Notice2024-17504
Self-Regulatory Organizations; MIAX Sapphire, LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Rule 531, Reports and Market Data Products, To Adopt the “Liquidity Taker Event Report-Complex Orders” and the “Liquidity Taker Event Report-Resting Simple Orders”
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
August 8, 2024
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 89 Issue 153 (Thursday, August 8, 2024)</title>
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[Federal Register Volume 89, Number 153 (Thursday, August 8, 2024)]
[Notices]
[Pages 64992-65001]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-17504]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-100642; File No. SR-SAPPHIRE-2024-05]
Self-Regulatory Organizations; MIAX Sapphire, LLC; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend
Rule 531, Reports and Market Data Products, To Adopt the ``Liquidity
Taker Event Report--Complex Orders'' and the ``Liquidity Taker Event
Report--Resting Simple Orders''
August 2, 2024.
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 July 24, 2024, MIAX Sapphire, LLC (``MIAX Sapphire'' or
``Exchange'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I and
II 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 proposes to amend Exchange Rule 531, Reports and
Market Data Products, to: (1) adopt rule text for the ``Liquidity Taker
Event Report--Complex Orders''; (2) adopt rule text for the ``Liquidity
Taker Event Report--Resting Simple Orders''; and (3) make non-
substantive, clarifying changes to current Exchange Rules 531(a) and
(b).
The text of the proposed rule change is available on the Exchange's
website at <a href="https://www.miaxglobal.com/markets/us-options/miax-sapphire/rule-filings">https://www.miaxglobal.com/markets/us-options/miax-sapphire/rule-filings</a>, at the Exchange's principal office, and at the
Commission's Public Reference Room.
[[Page 64993]]
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 currently offers the Liquidity Taker Event Report
(referred to herein as the ``Simple Order Report''), which is a Member
\3\-specific report and helps Members to better understand by how much
time a particular order missed executing against a specific order
resting on the Exchange's Simple Order Book.\4\ The current Liquidity
Taker Event Report is described under Exchange Rule 531(a).\5\ The
Exchange now proposes to: (1) amend Exchange Rule 531(b) \6\ to provide
for the new ``Liquidity Taker Event Report--Complex Orders'' (referred
to herein as the ``Complex Order Report''); \7\ (2) adopt new Exchange
Rule 531(c) to provide for the new ``Liquidity Taker Event Report--
Resting Simple Orders'' (referred to herein as the ``Resting Simple
Order Report''); \8\ (3) make corresponding changes to current Exchange
Rule 531(a) to specify that it is for the Simple Order Report; and (4)
renumber current Exchange Rule 531(b), Market Data Products, to
Exchange Rule 531(d).
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\3\ The term ``Member'' means an individual or organization that
is registered with the Exchange pursuant to Chapter II of MIAX
Sapphire Rules for purposes of trading on the Exchange as an
``Electronic Exchange Member'' or ``Market Maker.'' Members are
deemed ``members'' under the Exchange Act. See Exchange Rule 100.
\4\ The ``Simple Order Book'' is the Exchange's regular
electronic book of orders and quotes. See Exchange Rule 100.
\5\ See Exchange Rule 531(a) and Securities Exchange Act Release
No. 100539 (July 15, 2024) (In the Matter of the Application of MIAX
Sapphire, LLC for Registration as a National Securities Exchange;
Findings, Opinion, and Order of the Commission).
\6\ Currently, Exchange Rule 531(b) is titled ``Market Data
Products'' and provides the rule text for the Open-Close Report. See
current Exchange Rule 531(b). Pursuant to this proposal, the
Exchange proposes to move the rule text for Market Data Products to
now be renumbered as Exchange Rule 531(d). Proposed Exchange Rule
531(c) will be for the Resting Simple Order Report, described below.
The Exchange does not propose to amend any of the rule text for
Market Data Products as currently stated in Exchange Rule 531.
\7\ The proposed rule change is substantively identical to
Complex Order Reports available through the Exchange's affiliates
(Miami International Securities Exchange, LLC (``MIAX'') and MIAX
Emerald, LLC (``MIAX Emerald'')) as it relates to MIAX and MIAX
Emerald markets. See MIAX Rule 531(b) and MIAX Emerald Rule 531(b).
\8\ The proposed rule change is substantively identical to
Resting Simple Order Reports available through the Exchange's
affiliates, MIAX and MIAX Emerald, as it relates to MIAX and MIAX
Emerald markets. See MIAX Rule 531(c) and MIAX Emerald Rule 531(c).
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Complex Order Report
The proposed Complex Order Report would be substantially similar to
the existing Simple Order Report, but would include data concerning a
Member's complex orders.\9\ The Exchange also proposes to amend the
name of the existing Liquidity Taker Event Report in Exchange Rule
531(a) to now be titled the ``Liquidity Taker Event Report--Simple
Orders'' and amend references in Exchange Rule 531(a) accordingly.
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\9\ In sum, a ``complex order'' is ``any order involving the
concurrent purchase and/or sale of two or more different options in
the same underlying security (the `legs' or `components' of the
complex order), for the same account, in a conforming or non-
conforming ratio. . . .'' See Exchange Rule 518(a).
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The Simple Order Report includes information about incoming orders
seeking to remove resting orders from the Simple Order Book. The
proposed Complex Order Report would include the same information about
incoming complex orders that seek to remove complex orders resting on
the Strategy Book.\10\ Two other differences between the proposed
Complex Order Report and the Simple Order Report are that the proposed
Complex Order Report will include the Complex SBBO \11\ in place of the
SBBO and Complex ABBO \12\ in place of the ABBO, as described further
below. These are minor differences designed to provide the SBBO and
ABBO that are relevant to trading complex orders. Otherwise, the
content and dissemination of the proposed Complex Order Report set
forth under amended Exchange Rule 531(b) will be identical to that of
the Simple Order Report under Exchange Rule 531(a). Other than the
difference set forth above, the Exchange represents that there are no
other differences between simple orders and complex orders that would
necessitate any other changes to the proposed Complex Order Report or
render the effects or use of the proposed Complex Order Report as
different from the Simple Order Report.
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\10\ The term ``complex strategy'' means a particular
combination of components and their ratios to one another. New
complex strategies can be created as the result of the receipt of a
complex order or by the Exchange for a complex strategy that is not
currently in the System. The Exchange may limit the number of new
complex strategies that may be in the System at a particular time
and will communicate this limitation to Members via Regulatory
Circular. See Exchange Rule 518(a). The ``Strategy Book'' is the
Exchange's electronic book of complex orders. See Exchange Rule 100.
