIs and 
connectivity function correctly to prevent any System malfunction.
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    \39\ 15 U.S.C. 78f(b)(4).
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    Further, the Exchange believes the price differential in API 
Testing and Certification fees and Network Connectivity Testing and 
Certification fees for Members and non-Members is not unfairly 
discriminatory because, in the Exchange's experience, Member testing 
utilizes less Exchange resources and employee time than non-Member 
testing as Members have more experience testing these systems with 
exchanges, resulting generally in fewer questions and issues arising 
during the testing and certification process. Also, with respect to API 
testing and certification, because Third Party

[[Page 8471]]

Vendors and Service Bureaus are redistributing data and reselling 
services to other Members and market participants the number and types 
of scenarios that need to be tested are more numerous and complex than 
those tested and certified for Members.
    The Exchange believes the difference in the proposed 1 Gigabit and 
10 Gigabit ULL network connectivity testing and certification fees is 
an equitable allocation of reasonable dues and fees pursuant to Section 
6(b)(4) of the Act \40\ because of the additional review and resources 
involved in testing and certifying a 10 Gigabit ULL connection as 
opposed to a 1 Gigabit connection, as 10 Gigabit ULL connections offer 
vastly greater products and services which require significantly more 
time to test, including Market Maker quoting systems. The Exchange 
believes its proposed API Testing and Certification fees and Network 
Connectivity Testing and Certification fees are reasonable and well 
within the range of non-transaction fees assessed among other 
exchanges, including the Exchange's affiliate options exchanges, MIAX 
and MIAX PEARL.\41\
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    \40\ 15 U.S.C. 78f(b)(4).
    \41\ See supra note 30.
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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.
Intra-Market Competition
    The Exchange believes that the proposed fees do not put any market 
participants at a relative disadvantage compared to other market 
participants. The proposed fees would apply to all new Exchange Members 
and those firms looking to establish APIs and network connectivity in 
the same manner. Market participants may not only choose whether to 
become Exchange Members at all, but may choose to become members at 
competing options exchanges instead.
    The Exchange further believes the proposed fees do not place any 
market participant at a disadvantage compared to other market 
participants because the proposed API Testing and Certification and 
Network Connectivity Testing and Certification fees are intended to 
cover the situations where a Member or non-Member firm makes changes to 
its own system for its own business purpose (i.e., instances where a 
firm is trying to improve its quoting engine), which requires the 
Exchange to test those re-architected systems. This testing requires 
the time of Exchange personnel in several departments (Trading 
Operations, Business, On-Boarding, Membership), and occurs primarily 
outside of normal business hours, often over the course of the weekend. 
The proposed fees are a way for the Exchange to recoup its costs 
associated with this testing. When the Exchange determines to make 
upgrades to its own system which requires mandatory testing and 
certification by Members, the Exchange does not charge any fees.
    The Exchange believes that the proposed fees do not dampen 
innovation because the majority of Exchange Members are members of 
most, if not all, of the other 15 options exchanges. Those exchanges 
also require testing and certification any time the Member makes 
changes to its system at those exchanges, and also charge a fee to 
recoup the costs associated with testing and certifying members. The 
Exchange also notes that it has never received a complaint from a 
Member or non-Member any time a Member or non-Member has made a change 
to its own system that resulted in the Exchange assessing a testing and 
certification fee. Without some sort of testing and certification fee, 
the Exchange believes that Members and non-Members might be less 
efficient in testing their systems, potentially resulting in excessive 
time being consumed by the Exchange re-testing and re-certifying 
Members and non-Members, to the detriment of all market participants as 
Exchange resources are diverted away from other trading operations.
    The Exchange also believes that the proposed fees neither favor nor 
penalize one or more categories of market participants in a manner that 
would impose an undue burden on competition. To the extent that various 
market participants are charged different fees for the one-time 
membership application and per-instance API and network connectivity 
testing, those distinctions are not unfairly discriminatory and do not 
unfairly burden one set of market participants over another. 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.\42\ The proposed higher fee charged to 
Third Party Vendors, Service Bureaus and non-Members reflects the 
greater amount of time spent by MIAX Emerald employees testing and 
certifying non-Members. It has been MIAX Emerald's experience that 
Member testing takes less time than non-Member testing because Members 
have more experience testing these systems with exchanges, resulting in 
generally fewer questions and issues arising during the testing and 
certification process. Also, because Third Party Vendors and Service 
Bureaus are redistributing data and reselling services to other Members 
and market participants, the number and types of scenarios that need to 
be tested are more numerous and complex than those tested and certified 
for a single Member. The higher fee charged to non-Members reflects the 
greater amount of time spent by MIAX Emerald employees testing and 
certifying non-Members. It has been MIAX Emerald's experience that 
Member network connectivity testing takes less time than non-Member 
network connectivity testing because Members have more experience 
testing these systems with exchanges as generally fewer questions and 
issues arise during the testing and certification process. The proposed 
higher fee charged for 10 Gigabit ULL connections versus 1 Gigabit ULL 
connections reflects the greater amount of time spent by MIAX Emerald 
employees testing and certifying 10 Gigabit ULL connections. MIAX 
Emerald's proposed one-time membership application fee and per-instance 
API Testing and Certification fee levels and Network Connectivity 
Testing and Certification fee levels, as described herein, are 
comparable to fee levels charged by other options exchanges for the 
same or similar services, including those fees assessed by the 
Exchange's affiliates, MIAX and MIAX PEARL.\43\
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    \42\ See supra note 17.
    \43\ See supra notes 18, 19, 20 and 30.
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    The Exchange believes that the proposed API Testing and 
Certification fees and Network Connectivity Testing and Certification 
fees do not place certain market participants at a relative 
disadvantage to other market participants because the fees do not apply 
unequally to different size market participants, but instead would 
allow the Exchange to charge for the time and resource necessary for 
API testing and certification and network connectivity testing and 
certification for Members and non-Members to ensure proper functioning 
of all available order types, new order entry, order management, order 
throughput and mass order cancellation (as well as, for Market Makers, 
all available quote types, quote

[[Page 8472]]

throughput, quote management and cancellation, Aggregate Risk Manager 
settings and triggers, and confirmation of quotes within the trading 
engines). Accordingly, the proposed API Testing and Certification fees 
and network connectivity testing and certification fees do not favor 
certain categories of market participants in a manner that would impose 
a burden on competition.
Inter-Market Competition
    The Exchange believes the proposed API Testing and Certification 
fees and Network Connectivity Testing and Certification fees do not 
place an undue burden on competition on other SROs that is not 
necessary or appropriate. The Exchange believes that the proposed fees 
do not impose a burden on competition or on other exchanges that is not 
necessary or appropriate because of the availability of numerous 
substitute options exchanges. There are 15 other options exchanges 
where market participants can become members.

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,\44\ and Rule 19b-4(f)(2) \45\ 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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    \44\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \45\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------

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-2021-01 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-2021-01. 
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-2021-01 and should 
be submitted on or before February 26, 2021.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\46\
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    \46\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-02398 Filed 2-4-21; 8:45 am]
BILLING CODE 8011-01-P


