Self-Regulatory Organizations; MIAX EMERALD, LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Its Fee Schedule, 10856-10860 [2022-03963]
Download as PDF
<![CDATA[
10856
Federal Register / Vol. 87, No. 38 / Friday, February 25, 2022 / Notices
provided by the Exchange, and any
additional independent analysis by the
Commission.
V. Commission’s Solicitation of
Comments
The Commission requests written
views, data, and arguments with respect
to the concerns identified above as well
as any other relevant concerns. In
particular, the Commission invites the
written views of interested persons
concerning whether the proposal is
consistent with Sections 6(b)(4), 6(b)(5),
and 6(b)(8), or any other provision of the
Act, or the rules and regulations
thereunder. The Commission asks that
commenters address the sufficiency and
merit of the Exchange’s statements in
support of the proposal, in addition to
any other comments they may wish to
submit about the proposed rule change.
Although there do not appear to be any
issues relevant to approval or
disapproval that would be facilitated by
an oral presentation of views, data, and
arguments, the Commission will
consider, pursuant to Rule 19b–4, any
request for an opportunity to make an
oral presentation.128
Interested persons are invited to
submit written data, views, and
arguments regarding whether the
proposal should be approved or
disapproved by March 18, 2022. Any
person who wishes to file a rebuttal to
any other person’s submission must file
that rebuttal by April 1, 2022.
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 No. SR–
PEARL–2022–05 on the subject line.
Paper Comments
lotter on DSK11XQN23PROD with NOTICES1
• 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–PEARL–2022–05. 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
128 15 U.S.C. 78s(b)(2). Section 19(b)(2) of the Act
grants the Commission flexibility to determine what
type of proceeding—either oral or notice and
opportunity for written comments—is appropriate
for consideration of a particular proposal by an
SRO. See Securities Acts Amendments of 1975,
Report of the Senate Committee on Banking,
Housing and Urban Affairs to Accompany S. 249,
S. Rep. No. 75, 94th Cong., 1st Sess. 30 (1975).
VerDate Sep<11>2014
16:44 Feb 24, 2022
Jkt 256001
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–PEARL–2022–05 and
should be submitted on or before March
18, 2022. Rebuttal comments should be
submitted by April 1, 2022.
VI. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(3)(C) of the Act,129 that
File Numbers SR–PEARL–2022–05 be,
and hereby is, temporarily suspended.
In addition, the Commission is
instituting proceedings to determine
whether the proposed rule change
should be approved or disapproved.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.130
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022–03965 Filed 2–24–22; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–94284; File No. SR–
EMERALD–2022–07]
Self-Regulatory Organizations; MIAX
EMERALD, LLC; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change To Amend Its Fee
Schedule
February 18, 2022.
Pursuant to the provisions of 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 February 9, 2022, 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.
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)i) of the Fee Schedule to: (i)
Modify the application of the per
129 15
130 17
PO 00000
U.S.C. 78s(b)(3)(C).
CFR 200.30–3(a)(12), (57) and (58).
Frm 00093
Fmt 4703
Sfmt 4703
1 15
2 17
E:\FR\FM\25FEN1.SGM
U.S.C. 78s(b)(1).
CFR 240.19b–4.
25FEN1
Federal Register / Vol. 87, No. 38 / Friday, February 25, 2022 / Notices
contract surcharge assessed for Complex
Order 3 transactions (the ‘‘Complex
surcharge’’); and (ii) increase the
Complex surcharge for Complex Order
transactions in Penny and non-Penny
Classes (defined below). The Exchange
originally filed this proposal on January
31, 2022 (the ‘‘First Proposed Rule
Change’’).4 On February 9, 2022, the
Exchange withdrew the First Proposed
Rule Change and submitted this filing
for immediate effectiveness.
lotter on DSK11XQN23PROD with NOTICES1
Background
The Exchange currently assesses
transaction rebates and fees to all
market participants, which are based
upon a threshold tier structure (‘‘Tier’’).
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
calculation method that results in the
highest Tier achieved by the Member 5
shall apply to all Origin types by the
Member, except the Priority Customer 6
Origin type. For the Priority Customer
Origin calculation, the Tier applied for
a Member and its Affiliates’ 7 is solely
3 See Exchange Rule 518(a)(5) for the definition of
Complex Order.
4 See SR–EMERALD–2022–03.
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 ‘‘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.
7 ‘‘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
VerDate Sep<11>2014
16:44 Feb 24, 2022
Jkt 256001
determined by calculation Method 3, as
defined in Section 1)a)ii) of the Fee
Schedule, titled ‘‘Total Priority
Customer, Maker sides volume, based
on % of CTCV (‘Method 3’).’’ The
monthly volume thresholds for each of
the methods, 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,8 (as the numerator) expressed
as a percentage of (divided by) Customer
Total Consolidated Volume (‘‘CTCV’’)
(as the denominator). CTCV is
calculated as the total national volume
cleared at The Options Clearing
Corporation (‘‘OCC’’) in the Customer
range in those classes listed on MIAX
Emerald for the month for which fees
apply, excluding volume cleared at the
OCC in the Customer range executed
during the period of time in which the
Exchange experiences an ‘‘Exchange
System Disruption’’ 9 (solely in the
option classes of the affected Matching
Engine).10 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’’).11 Members are
also assessed lower transaction fees and
smaller rebates for order executions in
standard option classes in the Penny
Interval Program 12 (‘‘Penny Classes’’)
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.
