Self-Regulatory Organizations; MIAX Emerald, LLC; Suspension of and Order Instituting Proceedings To Determine Whether To Approve or Disapprove Proposed Rule Change To Increase Fees for the ToM Market Data Product and Establish Fees for the cToM Market Data Product, 53937-53941 [2023-16988]
Download as PDF
<![CDATA[
Federal Register / Vol. 88, No. 152 / Wednesday, August 9, 2023 / Notices
The respondents to the collection of
information are SROs. 3 Two
respondents file an average total of
approximately 2 responses per year.
Each response takes approximately 12.5
hours to complete and each amendment
takes approximately 3 hours to
complete, which corresponds to an
estimated annual response burden of 25
hours ((2 rule change proposals × 12.5
hours) plus (0 amendments 4 × 3 hours)).
The total industry burden for filings is
50 hours.5 The average internal cost of
compliance per response to file a Form
19b–7 is $5,555.6 The total internal cost
of compliance for a respondent is
$11,110 per year and the total industry
internal cost of compliance is $22,220
per year.7
In addition to filing its proposed rule
changes and any amendments thereto
with the Commission, a respondent is
also required to post each of its
proposals and any amendments thereto,
on its website. This process takes
approximately 0.5 hours to complete per
proposal and 0.5 hours per amendment.
Thus, for approximately 2 responses
and no amendments,8 the total annual
reporting burden on a respondent to
post these on its website is 1 hour and
the total industry burden per year is 2
hours.9 Further, a respondent is
required to update its rulebook, which
it maintains on its website, to reflect the
changes that it makes in each proposal
lotter on DSK11XQN23PROD with NOTICES1
3 There
are currently two Security Futures
Product Exchanges and one Limited Purpose
National Securities Association, the National
Futures Association. One of the Security Futures
Product Exchanges, however, is conditionally
exempted from filing proposed rule changes using
Form 19b–7. Therefore, there are currently two
respondents to Form 19b–7.
4 SEC staff notes that even though no
amendments were received in the previous three
years and that staff does not anticipate the receipt
of any amendments, calculation of amendments is
a separate step in the calculation of the PRA burden
and it is possible that amendments are filed in the
future. Therefore, instead of removing the
calculation altogether, staff has shown the
calculation as anticipating zero amendments.
5 This estimate is based on 2 respondents × 25
hours per year per respondent which equals 50
burden hours for the entire industry.
6 This estimate is based on 11.5 legal hours
multiplied by an average hourly rate of $462 plus
1 hour of paralegal work multiplied by an average
hourly rate of $242. The wage data is for an attorney
and paralegal respectively, from SIFMA’s
Management & Professional Earnings in the
Securities Industry 2013, modified by Commission
staff to account for inflation and an 1,800-hour
work-year and then multiplied by 5.35 to account
for bonuses, firm size, employee benefits, and
overhead.
7 This estimate is based on 2 responses × $5,555
per response equals $11,110 per respondent per
year and 2 respondents × $11,110 equals $22,220
or the total industry cost per year.
8 See supra note 4.
9 This estimate is based on 2 proposals per year
× 0.5 hours per filing plus 0 amendments × 0.5
hours.
VerDate Sep<11>2014
18:19 Aug 08, 2023
Jkt 259001
and any amendment thereto. Thus, for
all filings that were not withdrawn by
a respondent (there were 0 withdrawn
filings in calendar years 2019–2021) or
disapproved by the Commission (there
were 0 disapproved filings in calendar
years 2019–2021), a respondent was
required to update its online rulebook to
reflect the effectiveness of 2 filings on
average, each of which takes
approximately 4 hours to complete.
Thus, the total annual reporting burden
for updating an online rulebook is 8
hours and the total industry burden is
16 hours.10
The total industry burden per year for
rule changes, updating and posting rule
changes and updating the online
rulebook is estimated to be 68 burden
hours.11 As described above, the total
internal cost of compliance for a
respondent is estimated to be $11,110
per year and the total industry internal
cost of compliance is estimated to be
$22,220 per year.12 The net change in
estimated total aggregate burden hours
decreased from 102 to 68 (reduction of
34 burden hours). Similarly, with
respect to the internal dollar cost
burden of respondents, the total
industry internal dollar costs has
decreased overall due to one less
respondent. The total industry internal
cost of compliance decreased from $30,
300 to $22,220.
Compliance with Rule 19b–7 is
mandatory. Information received in
response to Rule 19b–7 is not kept
confidential; the information collected
is public information.
Written comments are invited on: (a)
whether the proposed collection of
information is necessary for the proper
performance of the functions of the
Commission, including whether the
information shall have practical utility;
(b) the accuracy of the Commission’s
estimates of the burden of the proposed
collection of information; (c) ways to
enhance the quality, utility, and clarity
of the information collected; and (d)
ways to minimize the burden of the
collection of information on
respondents, including through the use
of automated collection techniques or
other forms of information technology.
Consideration will be given to
10 This estimate is based on 2 proposals per year
× 4 hours which equals 8 hours. As noted, there
were 0 withdrawn filings and 0 disapproved filings.
There are 2 respondents × 8 hours per year equals
a total industry burden of 16 hours.
11 This estimate is the sum of the total industry
(2 respondents) burden hours for rule filings (50
hours), updating and posting rule changes (2 hours)
and updating rules (16 hours).
12 This estimate is based on 2 responses × $5,555
per response equals $11,110 per respondent per
year and 2 respondents × $11,110 equals $22,220
or the total industry cost per year.
PO 00000
Frm 00080
Fmt 4703
Sfmt 4703
53937
comments and suggestions submitted by
October 10, 2023.
An agency may not conduct or
sponsor, and a person is not required to
respond to, a collection of information
unless it displays a currently valid OMB
control number.
Please direct your written comments
to: David Bottom, Director/Chief
Information Officer, Securities and
Exchange Commission, c/o John
Pezzullo, 100 F Street NE, Washington,
DC 20549, or send an email to: PRA_
Mailbox@sec.gov.
Dated: August 3, 2023.
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023–16991 Filed 8–8–23; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–98051; File No. SR–
EMERALD–2023–13]
Self-Regulatory Organizations; MIAX
Emerald, LLC; Suspension of and
Order Instituting Proceedings To
Determine Whether To Approve or
Disapprove Proposed Rule Change To
Increase Fees for the ToM Market Data
Product and Establish Fees for the
cToM Market Data Product
August 3, 2023.
I. Introduction
On June 7, 2023, MIAX Emerald, LLC
(‘‘MIAX Emerald’’ or ‘‘Exchange’’) filed
with the Securities and Exchange
Commission (‘‘Commission’’), pursuant
to section 19(b)(1) of the Securities
Exchange Act of 1934 (‘‘Act’’),1 and
Rule 19b–4 thereunder,2 a proposed rule
change (File Number SR–EMERALD–
2023–13) to increase fees for the MIAX
Emerald Top of Market (‘‘ToM’’) market
data product and establish fees for the
MIAX Emerald Complex Top of Market
(‘‘cToM’’) market data product. The
proposed rule change was immediately
effective upon filing with the
Commission pursuant to section
19(b)(3)(A) of the Act.3 The proposed
rule change was published for comment
in the Federal Register on June 26,
2023.4 Pursuant to section 19(b)(3)(C) of
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A). A proposed rule change
may take effect upon filing with the Commission if
it is designated by the exchange as ‘‘establishing or
changing a due, fee, or other charge imposed by the
self-regulatory organization on any person, whether
or not the person is a member of the self-regulatory
organization.’’ 15 U.S.C. 78s(b)(3)(A)(ii).
