[Federal Register Volume 86, Number 104 (Wednesday, June 2, 2021)]
[Notices]
[Pages 29608-29611]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-11530]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-92028; File No. SR-EMERALD-2021-19]


Self-Regulatory Organizations; MIAX Emerald, LLC; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend 
Its Fee Schedule To Adopt Fees for a New Data Product Known as the 
Liquidity Taker Event Report

May 26, 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 May 14, 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 Exchange's Fee 
Schedule (``Fee Schedule'') to adopt fees for a new data product known 
as the Liquidity Taker Event Report.\3\
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    \3\ See, generally, Exchange Rule 531(a).
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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 recently adopted a new data product known as the 
Liquidity Taker Event Report (the ``Report''), which will be available 
for purchase to Exchange Members on a voluntary basis.\4\ The Exchange 
now proposes to adopt fees for the Report. The Report was recently 
approved by the Securities and Exchange Commission (``Commission'') and 
is described under Exchange Rule 531(a).\5\ The Report is an optional 
product available to Members.
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    \4\ 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 
the Definitions Section of the Fee Schedule and Exchange Rule 100.
    \5\ See Securities Exchange Act Release No. 91787 (May 6, 2021), 
86 FR 26111 (May 12, 2021) (SR-EMERALD-2021-09) (Order Granting 
Approval of a Proposed Rule Change to Adopt Exchange Rule 531(a), 
Reports, to Provide for a New ``Liquidity Taker Event Report'').
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    By way of background, the Report is a daily report that provides a 
Member (``Recipient Member'') with its liquidity response time details 
for executions of an order resting on the Book,\6\ where that Recipient 
Member attempted to execute against such resting order \7\ within a 
certain timeframe. It is important to note that the content of the 
Report is specific to the Recipient Member and the Report will not 
include any information related to any Member other than the Recipient 
Member.
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    \6\ The term ``Book'' means the electronic book of buy and sell 
orders and quotes maintained by the System. See Exchange Rule 100. 
The term ``System'' means the automated trading system used by the 
Exchange for the trading of securities. See id.
    \7\ Only displayed orders will be included in the Report. The 
Exchange notes that it does not currently offer any non-displayed 
orders types on its options trading platform.
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    The following information is included in the Report regarding the 
resting order: (A) The time the resting order was received by the 
Exchange; (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 \8\ of the Member

[[Page 29609]]

