Notice2021-11530
Self-Regulatory Organizations; MIAX Emerald, LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Its Fee Schedule To Adopt Fees for a New Data Product Known as the Liquidity Taker Event Report
Primary source
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Published
June 2, 2021
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 86 Issue 104 (Wednesday, June 2, 2021)</title>
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[Federal Register Volume 86, Number 104 (Wednesday, June 2, 2021)]
[Notices]
[Pages 29608-29611]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2021-11530]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-92028; File No. SR-EMERALD-2021-19]
Self-Regulatory Organizations; MIAX Emerald, LLC; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend
Its Fee Schedule To Adopt Fees for a New Data Product Known as the
Liquidity Taker Event Report
May 26, 2021.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on May 14, 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 Exchange's Fee
Schedule (``Fee Schedule'') to adopt fees for a new data product known
as the Liquidity Taker Event Report.\3\
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\3\ See, generally, Exchange Rule 531(a).
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The text of the proposed rule change is available on the Exchange's
website at <a href="http://www.miaxoptions.com/rule-filings/emerald">http://www.miaxoptions.com/rule-filings/emerald</a>, 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 (the ``Report''), which will be available
for purchase to Exchange Members on a voluntary basis.\4\ The Exchange
now proposes to adopt fees for the Report. The Report was recently
approved by the Securities and Exchange Commission (``Commission'') and
is described under Exchange Rule 531(a).\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. 91787 (May 6, 2021),
86 FR 26111 (May 12, 2021) (SR-EMERALD-2021-09) (Order Granting
Approval of a Proposed Rule Change to Adopt Exchange Rule 531(a),
Reports, to Provide for a New ``Liquidity Taker Event Report'').
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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 Book,\6\ where that Recipient
Member attempted to execute against such resting order \7\ within a
certain timeframe. It is important to note that the content of the
Report is specific to the Recipient Member and the Report will not
include any information related to any Member other than the Recipient
Member.
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\6\ The term ``Book'' means the electronic book of buy and sell
orders and quotes maintained by the System. See Exchange Rule 100.
The term ``System'' means the automated trading system used by the
Exchange for the trading of securities. See id.
\7\ Only displayed orders will be included in the Report. The
Exchange notes that it does not currently offer any non-displayed
orders types on its options trading platform.
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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 \8\ of the Member
[[Page 29609]]
that entered the resting order; \9\ (E) origin type (e.g., Priority
Customer,\10\ Market Maker; \11\) (F) side (buy or sell); and (G)
displayed price and size of the resting order.\12\
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\8\ 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.
\9\ 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.
\10\ 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 to Exchange Rule 100. See Exchange Rule 100.
\11\ The term ``Market Maker'' refers to ``Lead Market Makers'',
``Primary Lead Market Makers'' and ``Registered Market Makers''
collectively. See Exchange Rule 100.
\12\ This information is also included in the Missed
Opportunity--Latency Report, which is similar report for equity
securities that is offered by the NASDAQ Stock Market, LLC (the
``NASDAQ Report''). See NASDAQ Equity Section 7, Rule 146(a)(2). The
Exchange notes that the displayed price and size are also
disseminated via the Exchange's proprietary data feeds and the
Options Price Reporting Authority (``OPRA''). The Exchange also
notes that the displayed price of the resting order may be different
than the ultimate execution price. This may occur when a resting
order is displayed and ranked at different prices upon entry to
avoid a locked or crossed market.
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The following information is included in the Report regarding the
execution of the resting order: (A) The EBBO \13\ at the time of
execution; \14\ (B) the ABBO \15\ at the time of execution; \16\ (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; \17\ (D) the time difference between the time the resting
order was received by the Exchange and the time the first response that
executes against the resting order was received by the Exchange; \18\
and (E) whether the response was entered by the Recipient Member. If
the resting order executes against multiple contra-side responses, only
the EBBO and ABBO at the time of the execution against the first
response will be included.
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\13\ The term ``EBBO'' means the best bid or offer on the
Exchange. See Exchange Rule 100.
\14\ Exchange Rule 531(a)(1)(ii)(B) 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.
\15\ 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.
\16\ Exchange Rule 531(a)(1)(ii)(A) 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.
\17\ 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.
\18\ The time difference would be provided in nanoseconds.
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The following information is included in the Report regarding
response(s) sent by the Recipient Member: (A) Recipient 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; \19\ (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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\19\ 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 Report includes the data set for executions and contra-side
responses that occurred within 200 microseconds of the time the resting
order was received by the Exchange. The Report contains historical data
from the prior trading day and will be available after the end of the
trading day, generally on a T+1 basis. The Report does not include
real-time data.
The Exchange believes the additional data points from the matching
engine outlined above may help Members gain a better understanding
about their own interactions with the Exchange. The Exchange believes
the Report will provide Members with an opportunity to learn more about
better opportunities to access liquidity and receive better execution
rates. The Report will increase transparency and democratize
information so that all firms that subscribe to the Report have access
to the same information on an equal basis, even for firms that do not
have the appropriate resources to generate a similar report regarding
interactions with the Exchange.
