Document ID: SEC-2020-1530-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: MIAX Emerald, LLC
Posted Date: 2020-09-25T04:00Z

[Federal Register Volume 85, Number 187 (Friday, September 25, 2020)]
[Notices]
[Pages 60498-60503]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-21141]

[[Page 60498]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-89927; File No. SR-EMERALD-2020-07]

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

September 21, 2020.
    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 September 8, 2020, 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.
---------------------------------------------------------------------------

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 lower the Simple Maker (as defined below) rebates in Tier 4 for 
options transactions in Penny classes and non-Penny classes (as defined 
below) for executed Priority Customers \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 membership@miaxoptions.com 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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    The proposed change is scheduled to become operative September 8, 
2020.
Background
    The Exchange currently assesses transaction rebates and fees to all 
market participants which are based upon a threshold tier structure 
(``Tier'') that is applicable to transaction fees. 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 shall apply to all Origin types by the Member. The monthly 
volume thresholds for each method, 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,\6\ (as the 
numerator) expressed as a percentage of (divided by) Customer Total 
Consolidated Volume (``CTCV'') (as the denominator). CTCV means 
Customer Total Consolidated Volume 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'' \7\ (solely in the option 
classes of the affected Matching Engine).\8\ 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'').\9\ 
Members are also assessed lower transaction fees and smaller rebates 
for order executions in standard option classes in the Penny Interval 
Program \10\ (``Penny classes'') than for order executions in standard 
option classes which are not in the

[[Page 60499]]

Penny Interval Program (``non-Penny classes''), for which Members will 
be assessed a higher transaction fees and larger rebates.
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    \6\ ``Excluded Contracts'' means any contracts routed to an away 
market for execution. See the Definitions Section of the Fee 
Schedule.
    \7\ 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.
    \8\ A ``Matching Engine'' is a part of the MIAX Emerald 
electronic system that processes options orders and trades on a 
symbol-by-symbol basis. Some Matching Engines will process option 
classes with multiple root symbols, and other Matching Engines may 
be dedicated to one single option root symbol (for example, options 
on SPY may be processed by one single Matching Engine that is 
dedicated only to SPY). A particular root symbol may only be 
assigned to a single designated Matching Engine. A particular root 
symbol may not be assigned to multiple Matching Engines. See the 
Definitions Section of the Fee Schedule.
    \9\ 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.
    \10\ 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).
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    Currently, transaction rebates and fees for Penny and non-Penny 
classes are assessed according to the following tables:

                                        Members and Their Affiliates in Penny Classes Simple/Complex/PRIME/cPRIME
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                        Simple               Complex #                   PRIME/cPRIME [diam]
                                                               -----------------------------------------------------------------------------------------
                                                                                         Maker
                                                                                        (contra     Maker
                       Origin                           Tier                  Taker     origins    (contra
                                                                  Maker    [supcaret]      ex      priority    Taker      Agency     Contra    Responder
                                                                                        priority   customer
                                                                                       customer)   origin)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Market Maker.......................................          1    ($0.35)       $0.50      $0.10      $0.47      $0.50      $0.05      $0.05       $0.05
                                                             2     (0.35)        0.50       0.10       0.47       0.50       0.05       0.05        0.05
                                                             3     (0.35)        0.50       0.10       0.47       0.50       0.05       0.05        0.05
                                                             4     (0.45)        0.50       0.10       0.47       0.50       0.05       0.05        0.05
Non-MIAX Emerald Market Maker......................          1     (0.25)        0.50       0.20       0.50       0.50       0.05       0.05        0.05
                                                             2     (0.25)         .50       0.20       0.50       0.50       0.05       0.05        0.05
                                                             3     (0.25)        0.50       0.20       0.50       0.50       0.05       0.05        0.05
                                                             4     (0.25)        0.50       0.20       0.50       0.50       0.05       0.05        0.05
Firm Proprietary/Broker-Dealer.....................          1     (0.25)        0.50       0.20       0.50       0.50       0.05       0.05        0.05
                                                             2     (0.25)        0.50       0.20       0.50       0.50       0.05       0.05        0.05
                                                             3     (0.25)        0.50       0.20       0.50       0.50       0.05       0.05        0.05
                                                             4     (0.25)        0.50       0.20       0.50       0.50       0.05       0.05        0.05
Non-Priority Customer..............................          1     (0.25)        0.50       0.20       0.50       0.50       0.05       0.05        0.05
                                                             2     (0.25)        0.50       0.20       0.50       0.50       0.05       0.05        0.05
                                                             3     (0.25)        0.50       0.20       0.50       0.50       0.05       0.05        0.05
                                                             4     (0.25)        0.50       0.20       0.50       0.50       0.05       0.05        0.05
Priority Customer *................................          1    [sdtri]        0.50     (0.25)     (0.25)     (0.25)       0.00       0.05        0.05
                                                                   (0.43)
                                                             2    [sdtri]        0.50     (0.40)     (0.40)     (0.40)       0.00       0.05        0.05
                                                                   (0.43)
                                                             3    [sdtri]        0.50     (0.45)     (0.45)     (0.45)       0.00       0.05        0.05
                                                                   (0.43)
                                                             4     (0.53)        0.50     (0.50)     (0.50)     (0.50)       0.00       0.05        0.05
--------------------------------------------------------------------------------------------------------------------------------------------------------

