Self-Regulatory Organizations; MIAX Emerald LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Exchange Rule 519, MIAX Emerald Order Monitor, 57944-57948 [2022-20502]

Download as PDF 57944 Federal Register / Vol. 87, No. 183 / Thursday, September 22, 2022 / Notices accumulate additional interest at each posted price during the Posting Periods. Re-pricing affords Members the ability to obtain the best price offered among the various options markets while continuing to be consistent with the Options Order Protection and Locked/ Crossed Market Plan, as discussed above. The ability to leverage these mechanisms to achieve better prices for market participants will drive competition from Members to provide tighter markets and more liquidity in order to participate in the trading opportunities while still being bound by reasonable risk protections. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were either solicited or received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Because the foregoing proposed rule change does not: (i) significantly affect the protection of investors or the public interest; (ii) impose any significant burden on competition; and (iii) become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate, it has become effective pursuant to Section 19(b)(3)(A) of the Act 67 and Rule 19b– 4(f)(6) thereunder.68 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: jspears on DSK121TN23PROD with NOTICES 67 15 U.S.C. 78s(b)(3)(A). CFR 240.19b–4(f)(6). In addition, Rule 19b– 4(f)(6)(iii) requires a self-regulatory organization to give the Commission written notice of its intent to file the proposed rule change, along with a brief description and text of the proposed rule change, at least five business days prior to the date of filing of the proposed rule change, or such shorter time as designated by the Commission. The Exchange has satisfied this requirement. 68 17 VerDate Sep<11>2014 17:32 Sep 21, 2022 Jkt 256001 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– MRX–2022–16 on the subject line. Paper Comments • Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549–1090. All submissions should refer to File Number SR–MRX–2022–16. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission’s internet website (https://www.sec.gov/ rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for website viewing and printing in the Commission’s Public Reference Room, 100 F Street NE, Washington, DC 20549 on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of the filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change. Persons submitting comments are cautioned that we do not redact or edit personal identifying information from comment submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR–MRX–2022–16 and should be submitted on or before October 13, 2022. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.69 J. Matthew DeLesDernier, Deputy Secretary. [FR Doc. 2022–20500 Filed 9–21–22; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–95810; File No. SR– EMERALD–2022–28] Self-Regulatory Organizations; MIAX Emerald LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Exchange Rule 519, MIAX Emerald Order Monitor September 16, 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 September 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 proposes to amend Exchange Rule 519, MIAX Emerald Order Monitor. The text of the proposed rule change is available on the Exchange’s website at https://www.miaxoptions.com/rulefilings/emerald at MIAX Emerald’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 Exchange Rule 519, MIAX Emerald Order Monitor to (i) establish an 1 15 69 17 PO 00000 CFR 200.30–3(a)(12). Frm 00081 Fmt 4703 Sfmt 4703 2 17 E:\FR\FM\22SEN1.SGM U.S.C. 78s(b)(1). CFR 240.19b–4. 22SEN1 Federal Register / Vol. 87, No. 183 / Thursday, September 22, 2022 / Notices Exchange default Threshold Setting for market orders 3 to sell an option when the national best bid is zero; (ii) provide that a Member 4 may supply their own pre-set value to be used as the Threshold Setting; (iii) reorganize the rule text for ease of reference; and (iv) adopt new rule text to add additional detail regarding the Exchange’s process for evaluating and reevaluating market orders to sell. The Exchange notes that its proposal harmonizes the operation of Rule 519 to that of its affiliate exchanges, MIAX Options and MIAX Pearl that have recently amended this rule.5 jspears on DSK121TN23PROD with NOTICES Background Currently, in order to avoid the occurrence of potential obvious or catastrophic errors on the Exchange the MIAX Emerald Order Monitor will prevent certain orders from executing or being placed on the Book 6 at prices outside pre-set standard limits. Beginning after the Opening Process 7 is complete, the MIAX Emerald Order Monitor is operational each trading day until the close of trading.8 Exchange Rule 519(a)(1)(i) provides that if the Exchange upon initial receipt or reevaluation 9 evaluates a market order to sell an option when the national best bid is zero and the Exchange’s disseminated offer is equal to or less than $0.10, the System 10 will convert the market order to sell to a limit order to sell with a limit price of one minimum trading increment.11 In this case, such sell orders will automatically be placed on the Book in time priority and will be displayed at the appropriate Minimum Price Variation.12 Exchange Rule 519(a)(1)(ii) provides that if the 3 A market order is an order to buy or sell a stated number of option contracts at the best price available at the time of execution. See Exchange Rule 516(a). 4 The term ‘‘Member’’ means an individual or organization approved to exercise the trading rights associated with a Trading Permit. Members are deemed ‘‘members’’ under the Exchange Act. See Exchange Rule 100. 5 See Securities Exchange Act Release Nos. 95001 (May 27, 2022), 87 FR 33854 (June 3, 2022) (SR– MIAX–2022–22); and 95000 (May 27, 2022), 87 FR 33862 (June 3, 2022) (SR–PEARL–2022–22). 6 The term ‘‘Book’’ means the electronic book of buy and sell orders and quotes maintained by the System. See Exchange Rule 100. 7 See Exchange Rule 503. 8 See Exchange Rule 519(a). 9 A reevaluation of an order occurs when an order has been partially filled on the Exchange, or has been routed to an away exchange and is returned to the Exchange partially or completely unfilled, and the resulting national best bid is zero. 10 The term ‘‘System’’ means the automated trading system used by the Exchange for the trading of securities. See Exchange Rule 100. 11 See Exchange Rule 510. 12 See Exchange Rule 510(a). VerDate Sep<11>2014 17:32 Sep 21, 2022 Jkt 256001 Exchange upon initial receipt or reevaluation evaluates a market order to sell an option when the national best bid is zero and the national best offer is greater than $0.10, the System will cancel the market order to sell. Proposal The Exchange now proposes to allow Members to determine their own pre-set value to be used as the threshold setting (‘‘Threshold Setting’’) that the Exchange will use when evaluating market orders to sell when the national best bid is zero and the national best offer is less than, equal to, or greater than, the Threshold Setting. Members are not constrained by the Exchange in determining their Threshold Setting and may set the threshold at any value in accordance to their business and risk tolerances. Members will communicate their desired threshold value to the Exchange’s Help Desk.13 Specifically, the Exchange proposes to adopt new subparagraph (i) to paragraph (a)(1) of Rule 519 to provide that, ‘‘[f]or the purposes of this Rule a Member may establish a pre-set value to be used as the Threshold Setting by communicating its value to the Exchange’s Help Desk in a form and manner to be determined by the Exchange and communicated via Regulatory Circular.14 The Exchange will establish a default Threshold Setting of $0.10 15 and communicate its value to Members via Regulatory Circular. If a Member does not establish a Threshold Setting the Exchange default value will be used.’’ Currently, the Exchange uses a value of $0.10 as its threshold value for purposes of evaluating or reevaluating market orders to sell when the national best bid is zero.16 The Exchange proposes to adopt new subparagraph (ii) to paragraph (a)(1) of Rule 519 to provide that, if the Exchange receives a market order to sell an option when the national best bid is zero and the national best offer is less than or equal to the Threshold Setting, the System will convert the market order to sell, to a limit order to sell, with a limit price of one minimum trading 13 The term ‘‘Help Desk’’ means the Exchange’s control room consisting of Exchange staff authorized to make certain determinations on behalf of the Exchange. The Help Desk shall report to and be supervised by a senior executive of the Exchange. See Exchange Rule 100. 14 Requests to establish a Threshold Setting are received by the Help Desk and are processed for implementation on the next trading day. 15 The Exchange proposes to convert its current $0.10 threshold setting to the Exchange default Threshold Setting. 16 See Exchange Rule 519(a)(1)(i) and (ii). PO 00000 Frm 00082 Fmt 4703 Sfmt 4703 57945 increment.17 The Exchange proposes to use the national best offer as the reference price in determining how to handle a market order to sell when the national best bid is zero as the national best offer better represents the current market conditions.18 This provision is consistent with the operation of the current rule, however the Threshold Setting used for evaluation purposes under the Exchange’s proposal may now be either the Exchange’s default setting of $0.10 or the Member’s Threshold Setting. The Exchange proposes to adopt new subparagraph (iii) to paragraph (a)(1) of Rule 519 to provide that, if the Exchange reevaluates a market order to sell an option when the resulting national best bid is zero and either the trade price, route price, or national best offer is less than or equal to the Threshold Setting, the System will convert the market order to sell, to a limit order to sell, with a limit price of one minimum trading increment.19 For the purposes of this rule, the execution price of a trade in the subject series is considered the ‘‘trade price.’’ In the event the Exchange receives a market order to sell and the Exchange is zero bid but an away market is not, the Exchange will route the order to that away exchange at the away market price, the ‘‘route price.’’ The Exchange uses the route price, trade price, or national best offer to determine the proper disposition of a market order to sell when the national best bid becomes zero. Current paragraph (i) describes the initial evaluation and reevaluation process of a market order to sell whereas each process is given separate treatment under this proposal. Specifically, new proposed paragraph (ii) describes the initial evaluation process of a market order to sell when the national best bid is zero and new proposed paragraph (iii) describes the reevaluation process of a market order to sell when the national best bid becomes zero. The Exchange believes this format provides additional clarity to the Exchange’s rules regarding its order handling process when the Exchange reevaluates a market order to sell when the national best bid becomes zero. 17 See Exchange Rule 510, Minimum Price Variations and Minimum Trading Increments. 18 The Exchange notes that its current rule uses the Exchange’s disseminated offer for evaluation purposes however the Exchange proposes to use the national best offer for consistency and uniform application of the proposed rule. 19 Market orders converted to limit orders under Rule 519 are posted to the Book with a time in force of Day. E:\FR\FM\22SEN1.SGM 22SEN1 57946 Federal Register / Vol. 87, No. 183 / Thursday, September 22, 2022 / Notices jspears on DSK121TN23PROD with NOTICES The Exchange proposes to adopt new subparagraph (iv) to paragraph (a)(1) of Rule 519 to provide that, in either case of (ii) or (iii) above, such sell orders will automatically be placed on the Book in time priority and will be displayed at the appropriate Minimum Price Variation.20 The Exchange notes that this language is substantially similar to the current rule text.21 The Exchange proposes to adopt new subparagraph (v) to paragraph (a)(1) of Rule 519 to provide that, if the Exchange receives a market order to sell an option when the national best bid is zero and the national best offer is greater than the Threshold Setting, the System will reject 22 the order. This provision is consistent with the operation of the current rule, however under the Exchange’s proposal the Threshold Setting used for evaluation purposes may now be either the Exchange default setting of $0.10 or the Member’s Threshold Setting. The Exchange proposes to adopt new subparagraph (vi) to paragraph (a)(1) of Rule 519 to provide that, if the Exchange reevaluates a market order to sell an option when the resulting national best bid is zero and both (A) the trade price or route price, and (B) the national best offer, are greater than the Threshold Setting, the System will reject the order or cancel any unexecuted balance of the order. The Exchange uses the route price or trade price, in conjunction with the national best offer to determine the proper disposition of a market order to sell when the national best bid becomes zero. Proposed paragraphs (iii) and (vi) both address the reevaluation process. A market order to sell may be partially executed on the Exchange and reevaluated by the Exchange, and may also be routed to an away Exchange and then reevaluated by the Exchange. The first scenario occurs when the Exchange receives a market order to sell and the Exchange is not zero bid, but away exchanges are. In this scenario, the Exchange will execute the order on the Exchange and the execution price will be the ‘‘trade price.’’ In the event that there is still interest remaining of the order, and the national best bid is zero, the Exchange will reevaluate the order using the trade price. If the trade price 20 See Exchange Rule 510(a). Exchange Rule 519(a)(1)(i). 22 The current rule provides that the Exchange will cancel the order however the Exchange is proposing to provide additional clarity to distinguish order handling in the rule text in this proposal. An order that is rejected has not been accepted by the System, whereas an order that is cancelled has been accepted by the System. 