8 ‘‘Excluded Contracts’’ means any contracts
routed to an away market for execution. See the
Definitions Section of the Fee Schedule.
9 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 the
Definitions Section of the Fee Schedule.
10 A ‘‘Matching Engine’’ is a part of the MIAX
Emerald electronic system that processes options
orders and trades on a symbol-by-symbol basis. See
the Definitions Section of the Fee Schedule.
11 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.
12 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
PO 00000
Frm 00094
Fmt 4703
Sfmt 4703
10857
than for order executions in standard
option classes which are not in the
Penny Program (‘‘non-Penny Classes’’),
for which Members will be assessed a
higher transaction fees and larger
rebates.
Proposal To Modify the Application of,
and Increase, the Complex Surcharge
The Exchange proposes to amend
Section 1)a)i) of the Fee Schedule to: (i)
Modify the application of the Complex
surcharge; and (ii) increase the Complex
surcharge for Complex Order
transactions in Penny and non-Penny
Classes. Currently, the Exchange
assesses a fee of $0.86 or $0.88 per
contract for all Origins other than
Priority Customer for Complex Orders
that remove liquidity from the
Exchange’s Strategy Book 13 in nonPenny Classes, depending on the Origin
and Tier achieved. The Exchange also
assesses a Complex surcharge of $0.05
per contract for all Origins other than
Priority Customer for Complex Orders
that remove liquidity from the Strategy
Book in non-Penny Classes, which is
denoted by footnote ‘‘∼’’ following the
tables in Section 1)a)i) of the Fee
Schedule. Currently, the Exchange does
not assess a Complex surcharge for
Complex Orders that remove liquidity
from the Strategy Book in Penny Classes
for any Origin.
The Exchange proposes to modify the
application of the Complex surcharge in
several ways. First, the Exchange
proposes that the Complex surcharge
will now apply to both Penny and nonPenny Classes, which the Exchange will
denote in both the Penny and nonPenny Class tables of transaction fees
and rebates in Section 1)a)i) of the Fee
Schedule (described further below).
Prior to the First Proposed Rule Change,
the Complex surcharge applied only to
non-Penny Classes. Second, the
Exchange proposes that the Complex
surcharge will now apply to both
liquidity adding (Maker) and liquidity
removing (Taker) Complex Orders for all
Origins, except the Priority Customer
Origin. Prior to the First Proposed Rule
Change, the Complex surcharge applied
only to liquidity removing (Taker)
Complex Orders. Third, the Exchange
proposes that the Complex surcharge
will apply to Complex Orders submitted
as a Response or unrelated quote or
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’’).
13 The ‘‘Strategy Book’’ is the Exchange’s
electronic book of complex orders and complex
quotes. See Exchange Rule 518(a)(17).
E:\FR\FM\25FEN1.SGM
25FEN1
10858
Federal Register / Vol. 87, No. 38 / Friday, February 25, 2022 / Notices
order in a Complex Order Auction.14
Prior to the First Proposed Rule Change,
the Complex surcharge applied only to
liquidity removing Complex Orders that
were not part of a Complex Order
Auction. Fourth, the Exchange proposes
that the Complex surcharge will apply
to Complex Orders that are contra to the
Priority Customer Origin only. Prior to
the First Proposed Rule Change, the
Complex surcharge applied to Complex
Orders that were contra to any Origin.
Fifth, the Exchange proposes to increase
the Complex surcharge from $0.05 per
contract to $0.12 per contract. The
Exchange notes that the Complex
surcharge will continue to not apply to
transactions that are Linkage Trades.15
Additionally, the Exchange notes that
the Complex surcharge will not apply to
transactions that are paired trades, such
as transactions in cPRIME, which the
Exchange proposes to explicitly exclude
from the Complex surcharge (denoted in
a footnote described below).
Accordingly, with all of the proposed
changes, the proposed Complex
surcharge of $0.12 per contract will
apply to Complex Orders for all Origins
except Priority Customer that add
(Maker) or remove (Taker) liquidity in
Penny and non-Penny Classes when
trading against a Priority Customer on
the Strategy Book. The Complex
surcharge would continue to not apply
to the Priority Customer Origin. The
Complex surcharge would also apply to
all Origins except Priority Customer
when trading against a Priority
Customer as a Response or unrelated
quote or order in a Complex Order
Auction,16 other than a cPRIME
auction.17 The Exchange notes that the
proposed application and amount of the
Complex surcharge subject to this filing
is the same application and amount of
the Complex surcharge that is currently
assessed by the Exchange’s affiliate,
Miami International Securities
Exchange, LLC (‘‘MIAX’’).18 For
lotter on DSK11XQN23PROD with NOTICES1
14 See
Exchange Rule 518(d) (describing the
Complex Order Auction process). The Exchange
notes that the Complex surcharge will not apply to
Complex Orders submitted as part of a cPRIME
auction. A Complex PRIME or ‘‘cPRIME’’ Order is
a complex order (as defined in Rule 518(a)(5)) that
is submitted for participation in a cPRIME Auction.
Trading of cPRIME Orders is governed by Rule
515A, Interpretation and Policy .12. See Exchange
Rule 518(b)(7). ‘‘cPRIME’’ is the process by which
a Member may electronically submit a ‘‘cPRIME
Order’’ (as defined in Exchange Rule 518(b)(7)) it
represents as agent (a ‘‘cPRIME Agency Order’’)
against principal or solicited interest for execution
(a ‘‘cPRIME Auction’’), subject to the requirements
in Exchange Rule 515A, Interpretation and Policy
.12(a). See, generally, Exchange Rule 515A.
