Document ID: SEC-2020-1670-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: MIAX Emerald, LLC
Posted Date: 2020-10-20T04:00Z

[Federal Register Volume 85, Number 203 (Tuesday, October 20, 2020)]
[Notices]
[Pages 66607-66612]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-23142]

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-90183; File No. SR-EMERALD-2020-09]

Self-Regulatory Organizations; MIAX Emerald, LLC; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend 
Its Fee Schedule To Adopt Application Programming Interface (``API'') 
Testing and Certification Fees and Network Connectivity Testing and 
Certification Fees

October 14, 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 October 1, 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.
---------------------------------------------------------------------------

    \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'') to establish Application Programming 
Interface (``API'') Testing and Certification fees and Network 
Connectivity Testing and Certification fees.
    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 the Fee Schedule to establish API 
Testing and Certification fees for Members \3\ and non-Members and 
Network Connectivity Testing and Certification fees for Members and 
non-Members. MIAX Emerald commenced operations as a national securities 
exchange registered under Section 6 of the Act \4\ on March 1, 2019.\5\ 
The Exchange adopted its transaction fees and certain of its non-
transaction fees in its filing SR-EMERALD-2019-15.\6\ In that filing, 
the Exchange expressly waived, among other fees, API Testing and 
Certification fees and Network Connectivity Testing and Certification 
fees, both for Members and non-Members, in order to provide an 
incentive to prospective Members and non-Members to connect to MIAX 
Emerald as soon as possible. At that time, the Exchange waived API 
Testing and Certification fees and Network Connectivity Testing and 
Certification fees for the Waiver Period \7\ and stated

[[Page 66608]]

that it would provide notice to market participants when the Exchange 
intended to terminate the Waiver Period.
---------------------------------------------------------------------------

    \3\ ``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 Exchange 
Rule 100 and the Definitions section of the Fee Schedule.
    \4\ 15 U.S.C. 78f.
    \5\ See Securities Exchange Act Release No. 84891 (December 20, 
2018), 83 FR 67421 (December 28, 2018) (File No. 10-233) (order 
approving application of MIAX Emerald, LLC for registration as a 
national securities exchange).
    \6\ See Securities Exchange Act Release No. 85393 (March 21, 
2019), 84 FR 11599 (March 27, 2019) (SR-EMERALD-2019-15) (Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To 
Establish the MIAX Emerald Fee Schedule).
    \7\ ``Waiver Period'' means, for each applicable fee, the period 
of time from the initial effective date of the MIAX Emerald Fee 
Schedule until such time that the Exchange has an effective fee 
filing establishing the applicable fee. The Exchange will issue a 
Regulatory Circular announcing the establishment of an applicable 
fee that was subject to a Waiver Period at least fifteen (15) days 
prior to the termination of the Waiver Period and effective date of 
any such applicable fee. See the Definitions Section of the Fee 
Schedule.
---------------------------------------------------------------------------

    On September 15, 2020, the Exchange issued a Regulatory Circular 
which announced that the Exchange would terminate the Waiver Period 
for, among other fees, API Testing and Certification fees and Network 
Connectivity Testing and Certification fees for Members and non-
Members, beginning October 1, 2020.\8\
---------------------------------------------------------------------------

    \8\ See MIAX Emerald Regulatory Circular 2020-41 available at 
https://www.miaxoptions.com/sites/default/files/circular-files/MIAX_Emerald_RC_2020_41.pdf.
---------------------------------------------------------------------------

API Testing and Certification Fees for Members
    The Exchange proposes to adopt an API Testing and Certification fee 
for Members. An API makes it possible for Member software to 
communicate with MIAX Emerald software applications, and is subject to 
Member testing with, and certification by, MIAX Emerald. API testing 
and certification includes, for Electronic Exchange Members \9\ 
(``EEMs''), testing all available order types, new order entry, order 
management, order throughput and mass order cancellation. For Market 
Makers,\10\ API testing and certification also includes testing of all 
available quote types, quote throughput, quote management and 
cancellation, Aggregate Risk Manager settings and triggers, and 
confirmation of quotes within the trading engines.
---------------------------------------------------------------------------

