[Federal Register Volume 86, Number 168 (Thursday, September 2, 2021)]
[Notices]
[Pages 49384-49386]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-18944]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-92792; File Nos. SR-MIAX-2021-29, SR-EMERALD-2021-22, 
SR-PEARL-2021-30]


Self-Regulatory Organizations; Miami International Securities 
Exchange, LLC, MIAX Emerald, LLC, and MIAX PEARL, LLC; Suspension of 
and Order Instituting Proceedings To Determine Whether To Approve or 
Disapprove Proposed Rule Changes To Amend Fees for Purge Ports

August 27, 2021.

I. Introduction

    On July 1, 2021, Miami International Securities Exchange, LLC 
(``MIAX''), MIAX Emerald, LLC (``MIAX Emerald), and MIAX PEARL, LLC 
(``MIAX Pearl'') (each an ``Exchange;'' collectively, the 
``Exchanges'') each filed with the Securities and Exchange Commission 
(``Commission'') pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a 
proposed rule change to increase fees for purge ports. Each proposed 
rule change was immediately effective upon filing with the Commission 
pursuant to Section 19(b)(3)(A) of the Act.\3\ The proposed rule 
changes were published for comment in the Federal Register on July 15, 
2021.\4\ The Commission has received comment on the proposals.\5\ 
Pursuant to Section 19(b)(3)(C) of the Act,\6\ the Commission is 
hereby: (1) Temporarily suspending File Nos. SR-MIAX-2021-29, SR-
EMERALD-2021-22, and SR-PEARL-2021-30; and (2) instituting proceedings 
to determine whether to approve or disapprove File Nos. SR-MIAX-2021-
29, SR-EMERALD-2021-22, and SR-PEARL-2021-30.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A). A proposed rule change may take 
effect upon filing with the Commission if it is designated by the 
exchange as ``establishing or changing a due, fee, or other charge 
imposed by the self-regulatory organization on any person, whether 
or not the person is a member of the self-regulatory organization.'' 
15 U.S.C. 78s(b)(3)(A)(ii).
    \4\ See Securities Exchange Act Release Nos. 92364 (July 9, 
2021), 86 FR 37364 (July 15, 2021) (SR-MIAX-2021-29) (``MIAX 
Notice''); 92360 (July 9, 2021), 86 FR 37373 (July 15, 2021) (SR-
EMERALD-2021-22) (``MIAX Emerald Notice''); 92363 (July 9, 2021), 86 
FR 37376 (July 15, 2021) (SR-PEARL-2021-30) (``MIAX Pearl Notice''). 
For ease of reference, citations to statements generally applicable 
to all three notices are to the MIAX Notice.
    \5\ Comment on the proposed rule changes can be found at: 
https://www.sec.gov/comments/sr-miax-2021-29/srmiax202129.htm; 
https://www.sec.gov/comments/sr-emerald-2021-22/sremerald202122.htm; 
https://www.sec.gov/comments/sr-pearl-2021-30/srpearl202130.htm.
    \6\ 15 U.S.C. 78s(b)(3)(C).
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II. Description of the Proposed Rule Changes

    Each Exchange currently provides certain of its members the option 
to purchase purge ports to assist in their quoting activity.\7\ Purge 
ports provide the ability to send quote purge messages to an Exchange's 
system.\8\ Each Exchange offers purge ports as a package; a member has 
the option to receive up to two purge ports per matching engine to 
which it connects.\9\ MIAX has 24 matching engines, and thus a member 
may receive up to 48 purge ports on MIAX.\10\ MIAX Emerald and MIAX 
Pearl each have 12 matching engines, and thus a member may receive up 
to 24 purge ports on these Exchanges.\11\
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    \7\ See, e.g., MIAX Notice, supra note 4, at 37365.
    \8\ See MIAX Options Fee Schedule, Section (5)(d)(ii), footnote 
30; MIAX Emerald Options Fee Schedule, Section (5)(d)(ii); MIAX 
Pearl Options Fee Schedule, Definitions Section.
    \9\ See, e.g., MIAX Notice, supra note 4, at 37365.
    \10\ See MIAX Notice, supra note 4, at 37365.
    \11\ See MIAX Emerald Notice, supra note 4, at 37374; MIAX Pearl 
Notice, supra note 4, at 37377.
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    MIAX and MIAX Emerald previously charged a flat fee of $1,500 per 
month for purge ports, and MIAX Pearl previously charged a flat fee of 
$750 per month for purge ports, regardless of the number of matching 
engines to which a member connected and consequently regardless of the 
number of purge ports allocated to the member. Each Exchange proposes 
to increase the flat monthly fee to $7,500.

