Self-Regulatory Organizations; MIAX Emerald, LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Its Fee Schedule To Adopt Application Programming Interface (“API”) Testing and Certification Fees and Network Connectivity Testing and Certification Fees, 66607-66612 [2020-23142]
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Federal Register / Vol. 85, No. 203 / Tuesday, October 20, 2020 / Notices
of the Act 68 and paragraph (f)(2) of Rule
19b–4 thereunder.69 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.
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
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
FINRA–2020–032 on the subject line.
Paper Comments
• 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–FINRA–2020–032. 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 (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for website viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE,
Washington, DC 20549, on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of FINRA. All comments received
will be posted without change. Persons
submitting comments are cautioned that
we do not redact or edit personal
identifying information from comment
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File Number SR–FINRA–
2020–032 and should be submitted on
or before November 10, 2020.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.70
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020–23141 Filed 10–19–20; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–90183; File No. SR–
EMERALD–2020–09]
Self-Regulatory Organizations; MIAX
Emerald, LLC; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change To Amend Its Fee
Schedule To Adopt Application
Programming Interface (‘‘API’’) Testing
and Certification Fees and Network
Connectivity Testing and Certification
Fees
October 14, 2020.
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 October
1, 2020, MIAX Emerald, LLC (‘‘MIAX
Emerald’’ or ‘‘Exchange’’), filed with the
Securities and Exchange Commission
(‘‘Commission’’) a proposed rule change
as described in Items I, II, and III below,
which Items have been prepared by the
Exchange. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange is filing a proposal to
amend the MIAX Emerald Fee Schedule
(the ‘‘Fee Schedule’’) to establish
Application Programming Interface
(‘‘API’’) Testing and Certification fees
and Network Connectivity Testing and
Certification fees.
The text of the proposed rule change
is available on the Exchange’s website at
https://www.miaxoptions.com/rulefilings/emerald, at MIAX’s principal
70 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
68 15
U.S.C. 78s(b)(3)(A).
69 17 CFR 240.19b–4(f)(2).
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66607
office, and at the Commission’s Public
Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to amend the
Fee Schedule to establish API Testing
and Certification fees for Members 3 and
non-Members and Network
Connectivity Testing and Certification
fees for Members and non-Members.
MIAX Emerald commenced operations
as a national securities exchange
registered under Section 6 of the Act 4
on March 1, 2019.5 The Exchange
adopted its transaction fees and certain
of its non-transaction fees in its filing
SR–EMERALD–2019–15.6 In that filing,
the Exchange expressly waived, among
other fees, API Testing and Certification
fees and Network Connectivity Testing
and Certification fees, both for Members
and non-Members, in order to provide
an incentive to prospective Members
and non-Members to connect to MIAX
Emerald as soon as possible. At that
time, the Exchange waived API Testing
and Certification fees and Network
Connectivity Testing and Certification
fees for the Waiver Period 7 and stated
3 ‘‘Member’’ means an individual or organization
approved to exercise the trading rights associated
with a Trading Permit. Members are deemed
‘‘members’’ under the Exchange Act. See Exchange
Rule 100 and the Definitions section of the Fee
Schedule.
4 15 U.S.C. 78f.
5 See Securities Exchange Act Release No. 84891
(December 20, 2018), 83 FR 67421 (December 28,
2018) (File No. 10–233) (order approving
application of MIAX Emerald, LLC for registration
as a national securities exchange).
6 See Securities Exchange Act Release No. 85393
(March 21, 2019), 84 FR 11599 (March 27, 2019)
(SR–EMERALD–2019–15) (Notice of Filing and
Immediate Effectiveness of a Proposed Rule Change
To Establish the MIAX Emerald Fee Schedule).
7 ‘‘Waiver Period’’ means, for each applicable fee,
the period of time from the initial effective date of
the MIAX Emerald Fee Schedule until such time
Continued
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Federal Register / Vol. 85, No. 203 / Tuesday, October 20, 2020 / Notices
that it would provide notice to market
participants when the Exchange
intended to terminate the Waiver
Period.
On September 15, 2020, the Exchange
issued a Regulatory Circular which
announced that the Exchange would
terminate the Waiver Period for, among
other fees, API Testing and Certification
fees and Network Connectivity Testing
and Certification fees for Members and
non-Members, beginning October 1,
2020.8
API Testing and Certification Fees for
Members
The Exchange proposes to adopt an
API Testing and Certification fee for
Members. An API makes it possible for
Member software to communicate with
MIAX Emerald software applications,
and is subject to Member testing with,
and certification by, MIAX Emerald. API
testing and certification includes, for
Electronic Exchange Members 9
(‘‘EEMs’’), testing all available order
types, new order entry, order
management, order throughput and
mass order cancellation. For Market
Makers,10 API testing and certification
also includes testing of all available
quote types, quote throughput, quote
management and cancellation,
Aggregate Risk Manager settings and
triggers, and confirmation of quotes
within the trading engines.
The API Testing and Certification fees
for Members are based upon the type of
interface that the Member has been
credentialed to use. The Exchange
proposes to adopt an API testing and
certification fee for EEMs (other than
Clearing Firms): (i) Initially per API for
Financial Information Exchange
(‘‘FIX’’) 11 ports, FIX Drop Copy
that the Exchange has an effective fee filing
establishing the applicable fee. The Exchange will
issue a Regulatory Circular announcing the
establishment of an applicable fee that was subject
to a Waiver Period at least fifteen (15) days prior
to the termination of the Waiver Period and
effective date of any such applicable fee. See the
Definitions Section of the Fee Schedule.
8 See MIAX Emerald Regulatory Circular 2020–41
available at https://www.miaxoptions.com/sites/
default/files/circular-files/MIAX_Emerald_RC_
2020_41.pdf.
9 ‘‘Electronic Exchange Member’’ or ‘‘EEM’’
means the holder of a Trading Permit who is not
a Market Maker. Electronic Exchange Members are
deemed ‘‘members’’ under the Exchange Act. See
the Definitions section of the Fee Schedule.
10 The term ‘‘Market Maker’’ refers to ‘‘Lead
Market Maker’’ (‘‘LMM’’), ‘‘Primary Lead Market
Maker’’ (‘‘PLMM’’) and ‘‘Registered Market Maker’’
(‘‘RMM’’), collectively. See Exchange Rule 100. See
also the Definitions section of the Fee Schedule.
11 ‘‘FIX Port’’ means an interface with MIAX
Emerald systems that enables the Port user to
submit simple and complex orders electronically to
MIAX Emerald. See the Definitions section of the
Fee Schedule.
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(‘‘FXD’’) 12 ports and Clearing Trade
Drop (‘‘CTD’’) 13 ports in the month the
EEM has been credentialed to use one
or more ports in the production
environment for the tested API, and (ii)
each time an EEM initiates a change to
its system that requires testing and
certification. The Exchange proposes to
adopt an API testing and certification
fee for EEM Clearing Firms (i) initially
per API in the month the EEM Clearing
Firm has been credentialed to use one
or more CTD Ports in the production
environment, and (ii) each time an EEM
Clearing Firm initiates a change to its
system that requires testing and
certification.
The Exchange proposes to adopt an
API testing and certification fee for
Market Makers: (i) Initially per API for
CTD and MIAX Emerald Express
Interface (‘‘MEI’’) 14 ports in the month
the Market Maker has been credentialed
to use one or more ports in the
production environment for the tested
API and the Market Maker has been
assigned to quote in one or more classes,
and (ii) each time a Market Maker
initiates a change to its system that
requires testing and certification. The
Exchange also proposes that API Testing
12 The FIX Drop Copy (‘‘FXD’’) Port is a
messaging interface that will provide a copy of realtime trade execution, trade correction and trade
cancellation information to FXD Port users who
subscribe to the service. FXD Port users are those
users who are designated by an EEM to receive the
information and the information is restricted for use
by the EEM. FXD Port Fees will be assessed in any
month the Member is credentialed to use the FXD
Port in the production environment. See Fee
Schedule, Section 4)d)iv).
