[Federal Register Volume 87, Number 48 (Friday, March 11, 2022)]
[Notices]
[Pages 14051-14053]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-05145]



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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-94368; File No. SR-EMERALD-2022-09]


Self-Regulatory Organizations; MIAX Emerald, LLC; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend 
the MIAX Emerald Fee Schedule To Amend the Excessive Quoting Fee

March 7, 2022.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on February 24, 2022, MIAX Emerald, LLC (``MIAX Emerald'' or 
``Exchange''), filed with the Securities and Exchange Commission 
(``Commission'') a proposed rule change as described in Items I, II, 
and III below, which Items have been prepared by the Exchange. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange is filing a proposal to amend the MIAX Emerald Fee 
Schedule (the ``Fee Schedule'') to amend Section 1)c), Excessive 
Quoting Fee, to increase in the inbound quote limit.
    The text of the proposed rule change is available on the Exchange's 
website at http://www.miaxoptions.com/rule-filings/emerald, at MIAX's 
principal office, and at the Commission's Public Reference Room.

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

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

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

1. Purpose
    The Exchange proposes to amend Section 1)c), Excessive Quoting Fee, 
to increase the inbound quote limit for the Excessive Quoting Fee. The 
Exchange does not propose to amend the fee amount or how the quotes are 
counted. The proposed rule change is immediately effective as of 
February 24, 2022.
Background
    On February 22, 2021, the Exchange filed its proposal to amend the 
Fee Schedule to adopt the Excessive Quoting Fee.\3\ The Exchange 
adopted the Excessive Quoting Fee as a result of a significant upgrade 
to the MIAX Emerald System's \4\ network architecture, based on 
customer demand, which resulted in the Exchange's network environment 
becoming more transparent and deterministic. Pursuant to the Excessive 
Quoting Fee, the Exchange will assess a fee of $10,000 per day to any 
Market Maker \5\ that exceeds 2.5 billion inbound quotes \6\ sent to 
the Exchange on that particular day. In counting the total number of 
quotes for the purposes of the Excessive Quoting Fee, the Exchange 
excludes messages that are generated as a result of sending a mass 
purge message to the Exchange. The 2.5 billion inbound quote limit for 
the Excessive Quoting Fee resets each trading day.
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    \3\ See Securities Exchange Act Release No. 91406 (March 24, 
2021), 86 FR 16795 (March 31, 2021) (SR-EMERALD-2021-10) (Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To 
Amend the MIAX Emerald Fee Schedule To Adopt an Excessive Quoting 
Fee).
    \4\ The term ``System'' means the automated trading system used 
by the Exchange for the trading of securities. See Exchange Rule 
100.
    \5\ The term ``Market Maker'' refers to ``Lead Market Maker'' 
(``LMM''), ``Primary Lead Market Maker'' (``PLMM'') and ``Registered 
Market Maker'' (``RMM''), collectively. See the Definitions Section 
of the Fee Schedule and Exchange Rule 100.
    \6\ The term ``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 quotes 
and eQuotes, as more fully described in Rule 517. A Market Maker 
may, at times, choose to have multiple types of quotes active in an 
individual option. See the Definitions Section of the Fee Schedule.
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Proposal
    The Exchange now proposes to amend the Excessive Quoting Fee to 
increase the inbound quote limit before the Exchange will assess the 
Excessive Quoting Fee. In particular, the Exchange proposes to increase 
the inbound quote limit from 2.5 billion to 3.5 billion for inbound 
quotes sent to the Exchange on a particular trading day. In counting 
the total number of quotes for the purposes of the Excessive Quoting 
Fee, the Exchange will continue to exclude messages that are generated 
as a result of sending a mass purge message to the Exchange and the 
proposed 3.5 billion inbound quote limit will continue to reset each 
trading day.
    The purpose of the proposed change is to continue to ensure that 
Market Makers do not over utilize the Exchange's System by sending 
excessive quotes to the Exchange, to the detriment of all other Members 
of the Exchange, while balancing the interests of Market Makers sending 
quotes to the System in light of the recent significant increase in 
market volatility. Market Makers that send an excessive number of 
quotes to the Exchange on any particular day have the potential 
residual effect of exhausting System resources, bandwidth, and 
capacity. In turn, this may create latency and impact other Members' 
and non-Members' ability to send messages to the Exchange and receive 
timely executions. The Exchange believes that due to significant 
increases in market volatility, it is appropriate to increase the 
inbound quote limit for Market Markers.
    The Exchange's high performance network provides unparalleled 
system throughput and the capacity to handle approximately 38 million 
messages per second. On an average day, the Exchange handles over 
approximately 11 billion total messages. These billions of messages per 
day consume the Exchange's resources, particularly storage 
capabilities. The combination of (i) Member quoting behavior, (ii) 
increased volatility in the marketplace, and (iii) increased number of 
options products quoted on the Exchange has a significant impact on the 
total number of quotes sent each trading day, resulting in additional 
storage capacity. The Exchange believes this proposal will continue to 
reduce the potential for market participants to engage in excessive 
quoting behavior that would require the Exchange to increase its 
storage capacity and will encourage quotes to be made in good faith, 
while balancing the interests of Market Makers facing increased market 
volatility in recent days.
    Recognizing that orders and executions often occur in large 
numbers, the purpose of this proposal is to continue to focus on 
activity that is truly disproportionate while fairly allocating costs. 
The proposal

