Self-Regulatory Organizations; MIAX Emerald, LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Section 1(a)(ii) of the Fee Schedule To Revise the Application of the Tier Calculation, 64280-64283 [2021-25014]
Download as PDF
<![CDATA[
64280
Federal Register / Vol. 86, No. 219 / Wednesday, November 17, 2021 / Notices
information, and excluding index-based
options, no single exchange has
exceeded approximately 12% of the
market share of executed volume of
multiply-listed equity and ETF options
trades as of October 20, 2021, for the
month of October 2021.17 Therefore, no
exchange possesses significant pricing
power in the execution of multiplylisted equity and ETF options order
flow. More specifically, as of October
20, 2021, the Exchange had a market
share of approximately 5.87% of
executed volume of multiply-listed
equity and ETF options for the month of
October 2021. In such an environment,
the Exchange must continually adjust its
transaction and non-transaction fees to
remain competitive with other
exchanges and to attract order flow. The
Exchange believes that the proposed
rule changes reflect this competitive
environment because they modify the
Exchange’s fees in a manner that
encourages market participants to
provide Priority Customer liquidity and
to send order flow to the Exchange. To
the extent this is achieved, all the
Exchange’s market participants should
benefit from the improved market
quality.
19(b)(3)(A)(ii) of the Act,18 and Rule
19b–4(f)(2) 19 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.
Fee Schedule Cleanup Item
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–MIAX–2021–56. 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
The Exchange believes that the
proposed change to remove an incorrect
order type will not result in any burden
on competition that is not necessary or
appropriate in furtherance of the
purposes of the Act. The proposed rule
change is not a competitive filing but
rather is designed to remedy a minor
non-substantive issue and provide
added clarity to the Fee Schedule in
order to avoid potential confusion on
the part of market participants. In
addition, the Exchange does not believe
the proposal will impose any burden on
inter-market competition as the
proposal does not address any
competitive issues and is intended to
protect investors by providing further
transparency regarding the Exchange’s
Fee Schedule.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
khammond on DSKJM1Z7X2PROD with NOTICES
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
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
MIAX–2021–56 on the subject line.
U.S.C. 78s(b)(3)(A)(ii).
19 17 CFR 240.19b–4(f)(2).
supra note 12.
VerDate Sep<11>2014
17:11 Nov 16, 2021
Jkt 256001
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.20
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021–25015 Filed 11–16–21; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–93549; File No. SR–
EMERALD–2021–39]
Self-Regulatory Organizations; MIAX
Emerald, LLC; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change To Amend Section 1(a)(ii)
of the Fee Schedule To Revise the
Application of the Tier Calculation
November 10, 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 October
29, 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’’).
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.
20 17
18 15
17 See
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–MIAX–2021–56, and
should be submitted on or before
December 8, 2021.
PO 00000
Frm 00104
Fmt 4703
Sfmt 4703
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
E:\FR\FM\17NON1.SGM
17NON1
Federal Register / Vol. 86, No. 219 / Wednesday, November 17, 2021 / Notices
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
Section 1(a)(ii) of the Fee Schedule to
revise the application of the Tier
calculation (defined below).
Background
khammond on DSKJM1Z7X2PROD with NOTICES
The Exchange currently assesses
transaction rebates and fees to all
market participants which are based
upon a threshold tier structure (‘‘Tier’’)
that is applicable to transaction fees.
Tiers are determined on a monthly basis
and are based on three alternative
calculation methods, as defined in
Section 1(a)(ii) of the Fee Schedule. The
first calculation (‘‘Method 1’’) is total
Member sides, based on % of Customer
Total Consolidated Volume (‘‘CTCV’’); 3
the second calculation (‘‘Method 2’’) is
total Emerald Market Maker sides
volume, based on % of CTCV; and the
third calculation (‘‘Method 3’’) is total
3 ‘‘CTCV’’ means Customer Total Consolidated
Volume calculated as the total national volume
cleared at The Options Clearing Corporation in the
Customer range in those classes listed on MIAX
Emerald for the month for which fees apply,
excluding volume cleared at the Options Clearing
Corporation in the Customer range executed during
the period of time in which the Exchange
experiences an Exchange System Disruption (solely
in the option classes of the affected Matching
Engine). See the Definitions Section of the MIAX
Emerald Fee Schedule. The term ‘‘Exchange System
Disruption’’ means an outage of a Matching Engine
or collective Matching Engines for a period of two
consecutive hour or more, during trading hours. See
id. A ‘‘Matching Engine’’ is a part of the MIAX
Emerald electronic system that processes options
orders and trades on a symbol-by-symbol basis.
