[Federal Register Volume 87, Number 74 (Monday, April 18, 2022)]
[Notices]
[Pages 23000-23002]
[FR Doc No: 2022-08173]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-94697; File No. SR-EMERALD-2022-12]

Self-Regulatory Organizations; MIAX Emerald, LLC; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend
the MIAX Emerald Fee Schedule To Adopt Fees for the High Precision
Network Time Signal Service

April 12, 2022.
    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 March 30, 2022, MIAX Emerald, LLC (``MIAX Emerald'' or ``Exchange'')
filed with the Securities and Exchange Commission (``Commission'') a
proposed rule change as described in Items I, II, and III, below, which
Items have been prepared by the Exchange. The Commission is publishing
this notice to solicit comments on the proposed rule change from
interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

    The Exchange is filing a proposal to amend the MIAX Emerald Fee
Schedule (the ``Fee Schedule'') to adopt fees for a new service known
as the ``High Precision Network Time Signal Service.'' \3\
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    \3\ See, generally, Exchange Rule 531(d).
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    The text of the proposed rule change is available on the Exchange's
website at https://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 recently established a new service known as the ``High
Precision Network Time Signal Service'' (``HPNTSS'' or the
``Service''),\4\ which will be available for purchase by subscribers on
a voluntary basis. The Exchange now proposes to adopt fees for the
Service, which is described under Exchange Rule 531(d).\5\ The Service
is an optional product available to any firm that chooses to subscribe.
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    \4\ See Securities Exchange Act Release No. 94335 (March 1,
2022), 87 FR 12756 (March 7, 2022) (SR-EMERALD-2021-38) (Notice of
Filing of Amendment No. 1 and Order Granting Accelerated Approval of
a Proposed Rule Change, as Modified by Amendment No. 1, To Amend
Exchange Rule 531 To Provide for a New Service Called the High
Precision Network Time Signal Service).
    \5\ See Exchange Rule 531(d).
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    The Exchange proposes to assess a monthly fee of $3,600 for
subscribing to the Service. As such, the Exchange proposes to amend the
Fee Schedule to adopt new Section 8), Services, to provide that
subscribers may purchase the Service for a monthly fee of $3,600.
Subscribers may cancel their subscription at any time. The Exchange
proposes to specify that for mid-month subscriptions to the Service,
new subscribers will be charged for the full calendar month for which
they subscribe. A second time signal is available with each
subscription to the Service for redundancy and disaster recovery
purposes.
    In sum, the Service enables subscribers to synchronize their own
primary clock devices to the Exchange's primary clock device, by
receiving time signals from the Exchange via a 1 gigabit (``Gb'')
connection that is currently offered by the Exchange and utilized by
market participants to connect to the Exchange's System.\6\ The Service
simply provides subscribers with the Exchange's time signal at a sub-
nanosecond level and nothing else. The sub-nanosecond time signal would
tell the subscriber the Exchange's time at a sub-nanosecond level at a
particular point in time. The subscriber may then use that time signal
to synchronize their own primary clock to the Exchange's primary clock
at the more acute sub-nanosecond level.\7\ Subscribers would utilize
their own Enhanced PTP device \8\ to synchronize the clocks within the
subscriber's computer and network infrastructure, as appropriate, at a
sub-nanosecond level. This would enable the subscriber to record
certain times an order or message traveled through and leaves the
subscriber's system at a sub-nanosecond level.
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    \6\ The Exchange did not provide a new connectivity option to
receive time signals via the Service. The Service is not a
connectivity product and subscribers would only need to utilize an
existing connectivity method offered by the Exchange to utilize the
Service. See Fee Schedule, Section 5, System Connectivity Fees, for
information regarding 1 Gb connectivity.
    \7\ See supra note 4 for a detailed description of the Service.
See also MIAX Emerald Options--Update: The Introduction of the High
Precision Network Time Signal (Enhanced PTP/White Rabbit) Beginning
April 1, 2022 (March 3, 2022), available at https://www.miaxoptions.com/alerts/2022/03/03/miax-emerald-options-update-introduction-high-precision-network-time-signal.
    \8\ An Enhanced PTP clock synchronization device captures time
and coordinates time synchronization within a network at a sub-
nanosecond level.
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    The Service is not a connectivity product and subscribers are able
to utilize an existing connectivity method offered by the Exchange to
utilize the Service. The Service simply provides enhanced time
synchronization that may be utilized by a subscriber to adjust their
own systems. The Service is not a market data product or access/
connectivity service. Subscribers may continue to use their existing
methods to connect to and send orders to the Exchange. The Service will
not include any trading data regarding the subscriber's activity on the
Exchange or include any data from other trading activity on the
Exchange.
    The Exchange established the Service in response to demand for
tighter and more accurate clock synchronization options with the
Exchange's network. The Service is offered to subscribers on a
completely voluntary basis in that the Exchange is not required by any
rule or regulation to make the Service available and potential
subscribers may subscribe to the Service only if they voluntarily
choose to do so. It is a business decision of each subscriber whether
to subscribe to the Service or not.
    The Exchange intends to begin to offer the Service and charge the
proposed fees on April 1, 2022.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\9\ in general, and furthers the
objectives of Section 6(b)(5) of the Act,\10\ in particular, in that it
is designed to prevent fraudulent and manipulative acts and practices,
to promote just and equitable principles of trade, to remove
impediments to and perfect the mechanism of a free and open market and
a national market system, and to protect investors and the

