Self-Regulatory Organizations; MIAX Emerald, LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Its Fee Schedule To Adopt Fees for Dedicated Cross Connection Access to the Testing Systems Environment, 102978-102982 [2024-29924]

Download as PDF 102978 Federal Register / Vol. 89, No. 243 / Wednesday, December 18, 2024 / Notices are available at www.prc.gov, Docket Nos. MC2025–694, K2025–693. POSTAL SERVICE Product Change—Priority Mail Express, Priority Mail, and USPS Ground Advantage® Negotiated Service Agreement Sean C. Robinson, Attorney, Corporate and Postal Business Law. [FR Doc. 2024–30001 Filed 12–17–24; 8:45 am] BILLING CODE 7710–12–P Postal ServiceTM. ACTION: Notice. AGENCY: The Postal Service gives notice of filing a request with the Postal Regulatory Commission to add a domestic shipping services contract to the list of Negotiated Service Agreements in the Mail Classification Schedule’s Competitive Products List. DATES: Date of required notice: December 18, 2024. FOR FURTHER INFORMATION CONTACT: Sean C. Robinson, 202–268–8405. SUPPLEMENTARY INFORMATION: The United States Postal Service® hereby gives notice that, pursuant to 39 U.S.C. 3642 and 3632(b)(3), on December 9, 2024, it filed with the Postal Regulatory Commission a USPS Request to Add Priority Mail Express, Priority Mail & USPS Ground Advantage® Contract 970 to Competitive Product List. Documents are available at www.prc.gov, Docket Nos. MC2025–714, K2025–713. SUMMARY: Sean C. Robinson, Attorney, Corporate and Postal Business Law. [FR Doc. 2024–30031 Filed 12–17–24; 8:45 am] BILLING CODE 7710–12–P POSTAL SERVICE Product Change—Priority Mail Express, Priority Mail, and USPS Ground Advantage® Negotiated Service Agreement Postal ServiceTM. Notice. AGENCY: ACTION: The Postal Service gives notice of filing a request with the Postal Regulatory Commission to add a domestic shipping services contract to the list of Negotiated Service Agreements in the Mail Classification Schedule’s Competitive Products List. DATES: Date of required notice: December 18, 2024. FOR FURTHER INFORMATION CONTACT: Sean C. Robinson, 202–268–8405. SUPPLEMENTARY INFORMATION: The United States Postal Service® hereby gives notice that, pursuant to 39 U.S.C. 3642 and 3632(b)(3), on December 9, 2024, it filed with the Postal Regulatory Commission a USPS Request to Add Priority Mail Express, Priority Mail & USPS Ground Advantage® Contract 952 to Competitive Product List. Documents khammond on DSK9W7S144PROD with NOTICES SUMMARY: VerDate Sep<11>2014 18:09 Dec 17, 2024 Jkt 265001 SECURITIES AND EXCHANGE COMMISSION [Release No. 34–101895; File No. SR– EMERALD–2024–27] Self-Regulatory Organizations; MIAX Emerald, LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Its Fee Schedule To Adopt Fees for Dedicated Cross Connection Access to the Testing Systems Environment December 12, 2024. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’),1 and Rule 19b–4 thereunder,2 notice is hereby given that on November 29, 2024, MIAX Emerald, LLC (‘‘MIAX Emerald’’ or ‘‘Exchange’’), filed with the Securities and Exchange Commission (‘‘Commission’’) a proposed rule change as described in Items I, II, and III below, which Items have been prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend the MIAX Emerald Options Exchange Fee Schedule (the ‘‘Fee Schedule’’) to establish a fee for market participants that choose to utilize the Exchange’s testing systems environment via a dedicated cross connection. The text of the proposed rule change is available on the Exchange’s website at https://www.miaxglobal.com/markets/ us-options/miax-options/rule-filings, at the Exchange’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 1 15 2 17 PO 00000 U.S.C. 78s(b)(1). CFR 240.19b–4. Frm 00127 Fmt 4703 Sfmt 4703 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 establish a fee for market participants that choose to utilize the Exchange’s testing systems environment via a dedicated cross connection. The testing systems environment is a virtual trading system environment for Members 3 and nonMembers to test (i) upcoming Exchange software and code releases, (ii) product enhancements, and (iii) firm-developed software, prior to implementation in the Exchange’s production (e.g., live trading) environment. Further, the testing systems environment allows unlimited testing of existing functionality, such as order types, order entry, order management, order throughput, acknowledgements, risk settings, mass cancelations, and purge requests. The testing systems environment is built to closely approximate the production environment to enable Members and non-Members the ability to test their systems and mimics the live trading environment.4 There are currently three methods by which Members and non-Members may access the Exchange’s testing systems environment. One, Members and nonMembers may access the Exchange’s testing systems environment via a virtual private network (‘‘VPN’’) that operates over the internet and provides site-to-site access. VPN access is provided for free to all Members and non-Members. A second method is via a dedicated cross connection that allows Members and non-Members to access the testing systems environment and is available as either a 1 gigabit (‘‘Gb’’) or 10Gb connection. Members and non-Members that utilize a VPN or a dedicated cross connection to access the testing systems environment of the Exchange are also able to access the testing systems environments of each of the Exchange’s 3 The term ‘‘Member’’ means an individual or organization approved to exercise the trading rights associated with a Trading Permit. Members are deemed ‘‘members’’ under the Exchange Act. See Exchange Rule 100. 4 Business continuity and disaster recovery testing is performed separately and not within the testing systems environment that is the subject of this filing. E:\FR\FM\18DEN1.SGM 18DEN1 Federal Register / Vol. 89, No. 243 / Wednesday, December 18, 2024 / Notices affiliated options markets—MIAX Sapphire, LLC (‘‘MIAX Sapphire’’), MIAX PEARL, LLC 5 (‘‘MIAX Pearl Options’’), and Miami International Securities Exchange, LLC (‘‘MIAX’’). This dedicated cross connection would provide subscribers access to the testing systems environment of the Exchange, as well as each of its affiliate options exchanges, via a single connection. Third, access is also provided through the production connections for each 1Gb or 10Gb ULL connection for the applicable fee 6 for such connection and no additional charge. These 1Gb and 10Gb ULL connections provide access to the Exchange’s production environment (i.e., live trading) and allow the receipt of proprietary real-time market data. However, the Exchange previously announced that it will phase out the ability to connect to the testing systems environment via the existing 1Gb and 10Gb ULL production connections by February 28, 2025.7 * * * * * The Exchange now proposes to amend the Fee Schedule to establish a monthly fee for Members and non-Members that choose to access the testing systems environment via a dedicated cross connect. In particular, the Exchange proposes to establish a monthly fee of $1,000 per dedicated cross connection to the testing systems environment for Members and non-Members. The proposed fee is the same whether a Member or non-Member chooses to connect to the testing systems environment via a 1Gb or 10Gb cross connect. The proposed fees would be set forth under new Sections 4)e) and 4)f) of the Fee Schedule. Proposed Sections 4)e) and 4)f) would also codify that VPN access to the test environment is khammond on DSK9W7S144PROD with NOTICES 5 All references to ‘‘MIAX PEARL’’ in this filing are to the options trading facility of MIAX PEARL, LLC, referred to herein as ‘‘MIAX Pearl Options.’’ Members and non-Members that choose to utilize the testing systems environment of MIAX Pearl Equities, the equities trading facility of MIAX PEARL, LLC, must utilize a separate dedicated cross connection as MIAX Pearl Equities’ testing systems environment operates on a separate network from the affiliated options markets. 6 See MIAX Emerald Fee Schedule, Sections 5)a)– b) for the fees for 1Gb and 10Gb ULL production connectivity. 