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, 81242-81248 [2020-27488]
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Federal Register / Vol. 85, No. 241 / Tuesday, December 15, 2020 / Notices
exchanges and data vendors are free to
lower their prices to better compete
with the Exchange’s offering. Nasdaq’s
main competitors, in particular, offer
directly competing enterprise licenses
for their top-of-book products, and are
readily able to lower enterprise license
fees in response to Nasdaq. Indeed, the
Exchange’s decision to lower its
enterprise license fee was itself
generated by the need to compete with
other exchanges. The Proposal may in
turn generate competitive responses
from other exchanges, enhancing overall
competition.
of investors; or (iii) 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.
Intramarket Competition
The Proposal will not cause any
unnecessary or inappropriate burden on
intramarket competition. In fact, it will
foster competition among broker-dealers
by lowering costs for current licensees,
while at the same time increasing the
number of broker-dealers able to
purchase that license. The current
enterprise license, just like all of the
enterprise licenses offered by Nasdaq’s
competitors, does not itself impose an
unnecessary or inappropriate burden on
intramarket competition. Relatively
smaller broker-dealers have fewer
internal Professional Subscribers and
therefore operate with lower fixed costs,
helping them compete with the larger
broker-dealers. Moreover, the
underlying fee of $26 per Professional
Subscriber fee has itself been shown not
to place an undue burden on
competition, and, if that fee proves to be
excessive, broker-dealers would be able
to purchase top-of-book data from one of
the Exchange’s competitors offering a
substitute product. For all of these
reasons, the Proposal will not place any
unnecessary or inappropriate burden on
intramarket competition.
Electronic Comments
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were either
solicited or 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.54
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: (i) Necessary or appropriate in
the public interest; (ii) for the protection
54 15
U.S.C. 78s(b)(3)(A)(ii).
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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:
• 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–
NASDAQ–2020–086 on the subject line.
• 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–NASDAQ–2020–086. 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–NASDAQ–2020–086 and
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For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.55
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020–27484 Filed 12–14–20; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–90612; File No. SR–
EMERALD–2020–16]
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
December 9, 2020.
Paper Comments
PO 00000
should be submitted on or before
January 5, 2021.
Sfmt 4703
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 November
25, 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
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
55 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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Federal Register / Vol. 85, No. 241 / Tuesday, December 15, 2020 / Notices
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
market data products, MIAX Emerald
Top of Market (‘‘ToM’’), Administrative
Information Subscriber (‘‘AIS’’) feed,
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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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.10
On November 25, 2020, the Exchange
withdrew the Second Proposed Rule
Change and refiled its proposal to assess
fees for its ToM, AIS and MOR products
in order to provide sufficient
information to demonstrate that the
Exchange is subject to significant
substitution-based competitive forces 11
in setting the terms of its proposal for
ToM, AIS and MOR market data fees.12
A more detailed description of the
ToM, AIS and MOR products can be
found in the Exchange’s previously filed
Market Data Product filings.13 The
Exchange notes that it will not be
assessing fees for Complex Top of
Market (‘‘cToM’’) 14 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.
9 See SR–EMERALD–2020–10 (the ‘‘First
Proposed Rule Change’’).
10 See Securities Exchange Act Release No. 90274
(October 27, 2020), 85 FR 69371 (November 2, 2020)
(SR–EMERALD–2020–13) (Notice of Filing and
Immediate Effectiveness of a Proposed Rule Change
To Amend Its Fee Schedule To Establish Market
Data Fees) (the ‘‘Second Proposed Rule Change’’).
11 See, e.g., Securities Exchange Act Release No.
90217 (October 16, 2020), 85 FR 67392 (October 22,
2020) (SR–NYSENAT–2020–05) (Order Approving a
Proposed Rule Change To Establish Fees for the
NYSE National Integrated Feed) (the ‘‘Integrated
Feed Approval Order’’).
12 See Comment Letter from Joseph W. Ferraro III,
SVP, Deputy General Counsel, the Exchange, dated
November 20, 2020, notifying the Commission that
the Exchange will withdraw the Second Proposed
Rule Change.
13 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’’)).
14 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.
PO 00000
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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 15 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
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
15 The term ‘‘Priority Customer’’ means a person
or entity that (i) is not a broker or dealer in
securities, and (ii) does not place more than 390
orders in listed options per day on average during
a calendar month for its own beneficial account(s).
The number of orders shall be counted in
accordance with Interpretation and Policy .01 to
Exchange Rule 100. See Exchange Rule 100.
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Federal Register / Vol. 85, No. 241 / Tuesday, December 15, 2020 / Notices
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.16
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 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.’’ 17
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 exchange-traded fund
(‘‘ETF’’) options trades.18 Therefore,
currently no exchange possesses
significant pricing power in the
execution of multiply-listed equity &
ETF options order flow. More
16 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.
17 See Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37496, 37499 (June 29, 2005)
(S7–10–04) (‘‘Reg NMS Adopting Release’’).
18 The 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.
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specifically, in October 2020, the
Exchange had approximately 3.60%
market share of executed volume of
multiply-listed equity & ETF options
trades.