III. Suspension of the Proposed Rule Changes

    Pursuant to Section 19(b)(3)(C) of the Act,\12\ at any time within 
60 days of the date of filing of an immediately effective proposed rule 
change pursuant to Section 19(b)(1) of the Act,\13\ the Commission 
summarily may temporarily suspend the change in the rules of a self-
regulatory organization (``SRO'') 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. As described below, the Commission believes a temporary 
suspension of the proposed rule changes is necessary and appropriate to 
allow for additional analysis of the proposed rule changes' consistency 
with the Act and the rules thereunder.
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    \12\ 15 U.S.C. 78s(b)(3)(C).
    \13\ 15 U.S.C. 78s(b)(1).
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    When an exchange files a proposed rule change with the Commission, 
including fee filings, it is required to provide a statement supporting 
the proposal's basis under the Act and the rules and regulations 
thereunder applicable to the exchange.\14\ The instructions to Form 
19b-4, on which exchanges file their proposed rule changes, specify 
that such statement ``should be sufficiently detailed and specific to 
support a finding that the proposed rule change is consistent with 
[those] requirements.'' \15\
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    \14\ See 17 CFR 240.19b-4 (General Instructions for Form 19b-4--
Information to be Included in the Complete Form--Item 3 entitled 
``Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change'').
    \15\ See id.
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    Section 6 of the Act, including Sections 6(b)(4), (5), and (8), 
requires, among other things, that the rules of an exchange: (1) 
Provide for the equitable allocation of reasonable fees among members, 
issuers, and other persons using the exchange's facilities; \16\ (2) be 
designed to perfect the mechanism of a free and open market and a 
national market system and to protect investors and the public 
interest, and not be designed to permit unfair discrimination between 
customers, issuers, brokers, or dealers; \17\ and (3) not impose any 
burden on competition

[[Page 49385]]

not necessary or appropriate in furtherance of the purposes of the 
Act.\18\
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    \16\ 15 U.S.C. 78f(b)(4).
    \17\ 15 U.S.C. 78f(b)(5).
    \18\ 15 U.S.C. 78f(b)(8).
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    In support of their proposals, the Exchanges state that the use of 
purge ports is completely optional, and no options market participant 
is required by rule, regulation, or competitive forces to use them.\19\ 
The Exchanges explain that members can use other protocols to purge or 
cancel messages, and that purge ports were designed as an optional 
service to enable firms to manage their quoting risk and meet their 
heightened quoting obligations.\20\ The Exchanges state that they are 
not aware of any reason why a market participant could not simply drop 
its purge ports if the Exchanges were to establish unreasonable prices 
for purge ports that, in the determination of such market participant, 
did not make business or economic sense for such participant.\21\
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    \19\ See, e.g., MIAX Notice, supra note 4, at 37365-66.
    \20\ See id. at 37366.
    \21\ See id.
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    The Exchanges also state that they operate in a highly competitive 
environment, and if an exchange sets non-transaction fees that are too 
high for its relevant marketplace, market participants can choose to no 
longer access that particular exchange.\22\
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    \22\ See id. at 37365-66.
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    The Exchanges further state that the increased monthly flat fee for 
purge ports is competitive with fees charged by other exchanges that 
offer comparable purge port services.\23\ The Exchanges state that they 
have historically undercharged for purge ports as compared to other 
exchanges, and that the proposed monthly fee increase would bring the 
Exchanges' fees more in line with that of other options exchanges.\24\ 
The Exchanges argue that, when calculated on a per purge port basis, 
other exchanges charge higher monthly fees. MIAX states that, assuming 
a member receives 48 purge ports (two per each of its 24 matching 
engines), this results in a cost of $156.25 per purge port ($7,500 
divided by 48).\25\ MIAX Emerald and MIAX Pearl state that, assuming a 
member receives 24 purge ports (two per each of their 12 matching 
engines), this results in a cost of $312.50 per purge port ($7,500 
divided by 24).\26\ The Exchanges state that Cboe BZX Exchange, Inc. 
(``BZX''), Cboe EDGX Exchange, Inc. (``EDGX''), Cboe Exchange, Inc. 
(``Cboe''), and Nasdaq GEMX, LLC (``GEMX'') charge higher monthly per 
purge port fees of $750, $750, $850, and $1,250, respectively.\27\
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    \23\ See id. at 37365.
    \24\ See id.
    \25\ See MIAX Notice, supra note 4, at 37365.
    \26\ See MIAX Emerald Notice, supra note 4, at 37374; MIAX Pearl 
Notice, supra note 4, at 37377.
    \27\ See, e.g., MIAX Notice, supra note 4, at 37365.
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    The one comment letter received to date challenges several of the 
Exchanges' assertions.\28\ The commenter states that the Exchanges' 
argument that the proposed $7,500 monthly fee is lower on a per purge 
port basis than the fees assessed by other exchanges (BZX, EDGX, Cboe, 
GEMX) is disingenuous, because each of these other exchanges has one 
matching engine, and thus market participants require only two purge 
ports on each of these exchanges, resulting in significantly lower fees 
when calculated on a monthly basis.\29\ The commenter also states that 
the Exchanges' argument that purge ports are optional functionality, 
which members are free to drop if priced too high, is without 
merit.\30\ The commenter asserts that the Exchanges know that market 
makers have no choice but to absorb these fees so as not to imperil 
their business with stale quotes.\31\ The commenter further states that 
the Exchanges did not provide any justification for the fee increase 
itself; and that the Exchanges likely cannot assert that the cost of 
maintaining purge ports has increased at all, let alone five-fold.\32\
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    \28\ See letter from Brian Sopinsky, General Counsel, 
Susquehanna International Group, LLP, dated August 5, 2021 (``SIG 
Letter'').
    \29\ See SIG Letter, supra note 28, at 2.
    \30\ See id.
    \31\ See id.
    \32\ See id.
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    In temporarily suspending the Exchanges' proposed rule changes, the 
Commission intends to further consider whether the proposed purge port 
fees are consistent with the statutory requirements applicable to a 
national securities exchange under the Act. In particular, the 
Commission will consider whether the proposed rule changes satisfy the 
standards under the Act and the rules thereunder requiring, among other 
things, that an exchange's rules provide for the equitable allocation 
of reasonable fees among members, issuers, and other persons using its 
facilities; are designed to perfect the mechanism of a free and open 
market and a national market system and to protect investors and the 
public interest, and are not designed to permit unfair discrimination 
between customers, issuers, brokers, or dealers; and do not impose any 
burden on competition not necessary or appropriate in furtherance of 
the purposes of the Act.\33\
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    \33\ See 15 U.S.C. 78f(b)(4), (5), and (8), respectively.
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    Therefore, the Commission finds that it is appropriate in the 
public interest, for the protection of investors, and otherwise in 
furtherance of the purposes of the Act, to temporarily suspend the 
proposed rule changes.\34\
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    \34\ For purposes of temporarily suspending the proposed rule 
changes, the Commission has considered the proposed rules' impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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IV. Proceedings To Determine Whether To Approve or Disapprove the 
Proposed Rule Changes