15 See Exchange Rule 521(j).
16 See Exchange Rule 518(d).
17 See supra note 14.
18 See MIAX Fee Schedule, Sections 1)a)i)–ii)
(assessing a $0.12 per contract surcharge for trading
VerDate Sep<11>2014
16:44 Feb 24, 2022
Jkt 256001
example, assuming a Firm Origin
Complex Order taking liquidity against
(contra) a Priority Customer Origin
Complex Order resting liquidity in a
Penny Class, MIAX will charge a
standard fee of $0.47 and a Complex
surcharge of $0.12.19 Similarly, under
the proposed fee application and
proposed Complex surcharge rate
increase, MIAX Emerald would now
charge a standard (taker) fee of $0.50
and a Complex surcharge of $0.12.
To represent all the proposed
changes, the Exchange proposes to add
a new column to each table for Penny
and non-Penny Classes in Section 1)a)i)
of the Fee Schedule, under the
‘‘Complex’’ heading. The Exchange
proposes that each new column would
be titled ‘‘Per Contract Surcharge for
Trading Against a Priority Customer
Complex Order.’’ 20 In the new column
for each table, the Exchange proposes to
insert the proposed increased Complex
surcharge amount of $0.12 per contract
for all Origins, except Priority Customer,
which would be $0.00 per contract for
all Tiers. The Exchange also proposes to
move footnote ‘‘∼’’ from the ‘‘Taker’’
column in the non-Penny Classes table
and insert it at the end of each of the
newly proposed column headings for
the Complex surcharge, described
above. Further, the Exchange proposes
to delete the text of footnote ‘‘∼’’ in its
entirety and insert the following new
text for that footnote following the
tables in Section 1)a)i) of the Fee
Schedule: ‘‘The per contract surcharge
for trading against a Priority Customer
Complex Order for Penny and NonPenny Classes applies to all Origins
except Priority Customer when trading
against a Priority Customer: (i) On the
Strategy Book; or (ii) as a Response or
unrelated quote or order in a complex
order auction other than a cPRIME
Auction.’’ 21
As described above, the Exchange
proposes to increase the Complex
surcharge from $0.05 per contract to
$0.12 per contract. The Exchange notes
that the proposed Complex surcharge
rate of $0.12 per contract is the same
amount charged by at least two
competing options exchanges with base
fee amounts for complex orders of $0.50
per contract in Penny Classes plus a
against a Priority Customer Complex Order for
Penny and Non-Penny classes).
19 See MIAX Fee Schedule, Section 1)a)ii).
20 This is similar to how the Complex surcharge
is represented in the tables of transaction fees and
rebates in the MIAX Fee Schedule. See supra note
18.
21 This is substantially similar language regarding
the application of the Complex surcharge that is
represented by text below the tables of transaction
fees and rebates in the MIAX Fee Schedule. See
MIAX Fee Schedule, Section 1)a)ii), at page 4.
PO 00000
Frm 00095
Fmt 4703
Sfmt 4703
$0.12 per contract complex surcharge,
which has similar application
methods.22 Further, the proposed
application and increased amount of the
Complex surcharge is the same
application and amount of the Complex
surcharge that is currently assessed by
the Exchange’s affiliate, MIAX.23
The purpose of the proposed changes
to the Complex surcharge are for
business and competitive reasons. In
order to attract order flow, the Exchange
initially set its Complex surcharge rate
so that it was similar to, or lower, than
other options exchanges that operate
comparable maker/taker pricing
models.24 The Exchange now believes
that it is appropriate to adjust this rate
and application so that it is more in line
with other exchanges, but will remain
highly competitive such that it should
enable the Exchange to continue to
attract order flow and maintain market
share.25
Implementation
The proposed changes are
immediately effective.
2. Statutory Basis
The Exchange believes that its
proposal to amend its Fee Schedule is
consistent with Section 6(b) of the Act 26
in general, and furthers the objectives of
Section 6(b)(4) of the Act,27 in 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,28 in that it is designed
to prevent fraudulent and manipulative
acts and practices, promote just and
equitable principles of trade, foster
cooperation and coordination with
persons engaged in facilitating
transactions in securities, remove
impediments to and perfect the
mechanisms of a free and open market
and a national market system and, in
22 See NYSE American Options Fee Schedule,
Section I.A., footnote 5, page 9 (assessing $0.12 per
contract surcharge to any Electronic Non-Customer
Complex Order that executes against a Customer
Complex Order, regardless of whether the execution
occurs in a Complex Order Auction); BOX Options
Exchange Fee Schedule, Section III.A. Complex
Order Transaction Fees (noting that a $0.12 per
contract Complex Surcharge will be applied to any
electronic non-Public Customer Complex Order that
executes against an electronic Public Customer
Complex Order, including for Penny Interval Class
taker fees with a base fee amount of $0.50 per
contract).
23 See supra note 18.
24 See Securities Exchange Act Release No. 85393
(March 21, 2019), 84 FR 11599 (March 27, 2019)
(SR–EMERALD–2019–15).
25 See supra notes 18 and 22.
26 15 U.S.C. 78f(b).
27 15 U.S.C. 78f(b)(4).