Some Matching Engines will process option classes
with multiple root symbols, and other Matching
Engines may be dedicated to one single option root
symbol (for example, options on SPY may be
processed by one single Matching Engine that is
dedicated only to SPY). A particular root symbol
may only be assigned to a single designated
Matching Engine. A particular root symbol may not
be assigned to multiple Matching Engines. Id.
VerDate Sep<11>2014
17:11 Nov 16, 2021
Jkt 256001
Priority Customer,4 Maker (defined
below) sides volume, based on % of
CTCV. The calculation method that
results in the highest Tier achieved by
the Member 5 shall apply to all Origin
types by the Member. The monthly
volume thresholds for each method,
associated with each Tier, are calculated
as the total monthly volume executed by
the Member in all options classes on
MIAX Emerald in the relevant Origins
and/or applicable liquidity, not
including Excluded Contracts,6 (as the
numerator) expressed as a percentage of
(divided by) CTCV (as the denominator).
In addition, the per contract transaction
rebates and fees shall be applied
retroactively to all eligible volume once
the Tier has been reached by the
Member. Members that place resting
liquidity, i.e., orders on the MIAX
Emerald System, will be assessed the
specified ‘‘maker’’ rebate or fee (each a
‘‘Maker’’) and Members that execute
against resting liquidity will be assessed
the specified ‘‘taker’’ fee or rebate (each
a ‘‘Taker’’).7 Members are also assessed
lower transaction fees and smaller
rebates for order executions in standard
option classes in the Penny Interval
Program 8 (‘‘Penny classes’’) than for
order executions in standard option
classes which are not in the Penny
Program (‘‘non-Penny classes’’), for
which Members will be assessed higher
transaction fees and larger rebates.
Proposal
The Exchange proposes to amend the
application of the calculation
methodology used to determine the
applicable Tier for Origin types by
4 ‘‘Priority Customer’’ means a person or entity
that (i) is not a broker or dealer in securities, and
(ii) does not place more than 390 orders in listed
options per day on average during a calendar month
for its own beneficial account(s). See Exchange Rule
100, including Interpretation and Policy .01.
5 ‘‘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 the
Definitions Section of the Fee Schedule and
Exchange Rule 100.
6 ‘‘Excluded Contracts’’ means any contracts
routed to an away market for execution. See the
Definitions Section of the Fee Schedule.
7 For a Priority Customer complex order taking
liquidity in both a Penny class and non-Penny class
against Origins other than Priority Customer, the
Priority Customer order will receive a rebate based
on the Tier achieved.
8 See Securities Exchange Act Release No. 88993
(June 2, 2020), 85 FR 35145 (June 8, 2020) (SR–
EMERALD–2020–05) (Notice of Filing and
Immediate Effectiveness of a Proposed Rule Change
To Amend Exchange Rule 510, Minimum Price
Variations and Minimum Trading Increments, To
Conform the Rule to Section 3.1 of the Plan for the
Purpose of Developing and Implementing
Procedures Designed To Facilitate the Listing and
Trading of Standardized Options) (the ‘‘Penny
Program’’).
PO 00000
Frm 00105
Fmt 4703
Sfmt 4703
64281
Member as follows. The Tier applied for
a Member and its Affiliates’ 9 Priority
Customer Origin will solely be
determined by Method 3, Total Priority
Customer, Maker sides volume, based
on % of CTCV. The Tier applied for a
Member and its Affiliates’ Market Maker
and other professional Origins will be
the highest Tier achieved among the
three alternative calculation methods.
The Exchange proposes to amend the
current text in Section 1(a)(ii), Tiers and
their Application, to read, ‘‘Tiers are
determined on a monthly basis. Tiers
are determined based on three (3)
alternative calculation methods. The
Tier applied for a Member and its
Affiliates’ Priority Customer Origin will
solely be determined by Method 3
below. The Tier applied for a Member
and its Affiliates’ Market Maker and
other professional Origins will be the
highest Tier achieved among the three
alternative calculation methods.
Following are the three (3) alternative
calculation methods:’’
For example, under this proposal, if
Member A reaches Tier 2 via Total
Volume (Method 1); Tier 2 via Market
Maker Volume (Method 2); and Tier 4
via Priority Customer Maker (Method 3);
the effective Tier for Member A would
be Tier 4 across all Origins. If Member
B reaches Tier 3 via Total Volume
9 ‘‘Affiliate’’ means (i) an affiliate of a Member of
at least 75% common ownership between the firms
as reflected on each firm’s Form BD, Schedule A,
or (ii) the Appointed Market Maker of an Appointed
EEM (or, conversely, the Appointed EEM of an
Appointed Market Maker). An ‘‘Appointed Market
Maker’’ is a MIAX Emerald Market Maker (who
does not otherwise have a corporate affiliation
based upon common ownership with an EEM) that
has been appointed by an EEM and an ‘‘Appointed
EEM’’ is an EEM (who does not otherwise have a
corporate affiliation based upon common
ownership with a MIAX Emerald Market Maker)
that has been appointed by a MIAX Emerald Market
Maker, pursuant to the following process. A MIAX
Emerald Market Maker appoints an EEM and an
EEM appoints a MIAX Emerald Market Maker, for
the purposes of the Fee Schedule, by each
completing and sending an executed Volume
Aggregation Request Form by email to
membership@miaxoptions.com no later than 2
business days prior to the first business day of the
month in which the designation is to become
effective. Transmittal of a validly completed and
executed form to the Exchange along with the
Exchange’s acknowledgement of the effective
designation to each of the Market Maker and EEM
will be viewed as acceptance of the appointment.
