Notice2024-18697
Self-Regulatory Organizations; MIAX Sapphire, LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Describe the Access Methods to the Exchange's Testing Systems Environment and Discontinue One Access Method
Primary source
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Published
August 21, 2024
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 89 Issue 162 (Wednesday, August 21, 2024)</title>
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[Federal Register Volume 89, Number 162 (Wednesday, August 21, 2024)]
[Notices]
[Pages 67693-67696]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-18697]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-100732; File No. SR-SAPPHIRE-2024-07]
Self-Regulatory Organizations; MIAX Sapphire, LLC; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To
Describe the Access Methods to the Exchange's Testing Systems
Environment and Discontinue One Access Method
August 15, 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 August 5, 2024, MIAX Sapphire, LLC (``MIAX Sapphire'' or
``Exchange'') filed with the Securities and Exchange Commission
(``Commission'') a 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 is filing a proposal to describe the three methods to
access the Exchange's optional testing systems environment and the
timeline and process by which one of the three access methods would be
discontinued. The text of the proposed rule change is available on the
Exchange's website at <a href="https://www.miaxglobal.com/markets/us-options/all-options-exchanges/rule-filings">https://www.miaxglobal.com/markets/us-options/all-options-exchanges/rule-filings</a>, at MIAX Sapphire'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
On July 15, 2024, the Securities and Exchange Commission
(``Commission'') approved the Exchange's Form 1 application to register
as a national securities exchange under Section 6 of the Exchange
Act.\3\ As previously announced, the Exchange anticipates that it will
begin electronic operations on August 12, 2024.\4\
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\3\ See Securities Exchange Act Release No. 100539 (July 15,
2024) (File No. 10-240) (In the Matter of the Application of MIAX
Sapphire, LLC for Registration as a National Securities Exchange)
(the ``Approval Order'').
\4\ See MIAX Sapphire Options Alert, dated March 6, 2024,
available at <a href="https://www.miaxglobal.com/alert/2024/03/06/miax-sapphire-options-exchange-rescheduled-launch-date-august-12-2024">https://www.miaxglobal.com/alert/2024/03/06/miax-sapphire-options-exchange-rescheduled-launch-date-august-12-2024</a>.
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In anticipation of the launch of electronic equity options trading,
the Exchange submits this filing to describe the three methods to
access the Exchange's optional testing systems environment and the
timeline and process by which the 1 Gigabit (``Gb'') or 10Gb ultra-low
latency (``ULL'') connection access method described below would be
discontinued.
The testing systems environment is a virtual trading system
environment for Members \5\ and non-Members to test (i) upcoming
Exchange software and code releases, (ii) product enhancements, and
(iii) firm-developed software, prior to
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implementation in the Exchange's production (e.g., live trading)
environment. Further, the testing systems environment allows unlimited
testing of existing functionality, such as order types, order entry,
order management, order throughput, acknowledgements, risk settings,
mass cancelations, and purge requests. The testing systems environment
is built to closely approximate the production environment (once live
trading begins) to enable users the ability to test their systems and
mimics the real life trading environment.\6\
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\5\ The term ``Member'' means an individual or organization that
is registered with the Exchange pursuant to Chapter II of the
Exchange's 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.
\6\ Business continuity and disaster recovery testing is
performed separately and not within the testing systems environment
that is the subject of this filing.
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There are three methods by which Members and non-Members may access
the Exchange's testing systems environment. One, Members and non-
Members may access the Exchange's testing systems environment via a
virtual private network (``VPN'') that operates over the internet and
provides site-to-site access. VPN access is provided for free to all
Members and non-Members. Two, Members and non-Members may also access
the testing systems environment via a dedicated cross connection that
is available as either a 1Gb or 10Gb ULL connection.\7\ Firms that
utilize a VPN or dedicated cross connection to access the testing
systems environment of the Exchange are also able to access the testing
systems environments of each of the Exchange's affiliated options
markets--Miami International Securities Exchange, LLC (``MIAX''), MIAX
PEARL, LLC \8\ (``MIAX Pearl Options''), and MIAX Emerald, LLC (``MIAX
Emerald''). The dedicated cross connect to the testing systems
environment does not provide access to any of the production
environments (i.e., live trading) of the Exchange or its affiliates, or
allow the receipt of proprietary real-time market data for which each
Member or non-Member may subscribe.
