[Federal Register Volume 87, Number 74 (Monday, April 18, 2022)]
[Notices]
[Pages 23000-23002]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-08173]



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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-94697; File No. SR-EMERALD-2022-12]


Self-Regulatory Organizations; MIAX Emerald, LLC; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend 
the MIAX Emerald Fee Schedule To Adopt Fees for the High Precision 
Network Time Signal Service

April 12, 2022.
    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 March 30, 2022, MIAX Emerald, LLC (``MIAX Emerald'' or ``Exchange'') 
filed with the Securities and Exchange Commission (``Commission'') a 
proposed rule change as described in Items I, II, and III, below, which 
Items have been prepared by the Exchange. The Commission is publishing 
this notice to solicit comments on the proposed rule change from 
interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange is filing a proposal to amend the MIAX Emerald Fee 
Schedule (the ``Fee Schedule'') to adopt fees for a new service known 
as the ``High Precision Network Time Signal Service.'' \3\
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    \3\ See, generally, Exchange Rule 531(d).
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    The text of the proposed rule change is available on the Exchange's 
website at https://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 established a new service known as the ``High 
Precision Network Time Signal Service'' (``HPNTSS'' or the 
``Service''),\4\ which will be available for purchase by subscribers on 
a voluntary basis. The Exchange now proposes to adopt fees for the 
Service, which is described under Exchange Rule 531(d).\5\ The Service 
is an optional product available to any firm that chooses to subscribe.
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    \4\ See Securities Exchange Act Release No. 94335 (March 1, 
2022), 87 FR 12756 (March 7, 2022) (SR-EMERALD-2021-38) (Notice of 
Filing of Amendment No. 1 and Order Granting Accelerated Approval of 
a Proposed Rule Change, as Modified by Amendment No. 1, To Amend 
Exchange Rule 531 To Provide for a New Service Called the High 
Precision Network Time Signal Service).
    \5\ See Exchange Rule 531(d).
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    The Exchange proposes to assess a monthly fee of $3,600 for 
subscribing to the Service. As such, the Exchange proposes to amend the 
Fee Schedule to adopt new Section 8), Services, to provide that 
subscribers may purchase the Service for a monthly fee of $3,600. 
Subscribers may cancel their subscription at any time. The Exchange 
proposes to specify that for mid-month subscriptions to the Service, 
new subscribers will be charged for the full calendar month for which 
they subscribe. A second time signal is available with each 
subscription to the Service for redundancy and disaster recovery 
purposes.
    In sum, the Service enables subscribers to synchronize their own 
primary clock devices to the Exchange's primary clock device, by 
receiving time signals from the Exchange via a 1 gigabit (``Gb'') 
connection that is currently offered by the Exchange and utilized by 
market participants to connect to the Exchange's System.\6\ The Service 
simply provides subscribers with the Exchange's time signal at a sub-
nanosecond level and nothing else. The sub-nanosecond time signal would 
tell the subscriber the Exchange's time at a sub-nanosecond level at a 
particular point in time. The subscriber may then use that time signal 
to synchronize their own primary clock to the Exchange's primary clock 
at the more acute sub-nanosecond level.\7\ Subscribers would utilize 
their own Enhanced PTP device \8\ to synchronize the clocks within the 
subscriber's computer and network infrastructure, as appropriate, at a 
sub-nanosecond level. This would enable the subscriber to record 
certain times an order or message traveled through and leaves the 
subscriber's system at a sub-nanosecond level.
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    \6\ The Exchange did not provide a new connectivity option to 
receive time signals via the Service. The Service is not a 
connectivity product and subscribers would only need to utilize an 
existing connectivity method offered by the Exchange to utilize the 
Service. See Fee Schedule, Section 5, System Connectivity Fees, for 
information regarding 1 Gb connectivity.
    \7\ See supra note 4 for a detailed description of the Service. 
See also MIAX Emerald Options--Update: The Introduction of the High 
Precision Network Time Signal (Enhanced PTP/White Rabbit) Beginning 
April 1, 2022 (March 3, 2022), available at https://www.miaxoptions.com/alerts/2022/03/03/miax-emerald-options-update-introduction-high-precision-network-time-signal.
    \8\ An Enhanced PTP clock synchronization device captures time 
and coordinates time synchronization within a network at a sub-
nanosecond level.
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    The Service is not a connectivity product and subscribers are able 
to utilize an existing connectivity method offered by the Exchange to 
utilize the Service. The Service simply provides enhanced time 
synchronization that may be utilized by a subscriber to adjust their 
own systems. The Service is not a market data product or access/
connectivity service. Subscribers may continue to use their existing 
methods to connect to and send orders to the Exchange. The Service will 
not include any trading data regarding the subscriber's activity on the 
Exchange or include any data from other trading activity on the 
Exchange.
    The Exchange established the Service in response to demand for 
tighter and more accurate clock synchronization options with the 
Exchange's network. The Service is offered to subscribers on a 
completely voluntary basis in that the Exchange is not required by any 
rule or regulation to make the Service available and potential 
subscribers may subscribe to the Service only if they voluntarily 
choose to do so. It is a business decision of each subscriber whether 
to subscribe to the Service or not.
    The Exchange intends to begin to offer the Service and charge the 
proposed fees on April 1, 2022.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\9\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act,\10\ in particular, in that it 
is 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 to protect investors and the

