Federal Register / Vol. 83, No. 248 / Friday, December 28, 2018 / Notices 67421 

31 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78f. 

2See Securities Exchange Act Release No. 84313 

(September 28, 2018), 83 FR 49965 (‘‘Notice’’). 

3 15 U.S.C. 78f(b) and 15 U.S.C. 78s(a), 

respectively. 

4See 15 U.S.C. 78f(b)(3). 

5See 15 U.S.C. 78f(b)(5). 

6See 15 U.S.C. 78f(b)(8). 

7See MIAX EMERALD By-Laws, Section 2.1. See 

also Limited Liability Company Agreement of 

MIAX EMERALD, Section 8(b). 

8The MIAX EMERALD By-Laws are included in 

the Amended and Restated Limited Liability 

Company Agreement of MIAX EMERALD (‘‘MIAX 

EMERALD LLC Agreement’’). 

9See MIAX EMERALD By-Laws, Article II, 

Section 2.2(a). 

10See MIAX EMERALD By-Laws, Article II, 

Section 2.2(b). 

11 ‘‘Non-Industry Director’’ means a Director who 

is an Independent Director or any other individual 

who would not be an Industry Director. See MIAX 

EMERALD By-Laws, Article I(aa). 

12 ‘‘Independent Director’’ means a ‘‘Director who 

has no material relationship with [MIAX 

EMERALD] or any affiliate of [MIAX EMERALD], or 

any [MIAX EMERALD member] or any affiliate of 

any such [MIAX EMERALD member]; provided, 

however, that an individual who otherwise 

qualifies as an Independent Director shall not be 

disqualified from serving in such capacity solely 

because such Director is a Director of [MIAX 

EMERALD] or [Miami Holdings].’’ See MIAX 

EMERALD By-Laws, Article I(p). 

13An ‘‘Industry Director’’ is, among other things, 

a Director that is or has served within the prior 

three years as an officer, director, employee, or 

owner of a broker or dealer, as well as any Director 

who has, or has had, a consulting or employment 

relationship with MIAX EMERALD or any affiliate 

of MIAX EMERALD within the prior three years. 

See MIAX EMERALD By-Laws, Article I(r). This 

definition is consistent with what the Commission 

has approved for other exchanges. See Securities 

Exchange Act Release Nos. 79543 (December 13, 

2016), 81 FR 92901 (December 20, 2016) (File No. 

10–227) (order granting registration of MIAX 

PEARL, LLC) (‘‘MIAX PEARL Order’’); 68341 

(December 3, 2012), 77 FR 73065 (December 7, 

2012) (File No. 10–207) (order granting the 

registration of Miami International Securities 

Exchange, LLC (‘‘MIAX Exchange’’)) (‘‘MIAX 

Order’’); 58375 (August 18, 2008), 73 FR 49498 

(August 21, 2008) (File No. 10–182) (order granting 

the registration of BATS Exchange, Inc.) (‘‘BATS 

Order’’); and 66871 (April 27, 2012), 77 FR 26323 

(May 3, 2012) (File No. 10–206) (order granting the 

registration of BOX Options Exchange LLC 

(‘‘BOX’’)) (‘‘BOX Order’’). 

14See MIAX EMERALD By-Laws, Article II, 

Section 2.2 (b)(i). ‘‘Member Representative 

Director’’ means a Director who has been appointed 

by Miami International Holdings, Inc. as an initial 

Director pursuant to Section 2.5 of the MIAX 

EMERALD By-Laws to serve until the first annual 

meeting or who ‘‘has been elected by the Miami 

International Holdings, Inc. after having been 

Continued 

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 DTC and on DTCC’s website 

(http://dtcc.com/legal/sec-rulefilings.aspx). 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–DTC– 

2018–013 and should be submitted on 

or before January 18, 2019. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.31

Brent J. Fields, 

Secretary. 

[FR Doc. 2018–28191 Filed 12–27–18; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–84891; File No. 10–233) 

In the Matter of the Application of MIAX 

EMERALD, LLC for Registration as a 

National Securities Exchange; 

Findings, Opinion, and Order of the 

Commission 

December 20, 2018. 

I. Introduction 

On August 16, 2018, MIAX 

EMERALD, LLC (‘‘MIAX EMERALD’’ or 

‘‘Exchange’’) submitted to the Securities 

and Exchange Commission 

(‘‘Commission’’) an application for 

Registration as a National Securities 

Exchange (‘‘Form 1 Application’’) under 

Section 6 of the Securities Exchange Act 

of 1934 (‘‘Act’’), seeking registration as 

a national securities exchange under 

Section 6 of the Act.1 Notice of the Form 

1 Application was published for 

comment in the Federal Register on 

October 3, 2018.2 The Commission 

received no comments. 

II. Statutory Standards 

Under Sections 6(b) and 19(a) of the 

Act,3 the Commission shall by order 

grant an application for registration as a 

national securities exchange if the 

Commission finds, among other things, 

that the proposed exchange is so 

organized and has the capacity to carry 

out the purposes of the Act and to 

comply, and to enforce compliance by 

its members and persons associated 

with its members, with the provisions of 

the Act, the rules and regulations 

thereunder, and the rules of the 

exchange. 

As discussed in greater detail below, 

the Commission finds that MIAX 

EMERALD’s application for exchange 

registration meets the requirements of 

the Act and the rules and regulations 

thereunder. Further, the Commission 

finds that the proposed rules of MIAX 

EMERALD are consistent with Section 6 

of the Act in that, among other things, 

they assure a fair representation of the 

Exchange’s members in the selection of 

its directors and administration of its 

affairs and provide that one or more 

directors will be representative of 

issuers and investors and not be 

associated with a member of the 

exchange, or with a broker or dealer; 4

and that they are designed to prevent 

fraudulent and manipulative acts and 

practices, promote just and equitable 

principles of trade, foster cooperation 

and coordination with persons engaged 

in regulating, clearing, settling, 

processing information with respect to, 

and facilitating transactions in 

securities, and 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 and are not 

designed to permit unfair 

discrimination between customers, 

issuers, or broker-dealers.5 Finally, the 

Commission finds that MIAX 

EMERALD’s proposed rules do not 

impose any burden on competition not 

necessary or appropriate in furtherance 

of the purposes of the Act.6

III. Discussion 

A. Governance of MIAX EMERALD 

1. MIAX EMERALD Board of Directors 

The board of directors of MIAX 

EMERALD (‘‘Exchange Board’’ or 

‘‘MIAX EMERALD Board’’) will be its 

governing body and will possess all of 

the powers necessary for the 

management of its business and affairs, 

including governance of MIAX 

EMERALD as a self-regulatory 

organization (‘‘SRO’’).7

Under the By-Laws of MIAX 

EMERALD (‘‘MIAX EMERALD ByLaws’’): 8

• The Exchange Board will be 

composed of not less than ten 

directors; 9

• One director will be the Chief 

Executive Officer of MIAX 

EMERALD; 10

• The number of Non-Industry 

Directors,11 including at least one 

Independent Director,12 will equal or 

exceed the sum of the number of 

Industry Directors 13 and Member 

Representative Directors; 14 and 


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nominated by the Member Nominating Committee 

or by an Exchange Member pursuant to [the] ByLaws and confirmed as the nominee of Exchange 

Members after majority vote of Exchange Members, 

if applicable. A Member Representative Director 

may, but is not required to be, an officer, director, 

employee, or agent of an Exchange Member.’’ See 

MIAX EMERALD By-Laws, Article I(x). See also 

MIAX EMERALD By-Laws Article II, Section 2.5. 

15See MIAX EMERALD By-Laws, Article II, 

Section 2.2(b)(ii). 

16See MIAX EMERALD By-Laws, Article II, 

Section 2.4. See also MIAX EMERALD LLC 

Agreement, Section 9(a). 

17The Nominating Committee will be comprised 

of at least three directors, and the number of NonIndustry members on the Nominating Committee 

must equal or exceed the number of Industry 

members. See MIAX EMERALD By-Laws, Article V, 

Section 5.2. See also MIAX EMERALD By-Laws, 

Article IV, Section 4.2(a). 

18The Member Nominating Committee will be 

comprised of at least three directors, and each 

member of the Member Nominating Committee 

shall be a Member Representative member and shall 

not be required to be a Director of the Exchange. 

See MIAX EMERALD By-Laws, Article V, Section 

5.3. See also MIAX EMERALD By-Laws, Article IV, 

Section 4.2(a). Pursuant to MIAX EMERALD ByLaws, Article I(y), a ‘‘Member Representative 

member’’ is a member of any committee or hearing 

panel appointed by the Exchange Board who has 

been elected or appointed after having been 

nominated by the Member Nominating Committee 

pursuant to the By-Laws and who is an officer, 

director, employee, or agent of an Exchange 

Member. 

19See MIAX EMERALD By-Laws, Article V, 

Section 5.1. 

20See id. 

21The Member Nominating Committee will 

solicit comments from MIAX EMERALD members 

for the purpose of approving and submitting names 

of candidates for election to the position of Member 

Representative Director. See MIAX EMERALD ByLaws, Article II, Section 2.4(b). 

22See MIAX EMERALD By-Laws, Article II, 

Section 2.4(c). The petition must be signed by 

executive representatives of 10% or more of the 

MIAX EMERALD members. No MIAX EMERALD 

member, together with its affiliates, may account for 

more than 50% of the signatures endorsing a 

particular candidate. See id. 

23See MIAX EMERALD By-Laws, Article II, 

Sections 2.4(e) and (f). Each MIAX EMERALD 

Member shall have the right to cast one vote for 

each available Member Representative Director 

nomination, provided that any such vote must be 

cast for a person on the List of Candidates and that 

no MIAX EMERALD member, together with its 

affiliates, may account for more than 20% of the 

votes cast for a candidate. See MIAX EMERALD ByLaws, Article II, Section 2.4(f). 

24See MIAX EMERALD By-Laws, Article II, 

Section 2.4(f). 

25See id. 

26 15 U.S.C. 78f(b)(3). 

27See, e.g., MIAX PEARL Order, supra note 13, 

at 92903; MIAX Order, supra note 13, at 73067; 

Securities Exchange Act Release Nos. 76998 

(January 29, 2016), 81 FR 6066, 6068 (February 4, 

2016) (File No. 10–221) (order granting exchange 

registration of ISE Mercury, LLC) (‘‘ISE Mercury 

Order’’); 70050 (July 26, 2013), 78 FR 46622, 46624 

(August 1, 2013) (File No. 10–209) (order granting 

the exchange registration of ISE Gemini, LLC) (‘‘ISE 

Gemini Order’’); 53128 (January 13, 2006), 71 FR 

3550, 3553 (January 23, 2006) (File No. 10–131) 

(granting the exchange registration of Nasdaq Stock 

Market, Inc.) (‘‘Nasdaq Order’’); and BATS Order, 

supra note 13, at 49501. 

28 15 U.S.C. 78f(b)(3). 

29See, e.g., Regulation of Exchanges and 

Alternative Trading Systems, Securities Exchange 

Act Release No. 40760 (December 8, 1998), 63 FR 

70844, 70882 (December 22, 1998) (‘‘Regulation 

ATS Release’’). 

30See MIAX PEARL Order, supra note 13, at 

92903; MIAX Order, supra note 13, at 73067; BATS 

Order, supra note 13, at 49501; and Nasdaq Order, 

supra note 27, at 3553. 

• At least 20% of the directors on the 

Exchange Board will be Member 

Representative Directors.15

For the interim board (discussed 

below), and subsequently at the first 

annual meeting and each annual 

meeting thereafter, Miami International 

Holdings, Inc. (‘‘Miami Holdings’’), as 

the sole LLC Member of MIAX 

EMERALD, will elect the MIAX 

EMERALD Board pursuant to the MIAX 

EMERALD By-Laws.16 In addition, 

Miami Holdings will appoint the initial 

Nominating Committee 17 and Member 

Nominating Committee,18 consistent 

with each committee’s compositional 

requirements,19 to nominate candidates 

for election to the Exchange Board. Each 

of the Nominating Committee and 

Member Nominating Committee, after 

completion of its respective duties for 

nominating directors for election to the 

Board for that year, shall nominate 

candidates to serve on the succeeding 

year’s Nominating Committee or 

Member Nominating Committee, as 

applicable. Additional candidates for 

the Member Nominating Committee 

may be nominated and elected by MIAX 

EMERALD members pursuant to a 

petition process.20

The Nominating Committee will 

nominate candidates for each director 

position, and Miami Holdings, as the 

sole LLC Member, will elect those 

directors. For Member Representative 

Director positions, the Nominating 

Committee will nominate those 

candidates submitted to it, and 

approved, by the Member Nominating 

Committee.21 Additional candidates, 

however, may be nominated for the 

Member Representative Director 

positions by MIAX EMERALD members 

pursuant to a petition process.22 If no 

candidates are nominated pursuant to a 

petition process, then the initial 

nominees submitted by the Member 

Nominating Committee will be 

nominated as Member Representative 

Directors by the Nominating Committee. 

If a petition process produces additional 

candidates, then the candidates 

nominated pursuant to the petition 

process, together with those nominated 

by the Member Nominating Committee, 

will be presented to MIAX EMERALD 

members for a run-off election to 

determine the final slate of candidates 

for the vacant Member Representative 

Director positions.23 In the event of a 

contested run-off election, the 

candidates who receive the most votes 

will be nominated as the final slate of 

Member Representative Director 

candidates by the Nominating 

Committee.24 Miami Holdings, as the 

sole LLC Member, is obligated to elect 

the final slate of the Member 

Representative Director candidates that 

are nominated by the Nominating 

Committee.25

The Commission believes that the 

requirement in the MIAX EMERALD ByLaws that 20% of the directors be 

Member Representative Directors and 

the means by which they will be chosen 

by MIAX EMERALD members provide 

for the fair representation of members in 

the selection of directors and the 

administration of MIAX EMERALD and 

therefore is consistent with Section 

6(b)(3) of the Act.26 The Commission 

notes that this requirement helps to 

ensure that members have a voice in the 

use of self-regulatory authority by MIAX 

EMERALD.27

In addition, with respect to the 

requirement that the number of NonIndustry Directors, including at least 

one Independent Director, will equal or 

exceed the sum of the number of 

Industry Directors and Member 

Representative Directors, the 

Commission believes that the proposed 

composition of the Exchange Board 

satisfies the requirements in Section 

6(b)(3) of the Act,28 which requires in 

part that one or more directors be 

representative of issuers and investors 

and not be associated with a member of 

the exchange, or with a broker or dealer. 

The Commission notes that the 

inclusion of public, non-industry 

representatives on exchange oversight 

bodies is an important mechanism to 

support an exchange’s ability to protect 

the public interest.29 Further, the 

presence of public, non-industry 

representatives can help to ensure that 

no single group of market participants 

has the ability to systematically 

disadvantage other market participants 

through the exchange governance 

process. The Commission believes that 

public, non-industry directors can 

provide unique, unbiased perspectives, 

which are designed to enhance the 

ability of the Exchange Board to address 

issues in a non-discriminatory fashion 

and foster the integrity of the 

Exchange.30

2. Interim Exchange Board 

Prior to commencing operations, 

Miami Holdings will appoint an interim 

Exchange board of directors (‘‘Interim 

Exchange Board’’), which will include 


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31See MIAX EMERALD By-Laws, Section 2.5. 

32See MIAX EMERALD By-Laws, Section 2.5(b). 

Specifically, Miami Holdings will submit the names 

of its nominees for the interim Member 

Representative Director positions to persons who 

have submitted the initial documents for 

membership in the Exchange who would meet the 

qualifications for membership. See MIAX 

EMERALD By-Laws, Section 2.5(b). MIAX 

EMERALD additionally represents that the initial 

members of MIAX EMERALD will consist 

substantially of the current group of persons and 

firms that have begun the membership application 

process with MIAX EMERALD. See MIAX 

EMERALD Form 1 Application, Exhibit J. 

33See MIAX EMERALD By-Laws, Section 2.5(b). 

34See MIAX EMERALD By-Laws, Section 2.5(d). 

35See MIAX EMERALD By-Laws Section 2.5(a). 

36See MIAX EMERALD By-Laws, Sections 2.2(e) 

and 2.5(a). 

37See MIAX EMERALD By-Laws, Sections 2.5(a). 

The 90-day period is consistent with what the 

Commission approved for MIAX PEARL. See MIAX 

PEARL Order, supra note 13, at 92903 (allowing 

MIAX PEARL to appoint an initial interim board to 

enable it to commence operations as a registered 

exchange). See also ISE Mercury Order, supra note 

27, at 6068; MIAX Order, supra note 13, at 73067; 

and BOX Order, supra note 13, at 26325. 

38See 15 U.S.C. 78f(b)(3). 

39See supra note 32. 

40MIAX EMERALD’s proposed timeline for the 

interim board process follows a process identical to 

what the Commission approved for ISE Mercury, 

LLC. See ISE Mercury Order, supra note 27, at 6068. 

41See MIAX EMERALD By-Laws, Section 4.1. 

42See MIAX EMERALD By-Laws, Section 4.1(a). 

43See MIAX EMERALD By-Laws, Section 4.5(e) 

and (f), respectively. 

44See MIAX EMERALD By-Laws, Section 4.5(b). 

A Non-Industry Director shall serve as Chairman of 

the Committee. See id. See also MIAX EMERALD 

By-Laws, Section 4.2(a) (requiring that each 

committee be comprised of at least three people). 

45See MIAX EMERALD By-Laws, Section 4.5(a) 

and 4.5(c). 

46See MIAX EMERALD By-Laws, Section 4.5(d). 

47See MIAX EMERALD By-Laws, Section 4.5(f). 

See also MIAX EMERALD By-Laws, Section 4.2(a) 

(providing that except as otherwise provided in the 

MIAX EMERALD By-Laws, committees may 

include persons who are not members of the Board). 

48See MIAX EMERALD By-Laws, Section 4.5(e). 

49See MIAX EMERALD By-Laws, Article V, 

Section 5.2, and supra note 17. 

