2950 Federal Register / Vol. 87, No. 12 / Wednesday, January 19, 2022 / Notices 

16See Securities Exchange Act Release No. 51808 

(June 9, 2005), 70 FR 37496, 37499 (June 29, 2005). 

17NetCoalition v. SEC, 615 F.3d 525, 539 (D.C. 

Cir. 2010) (quoting Securities Exchange Act Release 

No. 59039 (December 2, 2008), 73 FR 74770, 74782– 

83 (December 9, 2008) (SR–NYSEArca–2006–21)). 

18 15 U.S.C. 78s(b)(3)(A). 

19 17 CFR 240.19b–4(f). 

20 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

has repeatedly expressed its preference 

for competition over regulatory 

intervention in determining prices, 

products, and services in the securities 

markets. Specifically, in Regulation 

NMS, the Commission highlighted the 

importance of market forces in 

determining prices and SRO revenues 

and, also, recognized that current 

regulation of the market system ‘‘has 

been remarkably successful in 

promoting market competition in its 

broader forms that are most important to 

investors and listed companies.’’ 16 The 

fact that this market is competitive has 

also long been recognized by the courts. 

In NetCoalition v. Securities and 

Exchange Commission, the D.C. Circuit 

stated as follows: ‘‘[n]o one disputes 

that competition for order flow is 

‘fierce.’ . . . As the SEC explained, ‘[i]n 

the U.S. national market system, buyers 

and sellers of securities, and the brokerdealers that act as their order-routing 

agents, have a wide range of choices of 

where to route orders for execution’; 

[and] ‘no exchange can afford to take its 

market share percentages for granted’ 

because ‘no exchange possesses a 

monopoly, regulatory or otherwise, in 

the execution of order flow from broker 

dealers’. . . .’’.17 Accordingly, the 

Exchange does not believe its proposed 

fee change imposes any burden on 

competition that is not necessary or 

appropriate in furtherance of the 

purposes of the Act. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

The Exchange neither solicited nor 

received comments on the proposed 

rule change. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

The foregoing rule change has become 

effective pursuant to Section 19(b)(3)(A) 

of the Act 18 and paragraph (f) of Rule 

19b–4 19 thereunder. At any time within 

60 days of the filing of the proposed rule 

change, the Commission summarily may 

temporarily suspend such rule change if 

it appears to the Commission that such 

action is necessary or appropriate in the 

public interest, for the protection of 

investors, or otherwise in furtherance of 

the purposes of the Act. If the 

Commission takes such action, the 

Commission will institute proceedings 

to determine whether the proposed rule 

change should be approved or 

disapproved. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views, and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 

Comments may be submitted by any of 

the following methods: 

Electronic Comments 

• Use the Commission’s internet 

comment form (http://www.sec.gov/ 

rules/sro.shtml); or 

• Send an email to rule-comments@

sec.gov. Please include File Number SR– 

CboeEDGX–2022–001 on the subject 

line. 

Paper Comments 

• Send paper comments in triplicate 

to Secretary, Securities and Exchange 

Commission, 100 F Street NE, 

Washington, DC 20549–1090. 

All submissions should refer to File 

Number SR–CboeEDGX–2022–001. This 

file number should be included on the 

subject line if email is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

internet website (http://www.sec.gov/ 

rules/sro.shtml). Copies of the 

submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

provisions of 5 U.S.C. 552, will be 

available for website viewing and 

printing in the Commission’s Public 

Reference Room, 100 F Street NE, 

Washington, DC 20549 on official 

business days between the hours of 

10:00 a.m. and 3:00 p.m. Copies of the 

filing also will be available for 

inspection and copying at the principal 

office of the Exchange. All comments 

received will be posted without change. 

