Notice2026-04219
Self-Regulatory Organizations; MIAX Sapphire, LLC; Order Approving Proposed Rule Change, as Modified by Amendment No. 1, To Amend Exchange Rule 527 (Exchange Liability)
Primary source
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Published
March 4, 2026
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 91 Issue 42 (Wednesday, March 4, 2026)</title>
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[Federal Register Volume 91, Number 42 (Wednesday, March 4, 2026)]
[Notices]
[Pages 10637-10640]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2026-04219]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-104906; File No. SR-SAPPHIRE-2025-32]
Self-Regulatory Organizations; MIAX Sapphire, LLC; Order
Approving Proposed Rule Change, as Modified by Amendment No. 1, To
Amend Exchange Rule 527 (Exchange Liability)
February 27, 2026.
I. Introduction
On August 15, 2025, MIAX Sapphire, LLC (``MIAX Sapphire'' or
``Exchange'') filed with the Securities and Exchange Commission
(``Commission''), pursuant to Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a
proposed rule change to amend Exchange Rule 527, Exchange Liability, to
provide a one-
[[Page 10638]]
time accommodation payment to Members \3\ for claims arising from the
System \4\ difficulties that the Exchange experienced on June 3, 2025
as a result of an operational error (hereinafter referred to as the
``Operational Error'').\5\ The proposed rule change was published for
comment in the Federal Register on September 3, 2025.\6\
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See infra note 12.
\4\ See infra note 13.
\5\ See Section II below (describing the Operational Error).
\6\ See Securities Exchange Act Release No. 103795 (Aug. 28,
2025), 90 FR 42651.
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On September 25, 2025, pursuant to Section 19(b)(2) of the Act,\7\
the Commission designated a longer period within which to approve the
proposed rule change, disapprove the proposed rule change, or institute
proceedings to determine whether to disapprove the proposed rule
change.\8\ On September 26, 2025, the Exchange filed Amendment No. 1 to
the proposed rule change, which amended and replaced the proposed rule
change as originally filed and superseded such filing in its entirety.
On December 2, 2025, the Commission issued notice of the filing of
Amendment No. 1 to the proposed rule change and instituted proceedings
pursuant to Section 19(b)(2)(B) of the Act \9\ to determine whether to
approve or disapprove the proposed rule change, as modified by
Amendment No. 1.\10\ The Commission has received no comments regarding
the proposed rule change. This order approves the proposed rule change,
as modified by Amendment No. 1.
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\7\ 15 U.S.C. 78s(b)(2).
\8\ See Securities Exchange Act Release No. 104050, 90 FR 47008
(Sept. 30, 2025). The Commission designated December 2, 2025, as the
date by which the Commission must approve or disapprove, or
institute proceedings to determine whether to disapprove, the
proposed rule change.
\9\ 15 U.S.C. 78s(b)(2)(B).
\10\ See Securities Exchange Act Release No. 104294, 90 FR 56235
(Dec. 5, 2025) (``Notice of Amendment No. 1 & OIP'').
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II. Description of the Proposed Rule Change, as Modified by Amendment
No. 1
Currently, Exchange Rule 527(a) sets forth general limitations on
the liability of the Exchange and its directors, officers, committee
members, limited liability company members, employees, or agents.\11\
Exchange Rule 527(b) describes exceptions to the Exchange's general
limitation of liability rule to allow for the payment of compensation
to Members \12\ for claims or losses that arise from a System \13\
issue that impacts the use or enjoyment of the facilities or services
afforded by the Exchange, subject to certain conditions that limit the
maximum amount of Exchange liability.\14\ The Exchange proposes to
amend Exchange Rule 527 to establish a voluntary one-time payment to
Members in excess of the current limitation of liability set forth in
Exchange Rule 527(b) for claims arising from the Operational Error on
June 3, 2025,\15\ in an amount not to exceed $525,000 in the
aggregate.\16\ The Exchange proposes to implement the proposed payment
process upon approval of the proposal and expects to fully compensate
all Members that incurred a loss that has been validated by the
Exchange and occurred as a result of the Operational Error.\17\
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\11\ See Exchange Rule 527(a).
\12\ 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.