    \9\ ``Electronic Exchange Member'' or ``EEM'' means the holder 
of a Trading Permit who is not a Market Maker. Electronic Exchange 
Members are deemed ``members'' under the Exchange Act. See the 
Definitions section of the Fee Schedule.
    \10\ The term ``Market Maker'' refers to ``Lead Market Maker'' 
(``LMM''), ``Primary Lead Market Maker'' (``PLMM'') and ``Registered 
Market Maker'' (``RMM''), collectively. See Exchange Rule 100. See 
also the Definitions section of the Fee Schedule.
---------------------------------------------------------------------------

    The API Testing and Certification fees for Members are based upon 
the type of interface that the Member has been credentialed to use. The 
Exchange proposes to adopt an API testing and certification fee for 
EEMs (other than Clearing Firms): (i) Initially per API for Financial 
Information Exchange (``FIX'') \11\ ports, FIX Drop Copy (``FXD'') \12\ 
ports and Clearing Trade Drop (``CTD'') \13\ ports in the month the EEM 
has been credentialed to use one or more ports in the production 
environment for the tested API, and (ii) each time an EEM initiates a 
change to its system that requires testing and certification. The 
Exchange proposes to adopt an API testing and certification fee for EEM 
Clearing Firms (i) initially per API in the month the EEM Clearing Firm 
has been credentialed to use one or more CTD Ports in the production 
environment, and (ii) each time an EEM Clearing Firm initiates a change 
to its system that requires testing and certification.
---------------------------------------------------------------------------

    \11\ ``FIX Port'' means an interface with MIAX Emerald systems 
that enables the Port user to submit simple and complex orders 
electronically to MIAX Emerald. See the Definitions section of the 
Fee Schedule.
    \12\ The FIX Drop Copy (``FXD'') Port is a messaging interface 
that will provide a copy of real-time trade execution, trade 
correction and trade cancellation information to FXD Port users who 
subscribe to the service. FXD Port users are those users who are 
designated by an EEM to receive the information and the information 
is restricted for use by the EEM. FXD Port Fees will be assessed in 
any month the Member is credentialed to use the FXD Port in the 
production environment. See Fee Schedule, Section 4)d)iv).
    \13\ ``CTD Port'' or ``Clearing Trade Drop Port'' provides an 
Exchange Member with a real-time clearing trade updates. The updates 
include the Member's clearing trade messages on a low latency, real-
time basis. The trade messages are routed to a Member's connection 
containing certain information. The information includes, among 
other things, the following: (i) Trade date and time; (ii) symbol 
information; (iii) trade price/size information; (iv) Member type 
(for example, and without limitation, Market Maker, Electronic 
Exchange Member, Broker-Dealer); and (v) Exchange MPID for each side 
of the transaction, including Clearing Member MPID. See the 
Definitions section of the Fee Schedule.
---------------------------------------------------------------------------

    The Exchange proposes to adopt an API testing and certification fee 
for Market Makers: (i) Initially per API for CTD and MIAX Emerald 
Express Interface (``MEI'') \14\ ports in the month the Market Maker 
has been credentialed to use one or more ports in the production 
environment for the tested API and the Market Maker has been assigned 
to quote in one or more classes, and (ii) each time a Market Maker 
initiates a change to its system that requires testing and 
certification. The Exchange also proposes that API Testing and 
Certification fees will not be assessed in situations where the 
Exchange initiates a mandatory change to the Exchange's System \15\ 
that requires testing and certification. The Exchange proposes to 
assess Member API Testing and Certification fees of $1,000 for EEMs and 
$2,500 for Market Makers. Below is the proposed fee table for API 
Testing and Certification fees for Members:
---------------------------------------------------------------------------