Persons submitting comments are 

cautioned that we do not redact or edit 

personal identifying information from 

comment submissions. You should 

submit only information that you wish 

to make available publicly. All 

submissions should refer to File 

Number SR–CboeEDGX–2022–001, and 

should be submitted on or before 

February 9, 2022. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.20

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2022–00877 Filed 1–18–22; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–93962; SR–EMERALD– 

2022–01] 

Self-Regulatory Organizations: Notice 

of Filing and Immediate Effectiveness 

of a Proposed Rule Change by MIAX 

Emerald, LLC To Amend Exchange 

Rule 521, Nullification and Adjustment 

of Options Transactions Including 

Obvious Errors 

January 12, 2022. 

Pursuant to the provisions of Section 

19(b)(1) of the Securities Exchange Act 

of 1934 (‘‘Act’’) 1 and Rule 19b–4 

thereunder,2 notice is hereby given that 

on January 7, 2022, MIAX Emerald, LLC 

(‘‘MIAX Emerald’’ or ‘‘Exchange’’) filed 

with the Securities and Exchange 

Commission (‘‘Commission’’) a 

proposed rule change as described in 

Items I, II, and III below, which Items 

have been prepared by the Exchange. 

The Commission is publishing this 

notice to solicit comments on the 

proposed rule change from interested 

persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to make a 

technical amendment to Exchange Rule 

521, Nullification and Adjustment of 

Options Transactions Including Obvious 

Errors. 

The text of the proposed rule change 

is available on the Exchange’s website at 

http://www.miaxoptions.com/rulefilings/emerald at MIAX Emerald’s 

principal office, and at the 

Commission’s Public Reference Room. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, the 

Exchange included statements 

concerning the purpose of and basis for 

the proposed rule change and discussed 

any comments it received on the 


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3 See Exchange Rule 521(b). 

4 For purposes of Rule 521, the term ‘‘Customer’’ 

means a Priority Customer as defined in Rule 100. 

See Exchange Rule 521(a)(1). 

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

74918 (May 8, 2015), 80 FR 27781 (May 14, 2015) 

(SR–MIAX–2015–35); 80284 (March 21, 2017), 82 

FR 15251 (March 27, 2017) (SR–MIAX–2017–13). 

6 See Securities Exchange Act Release No. 81321 

(August 7, 2017), 82 FR 37633 (August 11, 2017) 

(SR–MIAX–2017–38). 

7 See supra note 5. 8 The term ‘‘NBBO’’ means the national best bid 

or offer as calculated by the Exchange based on 

market information received by the Exchange from 

OPRA. See Exchange Rule 100. 

proposed rule change. The text of these 

statements may be examined at the 

places specified in Item IV below. The 

Exchange has prepared summaries, set 

forth in sections A, B, and C below, of 

the most significant aspects of such 

statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The Exchange is proposing to amend 

Exchange Rule 521, Nullification and 

Adjustment of Options Transactions 

Including Obvious Errors, to improve 

the operation of the Rule. Following 

discussions with other exchanges and a 

cross-section of industry participants 

and in coordination with the Listed 

Options Market Structure Working 

Group (‘‘LOMSWG’’) (collectively, the 

‘‘Industry Working Group’’), the 

Exchange proposes: (1) To amend 

section (b)(3) of the Rule to permit the 

Exchange to determine the Theoretical 

Price 3 of a Customer 4 option 

transaction in a wide market so long as 

a narrow market exists at any point 

during the 10-second period after an 

opening or re-opening; and (2) to amend 

section (c)(4)(B) of the Rule to adjust, 

rather than nullify, Customer 

transactions in Obvious Error situations, 

provided the adjustment does not 

violate the limit price. 

Proposed Change to Section (b)(3) 

Exchange Rule 521 has been part of 

various harmonization efforts by the 

Industry Working Group.5 These efforts 

have often centered around the 

Theoretical Price for which an options 

transaction should be compared to 

determine whether an Obvious Error has 

occurred. For instance, all options 

exchanges have adopted language 

comparable to Interpretations and 

Policies .04, Exchange Determining 

Theoretical Price,6 which explains how 

an exchange is to determine Theoretical 

Price at the open, when there are no 

valid quotes, and when there is a wide 

quote. This includes at times the use of 

a singular third-party vendor, known as 

a TP Provider (currently CBOE Livevol, 

LLC). 

