Self-Regulatory Organizations; MIAX Emerald, LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Its Fee Schedule To Establish Market Data Fees, 69371-69375 [2020-24162]
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Federal Register / Vol. 85, No. 212 / Monday, November 2, 2020 / Notices
Counsel, at (202) 551–5131, or Arisa
Kettig, Special Counsel, at (202) 551–
5676, Division of Trading and Markets,
Securities and Exchange Commission,
100 F Street NE, Washington, DC
20549–7010.
SUPPLEMENTARY INFORMATION: In
accordance with the requirements of the
Federal Advisory Committee Act, 5
U.S.C.—App, the Commission is
publishing this notice that the Chairman
of the Commission, with the
concurrence of the other
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renewal of the Securities and Exchange
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No more than 21 voting members will
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The Committee will operate for fourmonths from the date it is renewed or
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By the Commission.
Dated: October 27, 2020.
Vanessa A. Countryman,
Secretary.
[FR Doc. 2020–24168 Filed 10–30–20; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–90274; File No. SR–
EMERALD–2020–13]
Self-Regulatory Organizations; MIAX
Emerald, LLC; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change To Amend Its Fee
Schedule To Establish Market Data
Fees
October 27, 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
14, 2020, MIAX Emerald, LLC (‘‘MIAX
Emerald’’ or ‘‘Exchange’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’) the 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 market
data 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
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
1 15
1 See
41 CFR 102–3.30(a).
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U.S.C. 78s(b)(1).
CFR 240.19b–4.
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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 market data
fees. MIAX Emerald commenced
operations as a national securities
exchange registered under Section 6 of
the Act 3 on March 1, 2019.4 The
Exchange adopted its transaction fees
and certain of its non-transaction fees in
its filing SR–EMERALD–2019–15.5 In
that filing, the Exchange expressly
waived, among others, market data fees
to provide an incentive to prospective
market participants to become
Members 6 of the Exchange. At that
time, the Exchange waived market data
fees for the Waiver Period 7 and stated
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, among other things, that the
Exchange would be ending the Waiver
Period for market data fees, beginning
October 1, 2020.8
On October 1, 2020, the Exchange
filed its proposal to assess fees for its
3 15
U.S.C. 78f.
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).
5 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).
6 ‘‘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.
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.
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.
4 See
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market data products, MIAX Emerald
Top of Market (‘‘ToM’’), Administrative
Information Subscriber (‘‘AIS’’) feed,
and MIAX Order Feed (‘‘MOR’’).9 On
October 14, 2020, the Exchange
withdrew the First Proposed Rule
Change and refiled its proposal in order
to provide more description regarding
the difference in pricing for internal
distributors and external distributors. A
more detailed description of the ToM,
AIS and MOR products can be found in
the Exchange’s previously filed Market
Data Product filings.10 The Exchange
notes that it will not be assessing fees
for Complex Top of Market (‘‘cToM’’) 11
data at this time.
To summarize, ToM provides market
participants with a direct data feed that
includes the Exchange’s best bid and
offer, with aggregate size, and last sale
information, based on displayable order
and quoting interest on the Exchange.
The ToM data feed includes data that is
identical to the data sent to the
processor for the Options Price
Reporting Authority (‘‘OPRA’’). ToM
also contains a feature that provides the
number of Priority Customer 12 contracts
that are included in the size associated
with the Exchange’s best bid and offer.
AIS provides market participants with
a direct data feed that allows subscribers
to receive real-time updates of products
traded on MIAX Emerald, trading status
for MIAX Emerald and products traded
on MIAX Emerald, and liquidity seeking
event notifications. The AIS market data
9 See SR–EMERALD–2020–10 (the ‘‘First
Proposed Rule Change’’).
10 See Securities Exchange Act Release No. 85207
(February 27, 2019), 84 FR 7963 (March 5, 2019)
(SR–EMERALD–2019–09) (Notice of Filing and
Immediate Effectiveness of a Proposed Rule Change
to Establish MIAX Emerald Top of Market (‘‘ToM’’)
Data Feed, MIAX Emerald Complex Top of Market
(‘‘cToM’’) Data Feed, MIAX Emerald Administrative
Information Subscriber (‘‘AIS’’) Data Feed, and
MIAX Emerald Order Feed (‘‘MOR’’)).
11 cToM provides subscribers with the same
information as the ToM market data product as it
relates to the strategy book, i.e., the Exchange’s best
bid and offer for a complex strategy, with aggregate
size, based on displayable order and quoting
interest in the complex strategy on the Exchange.
cToM also provides subscribers with the
identification of the complex strategies currently
trading on MIAX Emerald; complex strategy last
sale information; and the status of securities
underlying the complex strategy (e.g., halted, open,
or resumed). cToM is distinct from ToM, and
anyone wishing to receive cToM data must
subscribe to cToM regardless of whether they are
a current ToM subscriber. ToM subscribers are not
required to subscribe to cToM, and cToM
subscribers are not required to subscribe to ToM.
See id.