50See MIAX EMERALD By-Laws, Article V, 

Section 5.3, and supra note 18. 

interim Member Representative 

Directors.31 With respect to the selection 

of the interim Member Representative 

Directors for the Interim Exchange 

Board, prior to the commencement of 

operations as an exchange, Miami 

Holdings will submit the names of its 

nominees for the interim Member 

Representative Directors positions to 

persons that have begun the process of 

becoming members in the new 

Exchange.32 Such persons and firms 

will be allowed 14 days to submit the 

names of alternative candidates.33

Voting will occur no sooner than 5 days 

after the interim election notice is 

delivered to confirm the final slate of 

candidates to become an interim 

Member Representative Director.34 All 

other interim directors, except for the 

interim Member Representative 

Directors, will be appointed and elected 

by Miami Holdings, and must meet the 

MIAX EMERALD board composition 

requirements as set forth in the MIAX 

EMERALD By-Laws.35 Once these 

interim Member Representative 

Directors are seated on the Interim 

Exchange Board, then the Interim 

Exchange Board will meet the board 

composition requirements set forth in 

the governing documents of MIAX 

EMERALD. 

The Interim Exchange Board will 

serve until the first initial Exchange 

Board is elected pursuant to the full 

nomination, petition, and voting process 

set forth in the MIAX EMERALD ByLaws.36 MIAX EMERALD will complete 

such process within 90 days after its 

application for registration as a national 

securities exchange is granted by the 

Commission.37

The Commission believes that the 

process for electing the Interim 

Exchange Board, as proposed, is 

consistent with the requirements of the 

Act, including that the rules of the 

exchange assure fair representation of 

the exchange’s members in the selection 

of its directors and administration of its 

affairs.38 As noted above, MIAX 

EMERALD represents that the initial 

members of MIAX EMERALD will 

consist substantially of the current 

group of persons and firms that have 

begun the membership application 

process with MIAX EMERALD.39 MIAX 

EMERALD will engage these persons 

and firms in the interim board election 

process by, prior to the commencement 

of operations as an exchange, providing 

each of them with the opportunity to 

participate in the selection of interim 

Member Representative Directors 

consistent with the MIAX EMERALD 

By-Laws. Further, MIAX EMERALD 

represents that it will complete the full 

nomination, petition, and voting process 

as set forth in the MIAX EMERALD ByLaws, which will provide persons that 

are approved as members after the 

effective date of this Order with the 

opportunity to participate in the 

selection of the Member Representative 

Directors, within 90 days of when MIAX 

EMERALD’s application for registration 

as a national securities exchange is 

granted.40 Therefore, the Commission 

believes that MIAX EMERALD’s initial 

interim board process is consistent with 

the Act, including Section 6(b)(3), in 

that it is designed to provide 

representation among the persons and 

firms likely to become members when 

MIAX EMERALD commences 

operations and is sufficient to allow 

MIAX EMERALD to commence 

operations for an interim period prior to 

going through the process to elect a new 

Exchange Board pursuant to the full 

nomination, petition, and voting process 

set forth in the MIAX EMERALD ByLaws. 

3. Exchange Committees 

In the MIAX EMERALD By-Laws, the 

Exchange proposed to establish several 

standing committees, which would be 

divided into two categories: Committees 

of the Board (composed of MIAX 

EMERALD directors) and Committees of 

the Exchange (composed of a mixture of 

MIAX EMERALD directors and persons 

that are not MIAX EMERALD 

directors).41 The standing Committees 

of the Board would be the Audit, 

Compensation, Appeals, and Regulatory 

Oversight Committees.42 In addition, 

the Exchange Chairman, with approval 

of the Exchange Board, may appoint an 

Executive Committee and a Finance 

Committee, which also would be 

Committees of the Board.43

The Audit Committee will consist of 

three or more directors, a majority of 

which will be Non-Industry Directors.44

Each of the Compensation and 

Regulatory Oversight Committees will 

consist of three or more directors, all of 

which will be required to be NonIndustry Directors.45 The Appeals 

Committee will consist of one 

Independent Director, one Industry 

Director, and one Member 

Representative Director.46 If established, 

the Finance Committee will consist of at 

least three persons (who may, but are 

not required to, be directors) a majority 

of whom will be Non-Industry 

Directors.47 The Executive Committee, if 

established, will consist of at least three 

directors. Because the Executive 

Committee will have the powers and 

authority of the Exchange Board in the 

management of the business and affairs 

of the Exchange between meetings of the 

Exchange Board, its composition must 

reflect that of the Exchange Board. 

Accordingly, the number of NonIndustry Directors on the Executive 

Committee must equal or exceed the 

number of Industry Directors and the 

percentages of Independent Directors 

and Member Representative Directors 

must be at least as great as the 

corresponding percentages on the 

Exchange Board as a whole.48

With respect to Committees of MIAX 

EMERALD, the Exchange has proposed 

to establish a Nominating Committee 49

and a Member Nominating 

Committee.50 As discussed above, these 


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51See MIAX EMERALD By-Laws, Article V, 

Section 5.1, and supra note 20. Additional 

candidates for the Member Nominating Committee 

may be nominated and elected by MIAX EMERALD 

members pursuant to a petition process. See supra 

note 22 and accompanying text. 

52See MIAX EMERALD By-Laws, Article IV, 

Section 4.6. 

53See MIAX EMERALD By-Laws, Article IV, 

Section 4.7. 

54See, e.g., MIAX PEARL Order, MIAX Order, 

and BATS Order, supra note 13, and ISE Mercury 

Order, ISE Gemini Order, and Nasdaq Order, supra 

note 27. 

55 15 U.S.C. 78f(b)(1). 

56These provisions are consistent with ownership 

and voting limits approved by the Commission for 

other SROs. See, e.g., ISE Mercury Order and ISE 

Gemini Order, supra note 27; MIAX PEARL Order, 

MIAX Order, and BATS Order, supra note 13. See 

also Securities Exchange Act Release Nos. 78101 

(June 17, 2016), 81 FR 41141 (June 23, 2016) (File 

No. 10–222) (order granting the registration of 

Investors’ Exchange, LLC); 62158 (May 24, 2010), 75 

FR 30082 (May 28, 2010) (CBOE–2008–88) (‘‘CBOE 

Demutualization Approval Order’’); 53963 (June 8, 

2006), 71 FR 34660 (June 15, 2006) (SR–NSX–2006– 

03) (‘‘NSX Demutualization Order’’); 51149 

(February 8, 2005), 70 FR 7531 (February 14, 2005) 

(SR–CHX–2004–26) (‘‘CHX Demutualization 

Order’’); and 49098 (January 16, 2004), 69 FR 3974 

(January 27, 2004) (SR-Phlx-2003–73) (‘‘Phlx 

Demutualization Order’’). 

57See Miami Holdings Certificate, Article NINTH 

(a)(ii) (defining ‘‘related persons’’). 

58See Miami Holdings Certificate, Article NINTH 

(b)(i)(A). 

59See Miami Holdings Certificate, Article NINTH 

(b)(i)(B). 

60See Miami Holdings Certificate, Article NINTH 

(e). Any shares which have been called for 

redemption shall not be deemed outstanding shares 

for the purpose of voting or determining the total 

number of shares entitled to vote. Once redeemed 

by Miami Holdings, such shares shall become 

treasury shares and shall no longer be deemed to 

be outstanding. See id. Furthermore, if any 

redemption results in another stockholder owning 

shares in violation of the ownership limits 

described above, Miami Holdings shall redeem such 

shares. See id. 

61See Miami Holdings Certificate, Article NINTH 

(b)(i)(C). 

62See Miami Holdings Certificate, Article NINTH 

(d). The Miami Holdings Certificate also prohibits 

the payment of any stock dividends and 

conversions that would violate the ownership and 

voting limitations. See Miami Holdings Certificate, 

Article FOURTH A.(b) and (e), and D.7. 

63See Miami Holdings Certificate, Article NINTH 

(b)(iv). 

64See id. 

65See Miami Holdings Certificate, Article NINTH 

(b)(ii)(B). The required findings include 

determinations that (A) such waiver will not impair 

the ability of MIAX EMERALD to carry out its 

functions and responsibilities under the Act and the 

rules and regulations promulgated thereunder, (B) 

such waiver is otherwise in the best interests of 

MIAX EMERALD and Miami Holdings, (C) such 

waiver will not impair the ability of the 

Commission to enforce the Act and (D) the 

transferee in such transfer and its related persons 

are not subject to any applicable ‘‘statutory 

committees will have responsibility for, 

among other things, nominating 

candidates for election to the Exchange 

Board. On an annual basis, the members 

of these committees will nominate 

candidates for the succeeding year’s 

respective committees to be elected by 

Miami Holdings, as the sole LLC 

Member.51 In addition, MIAX 

EMERALD has proposed to establish a 

Quality of Markets Committee,52 which 

will provide advice and guidance to the 

Exchange Board on issues related to the 

fairness, integrity, efficiency and 

competiveness of the information, order 

handling and execution mechanisms of 

the Exchange from the perspective of 

individual and institutional investors, 

retail and market making firms, and 

other market participants. The Quality 

of Markets Committee will include a 

broad representation of participants in 

the Exchange. Additionally, at least 

20% of the members of the committee 

will be Member Representative 

members, and the number of NonIndustry members must equal or exceed 

the total number of Industry and 

Member Representative members. MIAX 

EMERALD also has proposed to 

establish a Business Conduct 

Committee, which shall be appointed by 

the Chairman of the Exchange Board.53

Specifically, the Business Conduct 

Committee, which will not be a Board 

committee, will have a minimum of 

three members and will be composed of 

a number of individuals as determined 

by the Exchange Chairman, none of 

whom shall be Directors of MIAX 

EMERALD. In addition, at least one 

member of the Business Conduct 

Committee and any panel thereof must 

be an officer, director or employee of a 

MIAX EMERALD member. 

The Commission believes that MIAX 

EMERALD’s proposed committees, 

which are similar to the committees 

maintained by other exchanges,54 are 

designed to help enable MIAX 

EMERALD to carry out its 

responsibilities under the Act and are 

consistent with the Act, including 

Section 6(b)(1), which requires, in part, 

an exchange to be so organized and have 

the capacity to carry out the purposes of 

the Act.55

B. Regulation of MIAX EMERALD 

When MIAX EMERALD commences 

operations as a national securities 

exchange, the Exchange will have all the 

attendant regulatory obligations under 

the Act. In particular, MIAX EMERALD 

will be responsible for the operation and 

regulation of its trading system and the 

regulation of its members. Certain 

provisions in the MIAX EMERALD and 

Miami Holdings governance documents 

are designed to facilitate the ability of 

MIAX EMERALD and the Commission 

to fulfill their regulatory obligations. 

The discussion below summarizes some 

of these key provisions. 

1. Ownership Structure: Ownership and 

Voting Limitations 

MIAX EMERALD will be structured as 

a Delaware limited liability company, 

which will be wholly owned by the sole 

member of the LLC, Miami Holdings. 

The Miami Holdings’ proposed 

Amended and Restated Certificate of 

Incorporation (‘‘Miami Holdings 

Certificate’’) includes restrictions on the 

ability to own and vote shares of capital 

stock of Miami Holdings.56 These 

limitations are designed to prevent any 

Miami Holdings shareholder from 

exercising undue control over the 

operation of MIAX EMERALD and to 

assure that MIAX EMERALD and the 

Commission are able to carry out their 

regulatory obligations under the Act. 

In particular, for so long as Miami 

Holdings (directly or indirectly) controls 

MIAX EMERALD, no person, either 

alone or together with its related 

persons,57 may beneficially own more 

than 40% of any class of capital stock 

of Miami Holdings.58 There would be a 

more conservative restriction for MIAX 

EMERALD members, wherein MIAX 

EMERALD members, either alone or 

together with their related persons, are 

prohibited from beneficially owning 

more than 20% of shares of any class of 

capital stock of Miami Holdings.59 If any 

stockholder violates these ownership 

limits, Miami Holdings would redeem 

the shares in excess of the applicable 

ownership limit at their par value.60 In 

addition, no person, alone or together 

with its related persons, may vote or 

cause the voting of more than 20% of 

the voting power of the then issued and 

outstanding capital stock of Miami 

Holdings.61 If any stockholder purports 

to vote, or cause the voting of, shares 

that would violate this voting limit, 

Miami Holdings would not honor such 

vote in excess of the voting limit.62

Any person that proposes to own 

shares of capital stock in excess of the 

40% ownership limitation, or vote or 

grant proxies or consents with respect to 

shares of capital stock in excess of the 

20% voting limitation, must deliver 

written notice to the Miami Holdings 

board to notify the Board of its 

intention.63 The notice must be 

delivered to the Board not less than 45 

days before the proposed ownership of 

such shares or proposed exercise of 

such voting rights or the granting of 

such proxies or consents.64 The Miami 

Holdings board may waive the 40% 

ownership limitation and the 20% 

voting limitation, pursuant to a 

resolution duly adopted by the Board of 

Directors, if it makes certain findings,65


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disqualification’’ (within the meaning of Section 

3(a)(39) of the Act). See Miami Holdings Certificate, 

Article NINTH (b)(ii)(B) and (b)(iii). The 

Commission has previously approved the rules of 

other exchanges that provide for the ability of the 

exchange to waive the ownership and voting 

limitations discussed above for non-members of the 

exchange. See, e.g., ISE Mercury Order and ISE 

Gemini Order, supra note 27; MIAX PEARL Order 

and MIAX Order, supra note 13; and Securities 

Exchange Act Release No. 61698 (March 12, 2010), 

75 FR 13151 (March 18, 2010) (File Nos. 10–194 

and 10–196) (order approving DirectEdge 

exchanges) (‘‘DirectEdge Exchanges Order’’). 

66See Miami Holdings Certificate, Article NINTH 

(b)(ii)(B). These provisions are generally consistent 

with waiver of ownership and voting limits 

approved by the Commission for other SROs. See, 

e.g., ISE Mercury Order, supra note 27; MIAX 

PEARL Order and MIAX Order, supra note 13; 

BATS Order, supra note 13; NSX Demutualization 

Order, supra note 56; CHX Demutualization Order, 

supra note 56; and Securities Exchange Act Release 

No. 49718 (May 17, 2004), 69 FR 29611 (May 24, 

2004) (SR–PCX–2004–08). 

67See Miami Holdings Certificate, Article NINTH 

(b)(ii)(B). 

68See Miami Holdings Certificate, Article 

NINTH(c)(i). The notice will require the person’s 

full legal name; the person’s title or status; the 

person’s approximate ownership interest in Miami 

Holdings; and whether the person has power, 

directly or indirectly, to direct the management or 

policies of Miami Holdings. See id. 

69See Miami Holdings Certificate, Article 

NINTH(c)(ii). Changes of less than 1% must also be 

reported to Miami Holdings if they result in such 

person crossing a 20% or 40% ownership 

threshold. See id. In addition, the MIAX EMERALD 

rules also impose limits on affiliation between 

MIAX EMERALD and a member of MIAX 

EMERALD. See MIAX EMERALD Rule 201(g) 

(‘‘Without prior Commission approval, the 

Exchange or any entity with which it is affiliated 

shall not directly or indirectly through one or more 

intermediaries acquire or maintain an ownership 

interest in an Exchange Member. In addition, 

without prior Commission approval, no Member 

shall be or become affiliated with (1) the Exchange; 

or (2) any affiliate of the Exchange. Nothing herein 

shall prohibit a Member from acquiring or holding 

an equity interest in (i) Miami International 

Holdings, Inc. that is permitted by the Certificate of 

Incorporation of Miami International Holdings, Inc. 

or (ii) MIAX Emerald that is permitted by the 

Amended and Restated Limited Liability Company 

Agreement of MIAX Emerald.’’). 

70See MIAX EMERALD LLC Agreement and 

MIAX EMERALD By-Laws, Article I(v) (both of 

which define ‘‘LLC Member’’ to mean Miami 

Holdings, as the sole member of MIAX EMERALD). 

71See 15 U.S.C. 78s. See also MIAX EMERALD 

LLC Agreement, Section 28(b). 

72See MIAX EMERALD By-Laws, Article III, 

Section 3.4. 

73See, e.g., ISE Mercury Order, supra note 27; 

MIAX PEARL Order and MIAX Order, supra note 

13; BATS Order, supra note 13; and DirectEdge 

Exchanges Order, supra note 65. 

74 15 U.S.C. 78f(b)(1). See also ISE Mercury Order, 

supra note 27; MIAX PEARL Order and MIAX 

Order, supra note 13; and BOX Order, supra note 

13. 

75See, e.g., DirectEdge Exchanges Order, supra 

note 65, and BATS Order, supra note 13. See also 

Securities Exchange Act Release No. 61152 

(December 10, 2009), 74 FR 66699 (December 16, 

2009) (File No. 10–191) (order approving C2 

Options Exchange, Incorporated) (‘‘C2 Order’’). 

except that the Miami Holdings board 

cannot waive the voting and ownership 

limits above 20% for MIAX EMERALD 

members and their related persons.66

Any such waiver would not be effective 

unless and until approved by the 

Commission pursuant to Section 19 of 

the Act.67

The Miami Holdings Certificate also 

contains provisions that are designed to 

further safeguard the ownership and 

voting limitation described above, or are 

otherwise related to direct and indirect 

changes in control. Specifically, any 

person that, either alone or together 

with its related persons owns, directly 

or indirectly, of record or beneficially, 

5% or more of the capital stock of 

Miami Holdings will be required to 

immediately notify Miami Holdings in 

writing upon acquiring knowledge of 

such ownership.68 Thereafter, such 

persons will be required to update 

Miami Holdings of any increase or 

decrease of 1% or more in their 

previously reported ownership 

percentage.69

The MIAX EMERALD LLC Agreement 

does not include change of control 

provisions that are similar to those in 

the Miami Holdings Certificate; however 

the MIAX EMERALD LLC Agreement 

explicitly provides that Miami Holdings 

is the sole LLC Member of MIAX 

EMERALD.70 Thus, if Miami Holdings 

ever proposes to no longer be the sole 

LLC Member of MIAX EMERALD (and 

therefore no longer its sole owner), 

MIAX EMERALD would be required to 

amend the MIAX EMERALD LLC 

Agreement and the MIAX EMERALD 

By-Laws. Any changes to the MIAX 

EMERALD LLC Agreement or the MIAX 

EMERALD By-Laws, including any 

change in the provisions that identify 

Miami Holdings as the sole owner of 

MIAX EMERALD, must be filed with, or 

filed with and approved by, the 

Commission pursuant to Section 19 of 

the Act, as the case may be.71 Further, 

pursuant to the MIAX EMERALD ByLaws, Miami Holdings may not transfer 

or assign, in whole or in part, its 

ownership interest in MIAX EMERALD, 

unless such transfer is filed with and 

approved by the Commission pursuant 

to Section 19 of the Act.72

As described above, the provisions 

applicable to direct and indirect 

changes in control of Miami Holdings 

and MIAX EMERALD, as well as the 

voting limitation imposed on owners of 

Miami Holdings who also are MIAX 

EMERALD members, are designed to 

help prevent any owner of Miami 

Holdings from exercising undue 

influence or control over the operation 

of MIAX EMERALD. In addition, these 

limitations are designed to address the 

conflicts of interests that might result 

from a member of a national securities 

exchange owning interests in the 

exchange. A member’s interest in an 

exchange, including an entity that 

controls an exchange, could become so 

large as to cast doubts on whether the 

exchange may fairly and objectively 

exercise its self-regulatory 

responsibilities with respect to such 

member.73 A member that is a 

controlling shareholder of an exchange 

could seek to exercise that controlling 

influence by directing the exchange to 

refrain from, or the exchange may 

hesitate to, diligently monitor and 

conduct surveillance of the member’s 

conduct or diligently enforce the 

exchange’s rules and the federal 

securities laws with respect to conduct 

by the member that violates such 

provisions. As such, the Commission 

believes that these voting and 

ownership limitations are designed to 

minimize the potential that a person or 

entity can improperly interfere with or 

restrict the ability of MIAX EMERALD 

to effectively carry out its regulatory 

oversight responsibilities under the Act. 

