Self-Regulatory Organizations; MIAX Emerald, LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Its Fee Schedule To Adopt a One-Time Membership Application Fee, Application Programming Interface (“API”) Testing and Certification Fees, and Network Connectivity Testing and Certification Fees, 8465-8472 [2021-02398]
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Federal Register / Vol. 86, No. 23 / Friday, February 5, 2021 / Notices
discussed further below, the Exchange
proposes to amend the requirements to
disclose certain information on the
Trusts’ websites as required by the Prior
Releases.
Under the Prior Releases, each of the
Trusts is required to disseminate on its
respective website a calculation of the
premium or discount of the midpoint of
the respective bid-ask price against NAV
and data in chart form displaying the
frequency distribution of discounts and
premiums of such price against the
NAV, within appropriate ranges for each
of the four previous calendar quarters.
The Exchange proposes to instead
require each Trust to disseminate via its
website the premium or discount of the
Official Closing Price (rather than the
midpoint of the respective bid-ask price)
against the NAV as of the prior business
day, expressed as a percentage of such
NAV.8 Additionally, each Trust would
be required to disseminate a table
showing the number of days its shares
traded at a premium or discount during
the most recently completed calendar
year and the most recently completed
calendar quarters since that year, as well
as a line graph showing the shares’
premiums or discounts for the most
recently completed calendar year and
the most recently completed calendar
quarters since that year. Other than
these changes to the information
disclosed on the Trusts’ websites, each
of the Trusts would continue to comply
with all other representations referenced
in the Prior Releases (including the
website dissemination of other
information) and in NYSE Arca Rules
8.201–E or 8.203–E (as applicable).
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III. Discussion and Commission
Findings
After careful review, the Commission
finds that the proposed rule change, as
modified by Amendment No. 1, is
consistent with the Act and the rules
and regulations thereunder applicable to
of certain information on the websites of the Trusts)
(‘‘NYSE Arca Notice’’); Securities Exchange Act
Release No. 58956 (November 14, 2008), 73 FR
71074 (November 24, 2008) (SR–NYSEArca–2008–
124) (Notice of Filing and Order Granting
Accelerated Approval of Proposed Rule Change to
List Shares of iShares Silver Trust) (‘‘NYSE Arca
Silver Order’’); and Securities Exchange Act Release
No. 56932 (December 7, 2007), 72 FR 71178
(December 14, 2007) (SR–NYSEArca–2007–112)
(approving the listing and trading of shares of the
iShares S&P GSCI Commodity-Indexed Trust)
(‘‘GSCI Order’’). The NYSE Arca Gold Order, the
Amex Silver Order, the GSCI Order, and the NYSE
Arca Notice are referred to collectively as the ‘‘Prior
Releases.’’
8 The term ‘‘Official Closing Price’’ is defined in
NYSE Arca Rule 1.1(ll) as the reference price to
determine the closing price in a security for
purposes of Rule 7–E Equities Trading, and the
procedures for determining the Official Closing
Price are set forth in that rule.
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a national securities exchange.9 In
particular, the Commission finds that
the proposed rule change, as modified
by Amendment No. 1, is consistent with
Section 6(b)(5) of the Act,10 which
requires, among other things, that the
Exchange’s rules be designed to prevent
fraudulent and manipulative acts and
practices, 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.
The Exchange states that the proposed
alternative disclosures would be both
more specific and more comprehensive
than the manner by which premium or
discount information is currently
disseminated by the Trusts. By
providing the premium and discount
information in a table and line graph as
opposed to only in chart form, and for
the previous calendar year and the most
recently completed quarters following
such calendar year as opposed to only
for the four previous quarters, the Trusts
would provide market participants with
additional information to assess market
pricing of the Shares against their
respective NAVs. Additionally, the
Exchange states that, by disseminating
the premium or discount of the Official
Closing Price (rather than the midpoint
of the respective bid-ask price) against
the NAV as of the prior business day,
the Trusts would utilize more up-to-date
and reliable pricing information
available for the Shares compared to
midpoints of the bid-ask prices.
The Commission believes that the
proposed alternative disclosures will be
at least as useful to market participants
as the currently disclosed data with
respect to the Shares. Correspondingly,
the Commission believes that the
proposed alternative disclosures will
not negatively impact arbitrage
opportunities in the Shares that align
the market prices of the Shares with
their NAVs. For the foregoing reasons,
the Commission finds that the proposed
rule change, as modified by Amendment
No. 1, is consistent with Section 6(b)(5)
of the Act 11 and the rules and
regulations thereunder applicable to a
national securities exchange.12
9 In approving this proposed rule change, the
Commission has considered the proposed rule’s
impact on efficiency, competition, and capital
formation. See 15 U.S.C. 78c(f).
10 15 U.S.C. 78f(b)(5).
11 15 U.S.C. 78f(b)(5).
12 This approval order is based on all of the
Exchange’s statements and representations set forth
above and in Amendment No. 1 to the proposed
rule change.
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8465
IV. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,13 that the
proposed rule change (SR–NYSEArca–
2020–98), as modified by Amendment
No. 1, be, and it hereby is, approved.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.14
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021–02403 Filed 2–4–21; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–91030; File No. SR–
EMERALD–2021–01]
Self-Regulatory Organizations; MIAX
Emerald, LLC; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change To Amend Its Fee
Schedule To Adopt a One-Time
Membership Application Fee,
Application Programming Interface
(‘‘API’’) Testing and Certification Fees,
and Network Connectivity Testing and
Certification Fees
February 1, 2021.
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 January
21, 2021, MIAX Emerald, LLC (‘‘MIAX
Emerald’’ or ‘‘Exchange’’), filed with the
Securities and Exchange Commission
(‘‘Commission’’) a proposed rule change
as described in Items I, II, and III below,
which Items have been prepared by the
Exchange. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange is filing a proposal to
amend the MIAX Emerald Fee Schedule
(the ‘‘Fee Schedule’’) to establish: (1)
One-time membership application fees
for new MIAX Emerald Members; 3 and
(2) per-instance Application
Programming Interface (‘‘API’’) Testing
and Certification fees and Network
13 15
U.S.C. 78s(b)(2).
CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 The term ‘‘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.
14 17
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Federal Register / Vol. 86, No. 23 / Friday, February 5, 2021 / Notices
Connectivity Testing and Certification
fees for Members and non-Members.
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
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
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1. Purpose
The Exchange proposes to amend the
Fee Schedule to establish: (1) One-time
membership application fees for new
MIAX Emerald Members based upon the
applicant’s status as either an Electronic
Exchange Member (‘‘EEM’’) 4 or as a
Market Maker; 5 and (2) per-instance
API Testing and Certification fees and
Network Connectivity Testing and
Certification fees for Members and nonMembers.
MIAX Emerald commenced
operations as a national securities
exchange registered under Section 6 of
the Act 6 on March 1, 2019.7 The
Exchange adopted its transaction fees
and certain of its non-transaction fees in
its filing SR–EMERALD–2019–15.8 In
4 ‘‘Electronic Exchange Member’’ or ‘‘EEM’’
means the holder of a Trading Permit who is not
a Market Maker. Electronic Exchange Members are
deemed ‘‘members’’ under the Exchange Act. See
Exchange Rule 100 and the Definitions section of
the Fee Schedule.
5 The term ‘‘Market Makers’’ refers to ‘‘Lead
Market Makers’’, ‘‘Primary Lead Market Makers’’
and ‘‘Registered Market Makers’’ collectively. See
Exchange Rule 100 and the Definitions section of
the Fee Schedule.
6 15 U.S.C. 78f.
7 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).
8 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).
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that filing, the Exchange expressly
waived, among other fees, the one-time
membership application fee and perinstance API Testing and Certification
fees and Network Connectivity Testing
and Certification fees, both for Members
and non-Members, in order to provide
an incentive to prospective market
participants to become Exchange
Members and for prospective Members
and non-Members to connect to MIAX
Emerald as soon as possible. At that
time, the Exchange waived the one-time
membership application fee and perinstance API Testing and Certification
fees and Network Connectivity Testing
and Certification fees for the Waiver
Period,9 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 that the Exchange would
terminate the Waiver Period for, among
other fees, the one-time membership
application fee and per-instance API
Testing and Certification fees and
Network Connectivity Testing and
Certification fees for Members and nonMembers, beginning October 1, 2020.10
The Exchange initially filed its
proposals to establish the one-time
membership application fee and perinstance API Testing and Certification
fees and Network Connectivity Testing
and Certification fees on October 1,
2020.11 The First Proposed Rule
Changes were published for comment in
9 ‘‘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.
10 See MIAX Emerald Regulatory Circular 2020–
41 available at https://www.miaxoptions.com/sites/
default/files/circular-files/MIAX_Emerald_RC_
2020_41.pdf.
11 See Securities Exchange Act Release Nos.
90183 (October 14, 2020), 85 FR 66607 (October 20,
2020) (SR–EMERALD–2020–09) (Notice of Filing
and Immediate Effectiveness of a Proposed Rule
Change To Amend Its Fee Schedule To Adopt
Application Programming Interface (‘‘API’’) Testing
and Certification Fees and Network Connectivity
Testing and Certification Fees); 90196 (October 15,
2020), 85 FR 67064 (October 21, 2020) (SR–
EMERALD–2020–11) (Notice of Filing and
Immediate Effectiveness of a Proposed Rule Change
To Amend Its Fee Schedule To Adopt One-Time
Membership Application Fees and Monthly Trading
Permit Fees). The Exchange’s prior proposals to
establish the one-time membership application fee
and per-instance API Testing and Certification fees
and Network Connectivity Testing and Certification
fees are collectively referred to herein as the ‘‘First
Proposed Rule Changes.’’ The Exchange notes that
it will refile its proposal to establish monthly
Trading Permit fees in a separate filing.
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the Federal Register between October
20–21, 2020.12 On November 25, 2020,
the Exchange withdrew the First
Proposed Rule Changes 13 and refiled its
proposal to establish the one-time
membership application fee and perinstance API Testing and Certification
fees and Network Connectivity Testing
and Certification fees.14 The Second
Proposed Rule Change was published
for comment in the Federal Register on
December 14, 2020.15 On January 21,
2021, the Exchange withdrew the
Second Proposed Rule Change and
refiled its proposal.16
One-Time Membership Application Fee
The Exchange proposes to assess a
one-time membership application fee
based upon the applicant’s status as
either an EEM or as a Market Maker.