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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 Service is consistent 
with Section 6(b) of the Act \11\ in general, and furthers the 
objectives of Section 6(b)(4) of the Act \12\ in particular, in that it 
is an equitable allocation of dues, fees and other charges among market 
participants.
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    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(5).
    \11\ 15 U.S.C. 78f(b).
    \12\ 15 U.S.C. 78f(b)(4).
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    The Exchange operates in a highly competitive environment in which 
16 U.S. registered equity options exchanges compete for market share. 
Based on publicly available information, no single options exchange has 
more than 13-14% of the equity options market share and currently the 
Exchange represents only approximately 3.57% of the market share.\13\ 
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 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.'' \14\ Making products, 
like the Service, 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 product offering 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 Service.
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    \13\ See ``The Market at a Glance,'' (last visited March 15, 
2022), available at https://www.miaxoptions.com/.
    \14\ 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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    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 Service, which as noted, is entirely 
optional. Other options exchanges are also free to introduce their own 
comparable 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 services. Moreover, if a 
market participant views another exchange's potential service as more 
attractive, then such market participant can merely choose not to 
subscribe to the Exchange's Service and instead subscribe to another 
exchange's similar product, which may offer similar data points, albeit 
based on that other market's trading systems.
    The Exchange also believes the proposed fees are reasonable as they 
would support the introduction of a new product to subscribers. The 
Exchange believes the proposed fees are reasonable in order to support 
the introduction of the new Service, which may be used for numerous 
optional purposes. For example, the Service would allow subscribers to 
more precisely measure latency between their network and that of the 
Exchange at a sub-nanosecond level, allowing subscribers to better 
understand the times at which their order or message reached certain 
points when traveling from their network to the Exchange. The Service 
would also allow subscribers to analyze the efficiency of their network 
and connections when not only routing orders to the Exchange, but also 
when receiving messages back from the Exchange (including 
communications regarding whether their order was accepted, rejected, or 
executed). Subscribers utilizing the Service may also measure message 
traversal times by comparing their messages' (e.g., order, quote, 
cancellation) timestamps to the Exchange's matching engine timestamps 
from the Exchange-generated acknowledgement messages (e.g., order 
acknowledgment, quote acknowledgment, cancellation acknowledgment).\15\ 
Subscribers would then be able to enhance their own systems to ensure 
that they are receiving such communications in a timelier manner and to 
verify that their systems are working as intended.
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    \15\ The Exchange sends subscribers an acknowledgement message 
that their order or message was received by the Exchange. This 
acknowledgement includes the time of receipt at a nanosecond level.
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    In addition, subscribers may utilize these enhanced latency 
measurements to better analyze latencies within their own systems and 
use this analysis to optimize their network, models and trading 
patterns to potentially improve their interactions with the Exchange. 
In particular, subscribers may use these metrics to better assess the 
health of their network and that their systems are working as intended. 
For example, a subscriber may use this information when analyzing the 
efficacy of their various connections and whether a connection is 
performing as expected or experiencing a delay. A subscriber may then 
decide to rebalance the amount of orders and/or messages over its 
various connections to ensure each connection is operating with maximum 
efficiency. Subscribers may also use the Service for other purposes, 
such as determining compliance with certain regulatory requirements 
\16\ and trade surveillance. Subscribers may also utilize time 
synchronization to assist them in evaluating compliance with certain 
clock synchronization requirements. The Exchange therefore believes the 
proposed fees are reasonable because of the numerous benefits provided 
to subscribers that subscribe to the Service. Selling different 
products and services, such as HPNTSS, is also a means by which 
exchanges compete to attract business. To the extent that the Exchange 
is successful in attracting subscribers for the Service, it may earn 
trading revenues and further enhance market participants' interactions 
on the Exchange, which would increase value of its products and 
services. If the market deems the proposed fees to be unfair or 
inequitable, firms can diminish or discontinue their use of the 
Service. The Exchange therefore believes that the proposed fees for the 
Service reflect the competitive environment of U.S. exchanges and would 
be properly assessed to market participants that subscribe to the 
Service. 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 subscribe to the Service. It is a business decision 
of each market participant that chooses to subscribe to the Service. 
The Exchange's proposed fees would not differentiate between 
subscribers that purchase the Service and are set at a modest level 
that would allow any interested market participant to purchase the 
Service based on their business needs.
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    \16\ See, e.g., Chapter III of the Exchange's Rules, which 
incorporates by reference Rule 301, Interpretation and Policy .02 
(Just and Equitable Principles of Trade), of the Exchange's 
affiliate, Miami International Securities Exchange, LLC (``MIAX''); 
and Financial Industry Regulatory Authority, Inc. (``FINRA'') Rule 
5320.
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    The Exchange reiterates that the decision as to whether or not to 
purchase the Service is entirely optional for all potential 
subscribers. Indeed, no market participant is required to purchase the 
Service and the Exchange is not required to make the Service available 
to all investors. It is entirely a