The Commission believes that MIAX 

EMERALD’s and Miami Holding’s 

proposed governance provisions are 

consistent with the Act, including 

Section 6(b)(1), which requires, in part, 

an exchange to be so organized and have 

the capacity to carry out the purposes of 

the Act.74 In particular, these 

requirements are designed to minimize 

the potential that a person could 

improperly interfere with or restrict the 

ability of the Commission or MIAX 

EMERALD to effectively carry out their 

regulatory oversight responsibilities 

under the Act. 

2. Regulatory Independence and 

Oversight 

Although Miami Holdings will not 

itself carry out regulatory functions, its 

activities with respect to the operation 

of MIAX EMERALD must be consistent 

with, and must not interfere with, MIAX 

EMERALD’s self-regulatory obligations. 

In this regard, MIAX EMERALD and 

Miami Holdings propose to adopt 

certain provisions in their respective 

governing documents that are designed 

to help maintain the independence of 

the regulatory functions of MIAX 

EMERALD. These proposed provisions 

are substantially similar to those 

included in the governing documents of 

other exchanges that recently have been 

granted registration.75 Specifically: 

• The directors, officers, employees, 

and agents of Miami Holdings must give 

due regard to the preservation of the 

independence of the self-regulatory 

function of MIAX EMERALD and must 


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76See Amended and Restated By-Laws of Miami 

Holdings (‘‘Miami Holdings By-Laws’’), Article VII, 

Section 1. 

Similarly, Article II, Section 2.1(d) of the MIAX 

EMERALD By-Laws requires the MIAX EMERALD 

Board to, when managing the business and affairs 

of MIAX EMERALD and evaluating any proposal, 

consider the requirements of Section 6(b) of the Act. 

Section 2.1(e) also requires the MIAX EMERALD 

Board, when evaluating any proposal to take into 

account (among other things and to the extent 

relevant), the potential impact on the integrity, 

continuity and stability of the national securities 

exchange operated by MIAX EMERALD and the 

other operations of MIAX EMERALD, on the ability 

to prevent fraudulent and manipulative acts and 

practices and on investors and the public, and 

whether such would promote just and equitable 

principles of trade, foster cooperation and 

coordination with persons engaged in regulating, 

clearing, settling, processing information with 

respect to and facilitating transactions in securities 

or assist in the removal of impediments to or 

perfection of the mechanisms for a free and open 

market and a national market system. 

77See Miami Holdings By-Laws, Article VII, 

Section 4. 

78See Miami Holdings By-Laws, Article VII, 

Section 5. 

79See MIAX EMERALD By-Laws Article X, 

Section 10.4. The Commission notes that the Miami 

Holdings By-Laws also provide that all books and 

records of MIAX EMERALD reflecting confidential 

information pertaining to the self-regulatory 

function of MIAX EMERALD will be subject to 

confidentiality restrictions. See Miami Holdings ByLaws Article VII, Section 2. The requirement to 

keep such information confidential shall not limit 

the Commission’s ability to access and examine 

such information or limit the ability of officers, 

directors, employees, or agent of Miami Holdings to 

disclose such information to the Commission. See 

id. 

80See MIAX EMERALD By-Laws, Article X, 

Section 10.4; and Miami Holdings By-Laws, Article 

VII, Section 3. 

81See Miami Holdings By-Laws, Article VII, 

Section 3. 

82See Miami Holdings By-Laws, Article VII, 

Section 3. 

83See Miami Holdings By-Laws, Article VII, 

Section 6. 

84See Miami Holdings Certificate, Article VIII; 

and Miami Holdings By-Laws, Article XII, 

Section 1. 

85 15 U.S.C. 78f(b)(1). 

86See 15 U.S.C. 78s(h)(1). 

87See id. 

not take actions that would interfere 

with the effectuation of decisions by the 

MIAX EMERALD Board relating to its 

regulatory functions or that would 

interfere with MIAX EMERALD’s ability 

to carry out its responsibilities under 

the Act.76

• Miami Holdings must comply with 

federal securities laws and the rules and 

regulations promulgated thereunder, 

and agrees to cooperate with the 

Commission and MIAX EMERALD 

pursuant to, and to the extent of, their 

respective regulatory authority. In 

addition, Miami Holdings’ officers, 

directors, employees, and agents must 

comply with federal securities laws and 

the rules and regulations promulgated 

thereunder and agree to cooperate with 

the Commission and MIAX EMERALD 

in respect of the Commission’s oversight 

responsibilities regarding MIAX 

EMERALD and the self-regulatory 

functions and responsibilities of MIAX 

EMERALD.77

• Miami Holdings, and its officers, 

directors, employees, and agents are 

deemed to irrevocably submit to the 

jurisdiction of the U.S. federal courts, 

the Commission, and MIAX EMERALD, 

for purposes of any action, suit, or 

proceeding pursuant to U.S. federal 

securities laws, and the rules and 

regulations thereunder, arising out of, or 

relating to, MIAX EMERALD 

activities.78

• All books and records of MIAX 

EMERALD reflecting confidential 

information pertaining to the selfregulatory function of MIAX EMERALD 

(including but not limited to 

disciplinary matters, trading data, 

trading practices, and audit information) 

shall be retained in confidence by MIAX 

EMERALD and its personnel and will 

not be used by MIAX EMERALD for any 

non-regulatory purpose and shall not be 

made available to persons (including, 

without limitation, any MIAX 

EMERALD member) other than to 

personnel of the Commission, and those 

personnel of MIAX EMERALD, 

members of committees of MIAX 

EMERALD, members of the MIAX 

EMERALD Board, or hearing officers 

and other agents of MIAX EMERALD, to 

the extent necessary or appropriate to 

properly discharge the self-regulatory 

function of MIAX EMERALD.79

• The books and records of MIAX 

EMERALD and Miami Holdings must be 

maintained in the United States 80 and, 

to the extent they are related to the 

operation or administration of MIAX 

EMERALD, Miami Holdings books and 

records will be subject at all times to 

inspection and copying by the 

Commission.81

• Furthermore, to the extent they 

relate to the activities of MIAX 

EMERALD, the books, records, 

premises, officers, directors, employees, 

and agents of Miami Holdings will be 

deemed to be the books, records, 

premises, officers, directors, employees, 

and agents of MIAX EMERALD, for 

purposes of, and subject to oversight 

pursuant to, the Act.82

• Miami Holdings will take necessary 

steps to cause its officers, directors, 

employees, and agents, prior to 

accepting a position as an officer, 

director, employee or agent (as 

applicable) to consent in writing to the 

applicability of provisions regarding 

books and records, confidentiality, 

jurisdiction, and regulatory obligations, 

with respect to their activities related to 

MIAX EMERALD.83

• Miami Holdings Certificate and ByLaws require that, so long as Miami 

Holdings controls MIAX EMERALD, any 

changes to those documents be 

submitted to the MIAX EMERALD 

Board, and, if such change is required 

to be filed with the Commission 

pursuant to Section 19(b) of the Act and 

the rules and regulations thereunder, 

such change shall not be effective until 

filed with, or filed with and approved 

by, the Commission.84

The Commission believes that the 

provisions discussed in this section, 

which are designed to help maintain the 

independence of MIAX EMERALD’s 

regulatory function and help facilitate 

the ability of MIAX EMERALD to carry 

out its regulatory responsibilities and 

operate in a manner consistent with the 

Act, are appropriate and consistent with 

the requirements of the Act, particularly 

with Section 6(b)(1), which requires, in 

part, an exchange to be so organized and 

have the capacity to carry out the 

purposes of the Act.85 Whether MIAX 

EMERALD operates in compliance with 

the Act, however, depends on how it 

and Miami Holdings in practice 

implement the governance and other 

provisions that are the subject of this 

Order. 

Further, Section 19(h)(1) of the Act 86

provides the Commission with the 

authority ‘‘to suspend for a period not 

exceeding twelve months or revoke the 

registration of [an SRO], or to censure or 

impose limitations upon the activities, 

functions, and operations of [an SRO], if 

[the Commission] finds, on the record 

after notice and opportunity for hearing, 

that [the SRO] has violated or is unable 

to comply with any provision of the Act, 

the rules or regulations thereunder, or 

its own rules or without reasonable 

justification or excuse has failed to 

enforce compliance’’ with any such 

provision by its members (including 

associated persons thereof).87 If 

Commission staff were to find, or 

become aware of, through staff review 

and inspection or otherwise, facts 

indicating any violations of the Act, 

including without limitation Sections 

6(b)(1) and 19(g)(1), these matters could 

provide the basis for a disciplinary 

proceeding under Section 19(h)(1) of the 

Act. 

The Commission also notes that, even 

in the absence of the governance 

provisions described above, under 

Section 20(a) of the Act, any person 

with a controlling interest in MIAX 

EMERALD would be jointly and 

severally liable with and to the same 

extent that MIAX EMERALD is liable 


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88 15 U.S.C. 78t(a). 89 15 U.S.C. 78t(e). 90 15 U.S.C. 78u–3. 91See Section 6(b)(1) of the Act, 15 U.S.C. 

78f(b)(1). 

92See id. See also Section 19(g) of the Act, 15 

U.S.C. 78s(g). 

93See MIAX EMERALD By-Laws, Article IV, 

Section 4.5(c). The Regulatory Oversight Committee 

is responsible for reviewing MIAX EMERALD’s 

regulatory budget, and also will meet regularly with 

the Chief Regulatory Officer. See id. 

94See MIAX EMERALD By-Laws, Article VI, 

Section 6.10. 

95See MIAX EMERALD By-Laws, Article IV, 

Section 4.5(c). 

96See MIAX EMERALD By-Laws, Article VI, 

Section 6.10. 

97See MIAX EMERALD Form 1 Application, 

Exhibit I. 

98See id. 

99See id. 

100See MIAX EMERALD By-Laws, Article IX, 

Section 9.4. 

101See MIAX EMERALD Form 1 Application, 

Exhibit I. See also MIAX EMERALD LLC 

Agreement, Section 16; and MIAX EMERALD ByLaws, Article IX, Section 9.4. MIAX EMERALD ByLaws, Article 1(gg) defines ‘‘Regulatory Funds’’ as 

‘‘fees, fines, or penalties derived from the regulatory 

operations of [MIAX EMERALD]’’, but such term 

does not include ‘‘revenues derived from listing 

fees, market data revenues, transaction revenues, or 

any other aspect of the commercial operations of 

[MIAX EMERALD], even if such revenues are used 

to pay costs associated with the regulatory 

operations of [MIAX EMERALD].’’ This definition 

is consistent with the rules of other SROs. See, e.g., 

By-Laws of MIAX Exchange, Article I(ll); By-Laws 

of MIAX PEARL, Article 1(gg); By-Laws of Nasdaq 

PHLX LLC, Article I(ii); and By-Laws of Nasdaq BX, 

Inc., Article I(ii). 

102 15 U.S.C. 78q(d) and 15 U.S.C. 78s(g)(2), 

respectively. 

103 15 U.S.C. 78s(g)(1). 

104See Section 17(d)(1) of the Act and Rule 17d– 

2 thereunder, 15 U.S.C. 78q(d)(1) and 17 CFR 

240.17d–2. Section 17(d)(1) of the Act allows the 

Commission to relieve an SRO of certain 

responsibilities with respect to members of the SRO 

Continued 

under any provision of the Act, unless 

the controlling person acted in good 

faith and did not directly or indirectly 

induce the act or acts constituting the 

violation or cause of action.88 In 

addition, Section 20(e) of the Act creates 

aiding and abetting liability for any 

person who knowingly provides 

substantial assistance to another person 

in violation of any provision of the Act 

or rule thereunder.89 Further, Section 

21C of the Act authorizes the 

Commission to enter a cease-and-desist 

order against any person who has been 

‘‘a cause of’’ a violation of any provision 

of the Act through an act or omission 

that the person knew or should have 

known would contribute to the 

violation.90 These provisions are 

applicable to all entities’ dealings with 

MIAX EMERALD, including Miami 

Holdings. 

3. Regulation of MIAX EMERALD 

As a prerequisite to the Commission’s 

granting of an exchange’s application for 

registration, an exchange must be so 

organized and have the capacity to carry 

out the purposes of the Act.91

Specifically, an exchange must be able 

to enforce compliance by its members, 

and persons associated with its 

members, with the Act and the rules 

and regulations thereunder and the 

rules of the exchange.92 The discussion 

below summarizes how MIAX 

EMERALD proposes to structure and 

conduct its regulatory operations. 

a. Regulatory Oversight Committee 

The regulatory operations of MIAX 

EMERALD will be monitored by the 

Regulatory Oversight Committee of the 

Exchange Board. The Regulatory 

Oversight Committee will consist of at 

least three directors, all of whom will be 

Non-Industry Directors. The Regulatory 

Oversight Committee will be 

responsible for overseeing the adequacy 

and effectiveness of MIAX EMERALD’s 

regulatory and SRO responsibilities, 

assessing MIAX EMERALD’s regulatory 

performance, and assisting the Exchange 

Board (and committees of the Exchange 

Board) in reviewing MIAX EMERALD’s 

regulatory plan and the overall 

effectiveness of MIAX EMERALD’s 

regulatory functions.93

Further, a Chief Regulatory Officer 

(‘‘CRO’’) of MIAX EMERALD will have 

general supervision over MIAX 

EMERALD’s regulatory operations.94

The Regulatory Oversight Committee 

also will be responsible for 

recommending compensation and 

personnel actions involving the CRO 

and senior regulatory personnel to the 

Compensation Committee of MIAX 

EMERALD for action.95 The CRO will 

report to the Regulatory Oversight 

Committee.96

b. Regulatory Funding 

To help assure the Commission that it 

has and will continue to have adequate 

funding to be able to meet its 

responsibilities under the Act, MIAX 

EMERALD represents in its Form 1 

Application that, prior to beginning 

operations as a national securities 

exchange, Miami Holdings will provide 

sufficient funding to MIAX EMERALD 

for the exchange to carry out its 

responsibilities under the Act.97

Specifically, MIAX EMERALD 

represents that Miami Holdings has 

allocated sufficient operational assets to 

enable its operation and that prior to 

launching operations, Miami Holdings 

will make a capital contribution of not 

less than $5,000,000 into MIAX 

EMERALD’s capital account, in addition 

to any previously-provided in-kind 

contributions, such as legal, regulatory, 

and infrastructure-related services.98

MIAX EMERALD represents that such 

cash and in-kind contributions by 

Miami Holdings will be adequate to 

begin operation of the Exchange, 

including the regulation of the 

Exchange. 

MIAX EMERALD also represents in 

its Form 1 application that there is a 

written agreement (‘‘Funding 

Agreement’’) between MIAX EMERALD 

and Miami Holdings that requires 

Miami Holdings to provide adequate 

funding for MIAX EMERALD’s ongoing 

operations, including the regulation of 

MIAX EMERALD. This Funding 

Agreement provides that MIAX 

EMERALD will receive all fees, 

including regulatory fees and trading 

fees, payable by MIAX EMERALD’s 

members, as well as any funds received 

from any applicable market data fees 

and Options Price Reporting Authority 

tape revenue. The Funding Agreement 

further provides that Miami Holdings 

will reimburse MIAX EMERALD for its 

costs and expenses to the extent MIAX 

EMERALD’s assets are insufficient to 

meets its costs and expenses.99 Based on 

the various financial statements for 2016 

through 2018 that MIAX EMERALD has 

filed as part of its Form 1 for itself, its 

affiliates, and Miami Holdings, the 

Commission believes that the Funding 

Agreement appropriately will facilitate 

the ability of MIAX EMERALD to 

commence and continue operations. 

Further, any revenues received by 

MIAX EMERALD from fees derived 

from its regulatory function or 

regulatory penalties will not be used for 

non-regulatory purposes.100 Any excess 

funds, as determined by MIAX 

EMERALD, may be remitted to Miami 

Holdings, however ‘‘Regulatory Funds’’ 

will not be remitted to Miami 

Holdings.101

c. Rule 17d–2 Agreements; Regulatory 

Contract With FINRA 

Unless the SRO is relieved of this 

responsibility pursuant to Section 17(d) 

or Section 19(g)(2) of the Act,102 Section 

19(g)(1) of the Act, among other things, 

requires every SRO registered as a 

national securities exchange, absent 

reasonable justification or excuse, to 

enforce compliance by its members and 

persons associated with its members 

with the Act, the rules and regulations 

thereunder, and the SRO’s own rules.103

Section 17(d) of the Act and Rule 17d– 

2 thereunder permit SROs to propose 

joint plans to allocate regulatory 

responsibilities among themselves for 

their common rules with respect to their 

common members.104 These 


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who are also members of another SRO. Specifically, 

Section 17(d)(1) allows the Commission to relieve 

an SRO of its responsibilities to: (i) Receive 

regulatory reports from such members; (ii) examine 

such members for compliance with the Act and the 

rules and regulations thereunder, and the rules of 

the SRO; or (iii) carry out other specified regulatory 

responsibilities with respect to such members. 