The Exchange will only recognize one designation
per Member. A Member may make a designation
not more than once every 12 months (from the date
of its most recent designation), which designation
shall remain in effect unless or until the Exchange
receives written notice submitted 2 business days
prior to the first business day of the month from
either Member indicating that the appointment has
been terminated. Designations will become
operative on the first business day of the effective
month and may not be terminated prior to the end
of the month. Execution data and reports will be
provided to both parties. See the Definitions
Section of the MIAX Emerald Fee Schedule.
E:\FR\FM\17NON1.SGM
17NON1
64282
Federal Register / Vol. 86, No. 219 / Wednesday, November 17, 2021 / Notices
(Method 1); Tier 4 via Market Maker
Volume (Method 2); and Tier 2 via
Priority Customer Maker (Method 3);
their effective Tier will be Tier 4 for
Market Maker and other professional
Origins, and Priority Customer Origin
will remain Tier 2.
The purpose of adjusting the
application of the calculation
methodology used to determine the
applicable Tier for Origin types by
Member is for business and competitive
reasons. The Exchange designed the
current calculation methodology to
encourage Market Maker and Priority
Customer order flow to the Exchange
from its inception. The Exchange
believes that this proposal continues to
incentive all types of volume to the
Exchange including Market Maker,
professional, and Priority Customer.
khammond on DSKJM1Z7X2PROD with NOTICES
Implementation
The proposed changes will become
effective on November 1, 2021.
2. Statutory Basis
The Exchange believes that its
proposal to amend its Fee Schedule is
consistent with Section 6(b) of the Act 10
in general, and furthers the objectives of
Section 6(b)(4) of the Act,11 in that it is
an equitable allocation of reasonable
dues, fees and other charges among
Exchange members and issuers and
other persons using its facilities, and
6(b)(5) of the Act,12 in that it is designed
to prevent fraudulent and manipulative
acts and practices, to promote just and
equitable principles of trade, to foster
cooperation and coordination with
persons engaged in facilitating
transactions in securities, to remove
impediments to and perfect the
mechanisms of a free and open market
and a national market system and, in
general, to protect investors and the
public interest.
The Exchange believes that its
proposal provides for the equitable
allocation of reasonable dues and fees
and is not unfairly discriminatory for
the following reasons. The Exchange
operates in a highly competitive market.
The Commission has repeatedly
expressed its preference for competition
over regulatory intervention in
determining prices, products, and
services in the securities markets. In
Regulation NMS, the Commission
highlighted the importance of market
forces in determining prices and SRO
revenues and, also, recognized that
current regulation of the market system
‘‘has been remarkably successful in
10 15
U.S.C. 78f(b).
U.S.C. 78f(b)(4).
12 15 U.S.C. 78f(b)(1) and (b)(5).
11 15
VerDate Sep<11>2014
17:11 Nov 16, 2021
Jkt 256001
promoting market competition in its
broader forms that are most important to
investors and listed companies.’’ 13
There are currently 16 registered
options exchanges competing for order
flow. Based on publicly-available
information, and excluding index-based
options, no single exchange has more
than approximately 13% of the market
share of executed volume of multiplylisted equity and exchange-traded fund
(‘‘ETF’’) options trades as of October 26,
2021, for the month of October 2021.14
Therefore, no exchange possesses
significant pricing power in the
execution of multiply-listed equity and
ETF options order flow. More
specifically, as of October 26, 2021, the
Exchange had an approximately 4.66%
market share of executed volume of
multiply-listed equity and ETF options
for the month of October 2021.15 The
Exchange cannot predict with certainty
how the proposed change regarding the
application of the Tier calculation will
affect market participants as Members
may continually shift among the
different Tiers from month to month.