4 See Securities Exchange Act Release No. 97767
(June 20, 2023), 88 FR 41442 (‘‘Notice’’).
2 17
E:\FR\FM\09AUN1.SGM
09AUN1
53938
Federal Register / Vol. 88, No. 152 / Wednesday, August 9, 2023 / Notices
the Act,5 the Commission is hereby: (1)
temporarily suspending the proposed
rule change; and (2) instituting
proceedings to determine whether to
approve or disapprove the proposed
rule change.
II. Background and Description of the
Proposed Rule Change
The Exchange proposes to increase
fees for the ToM market data product
and establish fees for the cToM market
data product.6 According to the
Exchange, the ToM feed provides
subscribers with top of book quotations
based on options orders and quotes
entered into the System 7 and resting on
the Exchange’s Simple Order Book 8 as
well as administrative messages.9 The
cToM feed provides subscribers with
the same information as TOM as it
relates to the Strategy Book 10 (i.e., best
bid and offer for a complex strategy,
with aggregate size, based on
displayable orders in the complex
strategy on the Exchange), plus
additional information specific to
complex orders (i.e., identification of
the complex strategies currently trading
on the Exchange, complex strategy last
sale information, and the status of
securities underlying the complex
strategy).11
The Exchange proposes to increase
the fee for Internal Distributors 12 from
5 15
U.S.C. 78s(b)(3)(C).
Exchange initially filed the proposed fee
change on December 28, 2022, with an effective
date of January 1, 2023. See Securities Exchange
Act Release No. 96625 (January 10, 2023), 88 FR
2688 (January 17, 2023) (SR–EMERALD–2022–37).
That filing was withdrawn by the Exchange and the
Exchange filed new proposed fee changes with
additional justification (SR–EMERALD–2023–04)
on February 23, 2023. See Securities Exchange Act
Release No. 97078 (March 8, 2023), 88 FR 15813
(March 14, 2023). The Exchange subsequently
withdrew that filing and replaced it with SR–
EMERALD–2023–10 on April 11, 2023. See
Securities Exchange Act Release No. 97326 (April
19, 2023), 88 FR 25043 (April 25, 2023). The
Exchange subsequently withdrew that filing and
replaced it with the instant filing to provide
additional information and a revised justification
for the proposal, which is discussed herein. See
Notice, supra note 4, at 41442.
7 The term ‘‘System’’ means the automated
trading system used by the Exchange for the trading
of Securities. See Exchange Rule 100.
8 The term ‘‘Simple Order Book’’ means ‘‘the
Exchange’s regular electronic book of orders and
quotes.’’ See Exchange Rule 518(a)(15).
9 See Notice, supra note 4, at 41443.
10 The ‘‘Strategy Book’’ is each Exchange’s
electronic book of complex orders and complex
quotes. See Exchange Rule 518(a)(17).
11 See Notice, supra note 4, at 41443. The
Exchange states that cToM is a distinct market data
product from ToM. The Exchange also states that
ToM subscribers are not required to subscribe to
cToM, and that cToM subscribers are not required
to subscribe to ToM. See id. at 41443–44.
12 A ‘‘Distributor’’ of MIAX Emerald data is any
entity that receives a feed or file of data either
directly from MIAX Emerald or indirectly through
lotter on DSK11XQN23PROD with NOTICES1
6 The
VerDate Sep<11>2014
18:19 Aug 08, 2023
Jkt 259001
$1,250 per month to $2,000 per month
and External Distributors 13 from $1,750
per month to $3,000 per month for the
ToM data feed.14 The Exchange also
proposes to assess a fee on Internal
Distributors of $2,000 per month and
External Distributors of $3,000 per
month for the cToM feed.15 The
Exchange will assess the increased ToM
and new cToM fees on Internal and
External Distributors in each month the
Distributor is credentialed to use ToM
or cToM, and will reduce such fees for
new Distributors for the first month
during which they subscribe to ToM or
cToM based on the number of trading
days that have been held during the
month prior to the date on which that
subscriber has been credentialed to use
ToM or cToM.16
III. Suspension of the Proposed Rule
Changes
Pursuant to section 19(b)(3)(C) of the
Act,17 at any time within 60 days of the
date of filing of an immediately effective
proposed rule change pursuant to
section 19(b)(1) of the Act,18 the
Commission summarily may
temporarily suspend the change in the
rules of a self-regulatory organization
(‘‘SRO’’) 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. The Commission believes a
temporary suspension of the proposed
rule changes is necessary and
appropriate to allow for additional
analysis of the proposed rule changes’
another entity and then distributes it either
internally (within that entity) or externally (outside
that entity). See Fee Schedule, Section 6(a). All
members or non-members that determine to receive
any market data feed from the Exchange, or its
affiliates, must first execute, among other things,
the MIAX Exchange Group Exchange Data
Agreement (‘‘Exchange Data Agreement’’). See
Notice, supra note 4, at 41451. Pursuant to the
Exchange Data Agreement, ‘‘Internal Distributors’’
are restricted to the ‘‘internal use’’ of any market
data they receive, meaning they may only distribute
the Exchange’s market data to their officers and
employees and their affiliates. See id.
13 ‘‘External Distributors’’ may distribute the
Exchange’s market data to persons who are not their
officers, employees, or affiliates, and may charge
their own fees for the distribution of such market
data. See id.
14 See Notice, supra note 4, at 41443.
15 See id. at 41444.
16 New cToM Distributors will be assessed a prorata percentage of the fees described above, which
is the percentage of the number of trading days
remaining in the affected calendar month as of the
date on which they have been credentialed to use
cToM, divided by the total number of trading days
in the affected calendar month. See id.
17 15 U.S.C. 78s(b)(3)(C).
18 15 U.S.C. 78s(b)(1).
PO 00000
Frm 00081
Fmt 4703
Sfmt 4703
consistency with the Act and the rules
thereunder.
In support of the proposal, the
Exchange states its belief that the
proposed fees overall are fair and
reasonable as a form of ‘‘cost recovery
plus the possibility of a reasonable
return’’ for the Exchange’s aggregate
costs of offering the ToM and cToM data
feeds.19 Specifically, the Exchange
states the fees are based on a ‘‘cost-plus
model’’ used to determine a reasonable
fee structure that is informed by the
Exchange’s understanding of different
use of products by different types of
participants.20 According to the
Exchange, employing a methodology
that is the ‘‘result of an extensive review
and analysis,’’ it estimates the total
projected annual cost of providing the
ToM and cToM data feeds to be
$665,296.21 To arrive at these figures,
the Exchange states that it undertook a
thorough internal analysis of nearly
every expense in the Exchange’s general
expense ledger to determine whether
each such expense related to the
provision of ToM and cToM data feeds,
and, if such expense did so relate, what
portion (or percentage) of such expense
supported the provision of ToM and
cToM data feeds.22 The Exchange states
that it determined the total cost for the
Exchange and its affiliated markets for
each cost driver 23 through a companywide this process that included
discussions with senior management,
Exchange department heads, and the
Finance Team.24 The Exchange further
19 See
id. 41450.
id. at 41450. In addition, the Exchange
states that the proposed monthly cToM fees for
Internal and External Distributors are identical to
the fees that the Exchange proposes to charge for
ToM. See id. at 41444. The Exchange also states that
cToM was provided free of charge for the past four
years, since the cToM market data product was
established on the Exchange, the Exchange
absorbed all costs associated with compiling and
disseminating cToM during that time, and the
Exchange now proposes to establish fees for cToM
to recoup its ongoing costs going forward. See id.
at 41443.
