Self-Regulatory Organizations; MIAX Emerald, LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Exchange Rule 517, Quote Types Defined, 89738-89740 [2023-28705]
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89738
Federal Register / Vol. 88, No. 248 / Thursday, December 28, 2023 / Notices
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
withhold entirely from publication
submitted material that is obscene or
subject to copyright protection. All
submissions should refer to file number
SR–CboeBZX–2023–104 and should be
submitted on or before January 18, 2024.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.31
Christina Z. Milnor,
Assistant Secretary.
[FR Doc. 2023–28603 Filed 12–27–23; 8:45 am]
BILLING CODE 8011–01–P
[Release No. 34–99232; File No. SR–
EMERALD–2023–31]
Self-Regulatory Organizations; MIAX
Emerald, LLC; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change To Amend Exchange
Rule 517, Quote Types Defined
khammond on DSKJM1Z7X2PROD with NOTICES
December 22, 2023.
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 December 13, 2023, MIAX Emerald,
LLC (‘‘MIAX Emerald’’ or ‘‘Exchange’’)
filed with the Securities and Exchange
Commission (‘‘Commission’’) a
proposed rule change as described in
31 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
20:14 Dec 27, 2023
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange is filing a proposal to
amend Exchange Rule 517, Quote Types
Defined.
The text of the proposed rule change
is available on the Exchange’s website at
https://www.miaxglobal.com/markets/
us-options/emerald-options/rule-filings,
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
SECURITIES AND EXCHANGE
COMMISSION
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Items I and II below, which Items have
been prepared by the Exchange. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
Jkt 262001
The Exchange proposes to amend
Rule 517, Quote Types Defined.
Specifically, the Exchange proposes to
adopt new Interpretations and Policies
.02 to Rule 517 to adopt new risk
protection behavior for replacement
Standard quotes 3 that are rejected.
Background
Market Makers 4 on the Exchange
have heightened obligations separate
from other market participants.
Transactions of a Market Maker should
constitute a course of dealings
reasonably calculated to contribute to
the maintenance of a fair and orderly
market, and Market Makers should not
3 A Standard quote is a quote submitted by a
Market Maker that cancels and replaces the Market
Maker’s previous Standard quote, if any. See
Exchange Rule 517(a)(1).
4 The term ‘‘Market Makers’’ refers to ‘‘Lead
Market Makers’’, ‘‘Primary Lead Market Makers’’
and ‘‘Registered Market Makers’’ collectively. See
Exchange Rule 100.
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make bids 5 or offers 6 or enter into
transactions that are inconsistent with
such a course of dealings.7 A quotation
may only be entered by a Market Maker,
and only in the options classes to which
the Market Maker is appointed under
Rule 602.8 A Market Maker’s bid and
offer for a series of option contracts
shall state a price accompanied by the
number of contracts at that price the
Market Maker is willing to buy or sell
upon receipt of an order or upon
interaction with a quotation entered by
another Market Maker on the
Exchange.9 Additionally, a Market
Maker that enters a bid (offer) on the
Exchange must enter an offer (bid)
within the spread allowable under Rule
603(b)(4).10
The Exchange has three classes of
Market Makers; Primary Lead Market
Makers, Lead Market Makers, and
Registered Market Makers.11 Further,
each class of Market Maker has its own
separate and distinct quoting
obligations. A Primary Lead Market
Maker must provide continuous twosided Standard quotes, which for the
purpose of paragraph (e)(1)(i) of Rule
604 shall mean 90% of the time, for the
options classes to which it is
appointed.12 A Primary Lead Market
Maker must provide continuous twosided Standard quotes in at least the
lesser of 99% of the non-adjusted option
series, or 100% of the non-adjusted
option series minus one put-call pair, in
each class in which the Primary Lead
Market Maker is assigned.13 A Lead
Market Maker must provide continuous
two-sided Standard quotes, which for
the purpose of paragraph (e)(2)(i) of
Rule 604 shall mean 90% of the time,
for the options classes to which it is
appointed.14 A Lead Market Maker must
provide continuous two-sided Standard
quotes in at least 90% of the nonadjusted option series in each of its
appointed classes. Such quotations must
meet the bid/ask differential
requirements of Rule 603(b)(4).15 A
Registered Market Maker must provide
continuous two-sided Standard quotes
throughout the trading day in 60% of
the non-adjusted series that have a time
5 The term ‘‘bid’’ means a limit order or quote to
buy one or more option contracts. See Exchange
Rule 100.