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\7\ The Exchange notes that other exchange families offer a
similar dedicated connection to their testing environment for their
members and non-members. See, e.g., Nasdaq Options Test Facility
(NTF) Abstract, Version 1.4.4 (March 2024), available at <a href="https://www.nasdaq.com/Nasdaq_Test_Facility_NTF_Guide">https://www.nasdaq.com/Nasdaq_Test_Facility_NTF_Guide</a> (last visited July 16,
2024) (``. . . the Nasdaq Test Facility . . . where market
participants can test their trading applications with the INET
trading system. The NTF environment allows members to test sending
and executing quotes and orders offered by our six options exchanges
. . .''); see also Securities Exchange Act Release No. 100442 (June
27, 2024), 89 FR 55296 (July 3, 2024) (SR-CboeBZX-2024-058) (``. .
.the Exchange also offers corresponding ports which provide Members
and non-Members access to the Exchange's certification environment
to test proprietary systems and applications . . . The certification
environment facilitates testing using replicas of the Exchange's
production environment process configurations which provide for a
robust and realistic testing experience . . .'').
\8\ All references to ``MIAX PEARL'' in this filing are to the
options trading facility of MIAX PEARL, LLC, referred to herein as
``MIAX Pearl Options.'' Firms that choose to utilize the testing
systems environment of MIAX Pearl Equities, the equities trading
facility of MIAX PEARL, LLC, must utilize a separate dedicated cross
connect as MIAX Pearl Equities' testing systems environment operates
on a separate network from the affiliated options markets.
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Three, access is also provided through the production connections
for each 1Gb \9\ or 10Gb ULL connection for the applicable fee for such
connection and no additional charge.\10\ Unlike a dedicated cross
connection to the testing systems environment described above, these
1Gb and 10Gb ULL connections provide access to the Exchange's
production environment (i.e., live trading) and allow the receipt of
proprietary real-time market data. Also, unlike VPN, 1Gb, and the
dedicated cross connection access described above, the 10Gb ULL
connections only provide access the Exchange's testing systems
environment and not those of its affiliated options markets. This is
because of the nature of those connections, which are utilized to
access the Exchange only, not just for testing, but for other Exchange
specific items, such as access the Exchange's production environment
and for the receipt of proprietary Exchange market data.
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\9\ Like VPN access, the 1Gb connection will allow firms to
reach all testing systems environments of the Exchange's affiliates,
upon launch of the Exchange.
\10\ As noted above, the Exchange has not begun live trading at
the time of this filing; however, the Exchange anticipates filing a
separate rule filing with the Commission to establish fees for
connectivity to the production environment ahead of the commencement
of live trading. Such fees may also be waived for a period of time,
which will be stated in the respective filing. See, e.g., infra note
12.
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Firms that access the testing systems environment through any one
of the three available access methods receive functionally the same
testing experience. Each firm is free to decide how to access the
testing systems environment based on their own needs and trading
architecture. Again, use of the testing systems environment is entirely
optional and no firm is required by rule or regulation to make use of
the testing systems environment.\11\ Regardless of access method, all
firms are provided the same testing systems environment experience and
are able to perform all of the same functions.
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\11\ Access to the Exchange's testing systems environment was
provided to firms prior to the Exchange's Form 1 application being
approved. During that time, fourteen firms accessed the testing
systems environment via the dedicated cross connections and five
firms accessed the testing systems environment via a VPN.
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The Exchange will phase out the ability to connect to the testing
systems environment via the existing 1Gb and 10Gb ULL production
connections over the next 6 to 12 months. The Exchange will issue an
alert notifying market participants of the anticipated timeline by
which it will phase out access to the testing systems environment via
1Gb and 10Gb ULL production connections. During this phase out period,
firms that use a 1Gb or 10Gb ULL production connection to access the
testing systems environment would continue to be able to do so. At the
end of this period, Members and non-Members that currently elect to
access the Exchange's testing systems environment via a 1Gb or 10Gb ULL
connection that seek to continue to access the Exchange's testing
systems environment would be required to transfer their access to one
of the two remaining access methods, a VPN for free or by subscribing
to a dedicated cross connection for an amount that is expected to be
less than the current fee for a 1Gb or 10Gb ULL production
connection.\12\
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\12\ The Exchange will submit a separate proposed rule change
for immediate effectiveness pursuant to Section 19(b)(3)(A) of the
Act (15 U.S.C. 78s(b)(3)(A)) and Rule 19b-4(f)(2) (17 CFR 240.19b-
4(f)(2)) thereunder to establish a fee for the dedicated cross
connect to the testing systems environment. The Exchange anticipates
to waive such proposed fee for a period of time and that any
potential fees at the end of the waiver prior to be less than the
anticipated fees for a 1Gb and 10Gb ULL connection to the production
environment.
