[Federal Register Volume 87, Number 12 (Wednesday, January 19, 2022)]
[Notices]
[Pages 2968-2971]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-00880]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-93967; File No. SR-EMERALD-2021-45]


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

January 12, 2022.
    Pursuant to the provisions of Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice 
is hereby given that on December 30, 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'').
    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 1(a)(i) of the Fee Schedule 
to: (i) Decrease Simple Maker (as defined below) rebates in certain 
Tiers for options transactions in Penny classes (as defined below) for 
the Market Maker Origin \3\; and (ii) make several non-substantive 
formatting changes to the Exchange Rebates/Fees tables in Section 
1(a)(i) of the Fee Schedule.
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    \3\ The term ``Market Maker'' refers to ``Lead Market Maker'' 
(``LMM''), ``Primary Lead Market Maker'' (``PLMM'') and ``Registered 
Market Maker'' (``RMM''), collectively. See the Definitions Section 
of the Fee Schedule and Exchange Rule 100.
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Background
    The Exchange currently assesses transaction rebates and fees to all 
market participants, which are based upon a threshold tier structure 
(``Tier''). Tiers are determined on a monthly basis and are based on 
three alternative calculation methods, as defined in Section 1(a)(ii) 
of the Fee Schedule. The calculation method that results in the highest 
Tier achieved by the Member \4\ shall apply to all Origin types by the 
Member, except the Priority Customer \5\ Origin type (calculation of 
Tiers discussed below). The monthly volume thresholds for each method, 
associated with each Tier, are calculated as the total monthly volume 
executed by the Member in all options classes on MIAX Emerald in the 
relevant Origins and/or applicable liquidity, not including Excluded 
Contracts,\6\ (as the numerator) expressed as a percentage of (divided 
by) Customer Total Consolidated Volume (``CTCV'') (as the denominator). 
CTCV is calculated as the total national volume cleared at The Options 
Clearing Corporation (``OCC'') in the Customer range in those classes 
listed on MIAX Emerald for the month for which fees apply, excluding 
volume cleared at the OCC in the Customer range executed during the 
period of time in which the Exchange experiences an ``Exchange System 
Disruption'' \7\ (solely in the option classes of the affected Matching 
Engine).\8\ In addition, the per contract transaction rebates and fees 
shall be applied retroactively to all eligible volume once the Tier has 
been reached by the Member. Members that place resting liquidity, i.e., 
orders on the MIAX Emerald System, will be assessed the specified 
``maker'' rebate or fee (each a ``Maker'') and Members that execute 
against resting liquidity will be assessed the specified ``taker'' fee 
or rebate (each a ``Taker'').\9\ Members are also assessed lower 
transaction fees and smaller rebates for order executions in standard 
option classes in the Penny Interval Program \10\ (``Penny classes'') 
than for order executions in standard option classes which are not in 
the Penny Program (``non-Penny classes''), for which Members will be 
assessed a higher transaction fees and larger rebates.
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    \4\ ``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\ ``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). See Exchange Rule 
100, including Interpretation and Policy .01.
    \6\ ``Excluded Contracts'' means any contracts routed to an away 
market for execution. See the Definitions Section of the Fee 
Schedule.
    \7\ The term ``Exchange System Disruption'' means an outage of a 
Matching Engine or collective Matching Engines for a period of two 
consecutive hour or more, during trading hours. See the Definitions 
Section of the Fee Schedule.
    \8\ A ``Matching Engine'' is a part of the MIAX Emerald 
electronic system that processes options orders and trades on a 
symbol-by-symbol basis. See the Definitions Section of the Fee 
Schedule.
    \9\ For a Priority Customer complex order taking liquidity in 
both a Penny class and non-Penny class against Origins other than 
Priority Customer, the Priority Customer order will receive a rebate 
based on the Tier achieved.
    \10\ See Securities Exchange Act Release No. 88993 (June 2, 
2020), 85 FR 35145 (June 8, 2020) (SR-EMERALD-2020-05) (Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To 
Amend Exchange Rule 510, Minimum Price Variations and Minimum 
Trading Increments, To Conform the Rule to Section 3.1 of the Plan 
for the Purpose of Developing and Implementing Procedures Designed 
To Facilitate the Listing and Trading of Standardized Options) (the 
``Penny Program'').
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    For the Priority Customer Origin type, the Tier applied for a 
Member and its Affiliates' \11\ is solely determined by