21 See VerDate Sep<11>2014 17:32 Sep 21, 2022 Jkt 256001 or the national best offer price is less than or equal to the Threshold Setting, the System will convert the market order to sell, to a limit order to sell, with a limit price of one minimum increment.23 If the trade price and the national best offer price are greater than the Threshold Setting, the System will cancel any unexecuted balance of the order.24 The second scenario occurs when the Exchange receives a market order to sell and the Exchange is zero bid but away exchanges are not. The Exchange will route the order to the away exchange, if the order is returned to the Exchange and the national best bid becomes zero, the Exchange will reevaluate the order using the route price. If the route price or national best offer is less than or equal to the Threshold Setting, the System will convert the market order to sell, to a limit order to sell, with a limit price of one minimum trading increment.25 If the route price and the national best offer are greater than the Threshold Setting, the System will reject the order or cancel any unexecuted balance of the order.26 In proposed paragraph (vi) the Exchange believes considering both the route price or trade price, and the national best offer, provides a clear indication of the current market conditions when either the route price or trade price and the national best offer is greater than the Threshold Setting and allows the Exchange to make the proper determination regarding the disposition of the order. The proposed rule text provides additional detail regarding the System’s behavior when the Exchange reevaluates a market order to sell and the national best bid has become zero. Example 1 below describes the System processing when the national best offer is below the Threshold Setting, and Example 2 describes the System processing when the national best offer is above the Threshold Setting. Example 1 MPV: $0.05 Exchange default Threshold Setting: $0.10 Member selected Threshold Setting: $0.25 EBBO 27 (0) 0.00 × 5.00 (10) ABBO 28 (10) 0.10 × 0.15 (10) 23 See proposed Rule 519(a)(1)(iii). proposed Rule 519(a)(1)(vi). 25 See proposed Rule 519(a)(1)(iii). 26 See proposed Rule 519(a)(1)(vi). 27 The term ‘‘EBBO’’ means the best bid or offer on the Exchange. See Exchange Rule 100. 28 The term ‘‘ABBO’’ or ‘‘Away Best Bid or Offer’’ means the best bid(s) or offer(s) disseminated by other Eligible Exchanges (defined in Rule 1400(g)) NBBO 29 (10) 0.10 × 0.15 (10) Market order to sell 20 contracts is received by the Exchange. The Exchange routes the order to the away exchange by sending a limit order to sell 10 contracts at $0.10 (the route price). The order is executed on the away exchange, sell 10 at $0.10, and the away market becomes zero bid. EBBO: (0) 0.00 × 5.00 (10) ABBO: (0) 0.00 × 0.15 (10) NBBO: (0) 0.00 × 0.15 (10) Using the Member selected Threshold Setting of $0.25 to reevaluate the order, the remainder of the order (10 contracts) would be converted to a limit order to sell with a time in force of day, and placed on the Exchange as the national best offer ($0.15) (and the route price of $0.10) is less than or equal to the Member selected Threshold Setting of $0.25. The 10 contracts would then be displayed on the Exchange at an offer price of one minimum trading increment or $0.05. EBBO: (0) 0.00 × 0.05 (10) ABBO: (0) 0.00 × 0.15 (10) NBBO: (0) 0.00 × 0.05 (10) If the Exchange default Threshold Setting ($0.10) was used for the reevaluation, the remainder of the order (10 contracts) would be converted to a limit order to sell with a time in force of day, and placed on the Exchange, as the route price of $0.10 is equal to the Exchange Threshold Setting of $0.10. The 10 contracts would then be displayed on the Exchange at an offer price of one minimum trading increment or $0.05. Example 2 MPV: $0.05 Exchange default Threshold Setting: $0.10 Member selected Threshold Setting: $0.25 EBBO (0) 0.00 × 5.00 (10) ABBO (10) 0.40 × 0.50 (10) NBBO (10) 0.40 × 0.50 (10) Market order to sell 20 contracts is received by the Exchange. The Exchange is zero bid for that series and routes the order to the away exchange by sending a limit order to sell 10 at $0.40 (the route price). The order is executed on the away exchange, sell 10 at $0.40, and the away market becomes zero bid. EBBO: (0) 0.00 × 5.00 (10) 24 See PO 00000 Frm 00083 Fmt 4703 Sfmt 4703 and calculated by the Exchange based on market information received by the Exchange from OPRA. See Exchange Rule 100. 29 The term ‘‘NBBO’’ means the national best bid or offer as calculated by the Exchange based on market information received by the Exchange from OPRA. See Exchange Rule 100. E:\FR\FM\22SEN1.SGM 22SEN1 Federal Register / Vol. 87, No. 183 / Thursday, September 22, 2022 / Notices ABBO: (0) 0.00 × 0.50 (10) NBBO: (0) 0.00 × 0.50 (10) Using the Member selected Threshold Setting of $0.25 to reevaluate the order, the remainder of the order (10 contracts) would be cancelled as both (i) the route price ($0.40) and (ii) the national best offer ($0.50) are greater than the Threshold Setting ($0.25). jspears on DSK121TN23PROD with NOTICES Implementation Date The Exchange plans to implement the proposed rule change in Q4 of 2022 and will announce the implementation date to its Members via Regulatory Circular. 2. Statutory Basis The Exchange believes that its proposed rule change is consistent with Section 6(b) of the Act 30 in general, and furthers the objectives of Section 6(b)(5) of the Act 31 in particular, 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 regulating, clearing, settling, processing information with respect to, and 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 its proposal promotes just and equitable principles of trade, removes impediments to and perfects the mechanisms of a free and open market and a national market system, and in general, protects investors and the public interest by allowing Members to establish the Threshold Setting for the evaluation of market orders to sell when the national best bid is zero. The Exchange believes that allowing Members to determine the Threshold Setting provides greater flexibility and allows the Member to tailor the Threshold Setting to the business and risk tolerances of the Member. Providing Members with the flexibility to determine their own Threshold Setting may increase the opportunity for investors to receive an execution, to the benefit of investors; or, if an order that is evaluated under the proposed evaluation and reevaluation criteria in the proposal is rejected, investors are protected from receiving an execution at a potentially unwanted price. The Exchange believes its proposal to allow Members the flexibility to establish their own pre-set value to be used for evaluation purposes of market 30 15 31 15 U.S.C. 78f(b). U.S.C. 78f(b)(5). VerDate Sep<11>2014 17:32 Sep 21, 2022 Jkt 256001 orders to sell when the national best bid is zero allows Members to align their risk protections with their risk tolerance. Members have the discretion to set their pre-set value to whatever value best aligns to their risk profile, which may be as low as $0.00.32 The Exchange provides Members the ability to tailor risk protection functionality to the risk profile of the Member, and has allowed Members to customize their risk protection settings for other risk protections. Specifically, the Exchange allows Members to set the maximum size of an order for the purposes of the MIAX Emerald Order Monitor Order Size Protection,33 and if the maximum size of an order is not designated by the Member, the Exchange provides an Exchange defined default value.34 Additionally, the Exchange provides Members the option to set a price protection limit on a per order basis,35 and orders received without a price protection limit specified receive the Exchange defined default value.36 The current proposal to allow Members to determine a pre-set value to be used as the Threshold Setting continues the Exchange’s approach of allowing a Member to customize its risk protections to better align to the risk tolerance of the Member. The Exchange believes its proposal to reorganize the current rule text to describe each scenario separately (i.e., evaluation of a market order to sell when the national best bid is zero and the national best offer is less than or equal to the Threshold Setting (proposed paragraph (ii)); reevaluation of a market order to sell when the national best bid becomes zero and either the trade price, route price, or national best offer is less than or equal 32 The Exchange notes that the Nasdaq Phlx ZeroBid Option Series rule, does not have a threshold evaluation and provides that, ‘‘[i]n the case where the bid price for any options series is $0.00, a Market Order accepted into the System to sell that series shall be considered a Limit Order to sell at a price equal to the minimum trading increment as defined in [Nasdaq Phlx] Options 3, Section 3. Orders will be placed on the Limit Order book in the order in which they were received by the System. With respect to Market Orders to sell which are submitted prior to the Opening Process and persist after the Opening Process, those orders are posted at a price equal to the minimum trading increment as defined in Options 3, Section 3.’’ See Nasdaq Phlx Options 3, Section 10(b). 33 See Exchange Rule 519(b). 34 See MIAX Emerald Regulatory Circular 2019– 20, Mandatory Usage of MIAX Order Monitor Protections (February 28, 2019) available at https:// www.miaxoptions.com/sites/default/files/circularfiles/MIAX_Emerald_RC_2019_20.pdf. 35 See Exchange Rule 515(c)(1). 36 See MIAX Emerald Regulatory Circular 2019– 17, MIAX Emerald Price Protection Process (February 28, 2019) available at https:// www.miaxoptions.com/sites/default/files/circularfiles/MIAX_Emerald_RC_2019_17.pdf. PO 00000 Frm 00084 Fmt 4703 Sfmt 4703 57947 to the Threshold Setting (proposed paragraph (iii)); initial evaluation of a market order to sell when the national best bid is zero and the national best offer is greater than the Threshold Setting (proposed paragraph (v)); and reevaluation of a market order to sell when the national best bid becomes zero and the national best offer is greater than the Threshold Setting (proposed paragraph (vi))) better organizes the rule text. The Exchange believes discussing each scenario separately and describing the evaluations that are performed by the System to determine the proper disposition of the order provides transparency and clarity in the Exchange’s rules. The Exchange believes its proposal promotes just and equitable principles of trade, removes impediments to and perfects the mechanisms of a free and open market and a national market system, and in general, protects investors and the public interest by providing additional detail regarding the Exchange’s process for reevaluating market orders to sell when the national best bid becomes zero. The Exchange believes it is in the interest of investors and the public to accurately describe the behavior of the Exchange’s System in its rules as this information may be used by investors to make decisions concerning the submission of their orders. Transparency and clarity are consistent with the Act because it removes impediments to and perfects the mechanism of a free and open market and a national market system, and, in general, protects investors and the public interest by accurately describing how market orders to sell in zero bid series are handled on the Exchange. It is in the public interest for rules to be accurate and concise so as to eliminate the potential for confusion. Additionally, the Exchange believes its proposal promotes just and equitable principles of trade, removes impediments to and perfects the mechanisms of a free and open market and a national market system, and in general, protects investors and the public interest by re-organizing the rule text for ease of reference. The Exchange believes that Exchange rules should be clear and transparent so as to avoid the potential for confusion. B. Self-Regulatory Organization’s Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. The Exchange does not believe that its proposal will impose any burden on E:\FR\FM\22SEN1.SGM 22SEN1 57948 Federal Register / Vol. 87, No. 183 / Thursday, September 22, 2022 / Notices intra-market competition as all Members that submit market orders to the Exchange will be treated equally and the Rules of the Exchange apply equally to all Exchange Members. Additionally, the proposal allows each Member to determine the pre-set value to be used as the Threshold Setting and allows each Member to align their Threshold Setting to their risk tolerance. The Exchange’s proposal does not impose a burden on intra-market competition as all Members have the flexibility to determine their own Threshold Setting and the application of the rule is applied uniformly to all Members. The Exchange does not believe that its proposal will impose any burden on inter-market competition that is not necessary or appropriate in furtherance of the purposes of the Act. The Exchange’s proposal is not a competitive filing but one that provides Members the flexibility to determine their own Threshold Setting and also provides additional detail regarding the Exchange’s process for reevaluating market orders to sell when the national bid becomes zero. Other options exchanges have an equal opportunity to modify their systems to offer similar functionality. Additionally, the non-substantive changes proposed by the Exchange will have no impact on competition as they provide additional clarity and detail in the Exchange’s rules and are not changes made for any competitive purpose. 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. jspears on DSK121TN23PROD with NOTICES III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Because the foregoing proposed rule change does not: (i) Significantly affect the protection of investors or the public interest; (ii) impose any significant burden on competition; and (iii) become operative for 30 days after the date of the filing, or such shorter time as the Commission may designate, it has become effective pursuant to 19(b)(3)(A) of the Act 37 and Rule 19b–4(f)(6) 38 thereunder. 37 15 U.S.C. 78s(b)(3)(A). CFR 240.19b–4(f)(6). In addition, Rule 19b– 4(f)(6) requires a self-regulatory organization to give the Commission written notice of its intent to file the proposed rule change at least five business days prior to the date of filing of the proposed rule change, or such shorter time as designated by the Commission. The Exchange has satisfied this requirement. 38 17 VerDate Sep<11>2014 17:32 Sep 21, 2022 Jkt 256001 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–2022–28 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–2022–28. 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 such 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 PO 00000 Frm 00085 Fmt 4703 Sfmt 4703 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–2022–28 and should be submitted on or before October 13, 2022. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.39 J. Matthew DeLesDernier, Deputy Secretary. [FR Doc. 2022–20502 Filed 9–21–22; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–95813; File No. SR– NYSEAMER–2022–40] Self-Regulatory Organizations; NYSE American LLC; Notice of Filing and Immediate Effectiveness of Proposed Change To Amend Its Equities Price List September 16, 2022. Pursuant to Section 19(b)(1) 1 of the Securities Exchange Act of 1934 (the ‘‘Act’’) 2 and Rule 19b–4 thereunder,3 notice is hereby given that, on September 2, 2022, NYSE American LLC (‘‘NYSE American’’ or the ‘‘Exchange’’) 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 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 proposes to amend the NYSE American Equities Price List (‘‘Price List’’) to reflect the fee for Directed Orders routed directly by the Exchange to an alternative trading system (‘‘ATS’’). The proposed change is available on the Exchange’s website at www.nyse.com, at the principal office of the Exchange, and at the Commission’s Public Reference Room. 39 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 15 U.S.C. 78a. 3 17 CFR 240.19b–4. 1 15 E:\FR\FM\22SEN1.SGM 22SEN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 87, Number 183 (Thursday, September 22, 2022)]
[Notices]
[Pages 57944-57948]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-20502]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-95810; File No. SR-EMERALD-2022-28]