105Section 17(d) was intended, in part, to 

eliminate unnecessary multiple examinations and 

regulatory duplication with respect to Common 

Members. See Securities Exchange Act Release No. 

12935 (October 28, 1976), 41 FR 49091 (November 

8, 1976). 

106See id. 

107See, e.g., Securities Exchange Act Release Nos. 

83696 (July 24, 2018), 83 FR 35682 (July 27, 2018) 

(Financial Industry Regulatory Authority, Inc. 

(‘‘FINRA’’)/MIAX PEARL); 77321 (March 8, 2016), 

81 FR 13434 (March 14, 2016) (File No. 4–697) 

(FINRA/ISE Mercury, LLC), 73641 (November 19, 

2014), 79 FR 70230 (November 25, 2014) (File No. 

4–678) (FINRA/MIAX Exchange); 70053 (July 26, 

2013), 78 FR 46656 (August 1, 2013) (File No. 4– 

663) (FINRA/ISE Gemini, LLC); 59218 (January 8, 

2009), 74 FR 2143 (January 14, 2009) (File No. 4– 

575) (FINRA/Boston Stock Exchange, Inc.); 58818 

(October 20, 2008), 73 FR 63752 (October 27, 2008) 

(File No. 4–569) (FINRA/BATS Exchange, Inc.); 

55755 (May 14, 2007), 72 FR 28087 (May 18, 2007) 

(File No. 4–536) (National Association of Securities 

Dealers, Inc. (‘‘NASD’’) (n/k/a FINRA) and Chicago 

Board of Options Exchange, Inc. concerning the 

CBOE Stock Exchange, LLC); 55367 (February 27, 

2007), 72 FR 9983 (March 6, 2007) (File No. 4–529) 

(NASD/International Securities Exchange, LLC); 

and 54136 (July 12, 2006), 71 FR 40759 (July 18, 

2006) (File No. 4–517) (NASD/The Nasdaq Stock 

Market LLC). 

108See supra notes 104–105. 

109See MIAX EMERALD Form 1 Application, 

Exhibit L. See also Securities Exchange Act Release 

No. 68363 (December 5, 2012), 77 FR 73711 

(December 11, 2012) (File No. S7–966) (notice of 

filing and order approving and declaring effective 

an amendment to the multiparty 17d–2 plan 

concerning options-related sales practice matters); 

and 68362 (December 5, 2012), 77 FR 73719 

(December 11, 2012) (File No. 4–551) (notice of 

filing and order approving and declaring effective 

an amendment to the multiparty 17d–2 plan 

concerning options-related market surveillance). 

110See MIAX EMERALD Form 1 Application, 

Exhibit L. 

111See id. 

112See, e.g., Regulation ATS Release, supra note 

29. See also Securities Exchange Act Release Nos. 

50122 (July 29, 2004), 69 FR 47962 (August 6, 2004) 

(SR–Amex–2004–32) (order approving rule that 

allowed Amex to contract with another SRO for 

regulatory services) (‘‘Amex Regulatory Services 

Approval Order’’); 57478 (March 12, 2008), 73 FR 

14521 (March 18, 2008) (SR–NASDAQ–2007–004) 

(‘‘NOM Approval Order’’); Nasdaq Order, supra 

note 27; and BATS Order, supra note 13. 

113For example, MIAX Exchange, MIAX PEARL, 

Nasdaq MRX, LLC, Cboe EDGA Exchange, Inc., 

Cboe EDGX Exchange Inc., and Cboe BZX 

Exchange, Inc. have entered into 17d–2 Plans and 

RSAs with FINRA. 

114See, e.g., Amex Regulatory Services Approval 

Order, supra note 112; NOM Approval Order, supra 

note 112; and Nasdaq Order, supra note 27. The 

Commission notes that the RSA is not before the 

Commission and, therefore, the Commission is not 

acting on it. 

115See supra note 104. 

116For example, if failings by the SRO retained 

to perform regulatory functions have the effect of 

leaving an exchange in violation of any aspect of 

the exchange’s self-regulatory obligations, the 

exchange will bear direct liability for the violation, 

while the SRO retained to perform regulatory 

functions may bear liability for causing or aiding 

and abetting the violation. See, e.g., Nasdaq Order, 

supra note 27; BATS Order, supra note 13; and 

Release No. 42455 (February 24, 2000), 65 FR 11388 

(March 2, 2000) (File No. 10–127) (approval of 

registration of International Securities Exchange 

Act, LLC as a national securities exchange). 

117A ‘‘Member’’ is defined as an individual or 

organization approved to exercise the trading rights 

associated with a Trading Permit. MIAX EMERALD 

agreements, which must be filed with 

and declared effective by the 

Commission, generally cover areas 

where each SRO’s rules substantively 

overlap, including such regulatory 

functions as personnel registration and 

sales practices. Without this relief, the 

statutory obligation of each individual 

SRO could result in a pattern of 

multiple examinations of broker-dealers 

that maintain memberships in more 

than one SRO.105 Such regulatory 

duplication would add unnecessary 

expense for common members and their 

SROs. A 17d–2 plan that is declared 

effective by the Commission relieves the 

specified SRO of those regulatory 

responsibilities allocated by the plan to 

another SRO.106 Many SROs have 

entered into Rule 17d–2 agreements.107

A 17d–2 plan that is declared 

effective by the Commission relieves the 

specified SRO of those regulatory 

responsibilities allocated by the plan to 

another SRO.108 MIAX EMERALD has 

represented to the Commission that it 

intends to become a party to the existing 

multiparty options Rule 17d–2 plans 

concerning sales practice regulation and 

market surveillance.109 MIAX 

EMERALD has also represented that it 

will enter into a bi-lateral 17d–2 

agreement to allocate regulatory 

responsibility to FINRA for common 

rules of dual members between MIAX 

EMERALD and FINRA. Under these 

agreements, the examining SROs will 

examine firms that are common 

members of MIAX EMERALD and the 

particular examining SRO for 

compliance with certain provisions of 

the Act, certain rules and regulations 

adopted thereunder, and certain MIAX 

EMERALD Rules. 

In addition, MIAX EMERALD has 

represented that it will enter into a 

Regulatory Services Agreement (‘‘RSA’’) 

with FINRA, under which FINRA will 

perform certain regulatory functions on 

behalf of MIAX EMERALD.110 Pursuant 

to the RSA, FINRA, in its capacity as 

service provider to MIAX EMERALD, 

will perform various services on MIAX 

EMERALD’s behalf, including assisting 

MIAX EMERALD with member 

registration and related administrative 

support services; certain cross-market 

surveillance services; certain options 

trading examinations; at MIAX 

EMERALD’s request, investigating 

potential violations of enumerated 

MIAX EMERALD market rules, as well 

as federal securities laws, and rules and 

regulations thereunder, related to MIAX 

EMERALD market activity; performing 

examinations of options, including 

routine and for cause examinations of 

MIAX EMERALD members under 

certain MIAX EMERALD rules and 

federal securities laws; bringing formal 

disciplinary actions, including hearing 

officer services; and providing 

arbitration, mediation, and other 

dispute resolution services to MIAX 

EMERALD member firms.111

Notwithstanding the RSA, MIAX 

EMERALD, as an SRO, has the ultimate 

legal responsibility for the regulation of 

its members and market. 

The Commission believes that it is 

consistent with the Act for MIAX 

EMERALD to contract with other SROs 

to perform certain examination, 

enforcement, and disciplinary 

functions.112 This regulatory structure 

would be consistent with that of other 

SROs.113 These functions are 

fundamental elements of a regulatory 

program, and constitute core selfregulatory functions. The Commission 

believes that FINRA, as an SRO that 

provides contractual services to other 

SROs, should have the capacity to 

perform these functions for MIAX 

EMERALD.114 However, MIAX 

EMERALD, unless relieved by the 

Commission of its responsibility,115

bears the ultimate responsibility for selfregulatory responsibilities and primary 

liability for self-regulatory failures, not 

the SRO retained to perform regulatory 

functions on MIAX EMERALD’s behalf. 

In performing these regulatory 

functions, however, the SRO retained to 

perform regulatory functions may 

nonetheless bear liability for causing or 

aiding and abetting the failure of MIAX 

EMERALD to perform its regulatory 

functions.116 Accordingly, although 

FINRA will not act on its own behalf in 

carrying out these regulatory services for 

MIAX EMERALD, as the SRO retained 

to perform certain regulatory functions, 

FINRA may have secondary liability if, 

for example, the Commission finds that 

the contracted functions are being 

performed so inadequately as to cause a 

violation of the federal securities laws 

by MIAX EMERALD. 

C. Trading System 

1. Access to MIAX EMERALD 

Access to MIAX EMERALD will be 

granted to individuals or organizations 

who are approved to become 

Members.117 Approved Members will be 


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Members are ‘‘members’’ as defined under the Act. 

See MIAX EMERALD Rule 100. A ‘‘Trading Permit’’ 

means a permit issued by the Exchange that confers 

the ability to transact on the Exchange. Id. 118See MIAX EMERALD Rule 200(a). MIAX 

EMERALD represents that it has designed its 

systems to allow its Members to individually 

determine the best method for accessing the 

Exchange, whether by using customized front-end 

software using protocols determined by the 

Exchange or through third-party vendors who route 

orders to MIAX EMERALD through a front-end or 

service bureau configuration. See MIAX EMERALD 

Form 1 Application, Exhibit E. 

119See MIAX EMERALD Rule 200(e). 120See MIAX EMERALD Rule 200(b). 121See MIAX EMERALD Rule 200(d). If such 

other options exchange has not been designated by 

the Commission to examine Members for 

compliance with financial responsibility rules, then 

the broker-dealer must have and maintain a 

membership in FINRA. Id. 122See MIAX EMERALD Rule 200(c) and infra 

notes 127–128 and accompanying text. 123See MIAX EMERALD Rule 200(a). MIAX 

EMERALD would announce in advance any 

limitation or decrease it plans to impose pursuant 

to Rule 200(a). See id. In the event that MIAX 

EMERALD imposes a limitation or decrease, MIAX 

EMERALD, in doing so, may not eliminate the 

ability of an existing member to trade on the 

Exchange unless MIAX EMERALD is permitted to 

do so pursuant to a rule filing submitted to the 

Commission under Section 19(b) of the Act. See id. 

In addition, MIAX EMERALD’s exercise of 

authority under proposed Rule 200 would be 

subject to the provisions of Section 6(c)(4) of the 

Act. See id. See also Cboe Exchange, Inc. (‘‘Cboe’’) 

Rule 3.1(a)(vi); MIAX Exchange Rule 200(a) 

(concerning limiting or reducing the number of 

trading permits); and MIAX PEARL Rule 200(a) 

(concerning limiting or reducing the number of 

trading permits). Further, MIAX EMERALD’s 

exercise of authority under proposed Rule 200 

would be subject to the provisions of Section 6(b)(2) 

of the Act, which requires the rules of an exchange 

to provide that any registered broker or dealer or 

any natural person associated with a registered 

broker or dealer may become a member of such 

exchange and any person may become associated 

with a member thereof. See 15 U.S.C. 78f(b)(2). 

124See MIAX EMERALD Rule 600. Market Maker 

registration is discussed in greater detail below, 

infra Section III.C.3. 

125An ‘‘Electronic Exchange Member’’ is the 

holder of a Trading Permit who is not a Market 

Maker. MIAX EMERALD Electronic Exchange 

Members are ‘‘members’’ as defined under the Act. 

See MIAX EMERALD Rule 100. 

126See MIAX EMERALD Rule 200(c)(1). 

127See id. 

128See, e.g., Nasdaq MRX, LLC Rule 302(a) 

(containing similar expedited waive-in membership 

process for members of the Nasdaq ISE, LLC and 

Nasdaq GEMX, LLC); MIAX PEARL Rule 200(c)(1) 

(containing similar expedited waive-in membership 

process for members of MIAX Exchange); and Cboe 

C2 Exchange, Inc. Rule 3.1(c)(1) (containing similar 

expedited waive-in membership process for 

members of Cboe). 

129See MIAX EMERALD Rule 200(c)(2). 

130See MIAX EMERALD Rules Chapter II. Such 

criteria include, but are not limited to, capital 

maintenance requirements. See, e.g., MIAX 

Exchange Rule 200 Series; MIAX PEARL Rule 200 

Series; and Cboe C2 Exchange, Inc. Rules 3.1 and 

3.2 (containing similar criteria). 

131See MIAX EMERALD Rules Chapter XIII 

(incorporating by reference Chapter XIII of the 

MIAX Exchange Rules). Chapter XIII of the MIAX 

Exchange Rules also is similar to the rules of other 

exchanges. See, e.g., Nasdaq ISE, LLC Rules 

Chapter 6. 

132See MIAX EMERALD Rules Chapter XI 

(incorporating by reference Chapter XI of the MIAX 

Exchange Rules). 

133See MIAX EMERALD Rule 200(g). For MIAX 

EMERALD’s rules concerning discipline, see 

Chapter X of the MIAX EMERALD Rules. 

134 15 U.S.C. 78f(b)(2). 

135 15 U.S.C. 78f(c). 

136See, e.g., MIAX PEARL Order, supra note 13, 

at 92910; ISE Mercury Order, supra note 27, at 

6076; ISE Gemini Order, supra note 27, at 46633; 

MIAX Order, supra note 13, at 73074; BOX Order, 

supra note 13, at 26337; BATS Order, supra note 

13, at 49502; and Nasdaq Order, supra note 27, at 

3555. 

137See MIAX EMERALD Rule 210. 

138See MIAX EMERALD Rule 210(b). 

139See MIAX EMERALD Rule 210(b)–(c). 

issued Trading Permits that grant the 

Member the ability to transact on MIAX 

EMERALD through its electronic 

systems.118 Trading Permits will not 

convey upon Members any ownership 

interest in MIAX EMERALD, and they 

will not be transferable except in cases 

where a Member experiences a change 

in control or corporate 

reorganization.119 Membership will be 

open to any broker-dealer that: (1) Is 

registered under Section 15 of the 

Act; 120 and (2) has and maintains 

membership in another registered 

options exchange (other than MIAX 

Exchange or MIAX PEARL) or 

FINRA.121 As explained below, a holder 

of a MIAX Exchange or MIAX PEARL 

trading permit will not be required to 

submit a full application for 

membership on MIAX EMERALD.122

There will be no limit to the number of 

Trading Permits that MIAX EMERALD 

can issue, although MIAX could 

determine in the future a limit or 

decrease in the number of Trading 

Permits issued.123 Members of MIAX 

EMERALD may be one of three classes 

of Market Maker,124 or they may be 

Electronic Exchange Members.125

A holder of a MIAX Exchange or 

MIAX PEARL trading permit in good 

standing will be eligible to receive one 

MIAX EMERALD Trading Permit.126

MIAX Exchange and MIAX PEARL 

member applicants will not be required 

to submit a full application for 

membership on MIAX EMERALD, but 

rather will only need to complete 

selected MIAX EMERALD forms 

concerning their election to trade on 

MIAX EMERALD, consent to MIAX 

EMERALD’s jurisdiction, and other 

operational matters.127 This waive-in 

application process is similar to 

arrangements in place at other 

exchanges.128

Applicants that do not hold a MIAX 

Exchange or MIAX PEARL trading 

permit and seek to become members of 

MIAX EMERALD will need to submit a 

full application in accordance with 

procedures established by the 

Exchange.129 Individuals and entities 

that become members, and their 

associated persons, will be required to 

meet and maintain certain qualification 

and registration criteria similar to what 

is required by other options 

exchanges.130 In addition, MIAX 

EMERALD proposes further 

requirements on members that seek to 

do business with the public.131

Applicants who are denied membership 

may appeal MIAX EMERALD’s decision 

pursuant to MIAX EMERALD’s rules 

governing Hearings, Review, and 

Arbitration.132 Every Member will be 

subject to MIAX EMERALD’s regulatory 

jurisdiction, including MIAX 

EMERALD’s disciplinary 

jurisdiction.133

The Commission finds that MIAX 

EMERALD’s proposed membership 

rules are consistent with the Act, 

including Section 6(b)(2) of the Act, 

which requires the rules of an exchange 

to provide that any registered broker or 

dealer or natural person associated with 

a broker or dealer may become a 

member of such exchange or associated 

with a member thereof.134 MIAX 

EMERALD’s proposed rules with 

respect to exchange membership are 

substantively similar to the rules of 

other exchanges. 

The Commission notes that pursuant 

to Section 6(c) of the Act,135 an 

exchange must deny membership to any 

person, other than a natural person, that 

is not a registered broker or dealer, any 

natural person that is not, or is not 

associated with, a registered broker or 

dealer, and registered broker-dealers 

that do not satisfy certain standards, 

such as financial responsibility or 

operational capacity. As a registered 

exchange, MIAX EMERALD must 

independently determine if an applicant 

satisfies the standards set forth in the 

Act, regardless of whether an applicant 

is a member of another SRO.136

In addition, Members may enter into 

arrangements with other parties, 

including non-Members and other 

Members, to provide ‘‘Sponsored 

Access’’ to trading on MIAX 

EMERALD.137 Members who provide 

such Sponsored Access will be 

responsible for all trading conducted 

pursuant to the access agreement, and to 

the same extent as if the Member were 

trading directly.138 Accordingly, 

Members that provide Sponsored 

Access must maintain and implement 

policies and procedures to supervise 

and monitor sponsored trading 

activity.139 Additionally, non-Members 

who seek to trade on MIAX EMERALD 


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140See MIAX EMERALD Rule 210(b). See also, 

e.g., 17 CFR 240.15c3–5. 

141See, e.g., MIAX PEARL Rule 210; MIAX 

Exchange Rule 210; and Nasdaq Stock Market LLC 

Rule 4611(d). 

142See MIAX EMERALD Form 1 Application, 

Exhibit E. See also Securities Exchange Act Release 

No. 60405 (July 30, 2009), 74 FR 39362 (August 6, 

2009) (File No. 4–546) (order approving the Options 

Order Protection and Locked/Crossed Markets Plan 

submitted by the Chicago Board Options Exchange, 

Incorporated, International Securities Exchange, 

LLC, The NASDAQ Stock Market LLC, NASDAQ 

OMX BX, Inc., NASDAQ OMX PHLX, Inc., NYSE 

Amex LLC, and NYSE Arca, Inc.). 