    \14\ The MEI is a connection to the MIAX Emerald System that 
enables Market Makers to submit simple and complex electronic quotes 
to MIAX Emerald. The Exchange offers Full Service MEI Ports, which 
provide Market Makers with the ability to send Market Maker simple 
and complex quotes, eQuotes, and quote purge messages to the MIAX 
Emerald System. Full Service MEI Ports are also capable of receiving 
administrative information. Market Makers are limited to two Full 
Service MEI Ports per Matching Engine. The Exchange also offers 
Limited Service MEI Ports, which provide Market Makers with the 
ability to send simple and complex eQuotes and quote purge messages 
only, but not Market Maker Quotes, to the MIAX Emerald System. 
Limited Service MEI Ports are also capable of receiving 
administrative information. Market Makers initially receive two 
Limited Service MEI Ports per Matching Engine. See the Definitions 
section of the Fee Schedule.
    \15\ The term ``System'' means the automated trading system used 
by the Exchange for the trading of securities. See Exchange Rule 
100.

------------------------------------------------------------------------
                                                        API testing and
                    Type of member                     certification fee
------------------------------------------------------------------------
Electronic Exchange Member...........................          $1,000.00
Market Maker.........................................           2,500.00
------------------------------------------------------------------------

API Testing and Certification Fee for Non-Members
    The Exchange proposes to adopt an API Testing and Certification fee 
for Third Party Vendors,\16\ Service Bureaus \17\ and other non-Members 
(such as clearing firms): (i) Initially per API for FIX, FXD, CTD and 
MEI ports in the month the Third Party Vendor, Service Bureau or non-
Member has been credentialed to use one or more ports in the production 
environment for the tested API, and (ii) each time a Third Party 
Vendor, Service Bureau, or other non-Member initiates a change to its 
system that requires testing and certification. The Exchange also 
proposes that API Testing and Certification fees will not be assessed 
to non-Members in situations where the Exchange initiates a mandatory 
change to the Exchange's System that requires testing and 
certification.
---------------------------------------------------------------------------

    \16\ Third Party Vendors are subscribers of MIAX Emerald's 
market and other data feeds, which they in turn use for 
redistribution purposes. Third Party Vendors do not provide 
connectivity and therefore are not subject to Network testing and 
certification. See the Definitions section of the Fee Schedule.
    \17\ ``Service Bureau'' means a technology provider that offers 
and supplies technology and technology services to a trading firm 
that does not have its own proprietary system. See the Definitions 
section of the Fee Schedule.
---------------------------------------------------------------------------

    The Exchange proposes to assess non-Member API Testing and 
Certification fees of $1,200 for Third Party Vendors, Service Bureaus 
and other non-Members. Below is the proposed fee table for API Testing 
and Certification fees for non-Members:

------------------------------------------------------------------------
                                                        API testing and
                      Non-member                       certification fee
------------------------------------------------------------------------
Third Party Vendors and Service Bureaus and other non-         $1,200.00
 Members.............................................
------------------------------------------------------------------------

[[Page 66609]]

