Self-Regulatory Organizations; MIAX Emerald, LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend the MIAX Emerald Fee Schedule To Adopt an Excessive Quoting Fee
| Published date | 31 March 2021 |
| Citation | 86 FR 16795 |
| Record Number | 2021-06562 |
| Section | Notices |
| Court | Securities And Exchange Commission |
16795
Federal Register / Vol. 86, No. 60 / Wednesday, March 31, 2021 / Notices
1
15 U.S.C. 78s(b)(1).
2
17 CFR 240.19b–4.
3
See SR–EMERALD–2021–06 (the ‘‘First
Proposed Rule Change’’).
4
The term ‘‘System’’ means the automated
trading system used by the Exchange for the trading
of securities. See Exchange Rule 100.
5
‘‘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.
6
The term ‘‘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.
7
The term ‘‘quote’’ or ‘‘quotation’’ means a bid or
offer entered by a Market Maker that is firm and
may update the Market Maker’s previous quote, if
any. The Rules of the Exchange provide for the use
of different types of quotes, including Standard
quotes and eQuotes, as more fully described in Rule
517. A Market Maker may, at times, choose to have
multiple types of quotes active in an individual
option. See the Definitions Section of the Fee
Schedule.
Dated: March 25, 2021.
Stephanie Hillyard,
Secretary to the Board.
[FR Doc. 2021–06543 Filed 3–30–21; 8:45 am]
BILLING CODE 7905–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–91406; File No. SR–
EMERALD–2021–10]
Self-Regulatory Organizations; MIAX
Emerald, LLC; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change To Amend the MIAX
Emerald Fee Schedule To Adopt an
Excessive Quoting Fee
March 25, 2021.
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 March 12,
2021, MIAX Emerald, LLC (‘‘MIAX
Emerald’’ or ‘‘Exchange’’), filed with the
Securities and Exchange Commission
(‘‘Commission’’) a proposed rule change
as described in Items I, II, and III below,
which Items have been prepared by the
Exchange. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange is filing a proposal to
amend the MIAX Emerald Fee Schedule
(the ‘‘Fee Schedule’’) to adopt new
Section 1)c), Excessive Quoting Fee.
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 adopt new Section 1)c),
Excessive Quoting Fee.
Background
The Exchange initially filed its
proposal to adopt the Excessive Quoting
Fee on February 8, 2021.
3
On February
22, 2021, the Exchange withdrew the
First Proposed Rule Change and now
resubmits this proposal to provide
additional background information and
make further changes due to business
reasons.
The Exchange recently completed a
significant upgrade to its System’s
4
network architecture, based on customer
demand, which has resulted in the
Exchange’s network environment
becoming more transparent and
deterministic. This project included
additional network development in
several areas, which resulted in: (i)
Minimum latency between multicast
market data signals disseminated by the
Exchange across the extranet switches;
(ii) a reduction in the occurrence of
message sequence inversions from
Members
5
to the Exchange quoting
gateway processors; (iii) assurance of
the optical fiber path for participants
within extremely tight tolerances; (iv) a
re-architected and engineered
participant quoting gateway; and (v) the
Exchange being able to better measure
the performance of the network and
System at extremely tight tolerances and
the ability to provide Members with
reporting on the performance of their
own systems.
Proposal
The Exchange proposes to amend the
Fee Schedule to adopt new Section 1)c),
Excessive Quoting Fee. The Exchange
proposes to assess an Excessive Quoting
Fee of $10,000 per day to any Market
Maker
6
that exceeds 2.5 billion inbound
quotes
7
sent to the Exchange on that
particular day. In counting the total
number of quotes for the purposes of the
Excessive Quoting Fee, the Exchange
proposes to exclude messages that are
generated as a result of sending a mass
purge message to the Exchange. The
Exchange proposes that the 2.5 billion
inbound quote limit for the Excessive
Quoting Fee will reset each trading day.
The purpose of this proposal is to
ensure that Market Makers do not over
utilize the Exchange’s System by
sending excessive quotes to the
Exchange, to the detriment of all other
Members of the Exchange. Market
Makers that send an excessive number
of quotes to the Exchange on any
particular day have the potential
residual effect of exhausting System
resources, bandwidth, and capacity. In
turn, this may create latency and impact
other Members’ and non-Members’
ability to send messages to the Exchange
and receive timely executions.
The Exchange’s high performance
network provides unparalleled system
throughput and the capacity to handle
approximately 38 million messages per
second. On an average day, the
Exchange handles over approximately
11 billion total messages. These billions
of messages per day consume the
Exchange’s resources, particularly
storage capabilities. The combination of
(i) Member quoting behavior, (ii)
increased volatility in the marketplace,
and (iii) increased number of options
products quoted on the Exchange has a
significant impact on the total number
of quotes sent each trading day,
resulting in additional storage capacity.
The Exchange believes this proposal
will reduce the potential for market
participants to engage in excessive
quoting behavior that would require the
Exchange to increase its storage capacity
and will encourage quotes to be made in
good faith.