7 See MIAX Options, MIAX Pearl Options and MIAX Emerald Options Exchanges—Announcing New Extranet Access to Firm Test Beds (FTB1 and FTB2) and Decommissioning of Access via Production Connections Beginning in October 2024, dated September 12, 2024, available at https:// www.miaxglobal.com/alert/2024/09/12/miaxoptions-miax-pearl-options-and-miax-emeraldoptions-exchanges-2?nav=all; and Securities Exchange Act Release No. 100855 (August 28, 2024), 89 FR 71941 (September 4, 2024) (SR– EMERALD–2024–25). VerDate Sep<11>2014 18:09 Dec 17, 2024 Jkt 265001 provided for free for all Members and non-Members. * * * * * Members and non-Members that access the testing systems environment through any one of the available access methods, including a dedicated cross connection, receive functionally the same testing experience. Each Member or non-Member is free to decide how to access the testing systems environment based on their own needs and trading architecture or not utilize the testing systems environment at all. Again, accessing the testing systems environment via a dedicated direct connection is entirely optional and no Member or non-Member is required by rule or regulation to make use of the testing systems environment via a dedicated direct connection. Regardless of access method, all Members and nonMembers are provided the same testing systems environment experience and are able to perform all of the same functions. Implementation The proposed fee change will be effective December 1, 2024. 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with Section 6(b) of the Act,8 in general, and furthers the objectives of Section 6(b)(5) of the Act,9 in particular, in that it is not designed to permit unfair discrimination among customers, brokers, or dealers. The Exchange also believes that its proposal is consistent with Section 6(b)(4) of the Act 10 because it represents an equitable allocation of reasonable dues, fees and other charges among market participants using any facility or system which the Exchange operates or controls. Free VPN Access to the Firm Test Bed Is a Reasonable Substitute In 2019, Commission staff published guidance suggesting the types of information that self-regulatory organizations (‘‘SROs’’) may use to demonstrate that their fee filings comply with the standards of the Exchange Act (the ‘‘Staff Guidance’’).11 The Staff Guidance provides that in assessing the reasonableness of a fee, the Staff would consider whether the fee is constrained by significant competitive forces. To determine whether a proposed fee is constrained by significant competitive 8 15 U.S.C. 78f(b). U.S.C. 78f(b)(5). 10 15 U.S.C. 78f(b)(4). 11 See Staff Guidance on SRO Rule Filings Relating to Fees (May 21, 2019), available at https:// www.sec.gov/tm/staff-guidance-sro-rule-filings-fees. 9 15 PO 00000 Frm 00128 Fmt 4703 Sfmt 4703 102979 forces, the Staff Guidance further provides that the Staff would consider whether the evidence provided by an SRO in a Fee Filing proposal demonstrates (i) that there are reasonable substitutes for the product or service that is the subject of a proposed fee; (ii) that ‘‘platform’’ competition constrains the fee; and/or (iii) that the revenue and cost analysis provided by the SRO otherwise demonstrates that the proposed fee would not result in the SRO taking supra-competitive profits.12 The proposed fee is reasonable because there is a reasonable substitute for the service that is the subject of this proposed fee as set forth below. This filing includes the following evidence that demonstrates that there is a reasonable substitute to purchasing a dedicated cross connection to access the Exchange’s testing systems environment. That reasonable substitute is VPN access, which is provided for free and will continue to be free for all Members and non-Members. Members and non-Members may access the testing systems environment through either a VPN or a dedicated cross connection and will receive functionally the same testing environment and are able to perform all of the same functions. The testing systems environment, whether accessed via a dedicated cross connection or VPN, provides Members and non-Members the same scope of abilities to test their systems and software in the Exchange’s testing systems environment, which replicates the Exchange’s production trading environment. Like a dedicated cross connection, a VPN provides access to the testing systems environment of not only the Exchange, but also each of its affiliate options exchanges over the same single access point. Accessing the testing systems environment via a dedicated cross connection provides no advantage to Members and nonMembers compared to those market participants that elect to access the testing systems environment via a VPN for free. Each Member or non-Member is free to decide how to access the testing systems environment based on their own needs and trading architecture. Again, accessing the testing systems environment via a dedicated direct connection is entirely optional and no Member or non-Member is required by rule or regulation to make use of the testing systems environment via a dedicated direct connection. Accessing the testing systems environment via the proposed dedicated cross connection may not provide utility to all Members 12 Id. E:\FR\FM\18DEN1.SGM 18DEN1 102980 Federal Register / Vol. 89, No. 243 / Wednesday, December 18, 2024 / Notices and non-Members based on their business models and needs, and such users may choose to access the testing systems environment for free through the VPN and perform the same testing functions. As such, the Exchange believes that the proposed fee for access to the testing systems environment is reasonable and Members and nonMembers have the choice, but are not obligated to access the testing systems environment via a dedicated cross connection. Otherwise, a user may choose to access the test environment via a VPN for free to test system functionality. For example, of the Exchange’s thirty-seven Members 13 and one non-Member that provide connectivity to the Exchange, ten Members and non-Members currently use a VPN to access the Exchange’s testing systems environment instead of the other two currently available options, i.e., a dedicated cross connection or their existing 1Gb or 10Gb ULL connection to the production environment. Some Members and nonMembers also choose not to access the testing systems environment at all. Lastly, supporting a proposed nontransaction fee change by arguing the availability of reasonable substitutes is not novel. Commission Staff has published for immediate effectiveness filings regarding non-transaction fees by exchanges who argued that the fees were consistent with the Exchange Act because of reasonable substitutes were available as provided for in the Commission Staff Guidance.14 khammond on DSK9W7S144PROD with NOTICES Fee is Constrained by Competition and the Availability of Free VPN Access If the Exchange prices the fee for dedicated cross connection access to the testing systems environment too high, Members and non-Members may choose not to subscribe and contiue to perform the same testing functions via VPN internet access for no fee if they do not find the fee for accessing the testing systems environment via a dedicated cross connection to be of value. Again, the Exchange notes that accessing the testing systems environment via a dedicated cross connection would be completely voluntary and is simply an additional optional means to access the 13 See the Exchange’s Membership Directory available at https://www.miaxglobal.com/miax_ emerald_options_exchange_members.pdf. 14 See, e.g., Securities Exchange Act Release Nos. 101096 (September 18, 2024), 89 FR 77913 (September 24, 2024) (SR–ISE–2024–46); 98974 (November 16, 2023), 88 FR 81468 (November 22, 2023) (SR–NYSEARCA–2023–78); 87795 (December 18, 2019), 84 FR 71043 (December 26, 2019) (SR– NYSEArca–2019–88); and 90409 (November 12, 2020), 85 FR 73522 (November 18, 2020) (SR– NYSEArca–2020–95). VerDate Sep<11>2014 18:09 Dec 17, 2024 Jkt 265001 test environment. The Exchange also has Members and non-Members that do not utilize the testing systems environment at all. The Exchange operates in a highly competitive environment in which 18 U.S. registered equity options exchanges compete for market share. Based on publicly available information for the month of October 2024, no single options exchange had more than approximately 12–13% of the equity options market share and the Exchange represented only approximately 4.48% of the market share of equity options for that month.15 The Commission has repeatedly expressed its preference for competition over regulatory intervention in determining prices, products, and services in the securities markets. Particularly, in Regulation NMS, the Commission highlighted the importance of market forces in determining prices and SRO revenues and recognized that current regulation of the market system ‘‘has been remarkably successful in promoting market competition in its broader forms that are most important to investors and listed companies.’’ 