    In addition to temporarily suspending the proposal, the Commission 
also hereby institutes proceedings pursuant to Sections 19(b)(3)(C) 
\35\ and 19(b)(2)(B) of the Act \36\ to determine whether the 
Exchanges' proposed rule changes should be approved or disapproved. 
Institution of proceedings does not indicate that the Commission has 
reached any conclusions with respect to any of the issues involved. 
Rather, the Commission seeks and encourages interested persons to 
provide additional comment on the proposed rule changes to inform the 
Commission's analysis of whether to approve or disapprove the proposed 
rule changes.
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    \35\ 15 U.S.C. 78s(b)(3)(C). Once the Commission temporarily 
suspends a proposed rule change, Section 19(b)(3)(C) of the Act 
requires that the Commission institute proceedings under Section 
19(b)(2)(B) to determine whether a proposed rule change should be 
approved or disapproved.
    \36\ 15 U.S.C. 78s(b)(2)(B).
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    Pursuant to Section 19(b)(2)(B) of the Act,\37\ the Commission is 
providing notice of the grounds for possible disapproval under 
consideration:
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    \37\ 15 U.S.C. 78s(b)(2)(B). Section 19(b)(2)(B) of the Act also 
provides that proceedings to determine whether to disapprove a 
proposed rule change must be concluded within 180 days of the date 
of publication of notice of the filing of the proposed rule change. 
See id. The time for conclusion of the proceedings may be extended 
for up to 60 days if the Commission finds good cause for such 
extension and publishes its reasons for so finding, or if the 
exchange consents to the longer period. See id.
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    <bullet> Whether the Exchanges have demonstrated how the proposed 
fees are consistent with Section 6(b)(4) of the Act, which requires 
that the rules of a national securities exchange ``provide for the 
equitable allocation of reasonable dues, fees, and other charges among 
its members and issuers and other persons using its facilities''; \38\
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    \38\ 15 U.S.C. 78f(b)(4).
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    <bullet> Whether the Exchanges have demonstrated how the proposed 
fees are consistent with Section 6(b)(5) of the Act, which requires, 
among other things, that the rules of a national securities exchange be 
designed to ``perfect the mechanism of a free and open market and a 
national market