28 15 U.S.C. 78f(b)(1) and (b)(5).
E:\FR\FM\25FEN1.SGM
25FEN1
Federal Register / Vol. 87, No. 38 / Friday, February 25, 2022 / Notices
lotter on DSK11XQN23PROD with NOTICES1
general, protect investors and the public
interest.
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.’’ 29
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 a
market share of more than
approximately 12–13% of the equity
options market.30 Therefore, no
exchange possesses significant pricing
power. More specifically, as of January
26, 2022, the Exchange had a market
share of approximately 3.96% of
executed volume of multiply-listed
equity and exchange traded fund
(‘‘ETF’’) options for the month of
January 2022.31
The Exchange believes that the evershifting market share among the
exchanges from month to month
demonstrates that market participants
can discontinue or reduce use of certain
categories of products and services,
terminate an existing membership or
determine to not become a new member,
and/or shift order flow, in response to
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).32 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
29 See Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37496 (June 29, 2005).
30 See ‘‘The Market at a Glance,’’ (last visited
January 26, 2022), available at https://
www.miaxoptions.com/.
31 See id.
32 See Securities Exchange Act Release No. 85304
(March 13, 2019), 84 FR 10144 (March 19, 2019)
(SR–PEARL–2019–07).
VerDate Sep<11>2014
16:44 Feb 24, 2022
Jkt 256001
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.
The Exchange believes its proposal is
reasonable, equitable and not unfairly
discriminatory because all similarly
situated market participants in the same
Origin type (except Priority Customers)
will now be subject to the Complex
surcharge. The Exchange believes it is
equitable and not unfairly
discriminatory to increase the Complex
surcharge for business and competitive
business reasons. The Exchange initially
set its Complex surcharge rate similar
to, or lower than, the complex
surcharges assessed by other options
exchanges that operate comparable
maker/taker pricing models. The
Exchange now believes that it is
appropriate to increase the Complex
surcharge so that it is in line with other
exchanges, and will still remain highly
competitive such that it should enable
the Exchange to continue to attract order
flow and maintain market share.33 The
Exchange believes that the amount of
Complex surcharge, as proposed, will
continue to encourage market
participants to send Complex Orders to
the Exchange.
The Exchange believes the proposal to
increase the Complex surcharge and
broaden its application is consistent
with Section 6(b)(4) of the Act 34
because it applies equally to all market
participants (Market Makers, Non-MIAX
Market Makers, Firm Proprietary/
Broker-Dealers, except Priority
Customers) that would be charged such
Complex surcharge. Assessing the
Complex surcharge to Market Makers
and other professional market
participants (except Priority Customers),
in a broader application, similar to that
of other exchanges, is reasonable and
not unfairly discriminatory because it
will provide Market Makers and other
professional market participants with
equal surcharges when trading against a
Priority Customer Complex Order. As
stated above, the proposed Complex
surcharge is the same amount as the
surcharges assessed by NYSE American
Options, BOX Options, and the
Exchange’s affiliate, MIAX.35 The
Exchange notes that, although the
increase of the Complex surcharge
represents a slight fee increase, the
Exchange believes that this increase is
supra notes 18 and 22.
U.S.C. 78f(b)(4).
35 See supra notes 18 and 22.
fair and equitable because it is in line
with the amount of surcharges assessed
on other options exchanges when
trading against Priority Customer
Complex Orders.36
The Exchange believes its proposal to
apply the Complex surcharge to all
Origins, except Priority Customer, is
reasonable, equitably allocated and not
unfairly discriminatory because it will
continue to encourage Priority Customer
Complex Order flow. The Exchange
believes increased Priority Customer
Complex Order flow benefits all market
participants by providing more trading
opportunities and tighter spreads. The
Exchange also believes that increased
Priority Customer Complex Order flow
may attract Market Makers and other
liquidity providers, thus, facilitating
price improvement in the Complex
Order Auction process, signaling
additional corresponding increase in
Complex Order flow from other market
participants, and, as a result, increasing
liquidity on the Exchange.
The Exchange believes its proposal to
broaden the application of the Complex
surcharge is also consistent with Section
6(b)(5) of the Act 37 because it perfects
the mechanisms of a free and open
market and a national market system by
aligning the broader application of the
Complex surcharge to that of other
options exchanges,38 which will help to
create consistency and uniformity in the
marketplace.
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.
Intra-Market Competition
The Exchange believes that the
proposed changes to the Complex
surcharge should continue to encourage
the provision of liquidity that enhances
the quality of the Exchange’s Complex
Order market and increases the number
of trading opportunities on the
Exchange for all participants who will
be able to compete for such
opportunities. The proposed rule
changes should enable the Exchange to
continue to attract and compete for
order flow with other exchanges. The
Exchange also believes that its proposal
to apply the Complex surcharge to all
Origins except Priority Customer will
not impose any burden on competition
not necessary or appropriate because the
33 See
36 See
34 15
37 15
PO 00000
Frm 00096
Fmt 4703
Sfmt 4703
10859
id.
U.S.C. 78f(b)(1) and (b)(5).
38 See supra note 22.
E:\FR\FM\25FEN1.SGM
25FEN1
10860
Federal Register / Vol. 87, No. 38 / Friday, February 25, 2022 / Notices
Exchange believes increased Priority
Customer Complex Order flow benefits
all market participants by providing
more trading opportunities and tighter
spreads. The Exchange also believes that
increased Priority Customer Complex
Order flow may attract Market Makers
and other liquidity providers, thus,
facilitating price improvement in the
Complex Order Auction process,
signaling additional corresponding
increase in Complex Order flow from
other market participants, and, as a
result, increasing liquidity on the
Exchange.