The Strategy Book is organized by complex strategy in that
individual orders for a defined complex strategy are organized
together in a book that is separate from the orders for a different
complex strategy.
\11\ The term ``SBBO'' means the Exchange's best bid and offer
on the Simple Order Book. See Exchange Rule 100. The Complex SBBO
for a particular complex strategy is calculated using the Implied
Complex Sapphire Best Bid or Offer (``icSBBO'') combined with the
best price currently available for that particular complex strategy
on the Strategy Book to establish the Exchange's best net bid or
offer for that complex strategy. The icSBBO is calculated using the
best price from the Simple Order Book for each component of a
complex strategy including displayed and non-displayed trading
interest. For stock-option orders, the icSBBO for a complex strategy
is calculated using the best price (whether displayed or non-
displayed) on the Simple Order Book in the individual option
component(s), and the NBBO in the stock component. See Exchange Rule
518(a). The term ``NBBO'' means the national best bid or offer as
calculated by the Exchange based on market information received by
the Exchange from OPRA. See Exchange Rule 100.
\12\ 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 the
Options Price Reporting Authority (``OPRA''). See Exchange Rule 100.
The Complex ABBO is calculated using the ABBO for each component of
a complex strategy to establish the away markets' best net bid or
offer for a complex strategy.
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Like the Simple Order Report, the proposed Complex Order Report is
an optional product \13\ available to Members. Currently, the Exchange
provides real-time prices and analytics in the marketplace. The
Exchange believes the additional data points from the matching engine
outlined below may help Members gain a better understanding about their
complex order interactions with the Exchange. The Exchange believes the
proposed Complex Order Report will provide Members with an opportunity
to learn more about better opportunities to access liquidity and
receive better execution rates when trading complex orders. The
proposed Complex Order Report will increase transparency and
democratize information so that all firms that subscribe to the
proposed Complex Order Report have access to the same information on an
equal basis, even for firms that do not have the
[[Page 64994]]
appropriate resources to generate a similar report regarding
interactions with the Exchange. Like the Simple Order Report, none of
the components of the proposed Complex Order Report include real-time
market data.
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\13\ The Exchange intends to submit a separate filing with the
Commission pursuant to section 19(b)(1) to propose fees for the
Simple Order Report, proposed Complex Order Report, and proposed
Resting Simple Order Report.
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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 Simple Order Book. Like the Simple Order Report, the
proposed Complex Order Report would identify by how much time an order
that may have been marketable missed an execution. In the case of the
proposed Complex Order Report, the incoming order would be a complex
order submitted to trade against a resting order for a complex
strategy. The proposed Complex Order 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 when trading complex orders.
Like the Simple Order Report, the proposed Complex Order Report
will be a Member-specific report and will help Members to better
understand by how much time a particular order, in this case a complex
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 Strategy Book. For example, Member A
submits a complex order that is posted to the Strategy Book and then,
within 400 microseconds of the entry of Member A's complex order,
Member B enters a marketable complex order to execute against Member
A's resting complex order. Immediately thereafter, Member C, also
within 400 microseconds of the entry of Member A's complex order, sends
a marketable complex order to execute against Member A's resting
complex order. Because Member B's complex order is received by the
Exchange before the complex order for Member C, Member B's complex
order executes against Member A's resting complex order. If Member C
were to subscribe to the proposed Complex Order Report, it would be
provided the data points necessary for that firm to calculate by how
much time it missed executing against Member A's resting complex order.
Like the Simple Order Report, the Exchange proposes to provide the
proposed Complex Order Report on a T+1 basis. As further described
below, the proposed Complex Order Report will be specifically tailored
to the Member that is subscribed to the Complex Order Report and any
data included in the Complex Order Report that relates to a Member
other than the Member receiving the Complex Order Report will be
anonymized.
The Exchange's affiliates, MIAX and MIAX Emerald, adopted their
comparable Complex Order Reports in response to demand from their
members for data concerning the timeliness of their incoming complex
orders and executions against resting orders on those markets.\14\
Members of MIAX and MIAX Emerald have found the Simple Order Reports
and Complex Order Reports helpful and the Exchange believes that its
Members will request similar information from the Exchange regarding
their simple orders and complex orders. For MIAX and MIAX Emerald, this
came in the form of requests by members to those exchanges' trading
operations personnel for information concerning the timeliness of their
incoming simple orders and complex orders and efficacy of their
attempts to execute against resting liquidity on their books. The
purpose of the proposed Complex Order Report is to provide a
subscribing Member (``Recipient Member'') the necessary data in a
standardized format on a T+1 and equal basis.
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\14\ See MIAX Rule 531(b) and MIAX Emerald Rule 531(b). The
Exchange notes that its other affiliate, MIAX PEARL, LLC (``MIAX
Pearl'') only provides for the similar Simple Order Report and
Resting Simple Order Report as complex orders are not available for
trading on the options trading facility of MIAX Pearl.
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Similar to current Exchange Rule 531(a) regarding the Simple Order
Report, amended Exchange Rule 531(b) would provide that the proposed
Complex Order Report is a daily report that provides a Recipient Member
with its liquidity response time details for executions of an order
resting on the Strategy Book, where that Recipient Member submitted a
complex order that attempted to execute against such resting complex
order within a certain timeframe.
Complex Order Report Content
The content of the proposed Complex Order Report would be identical
to the Simple Order Report, but for two minor differences discussed
below. Proposed paragraph (b)(1) of Exchange Rule 531 would describe
the content of the proposed Complex Order Report and delineate which
information would be provided regarding the resting order,\15\ the
response that successfully executed against the resting order, and the
response submitted by the Recipient Member that missed executing
against the resting order. It is important to note that the content of
the proposed Complex Order Report will be specific to the Recipient
Member and the proposed Complex Order Report will not include any
information related to any Member other than the Recipient Member. The
Exchange will restrict all other market participants, including the
Recipient Member, from receiving another market participant's data.
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\15\ Like the Simple Order Report, only displayed orders will be
included in the proposed Complex Order Report. The Exchange notes
that it does not currently offer any non-displayed order types.
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Resting Order Information. The content of the proposed Complex
Order Report set forth under amended Exchange Rule 531(b)(1)(i) is
identical to the content of the Simple Order Report under Exchange Rule
531(a)(1)(i). However, as noted above, the content of the proposed
Complex Order Report would be limited to incoming complex orders that
seek to remove liquidity from the Exchange's Strategy Book.