[[Page 2969]]

calculation Method 3, as defined in Section 1(a)(ii) of the Fee 
Schedule, titled ``Total Priority Customer, Maker sides volume, based 
on % of CTCV (`Method 3').''
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    \11\ ``Affiliate'' means (i) an affiliate of a Member of at 
least 75% common ownership between the firms as reflected on each 
firm's Form BD, Schedule A, or (ii) the Appointed Market Maker of an 
Appointed EEM (or, conversely, the Appointed EEM of an Appointed 
Market Maker). An ``Appointed Market Maker'' is a MIAX Emerald 
Market Maker (who does not otherwise have a corporate affiliation 
based upon common ownership with an EEM) that has been appointed by 
an EEM and an ``Appointed EEM'' is an EEM (who does not otherwise 
have a corporate affiliation based upon common ownership with a MIAX 
Emerald Market Maker) that has been appointed by a MIAX Emerald 
Market Maker, pursuant to the following process. A MIAX Emerald 
Market Maker appoints an EEM and an EEM appoints a MIAX Emerald 
Market Maker, for the purposes of the Fee Schedule, by each 
completing and sending an executed Volume Aggregation Request Form 
by email to [email protected] no later than 2 business days 
prior to the first business day of the month in which the 
designation is to become effective. Transmittal of a validly 
completed and executed form to the Exchange along with the 
Exchange's acknowledgement of the effective designation to each of 
the Market Maker and EEM will be viewed as acceptance of the 
appointment. The Exchange will only recognize one designation per 
Member. A Member may make a designation not more than once every 12 
months (from the date of its most recent designation), which 
designation shall remain in effect unless or until the Exchange 
receives written notice submitted 2 business days prior to the first 
business day of the month from either Member indicating that the 
appointment has been terminated. Designations will become operative 
on the first business day of the effective month and may not be 
terminated prior to the end of the month. Execution data and reports 
will be provided to both parties. See the Definitions Section of the 
MIAX Emerald Fee Schedule.
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Decrease to Simple Maker Rebates in Certain Tiers for Options in Penny 
Classes for the Market Maker Origin
    The Exchange proposes to amend Section 1(a)(i) of the Fee Schedule 
to decrease certain Simple Maker rebates in Tiers 1 and 2 for options 
in Penny Classes for the Market Maker Origin. Currently, the Exchange 
provides a Simple Maker rebate of ($0.35) for Members that achieve 
Tiers 1 and 2 for options transactions in Penny Classes for the Market 
Maker Origin. The Exchange now proposes to decrease these rebates. In 
particular, the Exchange proposes to provide Simple Maker rebates of 
($0.30) and ($0.33) for Members that achieve Tiers 1 and 2, 
respectively, for options transactions in Penny Classes for the Market 
Maker Origin.
    The purpose of adjusting the specified Simple Maker rebates is for 
business and competitive reasons. In order to attract order flow, the 
Exchange initially set its Maker rebates so that they were meaningfully 
higher than other options exchanges that operate comparable maker/taker 
pricing models.\12\ The Exchange now believes that it is appropriate to 
adjust these specified Maker rebates so that they are more in line with 
other exchanges, but will still remain highly competitive such that 
they should enable the Exchange to continue to attract order flow and 
maintain market share.\13\
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    \12\ See Securities Exchange Act Release No. 85393 (March 21, 
2019), 84 FR 11599 (March 27, 2019) (SR-EMERALD-2019-15).
    \13\ See NYSE Arca Options Fees and Charges, Market Maker Penny 
and SPY Posting Credit Tiers, page 10 (``Base'' tier rebate of 
($0.28) and ``Select Tier'' rebate of ($0.32)); Cboe BZX Options 
Exchange Fee Schedule, Transaction Fees, Market Maker (base tier 
rebate of ($0.29) and tier rebate of ($0.33)).
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Formatting Changes to Tables of Exchange Rebates/Fees
    Next, the Exchange proposes to amend tables in Section 1(a)(i) of 
the Fee Schedule for the Exchange's rebates and fees for Penny Classes 
and non-Penny Classes to make non-substantive formatting changes to 
several Tiers for the Priority Customer Origin. The Exchange proposes 
to amend the Complex \14\ Maker rebates in Tiers 1-4 for the Priority 