                                      Members and Their Affiliates in Non-Penny Classes Simple/Complex/PRIME/cPRIME
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                        Simple               Complex #                   PRIME/cPRIME [diam]
                                                               -----------------------------------------------------------------------------------------
                                                                                         Maker
                                                                                        (contra     Maker
                       Origin                           Tier                  Taker     origins    (contra
                                                                  Maker    [supcaret]      ex      priority   Taker ~     Agency     Contra    Responder
                                                                                        priority   customer
                                                                                       customer)   origin)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Market Maker.......................................          1    ($0.45)       $1.05      $0.20      $0.86      $0.88      $0.05      $0.05       $0.05
                                                             2     (0.45)        1.05       0.20       0.86       0.88       0.05       0.05        0.05
                                                             3     (0.45)        1.05       0.20       0.86       0.86       0.05       0.05        0.05
                                                             4     (0.75)        1.05       0.20       0.86       0.86       0.05       0.05        0.05
Non-MIAX Emerald Market Maker......................          1     (0.25)        1.05       0.20       0.88       0.88       0.05       0.05        0.05
                                                             2     (0.25)        1.05       0.20       0.88       0.88       0.05       0.05        0.05
                                                             3     (0.25)        1.05       0.20       0.88       0.88       0.05       0.05        0.05
                                                             4     (0.25)        1.05       0.20       0.88       0.88       0.05       0.05        0.05
Firm Proprietary/Broker-Dealer.....................          1     (0.25)        1.05       0.20       0.88       0.88       0.05       0.05        0.05
                                                             2     (0.25)        1.05       0.20       0.88       0.88       0.05       0.05        0.05
                                                             3     (0.25)        1.05       0.20       0.88       0.88       0.05       0.05        0.05
                                                             4     (0.25)        1.05       0.20       0.88       0.88       0.05       0.05        0.05
Non-Priority Customer..............................          1     (0.25)        1.05       0.20       0.88       0.88       0.05       0.05        0.05
                                                             2     (0.25)        1.05       0.20       0.88       0.88       0.05       0.05        0.05
                                                             3     (0.25)        1.05       0.20       0.88       0.88       0.05       0.05        0.05
                                                             4     (0.25)        1.05       0.20       0.88       0.88       0.05       0.05        0.05
Priority Customer *................................          1     (0.85)        0.85     (0.40)     (0.40)     (0.40)       0.00       0.05        0.05
                                                             2     (0.85)        0.85     (0.60)     (0.60)     (0.60)       0.00       0.05        0.05
                                                             3     (0.85)        0.85     (0.70)     (0.70)     (0.75)       0.00       0.05        0.05
                                                             4     (1.05)        0.85     (0.87)     (0.87)     (0.85)       0.00       0.05        0.05
--------------------------------------------------------------------------------------------------------------------------------------------------------
[supcaret] Contra to Priority Customer Simple Orders, Origins ex Priority Customer Simple Orders will be charged $0.50 and Priority Customer Simple
  Orders will be charged $0.50 in Penny classes, and Origins ex Priority Customer Simple Orders will be charged $1.10 and Priority Customer Simple
  Orders will be charged $0.85 in Non-Penny classes.
* Priority Customer Complex Orders contra to Priority Customer Complex Orders are neither charged nor rebated. Priority Customer Complex Orders that leg
  into the Simple book are neither charged nor rebated.
~ A $0.05 Complex surcharge for Origins ex Priority Customer for Complex Orders that take liquidity from the Complex Order Book in Non-Penny classes.