Similarly, section (b)(3) of Rule 521 

was previously harmonized across all 

options exchanges to handle situations 

where executions occur in markets that 

are wide (as set forth in the rule).7

Under that section, the Exchange 

determines the Theoretical Price if the 

NBBO 8 for the subject series is wide 

immediately before execution and a 

narrow market (as set forth in the rule) 

existed ‘‘during the 10 seconds prior to 

the transaction.’’ The rule goes on to 

clarify that, should there be no narrow 

quotes ‘‘during the 10 seconds prior to 

the transaction,’’ the Theoretical Price 

for the affected series is the NBBO that 

existed at the time of execution 

(regardless of its width). 

In recent discussions, the Industry 

Working Group has identified proposed 

changes to section (b)(3) of Rule 521 that 

would improve the Rule’s functioning. 

Currently, section (b)(3) does not permit 

the Exchange to determine the 

Theoretical Price unless there is a 

narrow quote 10 seconds prior to the 

transaction. However, in the first 

seconds of trading, there is no 10- 

second period ‘‘prior to the 

transaction.’’ Further, the Industry 

Working Group has observed that prices 

in certain series can be disjointed at the 

start of trading. Accordingly, the 

Exchange proposes to provide 

additional protections to trading in 

certain circumstances immediately after 

the opening before liquidity has had a 

chance to enter the market. The 

Exchange proposes to amend section 

(b)(3) to allow the Exchange to 

determine the Theoretical Price in a 

wide market so long as a narrow market 

exists at any point during the 10-second 

period after an opening or re-opening. 

Specifically, the Exchange proposes 

that the existing text of section (b)(3) 

would become subsection ‘‘(A).’’ The 

Exchange proposes to add the following 

heading and text as subsection ‘‘(B)’’: 

(B) Customer Transactions Occurring 

Within 10 Seconds or Less After an 

Opening or Re-Opening: 

(i) The Exchange will determine the 

Theoretical Price if the bid/ask 

differential of the NBB and NBO for the 

affected series just prior to the 

Customer’s erroneous transaction was 

equal to or greater than the Minimum 

Amount set forth in paragraph A above 

and there was a bid/ask differential less 

than the Minimum Amount during the 

10 seconds prior to the transaction. 

(ii) If there was no bid/ask differential 

less than the Minimum Amount during 

the 10 seconds prior to the transaction, 

then the Exchange will determine the 

Theoretical Price if the bid/ask 

differential of the NBB and NBO for the 

affected series just prior to the 

Customer’s erroneous transaction was 

equal to or greater than the Minimum 

Amount set forth in paragraph A above 

and there was a bid/ask differential less 

than the Minimum Amount anytime 

during the 10 seconds after an opening 

or re-opening. 

(iii) If there was no bid/ask 

differential less than the Minimum 

Amount during the 10 seconds 

following an Opening or Re-Opening, 

then the Theoretical Price of an option 

series is the last NBB or NBO just prior 

to the Customer transaction in question, 

as set forth in paragraph (b) above. 

(iv) Customer transactions occurring 

more than 10 seconds after an opening 

or re-opening are subject to paragraph A 

above. 

The following examples illustrate the 

functioning of the proposed rule change. 

Consider that the NBBO of a series 

opens as $0.01 at $4.00. A marketable 

limit order to buy one contract arrives 

one second later and is executed at 

$4.00. In the third second of trading, the 

NBBO narrows from $0.01 at $4.00 to 

$2.00 at $2.10. While the execution 

occurred in a market with wide widths, 

there was no tight market within the 10 

seconds prior to execution. Accordingly, 

under the current rule, the trade would 

not qualify for obvious error review, in 

part due to the fact that there was only 

a single second of trading before the 

execution. Under the proposal, since a 

tight market existed at some point in the 

first 10 seconds of trading (i.e., in the 

third second), the Exchange would be 

able to determine the Theoretical Price 

as provided in Interpretations and 

Policies .04. 

