[Federal Register Volume 86, Number 90 (Wednesday, May 12, 2021)]
[Notices]
[Pages 26111-26112]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-09975]



[[Page 26111]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-91787; File No. SR-EMERALD-2021-09]


Self-Regulatory Organizations; MIAX Emerald, LLC; Order Approving 
Proposed Rule Change To Adopt Exchange Rule 531(a), Reports, To Provide 
for a New ``Liquidity Taker Event Report''

May 6, 2021.

I. Introduction

    On March 5, 2021, MIAX EMERALD, LLC (``MIAX Emerald'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission''), pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a 
proposed rule change to adopt Exchange Rule (``Rule'') 531(a) to 
provide for a new ``Liquidity Taker Event Report'' (``Report''). The 
proposed rule change was published for comment in the Federal Register 
on March 24, 2021.\3\ The Commission has received no comments on the 
proposed rule change. This order approves the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 91356 (March 18, 
2021), 86 FR 15759 (March 24, 2021) (``Notice'').
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II. Description of the Proposed Rule Change

    The Report that the Exchange proposes to offer pursuant to new Rule 
531(a) would be an historical options data product, generally available 
on a T+1 basis, that would provide certain information from the prior 
trading day to any member that wishes to subscribe to the Report.\4\ 
The information set forth in the proposed Report would be designed to 
identify for any subscribing member (``Recipient Member'') the amount 
of time by which certain orders from the Recipient Member that may have 
been marketable missed an execution due to other liquidity-accessing 
orders responding faster to resting interest on the Exchange's book.\5\ 
Specifically, for instances during the prior trading day where a 
Recipient Member attempted to execute against a resting order within 
200 microseconds of the Exchange's receipt of the resting order, the 
proposed Report would provide time-related information and additional 
detail regarding the resting order, the first response to the resting 
order that successfully executed against the resting order, and the 
Recipient Member's responses that missed executing against the resting 
order.\6\
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    \4\ See proposed Rule 531(a); see also Notice at 15760.
    \5\ See proposed Rule 531(a); see also Notice at 15759. The 
proposed Report would not include real-time market data. See Notice 
at 15759.
    \6\ See proposed Rule 531(a)(1)-(2); see also Notice at 15759-
60. The Exchange states that only displayed resting orders would be 
included in the Report, as the Exchange does not currently offer any 
non-displayed orders types on its options trading platform. See 
Notice at 15760 n.7.
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    Proposed Rule 531(a)(1) describes this time-related information and 
additional detail. With regard to each resting order covered by the 
proposed Report, the proposed Report would provide: (A) The time the 
resting order was received by the Exchange; \7\ (B) symbol; (C) order 
reference number, which is a unique reference number assigned to a new 
order at the time of receipt; (D) whether the Recipient Member is an 
affiliate of the member that entered the resting order; \8\ (E) origin 
type (e.g., priority customer, market maker); (F) side (buy or sell); 
and (G) displayed price and size of the resting order.\9\
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    \7\ This would reflect, in nanoseconds, the time at which the 
resting order was received by the Exchange's system. Id. at 15760 
n.8.
    \8\ The Exchange states that the Report would only indicate 
whether the Recipient Member is an affiliate of the member that 
entered the resting order and would not include any other 
information that may indicate the identity of the member that 
entered the resting order. Id. at 15760 n.12. According to the 
Exchange, including this information would allow the Recipient 
Member to better understand the scenarios in which it may execute 
against the orders of its affiliates. Id. at 15761.
    \9\ See proposed Rule 531(a)(1)(i); see also Notice at 15760. 
The Exchange states that the displayed price of the resting order 
may be different from the ultimate execution price when a resting 