[[Page 60500]]

 
# For orders in a Complex Auction, Priority Customer Complex Orders will receive the Complex Taker rebate based on the tier achieved when contra to an
  Origin that is not a Priority Customer. Origins that are not a Priority Customer will be charged the applicable Maker fee depending on the contra,
  based on the tier achieved.
[diam] For PRIME and cPRIME, the per contract rebate or fee for the preexisting contra-side interest that trades with the Agency side will be waived.
  PRIME/cPRIME Responder side interest that trades with unrelated Agency side interest trades as Taker will be subject to Simple or Complex rates, as
  applicable.
[sdtri] Simple Maker rebate in SPY, QQQ and IWM is ($0.45) for Priority Customer Origin in Tiers 1, 2 and 3.
Notes Accompanying Tables Above
During the Opening Rotation and the ABBO uncrossing, the per contract rebate or fee will be waived for all Origins.

Proposed Changes
    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 Customers 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 ($0.53) to ($0.49) 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 ($1.05) to ($0.95) when the contra is an 
Affiliated Market Maker.
    In order to differentiate between the proposed lower Tier 4 Simple 
Maker rebate in Penny and non-Penny classes when the contra is an 
Affiliated Market Maker, the Exchange proposes to insert two new 
symbols after the symbol ``[dtri]'' \11\ immediately following the 
table of rebates and fees in Section 1)a)i of the Fee Schedule. In 
particular, the Exchange proposes to adopt new symbol ``[squ],'' for 
the Penny classes table and the following explanatory sentences: ``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 ($0.49).'' The Exchange also proposes to 
adopt new symbol ``[squf],'' for the non-Penny classes table and the 
following explanatory sentences: ``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 ($0.95).'' 
Accordingly, the Exchange proposes to insert the new symbols ``[squ]'' 
and ``[squf]'' as footnotes for the current Simple Maker rebates for 
Priority Customer orders in options in Penny and non-Penny classes in 
Tier 4 of ($0.53) and ($1.05), respectively.
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    \11\ See Fee Schedule, Section 1)a)i.
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    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.\12\ 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.\13\
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    \12\ See Securities Exchange Act Release No. 85393 (March 21, 
2019), 84 FR 11599 (March 27, 2019) (SR-EMERALD-2019-15).
    \13\ See Cboe BZX Options Exchange Fee Schedule, under 
``Transaction Fees.''
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    With the proposed changes, Section 1)a)i) of the Fee Schedule will 
be as follows:

