Notice2022-00880
Self-Regulatory Organizations; MIAX Emerald, LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Its Fee Schedule
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Published
January 19, 2022
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 87 Issue 12 (Wednesday, January 19, 2022)</title>
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[Federal Register Volume 87, Number 12 (Wednesday, January 19, 2022)]
[Notices]
[Pages 2968-2971]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-00880]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-93967; File No. SR-EMERALD-2021-45]
Self-Regulatory Organizations; MIAX Emerald, LLC; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend
Its Fee Schedule
January 12, 2022.
Pursuant to the provisions of Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice
is hereby given that on December 30, 2021, MIAX Emerald, LLC (``MIAX
Emerald'' or ``Exchange''), filed with the Securities and Exchange
Commission (``Commission'') a proposed rule change as described in
Items I, II, and III below, which Items have been prepared by the
Exchange. The Commission is publishing this notice to solicit comments
on the proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange is filing a proposal to amend the MIAX Emerald Fee
Schedule (the ``Fee Schedule'').
The text of the proposed rule change is available on the Exchange's
website at <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 proposes to amend Section 1(a)(i) of the Fee Schedule
to: (i) Decrease Simple Maker (as defined below) rebates in certain
Tiers for options transactions in Penny classes (as defined below) for
the Market Maker Origin \3\; and (ii) make several non-substantive
formatting changes to the Exchange Rebates/Fees tables in Section
1(a)(i) of the Fee Schedule.
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\3\ The term ``Market Maker'' refers to ``Lead Market Maker''
(``LMM''), ``Primary Lead Market Maker'' (``PLMM'') and ``Registered
Market Maker'' (``RMM''), collectively. See the Definitions Section
of the Fee Schedule and Exchange Rule 100.
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Background
The Exchange currently assesses transaction rebates and fees to all
market participants, which are based upon a threshold tier structure
(``Tier''). Tiers are determined on a monthly basis and are based on
three alternative calculation methods, as defined in Section 1(a)(ii)
of the Fee Schedule. The calculation method that results in the highest
Tier achieved by the Member \4\ shall apply to all Origin types by the
Member, except the Priority Customer \5\ Origin type (calculation of
Tiers discussed below). The monthly volume thresholds for each method,
associated with each Tier, are calculated as the total monthly volume
executed by the Member in all options classes on MIAX Emerald in the
relevant Origins and/or applicable liquidity, not including Excluded
Contracts,\6\ (as the numerator) expressed as a percentage of (divided
by) Customer Total Consolidated Volume (``CTCV'') (as the denominator).
CTCV is calculated as the total national volume cleared at The Options
Clearing Corporation (``OCC'') in the Customer range in those classes
listed on MIAX Emerald for the month for which fees apply, excluding
volume cleared at the OCC in the Customer range executed during the
period of time in which the Exchange experiences an ``Exchange System
Disruption'' \7\ (solely in the option classes of the affected Matching
Engine).\8\ In addition, the per contract transaction rebates and fees
shall be applied retroactively to all eligible volume once the Tier has
been reached by the Member. Members that place resting liquidity, i.e.,
orders on the MIAX Emerald System, will be assessed the specified
``maker'' rebate or fee (each a ``Maker'') and Members that execute
against resting liquidity will be assessed the specified ``taker'' fee
or rebate (each a ``Taker'').\9\ Members are also assessed lower
transaction fees and smaller rebates for order executions in standard
option classes in the Penny Interval Program \10\ (``Penny classes'')
than for order executions in standard option classes which are not in
the Penny Program (``non-Penny classes''), for which Members will be
assessed a higher transaction fees and larger rebates.
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\4\ ``Member'' means an individual or organization approved to
exercise the trading rights associated with a Trading Permit.
Members are deemed ``members'' under the Exchange Act. See the
Definitions Section of the Fee Schedule and Exchange Rule 100.
