[Federal Register Volume 87, Number 144 (Thursday, July 28, 2022)]
[Notices]
[Pages 45371-45382]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-16148]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-95352; File No. SR-EMERALD-2022-25]


Self-Regulatory Organizations; MIAX Emerald, LLC; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend 
Exchange Rule 515A and Exchange Rule 518

July 22, 2022.
    Pursuant to the provisions of Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice 
is hereby given that on July 13, 2022, MIAX Emerald, LLC (``MIAX 
Emerald'' or ``Exchange'') filed with the Securities and Exchange 
Commission (``Commission'') a proposed rule change as described in 
Items I and II below, which Items have been prepared by the Exchange. 
The Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend Exchange Rule 518 to adopt (i) 
Complex Auction-on-Arrival-Only (``cAOAO'') orders and (ii) Complex 
Attributable Orders. Additionally, the Exchange proposes to amend 
Exchange Rule 518 to exclude cPRIME Orders from the Complex MIAX 
Emerald Price Collar Protection. The Exchange proposes to amend 
Exchange Rule 515A to adopt ISO PRIME orders and to make last priority 
allocation available for cPRIME Agency Orders.
    The text of the proposed rule change is available on the Exchange's 
website at http://www.miaxoptions.com/rule-filings/emerald, at MIAX 
Emerald'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: (i) Exchange Rule 518 to adopt a 
new Complex Auction-on-Arrival-Only (``cAOAO'') order type and to amend 
relevant portions of the rule to describe the behavior and operation of 
a cAOAO order; \3\ (ii) Exchange Rule 518 to adopt a new order type, 
Complex Attributable Order; \4\ (iii) Interpretation and Policy .05 of 
Exchange Rule 518 to exclude cPRIME Orders from the Complex MIAX 
Emerald Price Collar Protection; \5\ (iv) Interpretation and Policy .12 
of Exchange Rule 515A to remove the provision that precludes last 
priority in allocation from being available to Initiating Members \6\ 
that submit cPRIME Agency Orders; \7\ and (v) amend Exchange Rule 515A 
to adopt a new ISO PRIME order type and a new allocation methodology 
for Market Maker interest that is executed during an ISO PRIME 
Auction.\8\
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    \3\ The Exchange notes that the proposed rule text and 
functionality is identical to current rule text and functionality on 
MIAX Options. See MIAX Options Exchange Rule 518(b)(9).
    \4\ The Exchange notes that the proposed rule text and 
functionality is substantively identical to current rule text and 
functionality on MIAX Options. See MIAX Options Exchange Rule 
518(b)(8).
    \5\ The Exchange notes that the proposed rule text and 
functionality is identical to current rule text and functionality on 
MIAX Options. See MIAX Options Exchange Rule 532(b)(6)(i).
    \6\ An ``Initiating Member'' initiates a PRIME Auction. See 
Exchange Rule 515A(a)(1). The term ``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.
    \7\ The Exchange notes that the proposed rule text and 
functionality is identical to current rule text and functionality on 
MIAX Options. See Interpretations and Policies .12(c)(v) of MIAX 
Options Exchange Rule 515A.
    \8\ The Exchange notes that the proposed rule text and 
functionality is identical to current rule text and functionality on 
MIAX Options. See Interpretations and Policies .08 of MIAX Options 
Exchange Rule 515A and MIAX Options Exchange Rule 
515A(a)(2)(iii)(C).
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Background
    The Exchange launched in December 2018, and at that time, the 
Exchange Rulebook contained complex order rules that were substantially 
similar to the rules of its affiliate exchange, MIAX Options. Since 
December 2018, MIAX Options has added functionality to grow its complex 
order business. The Exchange proposes to amend its rules to adopt 
functionality that currently exists on the MIAX Options Exchange. The 
Exchange and MIAX Options seek to align functionality where feasible. 
The proposed rule changes described below are identical, or 
substantively identical, to rule changes filed by the Exchange's 
affiliate, MIAX Options.\9\
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    \9\ See Securities Exchange Act Release Nos. 89212 (July 1, 
2020), 85 FR 41075 (July 8, 2020) (SR-MIAX-2020-20); 89085 (June 17, 
2020), 85 FR 37719 (June 23, 2020) (SR-MIAX-2020-16); 89206 (July 1, 
2020), 85 FR 41079 (July 8, 2020) (SR-MIAX-2020-19); and 89991 
(September 24, 2020), 85 FR 61782 (September 30, 2020) (SR-MIAX-
2020-31).
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i. Complex Auction-on-Arrival-Only Order Type
    The Exchange proposes to amend Exchange Rule 518, Complex Orders, 
to adopt a new cAOAO order type and to amend relevant portions of the 
rule to describe the behavior and operation of the new cAOAO order 
type. This proposed rule change is identical to a rule change filed by 
the Exchange's affiliate, MIAX Options.\10\
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    \10\ See Securities Exchange Act Release No. 89212 (July 1, 
2020), 85 FR 41075 (July 8, 2020) (SR-MIAX-2020-20) (amending MIAX 
Options Exchange Rule 518, Complex Orders, to adopt a new Complex 
Auction-on-Arrival-Only Order type); see also MIAX Options Exchange 
Rule 518(b)(9).
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    Currently, the Exchange offers a Complex Auction-on-Arrival or 
``cAOA'' order that is a complex order designated to be placed into a 
Complex Auction \11\ upon receipt or upon evaluation. Complex orders 
that are not designated