21 See id. at 41446. The Exchange states that the
Cost Analysis is based on the Exchange’s 2023 fiscal
year of operations and projections. See id. at 41449.
The Exchange has calculated the annual cost for
producing ToM to subscribers to be $317,753, and
$347,543 for cToM. See id. at 41443.
22 See id. at 41446.
23 The Exchange defines ‘‘cost drivers’’ within the
filing as the costs necessary to deliver each of the
core services, see infra note 25, including
infrastructure, software, human resources (i.e.,
personnel), and certain general and administrative
expenses. See Notice supra note 4, at 41445.
24 See id. at 41445. The Exchange states that
because the Exchange’s parent company currently
owns and operates four separate and distinct
marketplaces, the Exchange’s parent company
determines the actual cost for each marketplace,
which results in different allocations and amounts
across exchanges for the same cost drivers. See id.
According to the Exchange, its allocation
20 See
E:\FR\FM\09AUN1.SGM
09AUN1
Federal Register / Vol. 88, No. 152 / Wednesday, August 9, 2023 / Notices
lotter on DSK11XQN23PROD with NOTICES1
states that it determined what portion of
the cost allocated to the Exchange
pursuant to this methodology is to be
allocated to each core service, including
the appropriate allocation to market
data.25 The Exchange states that through
this allocation methodology, the
Exchange ‘‘applied an estimated
allocation of each cost driver to each
core service’’ and ‘‘[e]ach of the
[resulting] cost allocations is unique to
the Exchange and represents a
percentage of overall cost that was
allocation to the Exchange pursuant to
the initial allocation.’’ 26
The Exchange states that the $665,296
aggregate annual costs for providing the
ToM and cToM data feeds is the sum of
to the following individual line-item
costs: (1) Human Resources at $354,553;
(2) Network Infrastructure (fiber
connectivity) at $9,428; (3) Data Center
at $20,630; (4) Hardware and Software
Maintenance and Licenses at $22,202;
(5) Depreciation at $21,167; and (6)
Allocated Shared Expenses at
$237,316.27 The Exchange represents
that it estimates that the proposed fees
will result in an annual revenue of
approximately $804,000, which is a
potential profit margin of 17% over the
cost of providing ToM and cToM market
data feeds.28
The Exchange states its belief that a
17% rate of return is reasonable because
it allows the Exchange to ‘‘recoup all of
its expenses for providing the ToM and
cToM data products’’ and that any
additional revenue would represent no
more than what the Exchange believes
to be a reasonable rate of return.29 In
addition, the Exchange states its belief
that the proposed fees are reasonable
because they are generally less than the
fees charged by competing options
exchanges for comparable market data
products.30
In further support of the proposal, the
Exchange states its belief that the fees
are reasonable, fair, and equitable, and
methodology ensures that no portion of any cost
would be allocated twice or double-counted
between the Exchange and its affiliated markets.
See id.
25 See id. at 41446. The Exchange describes ‘‘core
services’’ as services provided by the Exchange,
including transactions, market data, membership
services, physical connectivity, and ports (which
provides order entry, cancellation and modification
functionality, risk functionality, ability to receive
drop copies, and other functionality). See id.
26 Id.
27 See id. at 41446–47.
28 See id. at 41446, 41448.
29 Id. at 41450. The Exchange also states that an
approximately 17% mark-up is fair and reasonable
after taking into account the costs related to
creating, generating and disseminating the ToM and
cToM data feeds and the fact that the Exchange will
need to fund future expenditures. Id. at 41448.
30 Id. at 41450.
VerDate Sep<11>2014
18:19 Aug 08, 2023
Jkt 259001
not unfairly discriminatory, because
they are designed to align fees with
services provided, are allocated fairly
and equitably among the various
categories of users of the feeds with any
differences among categories of users
being justified and appropriate, and will
apply uniformly to all data recipients
that choose to subscribe to the ToM and
cToM data feeds.31 Moreover, the
Exchange asserts that it is reasonable,
equitable, and not unfairly
discriminatory to assess Internal
Distributors fees that are lower than the
fees assessed for External Distributors
for subscriptions to the ToM and cToM
data feeds because Internal Distributors
have limited, restricted usage rights to
the market data, as compared to
External Distributors, which have more
expansive usage rights, including rights
to commercialize such market data.32
Finally, the Exchange asserts that the
proposed fees would not cause any
unnecessary or inappropriate burden on
inter-market competition because other
exchanges already have similar market
data fees and they are free to adopt
comparable fee structures subject to the
Commission’s rule filing process.33
Furthermore, the Exchange asserts that
the allowing the Exchange, or any new
market entrant, to waive fees for a
period of time to allow it to become
established, such as the Exchange did
with cToM, will encourage market entry
and thus ultimately promote
competition.34 The Exchange also
asserts that the proposed rule change
would not cause any unnecessary or
inappropriate burden on intra-market
competition because the proposed fees
are associated with the usage of the data
feed by each market participant based
on whether the market participant
internally and externally distributes the
Exchange data.35
To date, the Commission has not
received any comment letters on the
revised justifications for the increase in
ToM market data fees or the
establishment of the cToM market data
fees.
When exchanges file their proposed
rule changes with the Commission,
including fee filings like the Exchange’s
present proposal, they are required to
provide a statement supporting the
31 See
id.
id. at 41451. In addition, the Exchange
argues that it utilizes more resources to support
External Distributors as compared to Internal
Distributors, as External Distributors have reporting
and monitoring obligations that Internal
Distributors do not have, thus requiring additional
time and effort of the Exchange’s staff. See id.
33 See id. at 41452.
34 See id.
35 See id.
32 See
PO 00000
Frm 00082
Fmt 4703
Sfmt 4703
53939
proposal’s basis under the Act and the
rules and regulations thereunder
applicable to the exchange.36 The
instructions to Form 19b–4, on which
exchanges file their proposed rule
changes, specify that such statement
‘‘should be sufficiently detailed and
specific to support a finding that the
proposed rule change is consistent with
[those] requirements.’’ 37
Section 6 of the Act, including
sections 6(b)(4), (5), and (8), require the
rules of an exchange to: (1) provide for
the equitable allocation of reasonable
fees among members, issuers, and other
persons using the exchange’s
facilities; 38 (2) perfect the mechanism of
a free and open market and a national
market system, protect investors and the
public interest, and not be designed to
permit unfair discrimination between
customers, issuers, brokers, or
dealers; 39 and (3) not impose any
burden on competition not necessary or
appropriate in furtherance of the
purposes of the Act.40
In temporarily suspending the
Exchange’s proposed rule change, the
Commission intends to further consider
whether the proposal to increase fees for
the ToM market data feeds and establish
fees for the cToM market data feeds are
consistent with the statutory
requirements applicable to a national
securities exchange under the Act. In
particular, the Commission will
consider whether the proposed rule
change satisfies the standards under the
Act and the rules thereunder requiring,
among other things, that an exchange’s
rules provide for the equitable
allocation of reasonable fees among
members, issuers, and other persons
using its facilities; not permit unfair
discrimination between customers,
issuers, brokers or dealers; and do not
impose any burden on competition not
necessary or appropriate in furtherance
of the purposes of the Act.41
Therefore, the Commission finds that
it is appropriate in the public interest,
for the protection of investors, and
otherwise in furtherance of the purposes
of the Act, to temporarily suspend the
proposed rule change.42
36 See 17 CFR 240.19b–4 (Item 3 entitled ‘‘SelfRegulatory Organization’s Statement of the Purpose
of, and Statutory Basis for, the Proposed Rule
Change’’).
