[Federal Register Volume 86, Number 133 (Thursday, July 15, 2021)]
[Notices]
[Pages 37361-37364]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-15030]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-92358; File No. SR-EMERALD-2021-21]


Self-Regulatory Organizations; MIAX Emerald, LLC; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change to 
Establish Fees for the cToM Market Data Product

July 9, 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 June 30, 2021, MIAX Emerald, LLC (``MIAX Emerald'' or ``Exchange'') 
filed with the Securities and Exchange Commission (``Commission'') the 
proposed rule change as described in Items I, II, and III below, which 
Items have been prepared by the Exchange. The Commission is publishing 
this notice to solicit comments on the proposed rule change from 
interested persons.
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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 establish fees for the market data 
product known as MIAX Emerald Complex Top of Market (``cToM'').
    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 Section 6(a) of the Fee Schedule to 
establish fees for the cToM market data product.
    The Exchange previously adopted rules governing the trading of 
Complex Orders \3\ on the Emerald System \4\ in 2018.\5\ Shortly 
thereafter, the Exchange also adopted the market data product cToM and 
expressly waived fees for cToM to provide an incentive to prospective 
market participants to subscribe to that market data feed.\6\ The 
Exchange has not charged fees to cToM subscribers in the over two years 
since it was first available for subscription.
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    \3\ See Exchange Rule 518(a)(5) for the definition of Complex 
Orders.
    \4\ The term ``System'' means the automated trading system used 
by the Exchange for the trading of securities. See Exchange Rule 
100.
    \5\ See Securities Exchange Act Release Nos. 84891 (December 20, 
2018), 83 FR 67421 (December 28, 2018) (In the Matter of the 
Application of MIAX EMERALD, LLC for Registration as a National 
Securities Exchange; Findings, Opinion, and Order of the 
Commission); and 85345 (March 18, 2019), 84 FR 10848 (March 22, 
2019) (SR-EMERALD-2019-13) (Notice of Filing and Immediate 
Effectiveness of a Proposed Rule Change To Amend Exchange Rule 518, 
Complex Orders).
    \6\ See Securities Exchange Act Release No. 85207 (February 27, 
2019), 84 FR 7963 (March 5, 2019) (SR-EMERALD-2019-09) (providing a 
complete description of the cToM data feed).
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    In summary, cToM provides subscribers with the same information as 
the MIAX Emerald Top of Market (``ToM'') data product as it relates to 
the Strategy Book \7\, i.e., the Exchange's best bid and offer for a 
complex strategy, with aggregate size, based on displayable order and 
quoting interest in the complex strategy on the Exchange. However, cToM 
provides subscribers with the following additional information that is 
not included in ToM: (i) The identification of the complex strategies 
currently trading on the Exchange; (ii) complex strategy last sale 
information; and (iii) the status of securities underlying the complex 
strategy (e.g., halted, open, or resumed). cToM is a distinct market 
data product from ToM. ToM subscribers are not required to subscribe to 
cToM, and cToM subscribers are not required to subscribe to ToM.\8\
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    \7\ The ``Strategy Book'' is the Exchange's electronic book of 
complex orders and complex quotes. See Exchange Rule 518(a)(17).
    \8\ See supra note 6.
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    The Exchange now proposes to amend Section 6(a) of the Fee Schedule 
to

[[Page 37362]]