[[Page 14052]]

contemplates that a Market Maker would have to exceed the high 
threshold of 3.5 billion inbound quotes before that Market Maker would 
be charged the proposed fee on that particular trading day. The 
Exchange believes that it is in the interests of all Members and market 
participants who access the Exchange to not allow other market 
participants to exhaust System resources, but to encourage efficient 
usage of network capacity.
    The Exchange notes that this concept is not new or novel.\7\ The 
Exchange's proposal is not intended to raise revenue; rather, it is 
intended to encourage efficient quoting behavior so that market 
participants do not exhaust System resources while balancing the 
increase in quotes as a result of current market volatility.
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    \7\ See Securities Exchange Act Release No. 60117 (June 16, 
2009), 74 FR 30190 (June 24, 2009) (SR-AMEX-2009-25) (Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change Amending 
the Schedule of Fees and Charges for Exchange Services by Adding a 
Ratio Threshold Fee); 64655 (June 13, 2011), 76 FR 35495 (June 17, 
2011) (SR-AMEX-2011-37) (Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change Amending the NYSE Amex Options 
Fee Schedule To Establish a New Fee Designed To Encourage Efficient 
Use of Bandwidth by ATP Firms and To Rename a Related Existing Fee); 
53522 (March 20, 2006), 71 FR 14975 (March 24, 2006) (SR-ISE-2006-
09) (Notice of Filing and Immediate Effectiveness of Proposed Rule 
Change and Amendment No. 1 Thereto Relating to Session/API Fees); 
55941 (June 21, 2007), 72 FR 35535 (June 28, 2007) (SR-ISE-2007-36) 
(Notice of Filing and Immediate Effectiveness of a Proposed Rule 
Change as Modified by Amendment No. 1 Thereto Relating to API Fees); 
84963 (December 26, 2018), 84 FR 830 (January 31, 2019) (SR-CboeBZX-
2018-095) (Notice of Filing and Immediate Effectiveness of a 
Proposed Rule Change To Amend the BZX Equities Fee Schedule).
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    The Exchange believes the proposal will continue to protect the 
integrity of the MIAX Emerald market and benefit all market 
participants of MIAX Emerald by ensuring that the Exchange's System is 
not overloaded from excessive quotes being sent to it each day. The 
Exchange notes that it provides Market Makers with daily reports, free 
of charge, which detail their quoting activity in order for those firms 
to be fully aware of the number of quotes they are sending to the 
Exchange. This allows firms to monitor if their quoting behavior is 
approaching the proposed 3.5 billion inbound quote limit.
2. Statutory Basis
    The Exchange believes that its proposal to amend its Fee Schedule 
is consistent with Section 6(b) of the Act \8\ in general, and furthers 
the objectives of Section 6(b)(4) of the Act \9\ in particular, in that 
it is an equitable allocation of reasonable dues, fees, and other 
charges among its Members and issuers and other persons using its 
facilities. The Exchange also believes the proposal furthers the 
objectives of Section 6(b)(5) of the Act \10\ in that it is designed to 
promote just and equitable principles of trade, remove impediments to 
and perfect the mechanism of a free and open market and a national 
market system, and, in general protects investors and the public 
interest and is not designed to permit unfair discrimination between 
customers, issuers, brokers and dealers.
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    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(4).
    \10\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that its proposal is designed to promote just 
and equitable principles of trade, remove impediments to and perfect 
the mechanism of a free and open market and a national market system, 
and, in general to protect investors and the public interest and is not 
designed to permit unfair discrimination between customers, issuers, 
brokers and dealers because it will continue to encourage efficient 
utilization of the Exchange's highly deterministic and transparent 
network architecture. The Exchange also believes the proposal will 
balance the interests of Market Makers sending quotes to the Exchange 
in light of extreme market volatility. The Exchange believes that 
unfettered usage of System capacity and network resource consumption 
can have a detrimental effect on all market participants who are 
potentially compelled to send quote messages to the Exchange on an 
unlimited basis, to the detriment of all other market participants who 
access and use the Exchange. Further, the proposed increase to the 
inbound quote limit will apply equally to all Market Makers who send 
quotes to the Exchange in excess of 3.5 billion inbound quotes on any 
particular trading day.
    The Exchange believes that the proposal is not unfairly 
discriminatory due to the substantial quote limit that the proposal 
contemplates before the Excessive Quoting Fee is applied, as well as 
the normal Market Maker quote traffic that the Exchange has experienced 
since it began operations in March of 2019 and in light of recent 
extreme market volatility that has resulted in above average number of 
quotes being sent to the Exchange. The Exchange does not anticipate 
that any Market Maker will exceed the proposed 3.5 billion inbound 
quote limit and become subject to the proposed fee.
    The Exchange further believes that its proposal is reasonable, 
equitably allocated and not unfairly discriminatory because it is not 
intended to raise revenue for the Exchange; rather, it is intended to 
ensure that Market Makers are using their quoting methodologies in the 
most efficient manner possible in light of the Exchange's highly 
deterministic and transparent infrastructure and in light of the recent 
increase in market volatility, resulting in more quotes being sent to 
the Exchange. The Exchange believes that the proposed increased quote 
limit is reasonable, equitably allocated and not unfairly 
discriminatory because this proposal will continue to reduce the 
potential for market participants to engage in excessive quoting 
behavior that would require the Exchange to increase its storage 
capacity and will continue to encourage quotes to be made in good 
faith. The Exchange notes that other exchanges have implemented similar 
fees and capacity type-limits in order to deter their firms from over-
utilizing their trading systems and exhausting system resources, while 
encouraging the efficient usage of system resources.\11\
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    \11\ See supra note 7.
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    The Exchange therefore believes that the proposed increased inbound 
quote limit for the Excessive Quoting Fee appropriately reflects the 
benefits to different firms of being able to send quotes into the 
Exchange's System and facilitates the Commission's goal of ensuring 
that critical market infrastructure has ``levels of capacity, 
integrity, resiliency, availability, and security adequate to maintain 
their operational capability and promote the maintenance of fair and 
orderly markets.'' \12\
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    \12\ See Securities Exchange Act Release No. 73639 (November 19, 
2014), 79 FR 72251 (December 5, 2014) (File No. S7-01-13) 
(Regulation SCI Adopting Release).
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    The Exchange will continue to review the quoting behavior of all 
firms on a regular basis to ensure that the inbound quote limit remains 
significantly higher than the average firm quoting behavior, while 
taking into account varying market conditions. The Exchange will 
continue to regularly monitor prevailing market conditions to ensure 
that the inbound quote limit is sufficiently flexible and could not 
inadvertently result in higher than anticipated fees being charged to 
firms that are providing liquidity in volatile, high volume markets. 
The Exchange does not want to discourage such liquidity provision and 
believes that it should be able to adjust the inbound quote limit on a 
monthly basis if need be.