\5\ ``Priority Customer'' means a person or entity that (i) is
not a broker or dealer in securities, and (ii) does not place more
than 390 orders in listed options per day on average during a
calendar month for its own beneficial account(s). See Exchange Rule
100, including Interpretation and Policy .01.
\6\ ``Excluded Contracts'' means any contracts routed to an away
market for execution. See the Definitions Section of the Fee
Schedule.
\7\ The term ``Exchange System Disruption'' means an outage of a
Matching Engine or collective Matching Engines for a period of two
consecutive hour or more, during trading hours. See the Definitions
Section of the Fee Schedule.
\8\ A ``Matching Engine'' is a part of the MIAX Emerald
electronic system that processes options orders and trades on a
symbol-by-symbol basis. See the Definitions Section of the Fee
Schedule.
\9\ For a Priority Customer complex order taking liquidity in
both a Penny class and non-Penny class against Origins other than
Priority Customer, the Priority Customer order will receive a rebate
based on the Tier achieved.
\10\ See Securities Exchange Act Release No. 88993 (June 2,
2020), 85 FR 35145 (June 8, 2020) (SR-EMERALD-2020-05) (Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To
Amend Exchange Rule 510, Minimum Price Variations and Minimum
Trading Increments, To Conform the Rule to Section 3.1 of the Plan
for the Purpose of Developing and Implementing Procedures Designed
To Facilitate the Listing and Trading of Standardized Options) (the
``Penny Program'').
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For the Priority Customer Origin type, the Tier applied for a
Member and its Affiliates' \11\ is solely determined by
[[Page 2969]]
calculation Method 3, as defined in Section 1(a)(ii) of the Fee
Schedule, titled ``Total Priority Customer, Maker sides volume, based
on % of CTCV (`Method 3').''
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\11\ ``Affiliate'' means (i) an affiliate of a Member of at
least 75% common ownership between the firms as reflected on each
firm's Form BD, Schedule A, or (ii) the Appointed Market Maker of an
Appointed EEM (or, conversely, the Appointed EEM of an Appointed
Market Maker). An ``Appointed Market Maker'' is a MIAX Emerald
Market Maker (who does not otherwise have a corporate affiliation
based upon common ownership with an EEM) that has been appointed by
an EEM and an ``Appointed EEM'' is an EEM (who does not otherwise
have a corporate affiliation based upon common ownership with a MIAX
Emerald Market Maker) that has been appointed by a MIAX Emerald
Market Maker, pursuant to the following process. A MIAX Emerald
Market Maker appoints an EEM and an EEM appoints a MIAX Emerald
Market Maker, for the purposes of the Fee Schedule, by each
completing and sending an executed Volume Aggregation Request Form
by email to <a href="/cdn-cgi/l/email-protection#711c141c13140302191801311c1810091e0105181e1f025f121e1c"><span class="__cf_email__" data-cfemail="55383038373027263d3c2515383c342d3a25213c3a3b267b363a38">[email protected]</span></a> no later than 2 business days
prior to the first business day of the month in which the
designation is to become effective. Transmittal of a validly
completed and executed form to the Exchange along with the
Exchange's acknowledgement of the effective designation to each of
the Market Maker and EEM will be viewed as acceptance of the
appointment. The Exchange will only recognize one designation per
Member. A Member may make a designation not more than once every 12
months (from the date of its most recent designation), which
designation shall remain in effect unless or until the Exchange
receives written notice submitted 2 business days prior to the first
business day of the month from either Member indicating that the
appointment has been terminated. Designations will become operative
on the first business day of the effective month and may not be
terminated prior to the end of the month. Execution data and reports
will be provided to both parties. See the Definitions Section of the
MIAX Emerald Fee Schedule.
