[Federal Register Volume 87, Number 247 (Tuesday, December 27, 2022)]
[Notices]
[Pages 79383-79385]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-28084]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-96548; File No. SR-EMERALD-2022-35]


Self-Regulatory Organizations; MIAX Emerald, LLC; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend 
Exchange Rule 519C, Mass Cancellation of Trading Interest

December 20, 2022.
    Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on December 8, 2022, 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 proposes to amend Exchange Rule 519C, Mass 
Cancellation of Trading Interest.
    The text of the proposed rule change is available on the Exchange's 
website at http://www.miaxoptions.com/rule-filings/emerald, at MIAX 
Emerald'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 Interpretations and Policies .01 of 
Exchange Rule 519C, Mass Cancellation

[[Page 79384]]

of Trading Interest, to provide Members \3\ the option of having the 
Exchange cancel all orders, including GTC Orders,\4\ if the Exchange 
detects a loss of communication on a FIX Order Interface (``FOI'') 
Session.
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    \3\ 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 
Exchange Rule 100.
    \4\ A Good `til Cancelled or ``GTC'' Order is an order to buy or 
sell which remains in effect until it is either executed, cancelled 
or the underlying option expires. See Exchange Rule 516(l).
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Background
    Electronic Exchange Members (``EEMs'') \5\ connect to the Exchange 
via the Financial Information eXchange (``FIX'') Protocol.\6\ An EEM 
connects to their assigned FIX port using the MIAX FIX Order Interface 
(``FOI'') which is a flexible interface that uses the FIX protocol for 
both application and session level messages. The Exchange relies on 
heartbeat \7\ messages to determine the status of the connection to 
ensure bi-directional communication remains intact. Upon missing a 
single heartbeat, FOI will send a Test Request message \8\ to the 
Member to check the status of the connection. Upon missing a certain 
number of heartbeats,\9\ FOI will send a logout message and terminate 
the connection. The Exchange currently offers Members certain order 
handling risk protection options in this scenario.
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    \5\ The term ``Electronic Exchange Member'' or ``EEM'' means the 
holder of a Trading Permit who is not a Market Maker. Electronic 
Exchange Members are deemed ``members'' under the Exchange Act. See 
Exchange Rule 100.
    \6\ The Financial Information eXchange (FIX) is a vendor-neutral 
electronic communications protocol for the international real-time 
exchange of securities transaction information. Scott, Gordon, 
Financial Information eXchange (FIX), Investopedia (June 20, 2022), 
https://www.investopedia.com/terms/f/financial-information-exchange.asp.
    \7\ A ``Heartbeat'' message is a communication which acts as a 
virtual pulse between the Exchange System and the Member's system. 
The heartbeat message sent by the Member and received by the 
Exchange allows the Exchange to continually monitor its connection 
with the Member. See Interpretations and Policies .02(i) of Exchange 
Rule 519C.
    \8\ The test request message is a FIX Protocol message that 
forces a heartbeat from the opposing application. The test request 
message checks sequence numbers or verifies communication line 
status. The opposite application responds to the Test Request with a 
Heartbeat containing the Test Request ID. Financial Information 
Exchange Protocol (FIX), Version 4.2 with errata. May 1, 2001.
    \9\ The Exchange notes that the current System setting is two 
(2) heartbeats, and that any change to this setting will be 
determined by the Exchange and communicated to Members via 
Regulatory Circular.
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    Specifically, when a Loss of Communication is detected on a FOI 
connection the System \10\ will logoff the Member's session and (i) 
cancel all eligible orders for the FIX Session if instructed by the 
Member upon login, or (ii) cancel all eligible orders identified by the 
Member. Following a disconnection, a reconnection will not be permitted 
for a certain period of time (``yy'' seconds). The Exchange shall 
determine the appropriate period of (``yy'' seconds) and shall notify 
Members of the value of ``yy'' seconds via Regulatory Circular. In no 
event shall ``yy'' be less than one (1) second or greater than ten (10) 
seconds.\11\
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    \10\ The term ``System'' means the automated trading system used 
by the Exchange for the trading of securities. See Exchange Rule 
100.
    \11\ See Exchange Rule 519C(c)(2).
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    At the time the Exchange adopted this functionality the Exchange 
created an exception for Good `Til Cancel Orders in Interpretations and 
Policies .01, which stated, Good `Til Cancelled (``GTC'') orders, as 
defined in Rule 516 and PRIME Orders, as defined in Rule 515A, are not 
eligible for automatic cancellation under paragraph (c) of Rule 
519C.\12\
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    \12\ See Interpretations and Policies .01 of Exchange Rule 519C.
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Proposal
    The Exchange now proposes to amend Interpretations and Policies .01 
to allow GTC orders to also be eligible for cancellation when the 
Exchange detects a Loss of Communication.
    As proposed, if the Exchange determines that there is a Loss of 
Communication, the Exchange will cancel the orders as described above, 
additionally, if elected, the Exchange proposes to cancel all GTC 
orders submitted through that FIX Session. As proposed, Members would 
need to contact the Exchange's Help Desk,\13\ in a form and manner to 
be determined by the Exchange and communicated via Regulatory Circular, 
to have this optional order protection (cancellation of GTC orders) 
configured.
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    \13\ The term ``Help Desk'' means the Exchange's control room 
consisting of Exchange staff authorized to make certain trading 
determinations on behalf of the Exchange. The Help Desk shall report 
to and be supervised by a senior executive officer of the Exchange. 
See Exchange Rule 100.
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2. Statutory Basis
    The Exchange believes that its proposed rule change is consistent 
with Section 6(b) of the Act \14\ in general, and furthers the 
objectives of section 6(b)(5) of the Act \15\ in particular, 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 regulating, 
clearing, settling, processing information with respect to, and 
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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    \14\ 15 U.S.C. 78f(b).
    \15\ 15 U.S.C. 78f(b)(5).
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    The disconnect feature of FIX connections is mandatory, however 
Members have the option to enable the cancellation of all orders for an 
entire session or select orders for cancellation on an order-by-order 
basis, which would result in the cancellation of orders submitted over 
a FIX Session when such session disconnects. The Exchange believes it 
is appropriate to offer an additional option for Members to have the 
Exchange cancel GTC orders from the order book when there is a 
communication issue between the Member and the Exchange, as a 
communication issue may or may not be quickly resolved.
    Offering to cancel all orders (including GTC orders) allows the 
Member to customize Exchange risk protection functionality to align to 
a Member's business needs. Offering this type of order cancellation 
functionality to Members is consistent with the Act because it enables 
Members to have greater control over the execution of their orders in 
the event there is a communication issue with the Exchange. The 
proposed order cancellation functionality is designed to mitigate the 
risk of a missed execution associated with a loss of communication with 
the Exchange. The proposed rule change is not unfairly discriminatory 
among market participants, as it is available equally to all market 
participants utilizing a FOI connection to the Exchange.
    The Exchange believes that the proposed rule change will assist 
with the maintenance of a fair and orderly market by providing Members 
with greater control over their resting orders. The Exchange's proposal 
is consistent with the Act because it will mitigate the risk of 
potential erroneous or unintended executions associated with a loss of 
communication which protects investors and the public interest. 
Additionally, the proposed rule adds another level of risk protection 
for Members and protects investors and the public interest by 
increasing the risk protection options available to Members of the 
Exchange.