12 The term ‘‘Priority Customer’’ means a person
or entity that (i) is not a broker or dealer in
securities, and (ii) does not place more than 390
orders in listed options per day on average during
a calendar month for its own beneficial account(s).
The number of orders shall be counted in
accordance with Interpretation and Policy .01 to
Exchange Rule 100. See Exchange Rule 100.
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feed includes opening imbalance
condition information, opening routing
information, expanded quote range
information, post-halt notifications, and
liquidity refresh condition information.
AIS real-time messages are disseminated
over multicast to achieve a fair delivery
mechanism. AIS notifications provide
current electronic system status
allowing subscribers to take necessary
actions immediately.
MOR provides market participants
with a direct data feed that allows
subscribers to receive real-time updates
of options orders, products traded on
MIAX Emerald, MIAX Emerald Options
System status, and MIAX Emerald
Options Underlying trading status.
Subscribers to the data feed will get a
list of all options symbols and strategies
that will be traded and sourced on that
feed at the start of every session.
The Exchange proposes to charge
monthly fees to Distributors (defined
below) of the ToM, AIS, and MOR
market data products. MIAX Emerald
will assess market data fees applicable
to the market data products on Internal
and External Distributors in each month
the Distributor is credentialed to use the
applicable market data product in the
production environment. A
‘‘Distributor’’ of MIAX Emerald data is
any entity that receives a feed or file of
data either directly from MIAX Emerald
or indirectly through another entity and
then distributes it either internally
(within that entity) or externally
(outside that entity). All Distributors are
required to execute a MIAX Emerald
Distributor Agreement. Market data fees
for ToM, AIS, and MOR will be reduced
for new Distributors for the first month
during which they subscribe to the
applicable market data product, based
on the number of trading days that have
been held during the month prior to the
date on which they have been
credentialed to use the applicable
market data product in the production
environment. Such new Distributors
will be assessed a pro-rata percentage of
the fees described above, which is the
percentage of the number of trading
days remaining in the affected calendar
month as of the date on which they have
been credentialed to use the applicable
market data product in the production
environment, divided by the total
number of trading days in the affected
calendar month.
Specifically, the Exchange proposes to
assess Internal Distributors $1,250 per
month and External Distributors $1,750
per month for the ToM market data feed.
The Exchange proposes to assess
Internal Distributors $1,250 per month
and External Distributors $1,750 per
month for the AIS market data feed. The
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Exchange proposes to assess Internal
Distributors $3,000 per month and
External Distributors $3,500 per month
for the MOR market data feed. The
Exchange notes that its data feed prices
are generally lower than other options
exchanges’ data feed prices for their
comparable data feed products.13
2. Statutory Basis
The Exchange believes that its
proposal to amend its Fee Schedule is
consistent with Section 6(b) of the Act 14
in general, and furthers the objectives of
Section 6(b)(4) of the Act 15 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 that its
proposal to adopt market data fees is
reasonable in several respects. First, the
Exchange is subject to significant
competitive forces in the market for
options transaction and non-transaction
services that constrain its pricing
determinations in that 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
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.’’ 16
Numerous indicia demonstrate the
competitive nature of this market. For
example, clear substitutes to the
Exchange exist in the market for options
transaction services. The Exchange is
one of several options venues to which
market participants may direct their
order flow, and it represents a small
13 See Nasdaq PHLX LLC Pricing Schedule,
Options 7, Section 10, Proprietary Data Feed Fees;
Cboe BZX Exchange, Inc. Fee Schedule, Market
Data Fees; Cboe Data Services, LLC, Fee Schedule.
14 15 U.S.C. 78f(b).
15 15 U.S.C. 78f(b)(4) and (5).
16 See Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37496 (June 29, 2005).
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percentage of the overall market. Within
this environment, market participants
can freely and often do shift their order
flow among the Exchange and
competing venues in response to
changes in their respective pricing
schedules. There are currently 16
registered options exchanges competing
for order flow. Based on publiclyavailable 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 exchangetraded fund (‘‘ETF’’) options.17
Therefore, no exchange possesses
significant pricing power. More
specifically, for the month of August
2020, the Exchange had a market share
of approximately 3.24% of executed
multiply-listed equity options.18
Additionally, the Exchange notes that it
does not currently list any proprietary
or singly-list products. Accordingly,
there are no products listed on the
Exchange for which the Exchange is the
sole source of market data. Thus, it is a
business decision whether firms decide
to purchase the Exchange’s market data
feeds, as the Exchange only offers
trading in multiply-listed options.
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, 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).19 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
17 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.
18 See id.
19 See Securities Exchange Act Release No. 85304
(March 13, 2019), 84 FR 10144 (March 19, 2019)
(SR–PEARL–2019–07).
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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.
Further, the Exchange no longer
believes it is necessary to waive its
market data 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 that the proposed
change is equitable and not unfairly
discriminatory because the elimination
of the fee waiver for market data fees
will uniformly apply to all market
participants and market participants are
not required to purchase any market
data feed from the Exchange. As
described above, the Exchange does not
offer trading in any proprietary or
singly-list options products.
Accordingly, the Exchange is not the
sole source of market data for any
products listed on the Exchange.