6 The term ‘‘offer’’ means a limit order or quote
to sell one or more option contracts. See Exchange
Rule 100.
7 See Exchange Rule 603(a).
8 See Exchange Rule 604(a).
9 See Exchange Rule 604(b).
10 See Exchange Rule 604(c).
11 See supra note 4.
12 See Exchange Rule 604(e)(1)(i).
13 See Exchange Rule 604(e)(1)(ii).
14 See Exchange Rule 604(e)(2)(i).
15 See Exchange Rule 604(e)(2)(ii).
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to expiration of less than nine months
in each of its appointed classes. For the
purpose of paragraph (e)(3)(i) of Rule
604, continuous two-sided quoting shall
mean 90% of the time, for the options
classes to which the Registered Market
Maker is appointed.16
The Exchange offers several features
to Market Makers designed to mitigate
potential risks unique to Market Makers
given their obligations on the Exchange.
For example, the Exchange offers an
Aggregate Risk Manager (‘‘ARM’’)
protection which provides that the
MIAX System 17 will maintain a
counting program (‘‘counting program’’)
for each Market Maker who is required
to submit continuous two-sided
quotations pursuant to Rule 604 in each
of their appointed option classes.18 The
System will engage the Aggregate Risk
Manager in a particular option class
when the counting program has
determined that a Market Maker has
traded during the specified time period
a number of contracts equal to or above
their Allowable Engagement Percentage.
The Aggregate Risk Manager will then
automatically remove the Market
Maker’s Standard quotations from the
Exchange’s disseminated quotation in
all series of that particular option class
until the Market Maker sends a
notification to the System of the intent
to reengage quoting and submits a new
revised quotation.19
Additionally, the Exchange offers
Market Makers Single Side Protection
(‘‘SSP’’) functionality which provides
that, if the full remaining size of a
Market Maker’s complex Standard quote
or cIOC eQuote in a strategy is
exhausted by a trade, the System will
trigger the SSP for the traded side of the
strategy. When triggered, the System
will cancel all complex Standard quotes
and block all new inbound complex
Standard quotes and cIOC eQuotes for
that particular side of that strategy for
that MPID.20
Proposal
The Exchange now proposes to cancel
a Market Maker’s Standard quote in
certain scenarios when a replacement
Standard quote submitted by the Market
Maker is rejected. Specifically, the
Exchange proposes to adopt new
Interpretations and Policies .02 to
Exchange Rule 517 which will provide
that a replacement Standard quote that
is rejected for a technical reason (as
16 See
Exchange Rule 604(e)(3)(i).
term ‘‘System’’ means the automated
trading system used by the Exchange for the trading
of securities. See Exchange Rule 100.
18 See Exchange Rule 612.
19 See Exchange Rule 612(b)(1).
20 See Exchange Rule 532(b)(8).
17 The
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20:14 Dec 27, 2023
Jkt 262001
described below) will still cancel the
target Standard quote.
A Standard quote is submitted by the
Market Maker to the Exchange using the
MIAX Express Interface (‘‘MEI’’). MEI is
a messaging interface that MIAX
members that are approved as Market
Makers use to submit quotes for trading
on the MIAX Options market. Market
Makers are only allowed to submit
quotes in the products of underlying
instruments to which they are
assigned.21 Each message submitted to
the Exchange via the MEI must pass a
number of validity checks that are
performed by the System. These
include, but are not limited to, price and
size checks. Specifically, Standard
quote prices must not (i) be less than
zero; (ii) exceed the maximum price;
and (iii) must comply with the
minimum trade increment 22 for that
class.23 Additionally, Standard quote
sizes must not be less than zero and
must not be less than the minimum
quote size as defined in Rule
604(b)(2).24 Collectively, these
requirements constitute the technical
reasons for which a replacement
Standard quote may be rejected, but
which will still result in the
cancellation of the target Standard quote
under the Exchange’s proposal.