[[Page 14053]]

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

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act.
Intra-Market Competition
    The Exchange believes that the proposal does not put any market 
participants at a relative disadvantage compared to other market 
participants because the proposed increased quote limit will apply 
equally to all Market Makers who send quotes to the Exchange in excess 
of 3.5 billion inbound quotes on any particular trading day. The 
Exchange also believes that the proposed change neither favors nor 
penalizes one or more categories of market participants in a manner 
that would impose an undue burden on competition. Rather, the proposal 
seeks to benefit all market participants by encouraging the efficient 
utilization of the Exchange's highly deterministic and transparent 
network architecture while taking into account increased market 
volatility that may impact the number of quotes being sent to the 
Exchange by Market Makers. The Exchange does not anticipate that any 
Market Maker will exceed the proposed 3.5 billion inbound quote limit 
and become subject to the proposed fee. Accordingly, the Exchange 
believes that the proposed Excessive Quoting Fee does not favor certain 
categories of market participants in a manner that would impose a 
burden on competition.
Inter-Market Competition
    The Exchange believes the proposal does not place an undue burden 
on competition on other self-regulatory organizations that is not 
necessary or appropriate because of the availability of numerous 
substitute options exchanges. There are 15 other options exchanges 
where market participants can become members and send quotes if they 
deem the 3.5 billion inbound quote limit to be too restrictive for 
their quoting behavior. In addition, the Exchange does not believe the 
proposal will impose any burden on inter-market competition as the 
proposal does not address any competitive issues; rather, it is 
intended to protect all market participants of MIAX Emerald by ensuring 
that the Exchange's System is not overloaded from excessive quotes 
being sent to it each day.

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

    Written comments were neither solicited nor received.

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

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A)(ii) of the Act,\13\ and Rule 19b-4(f)(2) \14\ thereunder. 
At any time within 60 days of the filing of the proposed rule change, 
the Commission summarily may temporarily suspend such rule change if it 
appears to the Commission that such action is necessary or appropriate 
in the public interest, for the protection of investors, or otherwise 
in furtherance of the purposes of the Act. If the Commission takes such 
action, the Commission shall institute proceedings to determine whether 
the proposed rule should be approved or disapproved.
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    \13\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \14\ 17 CFR 240.19b-4(f)(2).
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

    <bullet> Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
    <bullet> Send an email to <a href="/cdn-cgi/l/email-protection#4d3f382128602e2220202823393e0d3e282e632a223b"><span class="__cf_email__" data-cfemail="2351564f460e404c4e4e464d5750635046400d444c55">[email protected]</span></a>. Please include 
File Number SR-EMERALD-2022-09 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-EMERALD-2022-09. 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-2022-09 and should be submitted 
on or before April 1, 2022.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-05145 Filed 3-10-22; 8:45 am]
BILLING CODE 8011-01-P


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