37 See id.
38 15 U.S.C. 78f(b)(4).
39 15 U.S.C. 78f(b)(5).
40 15 U.S.C. 78f(b)(8).
41 See 15 U.S.C. 78f(b)(4), (5), and (8),
respectively.
42 For purposes of temporarily suspending the
proposed rule change, the Commission has
considered the proposed rule’s impact on
E:\FR\FM\09AUN1.SGM
Continued
09AUN1
53940
Federal Register / Vol. 88, No. 152 / Wednesday, August 9, 2023 / Notices
lotter on DSK11XQN23PROD with NOTICES1
IV. Proceedings To Determine Whether
To Approve or Disapprove the
Proposed Rule Changes
In addition to temporarily suspending
the proposal, the Commission also
hereby institutes proceedings pursuant
to sections 19(b)(3)(C) 43 and
19(b)(2)(B)of the Act 44 to determine
whether the Exchange’s proposed rule
change should be approved or
disapproved. Institution of proceedings
does not indicate that the Commission
has reached any conclusions with
respect to any of the issues involved.
Rather, the Commission seeks and
encourages interested persons to
provide additional comment on the
proposed rule change to inform the
Commission’s analysis of whether to
approve or disapprove the proposed
rule change.
Pursuant to section 19(b)(2)(B) of the
Act,45 the Commission is providing
notice of the grounds for possible
disapproval under consideration:
• Whether the Exchange has
demonstrated how the proposed fees are
consistent with section 6(b)(4) of the
Act, which requires that the rules of a
national securities exchange ‘‘provide
for the equitable allocation of reasonable
dues, fees, and other charges among its
members and issuers and other persons
using its facilities’’; 46
• Whether the Exchange has
demonstrated how the proposed fees are
consistent with section 6(b)(5) of the
Act, which requires, among other
things, that the rules of a national
securities exchange not be ‘‘designed to
permit unfair discrimination between
customers, issuers, brokers, or
dealers’’; 47 and
• Whether the Exchange has
demonstrated how the proposed fees are
consistent with section 6(b)(8) of the
Act, which requires that the rules of a
national securities exchange ‘‘not
impose any burden on competition not
efficiency, competition, and capital formation. See
15 U.S.C. 78c(f).
43 15 U.S.C. 78s(b)(3)(C). Once the Commission
temporarily suspends a proposed rule change,
section 19(b)(3)(C) of the Act requires that the
Commission institute proceedings under section
19(b)(2)(B) to determine whether a proposed rule
change should be approved or disapproved.
44 15 U.S.C. 78s(b)(2)(B).
45 Id. Section 19(b)(2)(B) of the Act also provides
that proceedings to determine whether to
disapprove a proposed rule change must be
concluded within 180 days of the date of
publication of notice of the filing of the proposed
rule change. See id. The time for conclusion of the
proceedings may be extended for up to 60 days if
the Commission finds good cause for such
extension and publishes its reasons for so finding,
or if the exchange consents to the longer period. See
id.
46 15 U.S.C. 78f(b)(4).
47 15 U.S.C. 78f(b)(5).
VerDate Sep<11>2014
18:19 Aug 08, 2023
Jkt 259001
necessary or appropriate in furtherance
of the purposes of [the Act].’’ 48
As discussed in section III above, the
Exchange made various arguments in
support of their proposal. The
Commission believes that there are
questions as to whether the Exchange
has provided sufficient information to
demonstrate that the proposed fees are
consistent with the Act and the rules
thereunder.
Under the Commission’s Rules of
Practice, the ‘‘burden to demonstrate
that a proposed rule change is
consistent with the [Act] and the rules
and regulations issued thereunder . . .
is on the [SRO] that proposed the rule
change.’’ 49 The description of a
proposed rule change, its purpose and
operation, its effect, and a legal analysis
of its consistency with applicable
requirements must all be sufficiently
detailed and specific to support an
affirmative Commission finding,50 and
any failure of an SRO to provide this
information may result in the
Commission not having a sufficient
basis to make an affirmative finding that
a proposed rule change is consistent
with the Act and the applicable rules
and regulations.51
The Commission is instituting
proceedings to allow for additional
consideration and comment on the
issues raised herein, including as to
whether the proposed fees are
consistent with the Act, and
specifically, with its requirements that
exchange fees be reasonable and
equitably allocated, not be unfairly
discriminatory, and not impose any
burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act.52
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. Such
comments should be submitted by
August 30, 2023. Rebuttal comments
should be submitted by September 13,
2023. 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.53
48 15
U.S.C. 78f(b)(8).
CFR 201.700(b)(3).
50 See id.
51 See id.
52 See 15 U.S.C. 78f(b)(4), (5), and (8).
53 15 U.S.C. 78s(b)(2). Section 19(b)(2) of the Act
grants the Commission flexibility to determine what
49 17
PO 00000
Frm 00083
Fmt 4703
Sfmt 4703
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 changes.
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–2023–13 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–2023–13. 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
a.m. and 3 p.m. Copies of the filing also
will be available for inspection and
copying at the principal office of the
Exchange. Do not include personal
identifiable information in submissions;
you should submit only information
that you wish to make available
publicly. We may redact in part or
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).
E:\FR\FM\09AUN1.SGM
09AUN1
Federal Register / Vol. 88, No. 152 / Wednesday, August 9, 2023 / Notices
withhold entirely from publication
submitted material that is obscene or
subject to copyright protection. All
submissions should refer to file number
SR–EMERALD–2023–13 and should be
submitted on or before August 30, 2023.
Rebuttal comments should be submitted
by September 13, 2023.