13 ‘‘CTD Port’’ or ‘‘Clearing Trade Drop Port’’
provides an Exchange Member with a real-time
clearing trade updates. The updates include the
Member’s clearing trade messages on a low latency,
real-time basis. The trade messages are routed to a
Member’s connection containing certain
information. The information includes, among other
things, the following: (i) Trade date and time; (ii)
symbol information; (iii) trade price/size
information; (iv) Member type (for example, and
without limitation, Market Maker, Electronic
Exchange Member, Broker-Dealer); and (v)
Exchange MPID for each side of the transaction,
including Clearing Member MPID. See the
Definitions section of the Fee Schedule.
14 The MEI is a connection to the MIAX Emerald
System that enables Market Makers to submit
simple and complex electronic quotes to MIAX
Emerald. The Exchange offers Full Service MEI
Ports, which provide Market Makers with the
ability to send Market Maker simple and complex
quotes, eQuotes, and quote purge messages to the
MIAX Emerald System. Full Service MEI Ports are
also capable of receiving administrative
information. Market Makers are limited to two Full
Service MEI Ports per Matching Engine. The
Exchange also offers Limited Service MEI Ports,
which provide Market Makers with the ability to
send simple and complex eQuotes and quote purge
messages only, but not Market Maker Quotes, to the
MIAX Emerald System. Limited Service MEI Ports
are also capable of receiving administrative
information. Market Makers initially receive two
Limited Service MEI Ports per Matching Engine.
See the Definitions section of the Fee Schedule.
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and Certification fees will not be
assessed in situations where the
Exchange initiates a mandatory change
to the Exchange’s System 15 that requires
testing and certification. The Exchange
proposes to assess Member API Testing
and Certification fees of $1,000 for
EEMs and $2,500 for Market Makers.
Below is the proposed fee table for API
Testing and Certification fees for
Members:
Type of member
Electronic Exchange
Member .......................
Market Maker ..................
API testing and
certification fee
$1,000.00
2,500.00
API Testing and Certification Fee for
Non-Members
The Exchange proposes to adopt an
API Testing and Certification fee for
Third Party Vendors,16 Service
Bureaus 17 and other non-Members
(such as clearing firms): (i) Initially per
API for FIX, FXD, CTD and MEI ports
in the month the Third Party Vendor,
Service Bureau or non-Member has been
credentialed to use one or more ports in
the production environment for the
tested API, and (ii) each time a Third
Party Vendor, Service Bureau, or other
non-Member initiates a change to its
system that requires testing and
certification. The Exchange also
proposes that API Testing and
Certification fees will not be assessed to
non-Members in situations where the
Exchange initiates a mandatory change
to the Exchange’s System that requires
testing and certification.
The Exchange proposes to assess nonMember API Testing and Certification
fees of $1,200 for Third Party Vendors,
Service Bureaus and other nonMembers. Below is the proposed fee
table for API Testing and Certification
fees for non-Members:
Non-member
Third Party Vendors and
Service Bureaus and
other non-Members .....
API testing and
certification fee
$1,200.00
15 The term ‘‘System’’ means the automated
trading system used by the Exchange for the trading
of securities. See Exchange Rule 100.
16 Third Party Vendors are subscribers of MIAX
Emerald’s market and other data feeds, which they
in turn use for redistribution purposes. Third Party
Vendors do not provide connectivity and therefore
are not subject to Network testing and certification.
See the Definitions section of the Fee Schedule.
17 ‘‘Service Bureau’’ means a technology provider
that offers and supplies technology and technology
services to a trading firm that does not have its own
proprietary system. See the Definitions section of
the Fee Schedule.
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The higher proposed fee charged to
Third Party Vendors, Service Bureaus
and non-Members reflects the greater
amount of time spent by MIAX Emerald
employees testing and certifying nonMembers. It has been MIAX Emerald’s
experience that Member testing takes
less time than non-Member testing
because Members have more experience
testing these systems with exchanges,
resulting in generally fewer questions
and issues arising during the testing and
certification process. Also, because
Third Party Vendors and Service
Bureaus are redistributing data and
reselling services to other Members and
market participants, the number and
types of scenarios that need to be tested
are more numerous and complex than
those tested and certified for a single
Member.
The Exchange believes it is necessary
to charge an API Testing and
Certification fee to Members and nonMembers because of the time and
resources spent to ensure that Member
and non-Member APIs function
correctly to prevent any System
malfunction. Further, the Exchange
believes the price differential in API
Testing and Certification fees for
Members and non-Members is not
unfairly discriminatory because, in the
Exchange’s experience, Member testing
takes less time than non-Member testing
as Members have more experience
testing these systems with exchanges,
resulting generally in fewer questions
and issues arising during the testing and
certification process.
Network Connectivity Testing and
Certification Fee for Members
The Exchange established electronic
communication connections with
Members and now proposes to assess
Members a Network Connectivity
Testing and Certification fee for each 1
Gigabit (‘‘Gb’’) connection and 10 Gb
ultra-low-latency (‘‘ULL’’) connection.
The Exchange proposes to assess a
Member Network Connectivity Testing
and Certification fee: (i) Initially per
connection in the month the Individual
Firm has been credentialed to use any
API or Market Data feeds in the
production environment utilizing the
tested network connection, and (ii) each
time an Individual Firm initiates a
change to its system that requires
network connectivity testing and
certification. Network Connectivity
Testing and Certification fees will not be
assessed in situations where the
Exchange initiates a mandatory change
to the Exchange’s system that requires
testing and certification. Member
Network Connectivity Testing and
Certification fees will not be assessed
for testing and certification of
connectivity to the Exchange’s Disaster
Recovery Facility.
The Exchange proposes to assess
Members a Network Connectivity
Testing and Certification Fee of $1,000
per 1Gb connection and $4,000 per
10Gb ULL connection. Below is the
proposed fee table for Member Network
Connectivity Testing and Certification
fees:
1 Gigabit fee
per connection
Type of member
Individual Firm .........................................................................................................................................................
The proposed fee amounts are
identical to the fees currently assessed
for the same services at the Exchange’s
affiliates, Miami International Securities
Exchange, LLC (‘‘MIAX’’) and MIAX
PEARL, LLC (‘‘MIAX PEARL’’). The
Exchange notes that the Emerald
Express Network Interconnect
(‘‘EENI’’) 18 is a network infrastructure
which provides Members and nonMembers network connectivity to the
trading platforms, market data systems,
test systems, and disaster recovery
facility of the Exchange. When utilizing
a Shared 19 cross-connect, the EENI can
also be configured to offer network
connectivity to the trading platforms,
market data systems, test systems, and
disaster recovery facilities of the
Exchange’s affiliates, MIAX and MIAX
PEARL.
Members utilizing a single, Shared
cross-connect to connect to the trading
platforms, market data systems, test
systems, and disaster recovery facilities
of the Exchange, MIAX and MIAX
PEARL will only be assessed one
Network Connectivity Testing and
Certification fee per connection tested,
regardless of the trading platforms,
market data systems, test systems, and
disaster recovery facilities accessed via
such connection.