The Exchange proposes that applicants
for MIAX Emerald membership as an
EEM will be assessed a one-time
application fee of $2,500. The Exchange
proposes that applicants for MIAX
Emerald membership as a Market Maker
will be assessed a one-time application
fee of $3,000. The difference in the
proposed membership application fee to
be charged to EEMs and Market Makers
is because of the additional review and
resources involved in processing a
Market Maker’s application, as Market
Makers have greater and more complex
obligations with respect to doing
business on the Exchange.17 MIAX
Emerald’s proposed one-time
membership application fees are the
same as the one-time application fees in
place at the Exchange’s affiliate, Miami
International Securities Exchange, LLC
(‘‘MIAX’’) ($2,500 for an EEM and
$3,000 for a MIAX Market Maker) 18,
and similar to or less than application
fees for the Cboe Exchange, Inc.
(‘‘Cboe’’) ($3,000 for an individual
applicant and $5,000 for an applicant
organization) 19 and Nasdaq ISE, LLC
(‘‘Nasdaq ISE’’) ($7,500 per firm for a
12 See
id.
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 First Proposed Rule
Changes.
14 See Securities Exchange Act Release Nos.
90597 (December 8, 2020), 85 FR 80878 (December
14, 2020) (SR–EMERALD–2020–15) (the ‘‘Second
Proposed Rule Change’’).
15 See id.
16 See Comment Letter from Joseph W. Ferraro III,
SVP, Deputy General Counsel, the Exchange, dated
January 15, 2021, notifying the Commission that the
Exchange will withdraw the Second Proposed Rule
Change.
17 See Chapter VI of the Exchange’s rules,
generally.
18 See MIAX Fee Schedule, Section 3(a).
19 See Cboe Fees Schedule, p. 9, Cboe Trading
Permit Holder Application Fees.
13 See
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Federal Register / Vol. 86, No. 23 / Friday, February 5, 2021 / Notices
primary market maker, $5,500 per firm
for a competitive market maker, and
$3,500 per firm for an electronic access
member).20 Below is the table showing
the proposed one-time membership
application fees for EEMs and Market
Makers:
Type of membership
Electronic Exchange Member .........
Market Maker ..................................
Application fee
$2,500.00
3,000.00
API Testing and Certification Fees for
Members
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The Exchange also proposes to adopt
an API Testing and Certification fee for
Members. An API makes it possible for
Member software to communicate with
MIAX Emerald software applications,
and is subject to Member testing with,
and certification by, MIAX Emerald. API
testing and certification includes, for
EEMs, testing all available order types,
new order entry, order management,
order throughput and mass order
cancellation. For Market Makers, API
testing and certification also includes
testing of all available quote types,
quote throughput, quote management
and cancellation, Aggregate Risk
Manager settings and triggers, and
confirmation of quotes within the
trading engines.
The API Testing and Certification fees
for Members are based upon the type of
interface that the Member has been
credentialed to use. The Exchange
proposes to adopt an API testing and
certification fee for EEMs (other than
Clearing Firms): (i) Initially per API for
Financial Information Exchange
(‘‘FIX’’) 21 ports, FIX Drop Copy
(‘‘FXD’’) 22 ports and Clearing Trade
Drop (‘‘CTD’’) 23 ports in the month the
20 See Nasdaq ISE, Options Rules, Options 7,
Pricing Schedule, Section 9. Legal and Regulatory
A. Application.
21 ‘‘FIX Port’’ means an interface with MIAX
Emerald systems that enables the Port user to
submit simple and complex orders electronically to
MIAX Emerald. See the Definitions section of the
Fee Schedule.
22 The FIX Drop Copy (‘‘FXD’’) Port is a
messaging interface that will provide a copy of realtime trade execution, trade correction and trade
cancellation information to FXD Port users who
subscribe to the service. FXD Port users are those
users who are designated by an EEM to receive the
information and the information is restricted for use
by the EEM. FXD Port Fees will be assessed in any
month the Member is credentialed to use the FXD
Port in the production environment. See the
Definitions section of the Fee Schedule.
23 ‘‘CTD Port’’ or ‘‘Clearing Trade Drop Port’’
provides an Exchange Member with a real-time
clearing trade updates. The updates include the
Member’s clearing trade messages on a low latency,
real-time basis. The trade messages are routed to a
Member’s connection containing certain
information. The information includes, among other
things, the following: (i) Trade date and time; (ii)
symbol information; (iii) trade price/size
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EEM has been credentialed to use one
or more ports in the production
environment for the tested API, and (ii)
each time an EEM initiates a change to
its system that requires testing and
certification. The Exchange proposes to
adopt an API testing and certification
fee for EEM Clearing Firms (i) initially
per API in the month the EEM Clearing
Firm has been credentialed to use one
or more CTD Ports in the production
environment, and (ii) each time an EEM
Clearing Firm initiates a change to its
system that requires testing and
certification.
The Exchange proposes to adopt an
API testing and certification fee for
Market Makers: (i) Initially per API for
CTD and MIAX Emerald Express
Interface (‘‘MEI’’) 24 ports in the month
the Market Maker has been credentialed
to use one or more ports in the
production environment for the tested
API and the Market Maker has been
assigned to quote in one or more classes,
and (ii) each time a Market Maker
initiates a change to its system that
requires testing and certification. The
Exchange also proposes that API Testing
and Certification fees will not be
assessed in situations where the
Exchange initiates a mandatory change
to the Exchange’s System 25 that requires
testing and certification. The Exchange
proposes to assess Member API Testing
and Certification fees of $1,000 for
EEMs and $2,500 for Market Makers.
Below is the proposed table for API
Testing and Certification fees for
Members:
information; (iv) Member type (for example, and
without limitation, Market Maker, Electronic
Exchange Member, Broker-Dealer); and (v)
Exchange MPID for each side of the transaction,
including Clearing Member MPID. See the
Definitions section of the Fee Schedule.
24 The MEI is a connection to the MIAX Emerald
System that enables Market Makers to submit
simple and complex electronic quotes to MIAX
Emerald. The Exchange offers Full Service MEI
Ports, which provide Market Makers with the
ability to send Market Maker simple and complex
quotes, eQuotes, and quote purge messages to the
MIAX Emerald System. Full Service MEI Ports are
also capable of receiving administrative
information. Market Makers are limited to two Full
Service MEI Ports per Matching Engine. The
Exchange also offers Limited Service MEI Ports,
which provide Market Makers with the ability to
send simple and complex eQuotes and quote purge
messages only, but not Market Maker Quotes, to the
MIAX Emerald System. Limited Service MEI Ports
are also capable of receiving administrative
information. Market Makers initially receive two
Limited Service MEI Ports per Matching Engine.
See the Definitions section of the Fee Schedule.
25 The term ‘‘System’’ means the automated
trading system used by the Exchange for the trading
of securities. See Exchange Rule 100.
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Type of member
Electronic Exchange Member .........
Market Maker ..................................
8467
API Testing
and
Certification
fee
$1,000.00
2,500.00
API Testing and Certification Fee for
Non-Members
The Exchange proposes to adopt an
API Testing and Certification fee for
Third Party Vendors,26 Service
Bureaus 27 and other non-Members
(such as clearing firms): (i) Initially per
API for FIX, FXD, CTD and MEI ports
in the month the Third Party Vendor,
Service Bureau or non-Member has been
credentialed to use one or more ports in
the production environment for the
tested API, and (ii) each time a Third
Party Vendor, Service Bureau, or other
non-Member initiates a change to its
system that requires testing and
certification. The Exchange also
proposes that API Testing and
Certification fees will not be assessed to
non-Members in situations where the
Exchange initiates a mandatory change
to the Exchange’s System that requires
testing and certification.
The Exchange proposes to assess nonMember API Testing and Certification
fees of $1,200 for Third Party Vendors,
Service Bureaus and other nonMembers. Below is the proposed table
for API Testing and Certification fees for
non-Members:
Non-Member
Third Party Vendors and Service
Bureaus and other non-Members
API Testing
and
Certification
fee
$1,200.00
The proposed higher fee charged to
Third Party Vendors, Service Bureaus
and non-Members reflects the greater
amount of time spent by MIAX Emerald
employees testing and certifying nonMembers. It has been MIAX Emerald’s
experience that Member testing takes
less time than non-Member testing
because Members have more experience
testing these systems with exchanges,
resulting in generally fewer questions
and issues arising during the testing and
certification process. Also, because
Third Party Vendors and Service
Bureaus are redistributing data and
reselling services to other Members and
26 Third Party Vendors are subscribers of MIAX
Emerald’s market and other data feeds, which they
in turn use for redistribution purposes. See the
Definitions section of the Fee Schedule.
27 ‘‘Service Bureau’’ means a technology provider
that offers and supplies technology and technology
services to a trading firm that does not have its own
proprietary system. See the Definitions section of
the Fee Schedule.
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Federal Register / Vol. 86, No. 23 / Friday, February 5, 2021 / Notices
market participants, the number and
types of scenarios that need to be tested
are more numerous and complex than
those tested and certified for a single
Member.
The Exchange believes it is necessary
to charge an API Testing and
Certification fee to Members and nonMembers because of the time and
resources spent to ensure that Member
and non-Member APIs function
correctly to prevent any System
malfunction. Further, the Exchange
believes the price differential in API
Testing and Certification fees for
Members and non-Members is not
unfairly discriminatory because, in the
Exchange’s experience, Member testing
takes less time than non-Member testing
as Members have more experience
testing these systems with exchanges,
Network Connectivity Testing and
Certification Fee for Members
The Exchange established electronic
communication connections with
Members and now proposes to assess
Members a Network Connectivity
Testing and Certification fee for each 1
Gigabit (‘‘Gb’’) connection and 10 Gb
ultra-low-latency (‘‘ULL’’) connection.
The Exchange proposes to assess a
Member Network Connectivity Testing
and Certification fee: (i) Initially per
connection in the month the Individual
Firm has been credentialed to use any
API or market data feeds in the
production environment utilizing the
tested network connection, and (ii) each
time an individual firm initiates a
change to its system that requires
network connectivity testing and
certification. Network Connectivity
Testing and Certification fees will not be
assessed in situations where the
Exchange initiates a mandatory change
to the Exchange’s system that requires
testing and certification. Member
Network Connectivity Testing and
Certification fees will not be assessed
for testing and certification of
connectivity to the Exchange’s Disaster
Recovery Facility.
The Exchange proposes to assess
Members a Network Connectivity
Testing and Certification Fee of $1,000
per 1Gb connection and $4,000 per
10Gb ULL connection. Below is the
proposed table for Member Network
Connectivity Testing and Certification
fees:
Type of member
1 Gigabit
fee per connection
10 Gigabit ULL
fee per connection
Individual Firm .........................................................................................................................