VI. Conclusion
It is therefore ordered, pursuant to
section 19(b)(3)(C) of the Act,54 that File
No. SR–EMERALD–2023–13, 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.55
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023–16988 Filed 8–8–23; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–98050; File No. SR–MIAX–
2023–23]
Self-Regulatory Organizations; Miami
International Securities Exchange,
LLC; Suspension of and Order
Instituting Proceedings To Determine
Whether To Approve or Disapprove
Proposed Rule Change To Increase
Fees for the ToM Market Data Product
and Establish Fees for the cToM
Market Data Product
August 3, 2023.
lotter on DSK11XQN23PROD with NOTICES1
I. Introduction
On June 7, 2023, Miami International
Securities Exchange, LLC (‘‘MIAX’’ or
‘‘Exchange’’) filed with the Securities
and Exchange Commission
(‘‘Commission’’), pursuant to section
19(b)(1) of the Securities Exchange Act
of 1934 (‘‘Act’’),1 and Rule 19b–4
thereunder,2 a proposed rule change
(File Number SR–MIAX–2023–23) to
increase fees for the MIAX Top of
Market (‘‘ToM’’) market data product
and establish fees for the MIAX
Complex Top of Market (‘‘cToM’’)
market data product. The proposed rule
change was immediately effective upon
filing with the Commission pursuant to
section 19(b)(3)(A) of the Act.3 The
54 15
U.S.C. 78s(b)(3)(C).
CFR 200.30–3(a)(57).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A). A proposed rule change
may take effect upon filing with the Commission if
55 17
VerDate Sep<11>2014
18:19 Aug 08, 2023
Jkt 259001
proposed rule change was published for
comment in the Federal Register on
June 26, 2023.4 Pursuant to section
19(b)(3)(C) of the Act,5 the Commission
is hereby: (1) temporarily suspending
the proposed rule change; and (2)
instituting proceedings to determine
whether to approve or disapprove the
proposed rule change.
II. Background and Description of the
Proposed Rule Change
53941
securities underlying the complex
strategy).11
The Exchange proposes to increase
the fee for Internal Distributors 12 from
$1,250 per month to $2,000 per month
and External Distributors 13 from $1,750
per month to $3,000 per month for the
ToM data feed.14 The Exchange also
proposes to assess a fee on Internal
Distributors of $2,000 per month and
External Distributors of $3,000 per
month for the cToM feed.15 The
Exchange will assess the increased ToM
and new cToM fees on Internal and
External Distributors in each month the
Distributor is credentialed to use ToM
or cToM, and will reduce such fees for
new Distributors for the first month
during which they subscribe to ToM or
cToM based on the number of trading
days that have been held during the
month prior to the date on which that
subscriber has been credentialed to use
ToM or cToM.16
The Exchange proposes to increase
fees for the ToM market data product
and establish fees for the cToM market
data product.6 According to the
Exchange, the ToM feed provides
subscribers with top of book quotations
based on options orders and quotes
entered into the System 7 and resting on
the Exchange’s Simple Order Book 8 as
well as administrative messages.9 The
cToM feed provides subscribers with
the same information as TOM as it
relates to the Strategy Book 10 (i.e., best
bid and offer for a complex strategy,
with aggregate size, based on
displayable orders in the complex
strategy on the Exchange), plus
additional information specific to
complex orders (i.e., identification of
the complex strategies currently trading
on the Exchange, complex strategy last
sale information, and the status of
III. Suspension of the Proposed Rule
Changes
Pursuant to section 19(b)(3)(C) of the
Act,17 at any time within 60 days of the
date of filing of an immediately effective
proposed rule change pursuant to
section 19(b)(1) of the Act,18 the
Commission summarily may
temporarily suspend the change in the
rules of a self-regulatory organization
(‘‘SRO’’) if it appears to the Commission
it is designated by the exchange as ‘‘establishing or
changing a due, fee, or other charge imposed by the
self-regulatory organization on any person, whether
or not the person is a member of the self-regulatory
organization.’’ 15 U.S.C. 78s(b)(3)(A)(ii).
4 See Securities Exchange Act Release No. 97768
(June 20, 2023), 88 FR 41423 (‘‘Notice’’).
5 15 U.S.C. 78s(b)(3)(C).
6 The Exchange initially filed the proposed fee
change on December 28, 2022, with an effective
date of January 1, 2023. See Securities Exchange
Act Release No. 96626 (January 10, 2023), 88 FR
2699 (January 17, 2023) (SR–MIAX–2022–49). That
filing was withdrawn by the Exchange and the
Exchange filed new proposed fee changes with
additional justification (SR–MIAX–2023–07) on
February 23, 2023. See Securities Exchange Act
Release No. 97080 (March 8, 2023), 88 FR 15803
(March 14, 2023). The Exchange subsequently
withdrew that filing and replaced it with SR–
MIAX–2023–17 on April 11, 2023. See Securities
Exchange Act Release No. 97327 (April 19, 2023),
88 FR 25032 (April 25, 2023). The Exchange
subsequently withdrew that filing and replaced it
with the instant filing to provide additional
information and a revised justification for the
proposal, which is discussed herein. See Notice,
supra note 4, at 41423.
7 The term ‘‘System’’ means the automated
trading system used by the Exchange for the trading
of Securities. See Exchange Rule 100.
8 The term ‘‘Simple Order Book’’ means ‘‘the
Exchange’s regular electronic book of orders and
quotes.’’ See Exchange Rule 518(a)(15).
9 See Notice, supra note 4, at 41424.
10 The ‘‘Strategy Book’’ is each Exchange’s
electronic book of complex orders and complex
quotes. See MIAX Rule 518(a)(17).
11 See Notice, supra note 4, at 41424. The
Exchange states that cToM is a distinct market data
product from ToM. The Exchange also states that
ToM subscribers are not required to subscribe to
cToM, and that cToM subscribers are not required
to subscribe to ToM. See id.
12 A ‘‘Distributor’’ of the Exchange’s data is any
entity that receives a feed or file of data either
directly from the Exchange or indirectly through
another entity and then distributes it either
internally (within that entity) or externally (outside
that entity). See MIAX Fee Schedule, Section 6(a).
All members or non-members that determine to
receive any market data feed from the Exchange
must first execute, among other things, the MIAX
Exchange Group Exchange Data Agreement
(‘‘Exchange Data Agreement’’). See Notice, supra
note 4, at 41431. Pursuant to the Exchange Data
Agreement, ‘‘Internal Distributors’’ are restricted to
the ‘‘internal use’’ of any market data they receive,
meaning they may only distribute the Exchange’s
market data to their officers and employees and
their affiliates. See id.
13 ‘‘External Distributors’’ may distribute the
Exchange’s market data to persons who are not their
officers, employees, or affiliates, and may charge
their own fees for the distribution of such market
data. See Notice, supra note 4, at 41431–32.
14 See Notice, supra note 4, at 41424.
15 See id.
16 New cToM Distributors will be assessed a prorata percentage of the fees described above, which
is the percentage of the number of trading days
remaining in the affected calendar month as of the
date on which they have been credentialed to use
cToM, divided by the total number of trading days
in the affected calendar month. See id. at 41424.
17 15 U.S.C. 78s(b)(3)(C).
18 15 U.S.C. 78s(b)(1).
PO 00000
Frm 00084
Fmt 4703
Sfmt 4703
E:\FR\FM\09AUN1.SGM
09AUN1
]]>Agencies
[Federal Register Volume 88, Number 152 (Wednesday, August 9, 2023)]
[Notices]
[Pages 53937-53941]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-16988]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-98051; File No. SR-EMERALD-2023-13]
Self-Regulatory Organizations; MIAX Emerald, LLC; Suspension of
and Order Instituting Proceedings To Determine Whether To Approve or
Disapprove Proposed Rule Change To Increase Fees for the ToM Market
Data Product and Establish Fees for the cToM Market Data Product
August 3, 2023.