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 a
market share of more than
approximately 12–13% of the equity
options market.39 Therefore, no
exchange possesses significant pricing
power. More specifically, as of January
26, 2022, the Exchange had a market
share of approximately 3.96% of
executed volume of multiply-listed
equity and ETF options for the month of
January 2022.40 Therefore, no exchange
possesses significant pricing power in
the execution of multiply-listed equity
and ETF options order flow. 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 it modifies the Exchange’s fees
for Complex Order transactions in a
manner that will allow the Exchange to
remain competitive.
lotter on DSK11XQN23PROD with NOTICES1
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,41 and Rule
39 See
supra note 30.
id.
41 15 U.S.C. 78s(b)(3)(A)(ii).
19b–4(f)(2) 42 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–2022–07 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–2022–07. 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
40 See
VerDate Sep<11>2014
16:44 Feb 24, 2022
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–2022–07, and
should be submitted on or before March
18, 2022.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.43
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022–03963 Filed 2–24–22; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–94286; File No. SR–
PEARL–2022–04]
Self-Regulatory Organizations; MIAX
PEARL LLC; Notice of Filing of a
Proposed Rule Change To Amend the
MIAX PEARL Options Fee Schedule To
Increase the Monthly Fees for MIAX
Express Network Full Service Port;
Suspension of and Order Instituting
Proceedings To Determine Whether To
Approve or Disapprove the Proposed
Rule Change
February 18, 2022.
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 February
15, 2022, MIAX PEARL, LLC (‘‘MIAX
Pearl’’ or ‘‘Exchange’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’) a proposed rule change
as described in Items I and II 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 and is, pursuant
to Section 19(b)(3)(C) of the Act, hereby:
(i) Temporarily suspending the rule
change; and (ii) instituting proceedings
to determine whether to approve or
disapprove the proposed rule change.
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 Pearl Options Fee
Schedule (the ‘‘Fee Schedule’’) to
amend the fees for the Exchange’s MIAX
43 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
42 17
Jkt 256001
PO 00000
CFR 240.19b–4(f)(2).
Frm 00097
Fmt 4703
Sfmt 4703
E:\FR\FM\25FEN1.SGM
25FEN1
]]>Agencies
[Federal Register Volume 87, Number 38 (Friday, February 25, 2022)]
[Notices]
[Pages 10856-10860]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-03963]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-94284; File No. SR-EMERALD-2022-07]
Self-Regulatory Organizations; MIAX EMERALD, LLC; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend
Its Fee Schedule
February 18, 2022.
Pursuant to the provisions of 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 February 9, 2022, 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.
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)i) of the Fee Schedule
to: (i) Modify the application of the per
[[Page 10857]]
contract surcharge assessed for Complex Order \3\ transactions (the
``Complex surcharge''); and (ii) increase the Complex surcharge for
Complex Order transactions in Penny and non-Penny Classes (defined
below). The Exchange originally filed this proposal on January 31, 2022
(the ``First Proposed Rule Change'').\4\ On February 9, 2022, the
Exchange withdrew the First Proposed Rule Change and submitted this
filing for immediate effectiveness.
---------------------------------------------------------------------------
\3\ See Exchange Rule 518(a)(5) for the definition of Complex
Order.
\4\ See SR-EMERALD-2022-03.
---------------------------------------------------------------------------
Background
The Exchange currently assesses transaction rebates and fees to all
market participants, which are based upon a threshold tier structure
(``Tier''). 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 calculation method that results in the highest
Tier achieved by the Member \5\ shall apply to all Origin types by the
Member, except the Priority Customer \6\ Origin type. For the Priority
Customer Origin calculation, the Tier applied for a Member and its
Affiliates' \7\ is solely determined by calculation Method 3, as
defined in Section 1)a)ii) of the Fee Schedule, titled ``Total Priority
Customer, Maker sides volume, based on % of CTCV (`Method 3').'' The
monthly volume thresholds for each of the methods, 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,\8\ (as the
numerator) expressed as a percentage of (divided by) Customer Total
Consolidated Volume (``CTCV'') (as the denominator). CTCV is calculated
as the total national volume cleared at The Options Clearing
Corporation (``OCC'') in the Customer range in those classes listed on
MIAX Emerald for the month for which fees apply, excluding volume
cleared at the OCC in the Customer range executed during the period of
time in which the Exchange experiences an ``Exchange System
Disruption'' \9\ (solely in the option classes of the affected Matching
Engine).\10\ 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'').\11\ Members are also assessed lower
transaction fees and smaller rebates for order executions in standard
option classes in the Penny Interval Program \12\ (``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 a higher transaction fees and larger rebates.
---------------------------------------------------------------------------
\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\ ``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.
\7\ ``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.
\8\ ``Excluded Contracts'' means any contracts routed to an away
market for execution. See the Definitions Section of the Fee
Schedule.
\9\ 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 the Definitions
Section of the Fee Schedule.
\10\ A ``Matching Engine'' is a part of the MIAX Emerald
electronic system that processes options orders and trades on a
symbol-by-symbol basis. See the Definitions Section of the Fee
Schedule.
\11\ 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.