charge monthly fees to Distributors \9\ of cToM. Specifically, the 
Exchange proposes to assess Internal Distributors $1,250 per month and 
External Distributors $1,750 per month for the cToM data feed.\10\ The 
Exchange notes that the proposed monthly cToM fees for Internal and 
External Distributor are the same prices that the Exchange charges for 
its ToM data product, and are similar to other options exchanges' data 
feed prices for their comparable complex order data feed products.\11\
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    \9\ A ``Distributor'' of MIAX Emerald data is any entity that 
receives a feed or file of data either directly from MIAX Emerald or 
indirectly through another entity and then distributes it either 
internally (within that entity) or externally (outside that entity). 
All Distributors are required to execute a MIAX Emerald Distributor 
Agreement. See Section 6(a) of the Fee Schedule.
    \10\ The Exchange also proposes to make a minor related change 
to remove ``(as applicable)'' from the explanatory paragraph in 
Section 6(a) as it will not change [sic] fees for both the ToM and 
cToM data feeds.
    \11\ See NYSE American Options Proprietary Market Data Fees, 
American Options Complex Fees ($1,500 per month Access Fee and 
$1,000 per month Redistribution Fee), at https://www.nyse.com/publicdocs/nyse/data/NYSE_American_Options_Market_Data_Fee_Schedule.pdf; see also NYSE 
Arca Options Proprietary Market Data Fees, Arca Options Complex Fees 
($1,500 per month Access Fee and $1,000 per month Redistribution 
Fee), at https://www.nyse.com/publicdocs/nyse/data/NYSE_Arca_Options_Proprietary_Data_Fee_Schedule.pdf; Nasdaq PHLX LLC 
Price List--U.S. Derivatives Data, PHLX Orders Fees (Internal 
Distributor fee of $3,000 per month and External Distributor fee of 
$3,500 per month), at http://www.nasdaqtrader.com/Trader.aspx?id=DPPriceListOptions#PHLX.
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    Like it does today for ToM, the Exchange proposes to assess cToM 
fees on Internal and External Distributors in each month the 
Distributor is credentialed to use cToM in the production environment. 
Also, like the Exchange does today for ToM, market data fees for cToM 
will be reduced for new Distributors for the first month during which 
they subscribe to cToM, based on the number of trading days that have 
been held during the month prior to the date on which that subscriber 
has been credentialed to use cToM in the production environment. Such 
new Distributors will be assessed a pro-rata percentage of the fees in 
the table in Section 6(a) of the Fee Schedule, which is the percentage 
of the number of trading days remaining in the affected calendar month 
as of the date on which they have been credentialed to use cToM in the 
production environment, divided by the total number of trading days in 
the affected calendar month.
Implementation Date
    The proposed fee changes will become effective on July 1, 2021.
2. Statutory Basis
    The Exchange believes that its proposal to amend its Fee Schedule 
is consistent with Section 6(b) of the Act \12\ in general, and 
furthers the objectives of Section 6(b)(4) of the Act \13\ 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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    \12\ 15 U.S.C. 78f(b).
    \13\ 15 U.S.C. 78f(b)(4) and (5).
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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. Particularly, cToM further broadens the 
availability of U.S. option market data to investors consistent with 
the principles of Regulation NMS. The data product also promotes 
increased transparency through the dissemination of cToM. Particularly, 
cToM provides subscribers with the same information as ToM, but 
includes the following additional information: (i) The identification 
of the complex strategies currently trading on the Exchange; (ii) 
complex strategy last sale information; and (iii) the status of 
securities underlying the complex strategy (e.g., halted, open, or 
resumed). The Exchange believes cToM provides a valuable tool that 
subscribers can use to gain substantial insight into the trading 
activity in Complex Orders, but also emphasizes such data is not 
necessary for trading. Moreover, other exchanges offer similar data 
products.\14\
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    \14\ See supra note 11.
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    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 3.24% of the market share.\15\ 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.'' \16\ 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 or less attractive than the competition, that market 
participant can and may switch between similar products. The proposed 
fees are a result of the competitive environment, as the Exchange seeks 
to adopt fees to attract purchasers of cToM.
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    \15\ See MIAX's ``The Market at a Glance'', available at https://www.miaxoptions.com/ (last visited June 29, 2021).
    \16\ 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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    No market participant is required by any rule or regulation to 
utilize the Exchange's Complex Order functionality or subscribe to the 
cToM data feed. Further, unlike orders on the Exchange's Simple Order 
Book, Complex Orders are not protected and will never trade through 
Priority Customer \17\ orders, thus protecting the priority that is 
established in the Simple Order Book.\18\ Additionally, unlike the 
continuous quoting requirements of Market Makers in the simple order 
market, there are no continuous quoting requirements respecting Complex 
Orders. It is a business decision whether market participants utilize 
Complex Order strategies on the Exchange and whether to purchase cToM 
data to help effect those strategies.
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    \17\ 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 accounts(s). The term 
``Priority Customer Order'' means an order for the account of a 
Priority Customer. See Exchange Rule 100.
    \18\ The ``Simple Order Book'' is the Exchange's regular 
electronic book of orders and quotes. See Exchange Rule 100. See 
supra note 5.
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    The Exchange believes the proposed fees are reasonable as the 
proposed fees are both modest and similar to, or even lower than, the 
fees assessed by other exchanges that provide similar data

[[Page 37363]]

