Notice2022-04674
Self-Regulatory Organizations; MIAX Emerald, LLC; Notice of Filing of Amendment No. 1 and Order Granting Accelerated Approval of a Proposed Rule Change, as Modified by Amendment No. 1, To Amend Exchange Rule 531 To Provide for a New Service Called the High Precision Network Time Signal Service
Primary source
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Published
March 7, 2022
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 87 Issue 44 (Monday, March 7, 2022)</title>
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[Federal Register Volume 87, Number 44 (Monday, March 7, 2022)]
[Notices]
[Pages 12756-12758]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-04674]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-94335; File No. SR-EMERALD-2021-38]
Self-Regulatory Organizations; MIAX Emerald, LLC; Notice of
Filing of Amendment No. 1 and Order Granting Accelerated Approval of a
Proposed Rule Change, as Modified by Amendment No. 1, To Amend Exchange
Rule 531 To Provide for a New Service Called the High Precision Network
Time Signal Service
March 1, 2022.
I. Introduction
On November 19, 2021, MIAX Emerald, LLC (``Exchange'') filed with
the Securities and Exchange Commission (``Commission''), pursuant to
Section 19(b)(1) of the Securities Exchange Act of 1934 (``Act'') \1\
and Rule 19b-4 thereunder,\2\ a proposed rule change to amend Exchange
Rule 531, Reports and Market Data Products, to provide for a new
service called the ``High Precision Network Time Signal Service.'' The
proposed rule change was published for comment in the Federal Register
on December 7, 2021.\3\ On January 19, 2022, pursuant to Section
19(b)(2) of the Act,\4\ the Commission designated a longer period
within which to approve the proposed rule change, disapprove the
proposed rule change, or institute proceedings to determine whether to
disapprove the proposed rule change.\5\ On February 18, 2022, the
Exchange filed Amendment No. 1 to the proposed rule change.\6\ The
Commission has received no comments on the proposed rule change. This
order provides notice of the filing of Amendment No. 1 to the proposed
rule change, and grants approval to the proposed rule change, as
modified by Amendment No. 1, on an accelerated basis.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 93698 (December 1,
2021), 86 FR 69301 (December 7, 2021) (``Notice'').
\4\ 15 U.S.C. 78s(b)(2).
\5\ See Securities Exchange Act Release No. 94000 (January 19,
2022), 87 FR 3865 (January 25, 2022). The Commission designated
March 7, 2022, as the date by which the Commission shall approve or
disapprove, or institute proceedings to determine whether to
disapprove, the proposed rule change.
\6\ In Amendment No. 1, the Exchange amended the proposal to
provide additional detail, clarification, and justification
regarding the proposed rule change and make a non-substantive change
to streamline the proposed rule text. Amendment No. 1 is available
on the Commission's website at <a href="https://www.sec.gov/comments/sr-emerald-2021-38/sremerald202138-20116580-268058.pdf">https://www.sec.gov/comments/sr-emerald-2021-38/sremerald202138-20116580-268058.pdf</a>.
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II. Description of the Proposed Rule Change, as Modified by Amendment
No. 1
The Exchange proposes to provide for a new, optional service called
the ``High Precision Network Time Signal Service'' (``Service''), which
would enable members to synchronize their internal devices to the same
time as the Exchange's devices with high precision.\7\
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\7\ See proposed Rule 531(c); Amendment No. 1, at 4. The
Exchange states that the proposed Service would be available to all
members who choose to subscribe, and that any member may discontinue
its subscription at any time. See Amendment No. 1, at 4 n.4., 14.
The Exchange also states that it intends to submit a separate rule
filing with the Commission to propose fees for the Service. See id.
at 4 n.4.
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According to the Exchange, the U.S. Government's Global Positioning
Satellite (``GPS'') clock time signal is the publicly-available
benchmark that the Exchange and most, if not all, members use to
synchronize their internal
[[Page 12757]]
primary clock devices.\8\ Typically, a recipient's GPS antenna serves
as a time signal receiver, which then feeds a primary clock device the
Coordinated Universal Time (referred to as ``UTC'') \9\ using a
Precision Time Protocol (``PTP'').\10\
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\8\ See Amendment No. 1, at 5. The Exchange states that a
``primary clock device'' is a precision ``parent'' clock that
provides timing signals to synchronized secondary ``child'' clocks
as part of an independent clock network. See id. at 5 n.8.
\9\ According to the Exchange, the term ``Coordinated Universal
Time'' is defined as the international standard of time that is kept
by atomic clocks around the world, and is the primary time standard
by which the world regulates clocks and time. See id. at 5 n.8.
\10\ See id. at 5. According to the Exchange, ``Precision Time
Protocol'' is a method used to synchronize clocks through a computer
network. See id. at 5 n.8.
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Currently, in terms of the Exchange synchronizing its own devices,
the Exchange states that its primary clock feeds a time signal to the
Exchange's timestamping devices within the Exchange's own network and
provides sub-nanosecond level synchronization using an enhanced PTP
(``Enhanced PTP'').\11\ This Enhanced PTP time signal is used to
synchronize the Exchange's capture devices (used to timestamp orders
and messages as they travel through the Exchange's System) with each
other at a sub-nanosecond level.\12\
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\11\ See id. at 6. According to the Exchange, ``Enhanced PTP''
is commonly defined as a precision time protocol that is at a sub-
nanosecond level. See id. at 6 n.9.
