[Federal Register Volume 87, Number 53 (Friday, March 18, 2022)]
[Notices]
[Pages 15460-15464]
[FR Doc No: 2022-05699]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-94406; File No. SR-EMERALD-2022-10]

Self-Regulatory Organizations; MIAX EMERALD, LLC; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend
Its Fee Schedule

March 14, 2022.
    Pursuant to the provisions of Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.

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notice is hereby given that on February 28, 2022, MIAX Emerald, LLC
(``MIAX Emerald'' or ``Exchange''), filed with the Securities and
Exchange Commission (``Commission'') a proposed rule change as
described in Items I, II, and III below, which Items have been prepared
by the Exchange. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.

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

    The Exchange is filing a proposal to amend the MIAX Emerald Fee
Schedule (the ``Fee Schedule'').
    The text of the proposed rule change is available on the Exchange's
website at http://www.miaxoptions.com/rule-filings/emerald, at MIAX's
principal office, and at the Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend Section 1)a)i) of the Fee Schedule
to amend the Simple Maker (defined below) rebates in Tier 4 for options
transactions in Penny Classes and non-Penny Classes (defined below) for
executed Priority Customer \3\ orders when the contra is an Affiliated
\4\ Market Maker.\5\
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    \3\ ``Priority Customer'' means a person or entity that (i) is
not a broker or dealer in securities, and (ii) does not place more
than 390 orders in listed options per day on average during a
calendar month for its own beneficial account(s). See Exchange Rule
100, including Interpretation and Policy .01.
    \4\ ``Affiliate'' means (i) an affiliate of a Member of at least
75% common ownership between the firms as reflected on each firm's
Form BD, Schedule A, or (ii) the Appointed Market Maker of an
Appointed EEM (or, conversely, the Appointed EEM of an Appointed
Market Maker). An ``Appointed Market Maker'' is a MIAX Emerald
Market Maker (who does not otherwise have a corporate affiliation
based upon common ownership with an EEM) that has been appointed by
an EEM and an ``Appointed EEM'' is an EEM (who does not otherwise
have a corporate affiliation based upon common ownership with a MIAX
Emerald Market Maker) that has been appointed by a MIAX Emerald
Market Maker, pursuant to the following process. A MIAX Emerald
Market Maker appoints an EEM and an EEM appoints a MIAX Emerald
Market Maker, for the purposes of the Fee Schedule, by each
completing and sending an executed Volume Aggregation Request Form
by email to [email protected] no later than 2 business days
prior to the first business day of the month in which the
designation is to become effective. Transmittal of a validly
completed and executed form to the Exchange along with the
Exchange's acknowledgement of the effective designation to each of
the Market Maker and EEM will be viewed as acceptance of the
appointment. The Exchange will only recognize one designation per
Member. A Member may make a designation not more than once every 12
months (from the date of its most recent designation), which
designation shall remain in effect unless or until the Exchange
receives written notice submitted 2 business days prior to the first
business day of the month from either Member indicating that the
appointment has been terminated. Designations will become operative
on the first business day of the effective month and may not be
terminated prior to the end of the month. Execution data and reports
will be provided to both parties. See the Definitions Section of the
Fee Schedule.
    \5\ ``Market Maker'' refers to ``Lead Market Maker'' (``LMM''),
``Primary Lead Market Maker'' (``PLMM'') and ``Registered Market
Maker'' (``RMM''), collectively. See the Definitions Section of the
Fee Schedule and Exchange Rule 100.
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Background
    The Exchange currently assesses transaction rebates and fees to all
market participants, which are based upon a threshold tier structure
(``Tier''). Tiers are determined on a monthly basis and are based on
three alternative calculation methods, as defined in Section 1)a)ii) of
the Fee Schedule. The calculation method that results in the highest
Tier achieved by the Member \6\ shall apply to all Origin types by the
Member, except the Priority Customer Origin type. For the Priority
Customer Origin calculation, the Tier applied for a Member and its
Affiliates' is solely determined by calculation Method 3, as defined in
Section 1)a)ii) of the Fee Schedule, titled ``Total Priority Customer,
Maker sides volume, based on % of CTCV (`Method 3').'' The monthly
volume thresholds for each of the methods, associated with each Tier,
are calculated as the total monthly volume executed by the Member in
all options classes on MIAX Emerald in the relevant Origins and/or
applicable liquidity, not including Excluded Contracts,\7\ (as the
numerator) expressed as a percentage of (divided by) Customer Total
Consolidated Volume (``CTCV'') (as the denominator). CTCV is calculated
as the total national volume cleared at The Options Clearing
Corporation (``OCC'') in the Customer range in those classes listed on
MIAX Emerald for the month for which fees apply, excluding volume
cleared at the OCC in the Customer range executed during the period of
time in which the Exchange experiences an ``Exchange System
Disruption'' \8\ (solely in the option classes of the affected Matching
Engine).\9\ In addition, the per contract transaction rebates and fees
shall be applied retroactively to all eligible volume once the Tier has
been reached by the Member. Members that place resting liquidity, i.e.,
orders on the MIAX Emerald System, will be assessed the specified
``maker'' rebate or fee (each a ``Maker'') and Members that execute
against resting liquidity will be assessed the specified ``taker'' fee
or rebate (each a ``Taker'').\10\ Members are also assessed lower
transaction fees and smaller rebates for order executions in standard
option classes in the Penny Interval Program \11\ (``Penny Classes'')
than for order executions in standard option classes which are not in
the Penny Program (``non-Penny Classes''), for which Members will be
assessed a higher transaction fees and larger rebates.
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    \6\ ``Member'' means an individual or organization approved to
exercise the trading rights associated with a Trading Permit.
Members are deemed ``members'' under the Exchange Act. See the
Definitions Section of the Fee Schedule and Exchange Rule 100.
    \7\ ``Excluded Contracts'' means any contracts routed to an away
market for execution. See the Definitions Section of the Fee
Schedule.
    \8\ The term ``Exchange System Disruption'' means an outage of a
Matching Engine or collective Matching Engines for a period of two
consecutive hour or more, during trading hours. See the Definitions
Section of the Fee Schedule.
    \9\ A ``Matching Engine'' is a part of the MIAX Emerald
electronic system that processes options orders and trades on a
symbol-by-symbol basis. See the Definitions Section of the Fee
Schedule.
    \10\ For a Priority Customer complex order taking liquidity in
both a Penny class and non-Penny class against Origins other than
Priority Customer, the Priority Customer order will receive a rebate
based on the Tier achieved.
    \11\ See Securities Exchange Act Release No. 88993 (June 2,
2020), 85 FR 35145 (June 8, 2020) (SR-EMERALD-2020-05) (Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To
Amend Exchange Rule 510, Minimum Price Variations and Minimum
Trading Increments, To Conform the Rule to Section 3.1 of the Plan
for the Purpose of Developing and Implementing Procedures Designed
To Facilitate the Listing and Trading of Standardized Options) (the
``Penny Program'').