products.\19\ Indeed, proposing fees that are excessively higher than 
established fees for similar data products would simply serve to reduce 
demand for the Exchange's data product, which as noted, is entirely 
optional. Like the Exchange's cToM data product, other exchanges offer 
similar data products and complex order functionality. As such, if a 
market participant views another exchange's complex order functionality 
and related data feed(s) as more attractive than what is offered by the 
Exchange, then such market participant can merely choose not to utilize 
the Exchange's Complex Order functionality or purchase cToM. Instead, 
that market participant can utilize similar complex functionality 
elsewhere and purchase another exchange's complex data product, which 
likely offers similar data points, albeit based on that other market's 
complex order trading activity.
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    \19\ See supra note 11.
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    Selling market data, such as cToM, is also a means by which 
exchanges compete to attract business. 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.\20\ The Exchange therefore believes that 
the proposed fees for cToM reflect the competitive environment and 
would be properly assessed on Member or non-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. The Exchange's proposed fees would not 
differentiate between subscribers that purchase cToM and are set at a 
modest level that would allow any interested Member or non-Member to 
purchase such data based on their business needs.
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    \20\ See id.
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    The Exchange also believes the proposed cToM fees are reasonable 
and not unfairly discriminatory because since the Exchange initially 
established the cToM data product in 2016, all Exchange Members have 
had the ability to receive the Exchange's cToM data free of charge for 
the past two years.\21\
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    \21\ See supra note 6.
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    The Exchange believes that it is reasonable, equitable and not 
unfairly discriminatory to assess Internal Distributors fees that are 
less than the fees assessed for External Distributors for subscriptions 
to the cToM data feed because Internal Distributors have limited, 
restricted usage rights to the market data, as compared to External 
Distributors, which have more expansive usage rights. All Members and 
non-Members that determine to receive any market data feed of the 
Exchange (or its affiliates, MIAX PEARL, LLC and Miami International 
Securities Exchange, LLC), must first execute, among other things, the 
MIAX Exchange Group Exchange Data Agreement (the ``Exchange Data 
Agreement'').\22\ Pursuant to the Exchange Data Agreement, Internal 
Distributors are restricted to the ``internal use'' of any market data 
they receive. This means that Internal Distributors may only distribute 
the Exchange's market data to the recipient's officers and employees 
and its affiliates.\23\ External Distributors may distribute the 
Exchange's market data to persons who are not officers, employees or 
affiliates of the External Distributor,\24\ and may charge their own 
fees for the distribution of such market data. Accordingly, the 
Exchange believes it is fair, reasonable and not unfairly 
discriminatory to assess External Distributors a higher fee for the 
Exchange's market data products as External Distributors have greater 
usage rights to commercialize such market data. The Exchange also 
utilizes more resources to support External Distributors versus 
Internal Distributors, as External Distributors have reporting and 
monitoring obligations that Internal Distributors do not have, thus 
requiring additional time and effort of Exchange staff. The Exchange 
believes the proposed cToM fees are equitable and not unfairly 
discriminatory because the fee level results in a reasonable and 
equitable allocation of fees amongst subscribers for similar services, 
depending on whether the subscribers is an Internal or External 
Distributor. Moreover, the decision as to whether or not to purchase 
market data is entirely optional to all market participants. Potential 
purchasers are not required to purchase the market data, and the 
Exchange is not required to make the market data available. Purchasers 
may request the data at any time or may decline to purchase such data. 
The allocation of fees among users is fair and reasonable because, if 
market participants deem the proposed fees to be unfair or inequitable, 
firms can discontinue their use of the cToM data.
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    \22\ See Exchange Data Agreement, available at https://miaxweb2.pairsite.com/sites/default/files/page-files/MIAX_Exchange_Group_Data_Agreement_09032020.pdf.
    \23\ See id.
    \24\ See id.
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    Further, the Exchange no longer believes it is necessary to provide 
cToM data for free to attract market participants since the Exchange's 
Strategy Book is now established and the Exchange no longer needs to 
rely on such waivers to attract market participants to its Complex 
Order market or cToM subscribers. The Exchange believes that the 
proposal is equitable and not unfairly discriminatory because the 
proposed cToM fees will apply to all market participants of the 
Exchange on a uniform basis. The Exchange also notes that the proposed 
monthly cToM fees for Internal and External Distributors are the same 
prices that the Exchange charges for its ToM data product, and are 
generally lower than other options exchanges' data feed prices for 
their comparable data feed products.\25\
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    \25\ See supra note 11.
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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 
result in any burden on competition that is not necessary or 
appropriate in furtherance of the purposes of the Act. Rather, the 
Exchange believes that the proposal will promote competition by 
permitting the Exchange to sell a data product similar to those offered 
by other competitor options exchanges.\26\ The Exchange made Complex 
Order functionality and cToM available in order to keep pace with 
changes in the U.S. options industry and evolving customer needs, and 
believes the data product will continue to contribute to robust 
competition among national securities exchanges. Other U.S. options 
exchanges offer complex order functionality and market data products 
that are substantially similar to that offered by the Exchange. As a 
result, the Exchange believes this proposed rule change permits fair 
competition among national securities exchanges.
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    \26\ Id.
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    Furthermore, the Exchange operates in a highly competitive 
environment, and its ability to price cToM is constrained by 
competition among exchanges that offer similar data products and 
complex order functionality to their customers. As discussed, there are 
currently a number of similar products available to market participants 
and investors. Other U.S. options exchanges offer market data products 
that are substantially similar to cToM, which the Exchange must 
consider in its pricing discipline in order to compete for the market 
data.\27\ For example, proposing fees that are excessively higher than 
established fees for similar data products would simply

[[Page 37364]]

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.
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    \27\ Id.
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    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 
and lower their prices to better compete with the Exchange's offering. 
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 it does not differentiate between subscribers that 
purchase cToM. The proposed fees are set at a modest level that would 
allow any interested Member or non-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,\28\ and Rule 19b-4(f)(2) \29\ 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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    \28\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \29\ 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-2021-21 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-2021-21. 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-2021-21, and should be submitted 
on or before August 5, 2021.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\30\
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    \30\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-15030 Filed 7-14-21; 8:45 am]
BILLING CODE 8011-01-P