143See Chapter XIV of the MIAX EMERALD Rules 

(incorporating by reference Chapter XIV of the 

MIAX Exchange Rules). 

144Market Makers’ benefits and obligations are 

discussed in greater detail in the following section. 

145See MIAX EMERALD Rule 600(b). 

146See id. See also MIAX Exchange Rule 600(b) 

and Nasdaq MRX, LLC Rule 800(b). The provision 

permitting MIAX EMERALD to consider ‘‘such 

other factors as [it] deems appropriate’’ must be 

applied in a manner that is consistent with the Act, 

including provisions that prohibit an exchange from 

acting in an unfairly discriminatory manner. See 15 

U.S.C. 78f(b)(5); see also C2 Order, supra note 75, 

at 66704, n. 80. 

147See id. 

148See MIAX EMERALD Rule 600(a). 

149See MIAX EMERALD Rule 200(c). 

150See id. 

151See MIAX EMERALD Rule 602. 

152See MIAX EMERALD Rule 602(a). MIAX 

EMERALD Chapter XI provides the process for 

hearings, review, and arbitration of claims by 

persons economically aggrieved by MIAX 

EMERALD action, which would include denial of 

registration as a Market Maker. See MIAX 

EMERALD Chapter XI (incorporating by reference 

MIAX Exchange Chapter XI). 

153See id. 

154See MIAX EMERALD Rule 602(c)(1). 

155See MIAX EMERALD Rule 602(c)(2). 

156See, e.g., MIAX EMERALD Rule 602(f) (stating 

that MIAX EMERALD shall periodically conduct an 

evaluation of Market Makers to determine whether 

they have fulfilled performance standards relating 

to, among other things, quality of markets, 

competition among Market Makers, observance of 

ethical standards, and administrative factors). 

157See, e.g., MIAX Exchange Rule 600; Nasdaq 

MRX, LLC Rule 800; Nasdaq ISE, LLC Rules 800 

and 801; and Cboe C2 Exchange, Inc. Rule 8.1 

(registration of market makers). See, e.g., MIAX 

Exchange Rule 602; Nasdaq ISE, LLC Rule 802; 

Nasdaq MRX, LLC Rule 802; and Cboe C2 

Exchange, Inc. Rule 8.11 (appointment of market 

makers). 

158See MIAX EMERALD Rule 603(a). 

through Sponsored Access agreements 

will need to agree to comply with all 

applicable federal securities laws and 

rules and Exchange rules.140 MIAX 

EMERALD’s rules governing Sponsored 

Access arrangements are similar to the 

rules of other exchanges.141

2. Linkage 

MIAX EMERALD intends to become a 

participant in the Options Order 

Protection and Locked/Crossed Markets 

Plan or any successor plan (‘‘Linkage 

Plan’’).142 If admitted as a participant to 

the Linkage Plan, other plan 

participants would be able to send 

orders to MIAX EMERALD in 

accordance with the terms of the plan as 

applied to the Exchange. The MIAX 

EMERALD Rules include relevant 

definitions, establish the conditions 

pursuant to which members may enter 

orders in accordance with the Linkage 

Plan, impose obligations on the 

Exchange regarding how it must process 

incoming orders, establish a general 

standard that members and MIAX 

EMERALD should avoid trade-throughs, 

establish potential regulatory liability 

for members that engage in a pattern or 

practice of trading through other 

exchanges, and establish obligations 

with respect to locked and crossed 

markets. 

The Commission believes that MIAX 

EMERALD has proposed rules that are 

designed to comply with the 

requirements of the Linkage Plan.143

Further, as provided below, before 

MIAX EMERALD can commence 

operations as a national securities 

exchange, it must become a participant 

in the Linkage Plan. 

3. Market Makers 

a. Registration and Appointment 

Members of MIAX EMERALD may 

apply to become one of three types of 

market maker: Primary Lead Market 

Maker, Lead Market Maker, or 

Registered Market Maker (collectively, 

‘‘Market Makers’’). Market Makers are 

entitled to receive certain benefits and 

privileges in exchange for fulfilling 

certain affirmative and negative marketmaking obligations.144 Each class of 

Market Maker will receive a specific 

level of benefits and privileges in 

exchange for a specific level of 

obligation that such Market Maker 

assumes to the MIAX EMERALD 

market. 

To begin the process of registering as 

a Registered Market Maker or Lead 

Market Maker, a member will be 

required to file a written application 

with MIAX EMERALD.145 In reviewing 

a member’s application for membership, 

MIAX EMERALD will consider, among 

other things, the applicant’s market 

making ability.146 Only approved Lead 

Market Makers may apply to be 

considered for appointment as a 

Primary Lead Market Maker in one or 

more option classes traded on MIAX 

EMERALD.147 All members who are 

approved to become Market Makers will 

be designated as specialists on MIAX 

EMERALD for all purposes under the 

Act and rules thereunder.148

In addition, all MIAX Exchange and 

MIAX PEARL market makers in good 

standing will be eligible to receive a 

MIAX EMERALD Trading Permit in the 

same membership category in which 

they operate on MIAX Exchange and 

MIAX PEARL, respectively, to trade on 

MIAX EMERALD.149 For example, a 

Lead Market Maker in good standing in 

MIAX Exchange will be eligible to 

become a Lead Market Maker on MIAX 

EMERALD, through the submission and 

approval of a MIAX EMERALD waivein membership application.150

Once approved, a Market Maker 

would seek appointment to make 

markets in one or more options classes 

traded on MIAX EMERALD.151 Either 

the Exchange Board or a committee 

thereof 152 will appoint classes of 

options contract traded on MIAX 

EMERALD to Market Makers taking into 

consideration: (1) The financial 

resources available to the Market Maker; 

(2) the Market Maker’s experience and 

expertise in market making or options 

trading; (3) the preferences of the 

Market Maker to receive appointment(s) 

in specific option class(es); and (4) the 

maintenance and enhancement of 

competition among Market Makers in 

each option class.153 MIAX EMERALD 

will allow one Primary Lead Market 

Maker appointment per class,154 and 

will have a maximum class quoting 

limit of fifty Market Makers per class.155

Once appointed, MIAX EMERALD will 

surveil a Market Maker’s activity for 

continued compliance with all 

applicable rules and requirements,156

which are discussed in more detail 

below. 

The Commission finds that MIAX 

EMERALD’s rules for the registration 

and appointment of Market Makers are 

consistent with the Act. In particular, 

MIAX EMERALD’s rules provide an 

objective process by which a member 

could become a Market Maker on MIAX 

EMERALD and provide for oversight by 

MIAX EMERALD to monitor for 

continued compliance by Market 

Makers with the terms of their 

application for such status. The 

Commission notes that MIAX 

EMERALD’s proposed Market Maker 

registration and appointment 

requirements are similar to those of 

other options exchanges.157

b. Market Maker Obligations 

Pursuant to MIAX EMERALD rules, 

all Market Makers will be subject to a 

number of general obligations. In 

particular, the transactions of a Market 

Maker must constitute a course of 

dealings reasonably calculated to 

contribute to the maintenance of a fair 

and orderly market.158 Among other 

things, a Market Maker must: (1) 

Compete with other Market Makers to 

improve the market; (2) make markets 


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159See MIAX EMERALD Rule 603(b). 

160See MIAX EMERALD Rule 609. 

161See MIAX EMERALD Rule 604. 

162See infra Section III.C.4 (discussing the 

various types of quotes that may be submitted by 

Market Makers on MIAX EMERALD). 

163See MIAX EMERALD Rule 604(e)(1). These 

obligations will apply to all appointed classes 

collectively for each Primary Lead Market Maker, 

rather than on a class-by-class basis. See MIAX 

EMERALD Rule 604(e)(1)(ii). 

164See MIAX EMERALD Rule 604(e)(2). These 

obligations will apply to all appointed classes 

collectively for each Lead Market Maker, rather 

than on a class-by-class basis. See MIAX EMERALD 

Rule 604(e)(2)(ii). 

165See MIAX EMERALD Rule 604(e)(3)(i). These 

obligations will apply to all appointed classes 

collectively for each Registered Market Maker, 

rather than on a class-by-class basis. Id. 

166See MIAX EMERALD Rule 604(e)(3)(iii). 

167See MIAX EMERALD Rule 604(e)(1)–(3) (for 

Primary Lead Market Makers, Lead Market Makers, 

and Registered Market Makers, respectively). 

168See MIAX EMERALD Rule 603(d). Among 

other things, a Market Maker should not effect 

purchases or sales except in an orderly manner. See 

id. See also MIAX Exchange Rule 603(d) and 

Nasdaq ISE, LLC Rule 803(d) (containing an 

identical provision). 

169See MIAX EMERALD Rule 605(b)(2). See also 

MIAX Exchange Rule 605(b)(2) and Nasdaq ISE, 

LLC Rule 805(b)(2). 

170See MIAX EMERALD Rule 605(b)(3). See also 

MIAX Exchange Rule 605(b)(3) and Nasdaq ISE, 

LLC Rule 805(b)(3). 

171See MIAX EMERALD Rules 600 and 602(f). 

172See, e.g., MIAX Order, supra note 13, at 73076 

and NOM Approval Order, supra note 112, at 14526 

(discussing the benefits and obligations of market 

makers). 

173See 12 CFR 221.5 and 12 CFR 220.7; see also 

17 CFR 240.15c3–1(a)(6) (capital requirements for 

market makers). 

174 15 U.S.C. 78k(a). 

175See NOM Approval Order, supra note 112, at 

73 FR 14526. 

176See id. 

177See infra Section III.C.4 (discussing the 

various quote types that Market Makers can utilize). 

178See infra notes 201–212 and accompanying 

text (describing the Primary Lead Market Maker and 

Directed Lead Market Maker participation 

entitlements). See also infra Section III.C.4 

(discussing the benefit Market Makers receive from 

the MIAX EMERALD priority quote rule). 

179See supra Section III.C.4 (describing Primary 

Lead Market Maker and Lead Market Maker quoting 

obligations). 

that, absent changed market conditions, 

will be honored for the number of 

contracts entered; (3) update quotations 

in response to changed market 

conditions; (4) price option contracts 

fairly by, among other things, bidding 

and offering so as to create differences 

of no more than $5 between the bid and 

offer following the opening rotation.159

In addition, Market Makers must 

maintain minimum net capital in 

accordance with MIAX EMERALD rules 

and the federal securities laws.160

MIAX EMERALD’s rules governing 

Market Maker quoting obligations are 

tailored to the specific class of Market 

Maker.161 Specifically, a Primary Lead 

Market Maker will be subject to the 

highest standard applicable on MIAX 

EMERALD, as they will be required to 

provide continuous two-sided Standard 

quotes 162 throughout the trading day 

90% of the time in the lesser of 99% of 

the series, or 100% of the series minus 

one put-call pair, in each appointed 

class.163 Lead Market Makers must 

provide continuous two-sided quotes 

(consisting of Standard quotes) 

throughout the trading day 90% of the 

time in 90% of the series in each of their 

appointed classes.164 Lastly, Registered 

Market Makers must provide continuous 

two-sided quotes (consisting of 

Standard quotes) 90% of the time in 

60% of the series in each of its 

appointed classes.165 Further, 

Registered Market Makers may be called 

upon by a MIAX EMERALD official to 

submit a single quote or maintain 

continuous quotes in one or more series 

of its appointed classes whenever, in the 

judgment of such official, it is necessary 

to do so in the interest of fair and 

orderly markets.166 For purposes of 

meeting the continuous quoting 

obligations discussed herein, a Market 

Maker’s quote must meet the bid/ask 

differential requirements of MIAX 

EMERALD Rule 603(b)(4).167

In options classes other than to which 

they are appointed, a Market Maker is 

prohibited from engaging in transactions 

in an account in which it has an interest 

that are disproportionate to, or in 

derogation of, the performance of its 

market making obligations as set forth in 

the MIAX EMERALD rules.168 Further, 

the total number of contracts executed 

during a quarter by a Registered Market 

Maker in options classes to which it is 

not appointed may not exceed 25% of 

the total number of contracts traded by 

such Registered Market Maker in classes 

to which it is appointed.169 Similarly, 

the total number of contracts executed 

during a quarter by a Lead Market 

Maker (including a Primary Lead Market 

Maker) in options classes to which it is 

not appointed may not exceed 10% of 

the total number of contracts traded by 

such Lead Market Maker in classes to 

which it is appointed.170

If MIAX EMERALD finds any failure 

by a Market Maker to meet minimum 

performance standards or properly 

perform as a Market Maker, such Market 

Maker may be subject to suspension, 

termination, or restriction of registration 

in one or more of the securities in which 

the Market Maker is registered.171

Market Makers will receive certain 

benefits in return for satisfying their 

responsibilities.172 For example, a 

broker-dealer or other lender may 

extend ‘‘good faith’’ credit to a member 

of a national securities exchange or 

registered broker-dealer to finance its 

activities as a market maker or 

specialist.173 In addition, market makers 

are excepted from the prohibition in 

Section 11(a) of the Act.174 The 

Commission believes that a market 

maker must be subject to sufficient and 

commensurate affirmative obligations, 

including the obligation to hold itself 

out as willing to buy and sell options for 

its own account on a regular or 

continuous basis, to justify favorable 

treatment.175 The Commission further 

believes that the rules of all U.S. options 

markets need not provide the same 

standards for market maker 

participation, so long as they impose 

affirmative obligations that are 

consistent with the Act.176

The Commission believes that MIAX 

EMERALD’s Market Maker participation 

requirements impose appropriate 

affirmative obligations on MIAX 

EMERALD’s Market Makers that are 

commensurate with the benefits 

afforded to such participants and, 

accordingly, are consistent with the Act. 

Specifically, with regard to MIAX 

EMERALD’s proposed continuous 

quoting obligations, only those quotes 

that are liquidity providing—Standard 

quotes, including Post-Only Quotes— 

will be counted towards a Market 

Maker’s quoting obligations, rather than 

all types of eQuotes that a Market Maker 

will be permitted to utilize.177 The 

Commission believes that this treatment 

is appropriate under the Act and 

consistent with a Market Maker’s 

obligation to contribute to the 

maintenance of a fair and orderly 

market. Further, the Commission 

believes that the specific levels of 

benefits conferred on the different 

classes of Market Makers are 

appropriately balanced by the 

obligations imposed by MIAX 

EMERALD’s rules. For example, as 

discussed below, Primary Lead Market 

Makers and Lead Market Makers are 

entitled to certain participation 

entitlements,178 and at the same time, 

are subject to heightened continuous 

quoting obligations to justify these 

special benefits.179

Finally, the Commission believes that 

the Act does not mandate a particular 

market model for exchanges, and while 

Market Makers may become an 

important source of liquidity on MIAX 

EMERALD, they will likely not be the 

only source, as MIAX EMERALD is 

designed to match buying and selling 

interest of all MIAX EMERALD 

participants. 


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180The definition of ‘‘quote’’ or ‘‘quotation’’ 

means a bid or offer entered by a Market Maker that 

is firm and may update the Market Maker’s 

previous quote, if any. The Rules of the Exchange 

provide for the use of different types of quotes, 

including Standard and eQuotes, as more fully 

described in MIAX EMERALD Rule 517. A Market 

Maker may, at times, choose to have multiple types 

of quotes active in an individual option. See MIAX 

EMERALD Rule 100. 

181See MIAX EMERALD Rule 510. 

182See MIAX EMERALD Rule 510, Interpretations 

and Policies .01. MIAX EMERALD has established 

a scheduled expiration date of December 31, 2018. 

However, MIAX EMERALD may not be operational 

before December 31, 2018, thus the Exchange may 

need to file a proposed rule change under Section 

19(b) of the Act to update this proposed rule. 

183See MIAX EMERALD Rule 516(e). An 

Attributable Order is a market or limit order which 

displays the user firm ID for purposes of trading on 

the Exchange. Use of Attributable Orders will be 

voluntary. 

184See text accompanying notes 219–233 infra. 

185See MIAX EMERALD Rule 516 for a 

description of each of the order types. MIAX 

EMERALD notes that some of these order types will 

be valid only during certain portions of the trading 

day (e.g., Opening Orders) or during certain events 

(e.g., Auction-or-Cancel Orders). If a Member 

submits an order type during a time period when 

the order type is not valid, the System will reject 

the order. 

186See, e.g., Cboe BZX Exchange, Inc. Rule 

21.1(c)(1) (Attributable Order), (d)(8) (Post Only 

Order) and (f)(5) (Fill-or-Kill Order); BOX Rule 

7110(c)(5) (Customer Cross Order) and (c)(6) 

(Qualified Contingent Cross Order); MIAX 

Exchange Rule 516(b)(4) (Auction or Cancel Order); 

Nasdaq Options Market Rules, Chapter VI, Section 

1(e)(7) (On the Open Order), 1(e)(8) (Intermarket 

Sweep Order) and 1(e)(1) (Cancel-replacement 

Order); Nasdaq PHLX LLC Rule 1080(m)(iv)(A) (Do 

Not Route Order and Immediate or Cancel Order); 

NYSE American, LLC Rule 900.3NY(m) (Day Order) 

and (n) (Good-Til-Cancelled Order). 

187See MIAX EMERALD Rule 517(a)(1) 

(providing that Standard quote is a quote submitted 

by a Market Maker that cancels and replaces the 

Market Maker’s previous Standard quote, and a 

Post-Only Quote is a Standard quote that will not 

remove liquidity from the Book). 188See MIAX EMERALD Rule 517(a)(2). 189See id. These eQuote types are similar to the 

eQuote types available on the MIAX Exchange. See 

MIAX Exchange Rule 517(a)(2); see also MIAX 

Order, supra note 13, at 73080–81. 190See MIAX EMERALD Rule 604(e); see also 

supra Section III.C.3.b (discussing Market Maker 

obligations). 191See, e.g., MIAX PEARL Rules 100 and 516(j) 

(defining Quotations and Post-Only Orders, 

respectively); Cboe C2 Exchange, Inc. Rule 1.1 

(similarly); MIAX Exchange Rule 517(a)(2) 

(describing eQuotes). 