Customer Origin when contra to Priority Customer Origin for Penny and 
non-Penny Classes to align the rebates with footnote ``*''. When the 
Exchange established the initial Fee Schedule, it adopted footnote 
``*'', which provides as follows: ``Priority Customer Complex Orders 
contra to Priority Customer Complex Orders are neither charged nor 
rebated. Priority Customer Complex Orders that leg into the Simple book 
are neither charged nor rebated.'' \15\ Accordingly, the Exchange 
proposes to amend the Complex Maker rebates in Tiers 1-4 for the 
Priority Customer Origin when contra to Priority Customer Origin for 
Penny and non-Penny Classes so that all these rebates will be listed in 
the tables as ``($0.00)'' to align with footnote ``*''. The purpose of 
these proposed changes is to reconcile Complex Maker rebates for the 
Priority Customer Origin in Tiers 1-4 when contra to Priority Customer 
Origin with footnote ``*'' to eliminate potential confusion between the 
tables and the footnotes below the tables. The Exchange notes that 
these proposed changes will have no impact on the application of the 
tiers to the Priority Customer Origin or the footnote ``*''.
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    \14\ See Exchange Rule 518(a)(5) for the definition of a Complex 
Order.
    \15\ See supra note 12.
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Implementation
    The proposed changes are scheduled to become operative January 1, 
2022.
2. Statutory Basis
    The Exchange believes that its proposal to amend its Fee Schedule 
is consistent with Section 6(b) of the Act \16\ in general, and 
furthers the objectives of Section 6(b)(4) of the Act,\17\ in that it 
is an equitable allocation of reasonable dues, fees and other charges 
among Exchange members and issuers and other persons using its 
facilities, and 6(b)(5) of the Act,\18\ in that it is designed to 
prevent fraudulent and manipulative acts and practices, to promote just 
and equitable principles of trade, to foster cooperation and 
coordination with persons engaged in facilitating transactions in 
securities, to remove impediments to and perfect the mechanisms of a 
free and open market and a national market system and, in general, to 
protect investors and the public interest.
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    \16\ 15 U.S.C. 78f(b).
    \17\ 15 U.S.C. 78f(b)(4).
    \18\ 15 U.S.C. 78f(b)(1) and (b)(5).
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    The Commission has repeatedly expressed its preference for 
competition over regulatory intervention in determining prices, 
products, and services in the securities markets. 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.'' \19\
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    \19\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496 (June 29, 2005).
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    There are currently 16 registered options exchanges competing for 
order flow. Based on publicly-available information, and excluding 
index-based options, no single exchange has more than approximately 15% 
market share.\20\ Therefore, no exchange possesses significant pricing 
power. More specifically, as of December 13, 2021, the Exchange had a 
market share of approximately 5.03% of executed volume of multiply-
listed equity and exchange traded fund (``ETF'') options for the month 
of December 2021.\21\
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    \20\ See ``The Market at a Glance,'' (last visited December 13, 
2021), available at https://www.miaxoptions.com/.
    \21\ See id.
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    The Exchange believes that the ever-shifting market share among the 
exchanges from month to month demonstrates that market participants can 
discontinue or reduce use of certain categories of products and 
services, terminate an existing membership or determine to not become a 
new member, and/or shift order flow, in response to transaction fee 
changes. For example, on February 28, 2019, the Exchange's affiliate, 
MIAX PEARL, LLC (``MIAX Pearl'') filed with the Commission a proposal 
to increase Taker fees in certain Tiers for options transactions in 
certain Penny classes for Priority Customers and decrease Maker rebates 
in certain Tiers for options transactions in Penny classes for Priority 
Customers (which fee was to be effective March 1, 2019).\22\ MIAX Pearl 
experienced a decrease in total market share for the month of March 
2019, after the proposal