I. Introduction
On June 7, 2023, MIAX Emerald, LLC (``MIAX Emerald'' or
``Exchange'') filed with the Securities and Exchange Commission
(``Commission''), pursuant to section 19(b)(1) of the Securities
Exchange Act of 1934 (``Act''),\1\ and Rule 19b-4 thereunder,\2\ a
proposed rule change (File Number SR-EMERALD-2023-13) to increase fees
for the MIAX Emerald Top of Market (``ToM'') market data product and
establish fees for the MIAX Emerald Complex Top of Market (``cToM'')
market data product. The proposed rule change was immediately effective
upon filing with the Commission pursuant to section 19(b)(3)(A) of the
Act.\3\ The proposed rule change was published for comment in the
Federal Register on June 26, 2023.\4\ Pursuant to section 19(b)(3)(C)
of
[[Page 53938]]
the Act,\5\ the Commission is hereby: (1) temporarily suspending the
proposed rule change; and (2) instituting proceedings to determine
whether to approve or disapprove the proposed rule change.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ 15 U.S.C. 78s(b)(3)(A). A proposed rule change may take
effect upon filing with the Commission if it is designated by the
exchange as ``establishing or changing a due, fee, or other charge
imposed by the self-regulatory organization on any person, whether
or not the person is a member of the self-regulatory organization.''
15 U.S.C. 78s(b)(3)(A)(ii).
\4\ See Securities Exchange Act Release No. 97767 (June 20,
2023), 88 FR 41442 (``Notice'').
\5\ 15 U.S.C. 78s(b)(3)(C).
---------------------------------------------------------------------------
II. Background and Description of the Proposed Rule Change
The Exchange proposes to increase fees for the ToM market data
product and establish fees for the cToM market data product.\6\
According to the Exchange, the ToM feed provides subscribers with top
of book quotations based on options orders and quotes entered into the
System \7\ and resting on the Exchange's Simple Order Book \8\ as well
as administrative messages.\9\ The cToM feed provides subscribers with
the same information as TOM as it relates to the Strategy Book \10\
(i.e., best bid and offer for a complex strategy, with aggregate size,
based on displayable orders in the complex strategy on the Exchange),
plus additional information specific to complex orders (i.e.,
identification of the complex strategies currently trading on the
Exchange, complex strategy last sale information, and the status of
securities underlying the complex strategy).\11\
---------------------------------------------------------------------------
\6\ The Exchange initially filed the proposed fee change on
December 28, 2022, with an effective date of January 1, 2023. See
Securities Exchange Act Release No. 96625 (January 10, 2023), 88 FR
2688 (January 17, 2023) (SR-EMERALD-2022-37). That filing was
withdrawn by the Exchange and the Exchange filed new proposed fee
changes with additional justification (SR-EMERALD-2023-04) on
February 23, 2023. See Securities Exchange Act Release No. 97078
(March 8, 2023), 88 FR 15813 (March 14, 2023). The Exchange
subsequently withdrew that filing and replaced it with SR-EMERALD-
2023-10 on April 11, 2023. See Securities Exchange Act Release No.
97326 (April 19, 2023), 88 FR 25043 (April 25, 2023). The Exchange
subsequently withdrew that filing and replaced it with the instant
filing to provide additional information and a revised justification
for the proposal, which is discussed herein. See Notice, supra note
4, at 41442.
\7\ The term ``System'' means the automated trading system used
by the Exchange for the trading of Securities. See Exchange Rule
100.
\8\ The term ``Simple Order Book'' means ``the Exchange's
regular electronic book of orders and quotes.'' See Exchange Rule
518(a)(15).
\9\ See Notice, supra note 4, at 41443.
\10\ The ``Strategy Book'' is each Exchange's electronic book of
complex orders and complex quotes. See Exchange Rule 518(a)(17).
\11\ See Notice, supra note 4, at 41443. The Exchange states
that cToM is a distinct market data product from ToM. The Exchange
also states that ToM subscribers are not required to subscribe to
cToM, and that cToM subscribers are not required to subscribe to
ToM. See id. at 41443-44.
---------------------------------------------------------------------------
The Exchange proposes to increase the fee for Internal Distributors
\12\ from $1,250 per month to $2,000 per month and External
Distributors \13\ from $1,750 per month to $3,000 per month for the ToM
data feed.\14\ The Exchange also proposes to assess a fee on Internal
Distributors of $2,000 per month and External Distributors of $3,000
per month for the cToM feed.\15\ The Exchange will assess the increased
ToM and new cToM fees on Internal and External Distributors in each
month the Distributor is credentialed to use ToM or cToM, and will
reduce such fees for new Distributors for the first month during which
they subscribe to ToM or cToM based on the number of trading days that
have been held during the month prior to the date on which that
subscriber has been credentialed to use ToM or cToM.\16\
---------------------------------------------------------------------------
\12\ A ``Distributor'' of MIAX Emerald data is any entity that
receives a feed or file of data either directly from MIAX Emerald or
indirectly through another entity and then distributes it either
internally (within that entity) or externally (outside that entity).
See Fee Schedule, Section 6(a). All members or non-members that
determine to receive any market data feed from the Exchange, or its
affiliates, must first execute, among other things, the MIAX
Exchange Group Exchange Data Agreement (``Exchange Data
Agreement''). See Notice, supra note 4, at 41451. Pursuant to the
Exchange Data Agreement, ``Internal Distributors'' are restricted to
the ``internal use'' of any market data they receive, meaning they
may only distribute the Exchange's market data to their officers and
employees and their affiliates. See id.
\13\ ``External Distributors'' may distribute the Exchange's
market data to persons who are not their officers, employees, or
affiliates, and may charge their own fees for the distribution of
such market data. See id.
\14\ See Notice, supra note 4, at 41443.
\15\ See id. at 41444.
\16\ New cToM Distributors will be assessed a pro-rata
percentage of the fees described above, which is the percentage of
the number of trading days remaining in the affected calendar month
as of the date on which they have been credentialed to use cToM,
divided by the total number of trading days in the affected calendar
month. See id.
---------------------------------------------------------------------------
III. Suspension of the Proposed Rule Changes
Pursuant to section 19(b)(3)(C) of the Act,\17\ at any time within
60 days of the date of filing of an immediately effective proposed rule
change pursuant to section 19(b)(1) of the Act,\18\ the Commission
summarily may temporarily suspend the change in the rules of a self-
regulatory organization (``SRO'') 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. The Commission believes a temporary suspension of the proposed
rule changes is necessary and appropriate to allow for additional
analysis of the proposed rule changes' consistency with the Act and the
rules thereunder.
---------------------------------------------------------------------------
\17\ 15 U.S.C. 78s(b)(3)(C).
\18\ 15 U.S.C. 78s(b)(1).