18 ‘‘EENI’’ means the Emerald Express Network
Interconnect, which is a network infrastructure
which provides Members and non-Members
network connectivity to the trading platforms,
market data systems, test systems, and disaster
recovery facilities of MIAX Emerald. When utilizing
a Shared cross-connect, the EENI can also be
configured to offer network connectivity to the
trading platforms, market data systems, test
systems, and disaster recovery facilities of MIAX
and MIAX PEARL. When utilizing a Dedicated
cross-connect, the EENI can only be configured to
offer network connectivity to the trading platforms,
market data systems, and test systems of MIAX
Emerald. The EENI consists of the low latency and
ultra-low latency connectivity options set forth in
the Exchange’s Fee Schedule. See the Definitions
section of the Fee Schedule.
19 ‘‘Shared’’ (cross-connect) means cross-connect
that provides network connectivity to the trading
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Network Connectivity Testing and
Certification Fee for Non-Members
MIAX Emerald established electronic
connections with Service Bureaus,
Extranet Providers and other nonMembers, and now proposes to assess a
Network Connectivity Testing and
Certification fee for each 1Gb
connection and 10Gb ULL connection.
The Exchange proposes to assess a nonMember Network Connectivity Testing
and Certification fee: (i) Initially per
connection in the month the Service
Bureau, Extranet Provider or other nonMember has been credentialed to use
any API or Market Data feeds in the
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66609
$1,000.00
10 Gigabit
ULL fee per
connection
$4,000.00
production environment using the
tested network connection, and (ii) each
time Service Bureau, Extranet Provider
or other non-Member initiates a change
to its system that requires network
connectivity testing and certification.
Network Connectivity Testing and
Certification fees will not be assessed in
situations where the Exchange initiates
a mandatory change to the Exchange’s
system that requires testing and
certification. Non-Member Network
Connectivity Testing and Certification
fees will not be assessed for testing and
certification of connectivity to the
Exchange’s Disaster Recovery Facility.
The Exchange proposes to assess nonMembers a Network Connectivity
Testing and Certification Fee of $1,200
per 1Gb connection and $4,200 per
10Gb ULL connection. Below is the
proposed fee table for non-Member
Network Connectivity Testing and
Certification fees:
platforms, market data systems, test systems, and/
or disaster recovery facilities of MIAX Emerald,
MIAX and MIAX PEARL via a single, shared
connection. The following connections can be
Shared across MIAX Emerald, MIAX and MIAX
PEARL: 1 Gigabit, 1 Gigabit Disaster Recovery, and
10 Gigabit Disaster Recovery. See the Definitions
section of the Fee Schedule.
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1 Gigabit fee
per connection
Non-member
Service Bureau/Extranet Provider and other non-Members ...................................................................................
The EENI is also available to nonMember subscribers. For non-Member
subscribers, when utilizing a Shared
cross-connect, the EENI can also be
configured to offer network connectivity
to the trading platforms, market data
systems, test systems, and disaster
recovery facilities of the Exchange’s
affiliates, MIAX and MIAX PEARL.
Accordingly, non-Members utilizing
Shared cross-connects to connect to the
trading platforms, market data systems,
test systems, and disaster recovery
facilities of the Exchange and its
affiliates, MIAX and MIAX PEARL, will
only be assessed one Network
Connectivity Testing and Certification
fee per connection tested, regardless of
the trading platforms, market data
systems, test systems, and disaster
recovery facilities accessed via such
connection. The Member and nonMember Network Testing and
Certification fees represent installation
and support costs incurred by the
Exchange as it works with each Member
and non-Member to make sure there are
appropriate electronic connections with
MIAX Emerald. The Exchange’s
affiliates, MIAX and MIAX PEARL,
charge the same fees for the same
services for their Members and nonMembers.20 The Exchange proposes to
assess a higher Network Connectivity
Testing and Certification fee to nonMembers than to Members, similar to
how MIAX and MIAX PEARL assesses
such fees to their Members and nonMembers. The higher fee charged to
non-Members reflects the greater
amount of time spent by MIAX Emerald
employees testing and certifying nonMembers. It has been MIAX Emerald’s
experience that Member network
connectivity testing takes less time than
non-Member network connectivity
testing because Members have more
experience testing these systems with
exchanges as generally fewer questions
and issues arise during the testing and
certification process.
The Commission has repeatedly
expressed its preference for competition
over regulatory intervention in
determining prices, products, and
services in the securities markets. In
Regulation NMS, the Commission
highlighted the importance of market
20 See MIAX Fee Schedule, Sections 4)c) and 4)d);
see also MIAX PEARL Fee Schedule, Sections 4)c)
and 4)d.
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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.’’ 21
There are currently 16 registered
options exchanges competing for order
flow. Based on publicly-available
information, and excluding index-based
options, no single exchange has more
than approximately 16% market
share.22 Therefore, no exchange
possesses significant pricing power.
More specifically, for the month of
August 2020, the Exchange had an
approximately 3.24% market share of
executed volume of multiply-listed
equity options.23 The Exchange believes
that the ever-shifting market share
among the exchanges from month to
month demonstrates that market
participants can discontinue or reduce
use of certain categories of products, or
shift order flow, in response to nontransaction and transaction fee changes.
For example, on February 28, 2019, the
Exchange’s affiliate, MIAX PEARL, LLC
(‘‘MIAX PEARL’’) filed with the
Commission a proposal to increase
Taker fees in certain Tiers for options
transactions in certain Penny classes for
Priority Customers and decrease Maker
rebates in certain Tiers for options
transactions in Penny classes for
Priority Customers (which fee was to be
effective March 1, 2019).24 MIAX
PEARL experienced a decrease in total
market share for the month of March
2019, after the proposal went into effect.
Accordingly, the Exchange believes that
the MIAX PEARL March 1, 2019 fee
change, to increase certain transaction
fees and decrease certain transaction
rebates, may have contributed to the
decrease in MIAX PEARL’s market share
and, as such, the Exchange believes
competitive forces constrain the
Exchange’s, and other options
exchanges, ability to set transaction fees
and market participants can shift order
21 See Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37496 (June 29, 2005).
22 The Options Clearing Corporation (‘‘OCC’’)
publishes options and futures volume in a variety
of formats, including daily and monthly volume by
exchange, available here: https://www.theocc.com/
market-data/volume/default.jsp.
23 See id.
24 See Securities Exchange Act Release No. 85304
(March 13, 2019), 84 FR 10144 (March 19, 2019)
(SR–PEARL–2019–07).
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$1,200.00
10 Gigabit
ULL fee per
connection
$4,200.00
flow based on fee changes instituted by
the exchanges.
Further, as there are currently 16
registered options exchanges competing
for order flow with no single exchange
accounting for more than approximately
16% of market share,25 the Exchange
cannot predict with certainty whether
any market participant is planning to
utilize any of the services of the
Exchange such that API testing and
certification or network connectivity
testing and certification would be
required, in which the Member or nonMember would be subject to the
proposed API Testing and Certification
fees and/or the Network Connectivity
Testing and Certification fees that the
Exchange proposes to establish herein.
2. Statutory Basis
The Exchange believes that its
proposal to amend its Fee Schedule is
consistent with Section 6(b) of the Act 26
in general, and furthers the objectives of
Section 6(b)(4) of the Act 27 in
particular, in that it is an equitable
allocation of reasonable dues, fees and
other charges among its members and
issuers and other persons using its
facilities. The Exchange also believes
the proposal furthers the objectives of
Section 6(b)(5) of the Act in that it is
designed to promote just and equitable
principles of trade, to remove
impediments to and perfect the
mechanism of a free and open market
and a national market system, and, in
general to protect investors and the
public interest and is not designed to
permit unfair discrimination between
customers, issuers, brokers and dealers.
The Exchange believes its proposal to
adopt API Testing and Certification fees
and Network Connectivity Testing and
Certification fees provides for the
equitable allocation of reasonable dues
and fees and is not unfairly
discriminatory for the following
reasons. First, the Exchange operates in
a highly competitive market. The
Commission has repeatedly expressed
its preference for competition over
regulatory intervention in determining
prices, products, and services in the
securities markets. In Regulation NMS,
the Commission highlighted the
importance of market forces in
25 See
supra note 22.