16 The proposed fee for optional access via a dedicated cross connection to the test environment is the result of the competitive environment of the U.S. options industry. Exchanges compete for order flow by providing testing opportunities and robust testing environments. Services like a testing environment provide Members and non-Members with the opportunity to test Exchange functionality prior to sending real order flow to be executed in the Exchange’s production environment. As mentioned above, numerous exchanges provide testing environments to market participants to test functionality and gain comfort with their exchange offering.17 This is intended to attract 15 See the ‘‘Market Share’’ section of the Exchange’s website, available at https:// www.miaxglobal.com/ (last visited November 18, 2024). 16 See Securities Exchange Act Release No. 51808 (June 9, 2005), 70 FR 37496, 37499 (June 29, 2005) (‘‘Regulation NMS Adopting Release’’). 17 The Exchange notes that other exchange families offer a similar dedicated connection to their testing environment for their members and non-members. See, e.g., Nasdaq Options Test Facility (NTF) Abstract, Version 1.4.4 (March 2024), available at https://www.nasdaq.com/Nasdaq_Test_ Facility_NTF_Guide (last visited July 16, 2024) (‘‘. . . the Nasdaq Test Facility . . . where market participants can test their trading applications with the INET trading system. The NTF environment allows members to test sending and executing quotes and orders offered by our six options exchanges . . .’’); see also Securities Exchange Act Release No. 100442 (June 27, 2024), 89 FR 55296 (July 3, 2024) (SR–CboeBZX–2024–058) (‘‘. . . the Exchange also offers corresponding ports which PO 00000 Frm 00129 Fmt 4703 Sfmt 4703 market share by offering a risk free way to gain comfort that their orders would be handled within the Exchange’s production environment as expected. Exchanges seek to further encourage market participants to utilize their testing environments by providing multiple methods to connect. Some are provided for free while others and require a fee. Providing multiple methods to connect to a test environment provides market participants a choice on how to engage with the testing environment and a choice regarding the access method that best meets their business and operational needs. If the Exchange proposed a fee that Members and non-Members viewed as excessively high, then the proposed fee would simply serve to reduce demand for access via a dedicated cross connection to the test environment, which as noted, is entirely optional as the Exchange will continue to provide free access to the test environment through VPN through the internet for site-to-site access. This could, in turn, reduce the attractiveness of the Exchange’s live trading production environment because Members and nonMembers may be unwilling to test functionality prior to entering live orders. Again, other options exchanges currently offer, or are able to introduce at their own cost, their own comparable testing environments with lower prices to better compete with the Exchange’s offering and several competing exchanges already provide a similar service. Selling different products and services, such as proposed herein, is a means by which exchanges compete to attract business. To the extent that the Exchange is successful in attracting market participants to purchase the dedicated cross connection to the test environment proposed herein, the Exchange may earn revenue and further enhance market participants’ interactions on the Exchange, which would increase value of its other products and services to all market participants. If the market deems the proposed fee to be too high, Members and non-Members can choose not to use or discontinue their use of dedicated cross connection to the test environment and perform the same testing functions via the VPN internet access for free. The Exchange, therefore, believes that the provide Members and non-Members access to the Exchange’s certification environment to test proprietary systems and applications . . . The certification environment facilitates testing using replicas of the Exchange’s production environment process configurations which provide for a robust and realistic testing experience . . .’’). E:\FR\FM\18DEN1.SGM 18DEN1 Federal Register / Vol. 89, No. 243 / Wednesday, December 18, 2024 / Notices proposed fee for dedicated cross connection to the test environment reflects the competitive environment of U.S. options exchanges and would be properly assessed to Members and nonMembers that subscribe. khammond on DSK9W7S144PROD with NOTICES The Proposed Fee Is Reasonable Because it Is Similar to or Lower Than Like Fees Charged by Other Exchanges The Exchange believes the proposed fees are reasonable as the proposed fees are similar to or lower than fees charged by competing exchanges for similar services. For example, The Nasdaq Stock Market, LLC assesses a fee of $1,000 per hand-off, per month for subscribers to the testing facility via either a 1Gb or 10Gb switch port plus a one-time installation fee of $1,000 per hand-off.18 The Exchange’s proposed fee is, therefore, lower because it does not charge a separate installation fee. Cboe BZX Exchange, Inc. (‘‘Cboe BZX’’) Options assesses a lower fee of $250 per month for each certification logical port, which only provides access to the Cboe BZX testing environment, and not to the testing environment of any of Cboe BZX’s affiliates.19 The fee to access the Cboe BZX testing environment and the testing environment of each of its three affiliated options exchange becomes incrementally higher with each Cboe BZX affiliate charging a $250 monthly fee to access each testing environment, totaling as much as $1,000.00 per month.20 Accordingly, the Exchange 18 See, e.g., Nasdaq, Options 7: Pricing Schedule, Section 13 Testing Facilities, available at https:// listingcenter.nasdaq.com/rulebook/nasdaq/rules/ Nasdaq%20Options%207. Nasdaq’s affiliates, like Nasdaq PHLX LLC (‘‘PHLX’’), also charge the same fee. See e.g., PHLX Options 7: Pricing Schedule, Section 9. Other Member Fees, E. Testing Facilities, available at https://listingcenter.nasdaq.com/ rulebook/phlx/rules/Phlx%20Options%207 (assessing a fee of $1,000 per hand-off, per month for subscribers to the testing facility via either a 1Gb or 10Gb switch port and a one-time installation fee of $1,000 per hand-off). See also Securities Exchange Act Release No. 76259 (October 26, 2015), 80 FR 66947 (October 30, 2015) (SR–NASDAQ– 2015–117) (Notice of Filing and Immediate Effectiveness of Proposed Rule Change to Options Testing Facility). Like the Exchange’s testing environment, a single connection to Nasdaq’s test environment provides access to the other test environments of its affiliate options markets, PHLX and Nasdaq BX, Inc. 19 See also Cboe BZX Options Fee Schedule, Options Logical Port Fees, Certification Logical Ports, available at https://www.cboe.com/us/ options/membership/fee_schedule/bzx/. See, e.g., Cboe EDGX Exchange, Inc. Options Fee Schedule, Options Logical Port Fees, Certification Logical Ports, available at https://www.cboe.com/us/ options/membership/fee_schedule/edgx/. 