[Federal Register Volume 87, Number 53 (Friday, March 18, 2022)]
[Notices]
[Pages 15460-15464]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-05699]


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SECURITIES AND EXCHANGE COMMISSION

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


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

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

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[[Page 15461]]

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

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

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

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

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

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

1. Purpose
    The Exchange proposes to amend Section 1)a)i) of the Fee Schedule 
to amend the Simple Maker (defined below) rebates in Tier 4 for options 
transactions in Penny Classes and non-Penny Classes (defined below) for 
executed Priority Customer \3\ orders when the contra is an Affiliated 
\4\ Market Maker.\5\
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    \3\ ``Priority Customer'' means a person or entity that (i) is 
not a broker or dealer in securities, and (ii) does not place more 
than 390 orders in listed options per day on average during a 
calendar month for its own beneficial account(s). See Exchange Rule 
100, including Interpretation and Policy .01.
    \4\ ``Affiliate'' means (i) an affiliate of a Member of at least 
75% common ownership between the firms as reflected on each firm's 
Form BD, Schedule A, or (ii) the Appointed Market Maker of an 
Appointed EEM (or, conversely, the Appointed EEM of an Appointed 
Market Maker). An ``Appointed Market Maker'' is a MIAX Emerald 
Market Maker (who does not otherwise have a corporate affiliation 
based upon common ownership with an EEM) that has been appointed by 
an EEM and an ``Appointed EEM'' is an EEM (who does not otherwise 
have a corporate affiliation based upon common ownership with a MIAX 
Emerald Market Maker) that has been appointed by a MIAX Emerald 
Market Maker, pursuant to the following process. A MIAX Emerald 
Market Maker appoints an EEM and an EEM appoints a MIAX Emerald 
Market Maker, for the purposes of the Fee Schedule, by each 
completing and sending an executed Volume Aggregation Request Form 
by email to <a href="/cdn-cgi/l/email-protection#84e9e1e9e6e1f6f7ecedf4c4e9ede5fcebf4f0edebeaf7aae7ebe9"><span class="__cf_email__" data-cfemail="ff929a929d9a8d8c97968fbf92969e87908f8b9690918cd19c9092">[email protected]</span></a> no later than 2 business days 
prior to the first business day of the month in which the 
designation is to become effective. Transmittal of a validly 
completed and executed form to the Exchange along with the 
Exchange's acknowledgement of the effective designation to each of 
the Market Maker and EEM will be viewed as acceptance of the 
appointment. The Exchange will only recognize one designation per 
Member. A Member may make a designation not more than once every 12 
months (from the date of its most recent designation), which 
designation shall remain in effect unless or until the Exchange 
receives written notice submitted 2 business days prior to the first 
business day of the month from either Member indicating that the 
appointment has been terminated. Designations will become operative 
on the first business day of the effective month and may not be 
terminated prior to the end of the month. Execution data and reports 
will be provided to both parties. See the Definitions Section of the 
Fee Schedule.
    \5\ ``Market Maker'' refers to ``Lead Market Maker'' (``LMM''), 
``Primary Lead Market Maker'' (``PLMM'') and ``Registered Market 
Maker'' (``RMM''), collectively. See the Definitions Section of the 
Fee Schedule and Exchange Rule 100.
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Background
    The Exchange currently assesses transaction rebates and fees to all 
market participants, which are based upon a threshold tier structure 
(``Tier''). Tiers are determined on a monthly basis and are based on 
three alternative calculation methods, as defined in Section 1)a)ii) of 
the Fee Schedule. The calculation method that results in the highest 
Tier achieved by the Member \6\ shall apply to all Origin types by the 
Member, except the Priority Customer Origin type. For the Priority 
Customer Origin calculation, the Tier applied for a Member and its 
Affiliates' is solely determined by calculation Method 3, as defined in 
Section 1)a)ii) of the Fee Schedule, titled ``Total Priority Customer, 
Maker sides volume, based on % of CTCV (`Method 3').'' The monthly 
volume thresholds for each of the methods, associated with each Tier, 
are calculated as the total monthly volume executed by the Member in 
all options classes on MIAX Emerald in the relevant Origins and/or 