\12\ 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 To Modify the Application of, and Increase, the Complex
Surcharge
The Exchange proposes to amend Section 1)a)i) of the Fee Schedule
to: (i) Modify the application of the Complex surcharge; and (ii)
increase the Complex surcharge for Complex Order transactions in Penny
and non-Penny Classes. Currently, the Exchange assesses a fee of $0.86
or $0.88 per contract for all Origins other than Priority Customer for
Complex Orders that remove liquidity from the Exchange's Strategy Book
\13\ in non-Penny Classes, depending on the Origin and Tier achieved.
The Exchange also assesses a Complex surcharge of $0.05 per contract
for all Origins other than Priority Customer for Complex Orders that
remove liquidity from the Strategy Book in non-Penny Classes, which is
denoted by footnote ``~'' following the tables in Section 1)a)i) of the
Fee Schedule. Currently, the Exchange does not assess a Complex
surcharge for Complex Orders that remove liquidity from the Strategy
Book in Penny Classes for any Origin.
---------------------------------------------------------------------------
\13\ The ``Strategy Book'' is the Exchange's electronic book of
complex orders and complex quotes. See Exchange Rule 518(a)(17).
---------------------------------------------------------------------------
The Exchange proposes to modify the application of the Complex
surcharge in several ways. First, the Exchange proposes that the
Complex surcharge will now apply to both Penny and non-Penny Classes,
which the Exchange will denote in both the Penny and non-Penny Class
tables of transaction fees and rebates in Section 1)a)i) of the Fee
Schedule (described further below). Prior to the First Proposed Rule
Change, the Complex surcharge applied only to non-Penny Classes.
Second, the Exchange proposes that the Complex surcharge will now apply
to both liquidity adding (Maker) and liquidity removing (Taker) Complex
Orders for all Origins, except the Priority Customer Origin. Prior to
the First Proposed Rule Change, the Complex surcharge applied only to
liquidity removing (Taker) Complex Orders. Third, the Exchange proposes
that the Complex surcharge will apply to Complex Orders submitted as a
Response or unrelated quote or
[[Page 10858]]
order in a Complex Order Auction.\14\ Prior to the First Proposed Rule
Change, the Complex surcharge applied only to liquidity removing
Complex Orders that were not part of a Complex Order Auction. Fourth,
the Exchange proposes that the Complex surcharge will apply to Complex
Orders that are contra to the Priority Customer Origin only. Prior to
the First Proposed Rule Change, the Complex surcharge applied to
Complex Orders that were contra to any Origin. Fifth, the Exchange
proposes to increase the Complex surcharge from $0.05 per contract to
$0.12 per contract. The Exchange notes that the Complex surcharge will
continue to not apply to transactions that are Linkage Trades.\15\
Additionally, the Exchange notes that the Complex surcharge will not
apply to transactions that are paired trades, such as transactions in
cPRIME, which the Exchange proposes to explicitly exclude from the
Complex surcharge (denoted in a footnote described below). Accordingly,
with all of the proposed changes, the proposed Complex surcharge of
$0.12 per contract will apply to Complex Orders for all Origins except
Priority Customer that add (Maker) or remove (Taker) liquidity in Penny
and non-Penny Classes when trading against a Priority Customer on the
Strategy Book. The Complex surcharge would continue to not apply to the
Priority Customer Origin. The Complex surcharge would also apply to all
Origins except Priority Customer when trading against a Priority
Customer as a Response or unrelated quote or order in a Complex Order
Auction,\16\ other than a cPRIME auction.\17\ The Exchange notes that
the proposed application and amount of the Complex surcharge subject to
this filing is the same application and amount of the Complex surcharge
that is currently assessed by the Exchange's affiliate, Miami
International Securities Exchange, LLC (``MIAX'').\18\ For example,
assuming a Firm Origin Complex Order taking liquidity against (contra)
a Priority Customer Origin Complex Order resting liquidity in a Penny
Class, MIAX will charge a standard fee of $0.47 and a Complex surcharge
of $0.12.\19\ Similarly, under the proposed fee application and
proposed Complex surcharge rate increase, MIAX Emerald would now charge
a standard (taker) fee of $0.50 and a Complex surcharge of $0.12.
---------------------------------------------------------------------------
\14\ See Exchange Rule 518(d) (describing the Complex Order
Auction process). The Exchange notes that the Complex surcharge will
not apply to Complex Orders submitted as part of a cPRIME auction. A
Complex PRIME or ``cPRIME'' Order is a complex order (as defined in
Rule 518(a)(5)) that is submitted for participation in a cPRIME
Auction. Trading of cPRIME Orders is governed by Rule 515A,
Interpretation and Policy .12. See Exchange Rule 518(b)(7).
``cPRIME'' is the process by which a Member may electronically
submit a ``cPRIME Order'' (as defined in Exchange Rule 518(b)(7)) it
represents as agent (a ``cPRIME Agency Order'') against principal or
solicited interest for execution (a ``cPRIME Auction''), subject to
the requirements in Exchange Rule 515A, Interpretation and Policy
.12(a). See, generally, Exchange Rule 515A.
\15\ See Exchange Rule 521(j).
\16\ See Exchange Rule 518(d).
\17\ See supra note 14.
\18\ See MIAX Fee Schedule, Sections 1)a)i)-ii) (assessing a
$0.12 per contract surcharge for trading against a Priority Customer
Complex Order for Penny and Non-Penny classes).