Therefore, it is a business decision as to
whether a firm purchases the
Exchange’s market data feeds.
Additionally, the Exchange believes its
proposal to establish market data fees is
reasonable and well within the range of
fees assessed among other exchanges,
including the Exchange’s affiliate,
MIAX.20
The Exchange believes that it is
reasonable, equitable and not unfairly
discriminatory to assess internal
distributors fees that are less than the
fees assessed for external distributors for
subscriptions to the Exchange’s ToM,
AIS and MOR data feeds because
internal distributors have limited,
restricted usage rights to the market
data, as compared to external
distributors which have more expansive
usage rights. All Members and nonMembers that determine to receive any
market data feed of the Exchange (or its
affiliates, MIAX and MIAX PEARL),
must first execute, among other things,
the MIAX Exchange Group Exchange
Data Agreement (the ‘‘Exchange Data
Agreement’’).21 Pursuant to the
Exchange Data Agreement, internal
distributors are restricted to the
‘‘internal use’’ of any market data they
receive. This means that internal
distributors may only distribute the
Exchange’s market data to the
recipient’s officers and employees and
its affiliates.22 External distributors may
20 See
the MIAX Options Fee Schedule.
Exchange Data Agreement, available at
https://miaxweb2.pairsite.com/sites/default/files/
page-files/MIAX_Exchange_Group_Data_
Agreement_09032020.pdf.
22 See id.
21 See
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distribute the Exchange’s market data to
persons who are not officers, employees
or affiliates of the external distributor,23
and may charge their own fees for the
distribution of such market data.
Accordingly, the Exchange believes it is
fair, reasonable and not unfairly
discriminatory to assess external
distributors a higher fee for the
Exchange’s market data products as
external distributors have greater usage
rights to commercialize such market
data. The Exchange believes the
proposed fees are a reasonable
allocation of its costs and expenses
among its Members and other persons
using its facilities since it is recovering
the costs associated with distributing
such data. Access to the Exchange is
provided on fair and non-discriminatory
terms. The Exchange believes the
proposed fees are equitable and not
unfairly discriminatory because the fee
level results in a reasonable and
equitable allocation of fees amongst
users for similar services. Moreover, the
decision as to whether or not to
purchase market data is entirely
optional to all users. Potential
purchasers are not required to purchase
the market data, and the Exchange is not
required to make the market data
available. Purchasers may request the
data at any time or may decline to
purchase such data. The allocation of
fees among users is fair and reasonable
because, if the market deems the
proposed fees to be unfair or
inequitable, firms can diminish or
discontinue their use of this data.
In adopting Regulation NMS, the
Commission granted self-regulatory
organizations and broker-dealers
increased authority and flexibility to
offer new and unique market data to the
public. It was believed that this
authority would expand the amount of
data available to consumers, and also
spur innovation and competition for the
provision of market data:
[E]fficiency is promoted when broker-dealers
who do not need the data beyond the prices,
sizes, market center identifications of the
NBBO and consolidated last sale information
are not required to receive (and pay for) such
data when broker-dealers may choose to
receive (and pay for) additional market data
based on their own internal analysis of the
need for such data. 24
By removing ‘‘unnecessary regulatory
restrictions’’ on the ability of exchanges
to sell their own data, Regulation NMS
advanced the goals of the Act and the
principles reflected in its legislative
history. If the free market should
23 See
id.
Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37496 (June 29, 2005).
24 See
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determine whether proprietary data is
sold to broker-dealers at all, it follows
that the price at which such data is sold
should be set by the market as well.
In July, 2010, Congress adopted H.R.
4173, the Dodd-Frank Wall Street
Reform and Consumer Protection Act of
2010 (‘‘Dodd-Frank Act’’), which
amended Section 19 of the Act. Among
other things, Section 916 of the DoddFrank Act amended paragraph (A) of
Section 19(b)(3) of the Act by inserting
the phrase ‘‘on any person, whether or
not the person is a member of the selfregulatory organization’’ after ‘‘due, fee
or other charge imposed by the selfregulatory organization.’’ As a result, all
SRO rule proposals establishing or
changing dues, fees or other charges are
immediately effective upon filing
regardless of whether such dues, fees or
other charges are imposed on members
of the SRO, non-members, or both.
Section 916 further amended paragraph
(C) of Section 19(b)(3) of the Act to read,
in pertinent part, ‘‘At any time within
the 60-day period beginning on the date
of filing of such a proposed rule change
in accordance with the provisions of
paragraph (1) [of Section 19(b)], the
Commission summarily may
temporarily suspend the change in the
rules of the self-regulatory organization
made thereby, 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 this title. If the Commission
takes such action, the Commission shall
institute proceedings under paragraph
(2)(B) [of Section 19(b)] to determine
whether the proposed rule should be
approved or disapproved.’’