public interest, and that it is not designed to permit unfair
discrimination among customers, brokers, or dealers. The Exchange also
believes that its proposal to adopt fees for the Service is consistent
with Section 6(b) of the Act \11\ in general, and furthers the
objectives of Section 6(b)(4) of the Act \12\ in particular, in that it
is an equitable allocation of dues, fees and other charges among market
participants.
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    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(5).
    \11\ 15 U.S.C. 78f(b).
    \12\ 15 U.S.C. 78f(b)(4).
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    The Exchange operates in a highly competitive environment in which
16 U.S. registered equity options exchanges compete for market share.
Based on publicly available information, no single options exchange has
more than 13-14% of the equity options market share and currently the
Exchange represents only approximately 3.57% of the market share.\13\
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.'' \14\ Making products,
like the Service, available to market participants fosters competition
in the marketplace, and constrains the ability of exchanges to charge
supra-competitive fees. In the event that a market participant views
one exchange's product offering as more attractive than the competition
that market participant can, and often does, switch between similar
products. The proposed fees are a result of the competitive environment
of the U.S. options industry as the Exchange seeks to adopt fees to
attract purchasers of the recently introduced Service.
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    \13\ See ``The Market at a Glance,'' (last visited March 15,
2022), available at https://www.miaxoptions.com/.
    \14\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting
Release'').
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    If the Exchange proposed fees that market participants viewed as
excessively high, then the proposed fees would simply serve to reduce
demand for the Exchange's Service, which as noted, is entirely
optional. Other options exchanges are also free to introduce their own
comparable products with lower prices to better compete with the
Exchange's offering. As such, the Exchange believes that the proposed
fees are reasonable and set at a level to compete with other options
exchanges that may choose to offer similar services. Moreover, if a
market participant views another exchange's potential service as more
attractive, then such market participant can merely choose not to
subscribe to the Exchange's Service and instead subscribe to another
exchange's similar product, which may offer similar data points, albeit
based on that other market's trading systems.
    The Exchange also believes the proposed fees are reasonable as they
would support the introduction of a new product to subscribers. The
Exchange believes the proposed fees are reasonable in order to support
the introduction of the new Service, which may be used for numerous
optional purposes. For example, the Service would allow subscribers to
more precisely measure latency between their network and that of the
Exchange at a sub-nanosecond level, allowing subscribers to better
understand the times at which their order or message reached certain
points when traveling from their network to the Exchange. The Service
would also allow subscribers to analyze the efficiency of their network
and connections when not only routing orders to the Exchange, but also
when receiving messages back from the Exchange (including
communications regarding whether their order was accepted, rejected, or
executed). Subscribers utilizing the Service may also measure message
traversal times by comparing their messages' (e.g., order, quote,
cancellation) timestamps to the Exchange's matching engine timestamps
from the Exchange-generated acknowledgement messages (e.g., order
acknowledgment, quote acknowledgment, cancellation acknowledgment).\15\
Subscribers would then be able to enhance their own systems to ensure
that they are receiving such communications in a timelier manner and to
verify that their systems are working as intended.
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    \15\ The Exchange sends subscribers an acknowledgement message
that their order or message was received by the Exchange. This
acknowledgement includes the time of receipt at a nanosecond level.
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    In addition, subscribers may utilize these enhanced latency
measurements to better analyze latencies within their own systems and
use this analysis to optimize their network, models and trading
patterns to potentially improve their interactions with the Exchange.
In particular, subscribers may use these metrics to better assess the
health of their network and that their systems are working as intended.
For example, a subscriber may use this information when analyzing the
efficacy of their various connections and whether a connection is
performing as expected or experiencing a delay. A subscriber may then
decide to rebalance the amount of orders and/or messages over its
various connections to ensure each connection is operating with maximum
efficiency. Subscribers may also use the Service for other purposes,
such as determining compliance with certain regulatory requirements
\16\ and trade surveillance. Subscribers may also utilize time
synchronization to assist them in evaluating compliance with certain
clock synchronization requirements. The Exchange therefore believes the
proposed fees are reasonable because of the numerous benefits provided
to subscribers that subscribe to the Service. Selling different
products and services, such as HPNTSS, is also a means by which
exchanges compete to attract business. To the extent that the Exchange
is successful in attracting subscribers for the Service, it may earn
trading revenues and further enhance market participants' interactions
on the Exchange, which would increase value of its products and
services. If the market deems the proposed fees to be unfair or
inequitable, firms can diminish or discontinue their use of the
Service. The Exchange therefore believes that the proposed fees for the
Service reflect the competitive environment of U.S. exchanges and would
be properly assessed to market participants that subscribe to the
Service. The Exchange also believes the proposed fees are equitable and
not unfairly discriminatory as the fees would apply equally to all
users who choose to subscribe to the Service. It is a business decision
of each market participant that chooses to subscribe to the Service.
The Exchange's proposed fees would not differentiate between
subscribers that purchase the Service and are set at a modest level
that would allow any interested market participant to purchase the
Service based on their business needs.
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    \16\ See, e.g., Chapter III of the Exchange's Rules, which
incorporates by reference Rule 301, Interpretation and Policy .02
(Just and Equitable Principles of Trade), of the Exchange's
affiliate, Miami International Securities Exchange, LLC (``MIAX'');
and Financial Industry Regulatory Authority, Inc. (``FINRA'') Rule
5320.
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    The Exchange reiterates that the decision as to whether or not to
purchase the Service is entirely optional for all potential
subscribers. Indeed, no market participant is required to purchase the
Service and the Exchange is not required to make the Service available
to all investors. It is entirely a