As another example, the NBBO for a 

series opens as $0.01 at $4.00. In the 

seventh second of trading, a marketable 

limit order is received to buy one 

contract and is executed at $4.00. Five 

seconds later (i.e., in the twelfth second 

of trading), the NBBO narrows from 

$0.01 at $4.00 to $2.00 at $2.10. While 

the execution occurred in a market with 

wide widths, there was no tight market 

within 10 seconds prior to execution. 

Accordingly, under the current rule, the 

trade would not qualify for obvious 

error review. Under the proposal, since 

no tight market existed at any point 

during the first 10 seconds of trading 

(i.e., the narrow market occurred in the 

twelfth second), the trade would not 

qualify for obvious error review. 


jspears on DSK121TN23PROD with NOTICES1
2952 Federal Register / Vol. 87, No. 12 / Wednesday, January 19, 2022 / Notices 

9 Specifically, the current Rule provides at 

section (c)(4)(C) that if any Member has 200 or more 

Customer transactions under review concurrently 

and the orders resulting in such transactions were 

submitted during the course of 2 minutes or less, 

where at least one party to the Obvious Error is a 

non-Customer, then the Exchange will apply the 

non-Customer adjustment criteria set forth in 

(c)(4)(A) for such transactions. 

10 See Securities Exchange Act Release No. 93818 

(December 17, 2021), 86 FR 73009 (December 23, 

2021) (SR–NYSEArca–2021–91) (Order Approving a 

Proposed Rule Change to Amend Rule 6.87–O). 

11 15 U.S.C. 78f(b). 

12 15 U.S.C. 78f(b)(5). 

The proposed rule change would also 

better harmonize section (b)(3) with 

section (b)(1) of the Rule. Under section 

(b)(1), the Exchange is permitted to 

determine the Theoretical Price for 

transactions occurring as part of the 

opening auction process (as described in 

Exchange Rule 503) if there is no NBB 

or NBO for the affected series just prior 

to the erroneous transaction. However, 

under the current version of section 

(b)(3), a core trading transaction could 

occur in the same wide market but the 

Exchange would not be permitted to 

determine the Theoretical Price. 

Consider an example where one second 

after the Exchange opens a selected 

series, the NBBO is $1.00 at $5.00. At 

9:30:03, a customer submits a 

marketable buy order to the Exchange 

and pays $5.00. At 9:30:03, a different 

exchange runs an opening auction that 

results in a customer paying $5.00 for 

the same selected series. At 9:30:06, the 

NBBO changes from $1.00 at $5.00 to 

$1.35 at $1.45. Under the current 

version of section (b)(3), the Exchange 

would not be able to determine the 

Theoretical Price for the trade occurring 

during core trading. However, the trade 

on the other exchange could be 

submitted for review under (b)(1) and 

that exchange would be able to 

determine the Theoretical Price. If the 

proposed change to section (b)(3) were 

approved, both of the trades occurring at 

9:30:03 (on the Exchange during core 

trading and on another exchange via 

auction) would also be entitled to the 

same review regarding the same 

Theoretical Price based upon the same 

time. 

The proposal would not change any 

obvious error review beyond the first 10 

seconds of an opening or re-opening. 

Proposed Change to Section (c)(4)(B) 

The Exchange proposes to amend 

section (c)(4)(B)—the ‘‘Adjust or Bust’’ 

rule for Customer transactions in 

Obvious Error situations—to adjust 

rather than nullify such orders, 

provided the adjustment does not 

violate the Customer’s limit price. 