The recent growth of the Exchange’s
market share demonstrates this
competitive marketplace. Up until
February 28, 2019, the Exchange was
non-operational, and therefore had a 0%
market share. On March 1, 2019, the
Exchange launched its current platform
as an affiliated exchange of Miami
International Securities Exchange, LLC
(‘‘MIAX’’) and MIAX PEARL, LLC
(‘‘MIAX PEARL’’). Within one month,
MIAX Emerald began regularly
executing at least 0.70% of trading
volume. By September, 2019, MIAX
Emerald began executing close to 1% of
trading volume on a more regular basis.
Beginning March of 2020, the Exchange
had a regular market share of
approximately 2–4% of executed
volume of equity option trades.19
As MIAX Emerald’s transaction
market share has increased, so has the
value of its market data. For example, in
March 2019, when MIAX Emerald
launched operations, the Exchange had
only 5 subscribers for its ToM data feed,
3 subscribers for its AIS data feed, and
2 subscribers for its MOR data feed—all
such feeds were free during that time.
As MIAX Emerald’s market share has
increased, the number of subscribers of
the ToM, AIS and MOR data feeds has
steadily increased and as of September
2020, prior to the First Proposed Rule
Change, the Exchange had 14
subscribers for its ToM data feed, 13
subscribers for its AIS data feed, and 9
subscribers for its MOR data feed—all
such feeds were free during that time.
However, notwithstanding this
subscriber growth, only a fraction of the
total MIAX Emerald Members subscribe
to MIAX Emerald data feed products.
For example, as of September 2020,
MIAX Emerald had 42 Members.
However, during that same period, only
14 Members subscribed to MIAX
Emerald data feed products. That is only
an approximately 30% subscription
rate. Accordingly, approximately 70%
of the MIAX Emerald Members rely on
substitute market data products to
satisfy their trading needs on MIAX
Emerald.
On September 15, 2020, the Exchange
issued a Regulatory Circular to
announce that the Exchange would be
ending the Waiver Period for its ToM,
AIS and MOR data feeds, beginning
October 1, 2020, which provided market
participants with sufficient advance
notice of the proposed fees for those
19 See
PO 00000
id.
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data feeds. This notice also afforded
market participants with reasonable
time to consider the value of the MIAX
Emerald ToM, AIS and MOR data feeds
on their businesses, and make a
determination of whether to continue
using the products or not, once they
were no longer provided for free.20
Since the First Proposed Rule Change
went into effect, 1 subscriber of the ToM
data feed product (i.e., nearly 7% of the
prior subscriber base), 2 subscribers of
the AIS data feed product (i.e., nearly
16.66% of the prior subscriber base),
and 1 subscriber of the MOR data feed
product (i.e., nearly 11% of the prior
subscriber base) cancelled their
subscriptions. In each instance, the
subscribers told the Exchange that their
reasons for cancelling their
subscriptions were the imminent
imposition of fees. The total number of
subscriptions lost constitute 11.4% of
the prior subscriber base.
The Exchange is not required to make
the ToM, AIS and MOR data feeds
available or to offer any specific pricing
alternatives to any customers, nor is any
firm required to purchase the ToM, AIS
and MOR data feeds. Firms that choose
to purchase the ToM, AIS and MOR data
feeds do so for the primary goals of
using them to increase their revenues,
reduce their expenses, and in some
instances to compete directly with the
Exchange (including for order flow).
Those firms are able to determine for
themselves whether or not the ToM, AIS
and MOR data feeds or any other similar
products are attractively priced.21
The Exchange produces and
disseminates the ToM, AIS and MOR
data feeds as part of its market data
offerings to support its transaction
execution services. Since March 2019,
when the Exchange launched trading,
the Exchange has observed a direct
correlation between the steady increase
of subscribers to the ToM, AIS and MOR
data feeds and the increase in the
Exchange’s transaction market share
volume over the same period.
The Exchange determined the level of
fees to charge for the ToM, AIS and
MOR data feeds based on the value of
the Exchange’s transaction services. As
noted above, over an initial 12-month
period, the Exchange has grown from
0% to approximately 2–4% market
share of consolidated trading volume on
20 See
supra, note 8.
Securities Exchange Act Release Nos.
60459 (August 7, 2009), 74 FR 41466 (August 17,
2009) (SR–Phlx–2009–54) (Order Approving a
Proposed Rule Change to Establish Fees for the Top
of PHLX Options Direct Data Feed Product); 66993
(May 15, 2012), 77 FR 30043 (May 21, 2012) (SR–
PHLX–2012–63). See also Nasdaq GEMX Options 7,
Pricing Schedule, Section 7, Market Data.
21 See
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a regular monthly basis. During that
same period, the Exchange had a steady
increase in the number of subscribers to
its ToM, AIS and MOR data feeds.
However, as discussed above, only
approximately 30% of MIAX Emerald
Members subscribe to market data
products from the Exchange.
Conversely, approximately 70% of the
MIAX Emerald Members rely on
substitute market data products to
satisfy their trading needs on MIAX
Emerald.
The proposed fee structure is not
novel as it is based on the fee structure
currently in place for the ToM, AIS and
MOR data feeds at the Exchange’s
affiliate, MIAX.22 Both MIAX and MIAX
Emerald trade over approximately 2,700
equity options. The Exchange now
proposes fees for its ToM, AIS and MOR
data feeds that are based on the existing
fee structure and rates that data
recipients already pay for the MIAX
ToM, AIS and MOR data feeds.