Self-Regulatory Organizations; MIAX Emerald LLC; Notice of Filing 
and Immediate Effectiveness of a Proposed Rule Change To Amend Exchange 
Rule 519, MIAX Emerald Order Monitor

September 16, 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 September 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.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend Exchange Rule 519, MIAX Emerald 
Order Monitor.
    The text of the proposed rule change is available on the Exchange's 
website at https://www.miaxoptions.com/rule-filings/emerald at MIAX 
Emerald'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 Exchange Rule 519, MIAX Emerald 
Order Monitor to (i) establish an

[[Page 57945]]

Exchange default Threshold Setting for market orders \3\ to sell an 
option when the national best bid is zero; (ii) provide that a Member 
\4\ may supply their own pre-set value to be used as the Threshold 
Setting; (iii) reorganize the rule text for ease of reference; and (iv) 
adopt new rule text to add additional detail regarding the Exchange's 
process for evaluating and reevaluating market orders to sell. The 
Exchange notes that its proposal harmonizes the operation of Rule 519 
to that of its affiliate exchanges, MIAX Options and MIAX Pearl that 
have recently amended this rule.\5\
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    \3\ A market order is an order to buy or sell a stated number of 
option contracts at the best price available at the time of 
execution. See Exchange Rule 516(a).
    \4\ The term ``Member'' means an individual or organization 
approved to exercise the trading rights associated with a Trading 
Permit. Members are deemed ``members'' under the Exchange Act. See 
Exchange Rule 100.
    \5\ See Securities Exchange Act Release Nos. 95001 (May 27, 
2022), 87 FR 33854 (June 3, 2022) (SR-MIAX-2022-22); and 95000 (May 
27, 2022), 87 FR 33862 (June 3, 2022) (SR-PEARL-2022-22).
---------------------------------------------------------------------------

Background
    Currently, in order to avoid the occurrence of potential obvious or 
catastrophic errors on the Exchange the MIAX Emerald Order Monitor will 
prevent certain orders from executing or being placed on the Book \6\ 
at prices outside pre-set standard limits. Beginning after the Opening 
Process \7\ is complete, the MIAX Emerald Order Monitor is operational 
each trading day until the close of trading.\8\ Exchange Rule 
519(a)(1)(i) provides that if the Exchange upon initial receipt or 
reevaluation \9\ evaluates a market order to sell an option when the 
national best bid is zero and the Exchange's disseminated offer is 
equal to or less than $0.10, the System \10\ will convert the market 
order to sell to a limit order to sell with a limit price of one 
minimum trading increment.\11\ In this case, such sell orders will 
automatically be placed on the Book in time priority and will be 
displayed at the appropriate Minimum Price Variation.\12\ Exchange Rule 
519(a)(1)(ii) provides that if the Exchange upon initial receipt or 
reevaluation evaluates a market order to sell an option when the 
national best bid is zero and the national best offer is greater than 
$0.10, the System will cancel the market order to sell.
---------------------------------------------------------------------------

    \6\ The term ``Book'' means the electronic book of buy and sell 
orders and quotes maintained by the System. See Exchange Rule 100.
    \7\ See Exchange Rule 503.
    \8\ See Exchange Rule 519(a).
    \9\ A reevaluation of an order occurs when an order has been 
partially filled on the Exchange, or has been routed to an away 
exchange and is returned to the Exchange partially or completely 
unfilled, and the resulting national best bid is zero.
    \10\ The term ``System'' means the automated trading system used 
by the Exchange for the trading of securities. See Exchange Rule 
100.
    \11\ See Exchange Rule 510.
    \12\ See Exchange Rule 510(a).
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Proposal
    The Exchange now proposes to allow Members to determine their own 
pre-set value to be used as the threshold setting (``Threshold 
Setting'') that the Exchange will use when evaluating market orders to 
sell when the national best bid is zero and the national best offer is 
less than, equal to, or greater than, the Threshold Setting. Members 
are not constrained by the Exchange in determining their Threshold 
Setting and may set the threshold at any value in accordance to their 
business and risk tolerances. Members will communicate their desired 
threshold value to the Exchange's Help Desk.\13\
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    \13\ The term ``Help Desk'' means the Exchange's control room 
consisting of Exchange staff authorized to make certain 
determinations on behalf of the Exchange. The Help Desk shall report 
to and be supervised by a senior executive of the Exchange. See 
Exchange Rule 100.
---------------------------------------------------------------------------

    Specifically, the Exchange proposes to adopt new subparagraph (i) 
to paragraph (a)(1) of Rule 519 to provide that, ``[f]or the purposes 
of this Rule a Member may establish a pre-set value to be used as the 
Threshold Setting by communicating its value to the Exchange's Help 
Desk in a form and manner to be determined by the Exchange and 
communicated via Regulatory Circular.\14\ The Exchange will establish a 
default Threshold Setting of $0.10 \15\ and communicate its value to 
Members via Regulatory Circular. If a Member does not establish a 
Threshold Setting the Exchange default value will be used.'' Currently, 
the Exchange uses a value of $0.10 as its threshold value for purposes 
of evaluating or reevaluating market orders to sell when the national 
best bid is zero.\16\
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    \14\ Requests to establish a Threshold Setting are received by 
the Help Desk and are processed for implementation on the next 
trading day.
    \15\ The Exchange proposes to convert its current $0.10 
threshold setting to the Exchange default Threshold Setting.
    \16\ See Exchange Rule 519(a)(1)(i) and (ii).
---------------------------------------------------------------------------