Amended Exchange Rule 531(b)(1)(i) would provide that the following
information would be included in the proposed Complex Order Report
regarding the resting order: (A) the time the resting order was
received by the Exchange; \16\ (B) symbol; \17\ (C) order reference
number, which is a unique reference number assigned to a new complex
order at the time of receipt; \18\ (D) whether the Recipient Member is
an Affiliate \19\ of the Member that entered the resting order; \20\
(E) origin type (e.g.,
[[Page 64995]]
Priority Customer,\21\ Market Maker \22\); \23\ (F) side (buy or sell);
\24\ and (G) displayed price and size of the resting order.\25\
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\16\ This information is also included in the Simple Order
Report. See Exchange Rule 531(a)(1)(i)(A).
\17\ This information is also included in the Simple Order
Report. See Exchange Rule 531(a)(1)(i)(B).
\18\ This information is also included in the Simple Order
Report. See Exchange Rule 531(a)(1)(i)(C).
\19\ 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.
\20\ This information is also included in the Simple Order
Report. See Exchange Rule 531(a)(1)(i)(D). The Complex Order Report
will simply indicate whether the Recipient Member is an 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.
\21\ 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.
\22\ The term ``Market Maker'' or ``MM'' means a Member
registered with the Exchange for the purpose of making markets in
options contracts traded on the Exchange and that is vested with the
rights and responsibilities specified in Chapter VI of the
Exchange's Rules. See Exchange Rule 100.
\23\ This information is also included in the Simple Order
Report. See Exchange Rule 531(a)(1)(i)(E).
\24\ This information is also included in the Simple Order
Report. See Exchange Rule 531(a)(1)(i)(F).
\25\ This information is also included in the Simple Order
Report. See Exchange Rule 531(a)(1)(i)(G). The Exchange notes that
the displayed price and size are also disseminated via the
Exchange's proprietary data feeds.
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Execution Information. Amended Exchange Rule 531(b)(1)(ii) would
provide that the following information would be included in the
proposed Complex Order Report regarding the execution of the resting
order: (A) the Complex SBBO at the time of execution; \26\ (B) the
Complex ABBO at the time of execution; \27\ (C) the time the first
response that executes against the resting order was received by the
Exchange and the size of the execution and type of the response; \28\
(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; \29\ and (E) whether
the response was entered by the Recipient Member.\30\ If the resting
order executes against multiple contra-side responses, only the Complex
SBBO and Complex ABBO at the time of the execution against the first
response will be included.
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\26\ Similar information is included in the Simple Order Report.
Exchange Rule 531(b)(1)(ii)(A) would similarly provide that if the
resting order executes against multiple contra-side responses, only
the Complex SBBO at the time of the execution against the first
response will be included.
\27\ Similar information is included in the Simple Order Report.
See Exchange Rule 531(a)(1)(ii)(B). Exchange Rule 531(b)(1)(ii)(B)
would similarly provide that if the resting order executes against
multiple contra-side responses, only the Complex ABBO at the time of
the execution against the first response will be included.
\28\ This information is also included in the Simple Order
Report. See Exchange Rule 531(a)(1)(ii)(C). 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. The
type of responses that would be identified in the proposed Complex
Order Report are Standard Quotes. The term ``quote'' or
``quotation'' means a bid or offer entered by a Market Maker as a
firm order that updates the Market Maker's previous bid or offer, if
any. When the term order is used in the Exchange's Rules and a bid
or offer is entered by the Market Maker in the option series to
which such Market Maker is registered, such order shall, as
applicable, constitute a quote or quotation for purposes of the
Exchange's Rules. See Exchange Rule 100.
\29\ The time difference would be provided in nanoseconds. This
information is also included in the Simple Order Report. See
Exchange Rule 531(a)(1)(ii)(D).
\30\ This information is also included in the Simple Order
Report. See Exchange Rule 531(a)(1)(ii)(E).
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The content of the proposed Complex Order Report set forth under
amended Exchange Rule 531(b)(1)(ii) is identical to the content of the
Simple Order Report under Exchange Rule 531(a)(1)(ii) with two minor
differences. The Simple Order Report includes the SBBO, which is the
Exchange's best bid or offer, and the ABBO, which is the best bid or
offer of away exchanges. In their place, the proposed Complex Order
Report would include the Complex SBBO and Complex ABBO. The Complex
SBBO is calculated using the SBBO for each component of a complex
strategy to establish the Exchange's best net bid or offer for a
complex strategy. As discussed above, the Complex SBBO is calculated
using the icSBBO \31\ combined with the best price currently available
on the Strategy Book to establish the Exchange's best net bid or offer
for a complex strategy.\32\ The Complex ABBO is calculated using the
ABBO for each component of a complex strategy to establish the away
markets' best net bid or offer for a complex strategy using OPRA data.
The Exchange is providing the Complex SBBO and Complex ABBO because
both are relevant and tailored to a Member that is entering a complex
order to remove liquidity as part of a complex strategy and, therefore,
more germane to the purpose of the Complex Order Report.
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\31\ The Implied Complex Sapphire Best Bid or Offer (``icSBBO'')
is a calculation that uses the best price from the Simple Order Book
for each component of a complex strategy including displayed and
non-displayed trading interest. For stock-option orders, the icSBBO
for a complex strategy will be calculated using the best price
(whether displayed or non-displayed) on the Simple Order Book in the
individual option component(s), and the NBBO in the stock component.
See Exchange Rule 518(a). The term ``NBBO'' means the national best
bid or offer as calculated by the Exchange based on market
information received by the Exchange from the appropriate Securities
Information Processor (``SIP''). See id.
\32\ See supra note 11.
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Recipient Member's Response Information. The content of the
proposed Complex Order Report set forth under amended Exchange Rule
531(b)(1)(iii) is identical to the content of the Simple Order Report
under Exchange Rule 531(a)(1)(iii). Amended Exchange Rule
531(b)(1)(iii) would provide that the following information would be
included in the Complex Order Report regarding complex order(s) sent by
the Recipient Member: (A) Recipient Member identifier; \33\ (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 complex order sent by the Recipient Member, regardless of whether
it executed or not; \34\ (C) size and type of each complex order
submitted by the Recipient Member; \35\ and (D) response reference
number, which is a unique reference number attached to the response by
the Recipient Member.\36\
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\33\ This information is also included in the Simple Order
Report. See Exchange Rule 531(a)(1)(iii)(A).
\34\ This information is also included in the Simple Order
Report. See Exchange Rule 531(a)(1)(iii)(B). For purposes of
calculating this duration of time, the Exchange will use the time
the first response that executes against 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.