At the time the Exchange filed the
First Proposed Rule Change, the
Exchange did not know the full impact
of the proposed fees on current data
recipients because subscribers may
choose to reduce or eliminate their use
of data. The Exchange anticipated that
there might be data recipients of the
ToM, AIS and MOR data feeds that
subscribed only because they were free
and might choose to discontinue using
the products once the fees were
implemented. The Exchange anticipated
that data recipients that choose to
discontinue the ToM, AIS and MOR
data feeds may also choose to shift order
flow away from the Exchange, and that,
given the current competitive
environment, if data recipients were to
both discontinue the product and shift
order flow away from the Exchange, the
Exchange would reevaluate the fees and
potentially file a separate proposed rule
change to amend its fees. Prior to the
imposition of the First Proposed Rule
Change, the Exchange could not
estimate the impact of the proposed fees
on the Exchange’s transaction services
business or the number of subscribers
for the Exchange’s ToM, AIS and MOR
data feeds. Since October 1, 2020, when
the fees for the ToM, AIS and MOR data
feeds took effect, 4 subscribers to the
ToM, AIS and MOR data feeds have
cancelled their subscriptions. In each
instance, the subscribers told the
Exchange that the reason for ending
their subscriptions was the imminent
imposition of fees. Additionally, this
data must be considered in the context
that only approximately 30% of MIAX
22 See MIAX Fee Schedule, Section 6, Market
Data Fees.
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Emerald Members subscribe to market
data products from the Exchange.
Conversely, approximately 70% of the
MIAX Emerald Members rely on
substitute market data products to
satisfy their trading needs on MIAX
Emerald.
to the Exchange’s trading system
ensures that the Exchange cannot set
unreasonable market data fees without
suffering the negative effects of that
decision in the fiercely competitive
market in which it operates as a
platform.
2. Statutory Basis
The Exchange believes that its
proposal to amend its Fee Schedule is
consistent with Section 6(b) of the Act 23
in general, and furthers the objectives of
Section 6(b)(4) of the Act 24 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.
MIAX Emerald ToM, AIS and MOR Data
Feeds Are Optional Market Data
Products
The decision to subscribe to the
Exchange’s ToM, AIS and/or MOR data
feeds is entirely optional and is a
business decision that is made by each
firm. The Exchange is not required to
make the ToM, AIS and MOR data feeds
available to any customers, nor is any
customer required to purchase the ToM,
AIS and MOR data feeds. A customer’s
decision whether to purchase the ToM,
AIS and MOR data feeds is entirely
discretionary. Most firms that choose to
subscribe to the ToM, AIS and MOR
data feeds do so for the primary goals
of using it to increase their revenues,
reduce their expenses, and in some
instances to compete directly with the
Exchange for order flow. Such firms are
able to determine for themselves
whether the ToM, AIS and MOR data
feeds are necessary for their business
needs, and if so, whether or not they are
attractively priced. If the ToM, AIS and
MOR data feeds do not provide
sufficient value to firms based on the
uses those firms may have for them,
those firms may simply choose to
conduct their business operations in
ways that do not use the ToM, AIS and
MOR data feeds. If they do not choose
to use the ToM, AIS and MOR data
feeds, they could also choose not to
direct order flow to the Exchange.
As noted above, after the First
Proposed Rule Change, current
subscribers to the ToM, AIS and MOR
data feeds began changing their
behavior in response to the imposition
of fees for those data feed products.
Since October 1, 2020, when the First
Proposed Rule Change took effect, 4
subscribers to the ToM, AIS and MOR
data feeds cancelled their subscriptions.
In each instance, the subscriber told the
Exchange that the reason for ending its
subscription was the imminent
imposition of fees. These cancellations
are evidence that subscribing to the
ToM, AIS and MOR data feeds is
discretionary, that each customer makes
the decision whether to subscribe based
on its own analysis of the benefits and
costs to itself, and that customers can
and do make those decisions quickly
based on reactions to fee changes.
However, only a fraction of total
MIAX Emerald Members subscribe to
MIAX Emerald data feed products. For
Exchange Market Data Fees Are
Constrained by the Availability of
Substitute Platforms
The fierce competition for order flow
constrains any exchange from pricing its
market data at a supracompetitive price,
and constrains the Exchange in setting
its fees for the ToM, AIS and MOR data
feeds. The proposed fees are therefore
reasonable because in setting them, the
Exchange is constrained by the
availability of 15 substitute options
exchanges offering market data products
and trading capabilities. Such
substitutes need not be identical, but
only substantially similar to the product
at hand.
More specifically, in setting fees for
ToM, AIS and MOR data feeds, the
Exchange is constrained by the fact that,
if its pricing is unattractive to
customers, customers have their pick of
an increasing number of alternative
options exchanges to use instead of the
Exchange. To illustrate, MIAX Emerald
has 42 Exchange Members. The Cboe
Exchange, Inc. (‘‘Cboe’’) has
approximately 229 exchange
members.25 The Exchange believes that
it has considered all relevant factors and
has not considered irrelevant factors in
order to establish fees. The existence of
numerous alternative options exchanges
23 15
U.S.C. 78f(b).
U.S.C. 78f(b)(4) and (5).
