Document ID: SEC-2019-0720-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: MIAX Emerald, LLC
Posted Date: 2019-05-28T04:00Z

[Federal Register Volume 84, Number 102 (Tuesday, May 28, 2019)]
[Notices]
[Pages 24587-24589]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-10985]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-85909; File No. SR-EMERALD-2019-21]

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

May 21, 2019.

    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 May 8, 2019, 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'').
    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.

[[Page 24588]]

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

1. Purpose
    The Exchange proposes to adopt Section (1)(a)vi to the Fee Schedule 
to adopt a stock handling fee for stock-option orders (including stock-
option eQuotes \3\) executed against other stock-option orders in the 
complex order book, which the Exchange must route to an outside venue.
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    \3\ An eQuote is a quote with a specific time in force that does 
not automatically cancel and replace a previous Standard quote or 
eQuote. An eQuote can be cancelled by the Market Maker at any time, 
or can be replaced by another eQuote that contains specific 
instructions to cancel an existing eQuote. See Exchange Rule 
517(a)(2).
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    The Exchange originally adopted Exchange Rule 518, Complex Orders, 
to implement trading on the Exchange in complex orders in an identical 
fashion, and with an identical rule, as the Exchange's affiliate, Miami 
International Securities Exchange, LLC (``MIAX).\4\ MIAX Emerald Rules, 
in their current form, were filed as Exhibit B to its Form 1 on August 
16, 2018. At that time, stock-option orders as described in MIAX Rule 
518 were being implemented on MIAX and MIAX Rule 518 was undergoing 
revisions to support the implementation and trading of stock-option 
orders, therefore the revised MIAX Rule 518 \5\ was not included in 
MIAX Emerald's Form 1 filing. In connection with the implementation by 
MIAX of stock-option orders, MIAX also adopted a stock handling fee for 
stock-option orders (including stock-option eQuotes) executed against 
other stock-option orders in the complex order book, which MIAX must 
route to an outside venue.\6\ MIAX Emerald recently amended Exchange 
Rule 518, Complex Orders, to update its rule text regarding the 
handling of stock-option orders, in connection with the upcoming launch 
of such orders on the Exchange.\7\
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    \4\ See Exchange Rule 518.
    \5\ See Securities Exchange Act Release No. 83726 (July 27, 
2018), 83 FR 37849 (August 2, 2018) (SR-MIAX-2018-16).
    \6\ See Securities Exchange Act Release No. 83788 (August 7, 
2018), 83 FR 40110 (August 13, 2018) (SR-MIAX-2018-18).
    \7\ See Securities Exchange Act Release No. 85345 (March 18, 
2019), 84 FR 10848 (March 22, 2019) (SR-EMERALD-2019-13).
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    The Exchange proposes to adopt a stock handling fee of $0.0010 per 
share for the stock leg of stock-option orders executed against other 
stock-option orders in the complex order book, which are routed to an 
outside venue. This stock handling fee to be assessed by the Exchange 
will cover all fees charged by the outside venue that prints the trade, 
and it is also intended to compensate the Exchange for matching these 
stock-option orders against other stock-option orders on the complex 
order book. A maximum of $50 per order, per day, per Member, will be 
assessed under this fee. The cap is intended to give market 
participants assurance that they will not pay more than the capped 
amount for the execution of the stock leg of their stock-option orders. 
The Exchange believes that by limiting this fee to a maximum of $50 per 
order, per day, the Exchange addresses the possibility that a Good `Til 
Cancelled (``GTC'') \8\ order could be executed over multiple days. For 
example, if such an order was partially-executed on a Monday, and then 
the remainder was fully-executed on a Tuesday, the total maximum fee 
charged to the market participant would be $100 ($50 per day). In 
addition to the Exchange's fee, the Exchange will also pass through to 
the Member any fees assessed by the routing broker-dealer utilized by 
the Exchange with respect to the execution of the stock leg of any such 
order (with such fees to be passed through at cost). For example, the 
Exchange anticipates that the routing broker-dealer will bill the 
Exchange for Section 31 fees and FINRA Trading Activity Fees with 
respect to the execution of the stock leg of any such order. The 
Exchange will pass such fees through to the Member, at cost (that is, 
without any additional mark-up).
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    \8\ A Good `til Cancelled or ``GTC'' Order is an order to buy or 
sell which remains in effect until it is either executed, cancelled 
or the underlying option expires. See Exchange Rule 516(l).
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    The proposed stock-option handling fee is similar to the stock 
handling fee charged by the Exchange's affiliate, MIAX.\9\
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    \9\ See supra note 6.
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2. Statutory Basis
    The Exchange believes that its proposal to amend its Fee Schedule 
is consistent with Section 6(b) of the Act \10\ in general, and 
furthers the objectives of Section 6(b)(4) of the Act \11\ in 
particular, in that it is an equitable allocation of reasonable 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 in that it is designed to 
promote just and equitable principles of trade, to remove impediments 
to and perfect the mechanism of a free and open market and a national 
market system, and, in general to protect investors and the public 
interest and is not designed to permit unfair discrimination between 
customers, issuers, brokers and dealers.
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    \10\ 15 U.S.C. 78f(b).
    \11\ 15 U.S.C. 78f(b)(4) and (5).
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    The Exchange believes that the proposed stock handling fee for 
stock-option orders (including stock-option eQuotes) is consistent with 
Section 6(b)(4) of the Act in that it is reasonable, equitable and not 
unfairly discriminatory. The Exchange believes the proposed stock 
handling fee for stock-option orders is reasonable and equitable as the 
proposed fee will cover the costs of developing and maintaining the 
systems that allow for the matching and processing of the stock legs of 
stock-option orders executed in the complex order book, as well as all 
fees charged by the outside venue that prints the trade. The Exchange 
also believes it is reasonable and equitable to pass through to the 
Member any fees assessed by the routing broker-dealer utilized by the 
Exchange with respect to the execution of the stock leg of any such 
order (with such fees to be passed through at cost). The Exchange notes 
that the Exchange's affiliate, MIAX,\12\ and Nasdaq ISE, LLC (``ISE'') 
have comparable fees for the handling of the stock leg of stock-option 
orders. ISE also charges a stock handling fee of $0.0010 per share 
which is capped at $50 per order.\13\ The Exchange also believes that 
its proposal is consistent with Section 6(b)(5) of the Act \14\ because 
it will be uniformly applied to all Members that execute stock-option 
orders in the complex order book on the Exchange.
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    \12\ See supra note 6.
    \13\ See Nasdaq ISE Pricing Schedule, Options 7, Section 4, 
Complex Order Fees and Rebates, 12; see also Securities Exchange Act 
Release No. 74117 (January 22, 2015), 80 FR 4600 (January 28, 2015) 
(SR-ISE-2015-03).
    \14\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    MIAX Emerald 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. The proposed fee is similar to 
and within the range of fees charged by the Exchange's affiliate, 
MIAX,\15\ and the Exchange's competitor, ISE.\16\ The Exchange notes 
that it 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. In such an environment, the 
Exchange must continually adjust its fees to remain competitive with 
other exchanges and to attract order flow to

[[Page 24589]]

the Exchange. For the reasons stated above, the Exchange believes that 
the proposed rule change reflects this competitive environment.
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    \15\ See supra note 6.
    \16\ See supra note 13.
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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,\17\ and Rule 19b-4(f)(2) \18\ 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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    \17\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \18\ 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

     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-2019-21 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-EMERALD-2019-21. 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-2019-21 and should be submitted 
on or before June 18, 2019.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
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    \19\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-10985 Filed 5-24-19; 8:45 am]
 BILLING CODE 8011-01-P