The Exchange believes that removing
the Standard quote that the Market
Maker was attempting to alter promotes
the quality of the Exchange’s market as
removing a Standard quote that was
targeted for replacement but was not
replaced due to a technical reason
maintains the integrity of quotes
available in the market by ensuring that
all available quotes accurately represent
Market Maker interest.
When a Market Maker’s replacement
Standard quote is rejected because of a
technical reason the existing Standard
quote will be cancelled by the
Exchange. In addition to maintaining
21 See MIAX Emerald Options Exchange, Express
Interface for Quoting and Trading Options, MEI
Interface Specification, version 2.2 (7/28/2023),
available at: https://www.miaxglobal.com/markets/
us-options/emerald-options/interfacespecifications.
22 The price of Market Maker quotes shall be in
the minimum trading increments applicable to the
security under Rule 510. See Exchange Rule
604(b)(1).
23 The terms ‘‘class of options’’ or ‘‘option class’’
mean all option contracts covering the same
underlying security. See Exchange Rule 100.
24 Exchange Rule 604(b)(2) provides that, the
initial size of a Market Maker incoming Standard
Quote and all other types of eQuotes must be for
the minimum number of contracts, which minimum
number shall be at least one (1) contract. The
minimum number of contracts, which can vary
according to type of quote or eQuote, shall be at
least one (1) contract, will be determined by the
Exchange on a class-by-class basis and announced
to the Members through a Regulatory Circular.
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89739
the integrity of the Exchange’s market,
the Exchange believes this functionality
also provides an additional level of risk
protection to Market Makers that are
attempting to replace an existing
Standard quote but are unable to as a
result of a technical reason with the
replacement Standard quote.
2. Statutory Basis
The Exchange believes that its
proposed rule change is consistent with
the Act and the rules and regulations
thereunder applicable to the Exchange
and, in particular, the requirements of
Section 6(b) of the Act.25 Specifically,
the Exchange believes that its proposed
rule change is consistent with Section
6(b)(5) 26 requirements 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
mechanism of a free and open market
and a national market system and, in
general, to protect investors and the
public interest. Additionally, the
Exchange believes the proposed rule
change is consistent with the Section
(6)(b)(5) 27 requirement that the rules of
an exchange not be designed to permit
unfair discrimination between
customers, issuers, brokers, or dealers as
the proposed rule will be uniformly
applied to all Standard quote messages
submitted by Market Makers on the
Exchange.
The Exchange believes its proposal
promotes just and equitable principles
of trade and removes impediments to
and perfects the mechanisms of a free
and open market and a national market
system as removing a Market Maker’s
Standard quote that the Market Maker
has targeted for replacement, but failed
to replace due to a technical reason with
the replacement Standard quote
message, promotes the quality of the
Exchange’s market by ensuring that all
available quotes accurately represent
Market Maker interest. When a Market
Maker enters a replacement Standard
quote a Market Maker has an
expectation that the existing Standard
quote will be cancelled, currently the
existing Standard quote that the Market
Maker intended to cancel may be
executed if the replacement Standard
quote is rejected which is contrary to
the Market Maker’s intent.
25 15
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
27 See id.
26 15
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Federal Register / Vol. 88, No. 248 / Thursday, December 28, 2023 / Notices
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act.
The Exchange does not believe that its
proposed rule change will impose any
burden on intra-market competition as
the Rules of the Exchange apply equally
to all Market Makers of the Exchange
and all Market Makers that submit a
replacement Standard quote that is
rejected as a result of a technical reason
will have the existing target Standard
quote removed by the Exchange.
The Exchange does not believe that its
proposed rule change will impose any
burden on inter-market competition, as
the Exchange’s proposal is not a
competitive filing. Rather the Exchange
believes that its proposal may promote
inter-market competition, as the
Exchange’s proposal will improve
market quality on the Exchange which
may improve competition for orders
across all exchanges.