    The Exchange proposes to adopt new subparagraph (ii) to paragraph 
(a)(1) of Rule 519 to provide that, if the Exchange receives a market 
order to sell an option when the national best bid is zero and the 
national best offer is less than or equal to the Threshold Setting, the 
System will convert the market order to sell, to a limit order to sell, 
with a limit price of one minimum trading increment.\17\ The Exchange 
proposes to use the national best offer as the reference price in 
determining how to handle a market order to sell when the national best 
bid is zero as the national best offer better represents the current 
market conditions.\18\ This provision is consistent with the operation 
of the current rule, however the Threshold Setting used for evaluation 
purposes under the Exchange's proposal may now be either the Exchange's 
default setting of $0.10 or the Member's Threshold Setting.
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    \17\ See Exchange Rule 510, Minimum Price Variations and Minimum 
Trading Increments.
    \18\ The Exchange notes that its current rule uses the 
Exchange's disseminated offer for evaluation purposes however the 
Exchange proposes to use the national best offer for consistency and 
uniform application of the proposed rule.
---------------------------------------------------------------------------

    The Exchange proposes to adopt new subparagraph (iii) to paragraph 
(a)(1) of Rule 519 to provide that, if the Exchange reevaluates a 
market order to sell an option when the resulting national best bid is 
zero and either the trade price, route price, or national best offer is 
less than or equal to the Threshold Setting, the System will convert 
the market order to sell, to a limit order to sell, with a limit price 
of one minimum trading increment.\19\ For the purposes of this rule, 
the execution price of a trade in the subject series is considered the 
``trade price.'' In the event the Exchange receives a market order to 
sell and the Exchange is zero bid but an away market is not, the 
Exchange will route the order to that away exchange at the away market 
price, the ``route price.'' The Exchange uses the route price, trade 
price, or national best offer to determine the proper disposition of a 
market order to sell when the national best bid becomes zero.
---------------------------------------------------------------------------

    \19\ Market orders converted to limit orders under Rule 519 are 
posted to the Book with a time in force of Day.
---------------------------------------------------------------------------

    Current paragraph (i) describes the initial evaluation and 
reevaluation process of a market order to sell whereas each process is 
given separate treatment under this proposal. Specifically, new 
proposed paragraph (ii) describes the initial evaluation process of a 
market order to sell when the national best bid is zero and new 
proposed paragraph (iii) describes the reevaluation process of a market 
order to sell when the national best bid becomes zero. The Exchange 
believes this format provides additional clarity to the Exchange's 
rules regarding its order handling process when the Exchange 
reevaluates a market order to sell when the national best bid becomes 
zero.

[[Page 57946]]

    The Exchange proposes to adopt new subparagraph (iv) to paragraph 
(a)(1) of Rule 519 to provide that, in either case of (ii) or (iii) 
above, such sell orders will automatically be placed on the Book in 
time priority and will be displayed at the appropriate Minimum Price 
Variation.\20\ The Exchange notes that this language is substantially 
similar to the current rule text.\21\
---------------------------------------------------------------------------

    \20\ See Exchange Rule 510(a).
    \21\ See Exchange Rule 519(a)(1)(i).
---------------------------------------------------------------------------

    The Exchange proposes to adopt new subparagraph (v) to paragraph 
(a)(1) of Rule 519 to provide that, if the Exchange receives a market 
order to sell an option when the national best bid is zero and the 
national best offer is greater than the Threshold Setting, the System 
will reject \22\ the order. This provision is consistent with the 
operation of the current rule, however under the Exchange's proposal 
the Threshold Setting used for evaluation purposes may now be either 
the Exchange default setting of $0.10 or the Member's Threshold 
Setting.
---------------------------------------------------------------------------

    \22\ The current rule provides that the Exchange will cancel the 
order however the Exchange is proposing to provide additional 
clarity to distinguish order handling in the rule text in this 
proposal. An order that is rejected has not been accepted by the 
System, whereas an order that is cancelled has been accepted by the 
System.
---------------------------------------------------------------------------

    The Exchange proposes to adopt new subparagraph (vi) to paragraph 
(a)(1) of Rule 519 to provide that, if the Exchange reevaluates a 
market order to sell an option when the resulting national best bid is 
zero and both (A) the trade price or route price, and (B) the national 
best offer, are greater than the Threshold Setting, the System will 
reject the order or cancel any unexecuted balance of the order. The 
Exchange uses the route price or trade price, in conjunction with the 
national best offer to determine the proper disposition of a market 
order to sell when the national best bid becomes zero.
    Proposed paragraphs (iii) and (vi) both address the reevaluation 
process. A market order to sell may be partially executed on the 
Exchange and reevaluated by the Exchange, and may also be routed to an 
away Exchange and then reevaluated by the Exchange. The first scenario 
occurs when the Exchange receives a market order to sell and the 
Exchange is not zero bid, but away exchanges are. In this scenario, the 
Exchange will execute the order on the Exchange and the execution price 
will be the ``trade price.'' In the event that there is still interest 
remaining of the order, and the national best bid is zero, the Exchange 
will reevaluate the order using the trade price. If the trade price or 
the national best offer price is less than or equal to the Threshold 
Setting, the System will convert the market order to sell, to a limit 
order to sell, with a limit price of one minimum increment.\23\ If the 
trade price and the national best offer price are greater than the 
Threshold Setting, the System will cancel any unexecuted balance of the 
order.\24\
---------------------------------------------------------------------------

    \23\ See proposed Rule 519(a)(1)(iii).
    \24\ See proposed Rule 519(a)(1)(vi).
---------------------------------------------------------------------------