25 See Cboe Form 1 Amendment, Exhibit M (June
26, 2020), available at https://www.sec.gov/
Archives/edgar/vprr/2001/20012232.pdf.
24 15
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example, as of September 2020, MIAX
Emerald had 42 Members. However,
during that same period, only 14
Members subscribed to MIAX Emerald
data feed products. That is only an
approximately 30% subscription rate.
Accordingly, approximately 70% of the
MIAX Emerald Members rely on
substitute market data products to
satisfy their trading needs on MIAX
Emerald.
But even if such firms determine that
the fees for the ToM, AIS and MOR data
feeds are too high, customers can access
much of the same data by subscribing to
the data feed of the Options Price
Reporting Authority (‘‘OPRA’’), which
consists of: last sale reports (price,
volume and related information with
respect to completed transactions);
quotation information (bids and offers
and related information pertaining to
quotations in eligible securities
available for trading); and other related
information with respect to trading and
administrative messages. Although not
free of charge, the fees for subscribing to
OPRA’s substitute data feeds are
significantly discounted.26 Customers
can also access much of this same data
through one of the numerous OPRA
Vendors.27 In this way, OPRA and
OPRA Vendors are substitutes for a
significant portion of the data available
on the ToM, AIS and MOR data feeds.
This is clear evidence that the
availability of these substitute products
constrains the Exchange’s ability to
charge supracompetitive prices for the
ToM, AIS and MOR data feeds.
Further, in the case of data that is
redistributed through OPRA Vendors, of
which there are numerous firms, the
vendors themselves provide additional
price discipline for proprietary data
products because they control the
primary means of access to certain end
users. These vendors impose price
discipline based upon their business
models. For example, vendors that
assess a surcharge on data they sell are
able to refuse to offer proprietary
products that their end users do not or
will not purchase in sufficient numbers.
In setting the proposed fees for the
ToM, AIS and MOR data feeds, the
Exchange considered the
competitiveness of the market for
26 See OPRA Fee Schedule, available at https://
assets.website-files.com/5ba40927ac854
d8c97bc92d7/5bf2f4661faec762fa07826a_OPRA_
Fee_Schedule.pdf (charging professional subscriber
device-based fees of $31.50 per display device and
non-professional subscriber fees starting at $1.25
per non-professional subscriber, up to 75,000, for
OPRA’s Basis Service).
27 See the list of OPRA Vendors, available at
https://assets.website-files.com/
5ba40927ac854d8c97bc92d7/5c671220ff4c
29504e423d0d_190215R2_OPRA_Vendors.pdf.
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proprietary data and all of the
implications of that competition. The
Exchange believes that it has considered
all relevant factors and has not
considered irrelevant factors in order to
establish reasonable fees. The existence
of alternatives to the Exchange’s trading
system and the continued availability of
the Exchange’s separate data feeds at a
steep discount ensure that the Exchange
cannot set unreasonable fees when
vendors and subscribers can elect these
alternatives or choose not to purchase a
specific proprietary data product if the
attendant fees are not justified by the
returns that any particular vendor or
data recipient would achieve through
the purchase.
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.28
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
28 See
PO 00000
the MIAX Options Fee Schedule.
Frm 00071
Fmt 4703
Sfmt 4703
Agreement’’).29 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.30 External distributors may
distribute the Exchange’s market data to
persons who are not officers, employees
or affiliates of the external distributor,31
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 brokerdealers who do not need the data beyond the
prices, sizes, market center identifications of
29 See Exchange Data Agreement, available at
https://miaxweb2.pairsite.com/sites/default/files/
page-files/MIAX_Exchange_Group_Data_
Agreement_09032020.pdf.
30 See id.
31 See id.
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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.’’ 32
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
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 self32 See
Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37496 (June 29, 2005).
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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 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
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.33
The Exchange therefore believes that the
fees for market data are properly
33 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).
PO 00000
Frm 00072
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81247
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 ‘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.’ ’’ 34
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 believes that the
proposed fees do not put any market
participants at a relative disadvantage
compared to other market participants.
34 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).
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As noted above, the proposed fee
schedule would apply to all subscribers
of the ToM, AIS and MOR data feeds,
and customers may choose whether to
subscribe to any or all of the feeds. The
Exchange also believes that the
proposed fees neither favor nor penalize
one or more categories of market
participants in a manner that would
impose an undue market on
competition. Further, the Exchange’s
proposed market data 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.35
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 that the
proposed fees do not impose a burden
on competition or on other SROs that is
not necessary or appropriate. In setting
the proposed fees, the Exchange was
constrained by the availability of
numerous substitute trading platforms
and services also offering market data
products and trading capabilities, and
low barriers to entry mean new
exchanges are frequently introduced. In
addition, the Exchange believes that the
proposed fees do not impose a burden
on competition or on other exchanges
that is not necessary or appropriate
because of the availability of numerous
substitute market data products. Many
other exchanges offer proprietary data
feeds similar to the Exchange’s ToM,
AIS and MOR data feeds. Because
market data users can find suitable
substitute feeds, an exchange that
overprices its market data products
stands a high risk that users may
substitute another platform, in which
case the platform would stand to lose
both market data and trading fees. These
competitive pressures ensure that no
one exchange’s market data fees can
impose an unnecessary burden on
competition, and the Exchange’s
proposed fees do not do so here.
