[Federal Register Volume 88, Number 45 (Wednesday, March 8, 2023)]
[Notices]
[Pages 14409-14412]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-04685]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-97023; File No. SR-EMERALD-2023-06]


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

March 2, 2023.
    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 February 24, 2023, 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 data product 
known as the Liquidity Taker Event Report--Resting Simple Orders.\3\
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    \3\ See, generally, Exchange Rule 531(c).
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    The text of the proposed rule change is available on the Exchange's 
website at http://www.miaxoptions.com/rule-filings/emerald, at MIAX's 
principal office, and at the Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
sections A, B, and C below, of the most significant aspects of such 
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange recently adopted a new data product known as the 
Liquidity Taker Event Report--Resting Simple Orders (the ``Report''), 
which will be available for purchase to Exchange Members \4\ on a 
voluntary basis. The Exchange now proposes to adopt fees for the 
Report. The proposal to adopt the Report was recently published by the 
Securities and Exchange Commission (``Commission'') and is described 
under Exchange Rule 531(c).\5\ The Report is an optional product 
available to Members.
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    \4\ The term ``Member'' means an individual or organization 
approved to exercise the trading rights associated with a Trading 
Permit. Members are deemed ``members'' under the Exchange Act. See 
the Definitions Section of the Fee Schedule and Exchange Rule 100.
    \5\ See Securities Exchange Act Release No. 96762 (January 27, 
2023), 88 FR 7114 (February 2, 2023) (SR-EMERALD-2023-02) (Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change by MIAX 
Emerald, LLC to Amend Exchange Rule 531, Reports, Market Data 
Products and Services, to provide for the New for the New 
``Liquidity Taker Event Report--Resting Simple Orders'').
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    By way of background, the Report is a daily report that provides a 
Member (``Recipient Member'') with its liquidity response time details 
for executions of an order resting on the Simple Order Book.\6\ The 
Report focuses on executions and contra-side responses that occurred 
after 200 microseconds of the time the resting order was received by 
the Exchange and within 200 microseconds of receipt of the first 
attempt to execute against the resting order after the initial 200 
microsecond time period has expired.
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    \6\ The term ``Simple Order Book'' means ``the Exchange's 
regular electronic book of orders and quotes.'' See Exchange Rule 
518(a)(15).
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    The following information is included in the Report regarding the 
resting order: (A) the time the resting order was received by the 
Exchange; (B) symbol; (C) order reference number, which is a unique 
reference number assigned to a new order at the time of receipt; (D) 
whether the Recipient Member is an Affiliate \7\ of the Member that 
entered the resting order; \8\ (E) origin type (e.g., Priority 
Customer,\9\ Market Maker \10\); (F) side (buy or sell); and (G) 
displayed price and size of the resting order.
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    \7\ The term ``affiliate'' of or person ``affiliated with'' 
another person means a person who, directly, or indirectly, 
controls, is controlled by, or is under common control with, such 
other person. See Exchange Rule 100.
    \8\ The Report will simply indicate whether the Recipient Member 
is Affiliate of the Member that entered the resting order and not 
include any other information that may indicate the identity of the 
Member that entered the resting order.
    \9\ The term ``Priority Customer'' means a person or entity that 
(i) is not a broker or dealer in securities, and (ii) does not place 
more than 390 orders in listed options per day on average during a 
calendar month for its own beneficial account(s). The number of 
orders shall be counted in accordance with Interpretation and Policy 
.01. See Exchange Rule 100.
    \10\ The term ``Market Maker'' refers to ``Lead Market Makers'', 
``Primary Lead Market Makers'' and ``Registered Market Makers'' 
collectively. See Exchange Rule 100.
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    The following information is included in the Report regarding the 
execution of the resting order: (A) the EBBO \11\ at the time of 
execution; \12\ (B) the ABBO \13\ at the time of execution; \14\ (C) 
the time first response that executes against the resting order was 
received by the Exchange and the size of the execution and type of the 
response; \15\ and (D) whether the response was entered by the 
Recipient Member.
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    \11\ The term ``EBBO'' means the best bid or offer on the 
Exchange. See Exchange Rule 100.
    \12\ Exchange Rule 531(c)(1)(ii)(A) provides that if the resting 
order executes against multiple contra-side responses, only the EBBO 
at the time of the execution against the first response will be 
included.
    \13\ The term ``ABBO'' or ``Away Best Bid or Offer'' means the 
best bid(s) or offer(s) disseminated by other Eligible Exchanges 
(defined in Exchange Rule 1400(g)) and calculated by the Exchange 
based on market information received by the Exchange from OPRA. See 
Exchange Rule 100.
    \14\ Exchange Rule 531(c)(1)(ii)(B) further provides that if the 
resting order executes against multiple contra-side responses, only 
the ABBO at the time of the execution against the first response 
will be included.
    \15\ The time the Exchange received the response order would be 
in nanoseconds and would be the time the response was received by 
the Exchange's network, which is before the time the response would 
be received by the System.
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    The following information is included in the Report regarding 
response(s) sent by the Recipient Member: (A) Recipient