$1,000.00
$4,000.00
The proposed fee amounts are
identical to the fees currently assessed
for the same services at the Exchange’s
affiliate options exchanges, MIAX and
MIAX PEARL, LLC (‘‘MIAX PEARL’’).
The Exchange notes that the Emerald
Express Network Interconnect
(‘‘EENI’’) 28 is a network infrastructure
which provides Members and nonMembers network connectivity to the
trading platforms, market data systems,
test systems, and disaster recovery
facility of the Exchange. When utilizing
a Shared 29 cross-connect, the EENI can
also be configured to offer network
connectivity to the trading platforms,
market data systems, test systems, and
disaster recovery facilities of the
Exchange’s affiliate options exchanges,
MIAX and MIAX PEARL. Members
utilizing a single, Shared cross-connect
to connect to the trading platforms,
market data systems, test systems, and
disaster recovery facilities of the
Exchange, MIAX and MIAX PEARL will
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resulting generally in fewer questions
and issues arising during the testing and
certification process.
only be assessed one Network
Connectivity Testing and Certification
fee per connection tested, regardless of
the trading platforms, market data
systems, test systems, and disaster
recovery facilities accessed via such
connection.
Network Connectivity Testing and
Certification Fee for Non-Members
MIAX Emerald established electronic
communication connections with
Service Bureaus, Extranet Providers and
other non-Members, and now proposes
to assess a Network Connectivity
Testing and Certification fee for each
1Gb connection and 10Gb ULL
connection. The Exchange proposes to
assess a non-Member Network
Connectivity Testing and Certification
fee: (i) Initially per connection in the
month the Service Bureau, Extranet
Provider or other non-Member has been
credentialed to use any API or market
data feeds in the production
environment using the tested network
connection, and (ii) each time the
Service Bureau, Extranet Provider or
other non-Member initiates a change to
its system that requires network
connectivity testing and certification.
Network Connectivity Testing and
Certification fees will not be assessed in
situations where the Exchange initiates
a mandatory change to the Exchange’s
system that requires testing and
certification. Non-Member Network
Connectivity Testing and Certification
fees will not be assessed for testing and
certification of connectivity to the
Exchange’s Disaster Recovery Facility.
The Exchange proposes to assess nonMembers a Network Connectivity
Testing and Certification Fee of $1,200
per 1Gb connection and $4,200 per
10Gb ULL connection. Below is the
proposed table for non-Member
Network Connectivity Testing and
Certification fees:
Non-Member
1 Gigabit
fee per connection
10 Gigabit ULL
fee per connection
Service Bureau/Extranet Provider and other non-Members ...................................................
$1,200.00
$4,200.00
28 ‘‘EENI’’ means the Emerald Express Network
Interconnect, which is a network infrastructure
which provides Members and non-Members
network connectivity to the trading platforms,
market data systems, test systems, and disaster
recovery facilities of MIAX Emerald. When utilizing
a Shared cross-connect, the EENI can also be
configured to offer network connectivity to the
trading platforms, market data systems, test
systems, and disaster recovery facilities of MIAX
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18:53 Feb 04, 2021
Jkt 253001
and MIAX PEARL. When utilizing a Dedicated
cross-connect, the EENI can only be configured to
offer network connectivity to the trading platforms,
market data systems, and test systems of MIAX
Emerald. The EENI consists of the low latency and
ultra-low latency connectivity options set forth in
the Exchange’s Fee Schedule. See the Definitions
section of the Fee Schedule.
29 ‘‘Shared’’ (cross-connect) means cross-connect
that provides network connectivity to the trading
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platforms, market data systems, test systems, and/
or disaster recovery facilities of MIAX Emerald,
MIAX and MIAX PEARL via a single, shared
connection. The following connections can be
Shared across MIAX Emerald, MIAX and MIAX
PEARL: 1 Gigabit, 1 Gigabit Disaster Recovery, and
10 Gigabit Disaster Recovery. See the Definitions
section of the Fee Schedule.
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The EENI is also available to nonMember subscribers. For non-Member
subscribers, when utilizing a Shared
cross-connect, the EENI can also be
configured to offer network connectivity
to the trading platforms, market data
systems, test systems, and disaster
recovery facilities of the Exchange’s
affiliate options exchanges, MIAX and
MIAX PEARL. Accordingly, nonMembers utilizing Shared crossconnects to connect to the trading
platforms, market data systems, test
systems, and disaster recovery facilities
of the Exchange and its affiliates, MIAX
and MIAX PEARL, will only be assessed
one Network Connectivity Testing and
Certification fee per connection tested,
regardless of the trading platforms,
market data systems, test systems, and
disaster recovery facilities accessed via
such connection. The Member and nonMember Network Testing and
Certification fees represent installation
and support costs incurred by the
Exchange as it works with each Member
and non-Member to make sure there are
appropriate electronic communication
connections with MIAX Emerald. The
Exchange’s affiliate options exchanges,
MIAX and MIAX PEARL, charge the
same fees for the same services for their
Members and non-Members.30 The
Exchange proposes to assess a higher
Network Connectivity Testing and
Certification fee to non-Members than to
Members, similar to how MIAX and
MIAX PEARL assesses such fees to their
Members and non-Members. The
proposed higher fee charged to nonMembers reflects the greater amount of
time spent by MIAX Emerald employees
testing and certifying non-Members. It
has been MIAX Emerald’s experience
that Member network connectivity
testing takes less time than non-Member
network connectivity testing because
Members have more experience testing
these systems with exchanges as
generally fewer questions and issues
arise during the testing and certification
process.
jbell on DSKJLSW7X2PROD with NOTICES
2. Statutory Basis
The Exchange believes that its
proposal to amend its Fee Schedule is
consistent with Section 6(b) of the Act 31
in general, and furthers the objectives of
Section 6(b)(4) of the Act 32 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
30 See MIAX Fee Schedule, Sections 4(c) and 4(d);
see also MIAX PEARL Fee Schedule, Sections 4(c)
and 4(d).
31 15 U.S.C. 78f(b).
32 15 U.S.C. 78f(b)(4) and (5).
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18:53 Feb 04, 2021
Jkt 253001
8469
facilities. The Exchange also believes
the proposal furthers the objectives of
Section 6(b)(5) of the Act in that it is
designed to promote just and equitable
principles of trade, to remove
impediments to and perfect the
mechanism of a free and open market
and a national market system, and, in
general to protect investors and the
public interest and is not designed to
permit unfair discrimination between
customers, issuers, brokers and dealers.
The Exchange launched trading on
March 1, 2019. For the month of
December 2020, the Exchange had only
a 3.58% market share of the U.S.
options industry.33 The Exchange is not
aware of any evidence that a market
share of approximately 3% provides the
Exchange with anti-competitive pricing
power. If the Exchange were to attempt
to establish unreasonable pricing, then
no market participant would apply to
become a Member of the Exchange, or
test and certify with the Exchange’s
trading System.
The Exchange believes the proposed
one-time membership application fee is
reasonable, equitable and not unfairly
discriminatory because it is a one-time
fee that is reasonably related to (and
designed to recover) the Exchange’s cost
associated with reviewing and
approving membership applications,
which consists primarily of the time and
resources of Exchange personnel to
process the membership application and
conduct the new member on-boarding
process. The Exchange’s process for
reviewing and approving potential new
Members involves several steps and
participation from personnel in multiple
Exchange departments, as follows: (i)
Reviewing prospective Member
information provided in various
membership forms, including, where
necessary, possibly consulting with
FINRA, pursuant to the Exchange’s
Regulatory Services Agreement; (ii) the
on-boarding process, where Exchange
personnel contacts the firm for an
introductory meeting with the
Exchange’s Business Team to discuss
goals, answer questions and schedule
the technical on-boarding meeting; (iii)
the technical on-boarding meeting,
where the Exchange’s on-boarding team
and Trading Operations Team guides
the firm through the on-boarding
process with Exchange personnel
available to discuss network
connectivity, APIs, Exchange
functionality and operational issues;
and (iv) follow-ups with the Trading
Operations Team to coordinate testing,
as necessary, until the firm is active in
the Exchange’s live trading
environment.34
The Exchange tracks the number of
hours spent by Exchange personnel
providing the aforementioned services
per membership application. Based on
the average number of person hours
spent by the Exchange on processing a
typical membership application, and
based on the Exchange’s average cost
per full-time employee (‘‘FTE’’) of
approximately $250,000 (inclusive of all
compensation and employee benefits)
per year, the Exchange represents that
its cost to provide this service is
reasonably related to (and often
exceeds) the amount of the membership
application fee the Exchange proposes
to charge for such service. In particular,
it takes approximately 40 person hours
to review, on-board and approve a
membership application. Therefore, the
cost to the Exchange for the review, onboarding, and approval of each
application is, on average,
approximately $4,000–$5,000 (with
EEM application costs closer to $4,000,
versus Market Maker application costs
closer to $5,000). Accordingly, the
proposed one-time membership
application fee would enable the
Exchange to recover a material portion
of such cost. The Exchange believes this
is a conservative cost allocation because
the Exchange is not allocating any
additional costs beyond the employee
compensation costs for employees
directly involved in this process, such
as costs associated with management
review and sign off, compliance team
reviews, technology costs of employees,
office space costs of employees, costs
associated with supporting departments’
time for things such as internal
meetings, project management
coordination among the individuals
who indirectly support the membership
approval and on-boarding processes,
and various other indirectly-related
costs.
The Exchange also points out that it
is not seeking to recoup any of its past
costs associated with reviewing
membership applications that took
place during the Waiver Period. The
Exchange currently has 35 Members,35
all of whom did not pay the one-time
membership application fee, as it was
waived for the Waiver Period when
these firms all became Members of the
Exchange. Further, the majority of firms
33 See The Options Clearing Corporation (‘‘OCC’’)
publishes options and futures volume in a variety
of formats, including daily and monthly volume by
exchange, available here: https://www.theocc.com/
market-data/volume/default.jsp.
34 See the Exchange’s Membership and Technical
Onboarding process, available at https://
www.miaxoptions.com/membership/emerald.
35 See https://www.miaxoptions.com/exchangemembers/emerald.
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Federal Register / Vol. 86, No. 23 / Friday, February 5, 2021 / Notices
that are Members of the Exchange’s
affiliate options exchanges, MIAX and
MIAX PEARL, also became Members of
those exchanges during similar Waiver
Periods for the MIAX and MIAX PEARL
one-time membership application fees.
Accordingly, the Exchange (and MIAX
and MIAX PEARL) have assumed
approximately 100% of the costs
associated with processing membership
applications for the majority of Member
firms approved by the Exchange, MIAX,
and MIAX PEARL. Accordingly, the
Exchange believes that it is reasonable,
equitable, and not unfairly
discriminatory to now adopt a one-time
membership application fee that is
reasonably related to (and designed to
recover) the Exchange’s cost associated
with reviewing and approving
membership applications.