\35\ This information is also included in the Simple Order
Report. See Exchange Rule 531(a)(1)(iii)(C).
\36\ This information is also included in the Simple Order
Report. See Exchange Rule 531(a)(1)(iii)(D).
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Timeframe for Data Included in the Complex Order Report
The timeframe for data to be included the proposed Complex Order
Report set forth under amended Exchange Rule 531(b)(2) is identical to
the timeframe for data included in the Complex Order Reports that are
available for MIAX and MIAX Emerald.\37\ Proposed paragraph (b)(2) of
Exchange Rule 531 would provide that the Complex Order Report would
include the data set forth under Exchange Rule 531(b)(1) described
above for executions and contra-side responses that occurred within 400
microseconds of the time the resting order was received by the
Exchange. The Exchange believes 400 microseconds is the appropriate
timeframe because it understands most Members that would be interested
in subscribing to the proposed Complex Order Report would submit their
incoming liquidity removing complex orders within 400 microseconds of
the time a contra-side complex order is posted to the Strategy Book.
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\37\ See MIAX Rule 531(b)(2) and MIAX Emerald Rule 531(b)(2).
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Scope of Data Included in the Report
The scope of data to be included the proposed Complex Order Report
set forth under amended Exchange Rule 531(b)(3) is identical to the
scope of data included in the Simple Order Report
[[Page 64996]]
under Exchange Rule 531(a)(3). Proposed paragraph (b)(3) of Exchange
Rule 531 would provide that the Complex Order Report will only include
trading data related to the Recipient Member and, subject to the
proposed paragraph (4) of Exchange Rule 531(b) described below, will
not include any other Member's trading data other than that listed in
paragraphs (1)(i) and (ii) of Exchange Rule 531(b), described above.
Like the Simple Order Report, the proposed Complex Order Report will
not include information related to any Member other than the Recipient
Member.\38\
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\38\ See Exchange Rule 531(a)(3).
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Historical Data
Proposed paragraph (b)(4) of Exchange Rule 531 would specify that
the Complex Order Report will contain historical data from the prior
trading day and will be available after the end of the trading day,
generally on a T+1 basis. This is identical to the timeframe for when
the Simple Order Report is made available.\39\
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\39\ See Exchange Rule 531(a)(4).
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Resting Simple Order Report
The Exchange proposes to amend Exchange Rule 531 to provide for the
new Resting Simple Order Report.\40\ The proposed Resting Simple Order
Report will be an optional product \41\ available to Members. But for
the modified timeframe and one difference described below, the proposed
Resting Simple Order Report would include the same data as the Simple
Order Report currently described under Exchange Rule 531(a), except
that the Resting Simple Order Report will focus 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 any Member's first attempt to execute
against the resting order after the initial 200 microsecond time period
has expired as described further below.
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\40\ The proposed rule change to adopt the Resting Simple Order
Report is substantively identical to reports offered by the
Exchange's affiliates, MIAX, MIAX Pearl and MIAX Emerald. See MIAX
Rule 531(c), MIAX Pearl Rule 531(c), and MIAX Emerald Rule 531(c).
\41\ See supra note 13.
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The Exchange believes the additional data points from the matching
engine outlined below for the proposed Resting Simple Order Report may
also help Members gain a better understanding about their interactions
with the Exchange. The Exchange believes the proposed Resting Simple
Order Report will provide Members with an opportunity to learn more
about better opportunities to access liquidity and receive better
execution rates. The proposed Resting Simple Order Report will increase
transparency and democratize information so that all firms that
subscribe to the proposed Resting Simple Order 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. None of the components of the proposed
Resting Simple Order Report include real-time market data.
Members generally would use a liquidity accessing order if there is
a high probability that it will execute against an order resting on the
Simple Order Book. The proposed Resting Simple Order Report would
identify by how much time an order that may have been marketable missed
an execution but would focus on a later timeframe than the Simple Order
Report and Complex Order Report. The proposed Resting Simple Order
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 proposed Resting Simple Order 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 Simple Order Book. The Exchange
proposes to provide the Resting Simple Order Report on a T+1 basis. As
further described below, the proposed Resting Simple Order Report will
be specific and tailored to the Member that is subscribed to the
Resting Simple Order Report and any data included in the Resting Simple
Order Report that relates to a Member other than the Member receiving
the Resting Simple Order Report will be anonymized.
The Exchange's affiliates, MIAX, MIAX Pearl, and MIAX Emerald,
adopted their comparable Resting Simple Order Reports in response to
demand from their members for data concerning the timeliness of their
incoming orders and executions against certain resting orders that have
been resting on the Simple Order Books of MIAX, MIAX Pearl, and MIAX
Emerald, for at least 200 microseconds 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.\42\ Members of
MIAX, MIAX Pearl, and MIAX Emerald have found the Resting Simple Order
Reports helpful and the Exchange believes that its Members will request
similar information from the Exchange regarding their resting simple
orders. For MIAX, MIAX Pearl, and MIAX Emerald, this came in the form
of requests by members to those exchanges' trading operations personnel
for information concerning the timeliness of their incoming simple
orders and efficacy of their attempts to execute against resting
liquidity on their books. The purpose of the proposed Resting Simple
Order Report is to provide Members the necessary data in a standardized
format on a T+1 basis to those that subscribe to the Resting Simple
Order Report on an equal basis.
---------------------------------------------------------------------------
\42\ See supra note 40.
---------------------------------------------------------------------------
Proposed Exchange Rule 531(c) would provide that the Resting Simple
Order Report is a daily report that provides a Recipient Member with
its liquidity response time details for executions of an order resting
on the Simple Order Book, where that Recipient Member attempted to
execute against such resting order within an extended timeframe that
meets certain criteria described below.
Resting Simple Order Report Content
The content of the proposed Resting Simple Order Report is
basically identical to that of the existing Simple Order Report
described under Exchange Rule 531(a) with two differences. The first
difference is the timeframe of the proposed Resting Simple Order Report
mentioned above and described in more detail below. The second
difference is that, unlike the existing Simple Order Report, the
proposed Resting Simple Order Report would not include 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. Each of these differences
are described below. All other aspects of the proposed Resting Simple
Order Report are identical to the existing Simple Order Report
described under Exchange Rule 531(a).
