Notice2024-18784
Self-Regulatory Organizations; MIAX Sapphire, LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Adopt Fees for the Liquidity Taker Event Report-Simple Orders, 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 22, 2024
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 89 Issue 163 (Thursday, August 22, 2024)</title>
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[Federal Register Volume 89, Number 163 (Thursday, August 22, 2024)]
[Notices]
[Pages 67999-68005]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-18784]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-100749; File No. SR-SAPPHIRE-2024-08]
Self-Regulatory Organizations; MIAX Sapphire, LLC; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Adopt
Fees for the Liquidity Taker Event Report--Simple Orders, the Liquidity
Taker Event Report--Complex Orders, and the Liquidity Taker Event
Report--Resting Simple Orders
August 16, 2024.
Pursuant to the provisions of Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice
is hereby given that on August 6, 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, II, and III below, which Items have been prepared by the
Exchange. The Commission is publishing this notice to solicit comments
on the proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange is filing a proposal to adopt fees for three data
products: (i) the Liquidity Taker Event Report--Simple Orders; (ii)
Liquidity Taker Event Report--Complex Orders; and (iii) Liquidity Taker
Event Report--Resting Simple Orders.\3\
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\3\ See Exchange Rules 531(a)-(c).
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While changes to the Fee Schedule pursuant to this proposal are
effective upon filing, the Exchange has designated these changes to be
operative on August 12, 2024.
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 68000]]
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 offers three Member \4\-specific reports: (1) the
Liquidity Taker Event Report--Simple Orders (referred to herein as the
``Simple Order Report''); (2) the Liquidity Taker Event Report--Complex
Orders (the ``Complex Order Report''); and (3) the Liquidity Taker
Event Report--Resting Simple Orders (the ``Resting Simple Order
Report''), which are available for purchase by Exchange Members on a
voluntary basis.
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\4\ 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.
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The Exchange proposes to adopt fees for these three reports. The
Exchange reports are described under Exchange Rules 531(a)-(c).\5\ The
reports are optional products available to Members. As further
described below, the Exchange also proposes to offer a discounted
combined fee for Members who purchase annual subscriptions to both the
Simple Order Report and Complex Order Report. The Exchange notes that
the proposed fees and proposed discount are identical to the fees and
discounts currently provided by the Exchange's affiliated options
exchanges, Miami International Securities Exchange, LLC (``MIAX''),
MIAX PEARL, LLC (``MIAX Pearl''),\6\ and MIAX Emerald, LLC (``MIAX
Emerald''), for the same liquidity taker event reports available on
those exchanges.\7\ The proposed fees are also identical to the fees
charged by a competing options exchange, BOX Exchange, LLC (``BOX''),
for BOX's version of the Simple Order Report and Complex Order
Report.\8\
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\5\ See supra note 3; see also Securities Exchange Act Release
Nos. 100539 (July 15, 2024), 89 FR 58848 (July 19, 2024) (File No.
10-240) and 100642 (August 2, 2024) (SR-SAPPHIRE-2024-05).
\6\ All references to ``MIAX Pearl'' in this filing are to the
options trading facility of MIAX Pearl, and not the equities trading
facility, which is referred to as ``MIAX Pearl Equities.''
\7\ See MIAX Fee Schedule, Section 7); MIAX Pearl Fee Schedule,
Section 7); and MIAX Emerald Fee Schedule, Section 7). The Exchange
notes that MIAX Pearl does not offer complex order functionality;
accordingly, it only offers its version of the Simple Order Report
and Resting Simple Order Report.
\8\ See BOX Fee Schedule, Section III.C.2. At the time of this
filing, BOX does not offer a version of the Resting Simple Order
Report.
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By way of background, the reports are daily reports that provide a
Member (``Recipient Member'') with its liquidity response time details
for executions of an order (or complex order,\9\ as the case may be)
resting on the Electronic Book,\10\ where that Recipient Member
attempted to execute against such resting order \11\ within a certain
timeframe. It is important to note that the content of each report is
specific to the Recipient Member and each report will not include any
information related to any Member other than the Recipient Member.
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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).
\10\ The term ``Electronic Book'' means the Exchange's Simple
Order Book and Strategy Book. See Exchange Rule 100. The ``Simple
Order Book'' is the Exchange's regular electronic book of orders and
quotes. Id. The ``Strategy Book'' is the Exchange's electronic book
of complex orders. Id.