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,36 and Rule
19b–4(f)(2) 37 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–2020–16 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–2020–16. 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
the MIAX Options Fee Schedule.
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17:35 Dec 14, 2020
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For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.38
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020–27488 Filed 12–14–20; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–90611; File No. SR–MSRB–
2020–08]
Self-Regulatory Organizations;
Municipal Securities Rulemaking
Board; Order Granting Approval of a
Proposed Rule Change To Amend
MSRB Form G–32
December 9, 2020.
I. Introduction
On October 13, 2020, the Municipal
Securities Rulemaking Board (the
‘‘MSRB’’ or ‘‘Board’’) filed with the
Securities and Exchange Commission
(the ‘‘SEC’’ or ‘‘Commission’’), pursuant
to Section 19(b)(1) of the Securities
Exchange Act of 1934 (‘‘Act’’) 1 and Rule
19b–4 thereunder,2 a proposed rule
change to amend MSRB Form G–32 to
clarify that brokers, dealers, and
municipal securities dealers
(collectively, ‘‘dealers’’ and,
individually, each a ‘‘dealer’’) acting as
underwriters in the primary offering of
municipal securities are obligated to
manually complete three data fields
(collectively, the ‘‘Amended Data
38 17
36 15
35 See
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–2020–16, and
should be submitted on or before
January 5, 2021.
U.S.C. 78s(b)(3)(A)(ii).
37 17 CFR 240.19b–4(f)(2).
PO 00000
Frm 00073
Fmt 4703
Sfmt 4703
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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]]>Agencies
[Federal Register Volume 85, Number 241 (Tuesday, December 15, 2020)]
[Notices]
[Pages 81242-81248]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-27488]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-90612; File No. SR-EMERALD-2020-16]
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
December 9, 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 November 25, 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
[[Page 81243]]
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 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.\10\
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\9\ See SR-EMERALD-2020-10 (the ``First Proposed Rule Change'').
\10\ See Securities Exchange Act Release No. 90274 (October 27,
2020), 85 FR 69371 (November 2, 2020) (SR-EMERALD-2020-13) (Notice
of Filing and Immediate Effectiveness of a Proposed Rule Change To
Amend Its Fee Schedule To Establish Market Data Fees) (the ``Second
Proposed Rule Change'').
---------------------------------------------------------------------------
On November 25, 2020, the Exchange withdrew the Second Proposed
Rule Change and refiled its proposal to assess fees for its ToM, AIS
and MOR products in order to provide sufficient information to
demonstrate that the Exchange is subject to significant substitution-
based competitive forces \11\ in setting the terms of its proposal for
ToM, AIS and MOR market data fees.\12\
---------------------------------------------------------------------------
\11\ See, e.g., Securities Exchange Act Release No. 90217
(October 16, 2020), 85 FR 67392 (October 22, 2020) (SR-NYSENAT-2020-
05) (Order Approving a Proposed Rule Change To Establish Fees for
the NYSE National Integrated Feed) (the ``Integrated Feed Approval
Order'').
\12\ See Comment Letter from Joseph W. Ferraro III, SVP, Deputy
General Counsel, the Exchange, dated November 20, 2020, notifying
the Commission that the Exchange will withdraw the Second Proposed
Rule Change.
---------------------------------------------------------------------------
A more detailed description of the ToM, AIS and MOR products can be
found in the Exchange's previously filed Market Data Product
filings.\13\ The Exchange notes that it will not be assessing fees for
Complex Top of Market (``cToM'') \14\ data at this time.
---------------------------------------------------------------------------
\13\ 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'')).
\14\ 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 \15\ contracts that are
included in the size associated with the Exchange's best bid and offer.
---------------------------------------------------------------------------
\15\ The term ``Priority Customer'' means a person or entity
that (i) is not a broker or dealer in securities, and (ii) does not
place more than 390 orders in listed options per day on average
during a calendar month for its own beneficial account(s). The
number of orders shall be counted in accordance with Interpretation
and Policy .01 to Exchange Rule 100. See Exchange Rule 100.
---------------------------------------------------------------------------
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
[[Page 81244]]
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.\16\
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\16\ 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.
---------------------------------------------------------------------------
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 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.'' \17\
---------------------------------------------------------------------------
\17\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496, 37499 (June 29, 2005) (S7-10-04) (``Reg NMS
Adopting Release'').
---------------------------------------------------------------------------
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 trades.\18\ Therefore, currently
no exchange possesses significant pricing power in the execution of
multiply-listed equity & ETF options order flow. More specifically, in
October 2020, the Exchange had approximately 3.60% market share of
executed volume of multiply-listed equity & ETF options trades.
---------------------------------------------------------------------------
\18\ The 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.
---------------------------------------------------------------------------
The recent growth of the Exchange's market share demonstrates this
competitive marketplace. Up until February 28, 2019, the Exchange was
non-operational, and therefore had a 0% market share. On March 1, 2019,
the Exchange launched its current platform as an affiliated exchange of
Miami International Securities Exchange, LLC (``MIAX'') and MIAX PEARL,
LLC (``MIAX PEARL''). Within one month, MIAX Emerald began regularly
executing at least 0.70% of trading volume. By September, 2019, MIAX
Emerald began executing close to 1% of trading volume on a more regular
basis. Beginning March of 2020, the Exchange had a regular market share
of approximately 2-4% of executed volume of equity option trades.\19\
---------------------------------------------------------------------------
\19\ See id.