Like current paragraph (a)(1) of Exchange Rule 531 for the existing
Simple Order Report, proposed paragraph (c)(1) of Exchange Rule 531
would describe the content of the proposed Resting Simple Order Report
and delineate which information would be provided regarding the resting
[[Page 64997]]
order,\43\ the response that successfully executed against the resting
order, and the response submitted by the Recipient Member that missed
executing against the resting order. It is important to note that the
content of the Resting Simple Order Report will be specific to the
Recipient Member and the Resting Simple Order Report will not include
any information related to any Member other than the Recipient Member,
other than certain information about the resting order described below.
The Exchange will restrict all other market participants, including the
Recipient Member, from receiving another market participant's data.
---------------------------------------------------------------------------
\43\ Only displayed orders will be included in the Resting
Simple Order Report. The Exchange notes that it does not currently
offer any non-displayed orders types on its options trading
platform.
---------------------------------------------------------------------------
Resting Order Information. Like current paragraph (a)(1)(i) of
Exchange Rule 531 for the existing Simple Order Report, proposed
Exchange Rule 531(c)(1)(i) would provide that the following information
would be included in the Resting Simple Order Report regarding the
resting order: (A) the time the resting order was received by the
Exchange; \44\ (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 of the Member that
entered the resting order; \45\ (E) origin type (e.g., Priority
Customer, Market Maker); (F) side (buy or sell); and (G) displayed
price and size of the resting order.\46\
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\44\ The time the Exchange received the resting order would be
in nanoseconds and is the time the resting order was received by the
Exchange's network.
\45\ The Resting Simple Order Report will simply indicate
whether the Recipient Member is an 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.
\46\ The Exchange notes that the displayed price and size are
also disseminated via the Exchange's proprietary data feeds and
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.
---------------------------------------------------------------------------
Execution Information. Like current paragraph (a)(1)(ii) of
Exchange Rule 531 for the existing Simple Order Report, proposed
Exchange Rule 531(c)(1)(ii) would provide that the following
information would be included in the Resting Simple Order Report
regarding the execution of the resting order: (A) the SBBO at the time
of execution; \47\ (B) the ABBO at the time of execution; \48\ (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; \49\ and (D) whether the response was entered by the
Recipient Member. If the resting order executes against multiple
contra-side responses, only the SBBO and ABBO at the time of the
execution against the first response will be included.
---------------------------------------------------------------------------
\47\ Exchange Rule 531(c)(1)(ii)(A) would further provide that
if the resting order executes against multiple contra-side
responses, only the SBBO at the time of the execution against the
first response will be included.
\48\ Exchange Rule 531(c)(1)(ii)(B) would further provide 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.
\49\ 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.
---------------------------------------------------------------------------
Exchange Rule 531(a)(1)(ii)(D) provides that the existing Simple
Order Report also includes 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. The proposed Resting Simple Order Report would not include
the same information because that timeframe could be for an extended
period of time since the proposed Resting Simple Order Report focuses
on orders that have been resting on the Simple Order Book for longer
than 200 microseconds and, therefore, the Exchange believes is less
likely to be valuable to the Recipient Member.
Recipient Member's Response Information. Like current paragraph
(a)(1)(iii) of Exchange Rule 531 for the existing Simple Order Report,
proposed Rule 531(c)(1)(iii) would provide that the following
information would be included in the Resting Simple Order 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; \50\ (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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\50\ For purposes of calculating this duration of time, the
Exchange will use the time the first response that executes against
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.
---------------------------------------------------------------------------
Timeframe for Data Included in Report
The timeframe covered by the proposed Resting Simple Order Report
is the primary difference between it and the existing Simple Order
Report. The existing Simple Order Report provides data for executions
and contra-side responses that occurred within 200 microseconds of the
time the resting order was received by the Exchange. Meanwhile, the
proposed Resting Simple Order Report would include the same data as the
Simple Order Report but would focus 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 any Member's first attempt to execute against the resting
order after the initial 200 microsecond time period has expired. More
specifically, the resting order must rest on the Simple Order Book for
at least 200 microseconds and once that initial 200 microsecond period
has passed, a Member must then submits an order to attempt to execute
against that resting order. This event starts a second 200 microsecond
period within which the proposed Resting Simple Order Report would
include data on executions and contra-side responses submitted by the
Recipient Member to execute against that resting order.
For example, Member A submits an order that is posted to the Simple
Order Book. 200 microseconds passes and Member A's order remains posted
to the Simple Order Book. Then Member B enters a marketable order to
execute against Member A's resting order, starting the second 200
microsecond window. Within this next 200 microsecond window, Member C
sends a marketable order to execute against Member A's resting Order.
Because Member B's order is received by the Exchange before Member C's
order, Member B's order executes against Member A's resting order. The
proposed Resting Simple Order Report would provide Member C the data
points necessary for that firm to calculate by how much time it missed
executing against Member A's resting order.
The above timeframe would be codified under proposed paragraph
(c)(2) of Exchange Rule 531 which would provide that the proposed
Resting Simple Order Report would include the data set forth under
Exchange Rule 531(c)(1) described above for executions and contra-side
responses that occurred (i) after 200 microseconds of the time the
resting order was received by the Exchange and (ii) within 200
microseconds of receipt
[[Page 64998]]
of the first attempt to execute against the resting order after the
initial 200 microsecond time period under (c)(2)(i) of this paragraph
has expired.
Scope of Data Included in the Resting Simple Order Report
Like current paragraph (a)(3) of Exchange Rule 531 for the existing
Simple Order Report, proposed paragraph (c)(3) of Exchange Rule 531
would provide that the proposed Resting Simple Order Report will only
include trading data related to the Recipient Member and, subject to
the proposed paragraph (4) of Exchange Rule 531(c) described below,
will not include any other Member's trading data other than that listed
in paragraphs (1)(i) and (ii) of proposed Exchange Rule 531(c),
described above.
Historical Data
Like current paragraph (a)(4) of Exchange Rule 531 for the existing
Simple Order Report, proposed paragraph (c)(4) of Exchange Rule 531
would specify that the proposed Resting Simple Order Report will
contain historical data from the prior trading day and will be
available after the end of the trading day, generally on a T+1 basis.
2. Statutory Basis
The Exchange believes the proposed rule changes are consistent with
the Act and the rules and regulations thereunder applicable to the
Exchange and, in particular, the requirements of section 6(b) of the
Act.\51\ Specifically, the Exchange believes the proposed rule change
is consistent with the section 6(b)(5) \52\ requirements that the rules
of an exchange be 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 regulating,
clearing, settling, processing information with respect to, and
facilitating transactions in securities, 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.