    The second scenario occurs when the Exchange receives a market 
order to sell and the Exchange is zero bid but away exchanges are not. 
The Exchange will route the order to the away exchange, if the order is 
returned to the Exchange and the national best bid becomes zero, the 
Exchange will reevaluate the order using the route price. If the route 
price or national best offer is less than or equal to the Threshold 
Setting, the System will convert the market order to sell, to a limit 
order to sell, with a limit price of one minimum trading increment.\25\ 
If the route price and the national best offer are greater than the 
Threshold Setting, the System will reject the order or cancel any 
unexecuted balance of the order.\26\
---------------------------------------------------------------------------

    \25\ See proposed Rule 519(a)(1)(iii).
    \26\ See proposed Rule 519(a)(1)(vi).
---------------------------------------------------------------------------

    In proposed paragraph (vi) the Exchange believes considering both 
the route price or trade price, and the national best offer, provides a 
clear indication of the current market conditions when either the route 
price or trade price and the national best offer is greater than the 
Threshold Setting and allows the Exchange to make the proper 
determination regarding the disposition of the order.
    The proposed rule text provides additional detail regarding the 
System's behavior when the Exchange reevaluates a market order to sell 
and the national best bid has become zero. Example 1 below describes 
the System processing when the national best offer is below the 
Threshold Setting, and Example 2 describes the System processing when 
the national best offer is above the Threshold Setting.
Example 1
MPV: $0.05
Exchange default Threshold Setting: $0.10
Member selected Threshold Setting: $0.25

EBBO \27\ (0) 0.00 x 5.00 (10)
---------------------------------------------------------------------------

    \27\ The term ``EBBO'' means the best bid or offer on the 
Exchange. See Exchange Rule 100.
---------------------------------------------------------------------------

ABBO \28\ (10) 0.10 x 0.15 (10)
---------------------------------------------------------------------------

    \28\ The term ``ABBO'' or ``Away Best Bid or Offer'' means the 
best bid(s) or offer(s) disseminated by other Eligible Exchanges 
(defined in Rule 1400(g)) and calculated by the Exchange based on 
market information received by the Exchange from OPRA. See Exchange 
Rule 100.
---------------------------------------------------------------------------

NBBO \29\ (10) 0.10 x 0.15 (10)
---------------------------------------------------------------------------

    \29\ The term ``NBBO'' means the national best bid or offer as 
calculated by the Exchange based on market information received by 
the Exchange from OPRA. See Exchange Rule 100.

    Market order to sell 20 contracts is received by the Exchange.
    The Exchange routes the order to the away exchange by sending a 
limit order to sell 10 contracts at $0.10 (the route price).
    The order is executed on the away exchange, sell 10 at $0.10, and 
the away market becomes zero bid.

EBBO: (0) 0.00 x 5.00 (10)
ABBO: (0) 0.00 x 0.15 (10)
NBBO: (0) 0.00 x 0.15 (10)

    Using the Member selected Threshold Setting of $0.25 to reevaluate 
the order, the remainder of the order (10 contracts) would be converted 
to a limit order to sell with a time in force of day, and placed on the 
Exchange as the national best offer ($0.15) (and the route price of 
$0.10) is less than or equal to the Member selected Threshold Setting 
of $0.25. The 10 contracts would then be displayed on the Exchange at 
an offer price of one minimum trading increment or $0.05.

EBBO: (0) 0.00 x 0.05 (10)
ABBO: (0) 0.00 x 0.15 (10)
NBBO: (0) 0.00 x 0.05 (10)

    If the Exchange default Threshold Setting ($0.10) was used for the 
reevaluation, the remainder of the order (10 contracts) would be 
converted to a limit order to sell with a time in force of day, and 
placed on the Exchange, as the route price of $0.10 is equal to the 
Exchange Threshold Setting of $0.10. The 10 contracts would then be 
displayed on the Exchange at an offer price of one minimum trading 
increment or $0.05.
Example 2
MPV: $0.05
Exchange default Threshold Setting: $0.10
Member selected Threshold Setting: $0.25

EBBO (0) 0.00 x 5.00 (10)
ABBO (10) 0.40 x 0.50 (10)
NBBO (10) 0.40 x 0.50 (10)

    Market order to sell 20 contracts is received by the Exchange. The 
Exchange is zero bid for that series and routes the order to the away 
exchange by sending a limit order to sell 10 at $0.40 (the route 
price).
    The order is executed on the away exchange, sell 10 at $0.40, and 
the away market becomes zero bid.

EBBO: (0) 0.00 x 5.00 (10)

[[Page 57947]]

ABBO: (0) 0.00 x 0.50 (10)
NBBO: (0) 0.00 x 0.50 (10)

    Using the Member selected Threshold Setting of $0.25 to reevaluate 
the order, the remainder of the order (10 contracts) would be cancelled 
as both (i) the route price ($0.40) and (ii) the national best offer 
($0.50) are greater than the Threshold Setting ($0.25).
Implementation Date
    The Exchange plans to implement the proposed rule change in Q4 of 
2022 and will announce the implementation date to its Members via 
Regulatory Circular.
2. Statutory Basis
    The Exchange believes that its proposed rule change is consistent 
with Section 6(b) of the Act \30\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act \31\ in particular, 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 regulating, 
clearing, settling, processing information with respect to, and 
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.
---------------------------------------------------------------------------