The Exchange believes that these
amendments to Section 19 of the Act
reflect Congress’s intent to allow the
Commission to rely upon the forces of
competition to ensure that fees for
market data are reasonable and
equitably allocated. Although Section
19(b) had formerly authorized
immediate effectiveness for a ‘‘due, fee
or other charge imposed by the selfregulatory organization,’’ the
Commission adopted a policy and
subsequently a rule stating that fees for
data and other products available to
persons that are not members of the selfregulatory organization must be
approved by the Commission after first
being published for comment. At the
time, the Commission supported the
adoption of the policy and the rule by
pointing out that unlike members,
whose representation in self-regulatory
organization governance was mandated
by the Act, non-members should be
given the opportunity to comment on
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fees before being required to pay them,
and that the Commission should
specifically approve all such fees. The
Exchange believes that the amendment
to Section 19 reflects Congress’s
conclusion that the evolution of selfregulatory organization governance and
competitive market structure have
rendered the Commission’s prior policy
on non-member fees obsolete.
Specifically, many exchanges have
evolved from member-owned, not-forprofit corporations into for-profit,
investor-owned corporations (or
subsidiaries of investor-owned
corporations). Accordingly, exchanges
no longer have narrow incentives to
manage their affairs for the exclusive
benefit of their members, but rather
have incentives to maximize the appeal
of their products to all customers,
whether members or non-members, so
as to broaden distribution and grow
revenues. Moreover, the Exchange
believes that the change also reflects an
endorsement of the Commission’s
determinations that reliance on
competitive markets is an appropriate
means to ensure equitable and
reasonable prices. Simply put, the
change reflects a presumption that all
fee changes should be permitted to take
effect immediately, since the level of all
fees are constrained by competitive
forces.
Selling proprietary market data is a
means by which exchanges compete to
attract business. To the extent that
exchanges are successful in such
competition, they earn trading revenues
and also enhance the value of their data
products by increasing the amount of
data they provide. The need to compete
for business places substantial pressure
upon exchanges to keep their fees for
both executions and data reasonable.25
The Exchange therefore believes that the
fees for market data are properly
assessed on Members and Non-Member
users.
The decision of the United States
Court of Appeals for the District of
Columbia Circuit in NetCoalition v.
SEC, No. 09–1042 (D.C. Cir. 2010),
although reviewing a Commission
decision made prior to the effective date
of the Dodd-Frank Act, upheld the
Commission’s reliance upon
competitive markets to set reasonable
and equitably allocated fees for market
data:
In fact, the legislative history indicates that
the Congress intended that the market system
25 See Sec. Indus. Fin. Mkts. Ass’n (SIFMA),
Initial Decision Release No. 1015, 2016 SEC LEXIS
2278 (ALJ June 1, 2016) (finding the existence of
vigorous competition with respect to non-core
market data).
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‘evolve through the interplay of competitive
forces as unnecessary regulatory restrictions
are removed’ and that the SEC wield its
regulatory power ‘in those situations where
competition may not be sufficient,’ such as
in the creation of a ‘consolidated
transactional reporting system.’ ’’ 26
The court’s conclusions about
Congressional intent are therefore
reinforced by the Dodd-Frank Act
amendments, which create a
presumption that exchange fees,
including market data fees, may take
effect immediately, without prior
Commission approval, and that the
Commission should take action to
suspend a fee change and institute a
proceeding to determine whether the fee
change should be approved or
disapproved only where the
Commission has concerns that the
change may not be consistent with the
Act.
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 the Exchange 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, the Exchange
does not have the market power
necessary to set prices for services that
are unreasonable or unfairly
discriminatory in violation of the Act.
The Exchange’s proposed market data
26 NetCoalition, at 15 (quoting H.R. Rep. No. 94–
229, at 92 (1975), as reprinted in 1975 U.S.C.C.A.N.
321, 323).
E:\FR\FM\02NON1.SGM
02NON1
Federal Register / Vol. 85, No. 212 / Monday, November 2, 2020 / Notices
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 affiliate,
MIAX.27
The Exchange believes that the
proposed market data 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 providing market
data to the market participants that
request such data. Accordingly, the
Exchange believes that the proposed
market data 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
market data 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. Based on publiclyavailable information, and excluding
index-based options, no single exchange
has more than 16% market share.28
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,29 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.
jbell on DSKJLSW7X2PROD with NOTICES
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.
27 See
28 See
the MIAX Options Fee Schedule.
supra note 17.
29 Id.
VerDate Sep<11>2014
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,30 and Rule
19b–4(f)(2) 31 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,
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–2020–13 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–2020–13. 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
30 15
31 17
20:55 Oct 30, 2020
Jkt 253001
PO 00000
U.S.C. 78s(b)(3)(A)(ii).
CFR 240.19b–4(f)(2).
Frm 00064
Fmt 4703
Sfmt 4703
69375
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–2020–13, and
should be submitted on or before
November 23, 2020.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.32
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020–24162 Filed 10–30–20; 8:45 am]
BILLING CODE P
SECURITIES AND EXCHANGE
COMMISSION
Sunshine Act Meetings
Notice is hereby given,
pursuant to the provisions of the
Government in the Sunshine Act, Public
Law 94–409, the Securities and
Exchange Commission will hold an
Open Meeting on Wednesday,
November 4, 2020 at 2:00 p.m.