---------------------------------------------------------------------------
As MIAX Emerald's transaction market share has increased, so has
the value of its market data. For example, in March 2019, when MIAX
Emerald launched operations, the Exchange had only 5 subscribers for
its ToM data feed, 3 subscribers for its AIS data feed, and 2
subscribers for its MOR data feed--all such feeds were free during that
time. As MIAX Emerald's market share has increased, the number of
subscribers of the ToM, AIS and MOR data feeds has steadily increased
and as of September 2020, prior to the First Proposed Rule Change, the
Exchange had 14 subscribers for its ToM data feed, 13 subscribers for
its AIS data feed, and 9 subscribers for its MOR data feed--all such
feeds were free during that time. However, notwithstanding this
subscriber growth, only a fraction of the total MIAX Emerald Members
subscribe to MIAX Emerald data feed products. For example, as of
September 2020, MIAX Emerald had 42 Members. However, during that same
period, only 14 Members subscribed to MIAX Emerald data feed products.
That is only an approximately 30% subscription rate. Accordingly,
approximately 70% of the MIAX Emerald Members rely on substitute market
data products to satisfy their trading needs on MIAX Emerald.
On September 15, 2020, the Exchange issued a Regulatory Circular to
announce that the Exchange would be ending the Waiver Period for its
ToM, AIS and MOR data feeds, beginning October 1, 2020, which provided
market participants with sufficient advance notice of the proposed fees
for those data feeds. This notice also afforded market participants
with reasonable time to consider the value of the MIAX Emerald ToM, AIS
and MOR data feeds on their businesses, and make a determination of
whether to continue using the products or not, once they were no longer
provided for free.\20\
---------------------------------------------------------------------------
\20\ See supra, note 8.
---------------------------------------------------------------------------
Since the First Proposed Rule Change went into effect, 1 subscriber
of the ToM data feed product (i.e., nearly 7% of the prior subscriber
base), 2 subscribers of the AIS data feed product (i.e., nearly 16.66%
of the prior subscriber base), and 1 subscriber of the MOR data feed
product (i.e., nearly 11% of the prior subscriber base) cancelled their
subscriptions. In each instance, the subscribers told the Exchange that
their reasons for cancelling their subscriptions were the imminent
imposition of fees. The total number of subscriptions lost constitute
11.4% of the prior subscriber base.
The Exchange is not required to make the ToM, AIS and MOR data
feeds available or to offer any specific pricing alternatives to any
customers, nor is any firm required to purchase the ToM, AIS and MOR
data feeds. Firms that choose to purchase the ToM, AIS and MOR data
feeds do so for the primary goals of using them to increase their
revenues, reduce their expenses, and in some instances to compete
directly with the Exchange (including for order flow). Those firms are
able to determine for themselves whether or not the ToM, AIS and MOR
data feeds or any other similar products are attractively priced.\21\
---------------------------------------------------------------------------
\21\ See Securities Exchange Act Release Nos. 60459 (August 7,
2009), 74 FR 41466 (August 17, 2009) (SR-Phlx-2009-54) (Order
Approving a Proposed Rule Change to Establish Fees for the Top of
PHLX Options Direct Data Feed Product); 66993 (May 15, 2012), 77 FR
30043 (May 21, 2012) (SR-PHLX-2012-63). See also Nasdaq GEMX Options
7, Pricing Schedule, Section 7, Market Data.
---------------------------------------------------------------------------
The Exchange produces and disseminates the ToM, AIS and MOR data
feeds as part of its market data offerings to support its transaction
execution services. Since March 2019, when the Exchange launched
trading, the Exchange has observed a direct correlation between the
steady increase of subscribers to the ToM, AIS and MOR data feeds and
the increase in the Exchange's transaction market share volume over the
same period.
The Exchange determined the level of fees to charge for the ToM,
AIS and MOR data feeds based on the value of the Exchange's transaction
services. As noted above, over an initial 12-month period, the Exchange
has grown from 0% to approximately 2-4% market share of consolidated
trading volume on
[[Page 81245]]
a regular monthly basis. During that same period, the Exchange had a
steady increase in the number of subscribers to its ToM, AIS and MOR
data feeds. However, as discussed above, only approximately 30% of MIAX
Emerald Members subscribe to market data products from the Exchange.
Conversely, approximately 70% of the MIAX Emerald Members rely on
substitute market data products to satisfy their trading needs on MIAX
Emerald.
The proposed fee structure is not novel as it is based on the fee
structure currently in place for the ToM, AIS and MOR data feeds at the
Exchange's affiliate, MIAX.\22\ Both MIAX and MIAX Emerald trade over
approximately 2,700 equity options. The Exchange now proposes fees for
its ToM, AIS and MOR data feeds that are based on the existing fee
structure and rates that data recipients already pay for the MIAX ToM,
AIS and MOR data feeds.
---------------------------------------------------------------------------
\22\ See MIAX Fee Schedule, Section 6, Market Data Fees.