Currently, the Rule provides that in 

Obvious Error situations, transactions 

involving non-Customers should be 

adjusted, while transactions involving 

Customers are nullified, unless a certain 

condition applies.9 The Industry 

Working Group has concluded that the 

treatment of these transactions should 

be harmonized under the Rule, such 

that transactions involving Customers 

may benefit from adjustment, just as 

non-Customer transactions currently do, 

except where such adjustment would 

violate the Customer’s limit price; in 

that instance, the trade would be 

nullified. 

Specifically, the Exchange proposes to 

amend the text of section (c)(4)(B) to 

add that where at least one party to the 

Obvious Error is a Customer, ‘‘the 

execution price of the transaction will 

be adjusted by the Official pursuant to 

the table immediately above. Any 

Customer Obvious Error exceeding 50 

contracts will be subject to the Size 

Adjustment Modifier defined in 

subparagraph (a)(4) above. However, if 

such adjustment(s) would result in an 

execution price higher (for buy 

transactions) or lower (for sell 

transactions) than the Customer’s limit 

price,’’ the trade will be nullified. The 

‘‘table immediately above’’ referenced in 

the proposed text refers to the table at 

current Section (c)(4)(A), which 

provides for the adjustment of prices a 

specified amount away from the 

Theoretical Price, rather than adjusting 

the Theoretical Price. 

The Exchange proposes no other 

changes at this time. 

Implementation Date 

The proposed rule change will 

become operative no sooner than six 

months following the approval of the 

NYSEArca proposal 10 to coincide with 

implementation on other option 

exchanges. The Exchange will announce 

the implementation date to its Members 

via Regulatory Circular. 

2. Statutory Basis 

The Exchange believes that its 

proposal is consistent with Section 6(b) 

of the Act 11 in general, and furthers the 

objectives of Section 6(b)(5) of the Act 12

in particular, in that it is designed to 

prevent fraudulent and manipulative 

acts and practices, to promote just and 

equitable principles of trade, to foster 

cooperation and coordination with 

persons engaged in regulating, clearing, 

settling, processing information with 

respect to, and facilitating transactions 

in securities, to remove impediments to 

and perfect the mechanisms of a free 

and open market and a national market 

system and, in general, to protect 

investors and the public interest and 

because it is not designed to permit 

unfair discrimination between 

customers, issuers, brokers, or dealers. 

The Exchange believes the proposed 

rule change to section (b)(3) of the Rule 

would remove impediments to and 

perfect the mechanism of a free and 

open market and a national market 

system, and, in general, protect 

investors and the public interest 

because it provides a method for 

addressing Obvious Error Customer 

transactions that occur in a wide market 

at the opening of trading. Generally, a 

wide market is an indication of a lack 

of liquidity in the market such that the 

market is unreliable. Current section 

(b)(3) recognizes that a persistently wide 

quote (i.e., more than 10 seconds) 

should be considered the reliable 

market regardless of its width, but does 

not address transactions that occur in a 

wide market in the first seconds of 

trading, where there is no preceding 10- 

second period to reference. Accordingly, 

in the first 10 seconds of trading, there 

is no opportunity for a wide quote to 

have persisted for a sufficiently lengthy 

period such that the market should 

consider it a reliable market for the 

purposes of determining an Obvious 

Error transaction. 

The proposed change would rectify 

this disparity and permit the Exchange 

to consider whether a narrow quote is 

present at any time during the 10- 

second period after an opening or reopening. The presence of such a narrow 

quote would indicate that the market 

has gained sufficient liquidity and that 

the previous wide market was 

unreliable, such that it would be 

appropriate for the Exchange to 

determine the Theoretical Price of an 

Obvious Error transaction. In this way, 

the proposed rule harmonizes the 

treatment of Customer transactions that 

execute in an unreliable market at any 

point of the trading day, by making 

them uniformly subject to Exchange 

determination of the Theoretical Price. 

The Exchange believes that the 

proposed change to section (c)(4)(B) of 

the Rule would remove impediments to 

and perfect the mechanism of a free and 

open market and a national market 

system and enhance the protection of 

investors by harmonizing the treatment 

of non-Customer transactions and 

Customer transactions under the Rule. 