The Exchange believes the proposed
API Testing and Certification fees and
Network Connectivity Testing and
Certification fees are reasonable,
equitable and not unfairly
discriminatory. The Exchange tracks the
number of hours spent by Exchange
personnel providing API testing and
certification services per billable
instance. Based on the average number
of person hours spent by the Exchange
on API testing and certification services,
and based on the Exchange’s average
cost per FTE of approximately $250,000
(inclusive of all compensation and
employee benefits) per year, the
Exchange represents that its costs to
provide these services are reasonably
related to (and often exceed) the amount
of the respective testing and
certification fees the Exchange proposes
to charge for such services. In particular,
it takes approximately 20 person hours
to complete the API testing and
certification process. Therefore, the cost
to the Exchange to provide API testing
and certification services is, on average,
approximately $2,500 per instance (with
EEM and non-Member testing and
certification costs closer to $2,000,
versus Market Maker testing and
certification costs closer to $3,000).
Accordingly, the proposed API Testing
and Certification fees would enable the
Exchange to recover a material portion
of such costs. The Exchange believes
this is a conservative cost allocation
because the Exchange is not allocating
any additional costs beyond the
employee compensation costs for
employees directly involved in this
process, such as management review
and sign off, technology costs of
employees, office space costs of
employees, costs associated with
supporting departments’ time for things
such as internal meetings, project
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18:53 Feb 04, 2021
Jkt 253001
management coordination among the
individuals who indirectly support the
testing and certification process, and
various other indirectly-related costs.
The Exchange also points out that it
is not seeking to recoup any of its past
costs associated with conducting API
testing and certification that took place
during the Waiver Period. The Exchange
currently has 35 Members,36 all of
whom did not pay the API testing and
certification fee, as it was waived for the
Waiver Period when these firms all
became Members of the Exchange.
Further, the majority of firms that are
Members of the Exchange’s affiliate
options exchanges, MIAX and MIAX
PEARL, also became Members of those
exchanges during similar Waiver
Periods for the MIAX and MIAX PEARL
API Testing and Certification fees.
Accordingly, the Exchange (and MIAX
and MIAX PEARL) have assumed
approximately 100% of the costs
associated with conducting API testing
and certification for the majority of
Member firms approved by the
Exchange, MIAX, and MIAX PEARL.
Accordingly, the Exchange believes that
it is reasonable, equitable, and not
unfairly discriminatory to now adopt a
per-instance fee that is reasonably
related to (and designed to recover) the
Exchange’s cost associated with
conducting API testing and certification.
The Exchange also tracks the number
of hours spent by Exchange personnel
providing network connectivity testing
and certification services per billable
instance. Based on the average number
of person hours spent by the Exchange
on network connectivity testing and
certification services, and based on the
Exchange’s average cost per FTE of
approximately $250,000 (inclusive of all
compensation and employee benefits)
per year, the Exchange represents that
its costs to provide these services are
reasonably related to (and often exceed)
the amount of the respective testing and
certification fees the Exchange proposes
to charge for such services. In particular,
it takes approximately 20 person hours
to complete the network testing and
certification process for 1 Gigabit
connections, and approximately 40
person hours to complete the network
testing and certification process for 10
Gigabit ULL connections. Therefore, the
cost to the Exchange to provide network
connectivity testing and certification
services is, on average, approximately
$2,500 per instance for 1 Gigabit
connections, and approximately $5,000
per instance for 10 Gigabit ULL
connections. Accordingly, the proposed
Network Connectivity Testing and
Certification fees would enable the
Exchange to recover a material portion
of such costs. The Exchange believes
this is a conservative cost allocation
because the Exchange is not allocating
any additional costs beyond the
employee compensation costs for
employees directly involved in this
process, such as management review
and sign off, technology costs of
employees, office space costs of
employees, costs associated with
supporting departments’ time for things
such as internal meetings, project
management coordination among the
individuals who indirectly support the
testing and certification process, and
various other indirectly-related costs.
The Exchange believes the difference
in the proposed membership
application fee to be charged to EEMs
and Market Makers is an equitable
allocation of reasonable dues and fees
pursuant to Section 6(b)(4) of the Act 37
because of the additional review and
resources involved in processing a
Market Maker’s application as opposed
to an EEM’s application, as Market
Makers have greater and more complex
obligations with respect to doing
business on the Exchange.38
The Exchange believes its proposal to
adopt API Testing and Certification fees
and Network Connectivity Testing and
Certification fees for Members and nonMembers is an equitable allocation of
reasonable dues and fees pursuant to
Section 6(b)(4) of the Act 39 because it is
a per-instance fee that is reasonably
related to (and designed to recover) the
Exchange’s cost associated with
providing such API Testing and
Certification services and Network
Connectivity Testing and Certification
services, which consists primarily of the
time and resources spent to ensure that
Member and non-Member APIs and
connectivity function correctly to
prevent any System malfunction.
Further, the Exchange believes the
price differential in API Testing and
Certification fees and Network
Connectivity Testing and Certification
fees for Members and non-Members is
not unfairly discriminatory because, in
the Exchange’s experience, Member
testing utilizes less Exchange resources
and employee time than non-Member
testing as Members have more
experience testing these systems with
exchanges, resulting generally in fewer
questions and issues arising during the
testing and certification process. Also,
with respect to API testing and
certification, because Third Party
37 15
U.S.C. 78f(b)(4).
supra note 17.
39 15 U.S.C. 78f(b)(4).
38 See
36 See
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Federal Register / Vol. 86, No. 23 / Friday, February 5, 2021 / Notices
Vendors and Service Bureaus are
redistributing data and reselling services
to other Members and market
participants the number and types of
scenarios that need to be tested are more
numerous and complex than those
tested and certified for Members.
The Exchange believes the difference
in the proposed 1 Gigabit and 10 Gigabit
ULL network connectivity testing and
certification fees is an equitable
allocation of reasonable dues and fees
pursuant to Section 6(b)(4) of the Act 40
because of the additional review and
resources involved in testing and
certifying a 10 Gigabit ULL connection
as opposed to a 1 Gigabit connection, as
10 Gigabit ULL connections offer vastly
greater products and services which
require significantly more time to test,
including Market Maker quoting
systems. The Exchange believes its
proposed API Testing and Certification
fees and Network Connectivity Testing
and Certification fees are reasonable and
well within the range of non-transaction
fees assessed among other exchanges,
including the Exchange’s affiliate
options exchanges, MIAX and MIAX
PEARL.41
jbell on DSKJLSW7X2PROD with NOTICES
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.
The proposed fees would apply to all
new Exchange Members and those firms
looking to establish APIs and network
connectivity in the same manner.
Market participants may not only
choose whether to become Exchange
Members at all, but may choose to
become members at competing options
exchanges instead.
The Exchange further believes the
proposed fees do not place any market
participant at a disadvantage compared
to other market participants because the
proposed API Testing and Certification
and Network Connectivity Testing and
Certification fees are intended to cover
the situations where a Member or nonMember firm makes changes to its own
system for its own business purpose
(i.e., instances where a firm is trying to
improve its quoting engine), which
requires the Exchange to test those re40 15
U.S.C. 78f(b)(4).
supra note 30.
41 See
VerDate Sep<11>2014
18:53 Feb 04, 2021
architected systems. This testing
requires the time of Exchange personnel
in several departments (Trading
Operations, Business, On-Boarding,
Membership), and occurs primarily
outside of normal business hours, often
over the course of the weekend. The
proposed fees are a way for the
Exchange to recoup its costs associated
with this testing. When the Exchange
determines to make upgrades to its own
system which requires mandatory
testing and certification by Members,
the Exchange does not charge any fees.
The Exchange believes that the
proposed fees do not dampen
innovation because the majority of
Exchange Members are members of
most, if not all, of the other 15 options
exchanges. Those exchanges also
require testing and certification any
time the Member makes changes to its
system at those exchanges, and also
charge a fee to recoup the costs
associated with testing and certifying
members. The Exchange also notes that
it has never received a complaint from
a Member or non-Member any time a
Member or non-Member has made a
change to its own system that resulted
in the Exchange assessing a testing and
certification fee. Without some sort of
testing and certification fee, the
Exchange believes that Members and
non-Members might be less efficient in
testing their systems, potentially
resulting in excessive time being
consumed by the Exchange re-testing
and re-certifying Members and nonMembers, to the detriment of all market
participants as Exchange resources are
diverted away from other trading
operations.
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 burden on
competition. To the extent that various
market participants are charged
different fees for the one-time
membership application and perinstance API and network connectivity
testing, those distinctions are not
unfairly discriminatory and do not
unfairly burden one set of market
participants over another. The
difference in the proposed membership
application fee to be charged to EEMs
and Market Makers is because of the
additional review and resources
involved in processing a Market Maker’s
application, as Market Makers have
greater and more complex obligations
with respect to doing business on the
Exchange.42 The proposed higher fee
charged to Third Party Vendors, Service
42 See
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supra note 17.
Frm 00135
Fmt 4703
Bureaus and non-Members reflects the
greater amount of time spent by MIAX
Emerald employees testing and
certifying non-Members. It has been
MIAX Emerald’s experience that
Member testing takes less time than
non-Member testing because Members
have more experience testing these
systems with exchanges, resulting in
generally fewer questions and issues
arising during the testing and
certification process. Also, because
Third Party Vendors and Service
Bureaus are redistributing data and
reselling services to other Members and
market participants, the number and
types of scenarios that need to be tested
are more numerous and complex than
those tested and certified for a single
Member. The higher fee charged to nonMembers reflects the greater amount of
time spent by MIAX Emerald employees
testing and certifying non-Members. It
has been MIAX Emerald’s experience
that Member network connectivity
testing takes less time than non-Member
network connectivity testing because
Members have more experience testing
these systems with exchanges as
generally fewer questions and issues
arise during the testing and certification
process. The proposed higher fee
charged for 10 Gigabit ULL connections
versus 1 Gigabit ULL connections
reflects the greater amount of time spent
by MIAX Emerald employees testing
and certifying 10 Gigabit ULL
connections. MIAX Emerald’s proposed
one-time membership application fee
and per-instance API Testing and
Certification fee levels and Network
Connectivity Testing and Certification
fee levels, as described herein, are
comparable to fee levels charged by
other options exchanges for the same or
similar services, including those fees
assessed by the Exchange’s affiliates,
MIAX and MIAX PEARL.43
The Exchange believes that the
proposed API Testing and Certification
fees and Network Connectivity Testing
and Certification fees do not place
certain market participants at a relative
disadvantage to other market
participants because the fees do not
apply unequally to different size market
participants, but instead would allow
the Exchange to charge for the time and
resource necessary for API testing and
certification and network connectivity
testing and certification for Members
and non-Members to ensure proper
functioning of all available order types,
new order entry, order management,
order throughput and mass order
cancellation (as well as, for Market
Makers, all available quote types, quote
43 See
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supra notes 18, 19, 20 and 30.