20 See also Cboe EDGX Exchange, Inc. Options Fee Schedule, Options Logical Port Fees, Certification Logical Ports, available at https:// www.cboe.com/us/options/membership/fee_ schedule/edgx/; Cboe Exchange, Inc. Fee Schedule, Logical Connectivity Fees, Certification Logical Ports, available at Cboe_FeeSchedule.pdf; and Cboe VerDate Sep<11>2014 18:09 Dec 17, 2024 Jkt 265001 believes that comparable and competitive pricing are key factors in determining whether a proposed fee meets the requirements of the Act. The Proposed Fee Is Not Unfairly Discriminatory The Exchange also believes the proposed fee is equitable and not unfairly discriminatory as the fee would apply equally to all Members and nonMembers who choose to subscribe. It is a business and operational decision of each Member or non-Member that chooses to subscribe. The Exchange’s proposed fee would not differentiate between Members and non-Members or connectivity types and is set at a modest level that would allow any interested Member and non-Member to subscribe based on their business and operational needs. The Exchange also believes the proposal furthers the objectives of Section 6(b)(5) of the Act 21 in that it is designed to promote just and equitable principles of trade, remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general protect investors and the public interest and is not designed to permit unfair discrimination between customer, issuers, brokers and dealers. The Exchange does not believe that the proposed fee is unfairly discriminatory to subscribers to the test environment via a dedicated cross connection because, unlike the live trading environment where the capacity of connectivity to the Exchange may confer a competitive advantage to a market participant and therefore price differentiation is appropriate for the benefit conferred, there is no such benefit conferred in the testing systems environment. The Exchange does not believe that the proposed fee is unfairly discriminatory among subscribers to the test environment because all Members and non-Members that subscribe to the service will be assessed the same fee. Because the proposed fee does not discriminate between 1Gb and 10Gb cross connection options, Members and non-Members are able to subscribe to the test environment without regard to the cost of their capacity election. The Exchange believes that not discriminating on this basis will encourage participants to connect to the test environment in the same manner as they do to the live trading environment, C2 Exchange, Inc. Options Fee Schedule, Options Logical Port Fees, Certification Logical Ports, available at https://www.cboe.com/us/options/ membership/fee_schedule/c2/. 21 15 U.S.C. 78f(b)(5). PO 00000 Frm 00130 Fmt 4703 Sfmt 4703 102981 and thereby help the test environment more closely mirror the live trading environment. Providing a more useful and accurate test environment will serve to improve live trading on the Exchange and the national market system by permitting Members and non-Members the ability to accurately test changes prior to implementing them in the live trading environment, thereby reducing the likelihood of a potentially disruptive system failure in the live trading environment, which has the potential to affect all market participants. The Proposed Fee Is Equitable The Exchange believes that the proposed fee is equitably allocated because all Members and non-Members that choose to connect to the test environment will be assessed a uniform fee for those services. The Exchange believes that offering subscribers the option to subscribe to either a 1Gb or 10Gb dedicated cross connection for the same fee is an equitable allocation of fees because, unlike the live trading environment, there is no competitive advantage to possessing a higher capacity connection in the test environment. The test environment is designed to closely mirror the live trading environment for Members and non-Members, including matching the capacity of the live trading environment connection of each Member and nonMember. In the absence of any competitive advantage, charging a uniform fee for both a 1Gb or 10Gb dedicated cross connection is an equitable allocation of fees. The Exchange believes that charging a uniform fee rather than mirroring the fees for the live trading environment will encourage Members and nonMembers to subscribe to the test environment and further encourage those that subscribe to use the same hardware as is used by them for connectivity to the live trading environment. * * * * * Finally, and as noted above, the Exchange’s test environment provides a robust and realistic testing experience using a replica of the Exchange’s production environment process configurations. This environment enables market participants to test upcoming Exchange software and code releases, product enhancements, as well as test firm software prior to implementation in the production environment. Further, the test environment allows unlimited firmlevel testing of order types, order entry, order management, order throughput, acknowledgements, risk settings, mass E:\FR\FM\18DEN1.SGM 18DEN1 102982 Federal Register / Vol. 89, No. 243 / Wednesday, December 18, 2024 / Notices khammond on DSK9W7S144PROD with NOTICES cancelations, and purge requests. By providing firms the ability to test all of these features in the test environment prior to implementing them in the live trading environment, the Exchange believes this will reduce the likelihood of a potentially disruptive system failure in the live trading environment, which has the potential to affect all market participants. B. Self-Regulatory Organization’s Statement on Burden on Competition The Exchange does not believe that the proposed rule change will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. The Exchange made connectivity access to the test environment available to keep pace with technological changes in the industry and evolving customer needs and demands, and believes the product will contribute to robust competition among national securities exchanges. As a result, the Exchange believes this proposed rule change permits fair competition among national securities exchanges. The Exchange believes the proposed fee would not cause any unnecessary or inappropriate burden on intermarket competition as other exchanges are free to introduce their own comparable testing environments for free or lower prices, which several competing exchanges already provide.22 The Exchange operates in a highly competitive environment, and its ability to price access to the test environment is constrained by the optional nature of accessing the test environment via a dedicated cross connect. Providing access to the test environment via dedicated cross connection is provided purely for convenience, in response to Member demand, and, again, would be entirely optional. The Exchange notes that use of accessing the test environment via a dedicated cross connection would be completely voluntary and is simply an additional optional means to access the test environment. Members who do not prefer the to access the test environment via a dedicated cross connection and pay the applicable fee will be able to continue to perform the same testing functions when accessing the test environment via the existing VPN internet access for free. The Exchange must consider this in its pricing discipline in order to attract subscribers. The Exchange believes that if it were to propose a fee that is excessively high, it would simply serve to reduce demand for the Exchange’s product, which as discussed, Members and non-Members are under no obligation to utilize. The Exchange does not believe the proposed rule change would cause any unnecessary or inappropriate burden on intramarket competition. Particularly, the proposed fee applies uniformly to any purchaser in that the Exchange does not differentiate between subscribers that wish to access the testing systems environment via a dedicated cross connect via either a 1Gb or 10Gb connection. The proposed fee is set at a modest level that would allow any interested market participant to purchase access to the test environment based on their business needs. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were either solicited or received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing rule change has become effective pursuant to Section 19(b)(3)(A)(ii) of the Act,23 and Rule 19b–4(f)(2) 24 thereunder. At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule should be approved or disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission’s internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include file number SR– EMERALD–2024–27 on the subject line. Paper Comments • Send paper comments in triplicate to Secretary, Securities and Exchange 23 15 22 See supra note 18. VerDate Sep<11>2014 18:09 Dec 17, 2024 24 17 Jkt 265001 PO 00000 U.S.C. 78s(b)(3)(A)(ii). CFR 240.19b–4(f)(2). Frm 00131 Fmt 4703 Sfmt 4703 Commission, 100 F Street NE, Washington, DC 20549–1090. All submissions should refer to file number SR–EMERALD–2024–27. 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–2024–27 and should be submitted on or before January 8, 2025. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.25 Sherry R. Haywood, Assistant Secretary. [FR Doc. 2024–29924 Filed 12–17–24; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–101902; File No. SR– PEARL–2024–57] Self-Regulatory Organizations; MIAX PEARL, LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend the MIAX Pearl Equities Fee Schedule To Make a NonSubstantive Change December 12, 2024. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 25 17 E:\FR\FM\18DEN1.SGM CFR 200.30–3(a)(12). 18DEN1