PLACE: The meeting will be webcast on
the Commission’s website at
www.sec.gov.
STATUS: This meeting will begin at 2:00
p.m. (ET) and will be open to the public
via audio webcast only on the
Commission’s website at www.sec.gov.
MATTERS TO BE CONSIDERED:
1. The Commission will consider
whether to issue a Notice, pursuant to
Exchange Act Rule 0–13, seeking public
comment on an application made by a
foreign financial regulatory authority,
pursuant to Exchange Act Rule 3a71–6,
for a substituted compliance
determination, and on a proposed order
providing for the conditional
availability of substituted compliance in
connection with the application.
2. The Commission will consider
whether to issue an order granting
exemptive relief from Sections 8 and
15(a)(1) of the Securities Exchange Act
of 1934 and Rules 3b–13(b)(2), 8c–1,
10b–10, 15a–1 and 15c2–1 thereunder
in connection with the revision of the
definition of ‘‘security’’ to encompass
TIME AND DATE:
32 17
E:\FR\FM\02NON1.SGM
CFR 200.30–3(a)(12).
02NON1
]]>Agencies
[Federal Register Volume 85, Number 212 (Monday, November 2, 2020)]
[Notices]
[Pages 69371-69375]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-24162]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-90274; File No. SR-EMERALD-2020-13]
Self-Regulatory Organizations; MIAX Emerald, LLC; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend
Its Fee Schedule To Establish Market Data Fees
October 27, 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 14, 2020, MIAX Emerald, LLC (``MIAX Emerald'' or
``Exchange'') filed with the Securities and Exchange Commission
(``Commission'') the 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 market data 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 market
data fees. MIAX Emerald commenced operations as a national securities
exchange registered under Section 6 of the Act \3\ on March 1, 2019.\4\
The Exchange adopted its transaction fees and certain of its non-
transaction fees in its filing SR-EMERALD-2019-15.\5\ In that filing,
the Exchange expressly waived, among others, market data fees to
provide an incentive to prospective market participants to become
Members \6\ of the Exchange. At that time, the Exchange waived market
data fees for the Waiver Period \7\ and stated that it would provide
notice to market participants when the Exchange intended to terminate
the Waiver Period.
---------------------------------------------------------------------------
\3\ 15 U.S.C. 78f.
\4\ 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).
\5\ 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).
\6\ ``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.
\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, among other things, that the Exchange would be ending
the Waiver Period for market data fees, 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.
---------------------------------------------------------------------------
On October 1, 2020, the Exchange filed its proposal to assess fees
for its
[[Page 69372]]
market data products, MIAX Emerald Top of Market (``ToM''),
Administrative Information Subscriber (``AIS'') feed, and MIAX Order
Feed (``MOR'').\9\ On October 14, 2020, the Exchange withdrew the First
Proposed Rule Change and refiled its proposal in order to provide more
description regarding the difference in pricing for internal
distributors and external distributors. A more detailed description of
the ToM, AIS and MOR products can be found in the Exchange's previously
filed Market Data Product filings.\10\ The Exchange notes that it will
not be assessing fees for Complex Top of Market (``cToM'') \11\ data at
this time.
---------------------------------------------------------------------------
\9\ See SR-EMERALD-2020-10 (the ``First Proposed Rule Change'').
\10\ See Securities Exchange Act Release No. 85207 (February 27,
2019), 84 FR 7963 (March 5, 2019) (SR-EMERALD-2019-09) (Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change to
Establish MIAX Emerald Top of Market (``ToM'') Data Feed, MIAX
Emerald Complex Top of Market (``cToM'') Data Feed, MIAX Emerald
Administrative Information Subscriber (``AIS'') Data Feed, and MIAX
Emerald Order Feed (``MOR'')).
\11\ cToM provides subscribers with the same information as the
ToM market data product as it relates to the strategy book, i.e.,
the Exchange's best bid and offer for a complex strategy, with
aggregate size, based on displayable order and quoting interest in
the complex strategy on the Exchange. cToM also provides subscribers
with the identification of the complex strategies currently trading
on MIAX Emerald; complex strategy last sale information; and the
status of securities underlying the complex strategy (e.g., halted,
open, or resumed). cToM is distinct from ToM, and anyone wishing to
receive cToM data must subscribe to cToM regardless of whether they
are a current ToM subscriber. ToM subscribers are not required to
subscribe to cToM, and cToM subscribers are not required to
subscribe to ToM. See id.
---------------------------------------------------------------------------
To summarize, ToM provides market participants with a direct data
feed that includes the Exchange's best bid and offer, with aggregate
size, and last sale information, based on displayable order and quoting
interest on the Exchange. The ToM data feed includes data that is
identical to the data sent to the processor for the Options Price
Reporting Authority (``OPRA''). ToM also contains a feature that
provides the number of Priority Customer \12\ contracts that are
included in the size associated with the Exchange's best bid and offer.
---------------------------------------------------------------------------
\12\ The term ``Priority Customer'' means a person or entity
that (i) is not a broker or dealer in securities, and (ii) does not
place more than 390 orders in listed options per day on average
during a calendar month for its own beneficial account(s). The
number of orders shall be counted in accordance with Interpretation
and Policy .01 to Exchange Rule 100. See Exchange Rule 100.