order is displayed and ranked at different prices upon entry to 
avoid a locked or crossed market. See Notice at 15760 n.16.
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    With regard to the execution of the resting order, the proposed 
Report would provide: (A) The EBBO at the time of execution; \10\ (B) 
the ABBO at the time of execution; \11\ (C) the time the first response 
that executed against the resting order was received by the Exchange 
and the size of the execution and type of the response; \12\ (D) the 
time difference between when the resting order was received by the 
Exchange and when the first response that executed against the resting 
order was received by the Exchange; \13\ and (E) whether the response 
was entered by the Recipient Member.\14\
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    \10\ The Exchange uses the term ``EBBO'' to mean the best bid or 
offer on the Exchange. See Rule 100; see also Notice at 15760 n.17. 
If the resting order executes against multiple contra-side 
responses, only the EBBO at the time of the execution against the 
first response would be included. See proposed Rule 
531(a)(1)(ii)(A).
    \11\ The Exchange uses the term ``ABBO'' or ``Away Best Bid or 
Offer'' to mean the best bid(s) or offer(s) disseminated by other 
Eligible Exchanges (defined in Rule 1400(g)) and calculated by the 
Exchange based on market information received by the Exchange from 
the Options Price Reporting Authority (``OPRA''). See Rule 100; see 
also Notice at 15760 n.19. If the resting order executes against 
multiple contra-side responses, only the ABBO at the time of the 
execution against the first response would be included. See proposed 
Rule 531(a)(1)(ii)(B).
    \12\ This time value would reflect, in nanoseconds, the time at 
which the response was received by the Exchange's network, which is 
before the response would be received by the Exchange's system. See 
Notice at 15760 n.21.
    \13\ This time difference would be provided in nanoseconds. Id. 
at 15760 n.22.
    \14\ See proposed Rule 531(a)(1)(ii); see also Notice at 15760. 
If not entered by the Recipient Member, this data point would be 
left blank so as not to include any identifying information about 
other member activity. See Notice at 15761.
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    With regard to response(s) sent by the Recipient Member, the 
proposed Report would provide: (A) A Recipient Member identifier; (B) 
the time difference between when the first response that executes 
against the resting order was received by the Exchange and when each 
response sent by the Recipient Member was received by the Exchange, 
regardless of whether the Recipient Member's responses executed or not; 
\15\ (C) size and type of each response submitted by the Recipient 
Member; and (D) response reference number, which is a unique reference 
number attached to the response by the Recipient Member.\16\
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    \15\ This time difference would be provided in nanoseconds. For 
purposes of calculating this duration of time, the Exchange would 
use the times that the resting order and the Recipient Member's 
response(s) are received by the Exchange's network, both of which 
would be before the order and response(s) would be received by the 
Exchange's system. Id. at 15760 n.23.
    \16\ See proposed Rule 531(a)(1)(iii); see also Notice at 15760.
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    In addition, proposed Rule 531(a)(3) would state that the Report 
would only include trading data related to the Recipient Member, and 
would not include any other member's trading data other than that 
listed in paragraphs (1)(i) and (ii) of the proposed rule.\17\ Further, 
the Exchange states that the content of the Report would be specific 
and tailored to the Recipient Member, and any data included in the 
Report that relates to a member other than the Recipient Member would 
be anonymized.\18\
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    \17\ See proposed Rule 531(a)(3).
    \18\ See Notice at 15759.
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    According to the Exchange, the proposed Report is designed for 
members that are interested in gaining insight into latency in 
connection with orders that failed to execute against an order resting 
on the Exchange's book.\19\ Exchange members have periodically 
requested from the Exchange's trading