Under the current Rule, Obvious Error 

situations involving non-Customer 

transactions are adjusted, while those 

involving Customer transactions are 

generally nullified, unless they meet the 

additional requirements of section 

(c)(4)(C) (i.e., where a Member has 200 

or more Customer transactions under 

review concurrently and the orders 


jspears on DSK121TN23PROD with NOTICES1
Federal Register / Vol. 87, No. 12 / Wednesday, January 19, 2022 / Notices 2953 

13 See Securities Exchange Act Release No. 74918 

(May 8, 2015), 80 FR 27781 (May 14, 2015) (SR– 

MIAX–2015–35). 

14 Dan Raju, Retail Traders Adopt Options En 

Masse, by Dan Raju, (Dec 8, 2020) available at 

https://www.nasdaq.com/articles/retail-tradersadopt-options-en-masse-2020-12-08. 15 15 U.S.C. 78f(b)(8). 

resulting in such transactions were 

submitted during the course of 2 

minutes or less.) The proposal would 

harmonize the treatment of nonCustomer and Customer transactions by 

providing for the adjustment of all such 

transactions, except where such 

adjustment would violate the 

Customer’s limit price. 

When the current rule was proposed 

in 2015, the MIAX Options Exchange 

believed there were sound reasons for 

treating non-Customer transactions and 

Customer transactions differently. At 

the time, the MIAX Options Exchange 

stated its belief that ‘‘Customers are not 

necessarily immersed in the day-to-day 

trading of the markets, are less likely to 

be watching trading activity in a 

particular option throughout the day, 

and may have limited funds in their 

trading accounts,’’ and that nullifying 

Obvious Error transactions involving 

Customers would give Customers 

‘‘greater protections’’ than adjusting 

such transactions by eliminating the 

possibility that a Customer’s order will 

be adjusted to a significantly different 

price. The Exchange also noted its belief 

that ‘‘Customers are . . . less likely to 

have engaged in significant hedging or 

other trading activity based on earlier 

transactions, and thus, are less in need 

of maintaining a position at an adjusted 

price than non-Customers.’’ 13

Those assumptions about Customer 

trading and hedging activity no longer 

hold. The Exchange and the Industry 

Working Group believe that over the 

course of the last five years, Customers 

that use options have become more 

sophisticated, as retail broker-dealers 

have enhanced the trading tools 

available. Pursuant to OCC data, 

volumes clearing in the Customer range 

have expanded from 12,022,163 ADV in 

2015 to 35,081,130 ADV in 2021. This 

increase in trading activity underscores 

the greater understanding of options by 

Customers as a trading tool and its use 

in the markets. Customers who trade 

options today largely are more educated, 

have better trading tools, and have 

better access to financial news than any 

time prior.14 The proposed rule would 

extend the hedging protections 

currently enjoyed by non-Customers to 

Customers, by allowing them to 

maintain an option position at an 

adjusted price, which would in turn 

prevent a cascading effect by 

maintaining the hedge relationship 

between the option transaction and any 

other transactions in a related security. 

The Exchange believes that extending 

such hedging protections to Customer 

transactions would remove 

impediments to and perfect the 

mechanism of a free and open market 

and a national market system and 

enhance the protection of investors by 

providing greater certainty of execution 

for all participants to options 

transactions. Under the current Rule, a 

Customer that believes its transaction 

was executed pursuant to an Obvious 

Error may be disincentivized from 

submitting the transaction for review, 

since during the review process, the 

Customer would be uncertain whether 

the trade would be nullified, and if so, 

whether market conditions would still 

permit the opportunity to execute a 

related order at a better price after the 

nullification ruling is finalized. In 

contrast, under the proposed rule, the 

Customer would know that the only 

likely outcomes of submitting a trade to 

Obvious Error review would be that the 

trade would stand or be re-executed at 

a better price; the trade would only be 

nullified if the adjustment would violate 

the order’s limit. Similarly, under the 

current Rule, during the review period, 

a market maker who traded contra to the 

Customer would be uncertain if it 

should retain any position executed to 

hedge the original trade, or attempt to 

unwind it, possibly at a significant loss. 