The Exchange believes that the evershifting market shares among the
exchanges from month to month
demonstrates that market participants
can shift order flow, or discontinue or
reduce use of certain categories of
products, in response to transaction
and/or non-transaction fee changes. For
example, on February 28, 2019, the
Exchange’s affiliate, MIAX PEARL, LLC
(‘‘MIAX Pearl’’), filed with the
Commission a proposal to increase
Taker fees in certain Tiers for options
transactions in certain Penny classes for
Priority Customers and decrease Maker
rebates in certain Tiers for options
transactions in Penny classes for
Priority Customers (which fee was to be
effective March 1, 2019).16 MIAX Pearl
experienced a decrease in total market
share for the month of March 2019, after
the proposal went into effect.
Accordingly, the Exchange believes that
the MIAX Pearl March 1, 2019 fee
change, to increase certain transaction
fees and decrease certain transaction
rebates, may have contributed to the
decrease in MIAX Pearl’s market share
and, as such, the Exchange believes
competitive forces constrain the
Exchange’s, and other options
exchanges, ability to set transaction fees
13 See Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37496 (June 29, 2005).
14 See MIAX’s ‘‘The Market at a Glance’’,
available at https://www.miaxoptions.com/ (last
visited October 26, 2021).
15 See id.
16 See Securities Exchange Act Release No. 85304
(March 13, 2019), 84 FR 10144 (March 19, 2019)
(SR–PEARL–2019–07).
PO 00000
Frm 00106
Fmt 4703
Sfmt 4703
and market participants can shift order
flow based on fee changes instituted by
the exchanges.
The Exchange believes its proposal to
revise the application of the Tier
calculation to determine the Origin type
Tier provides for the equitable
allocation of reasonable dues and fees
and is not unfairly discriminatory for
the following reasons. The Exchange is
only changing the application of the
Tier calculation for the Tier for
Members and its Affiliates’ Priority
Customer Origin, which will solely be
determined by Priority Customer, Maker
sides volume, based on % of CTCV
(Method 3). The Exchange believes that
it is equitable and not unfairly
discriminatory to calculate the Priority
Customer Tier independently and to
only use the Priority Customer Tier for
all Origin types when it is the highest
of all the Tier calculations as this may
incentivize Members to increase their
Priority Customer volume on the
Exchange. An increase in Priority
Customer order flow to the Exchange
would create additional liquidity which
would benefit all market participants
who trade on the Exchange.
The Exchange believes its proposal is
consistent with Section 6(b)(4) of the
Act 17 because it applies equally to all
Members of the Exchange and similarly
situated participants are subject to the
same Tier calculations and access to the
Exchange is offered on terms that are
not unfairly discriminatory. The
Exchange believes its proposal may
result in increased Priority Customer
order flow which liquidity benefits all
Exchange participants by providing
more trading opportunities and tighter
spreads.
In addition, The Exchange believes
that its proposal is consistent with
Section 6(b) (5) of the Act 18 because it
perfects the mechanisms of a free and
open market and a national market
system and protects investors and the
public interest because an increase in
Priority Customer order flow will bring
greater volume and liquidity to the
Exchange, which benefits all market
participants by providing more trading
opportunities and tighter spreads.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule changes will impose
any burden on competition not
necessary or appropriate in furtherance
of the purposes of the Act. The
Exchange believes that the proposed
changes in the application of the Tier
17 15
18 15
E:\FR\FM\17NON1.SGM
U.S.C. 78f(b)(4).
U.S.C. 78f(b)(4).
17NON1
Federal Register / Vol. 86, No. 219 / Wednesday, November 17, 2021 / Notices
participants to provide Priority
Customer liquidity and to send order
flow to the Exchange. To the extent this
is achieved, all the Exchange’s market
participants should benefit from the
improved market quality.
calculation should continue to
encourage liquidity that enhances the
quality of the Exchange’s market and
increases the number of trading
opportunities on the Exchange for all
participants who will be able to
compete for such opportunities.
khammond on DSKJM1Z7X2PROD with NOTICES
Intra-Market Competition
The Exchange does not believe that
other market participants at the
Exchange would be placed at a relative
disadvantaged by the proposed change
to amend the application of the
calculation methodology used to
determine the applicable Tier for Origin
types by Member. The proposed change
is designed to attract additional Priority
Customer order flow to the Exchange.
Accordingly, the Exchange believes that
the proposal will not impose any
burden on competition not necessary or
appropriate in furtherance of the
purposes of the Act because it will
continue to encourage Priority Customer
order flow to the Exchange and an
increase in Priority Customer order flow
will bring greater volume and liquidity,
which benefits all market participants
by providing more trading opportunities
and tighter spreads.
Inter-Market Competition
The Exchange operates in a highly
competitive market in which market
participants can readily favor competing
venues if they deem fee levels at a
particular venue to be excessive. There
are currently 16 registered options
exchanges competing for order flow.