Members generally would use a liquidity accessing order if there is
a high probability that it will execute against an order resting on the
Exchange's Book. The Report identifies by how much time an order that
may have been marketable missed an execution. The Report will provide
greater visibility into the missed trading execution, which will allow
Members to optimize their models and trading patterns to yield better
execution results.
The Report will be a Member-specific report and will help Members
to better understand by how much time a particular order missed
executing against a specific resting order, thus allowing that Member
to determine whether it wants to invest in the necessary resources and
technology to mitigate missed executions against certain resting orders
on the Exchange's Book.
The Exchange proposes to provide the Report in response to Member
demand for data concerning the timeliness of their incoming orders and
executions against resting orders. Members have periodically requested
from the Exchange's trading operations personnel information concerning
the timeliness of their incoming orders and efficacy of their attempts
to execute against resting liquidity on the Exchange's Book. The
purpose of the Report is to provide Members the necessary data in a
standardized format on a T+1 basis to those that subscribe to the
Report on an equal basis.
The product is offered to Members on a completely voluntary basis
in that the Exchange is not required by any rule or regulation to make
this data available and potential subscribers may purchase the Report
only if they voluntarily choose to do so. It is a business decision of
each Member whether to subscribe to the Report or not.
The Exchange proposes to adopt new Section 7), Reports, in its Fee
Schedule, 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 $4,000 per month and a fee of $24,000 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 May 17, 2021.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\20\ in general, and furthers the
objectives of Section 6(b)(5) of the Act,\21\ in particular, in that it
is designed to prevent fraudulent and manipulative acts and practices,
to promote just and equitable principles of
[[Page 29610]]
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 \22\ in general, and furthers the
objectives of Section 6(b)(4) of the Act \23\ 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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\20\ 15 U.S.C. 78f(b).
\21\ 15 U.S.C. 78f(b)(5).
\22\ 15 U.S.C. 78f(b).
\23\ 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 15% of the market share and currently the Exchange represents
only approximately 6.08% of the market share.\24\ 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.'' \25\ 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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\24\ See Cboe Global Markets U.S. Options Market Month-to-Date
Volume Summary (April 28, 2021), available at <a href="https://markets.cboe.com/us/options/market_statistics/">https://markets.cboe.com/us/options/market_statistics/</a>.
\25\ 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 similar to fees assessed by other
exchanges that provide similar data products.\26\ 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. 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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\26\ The NASDAQ Stock Market LLC (``NASDAQ'') charges fees
ranging from $1,500 to $3,500 per month for a similar report for
equity securities called the Missed Opportunity--Latency report as
part of its NASDAQ Trader Insights offering. See NASDAQ Equity
Section 7, Rule 146(a)(2). See also the CME Group, Inc.'s Time and
Sale report. https://www.cmegroup.com/trading/about-time-
sales.html#:~:text=CME%20Globex%20Options)-
,CME%20Group's%20Time%20%26%20Sales%20report%20provides%20the%20price
%20and%20time,calendar%20date)%20of%20the%20transaction.&text=A%20zer
o%20volume%20represents%20an%20indicative%20price.,-
The%20Indicator%20column.
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The Exchange also believes providing an annual subscription for an
overall 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 that other exchanges provide annual
subscriptions for reports concerning their data product offerings.\27\
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\27\ Cboe Exchange, Inc. (``Cboe'') assesses a $24,000 annual
fee for an intra-day subscription to Open-Close Data. See <a href="https://datashop.cboe.com/options-summary-subscription">https://datashop.cboe.com/options-summary-subscription</a>.
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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 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 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 offered by other exchanges.\28\ 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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\28\ See supra note 26.
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The Exchange reiterates that the decision as to whether or not to
purchase the Report is entirely optional
[[Page 29611]]
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,\29\ and Rule 19b-4(f)(2) \30\ 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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\29\ 15 U.S.C. 78s(b)(3)(A)(ii).
\30\ 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
<bullet> Use the Commission's internet comment form (<a href="http://www.sec.gov/rules/sro.shtml">http://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#a6d4d3cac38bc5c9cbcbc3c8d2d5e6d5c3c588c1c9d0"><span class="__cf_email__" data-cfemail="0e7c7b626b236d6163636b607a7d4e7d6b6d20696178">[email protected]</span></a>. Please include
File Number SR-EMERALD-2021-19 on the subject line.
Paper Comments
<bullet> 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-2021-19. 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 (<a href="http://www.sec.gov/rules/sro.shtml">http://www.sec.gov/rules/sro.shtml</a>).
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-2021-19 and should be submitted
on or before June 23, 2021.
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\31\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\31\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-11530 Filed 6-1-21; 8:45 am]
BILLING CODE 8011-01-P
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