Under the proposed rule change, this 

uncertainty is largely eliminated, and 

the question would be whether the 

already-executed and hedged trade 

would be adjusted to a better price for 

the Customer, or if it would stand as 

originally executed. In this way, the 

proposed rule enhances the protection 

of investors and removes impediments 

to and perfects the mechanism of a free 

and open market and a national market 

system. 

The proposed rule also addresses the 

concern the Exchange cited in its 2015 

filing that adjusting, rather than 

nullifying, Customer transactions could 

lead to a Customer’s order being 

adjusted to a significantly different 

price. To address that concern, the 

proposed rule would prevent Customer 

transactions from being adjusted to a 

price that violates the order’s limit; if 

the adjustment would violate a 

Customer’s limit, the trade would 

instead be nullified. The Exchange 

believes it is in the best interest of 

investors to expand the availability of 

adjustments to Customer transactions in 

all Obvious Error situations except 

where the adjustment would violate the 

Customer’s limit price. 

Further, the Exchange believes that, 

with respect to such proposed 

adjustments to Customer transactions, it 

is appropriate to use the same form of 

adjustment as is currently in place with 

respect to non-Customer transactions as 

laid out in the table in section (c)(4)(A). 

That is, the Exchange believes that it is 

appropriate to adjust to prices a 

specified amount away from the 

Theoretical Price rather than to adjust 

the Theoretical Price, even though the 

Exchange has determined a given trade 

to be erroneous in nature, because the 

parties in question should have had 

some expectation of execution at the 

price or prices submitted. Also, it is 

common that by the time it is 

determined that an Obvious Error has 

occurred, additional hedging and 

trading activity has already occurred 

based on the executions that previously 

happened. The Exchange believes that 

providing an adjustment to the 

Theoretical Price in all cases would not 

appropriately incentivize market 

participants to maintain appropriate 

controls to avoid potential errors, while 

adjusting to prices a specified amount 

away from the Theoretical Price would 

incentivize such behavior. 

The Exchange believes that the 

proposal is not designed to permit 

unfair discrimination between 

customers, issuers, brokers, or dealers. 

The proposed change to section (b)(3) 

would apply to all instances of a wide 

market occurring within the first 10 

seconds of trading followed by a narrow 

market at any point in the subsequent 

10-second period, regardless of the 

types of market participants involved in 

such transactions. The proposed change 

to section (c)(4)(B) would harmonize the 

treatment of Obvious Error transactions 

involving Customers and nonCustomers, no matter what type of 

market participants those parties may 

be. 

For these reasons, the Exchange 

believes that the proposal is consistent 

with the Act. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

The Exchange believes that the 

proposal will not impose any burden on 

competition that is not necessary or 

appropriate in furtherance of the 

purposes of Section 6(b)(8) of the Act.15

The Exchange anticipates that the other 

options exchanges will adopt 

substantively similar proposals, such 

that there would be no burden on 

intermarket competition from the 

Exchange’s proposal. Accordingly, the 

proposed change is not meant to affect 


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16 15 U.S.C. 78s(b)(3)(A). 

17 17 CFR 240.19b–4(f)(6). In addition, Rule 19b– 

4(f)(6) requires a self-regulatory organization to give 

the Commission written notice of its intent to file 

the proposed rule change at least five business days 

prior to the date of filing of the proposed rule 

change, or such shorter time as designated by the 

Commission. The Exchange has satisfied this 

requirement. 1817 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

competition among the options 

exchanges. For these reasons, the 

Exchange believes that the proposed 

rule change reflects this competitive 

environment and does not impose any 

undue burden on intermarket 

competition. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

Written comments were neither 

solicited nor received. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

Because the foregoing proposed rule 

change does not: (i) Significantly affect 

the protection of investors or the public 

interest; (ii) impose any significant 

burden on competition; and (iii) become 

operative for 30 days after the date of 

the filing, or such shorter time as the 

Commission may designate, it has 

become effective pursuant to 19(b)(3)(A) 

of the Act 16 and Rule 19b–4(f)(6) 17

thereunder. 