Based on publicly-available
information, and excluding index-based
options, no single exchange has
exceeded approximately 13% of the
market share of executed volume of
multiply-listed equity and ETF options
trades as of October 26, 2021, for the
month of October 2021.19 Therefore, no
exchange possesses significant pricing
power in the execution of multiplylisted equity and ETF options order
flow. More specifically, as of October
26, 2021, the Exchange had a market
share of approximately 4.66% of
executed volume of multiply-listed
equity and ETF options for the month of
October 2021.20 In such an
environment, the Exchange must
continually adjust its transaction and
non-transaction fees to remain
competitive with other exchanges and to
attract order flow. The Exchange
believes that the proposed rule changes
reflect this competitive environment
because they modify the Exchange’s fees
in a manner that encourages market
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,21 and Rule
19b–4(f)(2) 22 thereunder. At any time
within 60 days of the filing of the
proposed rule change, the Commission
summarily may temporarily suspend
such rule change if it appears to the
Commission that such action is
necessary or appropriate in the public
interest, for the protection of investors,
or otherwise in furtherance of the
purposes of the Act. If the Commission
takes such action, the Commission shall
institute proceedings to determine
whether the proposed rule should be
approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
EMERALD–2021–39 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–2021–39. 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–2021–39 and
should be submitted on or before
December 8, 2021.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.23
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021–25014 Filed 11–16–21; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–93552; File No. SR–CBOE–
2021–065]
Self-Regulatory Organizations; Cboe
Exchange, Inc.; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change To Amend Its Fees
Schedule
November 10, 2021.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on November
1, 2021, Cboe Exchange, Inc. (the
‘‘Exchange’’ or ‘‘Cboe Options’’) filed
with the Securities and Exchange
Commission (the ‘‘Commission’’) the
proposed rule change as described in
Items I, II, and III below, which Items
have been prepared by the Exchange.
The Commission is publishing this
23 17
19 Supra
note 14.
20 See id.
VerDate Sep<11>2014
17:11 Nov 16, 2021
21 15
U.S.C. 78s(b)(3)(A)(ii).
22 17 CFR 240.19b–4(f)(2).
Jkt 256001
PO 00000
Frm 00107
Fmt 4703
Sfmt 4703
64283
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
E:\FR\FM\17NON1.SGM
17NON1
]]>Agencies
[Federal Register Volume 86, Number 219 (Wednesday, November 17, 2021)]
[Notices]
[Pages 64280-64283]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-25014]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-93549; File No. SR-EMERALD-2021-39]
Self-Regulatory Organizations; MIAX Emerald, LLC; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend
Section 1(a)(ii) of the Fee Schedule To Revise the Application of the
Tier Calculation
November 10, 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 October 29, 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'').
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.
[[Page 64281]]
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 Section 1(a)(ii) of the Fee Schedule
to revise the application of the Tier calculation (defined below).
Background
The Exchange currently assesses transaction rebates and fees to all
market participants which are based upon a threshold tier structure
(``Tier'') that is applicable to transaction fees. Tiers are determined
on a monthly basis and are based on three alternative calculation
methods, as defined in Section 1(a)(ii) of the Fee Schedule. The first
calculation (``Method 1'') is total Member sides, based on % of
Customer Total Consolidated Volume (``CTCV''); \3\ the second
calculation (``Method 2'') is total Emerald Market Maker sides volume,
based on % of CTCV; and the third calculation (``Method 3'') is total
Priority Customer,\4\ Maker (defined below) sides volume, based on % of
CTCV. The calculation method that results in the highest Tier achieved
by the Member \5\ shall apply to all Origin types by the Member. The
monthly volume thresholds for each method, associated with each Tier,
are calculated as the total monthly volume executed by the Member in
all options classes on MIAX Emerald in the relevant Origins and/or
applicable liquidity, not including Excluded Contracts,\6\ (as the
numerator) expressed as a percentage of (divided by) CTCV (as the
denominator). In addition, the per contract transaction rebates and
fees shall be applied retroactively to all eligible volume once the
Tier has been reached by the Member. Members that place resting
liquidity, i.e., orders on the MIAX Emerald System, will be assessed
the specified ``maker'' rebate or fee (each a ``Maker'') and Members
that execute against resting liquidity will be assessed the specified
``taker'' fee or rebate (each a ``Taker'').\7\ Members are also
assessed lower transaction fees and smaller rebates for order
executions in standard option classes in the Penny Interval Program \8\
(``Penny classes'') than for order executions in standard option
classes which are not in the Penny Program (``non-Penny classes''), for
which Members will be assessed higher transaction fees and larger
rebates.