05FEN1
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throughput, quote management and
cancellation, Aggregate Risk Manager
settings and triggers, and confirmation
of quotes within the trading engines).
Accordingly, the proposed API Testing
and Certification fees and network
connectivity testing and certification
fees do not favor certain categories of
market participants in a manner that
would impose a burden on competition.
Electronic Comments
DEPARTMENT OF STATE
• 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–2021–01 on the subject line.
[Public Notice: 11343]
Inter-Market Competition
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549–1090.
The Exchange believes the proposed
API Testing and Certification fees and
Network Connectivity Testing and
Certification fees do not place an undue
burden on competition on other SROs
that is not necessary or appropriate. 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 options exchanges. There are
15 other options exchanges where
market participants can become
members.
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,44 and Rule
19b–4(f)(2) 45 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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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:
44 15
45 17
U.S.C. 78s(b)(3)(A)(ii).
CFR 240.19b–4(f)(2).
VerDate Sep<11>2014
18:53 Feb 04, 2021
Paper Comments
All submissions should refer to File
Number SR–EMERALD–2021–01. 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–2021–01 and
should be submitted on or before
February 26, 2021.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.46
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021–02398 Filed 2–4–21; 8:45 am]
BILLING CODE 8011–01–P
46 17
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Notice of Department of State
Sanctions Actions on Hong Kong
Normalization
The Secretary of State has
imposed sanctions on six individuals
pursuant to the President’s Executive
Order on Hong Kong Normalization.
DATES: The Secretary of State’s
determination regarding the six
individuals identified in the
SUPPLEMENTARY INFORMATION section
was effective on January 15, 2021.
FOR FURTHER INFORMATION CONTACT:
Taylor Ruggles, Director, Office of
Economic Sanctions Policy and
Implementation, Bureau of Economic
and Business Affairs, Department of
State, Washington, DC 20520, tel.: (202)
647 7677, email: RugglesTV@state.gov.
SUPPLEMENTARY INFORMATION: Pursuant
to Section 4(a)(iii)(A) of Executive Order
(E.O.) 13936, the Secretary of State, in
consultation with the Secretary of the
Treasury, or the Secretary of the
Treasury, in consultation with the
Secretary of State, may authorize the
imposition of sanctions blocking all
property or interests in property that are
in the United States, that hereafter come
within the United States, or that are in
or hereafter come within the possession
or control of any United States person,
of any foreign person upon determining
that the person met any criteria set forth
in section 4 of E.O. 13936.
The Secretary of State has
determined, pursuant to section
4(a)(iii)(A) of E.O. 13936, that You
Quan, Sun Wenqing AKA Sun Qingye,
and Tam Yiu-Chung, are or have been
leaders or officials of entities, including
any government entity, that have
engaged in, or whose members have
engaged in, developing, adopting, or
implementing the National Security
Law.
The Secretary of State has
determined, pursuant to section
4(a)(iii)(A) of E.O. 13936, that Frederic
Choi Chin-Pang, Kelvin Kong Hok Lai,
and Andrew Kan Kai Yan are foreign
persons who are or have been leaders or
officials of an entity, including any
government entity, that has engaged in,
or whose members have engaged in,
coercing, arresting, detaining or
imprisoning individuals under the
authority of, or in developing, adopting,
or implementing, the National Security
Law.
These persons have been added to the
list of Specially Designated Nationals
and Blocked Persons List and all
property and interests in property
SUMMARY:
E:\FR\FM\05FEN1.SGM
05FEN1
]]>Agencies
[Federal Register Volume 86, Number 23 (Friday, February 5, 2021)]
[Notices]
[Pages 8465-8472]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-02398]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-91030; File No. SR-EMERALD-2021-01]
Self-Regulatory Organizations; MIAX Emerald, LLC; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend
Its Fee Schedule To Adopt a One-Time Membership Application Fee,
Application Programming Interface (``API'') Testing and Certification
Fees, and Network Connectivity Testing and Certification Fees
February 1, 2021.
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 January 21, 2021, MIAX Emerald, LLC (``MIAX Emerald'' or
``Exchange''), filed with the Securities and Exchange Commission
(``Commission'') a proposed rule change as described in Items I, II,
and III below, which Items have been prepared by the Exchange. The
Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange is filing a proposal to amend the MIAX Emerald Fee
Schedule (the ``Fee Schedule'') to establish: (1) One-time membership
application fees for new MIAX Emerald Members; \3\ and (2) per-instance
Application Programming Interface (``API'') Testing and Certification
fees and Network
[[Page 8466]]
Connectivity Testing and Certification fees for Members and non-
Members.
---------------------------------------------------------------------------
\3\ The term ``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.
---------------------------------------------------------------------------
The text of the proposed rule change is available on the Exchange's
website at https://www.miaxoptions.com/rule-filings/emerald, at MIAX's
principal office, and at the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend the Fee Schedule to establish: (1)
One-time membership application fees for new MIAX Emerald Members based
upon the applicant's status as either an Electronic Exchange Member
(``EEM'') \4\ or as a Market Maker; \5\ and (2) per-instance API
Testing and Certification fees and Network Connectivity Testing and
Certification fees for Members and non-Members.
---------------------------------------------------------------------------
\4\ ``Electronic Exchange Member'' or ``EEM'' means the holder
of a Trading Permit who is not a Market Maker. Electronic Exchange
Members are deemed ``members'' under the Exchange Act. See Exchange
Rule 100 and the Definitions section of the Fee Schedule.
\5\ The term ``Market Makers'' refers to ``Lead Market Makers'',
``Primary Lead Market Makers'' and ``Registered Market Makers''
collectively. See Exchange Rule 100 and the Definitions section of
the Fee Schedule.
---------------------------------------------------------------------------
MIAX Emerald commenced operations as a national securities exchange
registered under Section 6 of the Act \6\ on March 1, 2019.\7\ The
Exchange adopted its transaction fees and certain of its non-
transaction fees in its filing SR-EMERALD-2019-15.\8\ In that filing,
the Exchange expressly waived, among other fees, the one-time
membership application fee and per-instance API Testing and
Certification fees and Network Connectivity Testing and Certification
fees, both for Members and non-Members, in order to provide an
incentive to prospective market participants to become Exchange Members
and for prospective Members and non-Members to connect to MIAX Emerald
as soon as possible. At that time, the Exchange waived the one-time
membership application fee and per-instance API Testing and
Certification fees and Network Connectivity Testing and Certification
fees for the Waiver Period,\9\ and stated that it would provide notice
to market participants when the Exchange intended to terminate the
Waiver Period.
---------------------------------------------------------------------------
\6\ 15 U.S.C. 78f.
\7\ 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).
\8\ 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).
\9\ ``Waiver Period'' means, for each applicable fee, the period
of time from the initial effective date of the MIAX Emerald Fee
Schedule until such time that the Exchange has an effective fee
filing establishing the applicable fee. The Exchange will issue a
Regulatory Circular announcing the establishment of an applicable
fee that was subject to a Waiver Period at least fifteen (15) days
prior to the termination of the Waiver Period and effective date of
any such applicable fee. See the Definitions Section of the Fee
Schedule.
---------------------------------------------------------------------------
On September 15, 2020, the Exchange issued a Regulatory Circular
which announced that the Exchange would terminate the Waiver Period
for, among other fees, the one-time membership application fee and per-
instance API Testing and Certification fees and Network Connectivity
Testing and Certification fees for Members and non-Members, beginning
October 1, 2020.\10\
---------------------------------------------------------------------------
\10\ See MIAX Emerald Regulatory Circular 2020-41 available at
https://www.miaxoptions.com/sites/default/files/circular-files/MIAX_Emerald_RC_2020_41.pdf.
---------------------------------------------------------------------------
The Exchange initially filed its proposals to establish the one-
time membership application fee and per-instance API Testing and
Certification fees and Network Connectivity Testing and Certification
fees on October 1, 2020.\11\ The First Proposed Rule Changes were
published for comment in the Federal Register between October 20-21,
2020.\12\ On November 25, 2020, the Exchange withdrew the First
Proposed Rule Changes \13\ and refiled its proposal to establish the
one-time membership application fee and per-instance API Testing and
Certification fees and Network Connectivity Testing and Certification
fees.\14\ The Second Proposed Rule Change was published for comment in
the Federal Register on December 14, 2020.\15\ On January 21, 2021, the
Exchange withdrew the Second Proposed Rule Change and refiled its
proposal.\16\
---------------------------------------------------------------------------
\11\ See Securities Exchange Act Release Nos. 90183 (October 14,
2020), 85 FR 66607 (October 20, 2020) (SR-EMERALD-2020-09) (Notice
of Filing and Immediate Effectiveness of a Proposed Rule Change To
Amend Its Fee Schedule To Adopt Application Programming Interface
(``API'') Testing and Certification Fees and Network Connectivity
Testing and Certification Fees); 90196 (October 15, 2020), 85 FR
67064 (October 21, 2020) (SR-EMERALD-2020-11) (Notice of Filing and
Immediate Effectiveness of a Proposed Rule Change To Amend Its Fee
Schedule To Adopt One-Time Membership Application Fees and Monthly
Trading Permit Fees). The Exchange's prior proposals to establish
the one-time membership application fee and per-instance API Testing
and Certification fees and Network Connectivity Testing and
Certification fees are collectively referred to herein as the
``First Proposed Rule Changes.'' The Exchange notes that it will
refile its proposal to establish monthly Trading Permit fees in a
separate filing.
\12\ See id.
\13\ 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 First Proposed
Rule Changes.
\14\ See Securities Exchange Act Release Nos. 90597 (December 8,
2020), 85 FR 80878 (December 14, 2020) (SR-EMERALD-2020-15) (the
``Second Proposed Rule Change'').
\15\ See id.
\16\ See Comment Letter from Joseph W. Ferraro III, SVP, Deputy
General Counsel, the Exchange, dated January 15, 2021, notifying the
Commission that the Exchange will withdraw the Second Proposed Rule
Change.