that entered the resting order; \9\ (E) origin type (e.g., Priority 
Customer,\10\ Market Maker; \11\) (F) side (buy or sell); and (G) 
displayed price and size of the resting order.\12\
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    \8\ The term ``affiliate'' of or person ``affiliated with'' 
another person means a person who, directly, or indirectly, 
controls, is controlled by, or is under common control with, such 
other person. See Exchange Rule 100.
    \9\ The Report will simply indicate whether the Recipient Member 
is Affiliate of the Member that entered the resting order and not 
include any other information that may indicate the identity of the 
Member that entered the resting order.
    \10\ The term ``Priority Customer'' means a person or entity 
that (i) is not a broker or dealer in securities, and (ii) does not 
place more than 390 orders in listed options per day on average 
during a calendar month for its own beneficial account(s). The 
number of orders shall be counted in accordance with Interpretation 
and Policy .01 to Exchange Rule 100. See Exchange Rule 100.
    \11\ The term ``Market Maker'' refers to ``Lead Market Makers'', 
``Primary Lead Market Makers'' and ``Registered Market Makers'' 
collectively. See Exchange Rule 100.
    \12\ This information is also included in the Missed 
Opportunity--Latency Report, which is similar report for equity 
securities that is offered by the NASDAQ Stock Market, LLC (the 
``NASDAQ Report''). See NASDAQ Equity Section 7, Rule 146(a)(2). The 
Exchange notes that the displayed price and size are also 
disseminated via the Exchange's proprietary data feeds and the 
Options Price Reporting Authority (``OPRA''). The Exchange also 
notes that the displayed price of the resting order may be different 
than the ultimate execution price. This may occur when a resting 
order is displayed and ranked at different prices upon entry to 
avoid a locked or crossed market.
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    The following information is included in the Report regarding the 
execution of the resting order: (A) The EBBO \13\ at the time of 
execution; \14\ (B) the ABBO \15\ at the time of execution; \16\ (C) 
the time first response that executes against the resting order was 
received by the Exchange and the size of the execution and type of the 
response; \17\ (D) the time difference between the time the resting 
order was received by the Exchange and the time the first response that 
executes against the resting order was received by the Exchange; \18\ 
and (E) whether the response was entered by the Recipient Member. If 
the resting order executes against multiple contra-side responses, only 
the EBBO and ABBO at the time of the execution against the first 
response will be included.
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    \13\ The term ``EBBO'' means the best bid or offer on the 
Exchange. See Exchange Rule 100.
    \14\ Exchange Rule 531(a)(1)(ii)(B) provides that if the resting 
order executes against multiple contra-side responses, only the EBBO 
at the time of the execution against the first response will be 
included.
    \15\ The term ``ABBO'' or ``Away Best Bid or Offer'' means the 
best bid(s) or offer(s) disseminated by other Eligible Exchanges 
(defined in Exchange Rule 1400(g)) and calculated by the Exchange 
based on market information received by the Exchange from OPRA. See 
Exchange Rule 100.
    \16\ Exchange Rule 531(a)(1)(ii)(A) further provides that if the 
resting order executes against multiple contra-side responses, only 
the ABBO at the time of the execution against the first response 
will be included.
    \17\ The time the Exchange received the response order would be 
in nanoseconds and would be the time the response was received by 
the Exchange's network, which is before the time the response would 
be received by the System.
    \18\ The time difference would be provided in nanoseconds.
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    The following information is included in the Report regarding 
response(s) sent by the Recipient Member: (A) Recipient Member 
identifier; (B) the time difference between the time the first response 
that executes against the resting order was received by the Exchange 
and the time of each response sent by the Recipient Member, regardless 
of whether it executed or not; \19\ (C) size and type of each response 
submitted by Recipient Member; and (D) response reference number, which 
is a unique reference number attached to the response by the Recipient 
Member.
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    \19\ For purposes of calculating this duration of time, the 
Exchange will use the time the resting order and the Recipient 
Member's response(s) is received by the Exchange's network, both of 
which would be before the order and response(s) would be received by 
the System. This time difference would be provided in nanoseconds.
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    The Report includes the data set for executions and contra-side 
responses that occurred within 200 microseconds of the time the resting 
order was received by the Exchange. The Report contains historical data 
from the prior trading day and will be available after the end of the 
trading day, generally on a T+1 basis. The Report does not include 
real-time data.
    The Exchange believes the additional data points from the matching 
engine outlined above may help Members gain a better understanding 
about their own interactions with the Exchange. The Exchange believes 
the Report will provide Members with an opportunity to learn more about 
better opportunities to access liquidity and receive better execution 
rates. The Report will increase transparency and democratize 
information so that all firms that subscribe to the Report have access 
to the same information on an equal basis, even for firms that do not 
have the appropriate resources to generate a similar report regarding 
interactions with the Exchange.
    Members generally would use a liquidity accessing order if there is 
a high probability that it will execute against an order resting on the 
Exchange's Book. The Report identifies by how much time an order that 
may have been marketable missed an execution. The Report will provide 
greater visibility into the missed trading execution, which will allow 
Members to optimize their models and trading patterns to yield better 
execution results.
    The Report will be a Member-specific report and will help Members 
to better understand by how much time a particular order missed 
executing against a specific resting order, thus allowing that Member 
to determine whether it wants to invest in the necessary resources and 
technology to mitigate missed executions against certain resting orders 
on the Exchange's Book.
    The Exchange proposes to provide the Report in response to Member 
demand for data concerning the timeliness of their incoming orders and 
executions against resting orders. Members have periodically requested 
from the Exchange's trading operations personnel information concerning 
the timeliness of their incoming orders and efficacy of their attempts 
to execute against resting liquidity on the Exchange's Book. The 
purpose of the Report is to provide Members the necessary data in a 
standardized format on a T+1 basis to those that subscribe to the 
Report on an equal basis.
    The product is offered to Members on a completely voluntary basis 
in that the Exchange is not required by any rule or regulation to make 
this data available and potential subscribers may purchase the Report 
only if they voluntarily choose to do so. It is a business decision of 
each Member whether to subscribe to the Report or not.
    The Exchange proposes to adopt new Section 7), Reports, in its Fee 
Schedule, which will provide that Members may purchase the Report on a 
monthly or annual (12-month) basis. The Exchange proposes to assess a 
monthly fee of $4,000 per month and a fee of $24,000 per year for a 12-
month subscription for the Report. Members may cancel their 
subscription at any time. The Exchange also proposes to specify that 
for mid-month subscriptions, new subscribers will be charged for the 
full calendar month for which they subscribe and will be provided 
Report data for each trading day of the calendar month prior to the day 
on which they subscribed.
    The Exchange intends to begin to offer the Report and charge the 
proposed fees on May 17, 2021.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\20\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act,\21\ in particular, in that it 
is designed to prevent fraudulent and manipulative acts and practices, 
to promote just and equitable principles of