\11\ Only displayed orders will be included in the reports. The
Exchange notes that it does not currently offer any non-displayed
orders.
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Report Content
The content of the Simple Order Report, Complex Order Report, and
Resting Simple Order Report are substantially similar to one another.
The following paragraphs explain the content of three reports by
delineating which information would be provided regarding the resting
order, the response that successfully executed against the resting
order, and the response submitted by the Recipient Member that missed
executing against the resting order.
Resting Order Information. The following information is included in
the Simple Order Report, Complex Order Report, and Resting Simple Order
Report regarding the resting order: (A) the time the resting order was
received by the Exchange; \12\ (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 \13\ of
the Member that entered the resting order \14\; (E) origin type (e.g.,
Priority Customer,\15\ Market Maker \16\); (F) side (buy or sell); and
(G) displayed price and size of the resting order.\17\ The Simple Order
Report and Resting Simple Order Report include the same information
about incoming orders seeking to remove resting orders from the Simple
Order Book. Meanwhile, the content of the Complex Order Report includes
the same information about incoming complex orders that seek to remove
liquidity from the Exchange's Strategy Book.\18\
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\12\ 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 System. The term ``System'' means the automated trading
system used by the Exchange for the trading of securities. See
Exchange Rule 100.
\13\ 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.
\14\ Each report will simply indicate whether the Recipient
Member is an Affiliate of the Member that entered the resting order
and will not include any other information that may indicate the
identity of the Member that entered the resting order.
\15\ 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.
\16\ 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.
\17\ The Exchange notes that the displayed price and size are
also disseminated via the Exchange's proprietary data feeds and the
Options Price Reporting Authority (``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.
\18\ 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 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.
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Execution Information. The following information is included in the
Simple Order Report regarding the execution of the resting order: (A)
the SBBO \19\ at the
[[Page 68001]]
time of execution; \20\ (B) the ABBO \21\ at the time of execution;
\22\ (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; \23\ (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; \24\ and (E) 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.
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\19\ The term ``SBBO'' means the best bid or offer on the Simple
Order Book of the Exchange. See Exchange Rule 100.
\20\ Exchange Rule 531(a)(1)(ii)(B) [sic] provides that if the
resting order executes against multiple contra-side responses, only
the ABBO [sic] at the time of the execution against the first
response will be included.
\21\ The term ``ABBO'' or ``Away Best Bid or Offer'' means the
best bid(s) or offer(s) disseminated by other Eligible Exchanges
(defined in Exchange Rule 1400(g)) and calculated by the Exchange
based on market information received by the Exchange from OPRA. See
Exchange Rule 100.
\22\ Exchange Rule 531(a)(1)(ii)(A) [sic] further provides that
if the resting order executes against multiple contra-side
responses, only the ABBO at the time of the execution against the
first response will be included.
\23\ 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.
\24\ The time difference would be provided in nanoseconds.
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The Simple Order Report and Resting Simple Order Report include the
SBBO, which is the Exchange's best bid or offer, and the ABBO, which is
the best bid or offer of away exchanges. The content of the Complex
Order Report is identical to the content of the Simple Order Report
with three minor differences. The Complex Order Report includes the
Complex SBBO \25\ in place of the SBBO and Complex ABBO \26\ in place
of the 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. 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.\27\ 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 third
difference is that the Complex Order Report includes the data listed in
Exchange Rule 531(b)(1) for executions and contra-side responses that
occurred within 400 microseconds of the time the resting order was
received by the Exchange, rather than 200 microseconds, which is the
timeframe utilized by the Simple Order Report.
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\25\ 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.
\26\ 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.
\27\ See supra note 25.
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But for the timeframe and one difference described below, the
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
under subparagraph (c)(2)(i) of Exchange Rule 531 has expired. The
Simple Order Report 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 Resting Simple Order Report does 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. The Simple Order Report and Resting
Simple Order Report focus on 200 microsecond windows with the Simple
Order Report's window starting at the time of receipt of the resting
order and the 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.
Recipient Member's Response Information. The following information
is included in the Simple Order Report, Complex Order Report, and
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; \28\
(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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\28\ 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.