192MIAX EMERALD will open for trading with an 

opening rotation similar to that of the MIAX 

Exchange. See MIAX EMERALD Rule 503 and 

MIAX Exchange Rule 503. 

193See MIAX EMERALD Rule 514(c). 

194See MIAX EMERALD Rule 517(b). 

195See MIAX EMERALD Rules 517(b) and 514(e). 

196See MIAX Exchange Rules 517(b) and 514(e). 

See also MIAX Order, supra note 13, at 73080–82. 

197Under the ‘‘Priority Customer Overlay,’’ the 

highest bid and lowest offer will have priority 

except that Priority Customer Orders will have 

priority over Professional Interest and all Market 

Maker interest at the same price. If there were two 

or more Priority Customer orders for the same 

options series at the same price, priority would be 

afforded based on the sequence in which such 

orders were received. See MIAX EMERALD Rule 

514(d)(1); see also MIAX EMERALD Rule 100 

(providing definitions of ‘‘Priority Customer’’ and 

‘‘Professional Interest’’). 

198Under the ‘‘Market Turner’’ priority overlay, 

the ‘‘Market Turner’’ refers to the participant that 

was the first to enter an order or quote at a better 

price than the previous best disseminated MIAX 

EMERALD price, where such order or quote is 

continuously in the market until the order or quote 

trades. When this priority overlay is in effect, the 

Market Turner would have priority at the highest 

bid or lowest offer that he or she established. The 

Market Turner overlay will never be in effect in 

conjunction with other priority overlays. See MIAX 

EMERALD Rule 514(d)(2). 

199See MIAX EMERALD Rule 514(d). 

200See MIAX Exchange Rule 514(d). 

4. Order Display, Execution, and 

Priority 

MIAX EMERALD will operate a fully 

automated electronic options 

marketplace. Liquidity will be derived 

from orders to buy and orders to sell, as 

well as Market Maker quotations,180

submitted to MIAX EMERALD 

electronically by its members from 

remote locations. There will be no 

physical trading floor. Options traded 

on the Exchange will be subject to 

Minimum Price Variations (‘‘MPV’’) that 

will begin at $0.05 for option contracts 

trading at less than $3.00 per option, 

and $.10 for option contracts trading at 

$3.00 per option or higher.181 In 

addition, MIAX EMERALD will 

participate in the penny pilot program 

pursuant to which it will permit certain 

options with premiums under $3 (as 

well as heavily traded options on 

certain indices) to be quoted and traded 

in increments as low as $.01.182

All orders and quotes submitted to 

MIAX EMERALD will be displayed 

unless the order or quote is immediately 

marketable, is a contingent order (such 

as an immediate-or-cancel (‘‘IOC’’) 

order), or is a certain type of eQuote 

(such as an Auction-or-Cancel (‘‘AOC’’) 

eQuote or IOC eQuote). Displayed 

orders and quotes will be displayed on 

an anonymous basis at a specified price 

(except for Attributable Orders,183

which allow voluntary disclosure of 

firm identification information). Nondisplayed orders and quotes will not be 

displayed to any participant. 

Additionally, orders and quotes may 

have a non-displayed price that is 

different than the displayed price, as 

further described below.184

Members may submit the following 

types of orders: Market; Marketable 

Limit; Fill-or-Kill; Auction-or-Cancel; 

Immediate-or-Cancel; Attributable 

Order; Intermarket Sweep; Do Not 

Route; Opening; Customer Cross; 

Qualified Contingent Cross; Day Limit; 

Good ‘Til Cancelled; and Post-Only.185

All of these order types are based on 

similar order types available on other 

options exchanges.186 The Commission 

believes that these order types are 

substantially similar to order types 

approved by the Commission on other 

exchanges. 

MIAX EMERALD Market Makers will 

be permitted to submit Standard quotes, 

including Post-Only Quotes.187 MIAX 

EMERALD Market Makers will also be 

allowed to submit eQuotes, which are 

quotes with a specific time in force that 

do not automatically cancel and replace 

a previous Standard quote or eQuote.188

The types of eQuotes permitted on 

MIAX EMERALD will be AOC, Opening 

Only, IOC, Fill-or-Kill and Intermarket 

Sweep.189 Only Standard quotes 

(including Post-Only Quotes) will be 

permitted to count towards a Market 

maker’s continuous quoting 

obligations.190 MIAX EMERALD’s 

proposed quote types are based on 

similar quote types on other options 

exchanges.191 The Commission believes 

that the MIAX EMERALD quote types 

are substantially similar to those 

approved by the Commission on other 

exchanges. 

After the opening, trades will execute 

on MIAX EMERALD when a buy order/ 

quote and a sell order/quote match one 

another on the MIAX EMERALD order 

book (‘‘MIAX EMERALD Book’’ or 

‘‘Book’’).192 The highest bid and lowest 

offer shall have priority on the 

Exchange. The MIAX EMERALD system 

will continuously and automatically 

match orders/quotes pursuant to either 

price-time allocation or pro-rata 

allocation, as determined by MIAX 

EMERALD on a class-by-class basis.193

On MIAX EMERALD all Market 

Maker quotes will be designated as 

either ‘‘priority quotes’’ or ‘‘non-priority 

quotes.’’ 194 In the event a Market Maker 

has a priority quote on MIAX 

EMERALD, all of that Market Maker’s 

quotes (including all Standard quotes 

and eQuotes) would be entitled to have 

precedence over all other ‘‘Professional 

Interest’’ (i.e., non-Priority Customer 

orders, Market Maker orders and nonpriority quotes) at the same price.195

The Commission notes that this is 

substantially similar to the MIAX 

Exchange which was previously 

approved by the Commission.196

MIAX EMERALD also will offer 

additional priority overlays at its 

discretion on a class-by-class basis, 

which include ‘‘Priority Customer’’ 197

and ‘‘Market Turner’’ 198 overlays. 

Priority overlays would only be 

applicable for pro-rata allocation.199

These priority overlays are the same as 

the priority overlays that were approved 

by the Commission for use on the MIAX 

Exchange.200


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201See supra Section III.C.3 (discussing the 

various categories of Market Makers, including 

Primary Lead Market Makers). 

202See supra notes 194–196 and accompanying 

text (discussing priority quotes). 

203See MIAX EMERALD Rule 514(g). 

Specifically, the Primary Lead Market Maker’s 

participation entitlement will be equal to the greater 

of: (i) The proportion of the total size at the best 

price represented by the size of its quote, or (ii) 

60% of the contracts to be allocated if there is only 

one other Market Maker quotation at the NBBO or 

40% if there are two or more other Market Maker 

quotes at the NBBO. See MIAX EMERALD Rule 

514(g)(1). 

204See MIAX EMERALD Rule 514(g). Further, 

neither a Primary Lead Market Maker nor a Lead 

Market Maker could be allocated a total quantity 

greater than the quantity they are quoting at the 

execution price, and they will not receive any 

further allocation of an order if they receive a 

participation entitlement. See id. 

205See MIAX EMERALD Rule 514(g)(2). The rule 

also provides that MIAX EMERALD will review the 

functioning of this provision quarterly to make sure 

that small size orders do not account for more than 

40% of the volume executed on MIAX EMERALD. 

206An Electronic Exchange Member is the holder 

of a trading permit who is not a Market Maker. See 

MIAX EMERALD Rule 100. 

207See MIAX EMERALD Rule 514(h). 

208See supra Section III.C.3 (discussing the 

various categories of market makers, including Lead 

Market Makers). 

209See MIAX EMERALD Rule 514(h). 

Specifically, the Directed Lead Market Maker’s 

participation entitlement will be equal to the greater 

of: (i) The proportion of the total size at the best 

price represented by the size of its quote; (ii) 60% 

of the contracts to be allocated if there is only one 

other Market Maker quotation at the NBBO or 40% 

if there are two or more other Market Maker quotes 

at the NBBO; or (iii) one contract. 

210See MIAX Exchange Rules 514(g) (Primary 

Lead Market Maker Participation Entitlements) and 

514(h) (Directed Lead Market Maker Participation 

Entitlements). 

211See supra Section III.C.3.b (discussing market 

maker obligations). 

212As discussed above, supra Section III.C.3.b, 

Primary Lead Market Makers must provide 

continuous two-sided quotes 90% of the time in the 

lesser of 99% of the series, or 100% of the series 

minus one put-call pair, in each class in which the 

Primary Lead Market Maker is assigned. See MIAX 

EMERALD Rule 604(e)(1). Lead Market Makers 

must provide continuous two-sided quotes 90% of 

the time in 90% of the series in each of its 

appointed classes. See MIAX EMERALD Rule 

604(e)(2). 

213See infra discussion of MIAX EMERALD’s 

proposed price protection process, managed interest 

process, process for handling Market Maker orders 

and quotes, and process for handling Post-Only 

Orders and Quotes, which are based on 

substantially similar order processing and matching 

features on MIAX Exchange and MIAX PEARL. 

214See MIAX EMERALD Rule 515(a) and (b). 

215See MIAX EMERALD Rule 515(c)(1). 

216See MIAX EMERALD Rule 515(c)(1). The 

Exchange will publish a Regulatory Circular setting 

a minimum and maximum number of MPVs away 

from the NBBO (or EBBO if the ABBO is crossing 

the EBBO) that a market participant may designate 

for its price protection limit, provided that the 

minimum shall be no less than zero MPVs and the 

maximum shall be no more than 20 MPVs. The 

Exchange will also set, and announce by Regulatory 

Circular, a default price protection limit within 1 

to 5 MPVs away from the NBBO (or EBBO if the 

ABBO is crossing the EBBO). 

217See MIAX EMERALD Rule 515(c)(1). 

218See MIAX Exchange Rule 515(c)(1). 

219Non-routable orders would include, for 

example, orders marked ‘‘Do Not Route’’ or PostOnly orders being handled under the Managed 

Interest Process. 

220See MIAX EMERALD Rules 515(c)(1)(ii) 

(Managed Interest Process for Non-Routable Orders) 

and 515(d) (Handling of Market Maker Orders and 

Quotes). 

In addition, proposed MIAX 

EMERALD rules provide that it may 

grant Primary Lead Market Makers and 

Lead Market Makers certain 

participation entitlements. For example, 

Primary Lead Market Makers 201 may be 

entitled to a participation entitlement 

with respect to each incoming order if 

they have a priority quote 202 at the 

National Best Bid and Offer 

(‘‘NBBO’’).203 The Primary Lead Market 

Maker participation entitlements will 

only be in effect if the Priority Customer 

Overlay also is in effect and will apply 

only to any remaining balance after any 

Priority Customer orders have first been 

satisfied.204 Another proposed Primary 

Lead Market Maker entitlement 

provides that small size orders (i.e., five 

or fewer contracts) will be allocated in 

full to the Primary Lead Market Maker 

if it has a priority quote at the NBBO.205

MIAX EMERALD also permits 

Electronic Exchange Members 206 to 

utilize Directed Orders.207 A ‘‘Directed 

Order’’ refers to an order that an 

Electronic Exchange Member enters into 

the Exchange system and directs to a 

particular Lead Market Maker, including 

a Primary Lead Market Maker 208

(‘‘Directed Lead Market Maker’’). The 

Lead Market Maker must have an 

appointment in the relevant options 

class to receive a Directed Order in that 

class. A Directed Lead Market Maker 

may be granted a participation 

entitlement if he or she has a priority 

quote at the NBBO.209 The Directed 

Lead Market Maker participation 

entitlement will only be in effect if the 

Priority Customer Overlay also is in 

effect and will apply only to any 

remaining balance after Priority 

Customer orders have first been 

satisfied. 

These participation entitlements for 

Primary Lead Market Makers and 

Directed Lead Market Makers are 

identical to those that the Commission 

has approved for the MIAX 

Exchange.210 Further, the Commission 

believes that these entitlements are 

appropriately balanced by the 

obligations imposed on these classes of 

market makers, as discussed in detail 

above.211 In particular, the Commission 

notes that Primary Lead Market Makers 

and Lead Market Makers are subject to 

higher quoting obligations than other 

Registered Market Makers who are not 

eligible to receive the aforementioned 

participation entitlements.212 Therefore, 

the Commission believes that the 

proposed rules regarding participation 

entitlements are consistent with the Act. 

MIAX EMERALD proposes to make 

available order processing and matching 

features, which are based on those 

features available on MIAX Exchange 

and MIAX PEARL.213 MIAX 

EMERALD’s system will automatically 

execute incoming orders/quotes that are 

executable against orders/quotes in its 

system, provided that such incoming 

orders/quotes will not be executed at 

prices inferior to the NBBO.214 MIAX 

EMERALD Rule 515 sets forth how the 

MIAX EMERALD system will handle 

incoming orders that cannot be executed 

in part or in full. In particular, MIAX 

EMERALD Rule 515 specifies a ‘‘price 

protection process,’’ a Managed Interest 

Process for non-Market Maker orders, a 

parallel process for handling Market 

Maker orders and quotes, and a Post 

Only Process, each discussed more fully 

below. 

The MIAX EMERALD system offers a 

‘‘price protection’’ process for nonMarket Maker orders.215 Price 

protection prevents an order from being 

executed beyond the price designated in 

the order’s price protection instructions 

(‘‘the price protection limit’’). The price 

protection limit is expressed in units of 

MPV away from the national best bid 

and offer (‘‘NBBO’’) at the time of the 

order’s receipt, or the MIAX EMERALD 

Best Bid and Offer (‘‘EBBO’’) if the best 

bid or offer on away markets (‘‘ABBO’’) 

is crossing the EBBO.216 When 

triggered, price protection will cancel an 

order or the remaining contracts of an 

order. The MIAX EMERALD system will 

not execute such orders at prices 

inferior to the current NBBO.217

The MIAX EMERALD price protection 

process is substantially similar to that 

adopted by MIAX Exchange.218 The 

Commission believes that this price 

protection functionality can benefit all 

market participants. 

The Exchange’s rules also provide for 

processes for managing non-routable 

orders 219 for non-Market Makers 

(‘‘Managed Interest Process’’), and for 

Market Maker orders or quotes (‘‘Rule 

515(d) Process’’), that would either lock 

or cross the current opposite side ABBO 

where the EBBO is inferior to the ABBO 

(such non-Market Maker orders handled 

under the Managed Interest Process and 

Market Maker orders or quotes handled 

under the Rule 515(d) Process will, for 

purposes of this Order, be referred to 

collectively as ‘‘managed orders or 

quotes’’).220 The MIAX EMERALD 


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221See id. 222See MIAX EMERALD Rules 515(c)(1)(ii)(B) 

and 515(d)(ii). See also MIAX Exchange Rule 

515(c)(1)(ii) and MIAX PEARL Rule 515(d)(2) 

(providing for the same Managed Interest Process) 

and MIAX Exchange Rule 515(d) (providing for the 

same handling of Market Maker orders and quotes). 223See id. 224See id. 225See MIAX EMERALD Rules 515(c)(1)(ii)(C) 

and 515(d)(iii). See also MIAX Exchange Rules 

515(c)(1)(ii) and 515(d) and MIAX PEARL Rule 

515(d)(2)(iii)(A). 

226See MIAX Exchange Rules 515(c)(1)(ii) and 

515(d) and MIAX PEARL Rule 515(d)(2). With 

regard to the treatment of Post-Only Orders and 

Post-Only Quotes under MIAX EMERALD’s 

processes, the Commission believes that the rules 

are consistent with the treatment of Post-Only 

Orders under MIAX PEARL’s managed interest rule 

and rules that have been adopted by other 

exchanges. See MIAX EMERALD Rules 

515(c)(1)(ii)(C)(2)–(3) and 515(d)(iii)(2)–(3) and 

MIAX PEARL Rule 515(d)(2)(iii)(B)–(C). See also, 

e.g., Bats BZX Rule 21.1(h) and Securities Exchange 

Act Release No. 77818 (May 12, 2016), 81 FR 31283 

(May 18, 2016) (SR–BatsBZX–2016–16). 

227See MIAX EMERALD Rule 515(i). 

228Non-Market Maker Post-Only Orders that lock 

or cross the current opposite side ABBO and the 

EBBO is inferior to the ABBO would be handled 

through the Managed Interest Process under Rule 

515(c)(1)(ii) as described above. Market Maker PostOnly OQs that lock or cross the current opposite 

side ABBO and the EBBO is inferior to the ABBO 

would be handled through the process under Rule 

515(d) as described above. 

229See MIAX EMERALD Rule 515(i)(3)(ii). 

230 Id. 

231See MIAX EMERALD Rule 515(i)(3)(iii)(A). 

232See MIAX EMERALD Rule 515(i)(3)(iii)(B). 

233See MIAX PEARL Rule 515(g). 

234See MIAX EMERALD Rule 515A(a). 

235See MIAX EMERALD Rule 515A(b). 

236See MIAX EMERALD Rule 515A, 

Interpretations and Policies .12. 237See, e.g., Cboe Rule 6.74A (Automated 

Improvement Mechanism) and Nasdaq PHLX, LLC 

Rule 1087 (Price Improvement XL). 238See MIAX Exchange Rule 519A. 239See MIAX EMERALD Rule 518. 240See MIAX EMERALD Rule 518(a)–(b). 241See MIAX EMERALD Rule 518(c). 242See MIAX EMERALD Rule 518(c)(4). 243See MIAX EMERALD Rule 518, Interpretations 

and Policies .05. 244See MIAX EMERALD Rule 518(d). 245See Securities Exchange Act Release No. 