    The higher proposed fee charged to Third Party Vendors, Service 
Bureaus and non-Members reflects the greater amount of time spent by 
MIAX Emerald employees testing and certifying non-Members. It has been 
MIAX Emerald's experience that Member testing takes less time than non-
Member testing because Members have more experience testing these 
systems with exchanges, resulting in generally fewer questions and 
issues arising during the testing and certification process. Also, 
because Third Party Vendors and Service Bureaus are redistributing data 
and reselling services to other Members and market participants, the 
number and types of scenarios that need to be tested are more numerous 
and complex than those tested and certified for a single Member.
    The Exchange believes it is necessary to charge an API Testing and 
Certification fee to Members and non-Members because of the time and 
resources spent to ensure that Member and non-Member APIs function 
correctly to prevent any System malfunction. Further, the Exchange 
believes the price differential in API Testing and Certification fees 
for Members and non-Members is not unfairly discriminatory because, in 
the Exchange's experience, Member testing takes less time than non-
Member testing as Members have more experience testing these systems 
with exchanges, resulting generally in fewer questions and issues 
arising during the testing and certification process.
Network Connectivity Testing and Certification Fee for Members
    The Exchange established electronic communication connections with 
Members and now proposes to assess Members a Network Connectivity 
Testing and Certification fee for each 1 Gigabit (``Gb'') connection 
and 10 Gb ultra-low-latency (``ULL'') connection. The Exchange proposes 
to assess a Member Network Connectivity Testing and Certification fee: 
(i) Initially per connection in the month the Individual Firm has been 
credentialed to use any API or Market Data feeds in the production 
environment utilizing the tested network connection, and (ii) each time 
an Individual Firm initiates a change to its system that requires 
network connectivity testing and certification. Network Connectivity 
Testing and Certification fees will not be assessed in situations where 
the Exchange initiates a mandatory change to the Exchange's system that 
requires testing and certification. Member Network Connectivity Testing 
and Certification fees will not be assessed for testing and 
certification of connectivity to the Exchange's Disaster Recovery 
Facility.
    The Exchange proposes to assess Members a Network Connectivity 
Testing and Certification Fee of $1,000 per 1Gb connection and $4,000 
per 10Gb ULL connection. Below is the proposed fee table for Member 
Network Connectivity Testing and Certification fees:

------------------------------------------------------------------------
                                                          10 Gigabit ULL
             Type of member                1 Gigabit fee      fee per
                                          per connection    connection
------------------------------------------------------------------------
Individual Firm.........................       $1,000.00       $4,000.00
------------------------------------------------------------------------

    The proposed fee amounts are identical to the fees currently 
assessed for the same services at the Exchange's affiliates, Miami 
International Securities Exchange, LLC (``MIAX'') and MIAX PEARL, LLC 
(``MIAX PEARL''). The Exchange notes that the Emerald Express Network 
Interconnect (``EENI'') \18\ is a network infrastructure which provides 
Members and non-Members network connectivity to the trading platforms, 
market data systems, test systems, and disaster recovery facility of 
the Exchange. When utilizing a Shared \19\ cross-connect, the EENI can 
also be configured to offer network connectivity to the trading 
platforms, market data systems, test systems, and disaster recovery 
facilities of the Exchange's affiliates, MIAX and MIAX PEARL.
---------------------------------------------------------------------------

    \18\ ``EENI'' means the Emerald Express Network Interconnect, 
which is a network infrastructure which provides Members and non-
Members network connectivity to the trading platforms, market data 
systems, test systems, and disaster recovery facilities of MIAX 
Emerald. When utilizing a Shared cross-connect, the EENI can also be 
configured to offer network connectivity to the trading platforms, 
market data systems, test systems, and disaster recovery facilities 
of MIAX and MIAX PEARL. When utilizing a Dedicated cross-connect, 
the EENI can only be configured to offer network connectivity to the 
trading platforms, market data systems, and test systems of MIAX 
Emerald. The EENI consists of the low latency and ultra-low latency 
connectivity options set forth in the Exchange's Fee Schedule. See 
the Definitions section of the Fee Schedule.
    \19\ ``Shared'' (cross-connect) means cross-connect that 
provides network connectivity to the trading platforms, market data 
systems, test systems, and/or disaster recovery facilities of MIAX 
Emerald, MIAX and MIAX PEARL via a single, shared connection. The 
following connections can be Shared across MIAX Emerald, MIAX and 
MIAX PEARL: 1 Gigabit, 1 Gigabit Disaster Recovery, and 10 Gigabit 
Disaster Recovery. See the Definitions section of the Fee Schedule.
---------------------------------------------------------------------------