[[Page 45372]]

as cAOA will, by default, not initiate a Complex Auction upon arrival, 
but except as described in Exchange Rule 518, will be eligible to 
participate in a Complex Auction that is in progress when such complex 
order arrives, or if placed on the Strategy Book, may participate in or 
may initiate a Complex Auction, following evaluation conducted by the 
System.\12\ Complex orders that are designated as cIOC \13\ or cAOC 
\14\ are not eligible for cAOA designation, and their evaluation will 
not result in the initiation of a Complex Auction either upon arrival 
or if eligible when resting on the Strategy Book.\15\ Any unexecuted 
balance of a cAOA Order remaining upon the completion of the auction 
process is eligible \16\ to be placed on the Strategy Book.
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    \11\ See Exchange Rule 518(d).
    \12\ See Exchange Rule 518(b)(2)(i); The term ``System'' means 
the automated trading system used by the Exchange for the trading of 
securities. See Exchange Rule 100.
    \13\ A Complex Immediate-or-Cancel or ``cIOC'' order is a 
complex order that is to be executed in whole or in part upon 
receipt. Any portion not so executed is cancelled. See Exchange Rule 
518(b)(4).
    \14\ A Complex Auction-or-Cancel or ``cAOC'' order is a complex 
limit order used to provide liquidity during a specific Complex 
Auction with a time in force that corresponds with that of the 
event. cAOC Orders are not displayed to any market participant, and 
are not eligible for trading outside of the event. A cAOC order with 
a size greater than the aggregate auctioned size (as defined in Rule 
518(d)(4)) will be capped for allocation purposes at the aggregate 
auctioned size. See Exchange Rule 518(b)(3).
    \15\ See Exchange Rule 518(b)(2)(ii); The ``Strategy Book'' is 
the Exchange's electronic book of complex orders and complex quotes. 
See Exchange Rule 518(a)(17).
    \16\ Any unexecuted portion of a Complex Auction-eligible order 
remaining at the end of the Response Time Interval will either be: 
(A) evaluated to determine if it may initiate another Complex 
Auction; or (B) placed on the Strategy Book and ranked pursuant to 
subparagraph (c)(3) of Exchange Rule 518. See Exchange Rule 
518(d)(5)(ii).
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    The Exchange now proposes to adopt a new Complex Auction-on-
Arrival-Only or ``cAOAO'' order type.\17\ A cAOAO order is a complex 
order that will be placed into an auction as described in Rule 518(d) 
if eligible, and cancelled if not eligible. Any unexecuted balance of a 
cAOAO order remaining upon the completion of the auction process is 
cancelled. Similar to Immediate-or-Cancel orders, the cAOAO order type 
is designed to assist Members \18\ in achieving an expeditious 
execution by exposing eligible Complex orders for potential price 
improvement before cancelling any unexecuted balance.
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    \17\ See proposed Exchange Rule 518(b)(9).
    \18\ The term ``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.
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Example 1
    Suppose the following market in complex strategy ABC:

MIAX Emerald dcEBBO: \19\ 1.00-1.10 (10 x 10)
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    \19\ The dcEBBO is calculated using the best displayed price for 
each component of a complex strategy from the Simple Order Book. For 
stock-option orders, the dcEBBO for a complex strategy will be 
calculated using the Exchange's best displayed bid or offer in the 
individual option component(s) and the NBBO in the stock component. 
See Exchange Rule 518(a)(8).

    A cAOAO order is entered to buy 20 @1.07.
    A Request For Response (RFR) message is sent identifying the 
complex strategy, the price, quantity of matched complex quotes and/or 
orders at that price, imbalance quantity and side of the market of the 
cAOAO order, in accordance to Rule 518(d)(2).\20\
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    \20\ An auction is commenced as the cAOAO order satisfies the 
URIP requirement described in Exchange Rule 518(c)(5)(i).

    During the Response Time Interval, the following RFR Responses \21\ 
are received:
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    \21\ Members may submit a response to the RFR message (an ``RFR 
Response'') during the Response Time Interval. RFR Responses may be 
submitted in $0.01 increments. RFR Responses must be a cAOC Order or 
a cAOC eQuote as defined in Interpretations and Policies .02 of 
Exchange Rule 518 and may be submitted on either side of the market. 
See Exchange Rule 518(d)(4).