[[Page 2970]]

went into effect. Accordingly, the Exchange believes that the MIAX 
Pearl March 1, 2019 fee change, to increase certain transaction fees 
and decrease certain transaction rebates, may have contributed to the 
decrease in MIAX Pearl's market share and, as such, the Exchange 
believes competitive forces constrain the Exchange's, and other options 
exchanges, ability to set transaction fees and market participants can 
shift order flow based on fee changes instituted by the exchanges.
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    \22\ See Securities Exchange Act Release No. 85304 (March 13, 
2019), 84 FR 10144 (March 19, 2019) (SR-PEARL-2019-07).
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    The Exchange believes its proposal to decrease Simple Maker rebates 
in certain Tiers for options transactions in Penny Classes for Market 
Makers is reasonable, equitable and not unfairly discriminatory because 
all similarly situated market participants in the same Origin type are 
subject to the same tiered Maker rebates and access to the Exchange is 
offered on terms that are not unfairly discriminatory. The Exchange 
believes it is equitable and not unfairly discriminatory to reduce the 
Simple Maker rebates for Market Maker quotes or orders in Penny Classes 
for business and competitive business reasons. The Exchange initially 
set its Simple Maker rebates for such orders higher than certain other 
options exchanges that operate comparable maker/taker pricing models. 
The Exchange now believes that it is appropriate to further decrease 
those specified Simple Maker rebates so that they are more in line with 
other exchanges, and will still remain highly competitive such that 
they should enable the Exchange to continue to attract order flow and 
maintain market share.\23\ The Exchange believes that the amount of 
such rebates, as proposed, will continue to encourage those market 
participants to send quotes or orders to the Exchange.
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    \23\ See supra note 13.
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    The Exchange believes the proposed formatting changes are 
consistent with Section 6(b)(4) of the Act in that they are reasonable, 
equitable, and not unfairly discriminatory because they are non-
substantive, clarifying changes regarding the Exchange's Complex Maker 
rebates in Tiers 1-4 for the Priority Customer Origin when contra to 
Priority Customer Origin for Penny and non-Penny Classes. The Exchange 
believes that the proposed formatting changes will reduce the risk of 
confusion to market participants. The proposed changes 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, 
in general protect investors and the public interest by reconciling the 
Complex Maker rebates listed in Tiers 1-4 for the Priority Customer 
Origin when contra to Priority Customer Origin for Penny and non-Penny 
Classes and the description of the rebates for that type of transaction 
in footnote ``[hairsp]*[hairsp]'', below the tables. The Exchange 
believes that these proposed changes will provide greater clarity to 
Members and the public regarding the Exchange's Fee Schedule and that 
it is in the public interest for the Fee Schedule to be accurate and 
concise so as to eliminate the potential for confusion.

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

    The Exchange does not believe that the proposed rule changes 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 changes in the specified 
Simple Maker rebates for the applicable market participants should 
continue to encourage the provision of liquidity that enhances the 
quality of the Exchange's market and increases the number of trading 
opportunities on the Exchange for all participants who will be able to 
compete for such opportunities. The proposed rule changes should enable 
the Exchange to continue to attract and compete for order flow with 
other exchanges. However, this competition does not create an undue 
burden on competition but rather offers all market participants the 
opportunity to receive the benefit of competitive pricing.
Inter-Market Competition
    The Exchange operates in a highly competitive market in which 
market participants can readily favor competing venues if they deem fee 
levels at a particular venue to be excessive. There are currently 16 
registered options exchanges competing for order flow. Based on 
publicly-available information, and excluding index-based options, no 
single exchange has exceeded approximately 15% of the market share of 
executed volume of multiply-listed equity and ETF options trades as of 
December 13, 2021, for the month of December 2021.\24\ Therefore, no 
exchange possesses significant pricing power in the execution of 
multiply-listed equity and ETF options order flow. More specifically, 
as of December 13, 2021, the Exchange had a market share of 
approximately 5.03% of executed volume of multiply-listed equity and 
ETF options for the month of December 2021.\25\ In such an environment, 
the Exchange must continually adjust its transaction and non-
transaction fees to remain competitive with other exchanges and to 
attract order flow. The Exchange believes that the proposed rule 
changes reflect this competitive environment because they modify the 
Exchange's rebates in a manner that will allow the Exchange to remain 
competition for Market Maker volume. To the extent this is achieved, 
all the Exchange's market participants should benefit from the improved 
market quality.
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    \24\ See supra note 20.
    \25\ See id.
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Formatting Changes
    The Exchange believes the proposed formatting changes will not 
impose any burden on intra-market competition as the proposed rule 
change will have no impact on competition as it is not designed to 
address any competitive issue but rather is designed to remedy minor 
non-substantive issues and provide added clarity to the Fee Schedule. 
In addition, the Exchange does not believe the proposal will impose any 
burden on inter-market competition as the proposal does not address any 
competitive issues and is intended to protect investors by providing 
further transparency regarding the Exchange's Fee Schedule.

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,\26\ and Rule 19b-4(f)(2) \27\ 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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    \26\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \27\ 17 CFR 240.19b-4(f)(2).

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[[Page 2971]]

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 [email protected]. Please include 
File Number SR-EMERALD-2021-45 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-2021-45. 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-2021-45, and should be submitted 
on or before February 9, 2022.
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    \28\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\28\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-00880 Filed 1-18-22; 8:45 am]
BILLING CODE 8011-01-P