[[Page 49386]]

system'' and ``protect investors and the public interest,'' and not be 
``designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers''; \39\ and
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    \39\ 15 U.S.C. 78f(b)(5).
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    <bullet> Whether the Exchanges have demonstrated how the proposed 
fees are consistent with Section 6(b)(8) of the Act, which requires 
that the rules of a national securities exchange ``not impose any 
burden on competition not necessary or appropriate in furtherance of 
the purposes of [the Act].'' \40\
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    \40\ 15 U.S.C. 78f(b)(8).
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    As discussed in Section III above, the Exchanges made various 
arguments in support of the proposal, and the Commission received 
comment disputing the Exchanges' arguments and expressing concerns 
regarding the proposal.\41\ In particular, the commenter argues that 
the Exchanges did not provide sufficient information to establish that 
the proposed fees are consistent with the Act and the rules 
thereunder.\42\
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    \41\ See SIG Letter, supra note 28.
    \42\ See id. at 2.
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    Under the Commission's Rules of Practice, the ``burden to 
demonstrate that a proposed rule change is consistent with the [Act] 
and the rules and regulations issued thereunder . . . is on the [SRO] 
that proposed the rule change.'' \43\ The description of a proposed 
rule change, its purpose and operation, its effect, and a legal 
analysis of its consistency with applicable requirements must all be 
sufficiently detailed and specific to support an affirmative Commission 
finding,\44\ and any failure of an SRO to provide this information may 
result in the Commission not having a sufficient basis to make an 
affirmative finding that a proposed rule change is consistent with the 
Act and the applicable rules and regulations.\45\
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    \43\ 17 CFR 201.700(b)(3).
    \44\ See id.
    \45\ See id.
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    The Commission is instituting proceedings to allow for additional 
consideration and comment on the issues raised herein, including as to 
whether the proposal is consistent with the Act, and specifically, with 
its requirements that the rules of a national securities exchange 
provide for the equitable allocation of reasonable dues, fees, and 
other charges among its members, issuers, and other persons using its 
facilities; are designed to perfect the mechanism of a free and open 
market and a national market system, and to protect investors and the 
public interest; are not designed to permit unfair discrimination 
between customers, issuers, brokers, or dealers; and do not impose a 
burden on competition not necessary or appropriate in furtherance of 
the purposes of the Act; \46\ as well as any other provision of the 
Act, or the rules and regulations thereunder.
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    \46\ See 15 U.S.C. 78f(b)(4), (5), and (8).
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V. Commission's Solicitation of Comments

    The Commission requests written views, data, and arguments with 
respect to the concerns identified above as well as any other relevant 
concerns. Such comments should be submitted by September 23, 2021. 
Rebuttal comments should be submitted by October 7, 2021. Although 
there do not appear to be any issues relevant to approval or 
disapproval that would be facilitated by an oral presentation of views, 
data, and arguments, the Commission will consider, pursuant to Rule 
19b-4, any request for an opportunity to make an oral presentation.\47\
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    \47\ 15 U.S.C. 78s(b)(2). Section 19(b)(2) of the Act grants the 
Commission flexibility to determine what type of proceeding--either 
oral or notice and opportunity for written comments--is appropriate 
for consideration of a particular proposal by an SRO. See Securities 
Acts Amendments of 1975, Report of the Senate Committee on Banking, 
Housing and Urban Affairs to Accompany S. 249, S. Rep. No. 75, 94th 
Cong., 1st Sess. 30 (1975).
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    The Commission asks that commenters address the sufficiency and 
merit of the Exchanges' statements in support of the proposals, in 
addition to any other comments they may wish to submit about the 
proposed rule changes.
    Interested persons are invited to submit written data, views, and 
arguments concerning the proposed rule changes, including whether the 
proposed rule changes are 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#93e1e6fff6bef0fcfefef6fde7e0d3e0f6f0bdf4fce5"><span class="__cf_email__" data-cfemail="d5a7a0b9b0f8b6bab8b8b0bba1a695a6b0b6fbb2baa3">[email protected]</span></a>. Please include 
File Nos. SR-MIAX-2021-29, SR-EMERALD-2021-22, and SR-PEARL-2021-30 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 Nos. SR-MIAX-2021-29, SR-EMERALD-
2021-22, and SR-PEARL-2021-30. These file numbers 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 changes that are filed with the Commission, and all 
written communications relating to the proposed rule changes 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 Exchanges. 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 Nos. SR-MIAX-
2021-29, SR-EMERALD-2021-22, and SR-PEARL-2021-30 and should be 
submitted on or before September 23, 2021. Rebuttal comments should be 
submitted by October 7, 2021.

VI. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(3)(C) of the 
Act,\48\ that File Nos. SR-MIAX-2021-29, SR-EMERALD-2021-22, and SR-
PEARL-2021-30 be, and hereby are, temporarily suspended. In addition, 
the Commission is instituting proceedings to determine whether the 
proposed rule changes should be approved or disapproved.
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    \48\ 15 U.S.C. 78s(b)(3)(C).
    \49\ 17 CFR 200.30-3(a)(57) and (58).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\49\
Vanessa A. Countryman,
Secretary.
[FR Doc. 2021-18944 Filed 9-1-21; 8:45 am]
BILLING CODE 8011-01-P


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