---------------------------------------------------------------------------
One-Time Membership Application Fee
The Exchange proposes to assess a one-time membership application
fee based upon the applicant's status as either an EEM or as a Market
Maker. The Exchange proposes that applicants for MIAX Emerald
membership as an EEM will be assessed a one-time application fee of
$2,500. The Exchange proposes that applicants for MIAX Emerald
membership as a Market Maker will be assessed a one-time application
fee of $3,000. The difference in the proposed membership application
fee to be charged to EEMs and Market Makers is because of the
additional review and resources involved in processing a Market Maker's
application, as Market Makers have greater and more complex obligations
with respect to doing business on the Exchange.\17\ MIAX Emerald's
proposed one-time membership application fees are the same as the one-
time application fees in place at the Exchange's affiliate, Miami
International Securities Exchange, LLC (``MIAX'') ($2,500 for an EEM
and $3,000 for a MIAX Market Maker) \18\, and similar to or less than
application fees for the Cboe Exchange, Inc. (``Cboe'') ($3,000 for an
individual applicant and $5,000 for an applicant organization) \19\ and
Nasdaq ISE, LLC (``Nasdaq ISE'') ($7,500 per firm for a
[[Page 8467]]
primary market maker, $5,500 per firm for a competitive market maker,
and $3,500 per firm for an electronic access member).\20\ Below is the
table showing the proposed one-time membership application fees for
EEMs and Market Makers:
---------------------------------------------------------------------------
\17\ See Chapter VI of the Exchange's rules, generally.
\18\ See MIAX Fee Schedule, Section 3(a).
\19\ See Cboe Fees Schedule, p. 9, Cboe Trading Permit Holder
Application Fees.
\20\ See Nasdaq ISE, Options Rules, Options 7, Pricing Schedule,
Section 9. Legal and Regulatory A. Application.
------------------------------------------------------------------------
Application
Type of membership fee
------------------------------------------------------------------------
Electronic Exchange Member.............................. $2,500.00
Market Maker............................................ 3,000.00
------------------------------------------------------------------------
API Testing and Certification Fees for Members
The Exchange also proposes to adopt an API Testing and
Certification fee for Members. An API makes it possible for Member
software to communicate with MIAX Emerald software applications, and is
subject to Member testing with, and certification by, MIAX Emerald. API
testing and certification includes, for EEMs, testing all available
order types, new order entry, order management, order throughput and
mass order cancellation. For Market Makers, API testing and
certification also includes testing of all available quote types, quote
throughput, quote management and cancellation, Aggregate Risk Manager
settings and triggers, and confirmation of quotes within the trading
engines.
The API Testing and Certification fees for Members are based upon
the type of interface that the Member has been credentialed to use. The
Exchange proposes to adopt an API testing and certification fee for
EEMs (other than Clearing Firms): (i) Initially per API for Financial
Information Exchange (``FIX'') \21\ ports, FIX Drop Copy (``FXD'') \22\
ports and Clearing Trade Drop (``CTD'') \23\ ports in the month the EEM
has been credentialed to use one or more ports in the production
environment for the tested API, and (ii) each time an EEM initiates a
change to its system that requires testing and certification. The
Exchange proposes to adopt an API testing and certification fee for EEM
Clearing Firms (i) initially per API in the month the EEM Clearing Firm
has been credentialed to use one or more CTD Ports in the production
environment, and (ii) each time an EEM Clearing Firm initiates a change
to its system that requires testing and certification.
---------------------------------------------------------------------------
\21\ ``FIX Port'' means an interface with MIAX Emerald systems
that enables the Port user to submit simple and complex orders
electronically to MIAX Emerald. See the Definitions section of the
Fee Schedule.
\22\ The FIX Drop Copy (``FXD'') Port is a messaging interface
that will provide a copy of real-time trade execution, trade
correction and trade cancellation information to FXD Port users who
subscribe to the service. FXD Port users are those users who are
designated by an EEM to receive the information and the information
is restricted for use by the EEM. FXD Port Fees will be assessed in
any month the Member is credentialed to use the FXD Port in the
production environment. See the Definitions section of the Fee
Schedule.
\23\ ``CTD Port'' or ``Clearing Trade Drop Port'' provides an
Exchange Member with a real-time clearing trade updates. The updates
include the Member's clearing trade messages on a low latency, real-
time basis. The trade messages are routed to a Member's connection
containing certain information. The information includes, among
other things, the following: (i) Trade date and time; (ii) symbol
information; (iii) trade price/size information; (iv) Member type
(for example, and without limitation, Market Maker, Electronic
Exchange Member, Broker-Dealer); and (v) Exchange MPID for each side
of the transaction, including Clearing Member MPID. See the
Definitions section of the Fee Schedule.
---------------------------------------------------------------------------
The Exchange proposes to adopt an API testing and certification fee
for Market Makers: (i) Initially per API for CTD and MIAX Emerald
Express Interface (``MEI'') \24\ ports in the month the Market Maker
has been credentialed to use one or more ports in the production
environment for the tested API and the Market Maker has been assigned
to quote in one or more classes, and (ii) each time a Market Maker
initiates a change to its system that requires testing and
certification. The Exchange also proposes that API Testing and
Certification fees will not be assessed in situations where the
Exchange initiates a mandatory change to the Exchange's System \25\
that requires testing and certification. The Exchange proposes to
assess Member API Testing and Certification fees of $1,000 for EEMs and
$2,500 for Market Makers. Below is the proposed table for API Testing
and Certification fees for Members:
---------------------------------------------------------------------------
\24\ The MEI is a connection to the MIAX Emerald System that
enables Market Makers to submit simple and complex electronic quotes
to MIAX Emerald. The Exchange offers Full Service MEI Ports, which
provide Market Makers with the ability to send Market Maker simple
and complex quotes, eQuotes, and quote purge messages to the MIAX
Emerald System. Full Service MEI Ports are also capable of receiving
administrative information. Market Makers are limited to two Full
Service MEI Ports per Matching Engine. The Exchange also offers
Limited Service MEI Ports, which provide Market Makers with the
ability to send simple and complex eQuotes and quote purge messages
only, but not Market Maker Quotes, to the MIAX Emerald System.
Limited Service MEI Ports are also capable of receiving
administrative information. Market Makers initially receive two
Limited Service MEI Ports per Matching Engine. See the Definitions
section of the Fee Schedule.
\25\ The term ``System'' means the automated trading system used
by the Exchange for the trading of securities. See Exchange Rule
100.
------------------------------------------------------------------------
API Testing
and
Type of member Certification
fee
------------------------------------------------------------------------
Electronic Exchange Member.............................. $1,000.00
Market Maker............................................ 2,500.00
------------------------------------------------------------------------
API Testing and Certification Fee for Non-Members
The Exchange proposes to adopt an API Testing and Certification fee
for Third Party Vendors,\26\ Service Bureaus \27\ and other non-Members
(such as clearing firms): (i) Initially per API for FIX, FXD, CTD and
MEI ports in the month the Third Party Vendor, Service Bureau or non-
Member has been credentialed to use one or more ports in the production
environment for the tested API, and (ii) each time a Third Party
Vendor, Service Bureau, or other non-Member initiates a change to its
system that requires testing and certification. The Exchange also
proposes that API Testing and Certification fees will not be assessed
to non-Members in situations where the Exchange initiates a mandatory
change to the Exchange's System that requires testing and
certification.
---------------------------------------------------------------------------
\26\ Third Party Vendors are subscribers of MIAX Emerald's
market and other data feeds, which they in turn use for
redistribution purposes. See the Definitions section of the Fee
Schedule.
\27\ ``Service Bureau'' means a technology provider that offers
and supplies technology and technology services to a trading firm
that does not have its own proprietary system. See the Definitions
section of the Fee Schedule.
---------------------------------------------------------------------------
The Exchange proposes to assess non-Member API Testing and
Certification fees of $1,200 for Third Party Vendors, Service Bureaus
and other non-Members. Below is the proposed table for API Testing and
Certification fees for non-Members:
------------------------------------------------------------------------
API Testing and
Non-Member Certification
fee
------------------------------------------------------------------------
Third Party Vendors and Service Bureaus and other non- $1,200.00
Members...............................................
------------------------------------------------------------------------
The proposed higher fee charged to Third Party Vendors, Service
Bureaus and non-Members reflects the greater amount of time spent by
MIAX Emerald employees testing and certifying non-Members. It has been
MIAX Emerald's experience that Member testing takes less time than non-
Member testing because Members have more experience testing these
systems with exchanges, resulting in generally fewer questions and
issues arising during the testing and certification process. Also,
because Third Party Vendors and Service Bureaus are redistributing data
and reselling services to other Members and
[[Page 8468]]
market participants, the number and types of scenarios that need to be
tested are more numerous and complex than those tested and certified
for a single Member.
The Exchange believes it is necessary to charge an API Testing and
Certification fee to Members and non-Members because of the time and
resources spent to ensure that Member and non-Member APIs function
correctly to prevent any System malfunction. Further, the Exchange
believes the price differential in API Testing and Certification fees
for Members and non-Members is not unfairly discriminatory because, in
the Exchange's experience, Member testing takes less time than non-
Member testing as Members have more experience testing these systems
with exchanges, resulting generally in fewer questions and issues
arising during the testing and certification process.
Network Connectivity Testing and Certification Fee for Members
The Exchange established electronic communication connections with
Members and now proposes to assess Members a Network Connectivity
Testing and Certification fee for each 1 Gigabit (``Gb'') connection
and 10 Gb ultra-low-latency (``ULL'') connection. The Exchange proposes
to assess a Member Network Connectivity Testing and Certification fee:
(i) Initially per connection in the month the Individual Firm has been
credentialed to use any API or market data feeds in the production
environment utilizing the tested network connection, and (ii) each time
an individual firm initiates a change to its system that requires
network connectivity testing and certification. Network Connectivity
Testing and Certification fees will not be assessed in situations where
the Exchange initiates a mandatory change to the Exchange's system that
requires testing and certification. Member Network Connectivity Testing
and Certification fees will not be assessed for testing and
certification of connectivity to the Exchange's Disaster Recovery
Facility.
The Exchange proposes to assess Members a Network Connectivity
Testing and Certification Fee of $1,000 per 1Gb connection and $4,000
per 10Gb ULL connection. Below is the proposed table for Member Network
Connectivity Testing and Certification fees:
----------------------------------------------------------------------------------------------------------------
1 Gigabit fee per 10 Gigabit ULL fee per
Type of member connection connection
----------------------------------------------------------------------------------------------------------------
Individual Firm............................................. $1,000.00 $4,000.00
----------------------------------------------------------------------------------------------------------------
The proposed fee amounts are identical to the fees currently
assessed for the same services at the Exchange's affiliate options
exchanges, MIAX and MIAX PEARL, LLC (``MIAX PEARL''). The Exchange
notes that the Emerald Express Network Interconnect (``EENI'') \28\ is
a network infrastructure which provides Members and non-Members network
connectivity to the trading platforms, market data systems, test
systems, and disaster recovery facility of the Exchange. When utilizing
a Shared \29\ cross-connect, the EENI can also be configured to offer
network connectivity to the trading platforms, market data systems,
test systems, and disaster recovery facilities of the Exchange's
affiliate options exchanges, MIAX and MIAX PEARL. Members utilizing a
single, Shared cross-connect to connect to the trading platforms,
market data systems, test systems, and disaster recovery facilities of
the Exchange, MIAX and MIAX PEARL will only be assessed one Network
Connectivity Testing and Certification fee per connection tested,
regardless of the trading platforms, market data systems, test systems,
and disaster recovery facilities accessed via such connection.