---------------------------------------------------------------------------
In support of the proposal, the Exchange states its belief that the
proposed fees overall are fair and reasonable as a form of ``cost
recovery plus the possibility of a reasonable return'' for the
Exchange's aggregate costs of offering the ToM and cToM data feeds.\19\
Specifically, the Exchange states the fees are based on a ``cost-plus
model'' used to determine a reasonable fee structure that is informed
by the Exchange's understanding of different use of products by
different types of participants.\20\ According to the Exchange,
employing a methodology that is the ``result of an extensive review and
analysis,'' it estimates the total projected annual cost of providing
the ToM and cToM data feeds to be $665,296.\21\ To arrive at these
figures, the Exchange states that it undertook a thorough internal
analysis of nearly every expense in the Exchange's general expense
ledger to determine whether each such expense related to the provision
of ToM and cToM data feeds, and, if such expense did so relate, what
portion (or percentage) of such expense supported the provision of ToM
and cToM data feeds.\22\ The Exchange states that it determined the
total cost for the Exchange and its affiliated markets for each cost
driver \23\ through a company-wide this process that included
discussions with senior management, Exchange department heads, and the
Finance Team.\24\ The Exchange further
[[Page 53939]]
states that it determined what portion of the cost allocated to the
Exchange pursuant to this methodology is to be allocated to each core
service, including the appropriate allocation to market data.\25\ The
Exchange states that through this allocation methodology, the Exchange
``applied an estimated allocation of each cost driver to each core
service'' and ``[e]ach of the [resulting] cost allocations is unique to
the Exchange and represents a percentage of overall cost that was
allocation to the Exchange pursuant to the initial allocation.'' \26\
---------------------------------------------------------------------------
\19\ See id. 41450.
\20\ See id. at 41450. In addition, the Exchange states that the
proposed monthly cToM fees for Internal and External Distributors
are identical to the fees that the Exchange proposes to charge for
ToM. See id. at 41444. The Exchange also states that cToM was
provided free of charge for the past four years, since the cToM
market data product was established on the Exchange, the Exchange
absorbed all costs associated with compiling and disseminating cToM
during that time, and the Exchange now proposes to establish fees
for cToM to recoup its ongoing costs going forward. See id. at
41443.
\21\ See id. at 41446. The Exchange states that the Cost
Analysis is based on the Exchange's 2023 fiscal year of operations
and projections. See id. at 41449. The Exchange has calculated the
annual cost for producing ToM to subscribers to be $317,753, and
$347,543 for cToM. See id. at 41443.
\22\ See id. at 41446.
\23\ The Exchange defines ``cost drivers'' within the filing as
the costs necessary to deliver each of the core services, see infra
note 25, including infrastructure, software, human resources (i.e.,
personnel), and certain general and administrative expenses. See
Notice supra note 4, at 41445.
\24\ See id. at 41445. The Exchange states that because the
Exchange's parent company currently owns and operates four separate
and distinct marketplaces, the Exchange's parent company determines
the actual cost for each marketplace, which results in different
allocations and amounts across exchanges for the same cost drivers.
See id. According to the Exchange, its allocation methodology
ensures that no portion of any cost would be allocated twice or
double-counted between the Exchange and its affiliated markets. See
id.
\25\ See id. at 41446. The Exchange describes ``core services''
as services provided by the Exchange, including transactions, market
data, membership services, physical connectivity, and ports (which
provides order entry, cancellation and modification functionality,
risk functionality, ability to receive drop copies, and other
functionality). See id.
\26\ Id.
---------------------------------------------------------------------------
The Exchange states that the $665,296 aggregate annual costs for
providing the ToM and cToM data feeds is the sum of to the following
individual line-item costs: (1) Human Resources at $354,553; (2)
Network Infrastructure (fiber connectivity) at $9,428; (3) Data Center
at $20,630; (4) Hardware and Software Maintenance and Licenses at
$22,202; (5) Depreciation at $21,167; and (6) Allocated Shared Expenses
at $237,316.\27\ The Exchange represents that it estimates that the
proposed fees will result in an annual revenue of approximately
$804,000, which is a potential profit margin of 17% over the cost of
providing ToM and cToM market data feeds.\28\
---------------------------------------------------------------------------
\27\ See id. at 41446-47.
\28\ See id. at 41446, 41448.
---------------------------------------------------------------------------
The Exchange states its belief that a 17% rate of return is
reasonable because it allows the Exchange to ``recoup all of its
expenses for providing the ToM and cToM data products'' and that any
additional revenue would represent no more than what the Exchange
believes to be a reasonable rate of return.\29\ In addition, the
Exchange states its belief that the proposed fees are reasonable
because they are generally less than the fees charged by competing
options exchanges for comparable market data products.\30\
---------------------------------------------------------------------------
\29\ Id. at 41450. The Exchange also states that an
approximately 17% mark-up is fair and reasonable after taking into
account the costs related to creating, generating and disseminating
the ToM and cToM data feeds and the fact that the Exchange will need
to fund future expenditures. Id. at 41448.
\30\ Id. at 41450.
---------------------------------------------------------------------------
In further support of the proposal, the Exchange states its belief
that the fees are reasonable, fair, and equitable, and not unfairly
discriminatory, because they are designed to align fees with services
provided, are allocated fairly and equitably among the various
categories of users of the feeds with any differences among categories
of users being justified and appropriate, and will apply uniformly to
all data recipients that choose to subscribe to the ToM and cToM data
feeds.\31\ Moreover, the Exchange asserts that it is reasonable,
equitable, and not unfairly discriminatory to assess Internal
Distributors fees that are lower than the fees assessed for External
Distributors for subscriptions to the ToM and cToM data feeds because
Internal Distributors have limited, restricted usage rights to the
market data, as compared to External Distributors, which have more
expansive usage rights, including rights to commercialize such market
data.\32\
---------------------------------------------------------------------------
\31\ See id.
\32\ See id. at 41451. In addition, the Exchange argues that it
utilizes more resources to support External Distributors as compared
to Internal Distributors, as External Distributors have reporting
and monitoring obligations that Internal Distributors do not have,
thus requiring additional time and effort of the Exchange's staff.
See id.
---------------------------------------------------------------------------
Finally, the Exchange asserts that the proposed fees would not
cause any unnecessary or inappropriate burden on inter-market
competition because other exchanges already have similar market data
fees and they are free to adopt comparable fee structures subject to
the Commission's rule filing process.\33\ Furthermore, the Exchange
asserts that the allowing the Exchange, or any new market entrant, to
waive fees for a period of time to allow it to become established, such
as the Exchange did with cToM, will encourage market entry and thus
ultimately promote competition.\34\ The Exchange also asserts that the
proposed rule change would not cause any unnecessary or inappropriate
burden on intra-market competition because the proposed fees are
associated with the usage of the data feed by each market participant
based on whether the market participant internally and externally
distributes the Exchange data.\35\
---------------------------------------------------------------------------
\33\ See id. at 41452.
\34\ See id.
\35\ See id.
---------------------------------------------------------------------------
To date, the Commission has not received any comment letters on the
revised justifications for the increase in ToM market data fees or the
establishment of the cToM market data fees.
When exchanges file their proposed rule changes with the
Commission, including fee filings like the Exchange's present proposal,
they are required to provide a statement supporting the proposal's
basis under the Act and the rules and regulations thereunder applicable
to the exchange.\36\ The instructions to Form 19b-4, on which exchanges
file their proposed rule changes, specify that such statement ``should
be sufficiently detailed and specific to support a finding that the
proposed rule change is consistent with [those] requirements.'' \37\
---------------------------------------------------------------------------
\36\ See 17 CFR 240.19b-4 (Item 3 entitled ``Self-Regulatory
Organization's Statement of the Purpose of, and Statutory Basis for,
the Proposed Rule Change'').