                                        Members and Their Affiliates in Penny Classes Simple/Complex/PRIME/cPRIME
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                        Simple               Complex #                   PRIME/cPRIME [diam]
                                                               -----------------------------------------------------------------------------------------
                                                                                         Maker
                                                                                        (contra     Maker
                       Origin                           Tier                  Taker     origins    (contra
                                                                  Maker    [supcaret]      ex      priority    Taker      Agency     Contra    Responder
                                                                                        priority   customer
                                                                                       customer)   origin)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Market Maker.......................................          1    ($0.35)       $0.50      $0.10      $0.47      $0.50      $0.05      $0.05       $0.05
                                                             2     (0.35)        0.50       0.10       0.47       0.50       0.05       0.05        0.05
                                                             3     (0.35)        0.50       0.10       0.47       0.50       0.05       0.05        0.05
                                                             4     (0.45)        0.50       0.10       0.47       0.50       0.05       0.05        0.05
Non-MIAX Emerald Market Maker......................          1     (0.25)        0.50       0.20       0.50       0.50       0.05       0.05        0.05
                                                             2     (0.25)        0.50       0.20       0.50       0.50       0.05       0.05        0.05
                                                             3     (0.25)        0.50       0.20       0.50       0.50       0.05       0.05        0.05
                                                             4     (0.25)        0.50       0.20       0.50       0.50       0.05       0.05        0.05
Firm Proprietary/Broker-Dealer.....................          1     (0.25)        0.50       0.20       0.50       0.50       0.05       0.05        0.05
                                                             2     (0.25)        0.50       0.20       0.50       0.50       0.05       0.05        0.05
                                                             3     (0.25)        0.50       0.20       0.50       0.50       0.05       0.05        0.05
                                                             4     (0.25)        0.50       0.20       0.50       0.50       0.05       0.05        0.05
Non-Priority Customer..............................          1     (0.25)        0.50       0.20       0.50       0.50       0.05       0.05        0.05
                                                             2     (0.25)        0.50       0.20       0.50       0.50       0.05       0.05        0.05
                                                             3     (0.25)        0.50       0.20       0.50       0.50       0.05       0.05        0.05
                                                             4     (0.25)        0.50       0.20       0.50       0.50       0.05       0.05        0.05
Priority Customer *................................          1    [sdtri]        0.50     (0.25)     (0.25)     (0.25)       0.00       0.05        0.05
                                                                   (0.43)
                                                             2    [sdtri]        0.50     (0.40)     (0.40)     (0.40)       0.00       0.05        0.05
                                                                   (0.43)
                                                             3    [sdtri]        0.50     (0.45)     (0.45)     (0.45)       0.00       0.05        0.05
                                                                   (0.43)
                                                             4   [supsqu]        0.50     (0.50)     (0.50)     (0.50)       0.00       0.05        0.05
                                                                   (0.53)
--------------------------------------------------------------------------------------------------------------------------------------------------------

[[Page 60501]]