U.S.C. 78f(b).
27 15 U.S.C. 78f(b)(4) and (5).
26 15
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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.’’ 28
There are currently 16 registered
options exchanges competing for order
flow. Based on publicly-available
information, and excluding index-based
options, no single exchange has more
than approximately 16% of the market
share of executed volume of multiplylisted equity and ETF options.29
Therefore, no exchange possesses
significant pricing power. More
specifically, for the month of August
2020, the Exchange had approximately
3.24% market share of executed volume
of multiply-listed equity options.30
The Exchange also believes that the
ever-shifting market share among the
exchanges from month to month
demonstrates that market participants
can discontinue or reduce use of certain
categories of products, or shift order
flow, in response to non-transaction and
transaction fee changes. For example, on
February 28, 2019, the Exchange’s
affiliate, MIAX PEARL, filed with the
Commission a proposal to increase
Taker fees in certain Tiers for options
transactions in certain Penny classes for
Priority Customers and decrease Maker
rebates in certain Tiers for options
transactions in Penny classes for
Priority Customers (which fee was to be
effective March 1, 2019).31 MIAX
PEARL experienced a decrease in total
market share for the month of March
2019, after the proposal went into effect.
Accordingly, the Exchange believes that
the MIAX PEARL March 1, 2019 fee
change, to increase certain transaction
fees and decrease certain transaction
rebates, may have contributed to the
decrease in MIAX PEARL’s market share
and, as such, the Exchange believes
competitive forces constrain the
Exchange’s, and other options
exchanges, ability to set transaction fees
and market participants can shift order
flow based on fee changes instituted by
the exchanges.
Second, the Exchange believes its
proposal to adopt API Testing and
Certification fees and Network
Connectivity Testing and Certification
fees for Members and non-Members is
28 See Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37496 (June 29, 2005).
29 The Options Clearing Corporation (‘‘OCC’’)
publishes options and futures volume in a variety
of formats, including daily and monthly volume by
exchange, available here: https://www.theocc.com/
market-data/volume/default.jsp.
30 See id.
31 See supra note 24.
VerDate Sep<11>2014
18:08 Oct 19, 2020
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an equitable allocation of reasonable
dues and fees pursuant to Section
6(b)(4) of the Act 32 because of the time
and resources spent to ensure that
Member and non-Member APIs and
connectivity function correctly to
prevent any System malfunction.
Further, the Exchange believes the price
differential in API Testing and
Certification fees and Network
Connectivity Testing and Certification
fees for Members and non-Members is
not unfairly discriminatory because, in
the Exchange’s experience, Member
testing utilizes less Exchange resources
and employee time than non-Member
testing as Members have more
experience testing these systems with
exchanges, resulting generally in fewer
questions and issues arising during the
testing and certification process. Also,
with respect to API testing and
certification, because Third Party
Vendors and Service Bureaus are
redistributing data and reselling services
to other Members and market
participants the number and types of
scenarios that need to be tested are more
numerous and complex than those
tested and certified for Members.
Accordingly, the Exchange no longer
believes it is necessary to waive API
Testing and Certification fees and
Network Connectivity Testing and
Certification fees to attract market
participants to the MIAX Emerald
market since this market is now
established and MIAX Emerald no
longer needs to rely on such waivers to
attract market participants. The
Exchange believes its proposed API
Testing and Certification fees and
Network Connectivity Testing and
Certification fees are reasonable and
well within the range of non-transaction
fees assessed among other exchanges,
including the Exchange’s affiliates,
MIAX and MIAX PEARL.33
Finally, the Exchange notes that it
operates in a highly competitive market
in which market participants can
readily favor competing venues if they
deem fee levels at a particular venue to
be excessive. In such an environment,
the Exchange must continually adjust its
fees for services and products, in
addition to order flow, to remain
competitive with other exchanges. The
Exchange believes that the proposed
changes reflect this competitive
environment.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
32 15
U.S.C. 78f(b)(4).
supra note 20.
33 See
PO 00000
Frm 00079
Fmt 4703
any burden on competition not
necessary or appropriate in furtherance
of the purposes of the Act.
Intra-Market Competition
The Exchange does not believe that
the proposed rule change would place
certain market participants at the
Exchange at a relative disadvantage
compared to other market participants
or affect the ability of such market
participants to compete. Unilateral
action by MIAX Emerald in the
assessment of certain non-transaction
fees for services provided to its
Members and others using its facilities
will not have an impact on competition.
As a more recent entrant in the already
highly competitive environment for
equity options trading, MIAX Emerald
does not have the market power
necessary to set prices for services that
are unreasonable or unfairly
discriminatory in violation of the Act.
MIAX Emerald’s proposed API Testing
and Certification fee levels and Network
Connectivity Testing and Certification
fee levels, as described herein, are
comparable to fee levels charged by
other options exchanges for the same or
similar services, including those fees
assessed by the Exchange’s affiliates,
MIAX and MIAX PEARL.34
The Exchange believes that the
proposed API Testing and Certification
fees and Network Connectivity Testing
and Certification fees do not place
certain market participants at a relative
disadvantage to other market
participants because the fees do not
apply unequally to different size market
participants, but instead would allow
the Exchange charge for the time and
resource necessary for API testing and
certification and network connectivity
testing and certification for Members
and non-Members to ensure proper
functioning of all available order types,
new order entry, order management,
order throughput and mass order
cancellation (as well as, for Market
Makers, all available quote types, quote
throughput, quote management and
cancellation, Aggregate Risk Manager
settings and triggers, and confirmation
of quotes within the trading engines).
Accordingly, the proposed API Testing
and Certification fees and network
connectivity testing and certification
fees do not favor certain categories of
market participants in a manner that
would impose a burden on competition.
Inter-Market Competition
The Exchange believes the proposed
API Testing and Certification fees and
network connectivity testing and
34 See
Sfmt 4703
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Federal Register / Vol. 85, No. 203 / Tuesday, October 20, 2020 / Notices
certification fees do not place an undue
burden on competition on other SROs
that is not necessary or appropriate. The
Exchange operates in a highly
competitive market in which market
participants can readily favor one of the
16 competing options venues if they
deem fee levels at a particular venue to
be excessive.35 Based on publiclyavailable information, and excluding
index-based options, no single exchange
has more than 16% market share.
Therefore, no exchange possesses
significant pricing power in the
execution of multiply-listed equity and
ETF options order flow. For the month
of August 2020, the Exchange had a
market share of approximately 3.24% of
executed multiply-listed equity
options 36 and the Exchange believes
that the ever-shifting market share
among exchanges from month to month
demonstrates that market participants
can discontinue or reduce use of certain
categories of products, or shift order
flow, in response to fee changes. In such
an environment, the Exchange must
continually adjust its fees and fee
waivers to remain competitive with
other exchanges and to attract order
flow to the Exchange.
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,37 and Rule
19b–4(f)(2) 38 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.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
35 See
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
EMERALD–2020–09 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–EMERALD–2020–09. 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 (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for website viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE,
Washington, DC 20549, on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change.
Persons submitting comments are
cautioned that we do not redact or edit
personal identifying information from
comment submissions. You should
submit only information that you wish
to make available publicly. All
submissions should refer to File
Number SR–EMERALD–2020–09 and
should be submitted on or before
November 10, 2020.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.39
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020–23142 Filed 10–19–20; 8:45 am]
supra note 22.
BILLING CODE 8011–01–P
36 Id.
U.S.C. 78s(b)(3)(A)(ii).
38 17 CFR 240.19b–4(f)(2).