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2. Statutory Basis
The Exchange believes the proposed change is consistent with the
requirements of Section 6(b) of the Act,\13\ in general, and Section
6(b)(5),\14\ in particular, because it is designed to prevent
fraudulent and manipulative acts and practices, promote just and
equitable principles of trade, foster cooperation and coordination with
persons engaged in regulating, clearing, settling, processing
information with respect to, and facilitating transactions in
securities, and remove impediments to and perfect the mechanism of a
free and open market and a national market system.
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\13\ 15 U.S.C. 78f(b).
\14\ 15 U.S.C. 78f(b)(5).
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This filing simply describes the three methods to access the
Exchange's optional testing systems environment and the timeline and
process by which one of the three access methods would be discontinued.
Access to the Exchange's testing systems environment
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is completely voluntary.\15\ The testing systems environment is a
useful tool for Members and non-Members to test (i) upcoming Exchange
software and code releases, (ii) product enhancements, and (iii) firm-
developed software, prior to implementation in the Exchange's
production environment. In addition, the testing systems environment
allows unlimited firm-level testing of order types, order entry, order
management, order throughput, acknowledgements, risk settings, mass
cancelations, and purge requests.
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\15\ As noted above, business continuity and disaster recovery
testing is performed separately and not within the testing systems
environment that is the subject of this filing.
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There is no functional difference between access alternatives. It
is simply a technical decision of each firm regarding how to access the
testing systems environment. The testing systems environment, whether
accessed via the proposed dedicated connection or otherwise, provides
firms the same scope of abilities to test their systems and software in
the Exchange's testing systems environment, which replicates the
Exchange's anticipated production trading environment. The testing
systems environment serves to improve live trading on the Exchange and
the national market system by permitting Members and non-Members the
ability to accurately test software and code changes prior to
implementing them in their systems in the live trading environment.
This should, in turn, reduce the likelihood of a potentially disruptive
issues in the live trading environment, which has the potential to
affect all market participants.
The Exchange is not proposing new functionality. This filing simply
describes the means of access to the Exchange's testing systems
environment and the process by which one of those access methods would
be discontinued. Doing so provides clarity to market participants and
seeks to avoid potential investor confusion. Therefore, for the above
reasons, the Exchange believes the proposed rule change is consistent
with the Act.
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. There would be
no competitive advantage for firms that access the testing systems
environment via one access method versus another. All modes of access
allow firms to perform the same testing functions in the same manner.
As such, the Exchange does not believe that the proposed change will
impose any burden on intermarket competition not necessary or
appropriate in furtherance of the purposes of the Act.
The Exchange believes the proposed rule change may have a positive
impact on or intramarket competition. Among other things, the proposed
rule change is intended to keep pace with technological changes in the
industry and evolving customer needs and demands, and believes the
dedicated connection to the testing systems environment will contribute
to robust competition among national securities exchanges. As noted
above, several exchanges already offer similar testing environments to
their members and non-members.\16\ As a result, the Exchange believes
this proposed rule change permits fair competition among national
securities exchanges.
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\16\ See supra note 7.
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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 from the date on which it was filed, or
such shorter time as the Commission may designate, if consistent with
the protection of investors and the public interest, the proposed rule
change has become effective pursuant to Section 19(b)(3)(A)(iii) of the
Act \17\ and Rule 19b-4(f)(6) thereunder.\18\
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\17\ 15 U.S.C. 78s(b)(3)(A)(iii).
\18\ 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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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) \19\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\19\ 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#deacabb2bbf3bdb1b3b3bbb0aaad9eadbbbdf0b9b1a8"><span class="__cf_email__" data-cfemail="f183849d94dc929e9c9c949f8582b1829492df969e87">[email protected]</span></a>. Please include
file number SR-SAPPHIRE-2024-07 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-2024-07. 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-2024-07 and should
be
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submitted on or before September 11, 2024.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\20\
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\20\ 17 CFR 200.30-3(a)(12), (59).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-18697 Filed 8-20-24; 8:45 am]
BILLING CODE 8011-01-P
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