At any time within 60 days of the 

filing of the proposed rule change, the 

Commission summarily may 

temporarily suspend such rule change if 

it appears to the Commission that such 

action is necessary or appropriate in the 

public interest, for the protection of 

investors, or otherwise in furtherance of 

the purposes of the Act. If the 

Commission takes such action, the 

Commission shall institute proceedings 

to determine whether the proposed rule 

should be approved or disapproved. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views, and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 

Comments may be submitted by any of 

the following methods: 

Electronic Comments 

• Use the Commission’s internet 

comment form (http://www.sec.gov/ 

rules/sro.shtml); or 

• Send an email to rule-comments@

sec.gov. Please include File Number SR– 

EMERALD–2022–01 on the subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Vanessa Countryman, Secretary, 

Securities and Exchange Commission, 

100 F Street NE, Washington, DC 

20549–1090. 

All submissions should refer to File 

Number SR–EMERALD–2022–01. This 

file number should be included on the 

subject line if email is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

internet website (http://www.sec.gov/ 

rules/sro.shtml). Copies of the 

submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

provisions of 5 U.S.C. 552, will be 

available for website viewing and 

printing in the Commission’s Public 

Reference Room, 100 F Street NE, 

Washington, DC 20549, on official 

business days between the hours of 

10:00 a.m. and 3:00 p.m. Copies of the 

filing also will be available for 

inspection and copying at the principal 

office of the Exchange. All comments 

received will be posted without change. 

Persons submitting comments are 

cautioned that we do not redact or edit 

personal identifying information from 

comment submissions. You should 

submit only information that you wish 

to make available publicly. All 

submissions should refer to File 

Number SR–EMERALD–2022–01 and 

should be submitted on or before 

February 9, 2022. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.18

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2022–00875 Filed 1–18–22; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–93965; File No. SR– 

PEARL–2022–02] 

Self-Regulatory Organizations: Notice 

of Filing and Immediate Effectiveness 

of a Proposed Rule Change by MIAX 

PEARL, LLC To Amend Exchange Rule 

521, Nullification and Adjustment of 

Options Transactions Including 

Obvious Errors 

January 12, 2022. 

Pursuant to the provisions of Section 

19(b)(1) of the Securities Exchange Act 

of 1934 (‘‘Act’’) 1 and Rule 19b–4 

thereunder,2 notice is hereby given that 

on January 7, 2022 MIAX PEARL, LLC 

(‘‘MIAX Pearl’’ or the ‘‘Exchange’’) filed 

with the Securities and Exchange 

Commission (‘‘Commission’’) a 

proposed rule change as described in 

Items I, II, and III below, which Items 

have been prepared by the Exchange. 

The Commission is publishing this 

notice to solicit comments on the 

proposed rule change from interested 

persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange is filing a proposed rule 

to make a technical amendment to 

Exchange Rule 521, Nullification and 

Adjustment of Options Transactions 

Including Obvious Errors. 

The text of the proposed rule change 

is available on the Exchange’s website at 

http://www.miaxoptions.com/rulefilings/pearl at MIAX PEARL’s principal 

office, and at the Commission’s Public 

Reference Room. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, the 

Exchange included statements 

concerning the purpose of and basis for 

the proposed rule change and discussed 

any comments it received on the 

proposed rule change. The text of these 

statements may be examined at the 

places specified in Item IV below. The 

Exchange has prepared summaries, set 

forth in sections A, B, and C below, of 

the most significant aspects of such 

statements. 


jspears on DSK121TN23PROD with NOTICES1