---------------------------------------------------------------------------
At the time the Exchange filed the First Proposed Rule Change, the
Exchange did not know the full impact of the proposed fees on current
data recipients because subscribers may choose to reduce or eliminate
their use of data. The Exchange anticipated that there might be data
recipients of the ToM, AIS and MOR data feeds that subscribed only
because they were free and might choose to discontinue using the
products once the fees were implemented. The Exchange anticipated that
data recipients that choose to discontinue the ToM, AIS and MOR data
feeds may also choose to shift order flow away from the Exchange, and
that, given the current competitive environment, if data recipients
were to both discontinue the product and shift order flow away from the
Exchange, the Exchange would reevaluate the fees and potentially file a
separate proposed rule change to amend its fees. Prior to the
imposition of the First Proposed Rule Change, the Exchange could not
estimate the impact of the proposed fees on the Exchange's transaction
services business or the number of subscribers for the Exchange's ToM,
AIS and MOR data feeds. Since October 1, 2020, when the fees for the
ToM, AIS and MOR data feeds took effect, 4 subscribers to the ToM, AIS
and MOR data feeds have cancelled their subscriptions. In each
instance, the subscribers told the Exchange that the reason for ending
their subscriptions was the imminent imposition of fees. Additionally,
this data must be considered in the context that only approximately 30%
of MIAX Emerald Members subscribe to market data products from the
Exchange. Conversely, approximately 70% of the MIAX Emerald Members
rely on substitute market data products to satisfy their trading needs
on MIAX Emerald.
2. Statutory Basis
The Exchange believes that its proposal to amend its Fee Schedule
is consistent with Section 6(b) of the Act \23\ in general, and
furthers the objectives of Section 6(b)(4) of the Act \24\ 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.
---------------------------------------------------------------------------
\23\ 15 U.S.C. 78f(b).
\24\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------
Exchange Market Data Fees Are Constrained by the Availability of
Substitute Platforms
The fierce competition for order flow constrains any exchange from
pricing its market data at a supracompetitive price, and constrains the
Exchange in setting its fees for the ToM, AIS and MOR data feeds. The
proposed fees are therefore reasonable because in setting them, the
Exchange is constrained by the availability of 15 substitute options
exchanges offering market data products and trading capabilities. Such
substitutes need not be identical, but only substantially similar to
the product at hand.
More specifically, in setting fees for ToM, AIS and MOR data feeds,
the Exchange is constrained by the fact that, if its pricing is
unattractive to customers, customers have their pick of an increasing
number of alternative options exchanges to use instead of the Exchange.
To illustrate, MIAX Emerald has 42 Exchange Members. The Cboe Exchange,
Inc. (``Cboe'') has approximately 229 exchange members.\25\ The
Exchange believes that it has considered all relevant factors and has
not considered irrelevant factors in order to establish fees. The
existence of numerous alternative options exchanges to the Exchange's
trading system ensures that the Exchange cannot set unreasonable market
data fees without suffering the negative effects of that decision in
the fiercely competitive market in which it operates as a platform.
---------------------------------------------------------------------------
\25\ See Cboe Form 1 Amendment, Exhibit M (June 26, 2020),
available at https://www.sec.gov/Archives/edgar/vprr/2001/20012232.pdf.
---------------------------------------------------------------------------
MIAX Emerald ToM, AIS and MOR Data Feeds Are Optional Market Data
Products
The decision to subscribe to the Exchange's ToM, AIS and/or MOR
data feeds is entirely optional and is a business decision that is made
by each firm. The Exchange is not required to make the ToM, AIS and MOR
data feeds available to any customers, nor is any customer required to
purchase the ToM, AIS and MOR data feeds. A customer's decision whether
to purchase the ToM, AIS and MOR data feeds is entirely discretionary.
Most firms that choose to subscribe to the ToM, AIS and MOR data feeds
do so for the primary goals of using it to increase their revenues,
reduce their expenses, and in some instances to compete directly with
the Exchange for order flow. Such firms are able to determine for
themselves whether the ToM, AIS and MOR data feeds are necessary for
their business needs, and if so, whether or not they are attractively
priced. If the ToM, AIS and MOR data feeds do not provide sufficient
value to firms based on the uses those firms may have for them, those
firms may simply choose to conduct their business operations in ways
that do not use the ToM, AIS and MOR data feeds. If they do not choose
to use the ToM, AIS and MOR data feeds, they could also choose not to
direct order flow to the Exchange.
As noted above, after the First Proposed Rule Change, current
subscribers to the ToM, AIS and MOR data feeds began changing their
behavior in response to the imposition of fees for those data feed
products. Since October 1, 2020, when the First Proposed Rule Change
took effect, 4 subscribers to the ToM, AIS and MOR data feeds cancelled
their subscriptions. In each instance, the subscriber told the Exchange
that the reason for ending its subscription was the imminent imposition
of fees. These cancellations are evidence that subscribing to the ToM,
AIS and MOR data feeds is discretionary, that each customer makes the
decision whether to subscribe based on its own analysis of the benefits
and costs to itself, and that customers can and do make those decisions
quickly based on reactions to fee changes.
However, only a fraction of total MIAX Emerald Members subscribe to
MIAX Emerald data feed products. For
[[Page 81246]]
example, as of September 2020, MIAX Emerald had 42 Members. However,
during that same period, only 14 Members subscribed to MIAX Emerald
data feed products. That is only an approximately 30% subscription
rate. Accordingly, approximately 70% of the MIAX Emerald Members rely
on substitute market data products to satisfy their trading needs on
MIAX Emerald.