[[Page 26112]]

operations personnel information concerning the timeliness of their 
incoming orders and efficacy of their attempts to execute against 
resting liquidity.\20\ The Exchange states that the purpose of the 
proposed Report is to provide Recipient Members with this type of data 
in a standardized format and on an equal basis.\21\ The Exchange 
believes that Recipient Members may use the data to optimize their 
models and trading patterns in an effort to yield better execution 
results.\22\ In addition, the Exchange states that the proposed Report 
is based on a similar data product that another exchange offers for 
equity securities,\23\ and that certain information that would be 
provided in the proposed Report, including in particular the time 
duration by which a Recipient Member's orders missed an execution, is 
similar to information that is provided in the other exchange's data 
product.\24\ Moreover, according to the Exchange, other information 
that would be contained in the proposed Report already is available 
from existing data sources, such as OPRA and the Exchange's proprietary 
data feeds, or is information that the Exchange would provide as a 
convenience to the Recipient Member and that would be known to the 
Recipient Member even if not included in the Report.\25\
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    \19\ Id. at 15761.
    \20\ Id. at 15759.
    \21\ Id. The Exchange states that it intends to submit a 
separate rule filing with the Commission to propose fees for the 
Report. Id. at 15759 n.3.
    \22\ Id. at 15761.
    \23\ Id. at 15759 n.6 (referencing the Missed Opportunity--
Latency report that is part of the Trading Insights offering of the 
NASDAQ Stock Market LLC (``Nasdaq'')); see also Nasdaq Rules, Equity 
Section 7, Rule 146(a)(2); Securities Exchange Act Release No. 78886 
(September 20, 2016), 81 FR 66113 (September 26, 2016) (SR-NASDAQ-
2016-101) (order approving Nasdaq Trading Insights data product).
    \24\ See Notice at 15760-62.
    \25\ Id.
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III. Discussion and Commission Findings

    After careful review, the Commission finds that the proposed rule 
change is consistent with the requirements of the Act and the rules and 
regulations thereunder applicable to a national securities 
exchange.\26\ In particular, the Commission finds that the proposal is 
consistent with Section 6(b)(5) of the Act,\27\ which requires, among 
other things, that the rules of a national securities exchange be 
designed to prevent fraudulent and manipulative acts and practices, 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 that those rules not be designed to permit unfair 
discrimination between customers, issuers, brokers, or dealers.
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    \26\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. See 15 U.S.C. 78c(f).
    \27\ 15 U.S.C. 78f(b)(5).
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    As discussed above, the Exchange currently fields ad hoc requests 
from members for information regarding the timeliness of their attempts 
to execute against resting options liquidity on the Exchange's 
book.\28\ The proposal is designed to offer this type of latency 
information in a systematized way and standardized format to any member 
that chooses to subscribe to the Report. As a result, the Commission 
believes that the proposal will make latency information for liquidity-
seeking orders available to Exchanges members in a more equalized 
manner and will increase transparency, particularly for Recipient 
Members that may not have the expertise to generate the same 
information on their own. The Commission also believes that the 
proposed Report may better enable Recipient Members to increase the 
fill rates for their liquidity-seeking orders. At the same time, as is 
also discussed above, the Report is designed to prevent a Recipient 
Member from learning other members' sensitive trading information. The 
Report would not be a real-time market data product, as it would 
provide only historical trading data for the previous trading day, 
generally on a T+1 basis.\29\ In addition, the data in the Report 
regarding incoming orders that failed to execute would be specific to 
the Recipient Member's orders,\30\ and other information in the 
proposed Report regarding resting orders and executions would be 
anonymized if it relates to a member other than the Recipient 
Member.\31\ Accordingly, consistent with Section 6(b)(5) of the Act, 
the Commission believes that the proposal is designed to prevent 
fraudulent and manipulative acts and practices, promote just and 
equitable principles of trade, remove impediments to and perfect the 
mechanism of a free and open market and a national market system, and 
protect investors and the public interest, and is not designed to 
permit unfair discrimination.
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    \28\ See Notice at 15759.
    \29\ See proposed Rule 531(a)(4); see also Notice at 15760.
    \30\ See proposed Rule 531(a)(1)(iii) and (a)(3).
    \31\ See Notice at 15759.
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IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\32\ that the proposed rule change (SR-EMERALD-2021-09), be, and 
hereby is, approved.
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    \32\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\33\
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    \33\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-09975 Filed 5-11-21; 8:45 am]
BILLING CODE 8011-01-P