---------------------------------------------------------------------------
\3\ ``CTCV'' means Customer Total Consolidated Volume calculated
as the total national volume cleared at The Options Clearing
Corporation in the Customer range in those classes listed on MIAX
Emerald for the month for which fees apply, excluding volume cleared
at the Options Clearing Corporation in the Customer range executed
during the period of time in which the Exchange experiences an
Exchange System Disruption (solely in the option classes of the
affected Matching Engine). See the Definitions Section of the MIAX
Emerald Fee Schedule. The term ``Exchange System Disruption'' means
an outage of a Matching Engine or collective Matching Engines for a
period of two consecutive hour or more, during trading hours. See
id. A ``Matching Engine'' is a part of the MIAX Emerald electronic
system that processes options orders and trades on a symbol-by-
symbol basis. Some Matching Engines will process option classes with
multiple root symbols, and other Matching Engines may be dedicated
to one single option root symbol (for example, options on SPY may be
processed by one single Matching Engine that is dedicated only to
SPY). A particular root symbol may only be assigned to a single
designated Matching Engine. A particular root symbol may not be
assigned to multiple Matching Engines. Id.
\4\ ``Priority Customer'' means a person or entity that (i) is
not a broker or dealer in securities, and (ii) does not place more
than 390 orders in listed options per day on average during a
calendar month for its own beneficial account(s). See Exchange Rule
100, including Interpretation and Policy .01.
\5\ ``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 the
Definitions Section of the Fee Schedule and Exchange Rule 100.
\6\ ``Excluded Contracts'' means any contracts routed to an away
market for execution. See the Definitions Section of the Fee
Schedule.
\7\ For a Priority Customer complex order taking liquidity in
both a Penny class and non-Penny class against Origins other than
Priority Customer, the Priority Customer order will receive a rebate
based on the Tier achieved.
\8\ See Securities Exchange Act Release No. 88993 (June 2,
2020), 85 FR 35145 (June 8, 2020) (SR-EMERALD-2020-05) (Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To
Amend Exchange Rule 510, Minimum Price Variations and Minimum
Trading Increments, To Conform the Rule to Section 3.1 of the Plan
for the Purpose of Developing and Implementing Procedures Designed
To Facilitate the Listing and Trading of Standardized Options) (the
``Penny Program'').
---------------------------------------------------------------------------
Proposal
The Exchange proposes to amend the application of the calculation
methodology used to determine the applicable Tier for Origin types by
Member as follows. The Tier applied for a Member and its Affiliates'
\9\ Priority Customer Origin will solely be determined by Method 3,
Total Priority Customer, Maker sides volume, based on % of CTCV. The
Tier applied for a Member and its Affiliates' Market Maker and other
professional Origins will be the highest Tier achieved among the three
alternative calculation methods.
---------------------------------------------------------------------------
\9\ ``Affiliate'' means (i) an affiliate of a Member of at least
75% common ownership between the firms as reflected on each firm's
Form BD, Schedule A, or (ii) the Appointed Market Maker of an
Appointed EEM (or, conversely, the Appointed EEM of an Appointed
Market Maker). An ``Appointed Market Maker'' is a MIAX Emerald
Market Maker (who does not otherwise have a corporate affiliation
based upon common ownership with an EEM) that has been appointed by
an EEM and an ``Appointed EEM'' is an EEM (who does not otherwise
have a corporate affiliation based upon common ownership with a MIAX
Emerald Market Maker) that has been appointed by a MIAX Emerald
Market Maker, pursuant to the following process. A MIAX Emerald
Market Maker appoints an EEM and an EEM appoints a MIAX Emerald
Market Maker, for the purposes of the Fee Schedule, by each
completing and sending an executed Volume Aggregation Request Form
by email to [email protected] no later than 2 business days
prior to the first business day of the month in which the
designation is to become effective. Transmittal of a validly
completed and executed form to the Exchange along with the
Exchange's acknowledgement of the effective designation to each of
the Market Maker and EEM will be viewed as acceptance of the
appointment. The Exchange will only recognize one designation per
Member. A Member may make a designation not more than once every 12
months (from the date of its most recent designation), which
designation shall remain in effect unless or until the Exchange
receives written notice submitted 2 business days prior to the first
business day of the month from either Member indicating that the
appointment has been terminated. Designations will become operative
on the first business day of the effective month and may not be
terminated prior to the end of the month. Execution data and reports
will be provided to both parties. See the Definitions Section of the
MIAX Emerald Fee Schedule.
---------------------------------------------------------------------------
The Exchange proposes to amend the current text in Section
1(a)(ii), Tiers and their Application, to read, ``Tiers are determined
on a monthly basis. Tiers are determined based on three (3) alternative
calculation methods. The Tier applied for a Member and its Affiliates'
Priority Customer Origin will solely be determined by Method 3 below.