\13\ The term ``System'' means the automated trading system used
by the Exchange for the trading of securities. See Exchange Rule
100.
\14\ See Exchange Rule 527(b). See also Notice of Amendment No.
1 & OIP, supra note 10, at 56236.
\15\ The Operational Error caused the Exchange's simulation/
testing environment to connect to MIAX Sapphire's production ports
and inject data into the Exchange's matching engines in the live
trading environment. Upon discovery of the error, the Exchange
halted trading in all symbols and, as discussed below, canceled all
trades that occurred during the relevant time period. See Notice of
Amendment No. 1 & OIP, supra note 10 at 56235-36 (providing
description of the Operational Error and its aftermath).
\16\ See Notice of Amendment No. 1 & OIP, supra note 10, at
56235-36. According to the Exchange, the majority of claims are from
customers of Member firms who utilize a Member firm as their
introducing broker to access and submit orders to the Exchange for
execution. Id. at 56236, n.11.
\17\ See id. at 56235.
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The Exchange proposes to establish new subparagraph (e) to Exchange
Rule 527, which will allow for a one-time payment program in excess of
Exchange liability limits, notwithstanding subparagraphs (b)(1)-(3)
\18\ and subparagraph(c) \19\ of Exchange Rule 527. Specifically, under
proposed subparagraph (e), for the single trading day of June 3, 2025
and the full calendar month of June 2025, the total amount of the
Exchange's liability will not exceed $525,000 for the aggregate of all
claims alleged by all market participants related to the System
difficulties resulting from the Operational Error.\20\ Further,
proposed subparagraph (e) sets forth the eligibility requirements for
such claims for payment, limits compensation to claims previously filed
with and validated by the Exchange, and provides that no new additional
claims arising out of the Operational Error will be accepted.\21\ The
Exchange represents that it has received all claims related to the
Operational Error and expects that all Members will be fully
compensated for their claims arising from the Operational Error.\22\
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\18\ Subparagraphs (b)(1) through (b)(3) of Exchange Rule 527
set forth the limitations on liability for claims made by Members,
individually and in the aggregate, related to Exchange System issues
that impact the use or enjoyment of the facilities of the Exchange.
Specifically, the current liability limits are as follows: (1) as to
any one or more claims made by a single Member growing out of the
use or enjoyment of the facilities afforded by the Exchange on a
single trading day, the Exchange shall not be liable in excess of
the larger of $100,000 or the amount of any recovery obtained by the
Exchange under any applicable insurance maintained by the Exchange;
(2) as to the aggregate of all claims made by all Members growing
out of the use or enjoyment of the facilities afforded by the
Exchange on a single trading day, the Exchange shall not be liable
in excess of the larger of $250,000 or the amount of the recovery
obtained by the Exchange under any applicable insurance maintained
by the Exchange; and (3) as to the aggregate of all claims made by
all Members growing out of the use or enjoyment of the facilities
afforded by the Exchange during a single calendar month, the
Exchange shall not be liable in excess of the larger of $500,000 or
the amount of the recovery obtained by the Exchange under any
applicable insurance maintained by the Exchange.
\19\ Subparagraph (c) of Exchange Rule 527 provides that ``[i]f
all of the claims arising out of the use or enjoyment of the
facilities afforded by the Exchange cannot be fully satisfied
because in the aggregate they exceed the applicable maximum amount
of liability provided for in paragraph (b) . . . then such maximum
amount shall be allocated among all such claims arising on a single
trading day or during a single calendar month, as applicable,
written notice of which has been given to the Exchange no later than
the opening of trading on the next business day following the day on
which the use or enjoyment of Exchange facilities giving rise to the
claim occurred, based upon the proportion that each such claim bears
to the sum of all such claims.'' Exchange Rule 527(c). Accordingly,
the Exchange proposes that the notice requirement of Exchange Rule
527(c) will not apply to claims submitted under proposed paragraph
(e) to Exchange Rule 527. See Notice of Amendment No. 1 & OIP, supra
note 10, at 56238, n.21.
\20\ See proposed Exchange Rule 527(e).