[[Page 14410]]

Member identifier; (B) the time difference between the time the first 
response that executes against the resting order was received by the 
Exchange and the time of each response sent by the Recipient Member, 
regardless of whether it executed or not; \16\ (C) size and type of 
each response submitted by Recipient Member; and (D) response reference 
number, which is a unique reference number attached to the response by 
the Recipient Member.
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    \16\ For purposes of calculating this duration of time, the 
Exchange will use the time the resting order and the Recipient 
Member's response(s) is received by the Exchange's network, both of 
which would be before the order and response(s) would be received by 
the System. This time difference would be provided in nanoseconds.
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    The Exchange proposes to amend Section 7), Reports, of the Fee 
Schedule, to add a new row for the Report, which will provide that 
Members may purchase the Report on a monthly or annual (12-month) 
basis. The Exchange proposes to assess a monthly fee of $2,000 per 
month and a fee of $12,000 per year for a 12-month subscription for the 
Report. Members may cancel their subscription at any time. The Exchange 
also proposes to specify that for mid-month subscriptions, new 
subscribers will be charged for the full calendar month for which they 
subscribe and will be provided Report data for each trading day of the 
calendar month prior to the day on which they subscribed.
    The Exchange intends to begin to offer the Report and charge the 
proposed fees on March 1, 2023.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\17\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act,\18\ 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 public 
interest, and that it is not designed to permit unfair discrimination 
among customers, brokers, or dealers. The Exchange also believes that 
its proposal to adopt fees for the Report is consistent with Section 
6(b) of the Act \19\ in general, and furthers the objectives of Section 
6(b)(4) of the Act \20\ in particular, in that it is an equitable 
allocation of dues, fees and other charges among its Members and other 
recipients of Exchange data.
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    \17\ 15 U.S.C. 78f(b).
    \18\ 15 U.S.C. 78f(b)(5).
    \19\ 15 U.S.C. 78f(b).
    \20\ 15 U.S.C. 78f(b)(4).
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    In adopting Regulation NMS, the Commission granted self-regulatory 
organizations (``SROs'') and broker-dealers increased authority and 
flexibility to offer new and unique market data to the public. It was 
believed that this authority would expand the amount of data available 
to consumers, and also spur innovation and competition for the 
provision of market data. The Exchange believes that the Report further 
broadens the availability of U.S. option market data to investors 
consistent with the principles of Regulation NMS. The Report also 
promotes increased transparency through the dissemination of the 
Report. Particularly, the Report will benefit investors by facilitating 
their prompt access to the value added information that is included in 
the Report. The Report will allow Members to access information 
regarding their trading activity that they may utilize to evaluate 
their own trading behavior and order interactions.
    The Exchange operates in a highly competitive environment. Indeed, 
there are currently 16 registered options exchanges that trade options. 
Based on publicly available information, no single options exchange has 
more than 13% of the equity options market share and currently the 
Exchange represents only approximately 3.36% of the equity options 
market share.\21\ 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.'' \22\ Making 
similar data products available to market participants fosters 
competition in the marketplace, and constrains the ability of exchanges 
to charge supra-competitive fees. In the event that a market 
participant views one exchange's data product as more attractive than 
the competition, that market participant can, and often does, switch 
between similar products. The proposed fees are a result of the 
competitive environment of the U.S. options industry as the Exchange 
seeks to adopt fees to attract purchasers of the recently introduced 
Report.
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    \21\ See Market at a Glance, available at https://www.miaxoptions.com/ (last visited February 8, 2023).
    \22\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting 
Release'').
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    The Exchange believes the proposed fees are reasonable as the 
proposed fees are both modest and lower than fees charged by the 
Exchange for similar data products.\23\ The proposed fees for this 
Report are less expensive than the Exchange's existing reports because 
the Exchange believes that the information provided in the Report may 
not be as valuable to market participants as the other information 
contained in the Exchange's similar reports, which measures the data in 
the first 200 microseconds of the time the resting order was received 
by the Exchange. While the Exchange believes that this Report is 
useful, it may not be as helpful as the other reports offered by the 
Exchange. Indeed, if the Exchange proposed fees that market 
participants viewed as excessively high, then the proposed fees would 
simply serve to reduce demand for the Exchange's data product, which as 
noted, is entirely optional. Other options exchanges are also free to 
introduce their own comparable data products with lower prices to 
better compete with the Exchange's offering.\24\ As such, the Exchange 
believes that the proposed fees are reasonable and set at a level to 
compete with other options exchanges that may choose to offer similar 
reports. Moreover, if a market participant views another exchange's 
potential report as more attractive, then such market participant can 
merely choose not to purchase the Exchange's Report and instead 
purchase another exchange's similar data product, which may offer 
similar data points, albeit based on that other market's trading 
activity.
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    \23\ The Exchange offers two Liquidity Taker Event Reports, one 
for Simple Orders and a second for Complex orders that both focus on 
executions and contra-side responses received within 200 
microseconds of the time the resting order was received by the 
Exchange. See Exchange Rules 531(a) and (b). The Exchange charges a 
monthly fee of $4,000 and a discounted annual (12 month) fee of 
$24,000 for each of these reports. See Fee Schedule, Section 7, 
providing fees for the Liquidity Taker Event Report--Simple Orders 
and the Liquidity Taker Event Report--Complex Orders available at 
https://www.miaxoptions.com/fees/emerald.
    \24\ This is supported by the BOX Exchange LLC (``BOX'') 
recently copying two similar reports recently adopted by the 
Exchange, namely, the Liquidity Taker Event Report--Simple Orders, 
described under Exchange Rule 531(a), and the Liquidity Taker Event 
Report--Complex Orders, described under Exchange Rule 531(b). See 
Securities Exchange Act Release Nos. 94563 (March 31, 2022), 87 FR 
19985 (April 6, 2022) (SR-BOX-2022-10); and 94920 (May 16, 2022), 87 
FR 31013 (May 20, 2022) (SR-BOX-2022-18).
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    The Exchange also believes providing an annual subscription for an 
overall