The Tier applied for a Member and its Affiliates' Market Maker and
other professional Origins will be the highest Tier achieved among the
three alternative calculation methods. Following are the three (3)
alternative calculation methods:''
For example, under this proposal, if Member A reaches Tier 2 via
Total Volume (Method 1); Tier 2 via Market Maker Volume (Method 2); and
Tier 4 via Priority Customer Maker (Method 3); the effective Tier for
Member A would be Tier 4 across all Origins. If Member B reaches Tier 3
via Total Volume
[[Page 64282]]
(Method 1); Tier 4 via Market Maker Volume (Method 2); and Tier 2 via
Priority Customer Maker (Method 3); their effective Tier will be Tier 4
for Market Maker and other professional Origins, and Priority Customer
Origin will remain Tier 2.
The purpose of adjusting the application of the calculation
methodology used to determine the applicable Tier for Origin types by
Member is for business and competitive reasons. The Exchange designed
the current calculation methodology to encourage Market Maker and
Priority Customer order flow to the Exchange from its inception. The
Exchange believes that this proposal continues to incentive all types
of volume to the Exchange including Market Maker, professional, and
Priority Customer.
Implementation
The proposed changes will become effective on November 1, 2021.
2. Statutory Basis
The Exchange believes that its proposal to amend its Fee Schedule
is consistent with Section 6(b) of the Act \10\ in general, and
furthers the objectives of Section 6(b)(4) of the Act,\11\ in that it
is an equitable allocation of reasonable dues, fees and other charges
among Exchange members and issuers and other persons using its
facilities, and 6(b)(5) of the Act,\12\ in that it is designed to
prevent fraudulent and manipulative acts and practices, to promote just
and equitable principles of trade, to foster cooperation and
coordination with persons engaged in facilitating transactions in
securities, to remove impediments to and perfect the mechanisms of a
free and open market and a national market system and, in general, to
protect investors and the public interest.
---------------------------------------------------------------------------
\10\ 15 U.S.C. 78f(b).
\11\ 15 U.S.C. 78f(b)(4).
\12\ 15 U.S.C. 78f(b)(1) and (b)(5).
---------------------------------------------------------------------------
The Exchange believes that its proposal provides for the equitable
allocation of reasonable dues and fees and is not unfairly
discriminatory for the following reasons. The Exchange operates in a
highly competitive market. The Commission has repeatedly expressed its
preference for competition over regulatory intervention in determining
prices, products, and services in the securities markets. In Regulation
NMS, the Commission highlighted the importance of market forces in
determining prices and SRO revenues and, also, recognized that current
regulation of the market system ``has been remarkably successful in
promoting market competition in its broader forms that are most
important to investors and listed companies.'' \13\ There are currently
16 registered options exchanges competing for order flow. Based on
publicly-available information, and excluding index-based options, no
single exchange has more than approximately 13% of the market share of
executed volume of multiply-listed equity and exchange-traded fund
(``ETF'') options trades as of October 26, 2021, for the month of
October 2021.\14\ Therefore, no exchange possesses significant pricing
power in the execution of multiply-listed equity and ETF options order
flow. More specifically, as of October 26, 2021, the Exchange had an
approximately 4.66% market share of executed volume of multiply-listed
equity and ETF options for the month of October 2021.\15\ The Exchange
cannot predict with certainty how the proposed change regarding the
application of the Tier calculation will affect market participants as
Members may continually shift among the different Tiers from month to
month.
---------------------------------------------------------------------------
\13\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496 (June 29, 2005).
\14\ See MIAX's ``The Market at a Glance'', available at https://www.miaxoptions.com/ (last visited October 26, 2021).
\15\ See id.
---------------------------------------------------------------------------
The Exchange believes that the ever-shifting market shares among
the exchanges from month to month demonstrates that market participants
can shift order flow, or discontinue or reduce use of certain
categories of products, in response to transaction and/or non-
transaction fee changes. For example, on February 28, 2019, the
Exchange's affiliate, MIAX PEARL, LLC (``MIAX Pearl''), filed with the
Commission a proposal to increase Taker fees in certain Tiers for
options transactions in certain Penny classes for Priority Customers
and decrease Maker rebates in certain Tiers for options transactions in
Penny classes for Priority Customers (which fee was to be effective
March 1, 2019).\16\ MIAX Pearl experienced a decrease in total market
share for the month of March 2019, after the proposal went into effect.
Accordingly, the Exchange believes that the MIAX Pearl March 1, 2019
fee change, to increase certain transaction fees and decrease certain
transaction rebates, may have contributed to the decrease in MIAX
Pearl's market share and, as such, the Exchange believes competitive
forces constrain the Exchange's, and other options exchanges, ability
to set transaction fees and market participants can shift order flow
based on fee changes instituted by the exchanges.