Recognizing that orders and
executions often occur in large numbers,
the purpose of this proposal is to focus
on activity that is truly disproportionate
while fairly allocating costs. The
proposal contemplates that a Market
Maker would have to exceed the high
threshold of 2.5 billion inbound quotes
before that Market Maker would be
charged the proposed fee on that
particular trading day. The Exchange
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Federal Register / Vol. 86, No. 60 / Wednesday, March 31, 2021 / Notices
8
See Securities Exchange Act Release No. 60117
(June 16, 2009), 74 FR 30190 (June 24, 2009) (SR–
AMEX–2009–25) (Notice of Filing and Immediate
Effectiveness of Proposed Rule Change Amending
the Schedule of Fees and Charges for Exchange
Services by Adding a Ratio Threshold Fee); 64655
(June 13, 2011), 76 FR 35495 (June 17, 2011) (SR–
AMEX–2011–37) (Notice of Filing and Immediate
Effectiveness of Proposed Rule Change Amending
the NYSE Amex Options Fee Schedule To Establish
a New Fee Designed To Encourage Efficient Use of
Bandwidth by ATP Firms and To Rename a Related
Existing Fee); 53522 (March 20, 2006), 71 FR 14975
(March 24, 2006) (SR–ISE–2006–09) (Notice of
Filing and Immediate Effectiveness of Proposed
Rule Change and Amendment No. 1 Thereto
Relating to Session/API Fees); 55941 (June 21,
2007), 72 FR 35535 (June 28, 2007) (SR–ISE–2007–
36) (Notice of Filing and Immediate Effectiveness of
a Proposed Rule Change as Modified by
Amendment No. 1 Thereto Relating to API Fees);
84963 (December 26, 2018), 84 FR 830 (January 31,
2019) (SR-CboeBZX–2018–095) (Notice of Filing
and Immediate Effectiveness of a Proposed Rule
Change To Amend the BZX Equities Fee Schedule).
9
15 U.S.C. 78f(b).
10
15 U.S.C. 78f(b)(4).
11
15 U.S.C. 78f(b)(5).
12
See supra note 8.
13
See Securities Exchange Act Release No. 73639
(November 19, 2014), 79 FR 72251 (December 5,
believes that it is in the interests of all
Members and market participants who
access the Exchange to not allow other
market participants to exhaust System
resources, but to encourage efficient
usage of network capacity.
The Exchange believes that this
concept is not new or novel.
8
The
Exchange notes that although prior
similar proposals from other exchanges
relating to capacity-type fees focused on
flow through capacity, the Exchange has
determined to adopt a quote cap
methodology at this time for business
reasons. The Exchange’s proposal is not
intended to raise revenue; rather, it is
intended to encourage efficient quoting
behavior so that market participants do
not exhaust System resources.
The Exchange believes adopting the
proposed fee will protect the integrity of
the MIAX Emerald market and benefit
all market participants of MIAX
Emerald by ensuring that the Exchange’s
System is not overloaded from excessive
quotes being sent to it each day. The
Exchange notes that it will provide
Market Makers with daily reports, free
of charge, which will detail their
quoting activity in order for those firms
to be fully aware of the number of
quotes they are sending to the Exchange.
This will allow firms to ensure that their
quoting behavior does not approach the
proposed 2.5 billion inbound quote
limit.
The Exchange notes that since the
launch of MIAX Emerald in March of
2019, no Market Maker has reached
approximately more than two thirds of
the proposed 2.5 billion inbound quote
limit threshold during peak trading
days, including days with high volatility
in the marketplace. Accordingly, the
Exchange does not anticipate that any
Market Maker will exceed the proposed
2.5 billion inbound quote limit and
become subject to the proposed fee. The
Exchange notes that this proposal is not
intended to raise revenue for the
Exchange; rather, it is intended to
ensure that Market Makers are using
their quoting methodologies in the most
efficient manner possible in light of the
Exchange’s highly deterministic and
transparent infrastructure.
2. Statutory Basis
The Exchange believes that its
proposal to amend its Fee Schedule is
consistent with Section 6(b) of the Act
9
in general, and furthers the objectives of
Section 6(b)(4) of the Act
10
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
11
in that it is
designed to promote just and equitable
principles of trade, remove
impediments to and perfect the
mechanism of a free and open market
and a national market system, and, in
general protects investors and the public
interest and is not designed to permit
unfair discrimination between
customers, issuers, brokers and dealers.
The Exchange believes that its
proposal is designed to promote just and
equitable principles of trade, 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
because it will encourage efficient
utilization of the Exchange’s highly
deterministic and transparent network
architecture. The Exchange believes that
unfettered usage of System capacity and
network resource consumption can have
a detrimental effect on all market
participants who are potentially
compelled to send quote messages to the
Exchange on an unlimited basis, to the
detriment of all other market
participants who access and use the
Exchange. Further, the proposed fee and
message limit will apply equally to all
Market Makers who send quotes to the
Exchange in excess of 2.5 billion
inbound quotes on any particular
trading day.