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lower fee than a monthly subscription is equitable and reasonable 
because it would enable the Exchange to gauge long-term interest in the 
Report. A lower annual subscription fee would also incentivize Members 
to subscribe to the Report on a long-term basis, thereby improving the 
efficiency by which the Exchange may deliver the Report by doing so on 
a regular basis over a prolonged and set period of time. The Exchange 
notes it provides annual subscriptions for similar reports.\25\
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    \25\ See Fee Schedule, Section 7, providing annual subscriptions 
to the Liquidity Taker Event Report--Simple Orders and the Liquidity 
Taker Event Report--Complex Orders available at https://www.miaxoptions.com/fees/emerald.
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    The Exchange also believes the proposed fees are reasonable as they 
would support the introduction of a new market data product to Members 
that are interested in gaining insight into latency in connection with 
orders that failed to execute against an order resting on the 
Exchange's Simple Order Book. The Report accomplishes this by providing 
those Members data to analyze by how much time their order may have 
missed an execution against a contra-side order resting on the Simple 
Order Book. Members may use this data to optimize their models and 
trading patterns in an effort to yield better execution results by 
calculating by how much time their order may have missed an execution.
    Selling market data, such as the Report, is also a means by which 
exchanges compete to attract business. To the extent that the Exchange 
is successful in attracting subscribers for the Report, it may earn 
trading revenues and further enhance the value of its data products. If 
the market deems the proposed fees to be unfair or inequitable, firms 
can diminish or discontinue their use of the data and/or avail 
themselves of similar products that may be offered by other 
exchanges.\26\ The Exchange, therefore, believes that the proposed fees 
for the Report reflect the competitive environment and would be 
properly assessed on Member users. The Exchange also believes the 
proposed fees are equitable and not unfairly discriminatory as the fees 
would apply equally to all users who choose to purchase such data. It 
is a business decision of each Member that chooses to purchase the 
Report. The Exchange's proposed fees would not differentiate between 
subscribers that purchase the Report and are set at a modest level that 
would allow any interested Member to purchase such data based on their 
business needs.
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    \26\ See supra note 24.
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    The Exchange reiterates that the decision as to whether or not to 
purchase the Report is entirely optional for all potential subscribers. 
Indeed, no market participant is required to purchase the Report, and 
the Exchange is not required to make the Report available to all 
investors. It is entirely a business decision of each Member to 
subscribe to the Report. The Exchange offers the Report as a 
convenience to Members to provide them with additional information 
regarding trading activity on the Exchange on a delayed basis after the 
close of regular trading hours. A Member that chooses to subscribe to 
the Report may discontinue receiving the Report at any time if that 
Member determines that the information contained in the Report is no 
longer useful.

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

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

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    Written comments were neither solicited nor received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A)(ii) of the Act,\27\ and Rule 19b-4(f)(2) \28\ 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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    \27\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \28\ 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 [email protected]. Please include 
File Number SR-EMERALD-2023-06 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-2023-06. This 
file number should be included on the

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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-2023-06, and should be submitted on or before March 29, 2023.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\29\
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    \29\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-04685 Filed 3-7-23; 8:45 am]
BILLING CODE 8011-01-P