This proposal is in keeping with those principles in that it promotes
increased transparency through the dissemination of the optional
Complex Order Report and Resting Simple Order Report to those
interested in subscribing to receive the data. Additionally, the
Exchange believes the proposed rule change is consistent with the
section 6(b)(5) \53\ requirement that the rules of an exchange not be
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers.
---------------------------------------------------------------------------
\51\ 15 U.S.C. 78f(b).
\52\ 15 U.S.C. 78f(b)(5).
\53\ Id.
---------------------------------------------------------------------------
But for three differences, the description of the proposed Complex
Order Report under Exchange Rule 531(b) is identical to that of the
Simple Order Report under Exchange Rule 531(a). The first difference
concerns the content of the proposed Complex Order Report, which would
be limited to incoming complex orders that seek to remove liquidity
from the Exchange's Strategy Book. The Simple Order Report includes
information about incoming orders seeking to remove liquidity from the
Simple Order Book. This difference is immaterial because both reports
include basically the same information and seek to serve the same
purpose, to provide the Recipient Member with the same type of data
necessary for them to evaluate their own trading behavior and order
interactions on the Exchange; however, the Simple Order Report contains
data relevant to the Simple Order Book while the proposed Complex Order
Report contains data relevant to the Strategy Book.
The other two differences are that the Simple Order Report includes
the SBBO, which is the Exchange's best bid or offer, and the ABBO,
which is the best bid or offer of away exchanges. In their place, the
proposed Complex Order Report would include the Complex SBBO and
Complex ABBO. As discussed above, the Complex SBBO is calculated using
the icSBBO combined with the best price currently available on the
Strategy Book to establish the Exchange's best net bid or offer for a
complex strategy.\54\ The Complex ABBO is calculated using the ABBO for
each component of a complex strategy to establish the away markets'
best net bid or offer for a complex strategy using OPRA data. The
Exchange is providing the Complex SBBO and Complex ABBO because both
are relevant and tailored to a Member that is entering a complex order
to remove liquidity as part of a complex strategy and, therefore, more
germane to the purpose of the Complex Order Report. The Exchange
believes these differences are appropriate because providing the
Complex SBBO in place of the SBBO and the Complex ABBO in place of the
ABBO are more germane to the purpose of the proposed Complex Order
Report.
---------------------------------------------------------------------------
\54\ See supra note 11.
---------------------------------------------------------------------------
The timeframe covered by the proposed Resting Simple Order Report
is the primary difference between it and the existing Simple Order
Report. However, this difference only pertains to the timeframe covered
by each report, with each report containing the exact same data fields
with one exception described here. The existing Simple Order Report
provides data for executions and contra-side responses that occurred
within 200 microseconds of the time the resting order was received by
the Exchange. Meanwhile, the proposed Resting Simple Order Report would
basically include the same data as the Simple Order Report but would
focus on executions and contra-side responses that occurred after 200
microseconds of the time the resting order was received by the Exchange
and one additional difference. The one difference is that unlike the
existing Simple Order Report, the proposed Resting Simple Order Report
would not include the time difference between the time the resting
order and first response that executes against the resting order are
received by the Exchange. Each report focuses on 200 microsecond
windows with the existing Simple Order Report's window starting at the
time of receipt of the resting order and the proposed Resting Simple
Order Report's window starting with the first attempt to execute
against the resting order after the order was resting on the Simple
Order Book for at least 200 microseconds.
Like the Simple Order Report, the Exchange believes the proposed
Complex Order Report and Resting Simple Order Report will serve to
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 providing Members access to information regarding their
trading activity that they may utilize to evaluate their own trading
behavior and order interactions. Also, like the Simple Order Report,
the proposed Complex Order Report is designed for Members that are
interested in gaining insight into latency in connection with complex
orders that failed to execute against an order resting on the
Exchange's Strategy Book by providing those Members data to analyze by
how much time their complex order may have missed an execution against
a contra-side order resting on the Strategy Book. Like the existing
Simple Order Report, the proposed Resting Simple Order Report is
designed for 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 by
[[Page 64999]]
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. The Exchange believes that providing this optional
latency data to interested Members is consistent with facilitating
transactions in securities, removing impediments to and perfecting the
mechanism of a free and open market and a national market system, and,
in general, protecting investors and the public interest because it
provides greater visibility into the latency of Members' incoming
orders that they may use 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. This would, in
turn, benefit other market participants who may experience better
executions on the Exchange because those that use the proposed Complex
Order Report and/or Resting Simple Order Report may re-calibrate their
trading models and then increase their trading on the Exchange and
volume of liquidity removing orders. This could lead to an increase in
incoming liquidity removing orders resulting in higher execution rates
for Members who primarily place resting orders on either the Strategy
Book or Simple Order Book, or both. The proposed Complex Order Report
and Resting Simple Order Report may benefit other market participants
who would receive greater fill rates, thereby facilitating transactions
in securities and perfecting the mechanism of the national market
system.
As discussed above, the Exchange's affiliates, MIAX, MIAX Pearl and
MIAX Emerald, received ad hoc requests from their members for
information regarding the timeliness of their attempts to execute
against resting options liquidity on Strategy Books and Simple Order
Books of those markets. The proposal promotes just and equitable
principles of trade because it would provide latency information in a
systematized way and standardized format to any Member that chooses to
subscribe to the proposed Complex Order Report or Resting Simple Order
Report. As a result, the proposal would also remove impediments to and
perfect the mechanism of a free and open market and a national market
system by making latency information for liquidity-seeking orders
available in a more equalized manner.
The proposal further promotes just and equitable principles of
trade by increasing transparency, particularly for Recipient Members of
either or both the Complex Order Report and Resting Simple Order Report
that may not have the expertise to generate the same information on
their own. The proposed Complex Order Report may better enable
Recipient Members to increase the fill rates for their liquidity-
seeking Complex Orders and the Resting Simple Order Report may better
enable Recipient Members to increase the fill rates for their
liquidity-seeking orders. At the same time, as is also discussed above,
the Complex Order Report and Resting Simple Order Report promote just
and equitable principles of trade and protect investors and the public
interest because they are designed to prevent a Recipient Member of
either report from learning other Members' sensitive trading
information. The Complex Order Report and Resting Simple Order Report
would not be real-time market data products, as they would provide only
historical trading data for the previous trading day, generally on a
T+1 basis. In addition, the data in the Complex Order Report regarding
incoming orders that failed to execute would be specific to the
Recipient Member's complex orders, and other information in the
proposed Complex Order Report regarding resting orders and executions
would be anonymized if it relates to a Member other than the Recipient
Member. The same is true for the Resting Simple Order Report.