\21\ See Notice of Amendment No. 1 & OIP, supra note 10, at
56238; proposed Exchange Rule 527(e). According to the Exchange,
immediately following the Operational Error, the Exchange's
Regulatory Operations Department spoke to each Member to discuss the
Operational Error, the Exchange's proposed method of remedying
trades based on erroneous simulation/testing environment data, and
the manner in which Members should submit claims for compensation.
See Notice of Amendment No. 1 & OIP, supra note 10, at 56239. The
Exchange further states that it independently verified each Member's
claim and confirmed the loss amount with each Member prior to
submitting the proposed rule change. See id. at 56236-37 (providing
detailed explanation regarding the Exchange's verification process).
\22\ See Notice of Amendment No. 1 & OIP, supra note 10, at
56238. According to the Exchange, the total claims received and
validated by the Exchange equal approximately $500,000. See id. at
56239.
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Proposed subparagraph (e)(1) of Exchange Rule 527 provides that all
claims for compensation must arise solely from realized trading losses
from executions that occurred on the Exchange on June 3, 2025 between
11:18 a.m. and 11:33 a.m. Eastern Time (the
[[Page 10639]]
``Timeframe'') that the Exchange subsequently canceled pursuant to
Exchange Rule 523, causing Members to execute a new trade on the
Exchange or at an away-exchange to replace the canceled trade. Proposed
subparagraphs (e)(1)(i)-(ii) describe the process the Exchange used to
determine a Member's trading losses. Specifically, for trading losses
that resulted from a Member executing the replacement trade \23\ on
MIAX Sapphire, the Exchange validated: (1) that the canceled trade took
place on MIAX Sapphire during the Timeframe of the Operational Error
based on the Member's MPID \24\; (2) the execution price of the
canceled trade; (3) that the replacement trade took place on MIAX
Sapphire; and (4) the execution price of the replacement trade.
Further, for trading losses that resulted from a Member executing the
replacement trade on an away-exchange, the Exchange validated: (1) that
the canceled trade took place on MIAX Sapphire during the Timeframe of
the Operational Error based on the Member's MPID; (2) the execution
price of the canceled trade; and (3) the execution price of the
replacement trade.\25\ In either case, the measure of loss was
calculated based on the difference between the execution prices of the
canceled trade and the replacement trade.\26\
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\23\ For purposes of Exchange Rule 527(e), unless stated
otherwise, the term ``replacement trade'' is construed to mean the
new trade executed by a Member on MIAX Sapphire or at an away-
exchange that was executed to replace the original trade that was
canceled by MIAX Sapphire during the timeframe of the Operational
Error. See proposed Exchange Rule 527(e)(1)(iii).
\24\ The term ``MPID'' means unique market participant
identifier. See Exchange Rule 100.
\25\ The Exchange validated the execution price of the
replacement trade by comparing such price against the closing or
opening price of the option, depending on the time of execution, as
well as the size of the replacement trade in comparison to the
original trade that was canceled. See proposed Exchange Rule
527(e)(1)(ii).
\26\ See proposed Exchange Rule 527(e)(1)(i) and (ii).
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Under the proposal, all payments will be made in cash and will not
be made until this proposed rule change becomes effective and
final.\27\ Further, payments to Members under proposed Exchange Rule
527(e) will be contingent on a Member submitting to the Exchange an
attestation within 14 calendar days after the effective date of the
proposed rule change (i.e., the date of Commission approval) detailing
the following information for each original trade that was canceled by
the Exchange that took place during the Timeframe of the Operational
Error and each replacement trade: (1) trade date; (2) execution time;
(3) symbol; (4) strike price; (5) expiration date; (6) side (buy or
sell); (7) quantity; (8) venue (on MIAX Sapphire or an away-exchange);
(9) notional value; and (10) claimed loss amount. Failure to provide
the required attestation will void the Member's eligibility to receive
a payment.\28\ Each Member will be required to maintain books and
records that detail the nature and amount of their losses.\29\
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\27\ See proposed Exchange Rule 527(e)(2).
\28\ See proposed Exchange Rule 527(e)(3).
\29\ See id.