\19\ See MIAX Fee Schedule, Section 1)a)ii).
---------------------------------------------------------------------------
To represent all the proposed changes, the Exchange proposes to add
a new column to each table for Penny and non-Penny Classes in Section
1)a)i) of the Fee Schedule, under the ``Complex'' heading. The Exchange
proposes that each new column would be titled ``Per Contract Surcharge
for Trading Against a Priority Customer Complex Order.'' \20\ In the
new column for each table, the Exchange proposes to insert the proposed
increased Complex surcharge amount of $0.12 per contract for all
Origins, except Priority Customer, which would be $0.00 per contract
for all Tiers. The Exchange also proposes to move footnote ``~'' from
the ``Taker'' column in the non-Penny Classes table and insert it at
the end of each of the newly proposed column headings for the Complex
surcharge, described above. Further, the Exchange proposes to delete
the text of footnote ``~'' in its entirety and insert the following new
text for that footnote following the tables in Section 1)a)i) of the
Fee Schedule: ``The per contract surcharge for trading against a
Priority Customer Complex Order for Penny and Non-Penny Classes applies
to all Origins except Priority Customer when trading against a Priority
Customer: (i) On the Strategy Book; or (ii) as a Response or unrelated
quote or order in a complex order auction other than a cPRIME
Auction.'' \21\
---------------------------------------------------------------------------
\20\ This is similar to how the Complex surcharge is represented
in the tables of transaction fees and rebates in the MIAX Fee
Schedule. See supra note 18.
\21\ This is substantially similar language regarding the
application of the Complex surcharge that is represented by text
below the tables of transaction fees and rebates in the MIAX Fee
Schedule. See MIAX Fee Schedule, Section 1)a)ii), at page 4.
---------------------------------------------------------------------------
As described above, the Exchange proposes to increase the Complex
surcharge from $0.05 per contract to $0.12 per contract. The Exchange
notes that the proposed Complex surcharge rate of $0.12 per contract is
the same amount charged by at least two competing options exchanges
with base fee amounts for complex orders of $0.50 per contract in Penny
Classes plus a $0.12 per contract complex surcharge, which has similar
application methods.\22\ Further, the proposed application and
increased amount of the Complex surcharge is the same application and
amount of the Complex surcharge that is currently assessed by the
Exchange's affiliate, MIAX.\23\
---------------------------------------------------------------------------
\22\ See NYSE American Options Fee Schedule, Section I.A.,
footnote 5, page 9 (assessing $0.12 per contract surcharge to any
Electronic Non-Customer Complex Order that executes against a
Customer Complex Order, regardless of whether the execution occurs
in a Complex Order Auction); BOX Options Exchange Fee Schedule,
Section III.A. Complex Order Transaction Fees (noting that a $0.12
per contract Complex Surcharge will be applied to any electronic
non-Public Customer Complex Order that executes against an
electronic Public Customer Complex Order, including for Penny
Interval Class taker fees with a base fee amount of $0.50 per
contract).
\23\ See supra note 18.
---------------------------------------------------------------------------
The purpose of the proposed changes to the Complex surcharge are
for business and competitive reasons. In order to attract order flow,
the Exchange initially set its Complex surcharge rate so that it was
similar to, or lower, than other options exchanges that operate
comparable maker/taker pricing models.\24\ The Exchange now believes
that it is appropriate to adjust this rate and application so that it
is more in line with other exchanges, but will remain highly
competitive such that it should enable the Exchange to continue to
attract order flow and maintain market share.\25\
---------------------------------------------------------------------------
\24\ See Securities Exchange Act Release No. 85393 (March 21,
2019), 84 FR 11599 (March 27, 2019) (SR-EMERALD-2019-15).
\25\ See supra notes 18 and 22.
---------------------------------------------------------------------------
Implementation
The proposed changes are immediately effective.
2. Statutory Basis
The Exchange believes that its proposal to amend its Fee Schedule
is consistent with Section 6(b) of the Act \26\ in general, and
furthers the objectives of Section 6(b)(4) of the Act,\27\ in 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,\28\ in that it is designed to
prevent fraudulent and manipulative acts and practices, promote just
and equitable principles of trade, foster cooperation and coordination
with persons engaged in facilitating transactions in securities, remove
impediments to and perfect the mechanisms of a free and open market and
a national market system and, in
[[Page 10859]]
general, protect investors and the public interest.
---------------------------------------------------------------------------
\26\ 15 U.S.C. 78f(b).
\27\ 15 U.S.C. 78f(b)(4).
\28\ 15 U.S.C. 78f(b)(1) and (b)(5).
---------------------------------------------------------------------------
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.'' \29\
---------------------------------------------------------------------------
\29\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496 (June 29, 2005).
---------------------------------------------------------------------------
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 a market share of more than
approximately 12-13% of the equity options market.\30\ Therefore, no
exchange possesses significant pricing power. More specifically, as of
January 26, 2022, the Exchange had a market share of approximately
3.96% of executed volume of multiply-listed equity and exchange traded
fund (``ETF'') options for the month of January 2022.\31\
---------------------------------------------------------------------------
\30\ See ``The Market at a Glance,'' (last visited January 26,
2022), available at https://www.miaxoptions.com/.
\31\ See id.
---------------------------------------------------------------------------
The Exchange believes that the ever-shifting market share among the
exchanges from month to month demonstrates that market participants can
discontinue or reduce use of certain categories of products and
services, terminate an existing membership or determine to not become a
new member, and/or shift order flow, in response to 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).\32\ 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.