The Complex Order Report and Resting Simple Order Report generally
would contain three buckets of information each. The first two buckets
include information about the resting order and the execution of the
resting order. The Exchange anticipates that this information will be
available from the Exchange's proprietary data feeds or derivable from
OPRA. For example, for the Complex Order Report, the Exchange plans to
offer the Complex Top of Market (``cToM'') data feed which will provide
real-time quote and last sale information for all displayed orders on
the Strategy Book.\55\ For the Resting Simple Order Report, OPRA
provides bids, offers, and consolidated last sale and quotation
information for options trading on all national securities exchanges,
including the Exchange. In addition, the Exchange plans to offer the
Top of Market (``ToM'') data feed which will provide real-time quote
and last sale information for all displayed orders on the Simple Order
Book.\56\
---------------------------------------------------------------------------
\55\ See MIAX Sapphire Options Exchange User Manual, Version
1.0.0, Section 5.07 (dated December 11, 2023), available at <a href="https://www.miaxglobal.com/sites/default/files/job-files/MIAX_Sapphire_User_Manual_v1.0.0_2024_06_18.pdf">https://www.miaxglobal.com/sites/default/files/job-files/MIAX_Sapphire_User_Manual_v1.0.0_2024_06_18.pdf</a>.
\56\ See MIAX Sapphire Options Exchange User Manual, Version
1.0.0, Section 5.06 (dated December 11, 2023), available at <a href="https://www.miaxglobal.com/sites/default/files/job-files/MIAX_Sapphire_User_Manual_v1.0.0_2024_06_18.pdf">https://www.miaxglobal.com/sites/default/files/job-files/MIAX_Sapphire_User_Manual_v1.0.0_2024_06_18.pdf</a>.
---------------------------------------------------------------------------
The first bucket of information contained in the proposed Complex
Order Report and Resting Simple Order Report for the resting order
includes the time the resting order was received by the Exchange, the
symbol, unique reference number assigned at the time of receipt, side
(buy or sell), and the displayed price and size of the resting order.
The symbol, origin type, side (buy or sell), and displayed price and
size are also available via the Exchange's proprietary data feeds
depending on which report a Member subscribes to. The first bucket of
information for both proposed reports would also indicate whether the
Recipient Member is an Affiliate of the Member that entered the resting
order. This data field for both proposed reports would not indicate the
identity of the Member that entered the resting order and would simply
allow the Recipient Member to better understand the scenarios in which
it may execute against the orders of its Affiliates.\57\
---------------------------------------------------------------------------
\57\ The Exchange surveils to monitor for aberrant behavior
related to internalized trades and identify potential wash sales.
---------------------------------------------------------------------------
For the proposed Complex Order Report, the second bucket of
information pertains to the execution of the resting order and includes
the Complex SBBO and Complex ABBO at the time of execution and for the
proposed Resting Simple Order Report, pertains to the execution of the
resting order and includes the SBBO and ABBO at the time of execution.
These data points for both proposed reports are also derivable from
information disseminated via OPRA or available via the Exchange's
proprietary data feeds, depending on the type of report. The second
bucket of information for both reports would also indicate whether the
response was entered by the Recipient Member. For both reports, this
data point would be simply provided as a convenience and, if not
entered by the Recipient Member, this data point would be left blank so
as not to include any identifying information about other Member
activity. For the Complex Order Report, the second bucket of
information would also include the size, time and type of first
response \58\ that executes against the resting order; as well as the
time difference between the time the resting order and first response
[[Page 65000]]
that executes against the resting order are received by the Exchange.
These data points would assist the Recipient Member in analyzing by how
much time their order may have missed an execution against a contra-
side order resting on the Strategy Book. For the Resting Simple Order
Report, the second bucket of information also includes the size, as
well as the time and type of first response that executes against the
resting order. These data points would assist the Recipient Member in
analyzing by how much time their order may have missed an execution
against a contra-side order resting on the Simple Order Book. Unlike
the existing Simple Order Report and proposed Complex Order Report, the
proposed Resting Simple Order Report would not include the time
difference between the time the resting order and first response that
executes against the resting order are received by the Exchange. The
proposed Resting Simple Order Report would not include this data point
because the Exchange understands Recipient Members may not find it
useful due to the fact that the proposed Resting Simple Order Report
focuses on orders that have been resting on the Simple Order Book for
longer than 200 microseconds. Therefore, the Exchange does not propose
to include this data point as a means to streamline the proposed
Resting Simple Order Report and remove unnecessary data.
---------------------------------------------------------------------------
\58\ See supra note 25.
---------------------------------------------------------------------------
For both proposed reports, the third bucket of information would be
about the Recipient Member's response(s) and the time their response(s)
is received by the Exchange. This would include 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. As
above, for both proposed reports, this data point would assist the
Recipient Member in analyzing by how much time their order may have
missed an execution against a contra-side order resting on the Strategy
Book. This bucket would also include the size and type of each response
submitted by the Recipient Member, the Recipient Member identifier, and
a response reference number, which is selected by the Recipient Member.
Each of these data points are unique to the Recipient Member and should
already be known by the Recipient Member even if not included in the
Complex Order Report or Resting Simple Order Report, as the case may
be.
The Exchange proposes to provide the Complex Order Report and
Resting Simple Order Report on a voluntary basis and no Member will be
required to subscribe to either report. The Exchange notes that there
is no rule or regulation that requires the Exchange to produce, or that
a Member elect to receive, either proposed report. It would be entirely
a business decision of each Member to subscribe to either proposed
report. The Exchange proposes to offer the Complex Order Report and
Resting Simple Order 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 either proposed report may discontinue
receiving either at any time if that Member determines that the
information contained in the Complex Order Report or Resting Simple
Order Report is no longer useful.
In summary, the proposed Complex Order Report and Resting Simple
Order Report will help to protect a free and open market by providing
additional data (offered on an optional basis) to the marketplace and
by providing investors with greater choices.\59\ Additionally, the
proposal would not permit unfair discrimination because the proposed
Complex Order Report and Resting Simple Order Report will be available
to all Exchange Members.
---------------------------------------------------------------------------
\59\ See Sec. Indus. Fin. Mkts. Ass'n (SIFMA), Initial Decision
Release No. 1015, 2016 SEC LEXIS 2278 (ALJ June 1, 2016) (finding
the existence of vigorous competition with respect to non-core
market data).
---------------------------------------------------------------------------
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, as amended.