Agencies

[Federal Register Volume 89, Number 243 (Wednesday, December 18, 2024)]
[Notices]
[Pages 102978-102982]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-29924]


=======================================================================
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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-101895; File No. SR-EMERALD-2024-27]


Self-Regulatory Organizations; MIAX Emerald, LLC; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend 
Its Fee Schedule To Adopt Fees for Dedicated Cross Connection Access to 
the Testing Systems Environment

December 12, 2024.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on November 29, 2024, MIAX Emerald, LLC (``MIAX Emerald'' or 
``Exchange''), filed with the Securities and Exchange Commission 
(``Commission'') a proposed rule change as described in Items I, II, 
and III below, which Items have been prepared by the Exchange. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend the MIAX Emerald Options Exchange 
Fee Schedule (the ``Fee Schedule'') to establish a fee for market 
participants that choose to utilize the Exchange's testing systems 
environment via a dedicated cross connection.
    The text of the proposed rule change is available on the Exchange's 
website at https://www.miaxglobal.com/markets/us-options/miax-options/rule-filings, at the Exchange'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 establish a fee for market participants 
that choose to utilize the Exchange's testing systems environment via a 
dedicated cross connection. The testing systems environment is a 
virtual trading system environment for Members \3\ and non-Members to 
test (i) upcoming Exchange software and code releases, (ii) product 
enhancements, and (iii) firm-developed software, prior to 
implementation in the Exchange's production (e.g., live trading) 
environment. Further, the testing systems environment allows unlimited 
testing of existing functionality, such as order types, order entry, 
order management, order throughput, acknowledgements, risk settings, 
mass cancelations, and purge requests. The testing systems environment 
is built to closely approximate the production environment to enable 
Members and non-Members the ability to test their systems and mimics 
the live trading environment.\4\
---------------------------------------------------------------------------

    \3\ The term ``Member'' means an individual or organization 
approved to exercise the trading rights associated with a Trading 
Permit. Members are deemed ``members'' under the Exchange Act. See 
Exchange Rule 100.
    \4\ Business continuity and disaster recovery testing is 
performed separately and not within the testing systems environment 
that is the subject of this filing.
---------------------------------------------------------------------------

    There are currently three methods by which Members and non-Members 
may access the Exchange's testing systems environment. One, Members and 
non-Members may access the Exchange's testing systems environment via a 
virtual private network (``VPN'') that operates over the internet and 
provides site-to-site access. VPN access is provided for free to all 
Members and non-Members.
    A second method is via a dedicated cross connection that allows 
Members and non-Members to access the testing systems environment and 
is available as either a 1 gigabit (``Gb'') or 10Gb connection. Members 
and non-Members that utilize a VPN or a dedicated cross connection to 
access the testing systems environment of the Exchange are also able to 
access the testing systems environments of each of the Exchange's

[[Page 102979]]

affiliated options markets--MIAX Sapphire, LLC (``MIAX Sapphire''), 
MIAX PEARL, LLC \5\ (``MIAX Pearl Options''), and Miami International 
Securities Exchange, LLC (``MIAX''). This dedicated cross connection 
would provide subscribers access to the testing systems environment of 
the Exchange, as well as each of its affiliate options exchanges, via a 
single connection.
---------------------------------------------------------------------------

    \5\ All references to ``MIAX PEARL'' in this filing are to the 
options trading facility of MIAX PEARL, LLC, referred to herein as 
``MIAX Pearl Options.'' Members and non-Members that choose to 
utilize the testing systems environment of MIAX Pearl Equities, the 
equities trading facility of MIAX PEARL, LLC, must utilize a 
separate dedicated cross connection as MIAX Pearl Equities' testing 
systems environment operates on a separate network from the 
affiliated options markets.
---------------------------------------------------------------------------

    Third, access is also provided through the production connections 
for each 1Gb or 10Gb ULL connection for the applicable fee \6\ for such 
connection and no additional charge. These 1Gb and 10Gb ULL connections 
provide access to the Exchange's production environment (i.e., live 
trading) and allow the receipt of proprietary real-time market data. 
However, the Exchange previously announced that it will phase out the 
ability to connect to the testing systems environment via the existing 
1Gb and 10Gb ULL production connections by February 28, 2025.\7\
---------------------------------------------------------------------------

    \6\ See MIAX Emerald Fee Schedule, Sections 5)a)-b) for the fees 
for 1Gb and 10Gb ULL production connectivity.
    \7\ See MIAX Options, MIAX Pearl Options and MIAX Emerald 
Options Exchanges--Announcing New Extranet Access to Firm Test Beds 
(FTB1 and FTB2) and Decommissioning of Access via Production 
Connections Beginning in October 2024, dated September 12, 2024, 
available at https://www.miaxglobal.com/alert/2024/09/12/miax-options-miax-pearl-options-and-miax-emerald-options-exchanges-2?nav=all; and Securities Exchange Act Release No. 100855 (August 
28, 2024), 89 FR 71941 (September 4, 2024) (SR-EMERALD-2024-25).
---------------------------------------------------------------------------