The Exchange believes that the
proposal is not unfairly discriminatory
due to the substantial quote limit that
the proposal contemplates before the
proposed fee kicks in, as well as the
normal Market Maker quote traffic that
the Exchange has experienced since it
began operations in March of 2019. In
addition, the Exchange believes that by
excluding messages that are generated
from a mass purge message sent to the
Exchange from the calculation of the
total quotes for the proposed fee is not
unfairly discriminatory because it will
keep from disadvantaging firms that
choose to use mass purges on a regular
basis for risk management reasons. The
Exchange notes that since the launch of
MIAX Emerald in March of 2019, no
Market Maker has reached
approximately more than two-thirds of
the proposed 2.5 billion inbound quote
limit threshold during peak trading
days, including days with high volatility
in the marketplace. The Exchange does
not anticipate that any Market Maker
will exceed the proposed 2.5 billion
inbound quote limit and become subject
to the proposed fee.
The Exchange further believes that its
proposal is reasonable, equitably
allocated and not unfairly
discriminatory because it is not
intended to raise revenue for the
Exchange; rather, it is intended to
ensure that Market Makers are using
their quoting methodologies in the most
efficient manner possible in light of the
Exchange’s highly deterministic and
transparent infrastructure. The
Exchange believes that the proposed fee
and quote limit is reasonable, equitably
allocated and not unfairly
discriminatory because this proposal
will reduce the potential for market
participants to engage in excessive
quoting behavior that would require the
Exchange to increase its storage capacity
and will encourage quotes to be made in
good faith. The Exchange notes that
other exchanges have implemented
similar fees and capacity type-limits in
order to deter their firms from over-
utilizing their trading systems and
exhausting system resources, while
encouraging the efficient usage of
system resources.
12
The Exchange therefore believes that
the proposed Excessive Quoting Fee
both appropriately reflects the benefits
to different firms of being able to send
quotes into the Exchange’s trading
System, and facilitates the
Commission’s goal of ensuring that
critical market infrastructure has ‘‘levels
of capacity, integrity, resiliency,
availability, and security adequate to
maintain their operational capability
and promote the maintenance of fair
and orderly markets.’’
13
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2014) (File No. S7–01–13) (Regulation SCI Adopting
Release).
14
15 U.S.C. 78s(b)(3)(A)(ii).
15
17 CFR 240.19b–4(f)(2).
16
17 CFR 200.30–3(a)(12).
The Exchange will also review the
quoting behavior of all firms on a
regular basis to ensure that the inbound
quote limit remains significantly higher
than the average firm quoting behavior,
while taking into account varying
market conditions. The Exchange will
regularly monitor prevailing market
conditions to ensure that the inbound
quote limit is sufficiently flexible and
could not inadvertently result in higher
than anticipated fees being charged to
firms that are providing liquidity in
volatile, high volume markets. The
Exchange does not want to discourage
such liquidity provision and believes
that it should be able to adjust the
inbound quote limit on a monthly basis
if need be.
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 believes that the
proposal does not put any market
participants at a relative disadvantage
compared to other market participants
because the proposed fee and message
limit will apply equally to all Market
Makers who send quotes to the
Exchange in excess of 2.5 billion
inbound quotes on any particular
trading day. The Exchange also believes
that the proposed fee neither favors nor
penalizes one or more categories of
market participants in a manner that
would impose an undue burden on
competition. Rather, the proposal seeks
to benefit all market participants by
encouraging the efficient utilization of
the Exchange’s highly deterministic and
transparent network architecture.
Further, the Exchange notes that since
the launch of MIAX Emerald in March
of 2019, no Market Maker has reached
approximately more than two-thirds of
the proposed 2.5 billion inbound quote
limit threshold during peak trading
days, including days with high volatility
in the marketplace. Accordingly, the
Exchange does not anticipate that any
Market Maker will exceed the proposed
2.5 billion inbound quote limit and
become subject to the proposed fee.
Accordingly, the Exchange believes that
the proposed Excessive Quoting Fee
does not favor certain categories of
market participants in a manner that
would impose a burden on competition.
Inter-Market Competition
The Exchange believes the proposal
does not place an undue burden on
competition on other self-regulatory
organizations that is not necessary or
appropriate because of the availability
of numerous substitute options
exchanges. There are 15 other options
exchanges where market participants
can become members and send quotes if
they deem the 2.5 billion inbound quote
limit to be too restrictive for their
quoting behavior. In addition, the
Exchange does not believe the proposal
will impose any burden on inter-market
competition as the proposal does not
address any competitive issues; rather,
it is intended to protect all market
participants of MIAX Emerald by
ensuring that the Exchange’s System is
not overloaded from excessive quotes
being sent to it each day.
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,
14
and Rule
19b–4(f)(2)
15
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.
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–2021–10 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–2021–10. This
file number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
internet website (http://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for website viewing and
printing in the Commission’s Public
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–2021–10 and
should be submitted on or before April
21, 2021.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.
16
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021–06562 Filed 3–30–21; 8:45 am]
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