Inter-Market Competition
The proposed Complex Order Report and Resting Simple Order Report
will allow the Exchange to provide new options for Members to receive
historical market data. The proposed Complex Order Report and Resting
Simple Order Report will also further enhance inter-market competition
between exchanges by allowing the Exchange to expand its product
offerings to include additional reports to provide latency information
requested by Members. The latency information that would be provided in
the proposed Complex Order Report and Resting Simple Order Report would
enhance competition between exchanges because it would allow Recipient
Members to recalibrate their models and trading strategies to improve
their overall trading experience on the Exchange. This may improve the
Exchange's overall trading environment resulting in increased liquidity
and order flow on the Exchange. In response, other exchanges may
similarly seek ways to provide latency related data in an effort to
improve their own market quality. Further, at least one other competing
exchange offers substantively identical reports as the Exchange's
Simple Order Report and proposed Complex Order Report.\60\
---------------------------------------------------------------------------
\60\ See BOX Exchange LLC Rules 7350(b) and (c).
---------------------------------------------------------------------------
Intra-Market Competition
The proposed rule change to offer the optional Complex Order Report
and Resting Simple Order Report is in response to Member interest and
requests for such information at the Exchange's affiliates, MIAX and
MIAX Emerald. The Exchange does not believe the proposed Complex Order
Report or Resting Simple Order Report will have an inappropriate burden
on intra-market competition between Recipient Members and other Members
who choose not to receive either report. As discussed above, the first
two buckets of information included in the Complex Order Report and
Resting Simple Order Report (with one minor exception described above)
contain information about the resting order and the execution of the
resting order, both of which are generally available to Members that
choose not to receive the Complex Order Report or Resting Simple Order
Report from other sources, such as by deriving these data points from
OPRA or obtaining them from the Exchange's proprietary data feeds. The
third bucket of information pertains to the Recipient Member's response
and the time their response is received by the Exchange, information
which latency sensitive Members that do not subscribe to the proposed
Complex Order Report or Resting Simple Order Report could obtain on
their own based on their knowledge of when they sent their response to
the Exchange and via timestamp information provided by the
acknowledgment message received from the Exchange. However, latency
sensitive Members that do not subscribe to the proposed Complex Order
Report or Resting Simple Order Report would not be able to obtain 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. Such latency sensitive
Members may not view this information as beneficial based on their own
trading models and systems. Other Members
[[Page 65001]]
that do not subscribe to the proposed Complex Order Report or Resting
Simple Order Report may not view either proposed report as useful due
to their own trading behaviors and business models. Such Members may
not be latency sensitive and may be interested primarily in providing
resting liquidity on the Exchange's Simple Order Book or Strategy Book,
or they may simply be connected to the Exchange for best execution
purposes or to comply with the trade-through requirements under Chapter
XIV of the Exchange's Rules.\61\ Additionally, some Members may already
be able to derive a substantial amount of the same data that is
provided by some of the components based on their own executions and
algorithms.
---------------------------------------------------------------------------
\61\ Chapter XIV of the Exchange Rules incorporates by reference
Rule 1401, Order Protection, of the Exchange's affiliate, MIAX.
---------------------------------------------------------------------------
In sum, if the proposed Complex Order Report or Resting Simple
Order Report is unattractive to Members, Members will opt not to
receive either report. Accordingly, the Exchange does not believe that
the proposed change will impair the ability of Members or competing
order execution venues to maintain their competitive standing in the
financial markets.
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
Because the foregoing proposed rule change does not: (i)
significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
become operative for 30 days after the date of the filing, or such
shorter time as the Commission may designate if consistent with the
protection of investors and the public interest, it has become
effective pursuant to section 19(b)(3)(A)(iii) of the Act \62\ and Rule
19b-4(f)(6) \63\ thereunder.
---------------------------------------------------------------------------
\62\ 15 U.S.C. 78s(b)(3)(A)(iii).
\63\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)
requires a self-regulatory organization to give the Commission
written notice of its intent to file the proposed rule change, along
with a brief description and text of the proposed rule change, at
least five business days prior to the date of filing of the proposed
rule change, or such shorter time as designated by the Commission.
The Exchange has satisfied this requirement.
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A proposed rule change filed under Rule 19b-4(f)(6) \64\ normally
does not become operative prior to 30 days after the date of the
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\65\ the Commission
may designate a shorter time if such action is consistent with the
protection of investors and the public interest. The Exchange has asked
the Commission to waive the 30-day operative delay so that the proposed
rule change may become operative upon filing. The Exchange states that
waiver of the 30-day operative delay would enable the Exchange to make
the Complex Order Report and the Resting Simple Order Report available
to Exchange Members on August 12, 2024, the date of the proposed launch
of the Exchange, and thus enable the Exchange to make information for
liquidity-seeking orders available to Exchange Members in a more
equalized and timelier manner. The Exchange states that other options
exchanges currently offer substantially similar reports.\66\ For these
reasons, and because the proposal does not raise any new or novel
issues, the Commission finds that waiver of the 30-day operative delay
is consistent with the protection of investors and the public interest.
Accordingly, the Commission hereby waives the 30-day operative delay
and designates the proposal operative upon filing.\67\
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\64\ 17 CFR 240.19b-4(f)(6).
\65\ 17 CFR 240.19b-4(f)(6)(iii).
\66\ See supra notes 7, 8 and 60.
\67\ For purposes only of waiving the 30-day operative delay,
the Commission has also considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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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 under
section 19(b)(2)(B) \68\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\68\ 15 U.S.C. 78s(b)(2)(B).
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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="https://www.sec.gov/rules/sro.shtml">https://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#1260677e773f717d7f7f777c6661526177713c757d64"><span class="__cf_email__" data-cfemail="a4d6d1c8c189c7cbc9c9c1cad0d7e4d7c1c78ac3cbd2">[email protected]</span></a>. Please include
file number SR-SAPPHIRE-2024-05 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-SAPPHIRE-2024-05. 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="https://www.sec.gov/rules/sro.shtml">https://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
a.m. and 3 p.m. Copies of the filing also will be available for
inspection and copying at the principal office of the Exchange. Do not
include personal identifiable information in submissions; you should
submit only information that you wish to make available publicly. We
may redact in part or withhold entirely from publication submitted
material that is obscene or subject to copyright protection. All
submissions should refer to file number SR-SAPPHIRE-2024-05 and should
be submitted on or before August 29, 2024.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\69\
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\69\ 17 CFR 200.30-3(a)(12), (59).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-17504 Filed 8-7-24; 8:45 am]
BILLING CODE 8011-01-P
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This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.