\37\ See id.
---------------------------------------------------------------------------
Section 6 of the Act, including sections 6(b)(4), (5), and (8),
require the rules of an exchange to: (1) provide for the equitable
allocation of reasonable fees among members, issuers, and other persons
using the exchange's facilities; \38\ (2) perfect the mechanism of a
free and open market and a national market system, protect investors
and the public interest, and not be designed to permit unfair
discrimination between customers, issuers, brokers, or dealers; \39\
and (3) not impose any burden on competition not necessary or
appropriate in furtherance of the purposes of the Act.\40\
---------------------------------------------------------------------------
\38\ 15 U.S.C. 78f(b)(4).
\39\ 15 U.S.C. 78f(b)(5).
\40\ 15 U.S.C. 78f(b)(8).
---------------------------------------------------------------------------
In temporarily suspending the Exchange's proposed rule change, the
Commission intends to further consider whether the proposal to increase
fees for the ToM market data feeds and establish fees for the cToM
market data feeds are consistent with the statutory requirements
applicable to a national securities exchange under the Act. In
particular, the Commission will consider whether the proposed rule
change satisfies the standards under the Act and the rules thereunder
requiring, among other things, that an exchange's rules provide for the
equitable allocation of reasonable fees among members, issuers, and
other persons using its facilities; not permit unfair discrimination
between customers, issuers, brokers or dealers; and do not impose any
burden on competition not necessary or appropriate in furtherance of
the purposes of the Act.\41\
---------------------------------------------------------------------------
\41\ See 15 U.S.C. 78f(b)(4), (5), and (8), respectively.
---------------------------------------------------------------------------
Therefore, the Commission finds that it is appropriate in the
public interest, for the protection of investors, and otherwise in
furtherance of the purposes of the Act, to temporarily suspend the
proposed rule change.\42\
---------------------------------------------------------------------------
\42\ For purposes of temporarily suspending the proposed rule
change, the Commission has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
---------------------------------------------------------------------------
[[Page 53940]]
IV. Proceedings To Determine Whether To Approve or Disapprove the
Proposed Rule Changes
In addition to temporarily suspending the proposal, the Commission
also hereby institutes proceedings pursuant to sections 19(b)(3)(C)
\43\ and 19(b)(2)(B)of the Act \44\ to determine whether the Exchange's
proposed rule change should be approved or disapproved. Institution of
proceedings does not indicate that the Commission has reached any
conclusions with respect to any of the issues involved. Rather, the
Commission seeks and encourages interested persons to provide
additional comment on the proposed rule change to inform the
Commission's analysis of whether to approve or disapprove the proposed
rule change.
---------------------------------------------------------------------------
\43\ 15 U.S.C. 78s(b)(3)(C). Once the Commission temporarily
suspends a proposed rule change, section 19(b)(3)(C) of the Act
requires that the Commission institute proceedings under section
19(b)(2)(B) to determine whether a proposed rule change should be
approved or disapproved.
\44\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------
Pursuant to section 19(b)(2)(B) of the Act,\45\ the Commission is
providing notice of the grounds for possible disapproval under
consideration:
---------------------------------------------------------------------------
\45\ Id. Section 19(b)(2)(B) of the Act also provides that
proceedings to determine whether to disapprove a proposed rule
change must be concluded within 180 days of the date of publication
of notice of the filing of the proposed rule change. See id. The
time for conclusion of the proceedings may be extended for up to 60
days if the Commission finds good cause for such extension and
publishes its reasons for so finding, or if the exchange consents to
the longer period. See id.
---------------------------------------------------------------------------
Whether the Exchange has demonstrated how the proposed
fees are consistent with section 6(b)(4) of the Act, which requires
that the rules of a national securities exchange ``provide for the
equitable allocation of reasonable dues, fees, and other charges among
its members and issuers and other persons using its facilities''; \46\
---------------------------------------------------------------------------
\46\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------
Whether the Exchange has demonstrated how the proposed
fees are consistent with section 6(b)(5) of the Act, which requires,
among other things, that the rules of a national securities exchange
not be ``designed to permit unfair discrimination between customers,
issuers, brokers, or dealers''; \47\ and
---------------------------------------------------------------------------
\47\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
Whether the Exchange has demonstrated how the proposed
fees are consistent with section 6(b)(8) of the Act, which requires
that the rules of a national securities exchange ``not impose any
burden on competition not necessary or appropriate in furtherance of
the purposes of [the Act].'' \48\
---------------------------------------------------------------------------
\48\ 15 U.S.C. 78f(b)(8).
---------------------------------------------------------------------------
As discussed in section III above, the Exchange made various
arguments in support of their proposal. The Commission believes that
there are questions as to whether the Exchange has provided sufficient
information to demonstrate that the proposed fees are consistent with
the Act and the rules thereunder.
Under the Commission's Rules of Practice, the ``burden to
demonstrate that a proposed rule change is consistent with the [Act]
and the rules and regulations issued thereunder . . . is on the [SRO]
that proposed the rule change.'' \49\ The description of a proposed
rule change, its purpose and operation, its effect, and a legal
analysis of its consistency with applicable requirements must all be
sufficiently detailed and specific to support an affirmative Commission
finding,\50\ and any failure of an SRO to provide this information may
result in the Commission not having a sufficient basis to make an
affirmative finding that a proposed rule change is consistent with the
Act and the applicable rules and regulations.\51\
---------------------------------------------------------------------------
\49\ 17 CFR 201.700(b)(3).
\50\ See id.
\51\ See id.
---------------------------------------------------------------------------
The Commission is instituting proceedings to allow for additional
consideration and comment on the issues raised herein, including as to
whether the proposed fees are consistent with the Act, and
specifically, with its requirements that exchange fees be reasonable
and equitably allocated, not be unfairly discriminatory, and not impose
any burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act.\52\
---------------------------------------------------------------------------
\52\ See 15 U.S.C. 78f(b)(4), (5), and (8).
---------------------------------------------------------------------------
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. Such comments should be submitted by August 30, 2023.
Rebuttal comments should be submitted by September 13, 2023. 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.\53\
---------------------------------------------------------------------------
\53\ 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).
---------------------------------------------------------------------------
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 changes.
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-2023-13 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-2023-13. 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
a.m. and 3 p.m. Copies of the filing also will be available for
inspection and copying at the principal office of the Exchange. Do not
include personal identifiable information in submissions; you should
submit only information that you wish to make available publicly. We
may redact in part or
[[Page 53941]]
withhold entirely from publication submitted material that is obscene
or subject to copyright protection. All submissions should refer to
file number SR-EMERALD-2023-13 and should be submitted on or before
August 30, 2023. Rebuttal comments should be submitted by September 13,
2023.
VI. Conclusion
It is therefore ordered, pursuant to section 19(b)(3)(C) of the
Act,\54\ that File No. SR-EMERALD-2023-13, 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.
---------------------------------------------------------------------------
\54\ 15 U.S.C. 78s(b)(3)(C).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\55\
---------------------------------------------------------------------------
\55\ 17 CFR 200.30-3(a)(57).
---------------------------------------------------------------------------
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-16988 Filed 8-8-23; 8:45 am]
BILLING CODE 8011-01-P