---------------------------------------------------------------------------
\16\ See Securities Exchange Act Release No. 85304 (March 13,
2019), 84 FR 10144 (March 19, 2019) (SR-PEARL-2019-07).
---------------------------------------------------------------------------
The Exchange believes its proposal to revise the application of the
Tier calculation to determine the Origin type Tier provides for the
equitable allocation of reasonable dues and fees and is not unfairly
discriminatory for the following reasons. The Exchange is only changing
the application of the Tier calculation for the Tier for Members and
its Affiliates' Priority Customer Origin, which will solely be
determined by Priority Customer, Maker sides volume, based on % of CTCV
(Method 3). The Exchange believes that it is equitable and not unfairly
discriminatory to calculate the Priority Customer Tier independently
and to only use the Priority Customer Tier for all Origin types when it
is the highest of all the Tier calculations as this may incentivize
Members to increase their Priority Customer volume on the Exchange. An
increase in Priority Customer order flow to the Exchange would create
additional liquidity which would benefit all market participants who
trade on the Exchange.
The Exchange believes its proposal is consistent with Section
6(b)(4) of the Act \17\ because it applies equally to all Members of
the Exchange and similarly situated participants are subject to the
same Tier calculations and access to the Exchange is offered on terms
that are not unfairly discriminatory. The Exchange believes its
proposal may result in increased Priority Customer order flow which
liquidity benefits all Exchange participants by providing more trading
opportunities and tighter spreads.
---------------------------------------------------------------------------
\17\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------
In addition, The Exchange believes that its proposal is consistent
with Section 6(b) (5) of the Act \18\ because it perfects the
mechanisms of a free and open market and a national market system and
protects investors and the public interest because an increase in
Priority Customer order flow will bring greater volume and liquidity to
the Exchange, which benefits all market participants by providing more
trading opportunities and tighter spreads.
---------------------------------------------------------------------------
\18\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule changes will
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act. The Exchange believes that the
proposed changes in the application of the Tier
[[Page 64283]]
calculation should continue to encourage liquidity that enhances the
quality of the Exchange's market and increases the number of trading
opportunities on the Exchange for all participants who will be able to
compete for such opportunities.
Intra-Market Competition
The Exchange does not believe that other market participants at the
Exchange would be placed at a relative disadvantaged by the proposed
change to amend the application of the calculation methodology used to
determine the applicable Tier for Origin types by Member. The proposed
change is designed to attract additional Priority Customer order flow
to the Exchange. Accordingly, the Exchange believes that the proposal
will not impose any burden on competition not necessary or appropriate
in furtherance of the purposes of the Act because it will continue to
encourage Priority Customer order flow to the Exchange and an increase
in Priority Customer order flow will bring greater volume and
liquidity, which benefits all market participants by providing more
trading opportunities and tighter spreads.
Inter-Market Competition
The Exchange operates in a highly competitive market in which
market participants can readily favor competing venues if they deem fee
levels at a particular venue to be excessive. There are currently 16
registered options exchanges competing for order flow. Based on
publicly-available information, and excluding index-based options, no
single exchange has exceeded approximately 13% of the market share of
executed volume of multiply-listed equity and ETF options trades as of
October 26, 2021, for the month of October 2021.\19\ Therefore, no
exchange possesses significant pricing power in the execution of
multiply-listed equity and ETF options order flow. More specifically,
as of October 26, 2021, the Exchange had a market share of
approximately 4.66% of executed volume of multiply-listed equity and
ETF options for the month of October 2021.\20\ In such an environment,
the Exchange must continually adjust its transaction and non-
transaction fees to remain competitive with other exchanges and to
attract order flow. The Exchange believes that the proposed rule
changes reflect this competitive environment because they modify the
Exchange's fees in a manner that encourages market participants to
provide Priority Customer liquidity and to send order flow to the
Exchange. To the extent this is achieved, all the Exchange's market
participants should benefit from the improved market quality.
---------------------------------------------------------------------------
\19\ Supra note 14.
\20\ See id.
---------------------------------------------------------------------------
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
Written comments were neither solicited nor received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become effective pursuant to Section
19(b)(3)(A)(ii) of the Act,\21\ and Rule 19b-4(f)(2) \22\ 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.
---------------------------------------------------------------------------
\21\ 15 U.S.C. 78s(b)(3)(A)(ii).
\22\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------
IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-EMERALD-2021-39 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-2021-39. 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-2021-39 and should be submitted
on or before December 8, 2021.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\23\
---------------------------------------------------------------------------
\23\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-25014 Filed 11-16-21; 8:45 am]
BILLING CODE 8011-01-P