[[Page 29610]]

trade, to remove impediments to and perfect the mechanism of a free and 
open market and a national market system, and to protect investors and 
the public interest, and that it is not designed to permit unfair 
discrimination among customers, brokers, or dealers. The Exchange also 
believes that its proposal to adopt fees for the Report is consistent 
with Section 6(b) of the Act \22\ in general, and furthers the 
objectives of Section 6(b)(4) of the Act \23\ in particular, in that it 
is an equitable allocation of dues, fees and other charges among its 
Members and other recipients of Exchange data.
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    \20\ 15 U.S.C. 78f(b).
    \21\ 15 U.S.C. 78f(b)(5).
    \22\ 15 U.S.C. 78f(b).
    \23\ 15 U.S.C. 78f(b)(4).
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    In adopting Regulation NMS, the Commission granted self-regulatory 
organizations (``SROs'') 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. The Exchange believes that the Report further 
broadens the availability of U.S. option market data to investors 
consistent with the principles of Regulation NMS. The Report also 
promotes increased transparency through the dissemination of the 
Report. Particularly, the Report will benefit investors by facilitating 
their prompt access to the value added information that is included in 
the Report. The Report will allow Members to access information 
regarding their trading activity that they may utilize to evaluate 
their own trading behavior and order interactions.
    The Exchange operates in a highly competitive environment. Indeed, 
there are currently 16 registered options exchanges that trade options. 
Based on publicly available information, no single options exchange has 
more than 15% of the market share and currently the Exchange represents 
only approximately 6.08% of the market share.\24\ The Commission has 
repeatedly expressed its preference for competition over regulatory 
intervention in determining prices, products, and services in the 
securities markets. Particularly, in Regulation NMS, the Commission 
highlighted the importance of market forces in determining prices and 
SRO revenues and, also, recognized that current regulation of the 
market system ``has been remarkably successful in promoting market 
competition in its broader forms that are most important to investors 
and listed companies.'' \25\ Making similar data products available to 
market participants fosters competition in the marketplace, and 
constrains the ability of exchanges to charge supra-competitive fees. 
In the event that a market participant views one exchange's data 
product as more attractive than the competition, that market 
participant can, and often does, switch between similar products. The 
proposed fees are a result of the competitive environment of the U.S. 
options industry as the Exchange seeks to adopt fees to attract 
purchasers of the recently introduced Report.
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    \24\ See Cboe Global Markets U.S. Options Market Month-to-Date 
Volume Summary (April 28, 2021), available at https://markets.cboe.com/us/options/market_statistics/.
    \25\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting 
Release'').
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    The Exchange believes the proposed fees are reasonable as the 
proposed fees are both modest and similar to fees assessed by other 
exchanges that provide similar data products.\26\ Indeed, if the 
Exchange proposed fees that market participants viewed as excessively 
high, then the proposed fees would simply serve to reduce demand for 
the Exchange's data product, which as noted, is entirely optional. 
Other options exchanges are also free to introduce their own comparable 
data products with lower prices to better compete with the Exchange's 
offering. As such, the Exchange believes that the proposed fees are 
reasonable and set at a level to compete with other options exchanges 
that may choose to offer similar reports. Moreover, if a market 
participant views another exchange's potential report as more 
attractive, then such market participant can merely choose not to 
purchase the Exchange's Report and instead purchase another exchange's 
similar data product, which may offer similar data points, albeit based 
on that other market's trading activity.
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    \26\ The NASDAQ Stock Market LLC (``NASDAQ'') charges fees 
ranging from $1,500 to $3,500 per month for a similar report for 
equity securities called the Missed Opportunity--Latency report as 
part of its NASDAQ Trader Insights offering. See NASDAQ Equity 
Section 7, Rule 146(a)(2). See also the CME Group, Inc.'s Time and 
Sale report. https://www.cmegroup.com/trading/about-time-
sales.html#:~:text=CME%20Globex%20Options)-
,CME%20Group's%20Time%20%26%20Sales%20report%20provides%20the%20price
%20and%20time,calendar%20date)%20of%20the%20transaction.&text=A%20zer
o%20volume%20represents%20an%20indicative%20price.,-
The%20Indicator%20column.
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    The Exchange also believes providing an annual subscription for an 
overall lower fee than a monthly subscription is equitable and 
reasonable because it would enable the Exchange to gauge long-term 
interest in the Report. A lower annual subscription fee would also 
incentivize Members to subscribe to the Report on a long-term basis, 
thereby improving the efficiency by which the Exchange may deliver the 
Report by doing so on a regular basis over a prolonged and set period 
of time. The Exchange notes that other exchanges provide annual 
subscriptions for reports concerning their data product offerings.\27\
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    \27\ Cboe Exchange, Inc. (``Cboe'') assesses a $24,000 annual 
fee for an intra-day subscription to Open-Close Data. See https://datashop.cboe.com/options-summary-subscription.
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    The Exchange also believes the proposed fees are reasonable as they 
would support the introduction of a new market data product to 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. The Report accomplishes this by providing those 
Members data to analyze by how much time their order may have missed an 
execution against a contra-side order resting on the Book. Members may 
use this data to optimize their models and trading patterns in an 
effort to yield better execution results by calculating by how much 
time their order may have missed an execution.
    Selling market data, such as the Report, is also a means by which 
exchanges compete to attract business. To the extent that the Exchange 
is successful in attracting subscribers for the Report, it may earn 
trading revenues and further enhance the value of its data products. If 
the market deems the proposed fees to be unfair or inequitable, firms 
can diminish or discontinue their use of the data and/or avail 
themselves of similar products offered by other exchanges.\28\ The 
Exchange therefore believes that the proposed fees for the Report 
reflect the competitive environment and would be properly assessed on 
Member users. The Exchange also believes the proposed fees are 
equitable and not unfairly discriminatory as the fees would apply 
equally to all users who choose to purchase such data. It is a business 
decision of each Member that chooses to purchase the Report. The 
Exchange's proposed fees would not differentiate between subscribers 
that purchase the Report and are set at a modest level that would allow 
any interested Member to purchase such data based on their business 
needs.
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    \28\ See supra note 26.
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    The Exchange reiterates that the decision as to whether or not to 
purchase the Report is entirely optional