---------------------------------------------------------------------------
AIS provides market participants with a direct data feed that
allows subscribers to receive real-time updates of products traded on
MIAX Emerald, trading status for MIAX Emerald and products traded on
MIAX Emerald, and liquidity seeking event notifications. The AIS market
data feed includes opening imbalance condition information, opening
routing information, expanded quote range information, post-halt
notifications, and liquidity refresh condition information. AIS real-
time messages are disseminated over multicast to achieve a fair
delivery mechanism. AIS notifications provide current electronic system
status allowing subscribers to take necessary actions immediately.
MOR provides market participants with a direct data feed that
allows subscribers to receive real-time updates of options orders,
products traded on MIAX Emerald, MIAX Emerald Options System status,
and MIAX Emerald Options Underlying trading status. Subscribers to the
data feed will get a list of all options symbols and strategies that
will be traded and sourced on that feed at the start of every session.
The Exchange proposes to charge monthly fees to Distributors
(defined below) of the ToM, AIS, and MOR market data products. MIAX
Emerald will assess market data fees applicable to the market data
products on Internal and External Distributors in each month the
Distributor is credentialed to use the applicable market data product
in the production environment. A ``Distributor'' of MIAX Emerald data
is any entity that receives a feed or file of data either directly from
MIAX Emerald or indirectly through another entity and then distributes
it either internally (within that entity) or externally (outside that
entity). All Distributors are required to execute a MIAX Emerald
Distributor Agreement. Market data fees for ToM, AIS, and MOR will be
reduced for new Distributors for the first month during which they
subscribe to the applicable market data product, based on the number of
trading days that have been held during the month prior to the date on
which they have been credentialed to use the applicable market data
product in the production environment. Such new Distributors will be
assessed a pro-rata percentage of the fees described above, which is
the percentage of the number of trading days remaining in the affected
calendar month as of the date on which they have been credentialed to
use the applicable market data product in the production environment,
divided by the total number of trading days in the affected calendar
month.
Specifically, the Exchange proposes to assess Internal Distributors
$1,250 per month and External Distributors $1,750 per month for the ToM
market data feed. The Exchange proposes to assess Internal Distributors
$1,250 per month and External Distributors $1,750 per month for the AIS
market data feed. The Exchange proposes to assess Internal Distributors
$3,000 per month and External Distributors $3,500 per month for the MOR
market data feed. The Exchange notes that its data feed prices are
generally lower than other options exchanges' data feed prices for
their comparable data feed products.\13\
---------------------------------------------------------------------------
\13\ See Nasdaq PHLX LLC Pricing Schedule, Options 7, Section
10, Proprietary Data Feed Fees; Cboe BZX Exchange, Inc. Fee
Schedule, Market Data Fees; Cboe Data Services, LLC, Fee Schedule.
---------------------------------------------------------------------------
2. Statutory Basis
The Exchange believes that its proposal to amend its Fee Schedule
is consistent with Section 6(b) of the Act \14\ in general, and
furthers the objectives of Section 6(b)(4) of the Act \15\ 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.
---------------------------------------------------------------------------
\14\ 15 U.S.C. 78f(b).
\15\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------
The Exchange believes that its proposal to adopt market data fees
is reasonable in several respects. First, the Exchange is subject to
significant competitive forces in the market for options transaction
and non-transaction services that constrain its pricing determinations
in that 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
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.'' \16\
---------------------------------------------------------------------------
\16\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496 (June 29, 2005).
---------------------------------------------------------------------------
Numerous indicia demonstrate the competitive nature of this market.
For example, clear substitutes to the Exchange exist in the market for
options transaction services. The Exchange is one of several options
venues to which market participants may direct their order flow, and it
represents a small
[[Page 69373]]
percentage of the overall market. Within this environment, market
participants can freely and often do shift their order flow among the
Exchange and competing venues in response to changes in their
respective pricing schedules. 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 exchange-traded fund (``ETF'') options.\17\
Therefore, no exchange possesses significant pricing power. More
specifically, for the month of August 2020, the Exchange had a market
share of approximately 3.24% of executed multiply-listed equity
options.\18\ Additionally, the Exchange notes that it does not
currently list any proprietary or singly-list products. Accordingly,
there are no products listed on the Exchange for which the Exchange is
the sole source of market data. Thus, it is a business decision whether
firms decide to purchase the Exchange's market data feeds, as the
Exchange only offers trading in multiply-listed options.
---------------------------------------------------------------------------
\17\ 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.
\18\ See id.
---------------------------------------------------------------------------
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, 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).\19\ 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.
---------------------------------------------------------------------------
\19\ See Securities Exchange Act Release No. 85304 (March 13,
2019), 84 FR 10144 (March 19, 2019) (SR-PEARL-2019-07).