[[Page 79385]]

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

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act.
    The Exchange does not believe that the proposed rule change to 
provide an additional risk protection imposes any burden on intra-
market competition that is not necessary or appropriate in furtherance 
of the purposes of the Act. The Exchange believes that adding an 
optional risk protection benefits all Members on the Exchange that use 
a FOI connection as any Member with a FOI connection can elect to use 
the risk protection described in the proposed rule.
    The Exchange does not believe the proposed rule change will impose 
any burden on inter-market competition that is not necessary or 
appropriate in furtherance of the purposes of the Act. For all the 
reasons stated, the Exchange does not believe that the proposed rule 
change will impose any burden on competition not necessary or 
appropriate in furtherance of the purposes of the Act.

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

    Because the foregoing proposed rule change does not: (i) 
Significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days after the date of the filing, or such 
shorter time as the Commission may designate, it has become effective 
pursuant to 19(b)(3)(A) of the Act \16\ and Rule 19b-4(f)(6) \17\ 
thereunder.
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    \16\ 15 U.S.C. 78s(b)(3)(A).
    \17\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file the proposed rule change at 
least five business days prior to the date of filing of the proposed 
rule change, or such shorter time as designated by the Commission. 
The Exchange has satisfied this requirement.
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    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.

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-2022-35.

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-2022-35. 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-2022-35, and should be submitted 
on or before January 17, 2023.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
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    \18\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2022-28084 Filed 12-23-22; 8:45 am]
BILLING CODE 8011-01-P