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Proposal
    The Exchange proposes to amend Section 1)a)i) of the Fee Schedule
to amend the Simple Maker rebates in Tier 4 for options transactions in
Penny Classes and non-Penny Classes for executed Priority Customer
orders when the contra is an Affiliated Market Maker. Currently, the
Exchange provides Simple Maker rebates of ($0.53) and ($1.05) for
executed Priority Customer orders in Tier 4 in options in Penny Classes
and non-Penny Classes, respectively, if the contra is not an Affiliated
Market Maker. If the contra is an Affiliated Market Maker, the Exchange
provides lower Simple Maker rebates of ($0.49) and ($0.95) for executed
Priority Customer orders in Tier 4 in options in Penny Classes and non-
Penny Classes, respectively.\12\ The lower Simple Maker rebate for an
Affiliated Market Maker transaction for executed Priority Customer
orders in Tier 4 in options in Penny Classes is denoted by the symbol
``[ssquf]'' following the table of fees and rebates in Section 1)a)i)
of the Fee Schedule. The lower Simple Maker rebate for an Affiliated
Market Maker transaction for executed Priority Customer orders in Tier
4 in options in non-Penny Classes is denoted by the symbol ``[ssquf]''
following the table of fees and rebates in Section 1)a)i) of the Fee
Schedule.\13\
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    \12\ See Fee Schedule, Section 1)a)i), notes ``[ssquf]'' and
``[ssquf]''. See also Securities Exchange Act Release No. 89927
(September 21, 2020), 85 FR 60498 (September 25, 2020) (SR-EMERALD-
2020-07) (establishing lower Priority Customer Tier 4 Simple Maker
rebates in Penny and non-Penny Classes when the contra is an
Affiliated Market Maker).
    \13\ See id.
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    The Exchange now proposes to lower the Simple Maker rebates in Tier
4 for options transactions in Penny Classes and non-Penny Classes for
executed Priority Customer orders when the contra is an Affiliated
Market Maker. Specifically, the Exchange proposes to lower the Simple
Maker rebate for executed Priority Customer orders in options in Penny
Classes in Tier 4 from ($0.49) to ($0.43) when the contra is an
Affiliated Market Maker. The Exchange also proposes to lower the Simple
Maker rebate for executed Priority Customer orders in options in non-
Penny Classes in Tier 4 from ($0.95) to ($0.85) when the contra is an
Affiliated Market Maker. The proposed changes would be reflected in
current footnotes ``[ssquf]'' and ``[ssquf]'' for Penny and non-Penny
Classes, respectively. Accordingly, the Exchange proposes to update
footnote ``[ssquf]'' to now read: ``This Maker rebate is for executed
Priority Customer Simple Orders when the contra is not an Affiliated
Market Maker. When the contra is an Affiliated Market Maker, this Maker
rebate for executed Priority Customer Simple Orders will be ($0.43).''
The Exchange also proposes to update footnote ``[ssquf]'' to now read:
``This Maker rebate is for executed Priority Customer Simple Orders
when the contra is not an Affiliated Market Maker. When the contra is
an Affiliated Market Maker, this Maker rebate for executed Priority
Customer Simple Orders will be ($0.85).''
    The purpose of adjusting the specified Simple Maker rebates is for
business and competitive reasons. In order to attract order flow, the
Exchange initially set its Maker rebates and Taker fees so that they
were meaningfully higher/lower than other options exchanges that
operate comparable maker/taker pricing models.\14\ The Exchange now
believes that it is appropriate to further adjust these specified Maker
rebates so that they are more in line with other exchanges, but will
still remain highly competitive such that they should enable the
Exchange to continue to attract order flow and maintain market
share.\15\
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    \14\ See Securities Exchange Act Release No. 85393 (March 21,
2019), 84 FR 11599 (March 27, 2019) (SR-EMERALD-2019-15).