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 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 28 and
subparagraph (f)(6) of Rule 19b 4
thereunder.29
A proposed rule change filed under
Rule 19b–4(f)(6) 30 normally does not
become operative prior to 30 days after
the date of filing. However, pursuant to
Rule 19b–4(f)(6)(iii),31 the Commission
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, 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.
30 17 CFR 240.19b–4(f)(6).
31 17 CFR 240.19b–4(f)(6)(iii).
may designate a shorter time if such
action is consistent with the protection
of investors and the public interest. The
Exchange has asked the Commission to
waive the 30-day operative delay so that
the proposed rule change may become
operative immediately upon filing. The
Exchange requested the waiver because
it would ensure the integrity of quotes
available in the market. The Exchange
stated that the Exchange provides risk
protection functionality specifically for
Market Makers due to the heightened
obligations that Market Makers have on
the Exchange and that the proposed rule
change would ensure that the quotes
available in the marketplace accurately
represent Market Maker interest. In
addition, the Commission notes that the
proposed rule change is substantively
identical to a recent proposed rule
change filed by another national
securities exchange that is now
operative.32 For these reasons, the
Commission believes that waiving the
30-day operative delay is consistent
with the protection of investors and the
public interest. Therefore, the
Commission hereby waives the 30-day
operative delay and designates the
proposal operative upon filing.33
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
change 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:
28 15
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29 17
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32 See
Securities Exchange Act Release No. 99041
(November 29, 2023), 88 FR 84376 (December 5,
2023) (SR–MIAX–2023–45); see also Interpretations
and Policies .02 of MIAX Options Exchange Rule
517.
33 For purposes only of waiving the 30-day
operative delay, the Commission has also
considered the proposed rule’s impact on
efficiency, competition, and capital formation. See
15 U.S.C. 78c(f).
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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–2023–31 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–2023–31. 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
withhold entirely from publication
submitted material that is obscene or
subject to copyright protection. All
submissions should refer to file number
SR–EMERALD–2023–31 and should be
submitted on or before January 18, 2024.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.34
Christina Z. Milnor,
Assistant Secretary.
[FR Doc. 2023–28705 Filed 12–27–23; 8:45 am]
BILLING CODE 8011–01–P
34 17
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CFR 200.30–3(a)(12), (59).
28DEN1
]]>Agencies
[Federal Register Volume 88, Number 248 (Thursday, December 28, 2023)]
[Notices]
[Pages 89738-89740]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-28705]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-99232; File No. SR-EMERALD-2023-31]
Self-Regulatory Organizations; MIAX Emerald, LLC; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend
Exchange Rule 517, Quote Types Defined
December 22, 2023.
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 December 13, 2023, MIAX Emerald, LLC (``MIAX
Emerald'' or ``Exchange'') filed with the Securities and Exchange
Commission (``Commission'') a proposed rule change as described in
Items I and II below, which Items have been prepared by the Exchange.
The Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange is filing a proposal to amend Exchange Rule 517, Quote
Types Defined.
The text of the proposed rule change is available on the Exchange's
website at https://www.miaxglobal.com/markets/us-options/emerald-options/rule-filings, 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 Rule 517, Quote Types Defined.
Specifically, the Exchange proposes to adopt new Interpretations and
Policies .02 to Rule 517 to adopt new risk protection behavior for
replacement Standard quotes \3\ that are rejected.
---------------------------------------------------------------------------
\3\ A Standard quote is a quote submitted by a Market Maker that
cancels and replaces the Market Maker's previous Standard quote, if
any. See Exchange Rule 517(a)(1).