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Decrease to Simple Maker Rebates in Certain Tiers for Options in Penny
Classes for the Market Maker Origin
The Exchange proposes to amend Section 1(a)(i) of the Fee Schedule
to decrease certain Simple Maker rebates in Tiers 1 and 2 for options
in Penny Classes for the Market Maker Origin. Currently, the Exchange
provides a Simple Maker rebate of ($0.35) for Members that achieve
Tiers 1 and 2 for options transactions in Penny Classes for the Market
Maker Origin. The Exchange now proposes to decrease these rebates. In
particular, the Exchange proposes to provide Simple Maker rebates of
($0.30) and ($0.33) for Members that achieve Tiers 1 and 2,
respectively, for options transactions in Penny Classes for the Market
Maker Origin.
The purpose of adjusting the specified Simple Maker rebates is for
business and competitive reasons. In order to attract order flow, the
Exchange initially set its Maker rebates so that they were meaningfully
higher than other options exchanges that operate comparable maker/taker
pricing models.\12\ The Exchange now believes that it is appropriate to
adjust these specified Maker rebates so that they are more in line with
other exchanges, but will still remain highly competitive such that
they should enable the Exchange to continue to attract order flow and
maintain market share.\13\
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\12\ See Securities Exchange Act Release No. 85393 (March 21,
2019), 84 FR 11599 (March 27, 2019) (SR-EMERALD-2019-15).
\13\ See NYSE Arca Options Fees and Charges, Market Maker Penny
and SPY Posting Credit Tiers, page 10 (``Base'' tier rebate of
($0.28) and ``Select Tier'' rebate of ($0.32)); Cboe BZX Options
Exchange Fee Schedule, Transaction Fees, Market Maker (base tier
rebate of ($0.29) and tier rebate of ($0.33)).
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Formatting Changes to Tables of Exchange Rebates/Fees
Next, the Exchange proposes to amend tables in Section 1(a)(i) of
the Fee Schedule for the Exchange's rebates and fees for Penny Classes
and non-Penny Classes to make non-substantive formatting changes to
several Tiers for the Priority Customer Origin. The Exchange proposes
to amend the Complex \14\ Maker rebates in Tiers 1-4 for the Priority
Customer Origin when contra to Priority Customer Origin for Penny and
non-Penny Classes to align the rebates with footnote ``*''. When the
Exchange established the initial Fee Schedule, it adopted footnote
``*'', which provides as follows: ``Priority Customer Complex Orders
contra to Priority Customer Complex Orders are neither charged nor
rebated. Priority Customer Complex Orders that leg into the Simple book
are neither charged nor rebated.'' \15\ Accordingly, the Exchange
proposes to amend the Complex Maker rebates in Tiers 1-4 for the
Priority Customer Origin when contra to Priority Customer Origin for
Penny and non-Penny Classes so that all these rebates will be listed in
the tables as ``($0.00)'' to align with footnote ``*''. The purpose of
these proposed changes is to reconcile Complex Maker rebates for the
Priority Customer Origin in Tiers 1-4 when contra to Priority Customer
Origin with footnote ``*'' to eliminate potential confusion between the
tables and the footnotes below the tables. The Exchange notes that
these proposed changes will have no impact on the application of the
tiers to the Priority Customer Origin or the footnote ``*''.
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\14\ See Exchange Rule 518(a)(5) for the definition of a Complex
Order.
\15\ See supra note 12.
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Implementation
The proposed changes are scheduled to become operative January 1,
2022.
2. Statutory Basis
The Exchange believes that its proposal to amend its Fee Schedule
is consistent with Section 6(b) of the Act \16\ in general, and
furthers the objectives of Section 6(b)(4) of the Act,\17\ in that it
is an equitable allocation of reasonable dues, fees and other charges
among Exchange members and issuers and other persons using its
facilities, and 6(b)(5) of the Act,\18\ in that it is designed to
prevent fraudulent and manipulative acts and practices, to promote just
and equitable principles of trade, to foster cooperation and
coordination with persons engaged in facilitating transactions in
securities, to remove impediments to and perfect the mechanisms of a
free and open market and a national market system and, in general, to
protect investors and the public interest.
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\16\ 15 U.S.C. 78f(b).
\17\ 15 U.S.C. 78f(b)(4).