* * * * *
    The Exchange now proposes to amend the Fee Schedule to establish a 
monthly fee for Members and non-Members that choose to access the 
testing systems environment via a dedicated cross connect. In 
particular, the Exchange proposes to establish a monthly fee of $1,000 
per dedicated cross connection to the testing systems environment for 
Members and non-Members. The proposed fee is the same whether a Member 
or non-Member chooses to connect to the testing systems environment via 
a 1Gb or 10Gb cross connect. The proposed fees would be set forth under 
new Sections 4)e) and 4)f) of the Fee Schedule. Proposed Sections 4)e) 
and 4)f) would also codify that VPN access to the test environment is 
provided for free for all Members and non-Members.
* * * * *
    Members and non-Members that access the testing systems environment 
through any one of the available access methods, including a dedicated 
cross connection, receive functionally the same testing experience. 
Each Member or non-Member is free to decide how to access the testing 
systems environment based on their own needs and trading architecture 
or not utilize the testing systems environment at all. Again, accessing 
the testing systems environment via a dedicated direct connection is 
entirely optional and no Member or non-Member is required by rule or 
regulation to make use of the testing systems environment via a 
dedicated direct connection. Regardless of access method, all Members 
and non-Members are provided the same testing systems environment 
experience and are able to perform all of the same functions.
Implementation
    The proposed fee change will be effective December 1, 2024.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\8\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act,\9\ in particular, in that it 
is not designed to permit unfair discrimination among customers, 
brokers, or dealers. The Exchange also believes that its proposal is 
consistent with Section 6(b)(4) of the Act \10\ because it represents 
an equitable allocation of reasonable dues, fees and other charges 
among market participants using any facility or system which the 
Exchange operates or controls.
---------------------------------------------------------------------------

    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(5).
    \10\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

Free VPN Access to the Firm Test Bed Is a Reasonable Substitute
    In 2019, Commission staff published guidance suggesting the types 
of information that self-regulatory organizations (``SROs'') may use to 
demonstrate that their fee filings comply with the standards of the 
Exchange Act (the ``Staff Guidance'').\11\ The Staff Guidance provides 
that in assessing the reasonableness of a fee, the Staff would consider 
whether the fee is constrained by significant competitive forces. To 
determine whether a proposed fee is constrained by significant 
competitive forces, the Staff Guidance further provides that the Staff 
would consider whether the evidence provided by an SRO in a Fee Filing 
proposal demonstrates (i) that there are reasonable substitutes for the 
product or service that is the subject of a proposed fee; (ii) that 
``platform'' competition constrains the fee; and/or (iii) that the 
revenue and cost analysis provided by the SRO otherwise demonstrates 
that the proposed fee would not result in the SRO taking supra-
competitive profits.\12\ The proposed fee is reasonable because there 
is a reasonable substitute for the service that is the subject of this 
proposed fee as set forth below.
---------------------------------------------------------------------------

    \11\ See Staff Guidance on SRO Rule Filings Relating to Fees 
(May 21, 2019), available at https://www.sec.gov/tm/staff-guidance-sro-rule-filings-fees.
    \12\ Id.
---------------------------------------------------------------------------

    This filing includes the following evidence that demonstrates that 
there is a reasonable substitute to purchasing a dedicated cross 
connection to access the Exchange's testing systems environment. That 
reasonable substitute is VPN access, which is provided for free and 
will continue to be free for all Members and non-Members. Members and 
non-Members may access the testing systems environment through either a 
VPN or a dedicated cross connection and will receive functionally the 
same testing environment and are able to perform all of the same 
functions. The testing systems environment, whether accessed via a 
dedicated cross connection or VPN, provides Members and non-Members the 
same scope of abilities to test their systems and software in the 
Exchange's testing systems environment, which replicates the Exchange's 
production trading environment. Like a dedicated cross connection, a 
VPN provides access to the testing systems environment of not only the 
Exchange, but also each of its affiliate options exchanges over the 
same single access point. Accessing the testing systems environment via 
a dedicated cross connection provides no advantage to Members and non-
Members compared to those market participants that elect to access the 
testing systems environment via a VPN for free.
    Each Member or non-Member is free to decide how to access the 
testing systems environment based on their own needs and trading 
architecture. Again, accessing the testing systems environment via a 
dedicated direct connection is entirely optional and no Member or non-
Member is required by rule or regulation to make use of the testing 
systems environment via a dedicated direct connection. Accessing the 
testing systems environment via the proposed dedicated cross connection 
may not provide utility to all Members

[[Page 102980]]

and non-Members based on their business models and needs, and such 
users may choose to access the testing systems environment for free 
through the VPN and perform the same testing functions. As such, the 
Exchange believes that the proposed fee for access to the testing 
systems environment is reasonable and Members and non-Members have the 
choice, but are not obligated to access the testing systems environment 
via a dedicated cross connection. Otherwise, a user may choose to 
access the test environment via a VPN for free to test system 
functionality. For example, of the Exchange's thirty-seven Members \13\ 
and one non-Member that provide connectivity to the Exchange, ten 
Members and non-Members currently use a VPN to access the Exchange's 
testing systems environment instead of the other two currently 
available options, i.e., a dedicated cross connection or their existing 
1Gb or 10Gb ULL connection to the production environment. Some Members 
and non-Members also choose not to access the testing systems 
environment at all.
---------------------------------------------------------------------------

    \13\ See the Exchange's Membership Directory available at 
https://www.miaxglobal.com/miax_emerald_options_exchange_members.pdf.
---------------------------------------------------------------------------

    Lastly, supporting a proposed non-transaction fee change by arguing 
the availability of reasonable substitutes is not novel. Commission 
Staff has published for immediate effectiveness filings regarding non-
transaction fees by exchanges who argued that the fees were consistent 
with the Exchange Act because of reasonable substitutes were available 
as provided for in the Commission Staff Guidance.\14\
---------------------------------------------------------------------------

    \14\ See, e.g., Securities Exchange Act Release Nos. 101096 
(September 18, 2024), 89 FR 77913 (September 24, 2024) (SR-ISE-2024-
46); 98974 (November 16, 2023), 88 FR 81468 (November 22, 2023) (SR-
NYSEARCA-2023-78); 87795 (December 18, 2019), 84 FR 71043 (December 
26, 2019) (SR-NYSEArca-2019-88); and 90409 (November 12, 2020), 85 
FR 73522 (November 18, 2020) (SR-NYSEArca-2020-95).
---------------------------------------------------------------------------

Fee is Constrained by Competition and the Availability of Free VPN 
Access
    If the Exchange prices the fee for dedicated cross connection 
access to the testing systems environment too high, Members and non-
Members may choose not to subscribe and contiue to perform the same 
testing functions via VPN internet access for no fee if they do not 
find the fee for accessing the testing systems environment via a 
dedicated cross connection to be of value. Again, the Exchange notes 
that accessing the testing systems environment via a dedicated cross 
connection would be completely voluntary and is simply an additional 
optional means to access the test environment. The Exchange also has 
Members and non-Members that do not utilize the testing systems 
environment at all.
    The Exchange operates in a highly competitive environment in which 
18 U.S. registered equity options exchanges compete for market share. 
Based on publicly available information for the month of October 2024, 
no single options exchange had more than approximately 12-13% of the 
equity options market share and the Exchange represented only 
approximately 4.48% of the market share of equity options for that 
month.\15\ The Commission has repeatedly expressed its preference for 
competition over regulatory intervention in determining prices, 
products, and services in the securities markets. Particularly, in 
Regulation NMS, the Commission highlighted the importance of market 
forces in determining prices and SRO revenues and recognized that 
current regulation of the market system ``has been remarkably 
successful in promoting market competition in its broader forms that 
are most important to investors and listed companies.'' \16\ The 
proposed fee for optional access via a dedicated cross connection to 
the test environment is the result of the competitive environment of 
the U.S. options industry.
---------------------------------------------------------------------------