---------------------------------------------------------------------------
Background
Market Makers \4\ on the Exchange have heightened obligations
separate from other market participants. Transactions of a Market Maker
should constitute a course of dealings reasonably calculated to
contribute to the maintenance of a fair and orderly market, and Market
Makers should not make bids \5\ or offers \6\ or enter into
transactions that are inconsistent with such a course of dealings.\7\ A
quotation may only be entered by a Market Maker, and only in the
options classes to which the Market Maker is appointed under Rule
602.\8\ A Market Maker's bid and offer for a series of option contracts
shall state a price accompanied by the number of contracts at that
price the Market Maker is willing to buy or sell upon receipt of an
order or upon interaction with a quotation entered by another Market
Maker on the Exchange.\9\ Additionally, a Market Maker that enters a
bid (offer) on the Exchange must enter an offer (bid) within the spread
allowable under Rule 603(b)(4).\10\
---------------------------------------------------------------------------
\4\ The term ``Market Makers'' refers to ``Lead Market Makers'',
``Primary Lead Market Makers'' and ``Registered Market Makers''
collectively. See Exchange Rule 100.
\5\ The term ``bid'' means a limit order or quote to buy one or
more option contracts. See Exchange Rule 100.
\6\ The term ``offer'' means a limit order or quote to sell one
or more option contracts. See Exchange Rule 100.
\7\ See Exchange Rule 603(a).
\8\ See Exchange Rule 604(a).
\9\ See Exchange Rule 604(b).
\10\ See Exchange Rule 604(c).
---------------------------------------------------------------------------
The Exchange has three classes of Market Makers; Primary Lead
Market Makers, Lead Market Makers, and Registered Market Makers.\11\
Further, each class of Market Maker has its own separate and distinct
quoting obligations. A Primary Lead Market Maker must provide
continuous two-sided Standard quotes, which for the purpose of
paragraph (e)(1)(i) of Rule 604 shall mean 90% of the time, for the
options classes to which it is appointed.\12\ A Primary Lead Market
Maker must provide continuous two-sided Standard quotes in at least the
lesser of 99% of the non-adjusted option series, or 100% of the non-
adjusted option series minus one put-call pair, in each class in which
the Primary Lead Market Maker is assigned.\13\ A Lead Market Maker must
provide continuous two-sided Standard quotes, which for the purpose of
paragraph (e)(2)(i) of Rule 604 shall mean 90% of the time, for the
options classes to which it is appointed.\14\ A Lead Market Maker must
provide continuous two-sided Standard quotes in at least 90% of the
non-adjusted option series in each of its appointed classes. Such
quotations must meet the bid/ask differential requirements of Rule
603(b)(4).\15\ A Registered Market Maker must provide continuous two-
sided Standard quotes throughout the trading day in 60% of the non-
adjusted series that have a time
[[Page 89739]]
to expiration of less than nine months in each of its appointed
classes. For the purpose of paragraph (e)(3)(i) of Rule 604, continuous
two-sided quoting shall mean 90% of the time, for the options classes
to which the Registered Market Maker is appointed.\16\
---------------------------------------------------------------------------
\11\ See supra note 4.
\12\ See Exchange Rule 604(e)(1)(i).
\13\ See Exchange Rule 604(e)(1)(ii).
\14\ See Exchange Rule 604(e)(2)(i).
\15\ See Exchange Rule 604(e)(2)(ii).
\16\ See Exchange Rule 604(e)(3)(i).
---------------------------------------------------------------------------
The Exchange offers several features to Market Makers designed to
mitigate potential risks unique to Market Makers given their
obligations on the Exchange. For example, the Exchange offers an
Aggregate Risk Manager (``ARM'') protection which provides that the
MIAX System \17\ will maintain a counting program (``counting
program'') for each Market Maker who is required to submit continuous
two-sided quotations pursuant to Rule 604 in each of their appointed
option classes.\18\ The System will engage the Aggregate Risk Manager
in a particular option class when the counting program has determined
that a Market Maker has traded during the specified time period a
number of contracts equal to or above their Allowable Engagement
Percentage. The Aggregate Risk Manager will then automatically remove
the Market Maker's Standard quotations from the Exchange's disseminated
quotation in all series of that particular option class until the
Market Maker sends a notification to the System of the intent to
reengage quoting and submits a new revised quotation.\19\
---------------------------------------------------------------------------
\17\ The term ``System'' means the automated trading system used
by the Exchange for the trading of securities. See Exchange Rule
100.