But even if such firms determine that the fees for the ToM, AIS and
MOR data feeds are too high, customers can access much of the same data
by subscribing to the data feed of the Options Price Reporting
Authority (``OPRA''), which consists of: last sale reports (price,
volume and related information with respect to completed transactions);
quotation information (bids and offers and related information
pertaining to quotations in eligible securities available for trading);
and other related information with respect to trading and
administrative messages. Although not free of charge, the fees for
subscribing to OPRA's substitute data feeds are significantly
discounted.\26\ Customers can also access much of this same data
through one of the numerous OPRA Vendors.\27\ In this way, OPRA and
OPRA Vendors are substitutes for a significant portion of the data
available on the ToM, AIS and MOR data feeds. This is clear evidence
that the availability of these substitute products constrains the
Exchange's ability to charge supracompetitive prices for the ToM, AIS
and MOR data feeds.
---------------------------------------------------------------------------
\26\ See OPRA Fee Schedule, available at https://assets.website-files.com/5ba40927ac854d8c97bc92d7/5bf2f4661faec762fa07826a_OPRA_Fee_Schedule.pdf (charging
professional subscriber device-based fees of $31.50 per display
device and non-professional subscriber fees starting at $1.25 per
non-professional subscriber, up to 75,000, for OPRA's Basis
Service).
\27\ See the list of OPRA Vendors, available at https://assets.website-files.com/5ba40927ac854d8c97bc92d7/5c671220ff4c29504e423d0d_190215R2_OPRA_Vendors.pdf.
---------------------------------------------------------------------------
Further, in the case of data that is redistributed through OPRA
Vendors, of which there are numerous firms, the vendors themselves
provide additional price discipline for proprietary data products
because they control the primary means of access to certain end users.
These vendors impose price discipline based upon their business models.
For example, vendors that assess a surcharge on data they sell are able
to refuse to offer proprietary products that their end users do not or
will not purchase in sufficient numbers.
In setting the proposed fees for the ToM, AIS and MOR data feeds,
the Exchange considered the competitiveness of the market for
proprietary data and all of the implications of that competition. The
Exchange believes that it has considered all relevant factors and has
not considered irrelevant factors in order to establish reasonable
fees. The existence of alternatives to the Exchange's trading system
and the continued availability of the Exchange's separate data feeds at
a steep discount ensure that the Exchange cannot set unreasonable fees
when vendors and subscribers can elect these alternatives or choose not
to purchase a specific proprietary data product if the attendant fees
are not justified by the returns that any particular vendor or data
recipient would achieve through the purchase.
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.\28\
---------------------------------------------------------------------------
\28\ 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'').\29\ 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.\30\ External
distributors may distribute the Exchange's market data to persons who
are not officers, employees or affiliates of the external
distributor,\31\ 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.
---------------------------------------------------------------------------
\29\ See Exchange Data Agreement, available at https://miaxweb2.pairsite.com/sites/default/files/page-files/MIAX_Exchange_Group_Data_Agreement_09032020.pdf.
\30\ See id.
\31\ See id.
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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
[[Page 81247]]
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.'' \32\
---------------------------------------------------------------------------
\32\ 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 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.\33\ The Exchange therefore believes that the fees for
market data are properly assessed on Members and Non-Member users.
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\33\ 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.' '' \34\
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\34\ 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 believes that the proposed fees do not put any market
participants at a relative disadvantage compared to other market
participants.
[[Page 81248]]
As noted above, the proposed fee schedule would apply to all
subscribers of the ToM, AIS and MOR data feeds, and customers may
choose whether to subscribe to any or all of the feeds. The Exchange
also believes that the proposed fees neither favor nor penalize one or
more categories of market participants in a manner that would impose an
undue market on competition. Further, the Exchange's proposed market
data 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.\35\
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\35\ 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 that the proposed fees do not impose a burden
on competition or on other SROs that is not necessary or appropriate.
In setting the proposed fees, the Exchange was constrained by the
availability of numerous substitute trading platforms and services also
offering market data products and trading capabilities, and low
barriers to entry mean new exchanges are frequently introduced. In
addition, the Exchange believes that the proposed fees do not impose a
burden on competition or on other exchanges that is not necessary or
appropriate because of the availability of numerous substitute market
data products. Many other exchanges offer proprietary data feeds
similar to the Exchange's ToM, AIS and MOR data feeds. Because market
data users can find suitable substitute feeds, an exchange that
overprices its market data products stands a high risk that users may
substitute another platform, in which case the platform would stand to
lose both market data and trading fees. These competitive pressures
ensure that no one exchange's market data fees can impose an
unnecessary burden on competition, and the Exchange's proposed fees do
not do so here.
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,\36\ and Rule 19b-4(f)(2) \37\ 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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\36\ 15 U.S.C. 78s(b)(3)(A)(ii).
\37\ 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-2020-16 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-2020-16. 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-2020-16, and should be submitted
on or before January 5, 2021.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\38\
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\38\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-27488 Filed 12-14-20; 8:45 am]
BILLING CODE 8011-01-P