    \15\ See the ``Market Share'' section of the Exchange's website, 
available at https://www.miaxglobal.com/ (last visited November 18, 
2024).
    \16\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting 
Release'').
---------------------------------------------------------------------------

    Exchanges compete for order flow by providing testing opportunities 
and robust testing environments. Services like a testing environment 
provide Members and non-Members with the opportunity to test Exchange 
functionality prior to sending real order flow to be executed in the 
Exchange's production environment. As mentioned above, numerous 
exchanges provide testing environments to market participants to test 
functionality and gain comfort with their exchange offering.\17\ This 
is intended to attract market share by offering a risk free way to gain 
comfort that their orders would be handled within the Exchange's 
production environment as expected. Exchanges seek to further encourage 
market participants to utilize their testing environments by providing 
multiple methods to connect. Some are provided for free while others 
and require a fee. Providing multiple methods to connect to a test 
environment provides market participants a choice on how to engage with 
the testing environment and a choice regarding the access method that 
best meets their business and operational needs.
---------------------------------------------------------------------------

    \17\ The Exchange notes that other exchange families offer a 
similar dedicated connection to their testing environment for their 
members and non-members. See, e.g., Nasdaq Options Test Facility 
(NTF) Abstract, Version 1.4.4 (March 2024), available at https://www.nasdaq.com/Nasdaq_Test_Facility_NTF_Guide (last visited July 16, 
2024) (``. . . the Nasdaq Test Facility . . . where market 
participants can test their trading applications with the INET 
trading system. The NTF environment allows members to test sending 
and executing quotes and orders offered by our six options exchanges 
. . .''); see also Securities Exchange Act Release No. 100442 (June 
27, 2024), 89 FR 55296 (July 3, 2024) (SR-CboeBZX-2024-058) (``. . . 
the Exchange also offers corresponding ports which provide Members 
and non-Members access to the Exchange's certification environment 
to test proprietary systems and applications . . . The certification 
environment facilitates testing using replicas of the Exchange's 
production environment process configurations which provide for a 
robust and realistic testing experience . . .'').
---------------------------------------------------------------------------

    If the Exchange proposed a fee that Members and non-Members viewed 
as excessively high, then the proposed fee would simply serve to reduce 
demand for access via a dedicated cross connection to the test 
environment, which as noted, is entirely optional as the Exchange will 
continue to provide free access to the test environment through VPN 
through the internet for site-to-site access. This could, in turn, 
reduce the attractiveness of the Exchange's live trading production 
environment because Members and non-Members may be unwilling to test 
functionality prior to entering live orders. Again, other options 
exchanges currently offer, or are able to introduce at their own cost, 
their own comparable testing environments with lower prices to better 
compete with the Exchange's offering and several competing exchanges 
already provide a similar service.
    Selling different products and services, such as proposed herein, 
is a means by which exchanges compete to attract business. To the 
extent that the Exchange is successful in attracting market 
participants to purchase the dedicated cross connection to the test 
environment proposed herein, the Exchange may earn revenue and further 
enhance market participants' interactions on the Exchange, which would 
increase value of its other products and services to all market 
participants. If the market deems the proposed fee to be too high, 
Members and non-Members can choose not to use or discontinue their use 
of dedicated cross connection to the test environment and perform the 
same testing functions via the VPN internet access for free. The 
Exchange, therefore, believes that the

[[Page 102981]]

proposed fee for dedicated cross connection to the test environment 
reflects the competitive environment of U.S. options exchanges and 
would be properly assessed to Members and non-Members that subscribe.
The Proposed Fee Is Reasonable Because it Is Similar to or Lower Than 
Like Fees Charged by Other Exchanges
    The Exchange believes the proposed fees are reasonable as the 
proposed fees are similar to or lower than fees charged by competing 
exchanges for similar services. For example, The Nasdaq Stock Market, 
LLC assesses a fee of $1,000 per hand-off, per month for subscribers to 
the testing facility via either a 1Gb or 10Gb switch port plus a one-
time installation fee of $1,000 per hand-off.\18\ The Exchange's 
proposed fee is, therefore, lower because it does not charge a separate 
installation fee. Cboe BZX Exchange, Inc. (``Cboe BZX'') Options 
assesses a lower fee of $250 per month for each certification logical 
port, which only provides access to the Cboe BZX testing environment, 
and not to the testing environment of any of Cboe BZX's affiliates.\19\ 
The fee to access the Cboe BZX testing environment and the testing 
environment of each of its three affiliated options exchange becomes 
incrementally higher with each Cboe BZX affiliate charging a $250 
monthly fee to access each testing environment, totaling as much as 
$1,000.00 per month.\20\ Accordingly, the Exchange believes that 
comparable and competitive pricing are key factors in determining 
whether a proposed fee meets the requirements of the Act.
---------------------------------------------------------------------------

    \18\ See, e.g., Nasdaq, Options 7: Pricing Schedule, Section 13 
Testing Facilities, available at https://listingcenter.nasdaq.com/rulebook/nasdaq/rules/Nasdaq%20Options%207. Nasdaq's affiliates, 
like Nasdaq PHLX LLC (``PHLX''), also charge the same fee. See e.g., 
PHLX Options 7: Pricing Schedule, Section 9. Other Member Fees, E. 
Testing Facilities, available at https://listingcenter.nasdaq.com/rulebook/phlx/rules/Phlx%20Options%207 (assessing a fee of $1,000 
per hand-off, per month for subscribers to the testing facility via 
either a 1Gb or 10Gb switch port and a one-time installation fee of 
$1,000 per hand-off). See also Securities Exchange Act Release No. 
76259 (October 26, 2015), 80 FR 66947 (October 30, 2015) (SR-NASDAQ-
2015-117) (Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change to Options Testing Facility). Like the Exchange's 
testing environment, a single connection to Nasdaq's test 
environment provides access to the other test environments of its 
affiliate options markets, PHLX and Nasdaq BX, Inc.
    \19\ See also Cboe BZX Options Fee Schedule, Options Logical 
Port Fees, Certification Logical Ports, available at https://www.cboe.com/us/options/membership/fee_schedule/bzx/. See, e.g., 
Cboe EDGX Exchange, Inc. Options Fee Schedule, Options Logical Port 
Fees, Certification Logical Ports, available at https://www.cboe.com/us/options/membership/fee_schedule/edgx/.
    \20\ See also Cboe EDGX Exchange, Inc. Options Fee Schedule, 
Options Logical Port Fees, Certification Logical Ports, available at 
https://www.cboe.com/us/options/membership/fee_schedule/edgx/; Cboe 
Exchange, Inc. Fee Schedule, Logical Connectivity Fees, 
Certification Logical Ports, available at Cboe_FeeSchedule.pdf; and 
Cboe C2 Exchange, Inc. Options Fee Schedule, Options Logical Port 
Fees, Certification Logical Ports, available at https://www.cboe.com/us/options/membership/fee_schedule/c2/.
---------------------------------------------------------------------------