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Timeframe
The 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. The Complex Order Report
provides data for executions and contra-side responses that occurred
within 400 microseconds of the time the resting order was received by
the Exchange. The minor difference in timeframes for the Simple Order
Report and Complex Order Report is to allow sufficient time for the
System to develop new complex strategies, which generally takes longer
than 200 microseconds. Accordingly, the Complex Order Report provides
for a timeframe of 400 microseconds to allow for the intended
information to be captured by the Complex Order Report.
The Resting Simple Order Report includes the same data as the
Simple Order Report and Complex Order Report but focuses on executions
and contra-side responses that occurred after 200 microseconds of the
time the resting order was received by the Exchange, and within 200
microseconds of receipt of 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
[[Page 68002]]
has passed, a Member must then submit an order to attempt to execute
against that resting order. This event starts a second 200 microsecond
period within which the Resting Simple Order Report would include data
on executions and contra-side responses submitted by the Recipient
Member to execute against that resting order.
Scope of Data Included in the Reports
The Simple Order Report, Complex Order Report, and Resting Simple
Order Report include trading data related to the Recipient Member and
subject to the historical data requirement described below, and do not
include information related to any other Member's trading data other
than resting order information and execution information described
above.
Historical Data
The Simple Order Report, Complex Order Report, and Resting Simple
Order Report 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. These reports do not include real-time data.
The Exchange believes the additional data points from the matching
engine outlined above may help Members gain a better understanding
about their own interactions with the Exchange. The Exchange believes
the Simple Order Report, Complex Order Report, and 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 Simple Order Report, Complex Order Report, and Resting
Simple Order Report will increase transparency and democratize
information so that all firms that subscribe to these reports 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.
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 or Strategy Book. The Simple Order Report, Complex
Order Report, and Resting Simple Order Report identify by how much time
an order that may have been marketable missed an execution. The Simple
Order Report, Complex Order Report, and 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 Simple Order Report, Complex Order Report, and Resting Simple
Order Report will be Member-specific reports 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 Electronic Book.
The reports are being offered to Members on a completely voluntary
basis in that the Exchange is not required by any rule or regulation to
make this data available and potential subscribers may purchase any
report only if they voluntarily choose to do so. It is a business
decision of each Member whether to subscribe to each report or not.
The Exchange proposes to adopt new Section 7), Reports, in its Fee
Schedule, which will provide that Members may purchase each report on a
monthly or annual (12-month) basis. The Exchange proposes to assess a
monthly fee of $4,000 per month and a fee of $24,000 per year for a 12-
month subscription for each of the Simple Order Report and Complex
Order Report. The Exchange proposes to assess a monthly fee of $2,000
per month and a fee of $12,000 per year for a 12-month subscription for
the Resting Simple Order Report. The proposed fees are identical to the
fees currently charged by the Exchange's affiliates, MIAX, MIAX Pearl
(for the Simple Order Report and Resting Simple Order Report), and MIAX
Emerald, for the same reports available on those exchanges.\29\ The
proposed fees for the Simple Order Report and Complex Order Report are
identical to the fees charged by a competing options exchange, BOX, for
its version of the Simple Order Report and Complex Order Report.\30\
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\29\ See supra note 7.
\30\ See supra note 8. At the time of this filing, BOX does not
offer a version of the Resting Simple Order Report.
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Members may cancel their subscription to any report at any time.
The Exchange also proposes to specify that for mid-month subscriptions,
new subscribers will be charged for the full calendar month for which
they subscribe and will be provided report data for each trading day of
the calendar month prior to the day on which they subscribed to any of
the reports. The Exchange proposes to waive the monthly fees for the
Simple Order Report, Complex Order Report and Resting Simple Order
Report for the Initial Waiver Period.\31\ Even though the Exchange
proposes to waive these particular fees during the Initial Waiver
Period, the Exchange believes that it is appropriate to provide market
participants with the overall structure of the fees by outlining the
structure and amounts in the Fee Schedule so that there is general
awareness that the Exchange intends to assess such fees upon expiration
of the defined term of the Initial Waiver Period.