18:08 Oct 19, 2020
[Release No. 34–90180; File No. SR–NYSE–
2020–82]
Self-Regulatory Organizations; New
York Stock Exchange LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change To Amend Its
Price List
October 14, 2020.
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934 (the
‘‘Act’’) 2 and Rule 19b–4 thereunder,3
notice is hereby given that, on
September 30, 2020, New York Stock
Exchange LLC (‘‘NYSE’’ or the
‘‘Exchange’’) filed with the Securities
and Exchange Commission (the
‘‘Commission’’) the proposed rule
change as described in Items I, II, and
III below, which Items have been
prepared by the self-regulatory
organization. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend its
Price List to (1) extend the Transition
Period for member organizations to
transition to the utilization of ports that
connect to the Exchange using Pillar
technology; (2) extend the
Decommission Period that begins once
the Transition Period ends; and (3)
extend the effective date that the
Exchange would prorate the monthly fee
for ports activated on or after July 1,
2019. The Exchange proposes to
implement these changes to its Price
List effective October 1, 2020. The
proposed rule change is available on the
Exchange’s website at www.nyse.com, at
the principal office of the Exchange, 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
self-regulatory organization 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 those statements may be examined at
the places specified in Item IV below.
The Exchange has prepared summaries,
1 15
37 15
VerDate Sep<11>2014
SECURITIES AND EXCHANGE
COMMISSION
U.S.C. 78s(b)(1).
U.S.C. 78a.
3 17 CFR 240.19b–4.
2 15
39 17
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]]>Agencies
[Federal Register Volume 85, Number 203 (Tuesday, October 20, 2020)]
[Notices]
[Pages 66607-66612]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-23142]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-90183; File No. SR-EMERALD-2020-09]
Self-Regulatory Organizations; MIAX Emerald, LLC; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend
Its Fee Schedule To Adopt Application Programming Interface (``API'')
Testing and Certification Fees and Network Connectivity Testing and
Certification Fees
October 14, 2020.
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 October 1, 2020, MIAX Emerald, LLC (``MIAX Emerald'' or
``Exchange''), filed with the Securities and Exchange Commission
(``Commission'') a proposed rule change as described in Items I, II,
and III below, which Items have been prepared by the Exchange. The
Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange is filing a proposal to amend the MIAX Emerald Fee
Schedule (the ``Fee Schedule'') to establish Application Programming
Interface (``API'') Testing and Certification fees and Network
Connectivity Testing and Certification fees.
The text of the proposed rule change is available on the Exchange's
website at https://www.miaxoptions.com/rule-filings/emerald, at MIAX's
principal office, and at the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend the Fee Schedule to establish API
Testing and Certification fees for Members \3\ and non-Members and
Network Connectivity Testing and Certification fees for Members and
non-Members. MIAX Emerald commenced operations as a national securities
exchange registered under Section 6 of the Act \4\ on March 1, 2019.\5\
The Exchange adopted its transaction fees and certain of its non-
transaction fees in its filing SR-EMERALD-2019-15.\6\ In that filing,
the Exchange expressly waived, among other fees, API Testing and
Certification fees and Network Connectivity Testing and Certification
fees, both for Members and non-Members, in order to provide an
incentive to prospective Members and non-Members to connect to MIAX
Emerald as soon as possible. At that time, the Exchange waived API
Testing and Certification fees and Network Connectivity Testing and
Certification fees for the Waiver Period \7\ and stated
[[Page 66608]]
that it would provide notice to market participants when the Exchange
intended to terminate the Waiver Period.
---------------------------------------------------------------------------
\3\ ``Member'' means an individual or organization approved to
exercise the trading rights associated with a Trading Permit.
Members are deemed ``members'' under the Exchange Act. See Exchange
Rule 100 and the Definitions section of the Fee Schedule.
\4\ 15 U.S.C. 78f.
\5\ See Securities Exchange Act Release No. 84891 (December 20,
2018), 83 FR 67421 (December 28, 2018) (File No. 10-233) (order
approving application of MIAX Emerald, LLC for registration as a
national securities exchange).
\6\ See Securities Exchange Act Release No. 85393 (March 21,
2019), 84 FR 11599 (March 27, 2019) (SR-EMERALD-2019-15) (Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To
Establish the MIAX Emerald Fee Schedule).
\7\ ``Waiver Period'' means, for each applicable fee, the period
of time from the initial effective date of the MIAX Emerald Fee
Schedule until such time that the Exchange has an effective fee
filing establishing the applicable fee. The Exchange will issue a
Regulatory Circular announcing the establishment of an applicable
fee that was subject to a Waiver Period at least fifteen (15) days
prior to the termination of the Waiver Period and effective date of
any such applicable fee. See the Definitions Section of the Fee
Schedule.
---------------------------------------------------------------------------
On September 15, 2020, the Exchange issued a Regulatory Circular
which announced that the Exchange would terminate the Waiver Period
for, among other fees, API Testing and Certification fees and Network
Connectivity Testing and Certification fees for Members and non-
Members, beginning October 1, 2020.\8\
---------------------------------------------------------------------------
\8\ See MIAX Emerald Regulatory Circular 2020-41 available at
https://www.miaxoptions.com/sites/default/files/circular-files/MIAX_Emerald_RC_2020_41.pdf.
---------------------------------------------------------------------------
API Testing and Certification Fees for Members
The Exchange proposes to adopt an API Testing and Certification fee
for Members. An API makes it possible for Member software to
communicate with MIAX Emerald software applications, and is subject to
Member testing with, and certification by, MIAX Emerald. API testing
and certification includes, for Electronic Exchange Members \9\
(``EEMs''), testing all available order types, new order entry, order
management, order throughput and mass order cancellation. For Market
Makers,\10\ API testing and certification also includes testing of all
available quote types, quote throughput, quote management and
cancellation, Aggregate Risk Manager settings and triggers, and
confirmation of quotes within the trading engines.
---------------------------------------------------------------------------
\9\ ``Electronic Exchange Member'' or ``EEM'' means the holder
of a Trading Permit who is not a Market Maker. Electronic Exchange
Members are deemed ``members'' under the Exchange Act. See the
Definitions section of the Fee Schedule.
\10\ The term ``Market Maker'' refers to ``Lead Market Maker''
(``LMM''), ``Primary Lead Market Maker'' (``PLMM'') and ``Registered
Market Maker'' (``RMM''), collectively. See Exchange Rule 100. See
also the Definitions section of the Fee Schedule.
---------------------------------------------------------------------------
The API Testing and Certification fees for Members are based upon
the type of interface that the Member has been credentialed to use. The
Exchange proposes to adopt an API testing and certification fee for
EEMs (other than Clearing Firms): (i) Initially per API for Financial
Information Exchange (``FIX'') \11\ ports, FIX Drop Copy (``FXD'') \12\
ports and Clearing Trade Drop (``CTD'') \13\ ports in the month the EEM
has been credentialed to use one or more ports in the production
environment for the tested API, and (ii) each time an EEM initiates a
change to its system that requires testing and certification. The
Exchange proposes to adopt an API testing and certification fee for EEM
Clearing Firms (i) initially per API in the month the EEM Clearing Firm
has been credentialed to use one or more CTD Ports in the production
environment, and (ii) each time an EEM Clearing Firm initiates a change
to its system that requires testing and certification.
---------------------------------------------------------------------------
\11\ ``FIX Port'' means an interface with MIAX Emerald systems
that enables the Port user to submit simple and complex orders
electronically to MIAX Emerald. See the Definitions section of the
Fee Schedule.