The Proposed Fee Is Not Unfairly Discriminatory
    The Exchange also believes the proposed fee is equitable and not 
unfairly discriminatory as the fee would apply equally to all Members 
and non-Members who choose to subscribe. It is a business and 
operational decision of each Member or non-Member that chooses to 
subscribe. The Exchange's proposed fee would not differentiate between 
Members and non-Members or connectivity types and is set at a modest 
level that would allow any interested Member and non-Member to 
subscribe based on their business and operational needs.
    The Exchange also believes the proposal furthers the objectives of 
Section 6(b)(5) of the Act \21\ in that it is designed to promote just 
and equitable principles of trade, remove impediments to and perfect 
the mechanism of a free and open market and a national market system, 
and, in general protect investors and the public interest and is not 
designed to permit unfair discrimination between customer, issuers, 
brokers and dealers. The Exchange does not believe that the proposed 
fee is unfairly discriminatory to subscribers to the test environment 
via a dedicated cross connection because, unlike the live trading 
environment where the capacity of connectivity to the Exchange may 
confer a competitive advantage to a market participant and therefore 
price differentiation is appropriate for the benefit conferred, there 
is no such benefit conferred in the testing systems environment.
---------------------------------------------------------------------------

    \21\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Exchange does not believe that the proposed fee is unfairly 
discriminatory among subscribers to the test environment because all 
Members and non-Members that subscribe to the service will be assessed 
the same fee. Because the proposed fee does not discriminate between 
1Gb and 10Gb cross connection options, Members and non-Members are able 
to subscribe to the test environment without regard to the cost of 
their capacity election. The Exchange believes that not discriminating 
on this basis will encourage participants to connect to the test 
environment in the same manner as they do to the live trading 
environment, and thereby help the test environment more closely mirror 
the live trading environment. Providing a more useful and accurate test 
environment will serve to improve live trading on the Exchange and the 
national market system by permitting Members and non-Members the 
ability to accurately test changes prior to implementing them in the 
live trading environment, thereby reducing the likelihood of a 
potentially disruptive system failure in the live trading environment, 
which has the potential to affect all market participants.
The Proposed Fee Is Equitable
    The Exchange believes that the proposed fee is equitably allocated 
because all Members and non-Members that choose to connect to the test 
environment will be assessed a uniform fee for those services. The 
Exchange believes that offering subscribers the option to subscribe to 
either a 1Gb or 10Gb dedicated cross connection for the same fee is an 
equitable allocation of fees because, unlike the live trading 
environment, there is no competitive advantage to possessing a higher 
capacity connection in the test environment. The test environment is 
designed to closely mirror the live trading environment for Members and 
non-Members, including matching the capacity of the live trading 
environment connection of each Member and non-Member. In the absence of 
any competitive advantage, charging a uniform fee for both a 1Gb or 
10Gb dedicated cross connection is an equitable allocation of fees. The 
Exchange believes that charging a uniform fee rather than mirroring the 
fees for the live trading environment will encourage Members and non-
Members to subscribe to the test environment and further encourage 
those that subscribe to use the same hardware as is used by them for 
connectivity to the live trading environment.
* * * * *
    Finally, and as noted above, the Exchange's test environment 
provides a robust and realistic testing experience using a replica of 
the Exchange's production environment process configurations. This 
environment enables market participants to test upcoming Exchange 
software and code releases, product enhancements, as well as test firm 
software prior to implementation in the production environment. 
Further, the test environment allows unlimited firm-level testing of 
order types, order entry, order management, order throughput, 
acknowledgements, risk settings, mass

[[Page 102982]]

cancelations, and purge requests. By providing firms the ability to 
test all of these features in the test environment prior to 
implementing them in the live trading environment, the Exchange 
believes this will reduce the likelihood of a potentially disruptive 
system failure in the live trading environment, which has the potential 
to affect all market participants.

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

    The Exchange does not believe that the proposed rule change will 
result in any burden on competition that is not necessary or 
appropriate in furtherance of the purposes of the Act. The Exchange 
made connectivity access to the test environment available to keep pace 
with technological changes in the industry and evolving customer needs 
and demands, and believes the product will contribute to robust 
competition among national securities exchanges. As a result, the 
Exchange believes this proposed rule change permits fair competition 
among national securities exchanges.
    The Exchange believes the proposed fee would not cause any 
unnecessary or inappropriate burden on intermarket competition as other 
exchanges are free to introduce their own comparable testing 
environments for free or lower prices, which several competing 
exchanges already provide.\22\ The Exchange operates in a highly 
competitive environment, and its ability to price access to the test 
environment is constrained by the optional nature of accessing the test 
environment via a dedicated cross connect. Providing access to the test 
environment via dedicated cross connection is provided purely for 
convenience, in response to Member demand, and, again, would be 
entirely optional. The Exchange notes that use of accessing the test 
environment via a dedicated cross connection would be completely 
voluntary and is simply an additional optional means to access the test 
environment. Members who do not prefer the to access the test 
environment via a dedicated cross connection and pay the applicable fee 
will be able to continue to perform the same testing functions when 
accessing the test environment via the existing VPN internet access for 
free. The Exchange must consider this in its pricing discipline in 
order to attract subscribers. The Exchange believes that if it were to 
propose a fee that is excessively high, it would simply serve to reduce 
demand for the Exchange's product, which as discussed, Members and non-
Members are under no obligation to utilize.
---------------------------------------------------------------------------

    \22\ See supra note 18.
---------------------------------------------------------------------------

    The Exchange does not believe the proposed rule change would cause 
any unnecessary or inappropriate burden on intramarket competition. 
Particularly, the proposed fee applies uniformly to any purchaser in 
that the Exchange does not differentiate between subscribers that wish 
to access the testing systems environment via a dedicated cross connect 
via either a 1Gb or 10Gb connection. The proposed fee is set at a 
modest level that would allow any interested market participant to 
purchase access to the test environment based on their business needs.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were either solicited or received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A)(ii) of the Act,\23\ and Rule 19b-4(f)(2) \24\ thereunder. 
At any time within 60 days of the filing of the proposed rule change, 
the Commission summarily may temporarily suspend such rule change if it 
appears to the Commission that such action is necessary or appropriate 
in the public interest, for the protection of investors, or otherwise 
in furtherance of the purposes of the Act. If the Commission takes such 
action, the Commission shall institute proceedings to determine whether 
the proposed rule should be approved or disapproved.
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    \23\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \24\ 17 CFR 240.19b-4(f)(2).
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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-2024-27 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-2024-27. 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-2024-27 and should 
be submitted on or before January 8, 2025.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\25\
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    \25\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-29924 Filed 12-17-24; 8:45 am]
BILLING CODE 8011-01-P
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