    \15\ See Cboe BZX Options Exchange Fee Schedule, under
``Transaction Fees'' (providing Customer rebates for Penny Program
Securities ranging from $0.25 to $0.53 and Non-Penny Program
Securities ranging from $0.90 to $1.05); see also Nasdaq Stock
Market, Options 7, Pricing Schedule, Section 2 Nasdaq Options
Market--Fees and Rebates, note 2 (providing lower rates when the
Participant is both the buyer and seller).
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Implementation
    The proposed changes are effective beginning March 1, 2022.
2. Statutory Basis
    The Exchange believes that its proposal to amend its Fee Schedule
is consistent with Section 6(b) of the Act \16\ in general, and
furthers the objectives of Section 6(b)(4) of the Act,\17\ in that it
is an equitable allocation of reasonable dues, fees and other charges
among Exchange members and issuers and other persons using its
facilities, and 6(b)(5) of the Act,\18\ in that it is designed to
prevent fraudulent and manipulative acts and practices, promote just
and equitable principles of trade, foster cooperation and coordination
with persons engaged in facilitating transactions in securities, remove
impediments to and perfect the mechanisms of a free and open market and
a national market system and, in general, protect investors and the
public interest.
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    \16\ 15 U.S.C. 78f(b).
    \17\ 15 U.S.C. 78f(b)(4).
    \18\ 15 U.S.C. 78f(b)(1) and (b)(5).
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    The Commission has repeatedly expressed its preference for
competition over regulatory intervention in determining prices,
products, and services in the securities markets. In Regulation NMS,
the Commission highlighted the importance of market forces in
determining prices and SRO revenues and, also, recognized that current
regulation of the market system ``has been remarkably successful in
promoting market competition in its broader forms that are most
important to investors and listed companies.'' \19\
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    \19\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496 (June 29, 2005).
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    There are currently 16 registered options exchanges competing for
order flow. Based on publicly-available information, and excluding
index-based options, no single exchange has a market share of more than
approximately 13-14% of the equity options market.\20\ Therefore, no
exchange possesses significant pricing power. More specifically, as of
February 25, 2022, the Exchange had a market share of approximately
3.68% of executed volume of multiply-listed equity and exchange traded
fund (``ETF'') options for the month of February 2022.\21\
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    \20\ See ``The Market at a Glance,'' (last visited February 25,
2022), available at https://www.miaxoptions.com/.
    \21\ See id.
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    The Exchange believes that the ever-shifting market share among the
exchanges from month to month demonstrates that market participants can
discontinue or reduce use of certain categories of products and
services, terminate an existing membership or determine to not become a
new member, and/or shift order flow, in response to transaction fee
changes. For example, on February 28, 2019, the Exchange's affiliate,
MIAX PEARL, LLC (``MIAX Pearl''), filed with the Commission a proposal
to increase Taker fees in certain Tiers for options transactions in
certain Penny classes for Priority Customers and decrease Maker rebates
in certain Tiers for options transactions in Penny classes for Priority
Customers (which fee was to be effective March 1, 2019).\22\ MIAX Pearl
experienced a decrease in total market share for the month of March
2019, after the proposal went into effect. Accordingly, the Exchange
believes that the MIAX Pearl March 1, 2019 fee change, to increase
certain transaction fees and decrease certain transaction rebates, may
have

