Notice2023-04685
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
March 8, 2023
Issuing agencies
Securities and Exchange Commission
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<title>Federal Register, Volume 88 Issue 45 (Wednesday, March 8, 2023)</title>
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[Federal Register Volume 88, Number 45 (Wednesday, March 8, 2023)]
[Notices]
[Pages 14409-14412]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[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 <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--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 <a href="https://www.miaxoptions.com/">https://www.miaxoptions.com/</a> (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
<a href="https://www.miaxoptions.com/fees/emerald">https://www.miaxoptions.com/fees/emerald</a>.
\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 <a href="https://www.miaxoptions.com/fees/emerald">https://www.miaxoptions.com/fees/emerald</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 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
<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#5a282f363f77393537373f342e291a293f39743d352c"><span class="__cf_email__" data-cfemail="0d7f786168206e6260606863797e4d7e686e236a627b">[email protected]</span></a>. Please include
File Number SR-EMERALD-2023-06 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-2023-06. This
file number should be included on the
[[Page 14412]]
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-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
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