\18\ See Exchange Rule 612.
\19\ See Exchange Rule 612(b)(1).
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Additionally, the Exchange offers Market Makers Single Side
Protection (``SSP'') functionality which provides that, if the full
remaining size of a Market Maker's complex Standard quote or cIOC
eQuote in a strategy is exhausted by a trade, the System will trigger
the SSP for the traded side of the strategy. When triggered, the System
will cancel all complex Standard quotes and block all new inbound
complex Standard quotes and cIOC eQuotes for that particular side of
that strategy for that MPID.\20\
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\20\ See Exchange Rule 532(b)(8).
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Proposal
The Exchange now proposes to cancel a Market Maker's Standard quote
in certain scenarios when a replacement Standard quote submitted by the
Market Maker is rejected. Specifically, the Exchange proposes to adopt
new Interpretations and Policies .02 to Exchange Rule 517 which will
provide that a replacement Standard quote that is rejected for a
technical reason (as described below) will still cancel the target
Standard quote.
A Standard quote is submitted by the Market Maker to the Exchange
using the MIAX Express Interface (``MEI''). MEI is a messaging
interface that MIAX members that are approved as Market Makers use to
submit quotes for trading on the MIAX Options market. Market Makers are
only allowed to submit quotes in the products of underlying instruments
to which they are assigned.\21\ Each message submitted to the Exchange
via the MEI must pass a number of validity checks that are performed by
the System. These include, but are not limited to, price and size
checks. Specifically, Standard quote prices must not (i) be less than
zero; (ii) exceed the maximum price; and (iii) must comply with the
minimum trade increment \22\ for that class.\23\ Additionally, Standard
quote sizes must not be less than zero and must not be less than the
minimum quote size as defined in Rule 604(b)(2).\24\ Collectively,
these requirements constitute the technical reasons for which a
replacement Standard quote may be rejected, but which will still result
in the cancellation of the target Standard quote under the Exchange's
proposal.
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\21\ See MIAX Emerald Options Exchange, Express Interface for
Quoting and Trading Options, MEI Interface Specification, version
2.2 (7/28/2023), available at: https://www.miaxglobal.com/markets/us-options/emerald-options/interface-specifications.
\22\ The price of Market Maker quotes shall be in the minimum
trading increments applicable to the security under Rule 510. See
Exchange Rule 604(b)(1).
\23\ The terms ``class of options'' or ``option class'' mean all
option contracts covering the same underlying security. See Exchange
Rule 100.
\24\ Exchange Rule 604(b)(2) provides that, the initial size of
a Market Maker incoming Standard Quote and all other types of
eQuotes must be for the minimum number of contracts, which minimum
number shall be at least one (1) contract. The minimum number of
contracts, which can vary according to type of quote or eQuote,
shall be at least one (1) contract, will be determined by the
Exchange on a class-by-class basis and announced to the Members
through a Regulatory Circular.
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The Exchange believes that removing the Standard quote that the
Market Maker was attempting to alter promotes the quality of the
Exchange's market as removing a Standard quote that was targeted for
replacement but was not replaced due to a technical reason maintains
the integrity of quotes available in the market by ensuring that all
available quotes accurately represent Market Maker interest.
When a Market Maker's replacement Standard quote is rejected
because of a technical reason the existing Standard quote will be
cancelled by the Exchange. In addition to maintaining the integrity of
the Exchange's market, the Exchange believes this functionality also
provides an additional level of risk protection to Market Makers that
are attempting to replace an existing Standard quote but are unable to
as a result of a technical reason with the replacement Standard quote.
2. Statutory Basis
The Exchange believes that its proposed rule change is consistent
with the Act and the rules and regulations thereunder applicable to the
Exchange and, in particular, the requirements of Section 6(b) of the
Act.\25\ Specifically, the Exchange believes that its proposed rule
change is consistent with Section 6(b)(5) \26\ requirements 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 mechanism of a free and open market and a national market
system and, in general, to protect investors and the public interest.