    \30\ 15 U.S.C. 78f(b).
    \31\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Exchange believes its proposal promotes just and equitable 
principles of trade, removes impediments to and perfects the mechanisms 
of a free and open market and a national market system, and in general, 
protects investors and the public interest by allowing Members to 
establish the Threshold Setting for the evaluation of market orders to 
sell when the national best bid is zero. The Exchange believes that 
allowing Members to determine the Threshold Setting provides greater 
flexibility and allows the Member to tailor the Threshold Setting to 
the business and risk tolerances of the Member. Providing Members with 
the flexibility to determine their own Threshold Setting may increase 
the opportunity for investors to receive an execution, to the benefit 
of investors; or, if an order that is evaluated under the proposed 
evaluation and reevaluation criteria in the proposal is rejected, 
investors are protected from receiving an execution at a potentially 
unwanted price.
    The Exchange believes its proposal to allow Members the flexibility 
to establish their own pre-set value to be used for evaluation purposes 
of market orders to sell when the national best bid is zero allows 
Members to align their risk protections with their risk tolerance. 
Members have the discretion to set their pre-set value to whatever 
value best aligns to their risk profile, which may be as low as 
$0.00.\32\ The Exchange provides Members the ability to tailor risk 
protection functionality to the risk profile of the Member, and has 
allowed Members to customize their risk protection settings for other 
risk protections. Specifically, the Exchange allows Members to set the 
maximum size of an order for the purposes of the MIAX Emerald Order 
Monitor Order Size Protection,\33\ and if the maximum size of an order 
is not designated by the Member, the Exchange provides an Exchange 
defined default value.\34\ Additionally, the Exchange provides Members 
the option to set a price protection limit on a per order basis,\35\ 
and orders received without a price protection limit specified receive 
the Exchange defined default value.\36\ The current proposal to allow 
Members to determine a pre-set value to be used as the Threshold 
Setting continues the Exchange's approach of allowing a Member to 
customize its risk protections to better align to the risk tolerance of 
the Member.
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    \32\ The Exchange notes that the Nasdaq Phlx Zero-Bid Option 
Series rule, does not have a threshold evaluation and provides that, 
``[i]n the case where the bid price for any options series is $0.00, 
a Market Order accepted into the System to sell that series shall be 
considered a Limit Order to sell at a price equal to the minimum 
trading increment as defined in [Nasdaq Phlx] Options 3, Section 3. 
Orders will be placed on the Limit Order book in the order in which 
they were received by the System. With respect to Market Orders to 
sell which are submitted prior to the Opening Process and persist 
after the Opening Process, those orders are posted at a price equal 
to the minimum trading increment as defined in Options 3, Section 
3.'' See Nasdaq Phlx Options 3, Section 10(b).
    \33\ See Exchange Rule 519(b).
    \34\ See MIAX Emerald Regulatory Circular 2019-20, Mandatory 
Usage of MIAX Order Monitor Protections (February 28, 2019) 
available at https://www.miaxoptions.com/sites/default/files/circular-files/MIAX_Emerald_RC_2019_20.pdf.
    \35\ See Exchange Rule 515(c)(1).
    \36\ See MIAX Emerald Regulatory Circular 2019-17, MIAX Emerald 
Price Protection Process (February 28, 2019) available at https://www.miaxoptions.com/sites/default/files/circular-files/MIAX_Emerald_RC_2019_17.pdf.
---------------------------------------------------------------------------

    The Exchange believes its proposal to reorganize the current rule 
text to describe each scenario separately (i.e., evaluation of a market 
order to sell when the national best bid is zero and the national best 
offer is less than or equal to the Threshold Setting (proposed 
paragraph (ii)); reevaluation of a market order to sell when the 
national best bid becomes zero and either the trade price, route price, 
or national best offer is less than or equal to the Threshold Setting 
(proposed paragraph (iii)); initial evaluation of a market order to 
sell when the national best bid is zero and the national best offer is 
greater than the Threshold Setting (proposed paragraph (v)); and 
reevaluation of a market order to sell when the national best bid 
becomes zero and the national best offer is greater than the Threshold 
Setting (proposed paragraph (vi))) better organizes the rule text. The 
Exchange believes discussing each scenario separately and describing 
the evaluations that are performed by the System to determine the 
proper disposition of the order provides transparency and clarity in 
the Exchange's rules.
    The Exchange believes its proposal promotes just and equitable 
principles of trade, removes impediments to and perfects the mechanisms 
of a free and open market and a national market system, and in general, 
protects investors and the public interest by providing additional 
detail regarding the Exchange's process for reevaluating market orders 
to sell when the national best bid becomes zero. The Exchange believes 
it is in the interest of investors and the public to accurately 
describe the behavior of the Exchange's System in its rules as this 
information may be used by investors to make decisions concerning the 
submission of their orders. Transparency and clarity are consistent 
with the Act because it removes impediments to and perfects the 
mechanism of a free and open market and a national market system, and, 
in general, protects investors and the public interest by accurately 
describing how market orders to sell in zero bid series are handled on 
the Exchange. It is in the public interest for rules to be accurate and 
concise so as to eliminate the potential for confusion.
    Additionally, the Exchange believes its proposal promotes just and 
equitable principles of trade, removes impediments to and perfects the 
mechanisms of a free and open market and a national market system, and 
in general, protects investors and the public interest by re-organizing 
the rule text for ease of reference. The Exchange believes that 
Exchange rules should be clear and transparent so as to avoid the 
potential for confusion.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act.
    The Exchange does not believe that its proposal will impose any 
burden on

[[Page 57948]]

intra-market competition as all Members that submit market orders to 
the Exchange will be treated equally and the Rules of the Exchange 
apply equally to all Exchange Members. Additionally, the proposal 
allows each Member to determine the pre-set value to be used as the 
Threshold Setting and allows each Member to align their Threshold 
Setting to their risk tolerance. The Exchange's proposal does not 
impose a burden on intra-market competition as all Members have the 
flexibility to determine their own Threshold Setting and the 
application of the rule is applied uniformly to all Members.
    The Exchange does not believe that its proposal will impose any 
burden on inter-market competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. The Exchange's proposal is 
not a competitive filing but one that provides Members the flexibility 
to determine their own Threshold Setting and also provides additional 
detail regarding the Exchange's process for reevaluating market orders 
to sell when the national bid becomes zero. Other options exchanges 
have an equal opportunity to modify their systems to offer similar 
functionality.
    Additionally, the non-substantive changes proposed by the Exchange 
will have no impact on competition as they provide additional clarity 
and detail in the Exchange's rules and are not changes made for any 
competitive purpose.

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

    Because the foregoing proposed rule change does not: (i) 
Significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days after the date of the filing, or such 
shorter time as the Commission may designate, it has become effective 
pursuant to 19(b)(3)(A) of the Act \37\ and Rule 19b-4(f)(6) \38\ 
thereunder.
---------------------------------------------------------------------------

    \37\ 15 U.S.C. 78s(b)(3)(A).
    \38\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file the proposed rule change at 
least five business days prior to the date of filing of the proposed 
rule change, or such shorter time as designated by the Commission. 
The Exchange has satisfied this requirement.
---------------------------------------------------------------------------

    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 [email protected]. Please include 
File Number SR-EMERALD-2022-28 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-2022-28. 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 such 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-2022-28 and should be submitted 
on or before October 13, 2022.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\39\
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    \39\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022-20502 Filed 9-21-22; 8:45 am]
BILLING CODE 8011-01-P

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