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\31\ The term ``Initial Waiver Period'' means, for each
applicable fee, the period of time from the initial effective date
of the MIAX Sapphire Fee Schedule plus an additional six (6) full
calendar months after the completion of the partial month of the
Exchange launch. See the Definitions Section of the Fee Schedule.
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The Exchange also proposes to provide a discounted rate of $40,000
per year to Members that purchase 12-month subscriptions to both the
Simple Order Report and Complex Order Report (as compared to a total of
$48,000 for each 12-month subscription at a rate of $24,000 for each
report on an individual subscription basis). The Exchange also proposes
to prorate the discounted 12-month subscription fee for Members that
seek to add either their Simple Order Report or the Complex Order
Report to an existing subscription. In particular, the Exchange
proposes that for those Members with an existing 12-month subscription
to either the Simple Order Report or Complex Order Report, but not
both, may add a subscription to the Simple Order Report or Complex
Order Report during their current 12-month subscription. In such case,
the fee for the added report will be prorated based on the $40,000
combined rate for the 12-month subscription discount for the remainder
of the subscriber's current 12-month subscription, and the number of
months remaining in the existing subscription until the Member's
renewal date. Members would then receive the 12-month discount ($40,000
annually) for subscribing to both reports on the renewal date of their
original subscription.
For example, assume ``Member A'' previously subscribed to the
Simple Order Report on September 1, 2024, and paid $24,000 for a 12
month subscription to the Simple Order Report. ``Member A's'' current
subscription expires on August 31, 2025, for the Simple Order Report.
Before ``Member A's'' subscription to the Simple Order Report expires,
``Member A'' decides to subscribe to the Complex Order Report,
beginning March 1, 2025. Rather than being immediately charged $40,000
for the 12 month subscription discount for subscribing to both reports
(``Member
[[Page 68003]]
A'' already paid $24,000 upfront for the Simple Order Report 12 month
subscription), ``Member A'' would only be charged an additional $8,000
to add the Complex Order Report for the remaining months of ``Member
A's'' current 12 month subscription to the Simple Order Report. On
September 1, 2025, assuming ``Member A'' decided to keep both reports,
``Member A'' would then be charged the 12 month discounted rate of
$40,000 for both reports for the next year.
The Exchange proposes to determine the prorated fee described above
as follows: on the date that ``Member A'' wanted to begin subscribing
to the Complex Order Report (March 1, 2025), there were six months
remaining on ``Member A's'' existing 12 month subscription to the
Simple Order Report (March, April, May, June, July and August). The
added cost would be calculated as ((6 months remaining/12 months total)
* ($40,000 discounted annual subscription for both reports--$24,000 for
annual subscription to each report individually) = $8,000 for remaining
6 months. Beginning September 1, 2025 (the original renewal date for
the Simple Order Report), ``Member A'' would then be charged the
discounted 12 month subscription rate of $40,000, assuming ``Member A''
renews their subscriptions to both the Simple Order Report and the
Complex Order Report.
The Exchange intends to begin to offer the reports on August 12,
2024.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\32\ in general, and furthers the
objectives of Section 6(b)(5) of the Act,\33\ in particular, in that it
is designed to prevent fraudulent and manipulative acts and practices,
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 protect investors and the public interest, and is
not designed to permit unfair discrimination among customers, brokers,
or dealers. The Exchange also believes that its proposal to adopt fees
for the reports is consistent with Section 6(b) of the Act \34\ in
general, and furthers the objectives of Section 6(b)(4) of the Act \35\
in particular, in that it is an equitable allocation of dues, fees and
other charges among its Members and other recipients of Exchange data.
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\32\ 15 U.S.C. 78f(b).
\33\ 15 U.S.C. 78f(b)(5).
\34\ 15 U.S.C. 78f(b).
\35\ 15 U.S.C. 78f(b)(4).
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In adopting Regulation NMS, the Commission granted self-regulatory
organizations (``SROs'') and broker-dealers increased authority and
flexibility to offer new and unique market data to the public. It was
believed that this authority would expand the amount of data available
to consumers, and also spur innovation and competition for the
provision of market data. The Exchange believes that the reports
further broaden the availability of U.S. option market data to
investors consistent with the principles of Regulation NMS. The reports
also promote increased transparency through the dissemination of the
data contained in each report. Particularly, the reports will benefit
investors by facilitating their prompt access to the value added
information that is included in each report. The reports will allow
Members to access information regarding their trading activity that
they may utilize to evaluate their own trading behavior and order
interactions.