applicable liquidity, not including Excluded Contracts,\7\ (as the 
numerator) expressed as a percentage of (divided by) Customer Total 
Consolidated Volume (``CTCV'') (as the denominator). CTCV is calculated 
as the total national volume cleared at The Options Clearing 
Corporation (``OCC'') in the Customer range in those classes listed on 
MIAX Emerald for the month for which fees apply, excluding volume 
cleared at the OCC in the Customer range executed during the period of 
time in which the Exchange experiences an ``Exchange System 
Disruption'' \8\ (solely in the option classes of the affected Matching 
Engine).\9\ In addition, the per contract transaction rebates and fees 
shall be applied retroactively to all eligible volume once the Tier has 
been reached by the Member. Members that place resting liquidity, i.e., 
orders on the MIAX Emerald System, will be assessed the specified 
``maker'' rebate or fee (each a ``Maker'') and Members that execute 
against resting liquidity will be assessed the specified ``taker'' fee 
or rebate (each a ``Taker'').\10\ Members are also assessed lower 
transaction fees and smaller rebates for order executions in standard 
option classes in the Penny Interval Program \11\ (``Penny Classes'') 
than for order executions in standard option classes which are not in 
the Penny Program (``non-Penny Classes''), for which Members will be 
assessed a higher transaction fees and larger rebates.
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    \6\ ``Member'' means an individual or organization approved to 
exercise the trading rights associated with a Trading Permit. 
Members are deemed ``members'' under the Exchange Act. See the 
Definitions Section of the Fee Schedule and Exchange Rule 100.
    \7\ ``Excluded Contracts'' means any contracts routed to an away 
market for execution. See the Definitions Section of the Fee 
Schedule.
    \8\ The term ``Exchange System Disruption'' means an outage of a 
Matching Engine or collective Matching Engines for a period of two 
consecutive hour or more, during trading hours. See the Definitions 
Section of the Fee Schedule.
    \9\ A ``Matching Engine'' is a part of the MIAX Emerald 
electronic system that processes options orders and trades on a 
symbol-by-symbol basis. See the Definitions Section of the Fee 
Schedule.
    \10\ For a Priority Customer complex order taking liquidity in 
both a Penny class and non-Penny class against Origins other than 
Priority Customer, the Priority Customer order will receive a rebate 
based on the Tier achieved.
    \11\ See Securities Exchange Act Release No. 88993 (June 2, 
2020), 85 FR 35145 (June 8, 2020) (SR-EMERALD-2020-05) (Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To 
Amend Exchange Rule 510, Minimum Price Variations and Minimum 
Trading Increments, To Conform the Rule to Section 3.1 of the Plan 
for the Purpose of Developing and Implementing Procedures Designed 
To Facilitate the Listing and Trading of Standardized Options) (the 
``Penny Program'').

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[[Page 15462]]

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

[[Page 15463]]

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

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

    Written comments were neither solicited nor received.

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

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A)(ii) of the Act,\27\ and Rule 19b-4(f)(2) \28\ thereunder. 
At any time within 60 days of the filing of the proposed rule change, 
the Commission summarily may temporarily suspend such rule change if it 
appears to the Commission that such action is necessary or appropriate 
in the public interest, for the protection of investors, or otherwise 
in furtherance of the purposes of the Act. If the Commission takes such 
action, the Commission shall institute proceedings to determine whether 
the proposed rule should be approved or disapproved.
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    \27\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \28\ 17 CFR 240.19b-4(f)(2).
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IV. Solicitation of Comments

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

Electronic Comments

    <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#0a787f666f27696567676f647e794a796f69246d657c"><span class="__cf_email__" data-cfemail="d8aaadb4bdf5bbb7b5b5bdb6acab98abbdbbf6bfb7ae">[email protected]</span></a>. Please include 
File Number SR-EMERALD-2022-10 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-2022-10. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (http://www.sec.gov/rules/sro.shtml). 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for website viewing and printing in 
the Commission's Public

[[Page 15464]]

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

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


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