\12\ The FIX Drop Copy (``FXD'') Port is a messaging interface
that will provide a copy of real-time trade execution, trade
correction and trade cancellation information to FXD Port users who
subscribe to the service. FXD Port users are those users who are
designated by an EEM to receive the information and the information
is restricted for use by the EEM. FXD Port Fees will be assessed in
any month the Member is credentialed to use the FXD Port in the
production environment. See Fee Schedule, Section 4)d)iv).
\13\ ``CTD Port'' or ``Clearing Trade Drop Port'' provides an
Exchange Member with a real-time clearing trade updates. The updates
include the Member's clearing trade messages on a low latency, real-
time basis. The trade messages are routed to a Member's connection
containing certain information. The information includes, among
other things, the following: (i) Trade date and time; (ii) symbol
information; (iii) trade price/size information; (iv) Member type
(for example, and without limitation, Market Maker, Electronic
Exchange Member, Broker-Dealer); and (v) Exchange MPID for each side
of the transaction, including Clearing Member MPID. See the
Definitions section of the Fee Schedule.
---------------------------------------------------------------------------
The Exchange proposes to adopt an API testing and certification fee
for Market Makers: (i) Initially per API for CTD and MIAX Emerald
Express Interface (``MEI'') \14\ ports in the month the Market Maker
has been credentialed to use one or more ports in the production
environment for the tested API and the Market Maker has been assigned
to quote in one or more classes, and (ii) each time a Market Maker
initiates a change to its system that requires testing and
certification. The Exchange also proposes that API Testing and
Certification fees will not be assessed in situations where the
Exchange initiates a mandatory change to the Exchange's System \15\
that requires testing and certification. The Exchange proposes to
assess Member API Testing and Certification fees of $1,000 for EEMs and
$2,500 for Market Makers. Below is the proposed fee table for API
Testing and Certification fees for Members:
---------------------------------------------------------------------------
\14\ The MEI is a connection to the MIAX Emerald System that
enables Market Makers to submit simple and complex electronic quotes
to MIAX Emerald. The Exchange offers Full Service MEI Ports, which
provide Market Makers with the ability to send Market Maker simple
and complex quotes, eQuotes, and quote purge messages to the MIAX
Emerald System. Full Service MEI Ports are also capable of receiving
administrative information. Market Makers are limited to two Full
Service MEI Ports per Matching Engine. The Exchange also offers
Limited Service MEI Ports, which provide Market Makers with the
ability to send simple and complex eQuotes and quote purge messages
only, but not Market Maker Quotes, to the MIAX Emerald System.
Limited Service MEI Ports are also capable of receiving
administrative information. Market Makers initially receive two
Limited Service MEI Ports per Matching Engine. See the Definitions
section of the Fee Schedule.
\15\ The term ``System'' means the automated trading system used
by the Exchange for the trading of securities. See Exchange Rule
100.
------------------------------------------------------------------------
API testing and
Type of member certification fee
------------------------------------------------------------------------
Electronic Exchange Member........................... $1,000.00
Market Maker......................................... 2,500.00
------------------------------------------------------------------------
API Testing and Certification Fee for Non-Members
The Exchange proposes to adopt an API Testing and Certification fee
for Third Party Vendors,\16\ Service Bureaus \17\ and other non-Members
(such as clearing firms): (i) Initially per API for FIX, FXD, CTD and
MEI ports in the month the Third Party Vendor, Service Bureau or non-
Member has been credentialed to use one or more ports in the production
environment for the tested API, and (ii) each time a Third Party
Vendor, Service Bureau, or other non-Member initiates a change to its
system that requires testing and certification. The Exchange also
proposes that API Testing and Certification fees will not be assessed
to non-Members in situations where the Exchange initiates a mandatory
change to the Exchange's System that requires testing and
certification.
---------------------------------------------------------------------------
\16\ Third Party Vendors are subscribers of MIAX Emerald's
market and other data feeds, which they in turn use for
redistribution purposes. Third Party Vendors do not provide
connectivity and therefore are not subject to Network testing and
certification. See the Definitions section of the Fee Schedule.
\17\ ``Service Bureau'' means a technology provider that offers
and supplies technology and technology services to a trading firm
that does not have its own proprietary system. See the Definitions
section of the Fee Schedule.
---------------------------------------------------------------------------
The Exchange proposes to assess non-Member API Testing and
Certification fees of $1,200 for Third Party Vendors, Service Bureaus
and other non-Members. Below is the proposed fee table for API Testing
and Certification fees for non-Members:
------------------------------------------------------------------------
API testing and
Non-member certification fee
------------------------------------------------------------------------
Third Party Vendors and Service Bureaus and other non- $1,200.00
Members.............................................
------------------------------------------------------------------------
[[Page 66609]]
The higher proposed fee charged to Third Party Vendors, Service
Bureaus and non-Members reflects the greater amount of time spent by
MIAX Emerald employees testing and certifying non-Members. It has been
MIAX Emerald's experience that Member testing takes less time than non-
Member testing because Members have more experience testing these
systems with exchanges, resulting in generally fewer questions and
issues arising during the testing and certification process. Also,
because Third Party Vendors and Service Bureaus are redistributing data
and reselling services to other Members and market participants, the
number and types of scenarios that need to be tested are more numerous
and complex than those tested and certified for a single Member.
The Exchange believes it is necessary to charge an API Testing and
Certification fee to Members and non-Members because of the time and
resources spent to ensure that Member and non-Member APIs function
correctly to prevent any System malfunction. Further, the Exchange
believes the price differential in API Testing and Certification fees
for Members and non-Members is not unfairly discriminatory because, in
the Exchange's experience, Member testing takes less time than non-
Member testing as Members have more experience testing these systems
with exchanges, resulting generally in fewer questions and issues
arising during the testing and certification process.
Network Connectivity Testing and Certification Fee for Members
The Exchange established electronic communication connections with
Members and now proposes to assess Members a Network Connectivity
Testing and Certification fee for each 1 Gigabit (``Gb'') connection
and 10 Gb ultra-low-latency (``ULL'') connection. The Exchange proposes
to assess a Member Network Connectivity Testing and Certification fee:
(i) Initially per connection in the month the Individual Firm has been
credentialed to use any API or Market Data feeds in the production
environment utilizing the tested network connection, and (ii) each time
an Individual Firm initiates a change to its system that requires
network connectivity testing and certification. Network Connectivity
Testing and Certification fees will not be assessed in situations where
the Exchange initiates a mandatory change to the Exchange's system that
requires testing and certification. Member Network Connectivity Testing
and Certification fees will not be assessed for testing and
certification of connectivity to the Exchange's Disaster Recovery
Facility.
The Exchange proposes to assess Members a Network Connectivity
Testing and Certification Fee of $1,000 per 1Gb connection and $4,000
per 10Gb ULL connection. Below is the proposed fee table for Member
Network Connectivity Testing and Certification fees:
------------------------------------------------------------------------
10 Gigabit ULL
Type of member 1 Gigabit fee fee per
per connection connection
------------------------------------------------------------------------
Individual Firm......................... $1,000.00 $4,000.00
------------------------------------------------------------------------
The proposed fee amounts are identical to the fees currently
assessed for the same services at the Exchange's affiliates, Miami
International Securities Exchange, LLC (``MIAX'') and MIAX PEARL, LLC
(``MIAX PEARL''). The Exchange notes that the Emerald Express Network
Interconnect (``EENI'') \18\ is a network infrastructure which provides
Members and non-Members network connectivity to the trading platforms,
market data systems, test systems, and disaster recovery facility of
the Exchange. When utilizing a Shared \19\ cross-connect, the EENI can
also be configured to offer network connectivity to the trading
platforms, market data systems, test systems, and disaster recovery
facilities of the Exchange's affiliates, MIAX and MIAX PEARL.