---------------------------------------------------------------------------
\32\ 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 is reasonable, equitable and not
unfairly discriminatory because all similarly situated market
participants in the same Origin type (except Priority Customers) will
now be subject to the Complex surcharge. The Exchange believes it is
equitable and not unfairly discriminatory to increase the Complex
surcharge for business and competitive business reasons. The Exchange
initially set its Complex surcharge rate similar to, or lower than, the
complex surcharges assessed by other options exchanges that operate
comparable maker/taker pricing models. The Exchange now believes that
it is appropriate to increase the Complex surcharge so that it is in
line with other exchanges, and will still remain highly competitive
such that it should enable the Exchange to continue to attract order
flow and maintain market share.\33\ The Exchange believes that the
amount of Complex surcharge, as proposed, will continue to encourage
market participants to send Complex Orders to the Exchange.
---------------------------------------------------------------------------
\33\ See supra notes 18 and 22.
---------------------------------------------------------------------------
The Exchange believes the proposal to increase the Complex
surcharge and broaden its application is consistent with Section
6(b)(4) of the Act \34\ because it applies equally to all market
participants (Market Makers, Non-MIAX Market Makers, Firm Proprietary/
Broker-Dealers, except Priority Customers) that would be charged such
Complex surcharge. Assessing the Complex surcharge to Market Makers and
other professional market participants (except Priority Customers), in
a broader application, similar to that of other exchanges, is
reasonable and not unfairly discriminatory because it will provide
Market Makers and other professional market participants with equal
surcharges when trading against a Priority Customer Complex Order. As
stated above, the proposed Complex surcharge is the same amount as the
surcharges assessed by NYSE American Options, BOX Options, and the
Exchange's affiliate, MIAX.\35\ The Exchange notes that, although the
increase of the Complex surcharge represents a slight fee increase, the
Exchange believes that this increase is fair and equitable because it
is in line with the amount of surcharges assessed on other options
exchanges when trading against Priority Customer Complex Orders.\36\
---------------------------------------------------------------------------
\34\ 15 U.S.C. 78f(b)(4).
\35\ See supra notes 18 and 22.
\36\ See id.
---------------------------------------------------------------------------
The Exchange believes its proposal to apply the Complex surcharge
to all Origins, except Priority Customer, is reasonable, equitably
allocated and not unfairly discriminatory because it will continue to
encourage Priority Customer Complex Order flow. The Exchange believes
increased Priority Customer Complex Order flow benefits all market
participants by providing more trading opportunities and tighter
spreads. The Exchange also believes that increased Priority Customer
Complex Order flow may attract Market Makers and other liquidity
providers, thus, facilitating price improvement in the Complex Order
Auction process, signaling additional corresponding increase in Complex
Order flow from other market participants, and, as a result, increasing
liquidity on the Exchange.
The Exchange believes its proposal to broaden the application of
the Complex surcharge is also consistent with Section 6(b)(5) of the
Act \37\ because it perfects the mechanisms of a free and open market
and a national market system by aligning the broader application of the
Complex surcharge to that of other options exchanges,\38\ which will
help to create consistency and uniformity in the marketplace.
---------------------------------------------------------------------------
\37\ 15 U.S.C. 78f(b)(1) and (b)(5).
\38\ See supra note 22.
---------------------------------------------------------------------------
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.
Intra-Market Competition
The Exchange believes that the proposed changes to the Complex
surcharge should continue to encourage the provision of liquidity that
enhances the quality of the Exchange's Complex Order market and
increases the number of trading opportunities on the Exchange for all
participants who will be able to compete for such opportunities. The
proposed rule changes should enable the Exchange to continue to attract
and compete for order flow with other exchanges. The Exchange also
believes that its proposal to apply the Complex surcharge to all
Origins except Priority Customer will not impose any burden on
competition not necessary or appropriate because the
[[Page 10860]]
Exchange believes increased Priority Customer Complex Order flow
benefits all market participants by providing more trading
opportunities and tighter spreads. The Exchange also believes that
increased Priority Customer Complex Order flow may attract Market
Makers and other liquidity providers, thus, facilitating price
improvement in the Complex Order Auction process, signaling additional
corresponding increase in Complex Order flow from other market
participants, and, as a result, increasing liquidity on the Exchange.
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 a market share of more than approximately 12-13% of
the equity options market.\39\ Therefore, no exchange possesses
significant pricing power. More specifically, as of January 26, 2022,
the Exchange had a market share of approximately 3.96% of executed
volume of multiply-listed equity and ETF options for the month of
January 2022.\40\ Therefore, no exchange possesses significant pricing
power in the execution of multiply-listed equity and ETF options order
flow. 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 it
modifies the Exchange's fees for Complex Order transactions in a manner
that will allow the Exchange to remain competitive.
---------------------------------------------------------------------------
\39\ See supra note 30.
\40\ 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,\41\ and Rule 19b-4(f)(2) \42\ 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.
---------------------------------------------------------------------------
\41\ 15 U.S.C. 78s(b)(3)(A)(ii).
\42\ 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-2022-07 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-2022-07.
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-2022-07, and should
be submitted on or before March 18, 2022.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\43\
---------------------------------------------------------------------------
\43\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-03963 Filed 2-24-22; 8:45 am]
BILLING CODE 8011-01-P