                                      Members and Their Affiliates in Non-Penny Classes Simple/Complex/PRIME/cPRIME
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                        Simple               Complex #                   PRIME/cPRIME [diam]
                                                               -----------------------------------------------------------------------------------------
                                                                                         Maker
                                                                                        (contra     Maker
                       Origin                           Tier                  Taker     origins    (contra
                                                                  Maker    [supcaret]      ex      priority   Taker ~     Agency     Contra    Responder
                                                                                        priority   customer
                                                                                       customer)   origin)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Market Maker.......................................          1    ($0.45)       $1.05      $0.20      $0.86      $0.88      $0.05      $0.05       $0.05
                                                             2     (0.45)        1.05       0.20       0.86       0.88       0.05       0.05        0.05
                                                             3     (0.45)        1.05       0.20       0.86       0.86       0.05       0.05        0.05
                                                             4     (0.75)        1.05       0.20       0.86       0.86       0.05       0.05        0.05
Non-MIAX Emerald Market Maker......................          1     (0.25)        1.05       0.20       0.88       0.88       0.05       0.05        0.05
                                                             2     (0.25)        1.05       0.20       0.88       0.88       0.05       0.05        0.05
                                                             3     (0.25)        1.05       0.20       0.88       0.88       0.05       0.05        0.05
                                                             4     (0.25)        1.05       0.20       0.88       0.88       0.05       0.05        0.05
Firm Proprietary/Broker-Dealer.....................          1     (0.25)        1.05       0.20       0.88       0.88       0.05       0.05        0.05
                                                             2     (0.25)        1.05       0.20       0.88       0.88       0.05       0.05        0.05
                                                             3     (0.25)        1.05       0.20       0.88       0.88       0.05       0.05        0.05
                                                             4     (0.25)        1.05       0.20       0.88       0.88       0.05       0.05        0.05
Non-Priority Customer..............................          1     (0.25)        1.05       0.20       0.88       0.88       0.05       0.05        0.05
                                                             2     (0.25)        1.05       0.20       0.88       0.88       0.05       0.05        0.05
                                                             3     (0.25)        1.05       0.20       0.88       0.88       0.05       0.05        0.05
                                                             4     (0.25)        1.05       0.20       0.88       0.88       0.05       0.05        0.05
Priority Customer *................................          1     (0.85)        0.85     (0.40)     (0.40)     (0.40)       0.00       0.05        0.05
                                                             2     (0.85)        0.85     (0.60)     (0.60)     (0.60)       0.00       0.05        0.05
                                                             3     (0.85)        0.85     (0.70)     (0.70)     (0.75)       0.00       0.05        0.05
                                                             4     [squf]        0.85     (0.87)     (0.87)     (0.85)       0.00       0.05        0.05
                                                                   (1.05)
--------------------------------------------------------------------------------------------------------------------------------------------------------
[caret] Contra to Priority Customer Simple Orders, Origins ex Priority Customer Simple Orders will be charged $0.50 and Priority Customer Simple Orders
  will be charged $0.50 in Penny classes, and Origins ex Priority Customer Simple Orders will be charged $1.10 and Priority Customer Simple Orders will
  be charged $0.85 in Non-Penny classes.
* Priority Customer Complex Orders contra to Priority Customer Complex Orders are neither charged nor rebated. Priority Customer Complex Orders that leg
  into the Simple book are neither charged nor rebated.
~ A $0.05 Complex surcharge for Origins ex Priority Customer for Complex Orders that take liquidity from the Complex Order Book in Non-Penny classes.
# For orders in a Complex Auction, Priority Customer Complex Orders will receive the Complex Taker rebate based on the tier achieved when contra to an
  Origin that is not a Priority Customer. Origins that are not a Priority Customer will be charged the applicable Maker fee depending on the contra,
  based on the tier achieved.
[diam] For PRIME and cPRIME, the per contract rebate or fee for the preexisting contra-side interest that trades with the Agency side will be waived.
  PRIME/cPRIME Responder side interest that trades with unrelated Agency side interest trades as Taker will be subject to Simple or Complex rates, as
  applicable.
[sdtri] Simple Maker rebate in SPY, QQQ and IWM is ($0.45) for Priority Customer Origin in Tiers 1, 2 and 3.
[supsqu] This Maker rebate is for executed Priority Customer Simple Orders when 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 ($0.49).
[squf] 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 ($0.95).
Notes Accompanying Tables Above
During the Opening Rotation and the ABBO uncrossing, the per contract rebate or fee will be waived for all Origins.

    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.'' \14\
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    \14\ 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 more than approximately 16% 
market share.\15\ Therefore, no exchange possesses significant pricing 
power. More specifically, for the month of August, the Exchange had a 
market share of approximately 3.24% of executed volume of multiply-
listed equity options.\16\
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    \15\ The Options Clearing Corporation (``OCC'') publishes 
options and futures volume in a variety of formats, including daily 
and monthly volume by exchange, available here: https://www.theocc.com/market-data/volume/default.jsp.
    \16\ 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).\17\ 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

[[Page 60502]]