---------------------------------------------------------------------------
Further, the Exchange no longer believes it is necessary to waive
its market data 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 that the proposed change is equitable and not
unfairly discriminatory because the elimination of the fee waiver for
market data fees will uniformly apply to all market participants and
market participants are not required to purchase any market data feed
from the Exchange. As described above, the Exchange does not offer
trading in any proprietary or singly-list options products.
Accordingly, the Exchange is not the sole source of market data for any
products listed on the Exchange. Therefore, it is a business decision
as to whether a firm purchases the Exchange's market data feeds.
Additionally, the Exchange believes its proposal to establish market
data fees is reasonable and well within the range of fees assessed
among other exchanges, including the Exchange's affiliate, MIAX.\20\
---------------------------------------------------------------------------
\20\ See the MIAX Options Fee Schedule.
---------------------------------------------------------------------------
The Exchange believes that it is reasonable, equitable and not
unfairly discriminatory to assess internal distributors fees that are
less than the fees assessed for external distributors for subscriptions
to the Exchange's ToM, AIS and MOR data feeds because internal
distributors have limited, restricted usage rights to the market data,
as compared to external distributors which have more expansive usage
rights. All Members and non-Members that determine to receive any
market data feed of the Exchange (or its affiliates, MIAX and MIAX
PEARL), must first execute, among other things, the MIAX Exchange Group
Exchange Data Agreement (the ``Exchange Data Agreement'').\21\ Pursuant
to the Exchange Data Agreement, internal distributors are restricted to
the ``internal use'' of any market data they receive. This means that
internal distributors may only distribute the Exchange's market data to
the recipient's officers and employees and its affiliates.\22\ External
distributors may distribute the Exchange's market data to persons who
are not officers, employees or affiliates of the external
distributor,\23\ and may charge their own fees for the distribution of
such market data. Accordingly, the Exchange believes it is fair,
reasonable and not unfairly discriminatory to assess external
distributors a higher fee for the Exchange's market data products as
external distributors have greater usage rights to commercialize such
market data. The Exchange believes the proposed fees are a reasonable
allocation of its costs and expenses among its Members and other
persons using its facilities since it is recovering the costs
associated with distributing such data. Access to the Exchange is
provided on fair and non-discriminatory terms. The Exchange believes
the proposed fees are equitable and not unfairly discriminatory because
the fee level results in a reasonable and equitable allocation of fees
amongst users for similar services. Moreover, the decision as to
whether or not to purchase market data is entirely optional to all
users. Potential purchasers are not required to purchase the market
data, and the Exchange is not required to make the market data
available. Purchasers may request the data at any time or may decline
to purchase such data. The allocation of fees among users is fair and
reasonable because, if the market deems the proposed fees to be unfair
or inequitable, firms can diminish or discontinue their use of this
data.
---------------------------------------------------------------------------
\21\ See Exchange Data Agreement, available at https://miaxweb2.pairsite.com/sites/default/files/page-files/MIAX_Exchange_Group_Data_Agreement_09032020.pdf.
\22\ See id.
\23\ See id.
---------------------------------------------------------------------------
In adopting Regulation NMS, the Commission granted self-regulatory
organizations and broker-dealers increased authority and flexibility to
offer new and unique market data to the public. It was believed that
this authority would expand the amount of data available to consumers,
and also spur innovation and competition for the provision of market
data:
[E]fficiency is promoted when broker-dealers who do not need the
data beyond the prices, sizes, market center identifications of the
NBBO and consolidated last sale information are not required to
receive (and pay for) such data when broker-dealers may choose to
receive (and pay for) additional market data based on their own
internal analysis of the need for such data.\24\
---------------------------------------------------------------------------
\24\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496 (June 29, 2005).
By removing ``unnecessary regulatory restrictions'' on the ability
of exchanges to sell their own data, Regulation NMS advanced the goals
of the Act and the principles reflected in its legislative history. If
the free market should
[[Page 69374]]
determine whether proprietary data is sold to broker-dealers at all, it
follows that the price at which such data is sold should be set by the
market as well.
In July, 2010, Congress adopted H.R. 4173, the Dodd-Frank Wall
Street Reform and Consumer Protection Act of 2010 (``Dodd-Frank Act''),
which amended Section 19 of the Act. Among other things, Section 916 of
the Dodd-Frank Act amended paragraph (A) of Section 19(b)(3) of the Act
by inserting the phrase ``on any person, whether or not the person is a
member of the self-regulatory organization'' after ``due, fee or other
charge imposed by the self-regulatory organization.'' As a result, all
SRO rule proposals establishing or changing dues, fees or other charges
are immediately effective upon filing regardless of whether such dues,
fees or other charges are imposed on members of the SRO, non-members,
or both. Section 916 further amended paragraph (C) of Section 19(b)(3)
of the Act to read, in pertinent part, ``At any time within the 60-day
period beginning on the date of filing of such a proposed rule change
in accordance with the provisions of paragraph (1) [of Section 19(b)],
the Commission summarily may temporarily suspend the change in the
rules of the self-regulatory organization made thereby, 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 this title. If the Commission takes such
action, the Commission shall institute proceedings under paragraph
(2)(B) [of Section 19(b)] to determine whether the proposed rule should
be approved or disapproved.''