    Members utilizing a single, Shared cross-connect to connect to the 
trading platforms, market data systems, test systems, and disaster 
recovery facilities of the Exchange, MIAX and MIAX PEARL will only be 
assessed one Network Connectivity Testing and Certification fee per 
connection tested, regardless of the trading platforms, market data 
systems, test systems, and disaster recovery facilities accessed via 
such connection.
Network Connectivity Testing and Certification Fee for Non-Members
    MIAX Emerald established electronic connections with Service 
Bureaus, Extranet Providers and other non-Members, and now proposes to 
assess a Network Connectivity Testing and Certification fee for each 
1Gb connection and 10Gb ULL connection. The Exchange proposes to assess 
a non-Member Network Connectivity Testing and Certification fee: (i) 
Initially per connection in the month the Service Bureau, Extranet 
Provider or other non-Member has been credentialed to use any API or 
Market Data feeds in the production environment using the tested 
network connection, and (ii) each time Service Bureau, Extranet 
Provider or other non-Member initiates a change to its system that 
requires network connectivity testing and certification. Network 
Connectivity Testing and Certification fees will not be assessed in 
situations where the Exchange initiates a mandatory change to the 
Exchange's system that requires testing and certification. Non-Member 
Network Connectivity Testing and Certification fees will not be 
assessed for testing and certification of connectivity to the 
Exchange's Disaster Recovery Facility.
    The Exchange proposes to assess non-Members a Network Connectivity 
Testing and Certification Fee of $1,200 per 1Gb connection and $4,200 
per 10Gb ULL connection. Below is the proposed fee table for non-Member 
Network Connectivity Testing and Certification fees:

[[Page 66610]]

------------------------------------------------------------------------
                                                          10 Gigabit ULL
               Non-member                  1 Gigabit fee      fee per
                                          per connection    connection
------------------------------------------------------------------------
Service Bureau/Extranet Provider and           $1,200.00       $4,200.00
 other non-Members......................
------------------------------------------------------------------------

    The EENI is also available to non-Member subscribers. For non-
Member subscribers, when utilizing a Shared cross-connect, the EENI can 
also be configured to offer network connectivity to the trading 
platforms, market data systems, test systems, and disaster recovery 
facilities of the Exchange's affiliates, MIAX and MIAX PEARL. 
Accordingly, non-Members utilizing Shared cross-connects to connect to 
the trading platforms, market data systems, test systems, and disaster 
recovery facilities of the Exchange and its affiliates, MIAX and MIAX 
PEARL, will only be assessed one Network Connectivity Testing and 
Certification fee per connection tested, regardless of the trading 
platforms, market data systems, test systems, and disaster recovery 
facilities accessed via such connection. The Member and non-Member 
Network Testing and Certification fees represent installation and 
support costs incurred by the Exchange as it works with each Member and 
non-Member to make sure there are appropriate electronic connections 
with MIAX Emerald. The Exchange's affiliates, MIAX and MIAX PEARL, 
charge the same fees for the same services for their Members and non-
Members.\20\ The Exchange proposes to assess a higher Network 
Connectivity Testing and Certification fee to non-Members than to 
Members, similar to how MIAX and MIAX PEARL assesses such fees to their 
Members and non-Members. The higher fee charged to non-Members reflects 
the greater amount of time spent by MIAX Emerald employees testing and 
certifying non-Members. It has been MIAX Emerald's experience that 
Member network connectivity testing takes less time than non-Member 
network connectivity testing because Members have more experience 
testing these systems with exchanges as generally fewer questions and 
issues arise during the testing and certification process.
---------------------------------------------------------------------------

    \20\ See MIAX Fee Schedule, Sections 4)c) and 4)d); see also 
MIAX PEARL Fee Schedule, Sections 4)c) and 4)d.
---------------------------------------------------------------------------

    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.'' \21\
---------------------------------------------------------------------------

    \21\ 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% 
market share.\22\ Therefore, no exchange possesses significant pricing 
power. More specifically, for the month of August 2020, the Exchange 
had an approximately 3.24% market share of executed volume of multiply-
listed equity options.\23\ 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, or shift order flow, in response to non-transaction and 
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).\24\ 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.
---------------------------------------------------------------------------