\12\ See id. at 6.
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In terms of members synchronizing their internal devices, the
Exchange states that many members today attempt to synchronize their
primary clock devices to the publicly-available GPS time signal by
receiving this time signal through a GPS-capable antenna.\13\ Members
can thereby synchronize their primary clock devices to the GPS network
time to within an accuracy of approximately 30 nanoseconds.\14\ Using
PTP, members can then synchronize their internal devices to their
primary clock devices to within a few nanoseconds of one another.\15\
Alternatively, some members may use their own Enhanced PTP with their
primary clock devices to synchronize their timestamping devices at a
sub-nanosecond level.\16\
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\13\ See id.
\14\ See id.
\15\ See id.
\16\ In those cases, the Exchange and these members use separate
Enhanced PTP devices. See id.
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However, because the Exchange and members independently access time
signals from the GPS network and synchronize those time signals with
their own primary clock devices, the Exchange states that measurement
times of market events by the Exchange and a member may oscillate by
approximately 30 or more nanoseconds.\17\ This may lead to a member's
time calculations of how long it took for an order or message to leave
their systems and reach the intended trading center to err by as many
as 30 nanoseconds.\18\ According to the Exchange, this discrepancy may
impair the member's ability to fully understand latencies within their
own systems and whether they need to adjust their systems or trading
models.\19\
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\17\ See id. at 6-7.
\18\ See id. at 7.
\19\ See id.
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The proposed Service would provide members with the Exchange's time
signal at a sub-nanosecond level, allowing members to synchronize their
own primary clock devices to the Exchange's primary clock device.\20\
The Exchange states that this sub-nanosecond time signal would tell the
member the Exchange's time at a sub-nanosecond level at a particular
point in time.\21\ Subscribing members would receive the time signal
from the Exchange via a 1 gigabit connection that is currently offered
by the Exchange and used by members and non-members to connect to the
Exchange's system.\22\ By then employing an Enhanced PTP clock
synchronization device,\23\ subscribing members could use that time
signal to synchronize their own primary clock to the Exchange's primary
clock at the more acute sub-nanosecond level.\24\
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\20\ See id.
\21\ See id. at 7. The Exchange states that the proposed Service
would not include any trading data regarding the member's activity
on the Exchange or include any data from other trading activity on
the Exchange. See id. at 10.
\22\ See id. See also MIAX Emerald Fee Schedule, Section 5,
System Connectivity Fees. The Exchange states that it does not
propose to include additional connectivity options or modify
existing connectivity options as part of this proposal, and that
members may continue to use their existing methods to connect and
send orders to the Exchange. See Amendment No. 1, at 10.
\23\ According to the Exchange, an ``Enhanced PTP clock
synchronization device'' captures time and coordinates time
synchronization within a network at a sub-nanosecond level. See
Amendment No. 1, at 8 n.13. In conjunction with the proposed
Service, a member's Enhanced PTP clock synchronization device would
be used to synchronize clocks within the member's own system at a
sub-nanosecond level, enabling the member to record certain times an
order or message traveled through and leaves the member's system at
a sub-nanosecond level. Some members may currently have an Enhanced
PTP clock synchronization device within their own network. This
device is not provided by the Exchange. The Exchange states that
other members that do not currently have an Enhanced PTP clock
synchronization device would need to acquire one from a third party
vendor, of which there are several providers. See id. at 8.
\24\ See id. at 7-8.
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The Exchange proposes to provide the Service in response to member
demand for tighter and more accurate clock synchronization options with
the Exchange's network.\25\ In this regard, the Exchange asserts that
members may use the proposed Service for several purposes.\26\ First,
according to the Exchange, the proposed Service would enable members to
more precisely measure latency between their network and that of the
Exchange, as it would allow them to better understand the times at
which an order or message reached certain points when traveling from
their network to the Exchange.\27\ Second, members may use the proposed
Service to analyze the efficiency of their network and connections when
receiving messages back from the Exchange (such as those regarding
whether an order was accepted, rejected, or executed), measuring
message traversal times by comparing their message's timestamp to the
Exchange's matching engine timestamp from Exchange-generated
acknowledgement messages.\28\ Third, members may then use these
enhanced latency measurements to better analyze latencies within their
own systems and better assess the health of their network and that
their systems are working as intended, and leverage this information to
optimize their network, models, and trading patterns to potentially
improve their interactions with the Exchange.\29\ Finally, the Exchange
states that members may use the proposed Service to assist with
determining compliance with certain regulatory requirements, trade
surveillance, and evaluating compliance with certain clock
synchronization requirements.\30\
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\25\ See id. at 4-5.
\26\ See id. at 8.
\27\ See id.
\28\ See id. at 8-9. The Exchange states that it sends members
an acknowledgement message that their order or message was received
by the Exchange, which includes the time of receipt at a nanosecond
level. See id. at 9 n.14.