\18\ 15 U.S.C. 78f(b)(1) and (b)(5).
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The Commission has repeatedly expressed its preference for
competition over regulatory intervention in determining prices,
products, and services in the securities markets. In Regulation NMS,
the Commission highlighted the importance of market forces in
determining prices and SRO revenues and, also, recognized that current
regulation of the market system ``has been remarkably successful in
promoting market competition in its broader forms that are most
important to investors and listed companies.'' \19\
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\19\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496 (June 29, 2005).
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There are currently 16 registered options exchanges competing for
order flow. Based on publicly-available information, and excluding
index-based options, no single exchange has more than approximately 15%
market share.\20\ Therefore, no exchange possesses significant pricing
power. More specifically, as of December 13, 2021, the Exchange had a
market share of approximately 5.03% of executed volume of multiply-
listed equity and exchange traded fund (``ETF'') options for the month
of December 2021.\21\
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\20\ See ``The Market at a Glance,'' (last visited December 13,
2021), available at <a href="https://www.miaxoptions.com/">https://www.miaxoptions.com/</a>.
\21\ See id.
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The Exchange believes that the ever-shifting market share among the
exchanges from month to month demonstrates that market participants can
discontinue or reduce use of certain categories of products and
services, terminate an existing membership or determine to not become a
new member, and/or shift order flow, in response to transaction fee
changes. For example, on February 28, 2019, the Exchange's affiliate,
MIAX PEARL, LLC (``MIAX Pearl'') filed with the Commission a proposal
to increase Taker fees in certain Tiers for options transactions in
certain Penny classes for Priority Customers and decrease Maker rebates
in certain Tiers for options transactions in Penny classes for Priority
Customers (which fee was to be effective March 1, 2019).\22\ MIAX Pearl
experienced a decrease in total market share for the month of March
2019, after the proposal
[[Page 2970]]
went into effect. Accordingly, the Exchange believes that the MIAX
Pearl March 1, 2019 fee change, to increase certain transaction fees
and decrease certain transaction rebates, may have contributed to the
decrease in MIAX Pearl's market share and, as such, the Exchange
believes competitive forces constrain the Exchange's, and other options
exchanges, ability to set transaction fees and market participants can
shift order flow based on fee changes instituted by the exchanges.
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\22\ See Securities Exchange Act Release No. 85304 (March 13,
2019), 84 FR 10144 (March 19, 2019) (SR-PEARL-2019-07).
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The Exchange believes its proposal to decrease Simple Maker rebates
in certain Tiers for options transactions in Penny Classes for Market
Makers is reasonable, equitable and not unfairly discriminatory because
all similarly situated market participants in the same Origin type are
subject to the same tiered Maker rebates and access to the Exchange is
offered on terms that are not unfairly discriminatory. The Exchange
believes it is equitable and not unfairly discriminatory to reduce the
Simple Maker rebates for Market Maker quotes or orders in Penny Classes
for business and competitive business reasons. The Exchange initially
set its Simple Maker rebates for such orders higher than certain other
options exchanges that operate comparable maker/taker pricing models.
The Exchange now believes that it is appropriate to further decrease
those specified Simple Maker rebates so that they are more in line with
other exchanges, and will still remain highly competitive such that
they should enable the Exchange to continue to attract order flow and
maintain market share.\23\ The Exchange believes that the amount of
such rebates, as proposed, will continue to encourage those market
participants to send quotes or orders to the Exchange.
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\23\ See supra note 13.