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Finally, all payments to Members will be contingent upon the
execution and delivery to the Exchange of a release by the Member of
all claims by it or its affiliates \30\ against the Exchange or its
affiliates for losses that arise out of, are associated with, or relate
in any way to the Operational Error or to any actions or omissions
related in any way to the Operational Error. Failure to provide the
required release within 14 calendar days after the effective date of
the proposed rule change will void the Member's eligibility to receive
a payment for its claim.\31\ The Exchange states that participation in
the proposed payment program is voluntary on the part of Members and
the program is designed to quantify and provide compensation in an
objectively discernable manner for customer losses there were directly
attributable to the Operational Error.\32\
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\30\ 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.
\31\ See proposed Exchange Rule 527(e)(4).
\32\ See Notice of Amendment No. 1 & OIP, supra note 10, at
56238-39.
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III. Discussion and Commission Findings
After careful review, the Commission finds that the proposed rule
change, as modified by Amendment No. 1, is consistent with the
requirements of the Act and the rules and regulations thereunder
applicable to a national securities exchange.\33\ In particular, the
Commission finds that the proposed rule change, as modified by
Amendment No. 1, is consistent with Section 6(b)(5) of the Act,\34\
which requires, among other things, 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, and not be
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers.
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\33\ In approving this proposed rule change, the Commission has
considered the proposed rule's impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
\34\ 15 U.S.C. 78f(b)(5).
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As discussed above, the Exchange's current limitation of liability
rules limit the amount of compensation Members may receive for claims
or losses that arise from a System issue that impacts the use or
enjoyment of the facilities or services afforded by the Exchange. In
particular, under existing Exchange Rules 527(b)(1)-(3), payment for
all claims cannot exceed the larger of (1) $100,000 for claims made by
a single Member related to a single trading day, $250,000 for the
aggregate of all claims made by all Members related to a single trading
day, or $500,000 for all claims made by all Members related to a single
calendar month, respectively; or (2) the amount of the recovery
obtained by the Exchange under any applicable insurance.\35\ The
Exchange proposes to amend Exchange Rule 527 to provide a one-time
voluntary payment program for claims arising from the Operational Error
it experienced on June 3, 2025. The proposed rule change would create a
means of providing significantly more compensation to compensate
Members for eligible claims arising from the Operational Error than
would otherwise be permitted under current Exchange Rule 527 and the
Exchange expects that the $525,000 aggregate amount would be sufficient
to fully compensate Members for losses arising out of the Operational
Error. Further, the Exchange states that this type of payment policy is
not without precedent.\36\
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\35\ See Exchange Rule 527(b)(1)-(3).
\36\ See Notice of Amendment No. 1 & OIP, supra note 10, at
56236, n.12 and accompanying text (stating that the Exchange's
proposal is substantively similar to the one-time payment plan set
forth in SR-NASDAQ-2012-090, which provided compensation in
connection with an operational error in excess of Nasdaq's then in
effect limitations on liability rules).
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It is consistent with Section 6(b)(5) of the Act \37\ and in the
public interest for the Exchange to allow for a one-time accommodation
payment in excess of its current limitation of liability rules so that
it can fully compensate Members for losses incurred in connection with
the Operational Error the Exchange experienced on June 3, 2025. The
Exchange's proposal provides clear and objective eligibility criteria
and a transparent process for the submission
[[Page 10640]]
and verification of Member claims. As discussed above, proposed
subparagraphs (e)(1)(i)-(ii) of Exchange Rule 527 describe the criteria
and process the Exchange used to determine a Member's trading losses,
and subparagraphs (e)(3) and (4) set forth the parameters and timing
required for proper attestation and release of claims in connection
with the Operational Error. The Exchange states that it has received
and verified all claims. For the reasons discussed, the Commission
finds that the Exchange's proposal to amend existing Exchange Rule 527
to establish a liability limit not to exceed $525,000 so that it can
fully compensate Members for claims related to the System difficulties
that resulted in connection with the Operational Error on June 3, 2025,
and to follow the process set forth herein to provide such
compensation, is consistent with the Section 6(b)(5) of the Act.
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\37\ 15 U.S.C. 78f(b)(5).
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IV. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\38\ that the proposed rule change (SR-SAPPHIRE-2025-32), as
modified by Amendment No. 1, be and hereby is, approved.
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\38\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\39\
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\39\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2026-04219 Filed 3-3-26; 8:45 am]
BILLING CODE 8011-01-P
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