decrease certain transaction rebates, may have 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. The 
Exchange also notes that at least one other competing exchange 
similarly provides for different pricing dependent upon whether the 
executing buyer and seller are the same market participant or have some 
form of common ownership.\18\
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    \17\ See Securities Exchange Act Release No. 85304 (March 13, 
2019), 84 FR 10144 (March 19, 2019) (SR-PEARL-2019-07).
    \18\ See Nasdaq Options Pricing Schedule, Options 7, Section 
2(1), note 2 (Participants that add 1.30% of Customer, Professional, 
Firm, Broker-Dealer or Non-NOM Market Maker liquidity in Penny Pilot 
Options and/or Non-Penny Pilot Options of total industry customer 
equity and ETF option ADV contracts per day in a month will be 
subject to the following pricing applicable to executions: A $0.48 
per contract Penny Pilot Options Fee for Removing Liquidity when the 
Participant is (i) both the buyer and the seller or (ii) the 
Participant removes liquidity from another Participant under Common 
Ownership. Participants that add 1.50% of Customer, Professional, 
Firm, Broker-Dealer or Non-NOM Market Maker liquidity in Penny Pilot 
Options and/or Non-Penny Pilot Options of total industry customer 
equity and ETF option ADV contracts per day in a month and meet or 
exceed the cap for The Nasdaq Stock Market Opening Cross during the 
month will be subject to the following pricing applicable to 
executions less than 10,000 contracts: A $0.32 per contract Penny 
Pilot Options Fee for Removing Liquidity when the Participant is (i) 
both the buyer and seller or (ii) the Participant removes liquidity 
from another Participant under Common Ownership. Participants that 
add 1.75% of Customer, Professional, Firm, Broker-Dealer or Non-NOM 
Market Maker liquidity in Penny Pilot Options and/or Non-Penny Pilot 
Options of total industry customer equity and ETF option ADV 
contracts per day in a month will be subject to the following 
pricing applicable to executions less than 10,000 contracts: A $0.32 
per contract Penny Pilot Options Fee for Removing Liquidity when the 
Participant is (i) both the buyer and seller or (ii) the Participant 
removes liquidity from another Participant under Common Ownership.).
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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 \19\ in general, and 
furthers the objectives of Section 6(b)(4) of the Act,\20\ 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,\21\ 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 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.
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    \19\ 15 U.S.C. 78f(b).
    \20\ 15 U.S.C. 78f(b)(4).
    \21\ 15 U.S.C. 78f(b)(1) and (b)(5).
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    The Exchange believes its proposal to decrease its Simple Maker 
rebates in Tier 4 for options transactions in Penny and non-Penny 
classes for Priority Customers orders when trading contra to an 
Affiliated Market Maker provides for the equitable allocation of 
reasonable dues and fees and is not unfairly discriminatory for the 
following reasons. The Exchange operates in a highly competitive 
market. 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.'' \22\
---------------------------------------------------------------------------

    \22\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496 (June 29, 2005).
---------------------------------------------------------------------------

    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 more than approximately 16% 
of the market share of executed volume of multiply-listed equity and 
ETF options trades based on the reported trade volumes for the month of 
August.\23\ Therefore, no exchange possesses significant pricing power 
in the execution of multiply-listed equity and ETF options order flow. 
More specifically, for the month of August, the Exchange had a market 
share of approximately 3.24% of executed volume of multiply-listed 
equity options.\24\ The Exchange cannot predict with certainty the 
number of market participants that would qualify for the lower Simple 
Maker rebates as Members \25\ may continually shift among the different 
Tiers from month to month.
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    \23\ See supra note 15.
    \24\ See id.
    \25\ ``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.
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    The Exchange believes that the ever-shifting market shares among 
the exchanges from month to month demonstrates that market participants 
can shift order flow, or discontinue or reduce use of certain 
categories of products, in response to transaction and/or non-
transaction fee changes. For example, on February 28, 2019, the 
Exchange's affiliate, 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).\26\ 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 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.
---------------------------------------------------------------------------

    \26\ See supra note 17.
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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.\27\ 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.\28\
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    \27\ See supra note 12.
    \28\ See supra note 13.
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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,

[[Page 60503]]

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.\29\ 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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    \29\ 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. The Exchange believes that the 
proposed changes in 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 changes 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.
    The proposed decreases for certain Simple Maker rebates are 
intended to keep the Exchange's fees highly competitive with those of 
other exchanges, and to encourage liquidity and should enable the 
Exchange to continue to attract and compete for order flow with other 
exchanges. 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 rebates and 
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 they modify the Exchange's fees in a 
manner that encourages market participants to continue to provide 
liquidity and to send order flow to the Exchange.

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,\30\ and Rule 19b-4(f)(2) \31\ 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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    \30\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \31\ 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-2020-07 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-2020-07. 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-2020-07 and should be submitted 
on or before October 16, 2020.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\32\
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    \32\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-21141 Filed 9-24-20; 8:45 am]
BILLING CODE 8011-01-P