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\18\ ``EENI'' means the Emerald Express Network Interconnect,
which is a network infrastructure which provides Members and non-
Members network connectivity to the trading platforms, market data
systems, test systems, and disaster recovery facilities of MIAX
Emerald. When utilizing a Shared cross-connect, the EENI can also be
configured to offer network connectivity to the trading platforms,
market data systems, test systems, and disaster recovery facilities
of MIAX and MIAX PEARL. When utilizing a Dedicated cross-connect,
the EENI can only be configured to offer network connectivity to the
trading platforms, market data systems, and test systems of MIAX
Emerald. The EENI consists of the low latency and ultra-low latency
connectivity options set forth in the Exchange's Fee Schedule. See
the Definitions section of the Fee Schedule.
\19\ ``Shared'' (cross-connect) means cross-connect that
provides network connectivity to the trading platforms, market data
systems, test systems, and/or disaster recovery facilities of MIAX
Emerald, MIAX and MIAX PEARL via a single, shared connection. The
following connections can be Shared across MIAX Emerald, MIAX and
MIAX PEARL: 1 Gigabit, 1 Gigabit Disaster Recovery, and 10 Gigabit
Disaster Recovery. See the Definitions section of the Fee Schedule.
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Members utilizing a single, Shared cross-connect to connect to the
trading platforms, market data systems, test systems, and disaster
recovery facilities of the Exchange, MIAX and MIAX PEARL will only be
assessed one Network Connectivity Testing and Certification fee per
connection tested, regardless of the trading platforms, market data
systems, test systems, and disaster recovery facilities accessed via
such connection.
Network Connectivity Testing and Certification Fee for Non-Members
MIAX Emerald established electronic connections with Service
Bureaus, Extranet Providers and other non-Members, and now proposes to
assess a Network Connectivity Testing and Certification fee for each
1Gb connection and 10Gb ULL connection. The Exchange proposes to assess
a non-Member Network Connectivity Testing and Certification fee: (i)
Initially per connection in the month the Service Bureau, Extranet
Provider or other non-Member has been credentialed to use any API or
Market Data feeds in the production environment using the tested
network connection, and (ii) each time Service Bureau, Extranet
Provider or other non-Member initiates a change to its system that
requires network connectivity testing and certification. Network
Connectivity Testing and Certification fees will not be assessed in
situations where the Exchange initiates a mandatory change to the
Exchange's system that requires testing and certification. Non-Member
Network Connectivity Testing and Certification fees will not be
assessed for testing and certification of connectivity to the
Exchange's Disaster Recovery Facility.
The Exchange proposes to assess non-Members a Network Connectivity
Testing and Certification Fee of $1,200 per 1Gb connection and $4,200
per 10Gb ULL connection. Below is the proposed fee table for non-Member
Network Connectivity Testing and Certification fees:
[[Page 66610]]
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10 Gigabit ULL
Non-member 1 Gigabit fee fee per
per connection connection
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Service Bureau/Extranet Provider and $1,200.00 $4,200.00
other non-Members......................
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The EENI is also available to non-Member subscribers. For non-
Member subscribers, when utilizing a Shared cross-connect, the EENI can
also be configured to offer network connectivity to the trading
platforms, market data systems, test systems, and disaster recovery
facilities of the Exchange's affiliates, MIAX and MIAX PEARL.
Accordingly, non-Members utilizing Shared cross-connects to connect to
the trading platforms, market data systems, test systems, and disaster
recovery facilities of the Exchange and its affiliates, MIAX and MIAX
PEARL, will only be assessed one Network Connectivity Testing and
Certification fee per connection tested, regardless of the trading
platforms, market data systems, test systems, and disaster recovery
facilities accessed via such connection. The Member and non-Member
Network Testing and Certification fees represent installation and
support costs incurred by the Exchange as it works with each Member and
non-Member to make sure there are appropriate electronic connections
with MIAX Emerald. The Exchange's affiliates, MIAX and MIAX PEARL,
charge the same fees for the same services for their Members and non-
Members.\20\ The Exchange proposes to assess a higher Network
Connectivity Testing and Certification fee to non-Members than to
Members, similar to how MIAX and MIAX PEARL assesses such fees to their
Members and non-Members. The higher fee charged to non-Members reflects
the greater amount of time spent by MIAX Emerald employees testing and
certifying non-Members. It has been MIAX Emerald's experience that
Member network connectivity testing takes less time than non-Member
network connectivity testing because Members have more experience
testing these systems with exchanges as generally fewer questions and
issues arise during the testing and certification process.
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\20\ See MIAX Fee Schedule, Sections 4)c) and 4)d); see also
MIAX PEARL Fee Schedule, Sections 4)c) and 4)d.
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The Commission has repeatedly expressed its preference for
competition over regulatory intervention in determining prices,
products, and services in the securities markets. 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.'' \21\
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\21\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496 (June 29, 2005).
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There are currently 16 registered options exchanges competing for
order flow. Based on publicly-available information, and excluding
index-based options, no single exchange has more than approximately 16%
market share.\22\ Therefore, no exchange possesses significant pricing
power. More specifically, for the month of August 2020, the Exchange
had an approximately 3.24% market share of executed volume of multiply-
listed equity options.\23\ The Exchange believes that the ever-shifting
market share among the exchanges from month to month demonstrates that
market participants can discontinue or reduce use of certain categories
of products, or shift order flow, in response to non-transaction and
transaction fee changes. For example, on February 28, 2019, the
Exchange's affiliate, MIAX PEARL, LLC (``MIAX PEARL'') filed with the
Commission a proposal to increase Taker fees in certain Tiers for
options transactions in certain Penny classes for Priority Customers
and decrease Maker rebates in certain Tiers for options transactions in
Penny classes for Priority Customers (which fee was to be effective
March 1, 2019).\24\ MIAX PEARL experienced a decrease in total market
share for the month of March 2019, after the proposal went into effect.
Accordingly, the Exchange believes that the MIAX PEARL March 1, 2019
fee change, to increase certain transaction fees and decrease certain
transaction rebates, may have contributed to the decrease in MIAX
PEARL's market share and, as such, the Exchange believes competitive
forces constrain the Exchange's, and other options exchanges, ability
to set transaction fees and market participants can shift order flow
based on fee changes instituted by the exchanges.
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\22\ The Options Clearing Corporation (``OCC'') publishes
options and futures volume in a variety of formats, including daily
and monthly volume by exchange, available here: https://www.theocc.com/market-data/volume/default.jsp.
\23\ See id.
\24\ See Securities Exchange Act Release No. 85304 (March 13,
2019), 84 FR 10144 (March 19, 2019) (SR-PEARL-2019-07).
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Further, as there are currently 16 registered options exchanges
competing for order flow with no single exchange accounting for more
than approximately 16% of market share,\25\ the Exchange cannot predict
with certainty whether any market participant is planning to utilize
any of the services of the Exchange such that API testing and
certification or network connectivity testing and certification would
be required, in which the Member or non-Member would be subject to the
proposed API Testing and Certification fees and/or the Network
Connectivity Testing and Certification fees that the Exchange proposes
to establish herein.
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\25\ See supra note 22.
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2. Statutory Basis
The Exchange believes that its proposal to amend its Fee Schedule
is consistent with Section 6(b) of the Act \26\ in general, and
furthers the objectives of Section 6(b)(4) of the Act \27\ in
particular, in that it is an equitable allocation of reasonable dues,
fees and other charges among its members and issuers and other persons
using its facilities. The Exchange also believes the proposal furthers
the objectives of Section 6(b)(5) of the Act in that it is designed to
promote just and equitable principles of trade, to remove impediments
to and perfect the mechanism of a free and open market and a national
market system, and, in general to protect investors and the public
interest and is not designed to permit unfair discrimination between
customers, issuers, brokers and dealers.
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\26\ 15 U.S.C. 78f(b).