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business decision of each market participant to subscribe to the 
Service. The Exchange offers the Service as a convenience to market 
participants to provide them with the ability to synchronize their own 
primary clock devices to the Exchange's primary clock device at a sub-
nanosecond level. A market participant that chooses to subscribe to the 
Service may discontinue the use of the Service at any time if that 
market participant determines that the synchronization of its primary 
clock devices to the Exchange's primary clock device 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 Service available in order to keep pace with changes in the 
industry and evolving customer needs and demands, and believes the 
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 believes the proposed fees would not cause any 
unnecessary or inappropriate burden on intermarket competition as other 
exchanges are free to introduce their own comparable 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 Service 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 market share. For example, proposing 
fees that are excessively higher than fees for potentially similar 
products would simply serve to reduce demand for the Exchange's 
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 also believes that the proposed fees do not cause any 
unnecessary or inappropriate burden on intermarket competition because 
the synchronization of subscribers' primary clock devices with that of 
the Exchange would enhance competition between exchanges. Subscribers 
that subscribe to the Service could use the Service to adjust their own 
systems and recalibrate their models and trading strategies to improve 
their overall trading experience on the Exchange. This may improve the 
Exchange's overall trading environment resulting in increased liquidity 
and order flow on the Exchange. In response, other exchanges may 
similarly seek ways to provide synchronized clock timestamps in an 
effort to improve their own market quality.
    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 Service. The proposed fees are set at a 
modest level that would allow any interested market participant to 
purchase the Service 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,\17\ and Rule 19b-4(f)(2) \18\ 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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    \17\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \18\ 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 (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-EMERALD-2022-12 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-2022-12. 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 (https://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-2022-12 and should 
be submitted on or before May 9, 2022.
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    \19\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-08173 Filed 4-15-22; 8:45 am]
BILLING CODE 8011-01-P