79072 (October 7, 2016), 81 FR 71131 (October 14, 

2016) (SR–MIAX–2016–26) (approving MIAX 

Exchange’s proposed new rules governing the 

trading of complex orders). 246 15 U.S.C. 78f(b)(5). 247 15 U.S.C. 78f(b)(8). 

system will not execute such managed 

orders or quotes at prices inferior to the 

current NBBO.221 The managed order or 

quote would be displayed at one MPV 

away from the current opposite side 

ABBO and placed on the MIAX 

EMERALD Book at a price equal to the 

opposite side ABBO.222 Should the 

ABBO price change to an inferior price 

level, the managed order or quote’s 

displayed price will continue to re-price 

so that it is displayed one MPV away 

from the new ABBO, and the managed 

order or quote’s Book price will 

continuously re-price to lock the new 

ABBO.223 Such re-pricing will continue 

until the managed order or quote is fully 

executed, reaches its limit price, reaches 

its price protection limit, or is 

cancelled.224 During these processes, if 

the Exchange receives a new order or 

quote on the opposite side of the market 

from the managed order or quote that 

could be executed, the MIAX EMERALD 

system will immediately execute the 

remaining contracts to the extent 

possible at the managed order or quote’s 

current booked bid or offer price, 

provided that it does not trade through 

the current NBBO.225

The Commission believes that MIAX 

EMERALD’s processes for handling 

managed orders or quotes are consistent 

with the processes that the Commission 

approved for handling such orders and 

quotes on MIAX Exchange and MIAX 

PEARL.226

MIAX EMERALD will also have a 

process for the handling of certain PostOnly Orders and Quotes (together, 

‘‘Post-Only OQs’’) (‘‘POP Process’’).227

The POP Process will apply to PostOnly OQs where the limit price of the 

Post-Only OQ locks or crosses the 

current opposite side EBBO where the 

EBBO is the NBBO (i.e., locks or crosses 

an order or quote on the MIAX 

EMERALD Book).228 The MIAX 

EMERALD system will display and book 

such Post-Only OQ one MPV away from 

the current opposite side EBBO.229

Should the EBBO price change to an 

inferior price level, the Post-Only OQ’s 

Book price and displayed price would 

continuously re-price to one MPV away 

from new PBBO until the Post-Only OQ 

is fully executed, reaches its limit price, 

reaches its price protection limit, or is 

cancelled.230

Under the POP Process, if the 

Exchange receives a new order or quote 

on the opposite side of the market from 

the Post-Only OQ that could be 

executed, the MIAX EMERALD system 

would immediately execute the 

remaining contracts to the extent 

possible at the Post-Only OQ’s current 

booked bid or offer price, provided that 

it does not trade through the current 

NBBO.231 If the Exchange receives a 

new Post-Only OQ on the opposite side 

of the market from a Post-Only OQ 

being managed under the POP Process, 

and the new Post-Only OQ locks or 

crosses the Book price of the resting 

Post-Only OQ, the Exchange will book 

and display the new Post-Only OQ one 

MPV away from the current opposite 

side EBBO.232

The POP Process under MIAX 

EMERALD’s rules is consistent with the 

POP Process that the Commission 

approved for MIAX PEARL.233

MIAX EMERALD also proposes to 

establish certain additional crossing and 

price improvement functionalities based 

on features available on MIAX 

Exchange. Mechanisms proposed by 

MIAX EMERALD that are substantially 

the same as those available on MIAX 

Exchange are: A Price Improvement 

Mechanism (‘‘PRIME’’) (which affords 

the opportunity for price improvement 

above the NBBO after an auction for 

eligible orders); 234 a PRIME Solicitation 

Mechanism (which allows members 

representing agency orders the 

opportunity to cross large size solicited 

orders after an auction); 235 and a PRIME 

for Complex Orders (which makes the 

MIAX EMERALD PRIME functionality 

available for complex orders).236 These 

mechanisms are consistent with 

substantially similar mechanisms 

currently existing on other options 

exchanges,237 as well as those offered by 

MIAX Exchange.238

MIAX EMERALD will permit the 

trading of complex orders and quotes on 

the Exchange.239 The proposed rule 

defines the types of complex orders and 

quotes,240 and also describes the 

priority, execution, and allocation of 

complex orders and quotes,241 including 

a managed interest process for complex 

orders.242 MIAX EMERALD also 

proposes price and order protection 

features.243 In addition, MIAX 

EMERALD will establish a Complex 

Auction Process.244 MIAX EMERALD’s 

rules governing the trading of complex 

orders and quotes are consistent with 

the complex order rules that the 

Commission approved for MIAX 

Exchange.245

The Commission believes that MIAX 

EMERALD’s proposed display, 

execution, and priority rules discussed 

above in this section are consistent with 

the Act. In particular, the Commission 

finds that the proposed rules are 

consistent with Section 6(b)(5) of the 

Act,246 which, among other things, 

requires that the rules of a national 

securities exchange be designed to 

promote just and equitable principles of 

trade, to foster cooperation and 

coordination with persons engaged in 

regulating transactions in securities, to 

remove impediments to and perfect the 

mechanism of a free and open market 

and a national market system and, in 

general, to protect investors and the 

public interest, and to not permit unfair 

discrimination between customers, 

issuers, or dealers. The Commission also 

finds that the proposed rules are 

consistent with Section 6(b)(8) of the 

Act,247 which requires that the rules of 

an exchange not impose any burden on 


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248Many of MIAX PEARL’s and MIAX Exchange’s 

rules were approved at the time that MIAX PEARL’s 

and MIAX Exchange’s registration as a national 

securities exchanges, respectively, were granted. 

See MIAX PEARL Order and MIAX Order, supra 

note 13. 

249 15 U.S.C. 78k(a)(1). 

250See Letter from Barbara J. Comly, EVP, General 

Counsel and Corporate Secretary, Miami Holdings, 

to Brent J. Fields, Secretary, Commission, and John 

C. Roeser, Associate Director, Office of Market 

Supervision, Division of Trading and Markets, 

Commission, dated November 30, 2018 (‘‘MIAX 

EMERALD 11(a) Request Letter’’). 

251 17 CFR 240.11a2–2(T). 

252The member may, however, participate in 

clearing and settling the transaction. See Securities 

Exchange Act Release No. 14563 (March 14, 1978), 

43 FR 11542 (March 17, 1978) (regarding the 

NYSE’s Designated Order Turnaround System 

(‘‘1978 Release’’)). 

253MIAX EMERALD 11(a) Request Letter, supra 

note 250. 

254See, e.g., Securities Exchange Act Release Nos. 

59154 (December 23, 2008), 73 FR 80468 (December 

31, 2008) (SR–BSE–2008–48) (order approving 

proposed rules of BX); 49068, (January 13, 2004), 

69 FR 2775 (January 20, 2004) (establishing, among 

other things, BOX as an options trading facility of 

Boston Stock Exchange, Inc.); 44983 (October 25, 

2001), 66 FR 55225 (November 1, 2001) (approving 

the Pacific Exchange, Inc.’s (‘‘PCX’’) use of the 

Archipelago Exchange as its equity trading facility); 

29237 (May 24, 1991), 56 FR 24853 (May 31, 1991) 

(regarding NYSE’s Off-Hours Trading Facility). See 

1978 Release, supra note 252. See also Securities 

Exchange Act Release No. 15533 (January 29, 1979), 

44 FR 6084 (January 31, 1979) (regarding the 

American Stock Exchange (‘‘Amex’’) Post Execution 

Reporting System, the Amex Switching System, the 

Intermarket Trading System, the Multiple Dealer 

Trading Facility of the Cincinnati Stock Exchange, 

the PCX Communications and Execution System, 

and the Philadelphia Stock Exchange Automated 

Communications and Execution System) (‘‘1979 

Release’’). 

255See MIAX EMERALD 11(a) Request Letter, 

supra note 253. Members may change or cancel an 

order or quote at any time before the order is 

executed on the Exchange. See MIAX EMERALD 

Form 1 Application, Exhibit E. The Commission has 

stated that the non-participation requirement is 

satisfied under such circumstances, so long as such 

modifications or cancellations are also transmitted 

from off the floor. See 1978 Release, supra note 252 

(stating that the ‘‘non-participation requirement 

does not prevent initiating members from canceling 

of modifying orders (or the instructions pursuant to 

which the initiating member wishes orders to be 

executed) after the orders have been transmitted to 

the executing member, provided that any such 

instructions are also transmitted from off the 

floor’’). 

256See MIAX EMERALD 11(a) Request Letter, 

supra note 253. 

257 In considering the operation of automated 

execution systems operated by an exchange, the 

Commission noted that while there is no 

independent executing exchange member, the 

execution of an order is automatic once it has been 

transmitted into each system. Because the design of 

these systems ensures that members do not possess 

any special or unique trading advantages in 

handling their orders after transmitting them to the 

exchange, the Commission has stated that 

executions obtained through these systems satisfy 

the independent execution requirement of Rule 

11a2–2(T). See 1979 Release, supra note 254. 

258See MIAX EMERALD 11(a) Request Letter, 

supra note 253. 

competition that is not necessary or 

appropriate in furtherance of the 

purposes of the Act. The trading rules 

of MIAX EMERALD are substantially 

similar to the current trading rules of 

MIAX Exchange, MIAX PEARL, and 

other exchanges, as noted above, which 

were filed with and approved by the 

Commission (or otherwise became 

effective) pursuant to Section 19(b) of 

the Act.248 Therefore, the Commission 

believes that these rules are consistent 

with the Act. 

5. Section 11(a) of the Act 

Section 11(a)(1) of the Act 249

prohibits a member of a national 

securities exchange from effecting 

transactions on that exchange for its 

own account, the account of an 

associated person, or an account over 

which it or its associated person 

exercises discretion (collectively, 

‘‘covered accounts’’), unless an 

exception applies. The Exchange has 

represented that it has analyzed its rules 

proposed hereunder, and believes that 

they are consistent with Section 11(a) of 

the Act and rules thereunder.250

Rule 11a2–2(T) under the Act,251

known as the ‘‘effect versus execute’’ 

rule, provides exchange members with 

an exemption from the Section 11(a)(1) 

prohibition. Rule 11a2–2(T) permits an 

exchange member, subject to certain 

conditions, to effect transactions for 

covered accounts by arranging for an 

unaffiliated member to execute the 

transactions on the exchange. To 

comply with Rule 11a2–2(T)’s 

conditions, a member: (1) Must transmit 

the order from off the exchange floor; (2) 

may not participate in the execution of 

the transaction once it has been 

transmitted to the member performing 

the execution; 252 (3) may not be 

affiliated with the executing member; 

and (4) with respect to an account over 

which the member has investment 

discretion, neither the member nor its 

associated person may retain any 

compensation in connection with 

effecting the transaction except as 

provided in the Rule. 

In a letter to the Commission,253

MIAX EMERALD requested that the 

Commission concur with its conclusion 

that MIAX EMERALD members that 

enter orders into the MIAX EMERALD 

trading system satisfy the requirements 

of Rule 11a2–2(T). For the reasons set 

forth below, the Commission believes 

that MIAX EMERALD members entering 

orders into the MIAX EMERALD trading 

system will satisfy the conditions of 

Rule 11a2–2(T). 

First, Rule 11a2–2(T) requires that 

orders for covered accounts be 

transmitted from off the exchange floor. 

MIAX EMERALD will not have a 

physical trading floor, and the MIAX 

EMERALD trading system will receive 

orders from members electronically 

through remote terminals or computerto-computer interfaces. In the context of 

other automated trading systems, the 

Commission has found that the off-floor 

transmission requirement is met if a 

covered account order is transmitted 

from a remote location directly to an 

exchange’s floor by electronic means.254

Since the MIAX EMERALD trading 

system receives all orders electronically 

through remote terminals or computerto- computer interfaces, the Commission 

believes that the trading system satisfies 

the off-floor transmission requirement. 

Second, Rule 11a2–2(T) requires that 

the member not participate in the 

execution of its order once it has been 

transmitted to the member performing 

the execution. MIAX EMERALD has 

represented that the MIAX EMERALD 

trading system will at no time following 

the submission of an order allow a 

member or an associated person of such 

member to acquire control or influence 

over the result or timing of an order’s 

execution.255 According to MIAX 

EMERALD, the execution of a member’s 

order is determined solely by what 

orders, bids, or offers are present in the 

MIAX EMERALD trading system at the 

time the member submits the order and 

the order priority based on MIAX 

EMERALD rules.256 Accordingly, the 

Commission believes that a MIAX 

EMERALD member will not participate 

in the execution of its order submitted 

into the trading system. 

Rule 11a2–2(T)’s third condition is 

that the order be executed by an 

exchange member who is unaffiliated 

with the member initiating the order. 

The Commission has stated that the 

requirement is satisfied when 

automated exchange facilities, such as 

the MIAX EMERALD trading system, are 

used, as long as the design of these 

systems ensures that members do not 

possess any special or unique trading 

advantages over non-members in 

handling their orders after transmitting 

them to MIAX EMERALD.257 MIAX 

EMERALD has represented that the 

design of its trading system ensures that 

no member has any special or unique 

trading advantage over non-members in 

the handling of its orders after 

transmitting its orders to MIAX 

EMERALD.258 Based on MIAX 

EMERALD’s representation, the 

Commission believes that the MIAX 

EMERALD trading system satisfies this 

requirement.’’ 

Fourth, in the case of a transaction 

effected for an account with respect to 


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259 17 CFR 240.11a2–2(T)(a)(2)(iv). In addition, 

Rule 11a2–2(T)(d) requires a member or associated 

person authorized by written contract to retain 

compensation, in connection with effecting 

transactions for covered accounts over which such 

member or associated person thereof exercises 

investment discretion, to furnish at least annually 

to the person authorized to transact business for the 

account a statement setting forth the total amount 

of compensation retained by the member in 

connection with effecting transactions for the 

account during the period covered by the statement. 

See 17 CFR 240.11a2–2(T)(d). See also 1978 

Release, supra note 252 (stating ‘‘[t]he contractual 

and disclosure requirements are designed to assure 

that accounts electing to permit transaction-related 

compensation do so only after deciding that such 

arrangements are suitable to their interests’’). 

260See MIAX EMERALD 11(a) Request Letter, 

supra note 253. 

261See 15 U.S.C. 78f(b)(1). 

262See id. 

263See MIAX EMERALD Rule 1000 (which 

incorporates by reference MIAX Exchange Rule 

1000). 

264See id. See also MIAX Exchange Rule 1000, 

Cboe Rule 17.1(a), and Nasdaq ISE, LLC Rule 

1600(a) (containing similar provisions). 

265See supra Section II.B.3.c (concerning the 

17d–2 plans to which MIAX EMERALD has 

committed to join). 

266See MIAX EMERALD Rules 1002 and 1004 

(which incorporate by reference MIAX Exchange 

Rules 1002 and 1004, respectively). As noted above, 

MIAX EMERALD has entered into an RSA with 

FINRA under which FINRA will perform certain 

regulatory functions on behalf of MIAX EMERALD. 

See MIAX EMERALD Rule 1015 (which 

incorporates by reference MIAX Exchange Rule 

1015). 

267See MIAX EMERALD Rule 1004 (which 

incorporates by reference MIAX Exchange Rule 

1004). 

268See MIAX EMERALD Rule 1015, 

Interpretation and Policy .01 (which incorporates 

by reference MIAX Exchange Rule 1015, 

Interpretation and Policy .01). 

269See MIAX EMERALD By-Laws, Article IV, 

Section 4.7. 

270See MIAX EMERALD Rule 1006 (which 

incorporates by reference MIAX Exchange Rule 

1006). 

271See MIAX EMERALD Rule 1010 (which 

incorporates by reference MIAX Exchange Rule 

1010). 

272Specifically, the Chairman of the MIAX 

EMERALD Board, with the approval of the Board, 

shall appoint an Appeals Committee to preside over 

all appeals related to disciplinary and adverse 

action determinations. See note 46 and 

accompanying text (detailing the composition of the 

Appeals Committee). If the Independent Director 

serving on the Appeals Committee recuses himself 

or herself from an appeal, due to conflict of interest 

or otherwise, the Independent Director may be 

replaced by a Non-Industry Director for purposes of 

the applicable appeal if there is no other 

Independent Director able to serve as the 

replacement. See MIAX EMERALD By-Laws, 

Article IV, Section 4.5(d). See also MIAX Exchange 

Amended and Restated By-Laws, Article IV, Section 

4.5(d). 

273See MIAX EMERALD Rule 1010 (which 

incorporates by reference MIAX Exchange Rule 

1010). 

274See id. 

275See MIAX EMERALD Rule 1100 (which 

incorporates by reference MIAX Exchange Rule 

1100). As noted above, MIAX EMERALD has 

entered into a RSA with FINRA under which 

FINRA will perform certain regulatory functions on 

behalf of MIAX EMERALD. MIAX EMERALD may 

perform some or all of the functions specified in the 

Chapter XI of the MIAX EMERLAD Rules, which 

incorporates by reference Chapter XI of the MIAX 

Exchange Rules. See supra note 110. See also MIAX 

EMERALD Rule 1106 (which incorporates by 

reference MIAX Exchange Rule 1106). 

276An applicant may file for an extension of time 

as allowed by the Chairman of the Business 

Conduct Committee within thirty days of MIAX 

EMERALD’s action. An application for an extension 

will be ruled upon by the Chairman of the Business 

Conduct Committee, and his ruling will be given in 

writing. Rulings on applications for extensions of 

time are not subject to appeal. See MIAX EMERALD 

Rule 1101 (which incorporates by reference MIAX 

Exchange Rule 1101). 