\27\ 15 U.S.C. 78f(b)(4) and (5).
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The Exchange believes its proposal to adopt API Testing and
Certification fees and Network Connectivity Testing and Certification
fees provides for the equitable allocation of reasonable dues and fees
and is not unfairly discriminatory for the following reasons. First,
the Exchange operates in a highly competitive market. The Commission
has repeatedly expressed its preference for competition over regulatory
intervention in determining prices, products, and services in the
securities markets. In Regulation NMS, the Commission highlighted the
importance of market forces in
[[Page 66611]]
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.'' \28\ There are currently
16 registered options exchanges competing for order flow. Based on
publicly-available information, and excluding index-based options, no
single exchange has more than approximately 16% of the market share of
executed volume of multiply-listed equity and ETF options.\29\
Therefore, no exchange possesses significant pricing power. More
specifically, for the month of August 2020, the Exchange had
approximately 3.24% market share of executed volume of multiply-listed
equity options.\30\
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\28\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496 (June 29, 2005).
\29\ The Options Clearing Corporation (``OCC'') publishes
options and futures volume in a variety of formats, including daily
and monthly volume by exchange, available here: https://www.theocc.com/market-data/volume/default.jsp.
\30\ See id.
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The Exchange also believes that the ever-shifting market share
among the exchanges from month to month demonstrates that market
participants can discontinue or reduce use of certain categories of
products, or shift order flow, in response to non-transaction and
transaction fee changes. For example, on February 28, 2019, the
Exchange's affiliate, MIAX PEARL, filed with the Commission a proposal
to increase Taker fees in certain Tiers for options transactions in
certain Penny classes for Priority Customers and decrease Maker rebates
in certain Tiers for options transactions in Penny classes for Priority
Customers (which fee was to be effective March 1, 2019).\31\ MIAX PEARL
experienced a decrease in total market share for the month of March
2019, after the proposal went into effect. Accordingly, the Exchange
believes that the MIAX PEARL March 1, 2019 fee change, to increase
certain transaction fees and decrease certain transaction rebates, may
have contributed to the decrease in MIAX PEARL's market share and, as
such, the Exchange believes competitive forces constrain the
Exchange's, and other options exchanges, ability to set transaction
fees and market participants can shift order flow based on fee changes
instituted by the exchanges.
---------------------------------------------------------------------------
\31\ See supra note 24.
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Second, the Exchange believes its proposal to adopt API Testing and
Certification fees and Network Connectivity Testing and Certification
fees for Members and non-Members is an equitable allocation of
reasonable dues and fees pursuant to Section 6(b)(4) of the Act \32\
because of the time and resources spent to ensure that Member and non-
Member APIs and connectivity function correctly to prevent any System
malfunction. Further, the Exchange believes the price differential in
API Testing and Certification fees and Network Connectivity Testing and
Certification fees for Members and non-Members is not unfairly
discriminatory because, in the Exchange's experience, Member testing
utilizes less Exchange resources and employee time than non-Member
testing as Members have more experience testing these systems with
exchanges, resulting generally in fewer questions and issues arising
during the testing and certification process. Also, with respect to API
testing and certification, because Third Party Vendors and Service
Bureaus are redistributing data and reselling services to other Members
and market participants the number and types of scenarios that need to
be tested are more numerous and complex than those tested and certified
for Members.
---------------------------------------------------------------------------
\32\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------
Accordingly, the Exchange no longer believes it is necessary to
waive API Testing and Certification fees and Network Connectivity
Testing and Certification fees to attract market participants to the
MIAX Emerald market since this market is now established and MIAX
Emerald no longer needs to rely on such waivers to attract market
participants. The Exchange believes its proposed API Testing and
Certification fees and Network Connectivity Testing and Certification
fees are reasonable and well within the range of non-transaction fees
assessed among other exchanges, including the Exchange's affiliates,
MIAX and MIAX PEARL.\33\
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\33\ See supra note 20.
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Finally, the Exchange notes that it operates in a highly
competitive market in which market participants can readily favor
competing venues if they deem fee levels at a particular venue to be
excessive. In such an environment, the Exchange must continually adjust
its fees for services and products, in addition to order flow, to
remain competitive with other exchanges. The Exchange believes that the
proposed changes reflect this competitive environment.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act.
Intra-Market Competition
The Exchange does not believe that the proposed rule change would
place certain market participants at the Exchange at a relative
disadvantage compared to other market participants or affect the
ability of such market participants to compete. Unilateral action by
MIAX Emerald in the assessment of certain non-transaction fees for
services provided to its Members and others using its facilities will
not have an impact on competition. As a more recent entrant in the
already highly competitive environment for equity options trading, MIAX
Emerald does not have the market power necessary to set prices for
services that are unreasonable or unfairly discriminatory in violation
of the Act. MIAX Emerald's proposed API Testing and Certification fee
levels and Network Connectivity Testing and Certification fee levels,
as described herein, are comparable to fee levels charged by other
options exchanges for the same or similar services, including those
fees assessed by the Exchange's affiliates, MIAX and MIAX PEARL.\34\
---------------------------------------------------------------------------
\34\ See supra note 20.
---------------------------------------------------------------------------
The Exchange believes that the proposed API Testing and
Certification fees and Network Connectivity Testing and Certification
fees do not place certain market participants at a relative
disadvantage to other market participants because the fees do not apply
unequally to different size market participants, but instead would
allow the Exchange charge for the time and resource necessary for API
testing and certification and network connectivity testing and
certification for Members and non-Members to ensure proper functioning
of all available order types, new order entry, order management, order
throughput and mass order cancellation (as well as, for Market Makers,
all available quote types, quote throughput, quote management and
cancellation, Aggregate Risk Manager settings and triggers, and
confirmation of quotes within the trading engines). Accordingly, the
proposed API Testing and Certification fees and network connectivity
testing and certification fees do not favor certain categories of
market participants in a manner that would impose a burden on
competition.
Inter-Market Competition
The Exchange believes the proposed API Testing and Certification
fees and network connectivity testing and
[[Page 66612]]
certification fees do not place an undue burden on competition on other
SROs that is not necessary or appropriate. The Exchange operates in a
highly competitive market in which market participants can readily
favor one of the 16 competing options venues if they deem fee levels at
a particular venue to be excessive.\35\ Based on publicly-available
information, and excluding index-based options, no single exchange has
more than 16% market share. Therefore, no exchange possesses
significant pricing power in the execution of multiply-listed equity
and ETF options order flow. For the month of August 2020, the Exchange
had a market share of approximately 3.24% of executed multiply-listed
equity options \36\ and the Exchange believes that the ever-shifting
market share among exchanges from month to month demonstrates that
market participants can discontinue or reduce use of certain categories
of products, or shift order flow, in response to fee changes. In such
an environment, the Exchange must continually adjust its fees and fee
waivers to remain competitive with other exchanges and to attract order
flow to the Exchange.
---------------------------------------------------------------------------
\35\ See supra note 22.
\36\ Id.
---------------------------------------------------------------------------
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,\37\ and Rule 19b-4(f)(2) \38\ 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.
---------------------------------------------------------------------------
\37\ 15 U.S.C. 78s(b)(3)(A)(ii).
\38\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------
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
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-EMERALD-2020-09 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to File Number SR-EMERALD-2020-09. 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 (https://www.sec.gov/rules/sro.shtml).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for website viewing and printing in
the Commission's Public Reference Room, 100 F Street NE, Washington, DC
20549, on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of the filing also will be available for inspection
and copying at the principal office of the Exchange. All comments
received will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-EMERALD-2020-09 and should be submitted
on or before November 10, 2020.
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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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-23142 Filed 10-19-20; 8:45 am]
BILLING CODE 8011-01-P