contributed to the decrease in MIAX Pearl's market share and, as such,
the Exchange believes competitive forces constrain the Exchange's, and
other options exchanges, ability to set transaction fees and market
participants can shift order flow based on fee changes instituted by
the exchanges.
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    \22\ See Securities Exchange Act Release No. 85304 (March 13,
2019), 84 FR 10144 (March 19, 2019) (SR-PEARL-2019-07).
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    The Exchange believes its proposal to decrease the Simple Maker
rebates in Tier 4 for options transactions in Penny and non-Penny
Classes for Priority Customers is reasonable, equitable and not
unfairly discriminatory because all similarly situated market
participants in the same Origin type are subject to the same tiered
Maker rebates and Taker fees and access to the Exchange is offered on
terms that are not unfairly discriminatory. The Exchange believes it is
equitable and not unfairly discriminatory to reduce the Simple Maker
rebates to Priority Customer orders in Penny and non-Penny Classes for
competitive and business reasons because the Exchange initially set its
Simple Maker rebates for such orders higher than certain other options
exchanges that operate comparable maker/taker pricing models.\23\ The
Exchange now believes that it is appropriate to further decrease the
specified Simple Maker rebates so that they are more in line with other
exchanges, and will still remain highly competitive such that they
should enable the Exchange to continue to attract order flow and
maintain market share.
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    \23\ See supra note 15.
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    Furthermore, the proposed decrease to the Simple Maker rebates for
Priority Customers promotes just and equitable principles of trade,
fosters cooperation and coordination with persons engaged in
facilitating transactions in securities, and protects investors and the
public interest, because even with the decrease, the Exchange's
proposed Simple Maker rebates for such orders still remain highly
competitive with certain other options exchanges offering comparable
pricing models, and should enable the Exchange to continue to attract
order flow and maintain market share.\24\ The Exchange believes that
the amount of such fees, as proposed to be decreased, will continue to
encourage those market participants to send orders to the Exchange.
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    \24\ See id.
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule changes will
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act.
Intra-Market Competition
    The Exchange believes that the proposed changes to the specified
Simple Maker rebates for the applicable market participants should
continue to encourage the provision of liquidity that enhances the
quality of the Exchange's market and increases the number of trading
opportunities on the Exchange for all participants who will be able to
compete for such opportunities. The proposed rule change should enable
the Exchange to continue to attract and compete for order flow with
other exchanges. However, this competition does not create an undue
burden on competition but rather offers all market participants the
opportunity to receive the benefit of competitive pricing.
Inter-Market Competition
    The Exchange operates in a highly competitive market in which
market participants can readily favor competing venues if they deem fee
levels at a particular venue to be excessive. There are currently 16
registered options exchanges competing for order flow. Based on
publicly-available information, and excluding index-based options, no
single exchange has a market share of more than approximately 13-14% of
the equity options market.\25\ Therefore, no exchange possesses
significant pricing power. More specifically, as of February 25, 2022,
the Exchange had a market share of approximately 3.68% of executed
volume of multiply-listed equity and ETF options for the month of
February 2022.\26\ Therefore, no exchange possesses significant pricing
power in the execution of multiply-listed equity and ETF options order
flow. In such an environment, the Exchange must continually adjust its
transaction and non-transaction fees to remain competitive with other
exchanges and to attract order flow. The Exchange believes that the
proposed rule changes reflect this competitive environment because it
modifies the Exchange's rebates in a manner that will allow the
Exchange to remain competitive.
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    \25\ See supra note 20.
    \26\ See id.
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C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others

    Written comments were neither solicited nor received.

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

    The foregoing rule change has become effective pursuant to Section
19(b)(3)(A)(ii) of the Act,\27\ and Rule 19b-4(f)(2) \28\ 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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    \27\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \28\ 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 (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include
File Number SR-EMERALD-2022-10 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.

All submissions should refer to File Number SR-EMERALD-2022-10. 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 (http://www.sec.gov/rules/sro.shtml).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for website viewing and printing in
the Commission's Public

Reference Room, 100 F Street NE, Washington, DC 20549 on official
business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of
the filing also will be available for inspection and copying at the
principal office of the Exchange. All comments received will be posted
without change. Persons submitting comments are cautioned that we do
not redact or edit personal identifying information from comment
submissions. You should submit only information that you wish to make
available publicly. All submissions should refer to File Number SR-
EMERALD-2022-10, and should be submitted on or before April 8, 2022.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\29\
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    \29\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-05699 Filed 3-17-22; 8:45 am]
BILLING CODE 8011-01-P