---------------------------------------------------------------------------
\28\ ``EENI'' means the Emerald Express Network Interconnect,
which is a network infrastructure which provides Members and non-
Members network connectivity to the trading platforms, market data
systems, test systems, and disaster recovery facilities of MIAX
Emerald. When utilizing a Shared cross-connect, the EENI can also be
configured to offer network connectivity to the trading platforms,
market data systems, test systems, and disaster recovery facilities
of MIAX and MIAX PEARL. When utilizing a Dedicated cross-connect,
the EENI can only be configured to offer network connectivity to the
trading platforms, market data systems, and test systems of MIAX
Emerald. The EENI consists of the low latency and ultra-low latency
connectivity options set forth in the Exchange's Fee Schedule. See
the Definitions section of the Fee Schedule.
\29\ ``Shared'' (cross-connect) means cross-connect that
provides network connectivity to the trading platforms, market data
systems, test systems, and/or disaster recovery facilities of MIAX
Emerald, MIAX and MIAX PEARL via a single, shared connection. The
following connections can be Shared across MIAX Emerald, MIAX and
MIAX PEARL: 1 Gigabit, 1 Gigabit Disaster Recovery, and 10 Gigabit
Disaster Recovery. See the Definitions section of the Fee Schedule.
---------------------------------------------------------------------------
Network Connectivity Testing and Certification Fee for Non-Members
MIAX Emerald established electronic communication connections with
Service Bureaus, Extranet Providers and other non-Members, and now
proposes to assess a Network Connectivity Testing and Certification fee
for each 1Gb connection and 10Gb ULL connection. The Exchange proposes
to assess a non-Member Network Connectivity Testing and Certification
fee: (i) Initially per connection in the month the Service Bureau,
Extranet Provider or other non-Member has been credentialed to use any
API or market data feeds in the production environment using the tested
network connection, and (ii) each time the Service Bureau, Extranet
Provider or other non-Member initiates a change to its system that
requires network connectivity testing and certification. Network
Connectivity Testing and Certification fees will not be assessed in
situations where the Exchange initiates a mandatory change to the
Exchange's system that requires testing and certification. Non-Member
Network Connectivity Testing and Certification fees will not be
assessed for testing and certification of connectivity to the
Exchange's Disaster Recovery Facility.
The Exchange proposes to assess non-Members a Network Connectivity
Testing and Certification Fee of $1,200 per 1Gb connection and $4,200
per 10Gb ULL connection. Below is the proposed table for non-Member
Network Connectivity Testing and Certification fees:
----------------------------------------------------------------------------------------------------------------
1 Gigabit fee per 10 Gigabit ULL fee per
Non-Member connection connection
----------------------------------------------------------------------------------------------------------------
Service Bureau/Extranet Provider and other non-Members...... $1,200.00 $4,200.00
----------------------------------------------------------------------------------------------------------------
[[Page 8469]]
The EENI is also available to non-Member subscribers. For non-
Member subscribers, when utilizing a Shared cross-connect, the EENI can
also be configured to offer network connectivity to the trading
platforms, market data systems, test systems, and disaster recovery
facilities of the Exchange's affiliate options exchanges, MIAX and MIAX
PEARL. Accordingly, non-Members utilizing Shared cross-connects to
connect to the trading platforms, market data systems, test systems,
and disaster recovery facilities of the Exchange and its affiliates,
MIAX and MIAX PEARL, will only be assessed one Network Connectivity
Testing and Certification fee per connection tested, regardless of the
trading platforms, market data systems, test systems, and disaster
recovery facilities accessed via such connection. The Member and non-
Member Network Testing and Certification fees represent installation
and support costs incurred by the Exchange as it works with each Member
and non-Member to make sure there are appropriate electronic
communication connections with MIAX Emerald. The Exchange's affiliate
options exchanges, MIAX and MIAX PEARL, charge the same fees for the
same services for their Members and non-Members.\30\ The Exchange
proposes to assess a higher Network Connectivity Testing and
Certification fee to non-Members than to Members, similar to how MIAX
and MIAX PEARL assesses such fees to their Members and non-Members. The
proposed higher fee charged to non-Members reflects the greater amount
of time spent by MIAX Emerald employees testing and certifying non-
Members. It has been MIAX Emerald's experience that Member network
connectivity testing takes less time than non-Member network
connectivity testing because Members have more experience testing these
systems with exchanges as generally fewer questions and issues arise
during the testing and certification process.
---------------------------------------------------------------------------
\30\ See MIAX Fee Schedule, Sections 4(c) and 4(d); see also
MIAX PEARL Fee Schedule, Sections 4(c) and 4(d).
---------------------------------------------------------------------------
2. Statutory Basis
The Exchange believes that its proposal to amend its Fee Schedule
is consistent with Section 6(b) of the Act \31\ in general, and
furthers the objectives of Section 6(b)(4) of the Act \32\ 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.
---------------------------------------------------------------------------
\31\ 15 U.S.C. 78f(b).
\32\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------
The Exchange launched trading on March 1, 2019. For the month of
December 2020, the Exchange had only a 3.58% market share of the U.S.
options industry.\33\ The Exchange is not aware of any evidence that a
market share of approximately 3% provides the Exchange with anti-
competitive pricing power. If the Exchange were to attempt to establish
unreasonable pricing, then no market participant would apply to become
a Member of the Exchange, or test and certify with the Exchange's
trading System.
---------------------------------------------------------------------------
\33\ See The Options Clearing Corporation (``OCC'') publishes
options and futures volume in a variety of formats, including daily
and monthly volume by exchange, available here: https://www.theocc.com/market-data/volume/default.jsp.
---------------------------------------------------------------------------
The Exchange believes the proposed one-time membership application
fee is reasonable, equitable and not unfairly discriminatory because it
is a one-time fee that is reasonably related to (and designed to
recover) the Exchange's cost associated with reviewing and approving
membership applications, which consists primarily of the time and
resources of Exchange personnel to process the membership application
and conduct the new member on-boarding process. The Exchange's process
for reviewing and approving potential new Members involves several
steps and participation from personnel in multiple Exchange
departments, as follows: (i) Reviewing prospective Member information
provided in various membership forms, including, where necessary,
possibly consulting with FINRA, pursuant to the Exchange's Regulatory
Services Agreement; (ii) the on-boarding process, where Exchange
personnel contacts the firm for an introductory meeting with the
Exchange's Business Team to discuss goals, answer questions and
schedule the technical on-boarding meeting; (iii) the technical on-
boarding meeting, where the Exchange's on-boarding team and Trading
Operations Team guides the firm through the on-boarding process with
Exchange personnel available to discuss network connectivity, APIs,
Exchange functionality and operational issues; and (iv) follow-ups with
the Trading Operations Team to coordinate testing, as necessary, until
the firm is active in the Exchange's live trading environment.\34\
---------------------------------------------------------------------------
\34\ See the Exchange's Membership and Technical Onboarding
process, available at https://www.miaxoptions.com/membership/emerald.
---------------------------------------------------------------------------
The Exchange tracks the number of hours spent by Exchange personnel
providing the aforementioned services per membership application. Based
on the average number of person hours spent by the Exchange on
processing a typical membership application, and based on the
Exchange's average cost per full-time employee (``FTE'') of
approximately $250,000 (inclusive of all compensation and employee
benefits) per year, the Exchange represents that its cost to provide
this service is reasonably related to (and often exceeds) the amount of
the membership application fee the Exchange proposes to charge for such
service. In particular, it takes approximately 40 person hours to
review, on-board and approve a membership application. Therefore, the
cost to the Exchange for the review, on-boarding, and approval of each
application is, on average, approximately $4,000-$5,000 (with EEM
application costs closer to $4,000, versus Market Maker application
costs closer to $5,000). Accordingly, the proposed one-time membership
application fee would enable the Exchange to recover a material portion
of such cost. The Exchange believes this is a conservative cost
allocation because the Exchange is not allocating any additional costs
beyond the employee compensation costs for employees directly involved
in this process, such as costs associated with management review and
sign off, compliance team reviews, technology costs of employees,
office space costs of employees, costs associated with supporting
departments' time for things such as internal meetings, project
management coordination among the individuals who indirectly support
the membership approval and on-boarding processes, and various other
indirectly-related costs.
The Exchange also points out that it is not seeking to recoup any
of its past costs associated with reviewing membership applications
that took place during the Waiver Period. The Exchange currently has 35
Members,\35\ all of whom did not pay the one-time membership
application fee, as it was waived for the Waiver Period when these
firms all became Members of the Exchange. Further, the majority of
firms
[[Page 8470]]
that are Members of the Exchange's affiliate options exchanges, MIAX
and MIAX PEARL, also became Members of those exchanges during similar
Waiver Periods for the MIAX and MIAX PEARL one-time membership
application fees. Accordingly, the Exchange (and MIAX and MIAX PEARL)
have assumed approximately 100% of the costs associated with processing
membership applications for the majority of Member firms approved by
the Exchange, MIAX, and MIAX PEARL. Accordingly, the Exchange believes
that it is reasonable, equitable, and not unfairly discriminatory to
now adopt a one-time membership application fee that is reasonably
related to (and designed to recover) the Exchange's cost associated
with reviewing and approving membership applications.
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\35\ See https://www.miaxoptions.com/exchange-members/emerald.