    \22\ 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.
    \23\ See id.
    \24\ See Securities Exchange Act Release No. 85304 (March 13, 
2019), 84 FR 10144 (March 19, 2019) (SR-PEARL-2019-07).
---------------------------------------------------------------------------

    Further, as there are currently 16 registered options exchanges 
competing for order flow with no single exchange accounting for more 
than approximately 16% of market share,\25\ the Exchange cannot predict 
with certainty whether any market participant is planning to utilize 
any of the services of the Exchange such that API testing and 
certification or network connectivity testing and certification would 
be required, in which the Member or non-Member would be subject to the 
proposed API Testing and Certification fees and/or the Network 
Connectivity Testing and Certification fees that the Exchange proposes 
to establish herein.
---------------------------------------------------------------------------

    \25\ See supra note 22.
---------------------------------------------------------------------------

2. Statutory Basis
    The Exchange believes that its proposal to amend its Fee Schedule 
is consistent with Section 6(b) of the Act \26\ in general, and 
furthers the objectives of Section 6(b)(4) of the Act \27\ in 
particular, in that it is an equitable allocation of reasonable dues, 
fees and other charges among its members and issuers and other persons 
using its facilities. The Exchange also believes the proposal furthers 
the objectives of Section 6(b)(5) of the Act 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.
---------------------------------------------------------------------------

    \26\ 15 U.S.C. 78f(b).
    \27\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------

    The Exchange believes its proposal to adopt API Testing and 
Certification fees and Network Connectivity Testing and Certification 
fees provides for the equitable allocation of reasonable dues and fees 
and is not unfairly discriminatory for the following reasons. First, 
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

[[Page 66611]]

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.'' \28\ 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.\29\ 
Therefore, no exchange possesses significant pricing power. More 
specifically, for the month of August 2020, the Exchange had 
approximately 3.24% market share of executed volume of multiply-listed 
equity options.\30\
---------------------------------------------------------------------------

    \28\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496 (June 29, 2005).
    \29\ 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.
    \30\ See id.
---------------------------------------------------------------------------

    The Exchange also 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, or shift order flow, in response to non-transaction and 
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).\31\ 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.
---------------------------------------------------------------------------

    \31\ See supra note 24.
---------------------------------------------------------------------------

    Second, the Exchange believes its proposal to adopt API Testing and 
Certification fees and Network Connectivity Testing and Certification 
fees for Members and non-Members is an equitable allocation of 
reasonable dues and fees pursuant to Section 6(b)(4) of the Act \32\ 
because of the time and resources spent to ensure that Member and non-
Member APIs and connectivity function correctly to prevent any System 
malfunction. Further, the Exchange believes the price differential in 
API Testing and Certification fees and Network Connectivity Testing and 
Certification fees for Members and non-Members is not unfairly 
discriminatory because, in the Exchange's experience, Member testing 
utilizes less Exchange resources and employee time than non-Member 
testing as Members have more experience testing these systems with 
exchanges, resulting generally in fewer questions and issues arising 
during the testing and certification process. Also, with respect to API 
testing and certification, because Third Party Vendors and Service 
Bureaus are redistributing data and reselling services to other Members 
and market participants the number and types of scenarios that need to 
be tested are more numerous and complex than those tested and certified 
for Members.
---------------------------------------------------------------------------

    \32\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

    Accordingly, the Exchange no longer believes it is necessary to 
waive API Testing and Certification fees and Network Connectivity 
Testing and Certification fees to attract market participants to the 
MIAX Emerald market since this market is now established and MIAX 
Emerald no longer needs to rely on such waivers to attract market 
participants. The Exchange believes its proposed API Testing and 
Certification fees and Network Connectivity Testing and Certification 
fees are reasonable and well within the range of non-transaction fees 
assessed among other exchanges, including the Exchange's affiliates, 
MIAX and MIAX PEARL.\33\
---------------------------------------------------------------------------

    \33\ See supra note 20.
---------------------------------------------------------------------------

    Finally, 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 for services and products, in addition to order flow, to 
remain competitive with other exchanges. The Exchange believes that the 
proposed changes reflect this competitive environment.