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The Exchange believes the proposed formatting changes are
consistent with Section 6(b)(4) of the Act in that they are reasonable,
equitable, and not unfairly discriminatory because they are non-
substantive, clarifying changes regarding the Exchange's Complex Maker
rebates in Tiers 1-4 for the Priority Customer Origin when contra to
Priority Customer Origin for Penny and non-Penny Classes. The Exchange
believes that the proposed formatting changes will reduce the risk of
confusion to market participants. The proposed changes promote just and
equitable principles of trade, remove impediments to and perfect the
mechanism of a free and open market and a national market system, and,
in general protect investors and the public interest by reconciling the
Complex Maker rebates listed in Tiers 1-4 for the Priority Customer
Origin when contra to Priority Customer Origin for Penny and non-Penny
Classes and the description of the rebates for that type of transaction
in footnote ``[hairsp]*[hairsp]'', below the tables. The Exchange
believes that these proposed changes will provide greater clarity to
Members and the public regarding the Exchange's Fee Schedule and that
it is in the public interest for the Fee Schedule to be accurate and
concise so as to eliminate the potential for confusion.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule changes will
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act.
Intra-Market Competition
The Exchange believes that the proposed changes in the specified
Simple Maker rebates for the applicable market participants should
continue to encourage the provision of liquidity that enhances the
quality of the Exchange's market and increases the number of trading
opportunities on the Exchange for all participants who will be able to
compete for such opportunities. The proposed rule changes should enable
the Exchange to continue to attract and compete for order flow with
other exchanges. However, this competition does not create an undue
burden on competition but rather offers all market participants the
opportunity to receive the benefit of competitive pricing.
Inter-Market Competition
The Exchange operates in a highly competitive market in which
market participants can readily favor competing venues if they deem fee
levels at a particular venue to be excessive. There are currently 16
registered options exchanges competing for order flow. Based on
publicly-available information, and excluding index-based options, no
single exchange has exceeded approximately 15% of the market share of
executed volume of multiply-listed equity and ETF options trades as of
December 13, 2021, for the month of December 2021.\24\ Therefore, no
exchange possesses significant pricing power in the execution of
multiply-listed equity and ETF options order flow. More specifically,
as of December 13, 2021, the Exchange had a market share of
approximately 5.03% of executed volume of multiply-listed equity and
ETF options for the month of December 2021.\25\ In such an environment,
the Exchange must continually adjust its transaction and non-
transaction fees to remain competitive with other exchanges and to
attract order flow. The Exchange believes that the proposed rule
changes reflect this competitive environment because they modify the
Exchange's rebates in a manner that will allow the Exchange to remain
competition for Market Maker volume. To the extent this is achieved,
all the Exchange's market participants should benefit from the improved
market quality.
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\24\ See supra note 20.
\25\ See id.
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Formatting Changes
The Exchange believes the proposed formatting changes will not
impose any burden on intra-market competition as the proposed rule
change will have no impact on competition as it is not designed to
address any competitive issue but rather is designed to remedy minor
non-substantive issues and provide added clarity to the Fee Schedule.
In addition, the Exchange does not believe the proposal will impose any
burden on inter-market competition as the proposal does not address any
competitive issues and is intended to protect investors by providing
further transparency regarding the Exchange's Fee Schedule.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
Written comments were neither solicited nor received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become effective pursuant to Section
19(b)(3)(A)(ii) of the Act,\26\ and Rule 19b-4(f)(2) \27\ thereunder.
At any time within 60 days of the filing of the proposed rule change,
the Commission summarily may temporarily suspend such rule change if it
appears to the Commission that such action is necessary or appropriate
in the public interest, for the protection of investors, or otherwise
in furtherance of the purposes of the Act. If the Commission takes such
action, the Commission shall institute proceedings to determine whether
the proposed rule should be approved or disapproved.
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\26\ 15 U.S.C. 78s(b)(3)(A)(ii).
\27\ 17 CFR 240.19b-4(f)(2).
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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#3a484f565f17595557575f544e497a495f59145d554c"><span class="__cf_email__" data-cfemail="e290978e87cf818d8f8f878c9691a2918781cc858d94">[email protected]</span></a>. Please include
File Number SR-EMERALD-2021-45 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-2021-45. This
file number should be included on the subject line if email is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (<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-2021-45, and should be submitted
on or before February 9, 2022.
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\28\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\28\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-00880 Filed 1-18-22; 8:45 am]
BILLING CODE 8011-01-P
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