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The Exchange believes the proposed API Testing and Certification
fees and Network Connectivity Testing and Certification fees are
reasonable, equitable and not unfairly discriminatory. The Exchange
tracks the number of hours spent by Exchange personnel providing API
testing and certification services per billable instance. Based on the
average number of person hours spent by the Exchange on API testing and
certification services, and based on the Exchange's average cost per
FTE of approximately $250,000 (inclusive of all compensation and
employee benefits) per year, the Exchange represents that its costs to
provide these services are reasonably related to (and often exceed) the
amount of the respective testing and certification fees the Exchange
proposes to charge for such services. In particular, it takes
approximately 20 person hours to complete the API testing and
certification process. Therefore, the cost to the Exchange to provide
API testing and certification services is, on average, approximately
$2,500 per instance (with EEM and non-Member testing and certification
costs closer to $2,000, versus Market Maker testing and certification
costs closer to $3,000). Accordingly, the proposed API Testing and
Certification fees would enable the Exchange to recover a material
portion of such costs. The Exchange believes this is a conservative
cost allocation because the Exchange is not allocating any additional
costs beyond the employee compensation costs for employees directly
involved in this process, such as management review and sign off,
technology costs of employees, office space costs of employees, costs
associated with supporting departments' time for things such as
internal meetings, project management coordination among the
individuals who indirectly support the testing and certification
process, and various other indirectly-related costs.
The Exchange also points out that it is not seeking to recoup any
of its past costs associated with conducting API testing and
certification that took place during the Waiver Period. The Exchange
currently has 35 Members,\36\ all of whom did not pay the API testing
and certification fee, as it was waived for the Waiver Period when
these firms all became Members of the Exchange. Further, the majority
of firms that are Members of the Exchange's affiliate options
exchanges, MIAX and MIAX PEARL, also became Members of those exchanges
during similar Waiver Periods for the MIAX and MIAX PEARL API Testing
and Certification fees. Accordingly, the Exchange (and MIAX and MIAX
PEARL) have assumed approximately 100% of the costs associated with
conducting API testing and certification for the majority of Member
firms approved by the Exchange, MIAX, and MIAX PEARL. Accordingly, the
Exchange believes that it is reasonable, equitable, and not unfairly
discriminatory to now adopt a per-instance fee that is reasonably
related to (and designed to recover) the Exchange's cost associated
with conducting API testing and certification.
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\36\ See id.
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The Exchange also tracks the number of hours spent by Exchange
personnel providing network connectivity testing and certification
services per billable instance. Based on the average number of person
hours spent by the Exchange on network connectivity testing and
certification services, and based on the Exchange's average cost per
FTE of approximately $250,000 (inclusive of all compensation and
employee benefits) per year, the Exchange represents that its costs to
provide these services are reasonably related to (and often exceed) the
amount of the respective testing and certification fees the Exchange
proposes to charge for such services. In particular, it takes
approximately 20 person hours to complete the network testing and
certification process for 1 Gigabit connections, and approximately 40
person hours to complete the network testing and certification process
for 10 Gigabit ULL connections. Therefore, the cost to the Exchange to
provide network connectivity testing and certification services is, on
average, approximately $2,500 per instance for 1 Gigabit connections,
and approximately $5,000 per instance for 10 Gigabit ULL connections.
Accordingly, the proposed Network Connectivity Testing and
Certification fees would enable the Exchange to recover a material
portion of such costs. The Exchange believes this is a conservative
cost allocation because the Exchange is not allocating any additional
costs beyond the employee compensation costs for employees directly
involved in this process, such as management review and sign off,
technology costs of employees, office space costs of employees, costs
associated with supporting departments' time for things such as
internal meetings, project management coordination among the
individuals who indirectly support the testing and certification
process, and various other indirectly-related costs.
The Exchange believes the difference in the proposed membership
application fee to be charged to EEMs and Market Makers is an equitable
allocation of reasonable dues and fees pursuant to Section 6(b)(4) of
the Act \37\ because of the additional review and resources involved in
processing a Market Maker's application as opposed to an EEM's
application, as Market Makers have greater and more complex obligations
with respect to doing business on the Exchange.\38\
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\37\ 15 U.S.C. 78f(b)(4).
\38\ See supra note 17.
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The Exchange believes its proposal to adopt API Testing and
Certification fees and Network Connectivity Testing and Certification
fees for Members and non-Members is an equitable allocation of
reasonable dues and fees pursuant to Section 6(b)(4) of the Act \39\
because it is a per-instance fee that is reasonably related to (and
designed to recover) the Exchange's cost associated with providing such
API Testing and Certification services and Network Connectivity Testing
and Certification services, which consists primarily of the time and
resources spent to ensure that Member and non-Member APIs and
connectivity function correctly to prevent any System malfunction.
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\39\ 15 U.S.C. 78f(b)(4).
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Further, the Exchange believes the price differential in API
Testing and Certification fees and Network Connectivity Testing and
Certification fees for Members and non-Members is not unfairly
discriminatory because, in the Exchange's experience, Member testing
utilizes less Exchange resources and employee time than non-Member
testing as Members have more experience testing these systems with
exchanges, resulting generally in fewer questions and issues arising
during the testing and certification process. Also, with respect to API
testing and certification, because Third Party
[[Page 8471]]
Vendors and Service Bureaus are redistributing data and reselling
services to other Members and market participants the number and types
of scenarios that need to be tested are more numerous and complex than
those tested and certified for Members.
The Exchange believes the difference in the proposed 1 Gigabit and
10 Gigabit ULL network connectivity testing and certification fees is
an equitable allocation of reasonable dues and fees pursuant to Section
6(b)(4) of the Act \40\ because of the additional review and resources
involved in testing and certifying a 10 Gigabit ULL connection as
opposed to a 1 Gigabit connection, as 10 Gigabit ULL connections offer
vastly greater products and services which require significantly more
time to test, including Market Maker quoting systems. The Exchange
believes its proposed API Testing and Certification fees and Network
Connectivity Testing and Certification fees are reasonable and well
within the range of non-transaction fees assessed among other
exchanges, including the Exchange's affiliate options exchanges, MIAX
and MIAX PEARL.\41\
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\40\ 15 U.S.C. 78f(b)(4).
\41\ See supra note 30.
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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. The proposed fees would apply to all new Exchange Members
and those firms looking to establish APIs and network connectivity in
the same manner. Market participants may not only choose whether to
become Exchange Members at all, but may choose to become members at
competing options exchanges instead.
The Exchange further believes the proposed fees do not place any
market participant at a disadvantage compared to other market
participants because the proposed API Testing and Certification and
Network Connectivity Testing and Certification fees are intended to
cover the situations where a Member or non-Member firm makes changes to
its own system for its own business purpose (i.e., instances where a
firm is trying to improve its quoting engine), which requires the
Exchange to test those re-architected systems. This testing requires
the time of Exchange personnel in several departments (Trading
Operations, Business, On-Boarding, Membership), and occurs primarily
outside of normal business hours, often over the course of the weekend.
The proposed fees are a way for the Exchange to recoup its costs
associated with this testing. When the Exchange determines to make
upgrades to its own system which requires mandatory testing and
certification by Members, the Exchange does not charge any fees.
The Exchange believes that the proposed fees do not dampen
innovation because the majority of Exchange Members are members of
most, if not all, of the other 15 options exchanges. Those exchanges
also require testing and certification any time the Member makes
changes to its system at those exchanges, and also charge a fee to
recoup the costs associated with testing and certifying members. The
Exchange also notes that it has never received a complaint from a
Member or non-Member any time a Member or non-Member has made a change
to its own system that resulted in the Exchange assessing a testing and
certification fee. Without some sort of testing and certification fee,
the Exchange believes that Members and non-Members might be less
efficient in testing their systems, potentially resulting in excessive
time being consumed by the Exchange re-testing and re-certifying
Members and non-Members, to the detriment of all market participants as
Exchange resources are diverted away from other trading operations.
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 burden on competition. To the extent that various
market participants are charged different fees for the one-time
membership application and per-instance API and network connectivity
testing, those distinctions are not unfairly discriminatory and do not
unfairly burden one set of market participants over another. The
difference in the proposed membership application fee to be charged to
EEMs and Market Makers is because of the additional review and
resources involved in processing a Market Maker's application, as
Market Makers have greater and more complex obligations with respect to
doing business on the Exchange.\42\ The proposed higher fee charged to
Third Party Vendors, Service Bureaus and non-Members reflects the
greater amount of time spent by MIAX Emerald employees testing and
certifying non-Members. It has been MIAX Emerald's experience that
Member testing takes less time than non-Member testing because Members
have more experience testing these systems with exchanges, resulting in
generally fewer questions and issues arising during the testing and
certification process. Also, because Third Party Vendors and Service
Bureaus are redistributing data and reselling services to other Members
and market participants, the number and types of scenarios that need to
be tested are more numerous and complex than those tested and certified
for a single Member. The higher fee charged to non-Members reflects the
greater amount of time spent by MIAX Emerald employees testing and
certifying non-Members. It has been MIAX Emerald's experience that
Member network connectivity testing takes less time than non-Member
network connectivity testing because Members have more experience
testing these systems with exchanges as generally fewer questions and
issues arise during the testing and certification process. The proposed
higher fee charged for 10 Gigabit ULL connections versus 1 Gigabit ULL
connections reflects the greater amount of time spent by MIAX Emerald
employees testing and certifying 10 Gigabit ULL connections. MIAX
Emerald's proposed one-time membership application fee and per-instance
API Testing and Certification fee levels and Network Connectivity
Testing and Certification fee levels, as described herein, are
comparable to fee levels charged by other options exchanges for the
same or similar services, including those fees assessed by the
Exchange's affiliates, MIAX and MIAX PEARL.\43\
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\42\ See supra note 17.
\43\ See supra notes 18, 19, 20 and 30.
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The Exchange believes that the proposed API Testing and
Certification fees and Network Connectivity Testing and Certification
fees do not place certain market participants at a relative
disadvantage to other market participants because the fees do not apply
unequally to different size market participants, but instead would
allow the Exchange to charge for the time and resource necessary for
API testing and certification and network connectivity testing and
certification for Members and non-Members to ensure proper functioning
of all available order types, new order entry, order management, order
throughput and mass order cancellation (as well as, for Market Makers,
all available quote types, quote
[[Page 8472]]
throughput, quote management and cancellation, Aggregate Risk Manager
settings and triggers, and confirmation of quotes within the trading
engines). Accordingly, the proposed API Testing and Certification fees
and network connectivity testing and certification fees do not favor
certain categories of market participants in a manner that would impose
a burden on competition.
Inter-Market Competition
The Exchange believes the proposed API Testing and Certification
fees and Network Connectivity Testing and Certification fees do not
place an undue burden on competition on other SROs that is not
necessary or appropriate. 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 options exchanges. There are 15 other options exchanges
where market participants can become members.
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,\44\ and Rule 19b-4(f)(2) \45\ 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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\44\ 15 U.S.C. 78s(b)(3)(A)(ii).
\45\ 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-2021-01 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-2021-01.
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-2021-01 and should
be submitted on or before February 26, 2021.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\46\
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\46\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-02398 Filed 2-4-21; 8:45 am]
BILLING CODE 8011-01-P