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

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act.
Intra-Market Competition
    The Exchange does not believe that the proposed rule change would 
place certain market participants at the Exchange at a relative 
disadvantage compared to other market participants or affect the 
ability of such market participants to compete. Unilateral action by 
MIAX Emerald in the assessment of certain non-transaction fees for 
services provided to its Members and others using its facilities will 
not have an impact on competition. As a more recent entrant in the 
already highly competitive environment for equity options trading, MIAX 
Emerald does not have the market power necessary to set prices for 
services that are unreasonable or unfairly discriminatory in violation 
of the Act. MIAX Emerald's proposed API Testing and Certification fee 
levels and Network Connectivity Testing and Certification fee levels, 
as described herein, are comparable to fee levels charged by other 
options exchanges for the same or similar services, including those 
fees assessed by the Exchange's affiliates, MIAX and MIAX PEARL.\34\
---------------------------------------------------------------------------

    \34\ See supra note 20.
---------------------------------------------------------------------------

    The Exchange believes that the proposed API Testing and 
Certification fees and Network Connectivity Testing and Certification 
fees do not place certain market participants at a relative 
disadvantage to other market participants because the fees do not apply 
unequally to different size market participants, but instead would 
allow the Exchange charge for the time and resource necessary for API 
testing and certification and network connectivity testing and 
certification for Members and non-Members to ensure proper functioning 
of all available order types, new order entry, order management, order 
throughput and mass order cancellation (as well as, for Market Makers, 
all available quote types, quote throughput, quote management and 
cancellation, Aggregate Risk Manager settings and triggers, and 
confirmation of quotes within the trading engines). Accordingly, the 
proposed API Testing and Certification fees and network connectivity 
testing and certification fees do not favor certain categories of 
market participants in a manner that would impose a burden on 
competition.
Inter-Market Competition
    The Exchange believes the proposed API Testing and Certification 
fees and network connectivity testing and

[[Page 66612]]

certification fees do not place an undue burden on competition on other 
SROs that is not necessary or appropriate. The Exchange operates in a 
highly competitive market in which market participants can readily 
favor one of the 16 competing options venues if they deem fee levels at 
a particular venue to be excessive.\35\ Based on publicly-available 
information, and excluding index-based options, no single exchange has 
more than 16% market share. Therefore, no exchange possesses 
significant pricing power in the execution of multiply-listed equity 
and ETF options order flow. For the month of August 2020, the Exchange 
had a market share of approximately 3.24% of executed multiply-listed 
equity options \36\ and the Exchange believes that the ever-shifting 
market share among exchanges from month to month demonstrates that 
market participants can discontinue or reduce use of certain categories 
of products, or shift order flow, in response to fee changes. In such 
an environment, the Exchange must continually adjust its fees and fee 
waivers to remain competitive with other exchanges and to attract order 
flow to the Exchange.
---------------------------------------------------------------------------

    \35\ See supra note 22.
    \36\ Id.
---------------------------------------------------------------------------

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,\37\ and Rule 19b-4(f)(2) \38\ 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.
---------------------------------------------------------------------------

    \37\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \38\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------

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-2020-09 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-2020-09. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (http://www.sec.gov/rules/sro.shtml). 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for website viewing and printing in 
the Commission's Public Reference Room, 100 F Street NE, Washington, DC 
20549, on official business days between the hours of 10:00 a.m. and 
3:00 p.m. Copies of the filing also will be available for inspection 
and copying at the principal office of the Exchange. All comments 
received will be posted without change. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-EMERALD-2020-09 and should be submitted 
on or before November 10, 2020.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\39\
---------------------------------------------------------------------------

    \39\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-23142 Filed 10-19-20; 8:45 am]
BILLING CODE 8011-01-P