\29\ For example, according to the Exchange, a member may use
this information when analyzing the efficacy of their various
connections and whether a connection is performing as expected or
experiencing a delay. A member may then decide to rebalance the
amount of orders and/or messages over its various connections to
ensure each connection is operating with maximum efficiency. See id.
at 9.
\30\ See id.
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Separately, to enhance the clarity of Rule 531 in light of the
proposed addition of the Service, the Exchange proposes to amend the
title of Exchange Rule 531 to include the phrase ``and Services'' so
that the title would read as ``Reports, Market Data Products and
Services.'' \31\
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\31\ See id. at 10.
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[[Page 12758]]
III. Discussion and Commission Findings
After careful review, the Commission finds that the proposed rule
change, as modified by Amendment No. 1, is consistent with the
requirements of the Act and the rules and regulations thereunder
applicable to a national securities exchange.\32\ In particular, the
Commission finds that the proposal is consistent with Section 6(b)(5)
of the Act,\33\ which requires, among other things, that the rules of a
national securities exchange be 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, in
general, to protect investors and the public interest, and that those
rules not be designed to permit unfair discrimination between
customers, issuers, brokers, or dealers.
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\32\ In approving this proposed rule change, the Commission has
considered the proposed rule's impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
\33\ 15 U.S.C. 78f(b)(5).
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As discussed above, the Exchange's proposed Service would provide
members with the ability to improve the degree of clock synchronization
between their systems and the Exchange's systems. The Commission has
stated previously that clock synchronization is a critical component of
today's market structure,\34\ and that it is reasonable to expect that
finer clock synchronization for market participants will evolve over
time.\35\ The Commission believes that the finer clock synchronization
enabled by the proposed Service is consistent with such evolvement and
advancements in technology, and would provide members with a tool that
enables them to more precisely calculate and better understand order
and message latencies. The Commission therefore believes that the
proposal is reasonably designed to remove impediments to and perfect
the mechanism of a free and open market and a national market system,
consistent with Section 6(b)(5) of the Act. In addition, the proposal
would promote just and equitable principles of trade and not permit
unfair discrimination, consistent with Section 6(b)(5) of the Act,
insofar as the proposed Service would be available to all Exchange
members.
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\34\ See Securities Exchange Act Release No. 77565 (April 8,
2016), 81 FR 22136, 22138 (April 14, 2016) (SR-FINRA-2016-005)
(Order Approving a Proposed Rule Change To Reduce the
Synchronization Tolerance for Computer Clocks That Are Used To
Record Events in NMS Securities and OTC Equity Securities).
\35\ See Securities Exchange Act Release No. 79318 (November 15,
2016), 81 FR 84696, 84785-86 (November 23, 2016) (File No. 4-698)
(Order Approving the National Market System Plan Governing the
Consolidated Audit Trail).
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The Commission also believes that the proposal is consistent with
Section 6(b)(5) of the Act because it would help protect investors and
the public interest to the extent that improved clock synchronization
would enhance subscribing members' ability to comply with regulatory
requirements and perform trade surveillance. In addition, the proposed
revision of Exchange Rule 531's title to ``Reports, Market Data
Products and Services'' should help market participants understand what
is set forth in the rule, consistent with the Section 6(b)(5) goal of
protecting investors and the public interest.
IV. Solicitation of Comments on Amendment No. 1
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether Amendment No. 1
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#255750494008464a4848404b5156655640460b424a53"><span class="__cf_email__" data-cfemail="82f0f7eee7afe1edefefe7ecf6f1c2f1e7e1ace5edf4">[email protected]</span></a>. Please include
File No. SR-EMERALD-2021-38 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 No. SR-EMERALD-2021-38. The file
numbers 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 such 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 publicly available. All submissions
should refer to File No. SR-EMERALD-2021-38 and should be submitted on
or before March 28, 2022.
V. Accelerated Approval of Proposed Rule Change, as Modified by
Amendment No. 1
The Commission finds good cause to approve the proposed rule
change, as modified by Amendment No. 1, prior to the thirtieth day
after the date of publication of notice of the amended proposal in the
Federal Register. In Amendment No. 1, the Exchange amended the proposal
to provide additional detail, clarification, and justification
regarding the proposed rule change and make a non-substantive change to
streamline the proposed rule text. Amendment No. 1 adds clarity and
justification to the proposal, and does not alter the proposed Service
functionality from what is set forth in the Notice, which was subject
to a full comment period. Accordingly, the Commission finds good cause,
pursuant to Section 19(b)(2) of the Act,\36\ to approve the proposed
rule change, as modified by Amendment No. 1, on an accelerated basis.
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\36\ 15 U.S.C. 78s(b)(2).
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VI. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\37\ that the proposed rule change (SR-EMERALD-2021-38), as
modified by Amendment No. 1, be, and hereby is, approved on an
accelerated basis.
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\37\ Id.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\38\
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\38\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-04674 Filed 3-4-22; 8:45 am]
BILLING CODE 8011-01-P
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