Additionally, the Exchange believes the proposed rule change is
consistent with the Section (6)(b)(5) \27\ requirement that the rules
of an exchange not be designed to permit unfair discrimination between
customers, issuers, brokers, or dealers as the proposed rule will be
uniformly applied to all Standard quote messages submitted by Market
Makers on the Exchange.
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\25\ 15 U.S.C. 78f(b).
\26\ 15 U.S.C. 78f(b)(5).
\27\ See id.
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The Exchange believes its proposal promotes just and equitable
principles of trade and removes impediments to and perfects the
mechanisms of a free and open market and a national market system as
removing a Market Maker's Standard quote that the Market Maker has
targeted for replacement, but failed to replace due to a technical
reason with the replacement Standard quote message, promotes the
quality of the Exchange's market by ensuring that all available quotes
accurately represent Market Maker interest. When a Market Maker enters
a replacement Standard quote a Market Maker has an expectation that the
existing Standard quote will be cancelled, currently the existing
Standard quote that the Market Maker intended to cancel may be executed
if the replacement Standard quote is rejected which is contrary to the
Market Maker's intent.
[[Page 89740]]
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 proposed rule change will
impose any burden on intra-market competition as the Rules of the
Exchange apply equally to all Market Makers of the Exchange and all
Market Makers that submit a replacement Standard quote that is rejected
as a result of a technical reason will have the existing target
Standard quote removed by the Exchange.
The Exchange does not believe that its proposed rule change will
impose any burden on inter-market competition, as the Exchange's
proposal is not a competitive filing. Rather the Exchange believes that
its proposal may promote inter-market competition, as the Exchange's
proposal will improve market quality on the Exchange which may improve
competition for orders across all exchanges.
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 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 \28\ and
subparagraph (f)(6) of Rule 19b 4 thereunder.\29\
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\28\ 15 U.S.C. 78s(b)(3)(A).
\29\ 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, 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.
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A proposed rule change filed under Rule 19b-4(f)(6) \30\ normally
does not become operative prior to 30 days after the date of filing.
However, pursuant to Rule 19b-4(f)(6)(iii),\31\ the Commission may
designate a shorter time if such action is consistent with the
protection of investors and the public interest. The Exchange has asked
the Commission to waive the 30-day operative delay so that the proposed
rule change may become operative immediately upon filing. The Exchange
requested the waiver because it would ensure the integrity of quotes
available in the market. The Exchange stated that the Exchange provides
risk protection functionality specifically for Market Makers due to the
heightened obligations that Market Makers have on the Exchange and that
the proposed rule change would ensure that the quotes available in the
marketplace accurately represent Market Maker interest. In addition,
the Commission notes that the proposed rule change is substantively
identical to a recent proposed rule change filed by another national
securities exchange that is now operative.\32\ For these reasons, the
Commission believes that waiving the 30-day operative delay is
consistent with the protection of investors and the public interest.
Therefore, the Commission hereby waives the 30-day operative delay and
designates the proposal operative upon filing.\33\
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\30\ 17 CFR 240.19b-4(f)(6).
\31\ 17 CFR 240.19b-4(f)(6)(iii).
\32\ See Securities Exchange Act Release No. 99041 (November 29,
2023), 88 FR 84376 (December 5, 2023) (SR-MIAX-2023-45); see also
Interpretations and Policies .02 of MIAX Options Exchange Rule 517.
\33\ For purposes only of waiving the 30-day operative delay,
the Commission has also considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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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 change 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-2023-31 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-2023-31. 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 withhold entirely from publication submitted
material that is obscene or subject to copyright protection. All
submissions should refer to file number SR-EMERALD-2023-31 and should
be submitted on or before January 18, 2024.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\34\
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\34\ 17 CFR 200.30-3(a)(12), (59).
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Christina Z. Milnor,
Assistant Secretary.
[FR Doc. 2023-28705 Filed 12-27-23; 8:45 am]
BILLING CODE 8011-01-P