[[Page 29611]]

for all potential subscribers. Indeed, no market participant is 
required to purchase the Report, and the Exchange is not required to 
make the Report available to all investors. It is entirely a business 
decision of each Member to subscribe to the Report. The Exchange offers 
the Report as a convenience to Members to provide them with additional 
information regarding trading activity on the Exchange on a delayed 
basis after the close of regular trading hours. A Member that chooses 
to subscribe to the Report may discontinue receiving the Report at any 
time if that Member determines that the information contained in the 
Report is no longer useful.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
result in any burden on competition that is not necessary or 
appropriate in furtherance of the purposes of the Act. The Exchange 
made the Report available in order to keep pace with changes in the 
industry and evolving customer needs and demands, and believes the data 
product will contribute to robust competition among national securities 
exchanges. As a result, the Exchange believes this proposed rule change 
permits fair competition among national securities exchanges.
    The Exchange also does not believe the proposed fees would cause 
any unnecessary or inappropriate burden on intermarket competition as 
other exchanges are free to introduce their own comparable data product 
with lower prices to better compete with the Exchange's offering. The 
Exchange operates in a highly competitive environment, and its ability 
to price the Report is constrained by competition among exchanges who 
choose to adopt a similar product. The Exchange must consider this in 
its pricing discipline in order to compete for the market data. For 
example, proposing fees that are excessively higher than fees for 
potentially similar data products would simply serve to reduce demand 
for the Exchange's data product, which as discussed, market 
participants are under no obligation to utilize. In this competitive 
environment, potential purchasers are free to choose which, if any, 
similar product to purchase to satisfy their need for market 
information. As a result, the Exchange believes this proposed rule 
change permits fair competition among national securities exchanges.
    The Exchange does not believe the proposed rule change would cause 
any unnecessary or inappropriate burden on intramarket competition. 
Particularly, the proposed product and fees apply uniformly to any 
purchaser in that the Exchange does not differentiate between 
subscribers that purchase the Report. The proposed fees are set at a 
modest level that would allow any interested Member to purchase such 
data based on their business needs.

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,\29\ and Rule 19b-4(f)(2) \30\ 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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    \29\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \30\ 17 CFR 240.19b-4(f)(2).
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-EMERALD-2021-19 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-2021-19. 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-2021-19 and should be submitted 
on or before June 23, 2021.
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    \31\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\31\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-11530 Filed 6-1-21; 8:45 am]
BILLING CODE 8011-01-P