The Exchange believes that these amendments to Section 19 of the
Act reflect Congress's intent to allow the Commission to rely upon the
forces of competition to ensure that fees for market data are
reasonable and equitably allocated. Although Section 19(b) had formerly
authorized immediate effectiveness for a ``due, fee or other charge
imposed by the self-regulatory organization,'' the Commission adopted a
policy and subsequently a rule stating that fees for data and other
products available to persons that are not members of the self-
regulatory organization must be approved by the Commission after first
being published for comment. At the time, the Commission supported the
adoption of the policy and the rule by pointing out that unlike
members, whose representation in self-regulatory organization
governance was mandated by the Act, non-members should be given the
opportunity to comment on fees before being required to pay them, and
that the Commission should specifically approve all such fees. The
Exchange believes that the amendment to Section 19 reflects Congress's
conclusion that the evolution of self-regulatory organization
governance and competitive market structure have rendered the
Commission's prior policy on non-member fees obsolete. Specifically,
many exchanges have evolved from member-owned, not-for-profit
corporations into for-profit, investor-owned corporations (or
subsidiaries of investor-owned corporations). Accordingly, exchanges no
longer have narrow incentives to manage their affairs for the exclusive
benefit of their members, but rather have incentives to maximize the
appeal of their products to all customers, whether members or non-
members, so as to broaden distribution and grow revenues. Moreover, the
Exchange believes that the change also reflects an endorsement of the
Commission's determinations that reliance on competitive markets is an
appropriate means to ensure equitable and reasonable prices. Simply
put, the change reflects a presumption that all fee changes should be
permitted to take effect immediately, since the level of all fees are
constrained by competitive forces.
Selling proprietary market data is a means by which exchanges
compete to attract business. To the extent that exchanges are
successful in such competition, they earn trading revenues and also
enhance the value of their data products by increasing the amount of
data they provide. The need to compete for business places substantial
pressure upon exchanges to keep their fees for both executions and data
reasonable.\25\ The Exchange therefore believes that the fees for
market data are properly assessed on Members and Non-Member users.
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\25\ See Sec. Indus. Fin. Mkts. Ass'n (SIFMA), Initial Decision
Release No. 1015, 2016 SEC LEXIS 2278 (ALJ June 1, 2016) (finding
the existence of vigorous competition with respect to non-core
market data).
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The decision of the United States Court of Appeals for the District
of Columbia Circuit in NetCoalition v. SEC, No. 09-1042 (D.C. Cir.
2010), although reviewing a Commission decision made prior to the
effective date of the Dodd-Frank Act, upheld the Commission's reliance
upon competitive markets to set reasonable and equitably allocated fees
for market data:
In fact, the legislative history indicates that the Congress
intended that the market system `evolve through the interplay of
competitive forces as unnecessary regulatory restrictions are
removed' and that the SEC wield its regulatory power `in those
situations where competition may not be sufficient,' such as in the
creation of a `consolidated transactional reporting system.' '' \26\
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\26\ NetCoalition, at 15 (quoting H.R. Rep. No. 94-229, at 92
(1975), as reprinted in 1975 U.S.C.C.A.N. 321, 323).
The court's conclusions about Congressional intent are therefore
reinforced by the Dodd-Frank Act amendments, which create a presumption
that exchange fees, including market data fees, may take effect
immediately, without prior Commission approval, and that the Commission
should take action to suspend a fee change and institute a proceeding
to determine whether the fee change should be approved or disapproved
only where the Commission has concerns that the change may not be
consistent with the Act.
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
the Exchange 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, the
Exchange does not have the market power necessary to set prices for
services that are unreasonable or unfairly discriminatory in violation
of the Act. The Exchange's proposed market data
[[Page 69375]]
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 affiliate, MIAX.\27\
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\27\ See the MIAX Options Fee Schedule.
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The Exchange believes that the proposed market data 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 providing
market data to the market participants that request such data.
Accordingly, the Exchange believes that the proposed market data 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 market data 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. Based on publicly-available information, and excluding
index-based options, no single exchange has more than 16% market
share.\28\ 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,\29\ 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.
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\28\ See supra note 17.
\29\ Id.
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C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
Written comments were neither solicited nor received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become effective pursuant to Section
19(b)(3)(A)(ii) of the Act,\30\ and Rule 19b-4(f)(2) \31\ thereunder.
At any time within 60 days of the filing of the proposed rule change,
the Commission summarily may temporarily suspend such rule change if it
appears to the Commission that such action is necessary or appropriate
in the public interest, for the protection of investors, or otherwise
in furtherance of the purposes of the Act. If the Commission takes such
action, the Commission shall institute proceedings to determine whether
the proposed rule should be approved or disapproved.
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\30\ 15 U.S.C. 78s(b)(3)(A)(ii).
\31\ 17 CFR 240.19b-4(f)(2).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
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-2020-13 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-2020-13. 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-2020-13, and should be submitted
on or before November 23, 2020.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\32\
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\32\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-24162 Filed 10-30-20; 8:45 am]
BILLING CODE P