The Exchange operates in a highly competitive environment. Indeed,
with the launch of MIAX Sapphire, there are 17 registered exchanges
that trade options. For the month of June 2024, based on publicly
available information, no single options exchange had more than
approximately 14-15% of the equity options market share.\36\ The
Commission has repeatedly expressed its preference for competition over
regulatory intervention in determining prices, products, and services
in the securities markets. Particularly, in Regulation NMS, the
Commission highlighted the importance of market forces in determining
prices and SRO revenues and, also, recognized that current regulation
of the market system ``has been remarkably successful in promoting
market competition in its broader forms that are most important to
investors and listed companies.'' \37\ Making similar data products
available to market participants fosters competition in the
marketplace, and constrains the ability of exchanges to charge supra-
competitive fees. In the event that a market participant views one
exchange's data product as more attractive than the competition, that
market participant can, and often does, switch between similar
products. The proposed fees are a result of the competitive environment
of the U.S. options industry as the Exchange seeks to adopt fees to
attract purchasers of the recently introduced reports.
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\36\ See the ``Market Share'' section of the Exchange's website,
available at <a href="https://www.miaxglobal.com/">https://www.miaxglobal.com/</a> (last visited July 25,
2024).
\37\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting
Release'').
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The Exchange believes the proposed fees are reasonable as the
proposed fees are both modest and identical to fees charged by MIAX,
MIAX Pearl, and MIAX Emerald for similar reports.\38\ Indeed, if the
Exchange proposed fees that market participants viewed as excessively
high, then the proposed fees would simply serve to reduce demand for
the Exchange's data products, which as noted, are entirely optional.
Other options exchanges are also free to introduce their own comparable
data products with lower prices to better compete with the Exchange's
offerings.\39\ As such, the Exchange believes that the proposed fees
are reasonable and set at a level to compete with other options
exchanges that may choose to offer similar reports. Moreover, if a
market participant views another exchange's potential report as more
attractive, then such market participant can merely choose not to
purchase the Exchange's reports and instead purchase another exchange's
similar data product(s), which may offer similar data points, albeit
based on that other market's trading activity.
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\38\ See supra note 7. See MIAX Rules 531(a)-(c) and MIAX
Emerald Rules 531(a)-(c).
\39\ This is supported by BOX introducing two nearly identical
reports. See supra note 8; see also Securities Exchange Act Release
Nos. 94563 (March 31, 2022), 87 FR 19985 (April 6, 2022) (SR-BOX-
2022-10); and 94920 (May 16, 2022), 87 FR 31013 (May 20, 2022) (SR-
BOX-2022-18).
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The Exchange also believes providing an annual subscription for an
overall lower fee than a monthly subscription is equitable and
reasonable because it would enable the Exchange to gauge long-term
interest in each of the reports. A lower annual subscription fee would
also incentivize Members to subscribe to the reports on a long-term
basis, thereby improving the efficiency by which the Exchange may
deliver the reports by doing so on a regular basis over a prolonged and
set period of time.
The Exchange also believes the proposed fees are reasonable as they
would support the introduction of new market data products to Members
that are interested in gaining insight into latency in connection with
orders that failed to execute against an order resting on the
Exchange's Simple Order Book or Strategy Book, as the case may be. The
reports accomplish this by providing those Members data to analyze by
how much time their order may have missed an execution against a
contra-side order resting on the Simple Order Book or Strategy Book.
Members may use this data to optimize their models and
[[Page 68004]]
trading patterns in an effort to yield better execution results by
calculating by how much time their order may have missed an execution.
Selling market data, such as one of the reports, is also a means by
which exchanges compete to attract business. To the extent that the
Exchange is successful in attracting subscribers for the reports, it
may earn trading revenues and further enhance the value of its data
products. If the market deems the proposed fees to be unfair or
inequitable, firms can decrease or discontinue their use of the data
and/or avail themselves of similar products that may be offered by
other exchanges.\40\ The Exchange, therefore, believes that the
proposed fees for the reports reflect the competitive environment and
would be properly assessed on Member users. The Exchange also believes
the proposed fees are equitable and not unfairly discriminatory as the
fees would apply equally to all users who choose to purchase such data.