business decision of each market participant to subscribe to the
Service. The Exchange offers the Service as a convenience to market
participants to provide them with the ability to synchronize their own
primary clock devices to the Exchange's primary clock device at a sub-
nanosecond level. A market participant that chooses to subscribe to the
Service may discontinue the use of the Service at any time if that
market participant determines that the synchronization of its primary
clock devices to the Exchange's primary clock device is no longer
useful.

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 the Service available in order to keep pace with 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 fees would not cause any
unnecessary or inappropriate burden on intermarket competition as other
exchanges are free to introduce their own comparable product with lower
prices to better compete with the Exchange's offering. The Exchange
operates in a highly competitive environment, and its ability to price
the Service is constrained by competition among exchanges who choose to
adopt a similar product. The Exchange must consider this in its pricing
discipline in order to compete for market share. For example, proposing
fees that are excessively higher than fees for potentially similar
products would simply serve to reduce demand for the Exchange's
product, which as discussed, market participants are under no
obligation to utilize. In this competitive environment, potential
purchasers are free to choose which, if any, similar product to
purchase to satisfy their need for market information. As a result, the
Exchange believes this proposed rule change permits fair competition
among national securities exchanges.
    The Exchange also believes that the proposed fees do not cause any
unnecessary or inappropriate burden on intermarket competition because
the synchronization of subscribers' primary clock devices with that of
the Exchange would enhance competition between exchanges. Subscribers
that subscribe to the Service could use the Service to adjust their own
systems and recalibrate their models and trading strategies to improve
their overall trading experience on the Exchange. This may improve the
Exchange's overall trading environment resulting in increased liquidity
and order flow on the Exchange. In response, other exchanges may
similarly seek ways to provide synchronized clock timestamps in an
effort to improve their own market quality.
    The Exchange does not believe the proposed rule change would cause
any unnecessary or inappropriate burden on intramarket competition.
Particularly, the proposed product and fees apply uniformly to any
purchaser in that the Exchange does not differentiate between
subscribers that purchase the Service. The proposed fees are set at a
modest level that would allow any interested market participant to
purchase the Service based on their business needs.

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,\17\ and Rule 19b-4(f)(2) \18\ 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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    \17\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \18\ 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-2022-12 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-2022-12. This
file number should be included on the subject line if email is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for website viewing and
printing in the Commission's Public Reference Room, 100 F Street NE,
Washington, DC 20549, on official business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available
for inspection and copying at the principal office of the Exchange. All
comments received will be posted without change. Persons submitting
comments are cautioned that we do not redact or edit personal
identifying information from comment submissions. You should submit
only information that you wish to make available publicly. All
submissions should refer to File Number SR-EMERALD-2022-12 and should
be submitted on or before May 9, 2022.
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    \19\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\19\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-08173 Filed 4-15-22; 8:45 am]
BILLING CODE 8011-01-P