277The application must include: (1) The action 

for which review is sought; (2) the specific reasons 

for the applicant’s exception to such action; (3) the 

relief sought; and (4) whether the applicant intends 

to submit any documents, statements, arguments or 

other material in support of the application, with 

which the initiating member or an 

associated person thereof exercises 

investment discretion, neither the 

initiating member nor any associated 

person thereof may retain any 

compensation in connection with 

effecting the transaction, unless the 

person authorized to transact business 

for the account has expressly provided 

otherwise by written contract referring 

to Section 11(a) of the Act and Rule 

11a2–2(T).259 MIAX EMERALD 

members trading for covered accounts 

over which they exercise investment 

discretion must comply with this 

condition in order to rely on the rule’s 

exemption.260

D. Discipline and Oversight of Members 

As noted above, one prerequisite for 

the Commission’s grant of an exchange’s 

application for registration is that a 

proposed exchange must be so 

organized and have the capacity to be 

able to carry out the purposes of the 

Act.261 Specifically, an exchange must 

be able to enforce compliance by its 

members and persons associated with 

its members with the Act and the rules 

and regulations thereunder and the 

rules of the exchange.262

MIAX EMERALD’s rules codify MIAX 

EMERALD’s disciplinary jurisdiction 

over its members, thereby facilitating its 

ability to enforce its members’ 

compliance with its rules and the 

federal securities laws.263 MIAX 

EMERALD’s rules permit it to sanction 

members for violations of its rules and 

violations of any provision of the Act or 

the rules and regulations promulgated 

thereunder, by, among other things, 

expelling or suspending members; 

limiting members’ activities, functions, 

or operations; fining or censuring 

members; suspending or barring a 

person from being associated with a 

member; or any other fitting sanction in 

accordance with MIAX EMERALD 

rules.264

MIAX EMERALD’s disciplinary and 

oversight functions will be administered 

in accordance with Chapter X of the 

MIAX EMERALD rules which governs 

disciplinary actions and which 

incorporates by reference Chapter X of 

the MIAX Exchange rules. Unless 

delegated to another SRO pursuant to 

the terms of any effective 17d–2 plan,265

MIAX EMERALD regulatory staff 

(including regulatory staff of another 

SRO that may be acting on MIAX 

EMERALD’s behalf pursuant to a 

regulatory services agreement) will, 

among other things, investigate 

potential securities laws violations and 

initiate charges pursuant to MIAX 

EMERALD rules.266

Upon a finding of probable cause of 

a violation within the disciplinary 

jurisdiction of MIAX EMERALD and 

where further proceedings are 

warranted,267 MIAX EMERALD will 

conduct a hearing on disciplinary 

matters before a professional hearing 

officer 268 and two members of the 

Business Conduct Committee 269 (the 

‘‘Panel’’).270 The MIAX EMERALD 

member (or their associated person) or 

the MIAX EMERALD regulatory staff 

may petition for review of the decision 

of the Panel by the MIAX EMERALD 

Board.271 Any review would be 

conducted by the MIAX EMERALD 

Board or a committee thereof composed 

of at least three Directors of the MIAX 

EMERALD Board 272 (whose decision 

must be ratified by the MIAX EMERALD 

Board) and such decision will be 

final.273 In addition, the MIAX 

EMERALD Board on its own motion 

may order review of a disciplinary 

decision.274

Appeals from any determination that 

impacts access to MIAX EMERALD, 

such as termination or suspension of 

membership, will be instituted under, 

and governed by, the provisions in the 

Chapter XI of the MIAX EMERALD 

Rules which incorporates by reference 

Chapter XI of the MIAX Exchange Rules. 

MIAX EMERALD’s Chapter XI applies 

to persons economically aggrieved by 

any of the following actions of MIAX 

EMERALD including, but not limited to: 

(a) Denial of an application to become 

a Member; (b) barring a person from 

becoming associated with a Member; (c) 

limiting or prohibiting services 

provided by MIAX EMERALD or 

services of any exchange member.275

Any person aggrieved by an action of 

MIAX EMERALD within the scope of 

Chapter XI may file a written 

application to be heard within thirty 

days 276 after such action has been 

taken.277 Applications for hearing and 


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a description of any such materials. See MIAX 

EMERALD Rule 1101(a) (which incorporates by 

reference MIAX Exchange Rule 1101(a)). 

278See MIAX EMERALD Rule 1102 (which 

incorporates by reference MIAX Exchange Rule 

1102). The decision of the hearing panel will be 

made in writing and sent to the parties to the 

proceedings. See MIAX EMERALD Rule 1103(d) 

(which incorporates by reference MIAX Exchange 

Rule 1103(d)). 

279See MIAX EMERALD Rule 1104(a) (which 

incorporates by reference MIAX Exchange Rule 

1104(a)). The MIAX EMERALD Board, or a 

committee of the MIAX EMERALD Board, will have 

sole discretion to grant or deny either request. See 

id. 

280See MIAX EMERALD Rule 1104(b) (which 

incorporates by reference MIAX Exchange Rule 

1104(b)). The MIAX EMERALD Board or its 

designated committee may affirm, reverse, or 

modify in whole or in part, the decision of the 

hearing panel. The decision of the MIAX EMERALD 

Board or its designated committee would be final, 

and must be in writing and would be sent to the 

parties to the proceeding. See MIAX EMERALD 

Rule 1104(c) (which incorporates by reference 

MIAX Exchange Rule 1104(c)). 

281 15 U.S.C. 78f(b)(6) and (b)(7), respectively. 

282See Section 6(b)(1) of the Act, 15 U.S.C. 

78f(b)(1). 

283See, e.g., ISE Mercury Order, supra note 27, 

ISE Gemini Order, supra note 27, MIAX PEARL 

Order, supra note 13, and MIAX Order, supra note 

13. 

284See MIAX EMERALD Rules Chapter IV 

(Option Contracts Traded on the Exchange) (which 

incorporates by reference MIAX Exchange Chapter 

IV) and Chapter XVIII (Index Options) (which 

incorporates by reference MIAX Exchange Chapter 

XVIII). 

285See MIAX Exchange Rules Chapter IV and 

Chapter XVIII, and MIAX PEARL Rules Chapter IV 

and Chapter XVIII. See also Nasdaq GEMX, LLC 

Rule 500 Series and Rule 2000 Series. 

286 15 U.S.C. 78f(b)(5). 

287 15 U.S.C. 78k–1(a)(3)(B). 

288Specifically, MIAX EMERALD proposes to 

incorporate by reference the following MIAX 

Exchange Rules: Chapter III (Business Conduct), 

Chapter IV (Option Contracts Traded on the 

Exchange), Chapter VII (Exercises and Deliveries), 

Chapter VIII (Records, Reports and Audits), Chapter 

IX (Summary Suspension), Chapter X (Discipline), 

Chapter XI (Hearings, Review and Arbitration), 

Chapter XIII (Doing Business With the Public), 

Chapter XIV (Order Protection, Locked and Crossed 

Markets), Chapter XV (Margins), Chapter XVI (Net 

Capital Requirements), Chapter XVII (Consolidated 

Audit Trail Compliance Rule), and Chapter XVIII 

(Index Options). The following rules are crossreferenced in the MIAX Exchange rules: MIAX 

Exchange Rule 1107 (Arbitration) incorporates by 

reference the Rule 12000 Series and Rule 13000 

Series of the FINRA Manual and FINRA Rule 2268; 

MIAX Exchange Rule 1321 (Transfer of Accounts) 

cross-references FINRA Rule 11870; MIAX 

Exchange Rule 1502 (Margin Requirements) crossreferences the Cboe and NYSE rules concerning 

initial and maintenance margin requirements that 

may be in effect from time to time. 

289 17 CFR 240.0–12. 

290See Letter from Barbara J. Comly, EVP, General 

Counsel and Corporate Secretary, Miami Holdings, 

to Brent J. Fields, Secretary, Commission, dated 

November 30, 2018. 

291See id. 

292MIAX EMERALD will provide such notice 

through a posting on the same website location 

where MIAX EMERALD posts its own rule filings 

pursuant to Rule 19b–4(l) under the Act, within the 

required time frame. The website posting will 

include a link to the location on the MIAX 

Exchange, Cboe, NYSE or FINRA website where 

MIAX Exchange, Cboe, NYSE or FINRA’s proposed 

rule change is posted. See id. 

293See, e.g., MIAX PEARL Order and MIAX 

Order, supra note 13, ISE Mercury Order, supra 

note 27, BATS Order, supra note 13, C2 Order, 

supra note 75, Nasdaq Order, supra note 27, and 

NOM Approval Order, supra note 112. 

review will be referred to the Business 

Conduct Committee, which will appoint 

a hearing panel of no less than three 

members of such Committee.278 The 

decision of the hearing panel made 

pursuant to Chapter XI of the MIAX 

EMERALD rules is subject to review by 

the MIAX EMERALD Board, either on 

its own motion within 30 days after 

issuance of the decision, or upon 

written request submitted by the 

applicant or the President of MIAX 

EMERALD within 15 days after issuance 

of the decision.279 The review would be 

conducted by the MIAX EMERALD 

Board or a committee of the MIAX 

EMERALD Board composed of at least 

three directors.280

The Commission finds that MIAX 

EMERALD’s proposed disciplinary and 

oversight rules and structure, as well as 

its proposed process for persons 

economically aggrieved by certain 

MIAX EMERALD actions, are consistent 

with the requirements of Sections 

6(b)(6) and 6(b)(7) of the Act 281 in that 

they provide fair procedures for the 

disciplining of members and persons 

associated with members. The 

Commission further finds that the 

proposed MIAX EMERALD rules are 

designed to provide MIAX EMERALD 

with the ability to comply, and with the 

authority to enforce compliance by its 

members and persons associated with 

its members, with the provisions of the 

Act, the rules and regulations 

thereunder, and the rules of MIAX 

EMERALD.282 The Commission notes 

that MIAX EMERALD’s proposed 

disciplinary and oversight rules and 

structures are similar to the rules of 

other exchanges.283

E. Listing Requirements 

MIAX EMERALD does not intend to 

initially list or trade common stock or 

non-option securities of operating 

companies but rather initially intends 

only to trade option contracts that meet 

the options listing standards of the 

Exchange.284 MIAX EMERALDS’s 

listing rules, including the criteria for 

the underlying securities of the options 

to be traded, incorporate by reference all 

of the listing rules of the MIAX 

Exchange, and are substantially similar 

to the listing standards adopted by other 

options exchanges.285

The Commission finds that MIAX 

EMERALD’s proposed initial and 

continued listing rules are consistent 

with the Act, including Section 

6(b)(5),286 in that they are designed to 

protect investors and the public interest, 

prevent fraudulent and manipulative 

acts and practices, and promote just and 

equitable principles of trade. Before 

beginning operation, MIAX EMERALD 

will need to become a participant in the 

Plan for the Purpose of Developing and 

Implementing Procedures Designed to 

Facilitate the Listing and Trading of 

Standardized Options Submitted 

Pursuant to Section 11A(a)(3)(B) of the 

Securities Exchange Act of 1934 

(‘‘OLPP’’).287 In addition, before 

beginning operation, MIAX EMERALD 

will need to become a participant in the 

Options Clearing Corporation. 

IV. Exemption From Section 19(b) of the 

Act With Regard to MIAX Exchange, 

Cboe, New York Stock Exchange 

(‘‘NYSE’’), and FINRA Rules 

Incorporated by Reference 

MIAX EMERALD proposes to 

incorporate by reference certain MIAX 

Exchange, Cboe, NYSE, and FINRA 

rules.288 Thus, for certain MIAX 

EMERALD rules, MIAX EMERALD 

members will comply with a MIAX 

EMERALD rule by complying with the 

referenced MIAX Exchange, Cboe, 

NYSE, and FINRA rules. 

In connection with the proposal to 

incorporate MIAX Exchange, Cboe, 

NYSE, and FINRA rules by reference, 

MIAX EMERALD requests, pursuant to 

Rule 240.0–12 under the Act,289 an 

exemption under Section 36 of the Act 

from the rule filing requirements of 

Section 19(b) of the Act for changes to 

the MIAX EMERALD rules that are 

effected solely by virtue of a change to 

a cross-referenced MIAX Exchange, 

Cboe, NYSE or FINRA rule.290 MIAX 

EMERALD proposes to incorporate by 

reference categories of rules, rather than 

individual rules within a category, that 

are not trading rules. In addition, MIAX 

EMERALD agrees to provide written 

notice to its members whenever MIAX 

Exchange, Cboe, NYSE or FINRA 

proposes a change to a cross-referenced 

rule 291 and whenever any such 

proposed changes are approved by the 

Commission or otherwise become 

effective.292

Using the authority under Section 36 

of the Act, the Commission previously 

exempted certain SROs from the 

requirement to file proposed rule 

changes under Section 19(b) of the 

Act.293 The Commission is hereby 

granting MIAX EMERALD’s request for 

exemption, pursuant to Section 36 of 


amozie on DSK3GDR082PROD with NOTICES1
67438 Federal Register / Vol. 83, No. 248 / Friday, December 28, 2018 / Notices 

294 15 U.S.C. 78mm. 

1Applicants request that the order apply to the 

initial fund and any additional series of the Trust, 

and any other existing or future open-end 

the Act, from the rule filing 

requirements of Section 19(b) of the Act 

with respect to the rules that MIAX 

EMERALD proposes to incorporate by 

reference. The exemption is conditioned 

upon MIAX EMERALD providing 

written notice to MIAX EMERALD 

members whenever MIAX Exchange, 

Cboe, NYSE or FINRA proposes to 

change an incorporated by reference 

rule and when the Commission 

approves any such changes. The 

Commission believes that the exemption 

is appropriate in the public interest and 

consistent with the protection of 

investors because it will promote more 

efficient use of Commission’s and SROs’ 

resources by avoiding duplicative rule 

filings based on simultaneous changes 

to identical rule text sought to be 

implemented by more than one SRO. 

V. Conclusion 

It is ordered that the application of 

MIAX EMERALD for registration as a 

national securities exchange be, and it 

hereby is, granted. 

It is further ordered that operation of 

MIAX EMERALD is conditioned on the 

satisfaction of the requirements below: 

A. Participation in National Market 

System Plans Relating to Options 

Trading. MIAX EMERALD must join: (1) 

The Plan for the Reporting of 

Consolidated Options Last Sale Reports 

and Quotation Information (Options 

Price Reporting Authority); (2) the 

OLPP; (3) the Linkage Plan; (4) the Plan 

of the Options Regulatory Surveillance 

Authority; and (5) the Plan Governing 

the Consolidated Audit Trail; 

B. Participation in Multiparty Rule 

17d–2 Plans. MIAX EMERALD must 

become a party to the multiparty Rule 

17d–2 agreements concerning options 

sales practice regulation and market 

surveillance, and covered Regulation 

NMS rules; 

C. Participation in the Options 

Clearing Corporation. MIAX EMERALD 

must become an Options Clearing 

Corporation participant exchange; and 

D. Participation in the Intermarket 

Surveillance Group. MIAX EMERALD 

must join the Intermarket Surveillance 

Group. 

It is further ordered, pursuant to 

Section 36 of the Act,294 that MIAX 

EMERALD shall be exempted from the 

rule filing requirements of Section 19(b) 

of the Act with respect to the MIAX 

Exchange, Cboe, NYSE and FINRA rules 

that MIAX EMERALD proposes to 

incorporate by reference, subject to the 

conditions specified in this order that 

MIAX EMERALD provide written notice 

to MIAX EMERALD members whenever 

MIAX Exchange, 

Cboe, NYSE or FINRA proposes to 

change an incorporated by reference 

rule and when the Commission 

approves any such changes. 

By the Commission. 

Brent J. Fields, 

Secretary. 

[FR Doc. 2018–28179 Filed 12–27–18; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Investment Company Act Release No. 

33343; 812–14812] 

AQR Trust and AQR Capital 

Management, LLC; Notice of 

Application 

December 21, 2018. 

AGENCY: Securities and Exchange 

Commission (‘‘Commission’’). 

ACTION: Notice. 

Notice of an application for an order 

under section 6(c) of the Investment 

Company Act of 1940 (the ‘‘Act’’) for an 

exemption from sections 2(a)(32), 

5(a)(1), 22(d), and 22(e) of the Act and 

rule 22c–1 under the Act, under 

sections 6(c) and 17(b) of the Act for an 

exemption from sections 17(a)(1) and 

17(a)(2) of the Act, and under section 

12(d)(1)(J) for an exemption from 

sections 12(d)(1)(A) and 12(d)(1)(B) of 

the Act. The requested order would 

permit (a) index-based series of certain 

open-end management investment 

companies (‘‘Funds’’) to issue shares 

redeemable in large aggregations 

(‘‘Creation Units’’); (b) secondary market 

transactions in Fund shares to occur at 

negotiated market prices rather than at 

net asset value (‘‘NAV’’); (c) certain 

Funds to pay redemption proceeds, 

under certain circumstances, more than 

seven days after the tender of shares for 

redemption; (d) certain affiliated 

persons of a Fund to deposit securities 

into, and receive securities from, the 

Fund in connection with the purchase 

and redemption of Creation Units; (e) 

certain registered management 

investment companies and unit 

investment trusts outside of the same 

group of investment companies as the 

Funds (‘‘Funds of Funds’’) to acquire 

shares of the Funds; (f) certain Funds 

(‘‘Feeder Funds’’) to create and redeem 

Creation Units in-kind in a masterfeeder structure; and (g) certain Funds 

to issue Shares in less than Creation 

Unit size to investors participating in a 

distribution reinvestment program. 

APPLICANTS: AQR Trust (the ‘‘Trust’’), a 

Delaware statutory trust that will 

register under the Act as an open-end 

management investment company with 

multiple series and AQR Capital 

Management, LLC (the ‘‘Initial 

Adviser’’), a Delaware corporation 

registered as an investment adviser 

under the Investment Advisers Act of 

1940. 

FILING DATES: The application was filed 

on August 17, 2017 and amended on 

April 9, 2018, August 8, 2018, and 

December 12, 2018. 

HEARING OR NOTIFICATION OF HEARING: An 

order granting the requested relief will 

be issued unless the Commission orders 

a hearing. Interested persons may 

request a hearing by writing to the 

Commission’s Secretary and serving 

applicants with a copy of the request, 

personally or by mail. Hearing requests 

should be received by the Commission 

by 5:30 p.m. on January 15, 2019, and 

should be accompanied by proof of 

service on applicants, in the form of an 

affidavit, or for lawyers, a certificate of 

service. Pursuant to rule 0–5 under the 

Act, hearing requests should state the 

nature of the writer’s interest, any facts 

bearing upon the desirability of a 

hearing on the matter, the reason for the 

request, and the issues contested. 

Persons who wish to be notified of a 

hearing may request notification by 

writing to the Commission’s Secretary. 

ADDRESSES: Secretary, Securities and 

Exchange Commission, 100 F Street NE, 

Washington, DC 20549–1090; 

Applicants: William J. Fenrich, Esq., 

AQR Capital Management, LLC, Two 

Greenwich Plaza, 4th Floor, Greenwich, 

Connecticut 06830. 

FOR FURTHER INFORMATION CONTACT: 

Steven I. Amchan, Senior Counsel, at 

(202) 551–6826, Hae-Sung Lee, Senior 

Counsel, at (202) 551–7345, or Andrea 

Ottomanelli Magovern, Branch Chief, at 

(202) 551–6825 (Division of Investment 

Management, Chief Counsel’s Office). 

SUPPLEMENTARY INFORMATION: The 

following is a summary of the 

application. The complete application 

may be obtained via the Commission’s 

website by searching for the file 

number, or for an applicant using the 

Company name box, at http://

www.sec.gov/search/search.htm or by 

calling (202) 551–8090. 

Summary of the Application 

1. Applicants request an order that 

would allow Funds to operate as index 

exchange traded funds (‘‘ETFs’’).1 Fund 


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