It is a business decision of each Member that chooses to purchase any
of the reports. The Exchange's proposed fees would not differentiate
between subscribers that purchase the reports and are set at modest
levels that would allow any interested Member to purchase such data
based on their business needs.
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\40\ See supra note 8.
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The Exchange reiterates that the decision as to whether or not to
purchase the reports is entirely optional for all potential
subscribers. Indeed, no market participant is required to purchase the
reports, and the Exchange is not required to make the reports available
to all investors. It is entirely a business decision of each Member to
subscribe to the reports. The Exchange offers the reports as a
convenience to Members to provide them with additional information
regarding trading activity on the Exchange on a delayed basis after the
close of regular trading hours. A Member that chooses to subscribe to
the reports may discontinue receiving the reports at any time if that
Member determines that the information contained in the reports is no
longer useful.
Further, the Exchange proposes to waive the fees for the reports
for the Initial Waiver Period in order to encourage market participants
to subscribe to the reports. The Exchange believes it is reasonable to
waive the fees for the reports for the Initial Waiver Period in order
for Members to determine whether they realize value from the reports
prior to the expiration of the Initial Waiver Period. The believes that
it is reasonable to provide market participants with the overall
structure of the fees by outlining the structure and amounts in the Fee
Schedule so that there is general awareness that the Exchange intends
to assess such fees upon expiration of the defined term of the Initial
Waiver Period.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
result in any burden on competition that is not necessary or
appropriate in furtherance of the purposes of the Act. The Exchange
proposes to make the reports available in order to keep pace with
changes in the industry and evolving customer needs and demands, and
believes the reports will contribute to robust competition among
national securities exchanges. As a result, the Exchange believes this
proposed rule change permits fair competition among national securities
exchanges.
The Exchange also does not believe the proposed fees would cause
any unnecessary or inappropriate burden on intermarket competition as
other exchanges are free to introduce their own comparable reports with
lower prices to better compete with the Exchange's offerings. The
Exchange operates in a highly competitive environment, and its ability
to price the reports is constrained by competition among exchanges who
choose to adopt similar products. The Exchange must consider this in
its pricing discipline in order to compete for subscribers of the
Exchange's market data via the reports. For example, proposing fees
that are excessively higher than fees for potentially similar data
products would simply serve to reduce demand for the Exchange's
reports, which as discussed, market participants are under no
obligation to utilize. In this competitive environment, potential
purchasers are free to choose which, if any, similar product to
purchase to satisfy their need for market information. As a result, the
Exchange believes this proposed rule change permits fair competition
among national securities exchanges.
The Exchange does not believe the proposed rule change would cause
any unnecessary or inappropriate burden on intramarket competition.
Particularly, the proposed fees apply uniformly to any purchaser in
that the Exchange does not differentiate between subscribers that
purchase the reports. The proposed fees are set at a modest level that
would allow any interested Member to purchase such data based on their
business needs.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
Written comments were neither solicited nor received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become effective pursuant to Section
19(b)(3)(A)(ii) of the Act,\41\ and Rule 19b-4(f)(2) \42\ thereunder.
At any time within 60 days of the filing of the proposed rule change,
the Commission summarily may temporarily suspend such rule change if it
appears to the Commission that such action is necessary or appropriate
in the public interest, for the protection of investors, or otherwise
in furtherance of the purposes of the Act. If the Commission takes such
action, the Commission shall institute proceedings to determine whether
the proposed rule should be approved or disapproved.
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\41\ 15 U.S.C. 78s(b)(3)(A)(ii).
\42\ 17 CFR 240.19b-4(f)(2).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
<bullet> Use the Commission's internet comment form (<a href="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#86f4f3eae3abe5e9ebebe3e8f2f5c6f5e3e5a8e1e9f0"><span class="__cf_email__" data-cfemail="e694938a83cb85898b8b83889295a6958385c8818990">[email protected]</span></a>. Please include
file number SR-SAPPHIRE-2024-08 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-2024-08. 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
[[Page 68005]]
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-2024-08 and should
be submitted on or before September 12, 2024.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\43\
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\43\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2024-18784 Filed 8-21-24; 8:45 am]
BILLING CODE 8011-01-P
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