Response 1: Sell 10 @1.07
Response 2: Sell 5 @1.07

    At the conclusion of the Response Time Interval, the cAOAO order 
trades 15 @1.07.
    The remaining quantity of 5 contracts from the cAOAO order is then 
cancelled.
    The Exchange proposes to amend Exchange Rule 518(b), Types of 
Complex Orders, to adopt a new Complex Auction-on-Arrival Only 
(``cAOAO'') order type to be included among other complex order types 
that may be submitted to the Exchange as provided by Exchange Rule 
518(b)(1). In addition, certain provisions in current Exchange Rule 518 
that apply to cAOA orders would also apply to cAOAO orders. Therefore, 
the Exchange proposes to amend Rule 518 to incorporate references to 
cAOAO orders as necessary. Specifically, the Exchange proposes to amend 
Rule 518(c)(6) to provide that complex orders may be submitted as 
market orders and may be designated as cAOA or cAOAO. Additionally, the 
Exchange proposes to amend Rule 518(c)(6)(i) to provide that complex 
market orders designated as cAOA or cAOAO may initiate a Complex 
Auction upon arrival or join a Complex Auction in progress. Finally, 
the Exchange proposes to amend Rule 518(c)(6)(ii) to provide that 
complex market orders not designated as cAOA or cAOAO will trade 
immediately with any contra-side complex orders or quotes, or against 
the individual legs, up to and including the dcEBBO, and may be subject 
to the managed interest process described in subparagraph (c)(4) of 
Exchange Rule 518, and the evaluation process described in subparagraph 
(c)(5) of Exchange Rule 518.
    The Exchange also proposes to amend Rule 518(d) to incorporate 
references to cAOAO orders. Specifically, the Exchange proposes to 
amend Rule 518(d)(1) to provide that, in order to initiate a Complex 
Auction upon receipt, a Complex Auction-eligible order must be 
designated as cAOA or cAOAO. Also, the order must meet the criteria 
described in Interpretation and Policy .03(b) of Exchange Rule 518 
regarding the URIP.\22\ Also, a complex order not designated as cAOA or 
cAOAO (i.e., a complex order considered by default to be ``do not 
auction on arrival'' by the System) may: (i) join a Complex Auction in 
progress at the time of receipt; (ii) become a Complex Auction-eligible 
order after resting on the Strategy Book and automatically join a 
Complex Auction then in effect for the complex strategy; or (iii) 
initiate a Complex Auction if it meets the criteria described in 
Interpretation and Policy .03(a) of Exchange Rule 518 regarding the IIP 
or .03(c) of Exchange Rule 518 regarding the RIP.
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    \22\ Upon receipt of a complex order when the complex strategy 
is open, the System will calculate an Upon Receipt Improvement 
Percentage (``URIP'') value, which is a defined percentage of the 
current dcEBBO bid/ask differential. Such percentage will be defined 
by the Exchange and communicated to Members via Regulatory Circular. 
If a Complex Auction-eligible Order is priced equal to, or improves, 
the URIP value and is also priced to improve other complex orders 
and/or quotes resting at the top of the Strategy Book, the complex 
order will be eligible to initiate a Complex Auction. See 
Interpretations and Polices .03(b) of Exchange Rule 518.
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    Aside from including references to cAOAO orders, the proposal makes 
no changes to the operation of Rule 518(d)(1).
    The Exchange also proposes to amend Exchange Rule 518(d)(9) to add 
a reference to cAOAO orders. The title of Rule 518(d)(9) as amended 
will read, ``Processing of Non-cAOA or cAOAO Complex Orders.'' The text 
of Rule 518(d)(9) as amended will provide that a complex order not 
designated as cAOA or cAOAO will either be: (i) executed in full at a 
single price or at multiple prices up to its limit price, with 
remaining contracts placed on the

[[Page 45373]]

Strategy Book; (ii) executed until the order exhausts the opposite side 
dcEBBO, at which time the order will be placed on the Strategy Book and 
evaluated for Complex Auction eligibility; or (iii) cancelled. Aside 
from adding a reference for cAOAO orders, the proposal makes no changes 
to the operation of Rule 518(d)(9).
    The Exchange believes the proposed changes will allow the Exchange 
to effectively implement the proposed cAOAO order type.
ii. Complex Attributable Order Type
    The Exchange proposes to amend Exchange Rule 518, Complex Orders, 
to adopt a new order type, Complex Attributable Order.\23\ This 
proposed rule change is substantively identical to a rule change filed 
by the Exchange's affiliate, MIAX Options.\24\
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    \23\ See proposed Rule 518(b)(8).
    \24\ See Securities Exchange Act Release No. 89085 (June 17, 
2020), 85 FR 37719 (June 23, 2020) (SR-MIAX-2020-16) (amending MIAX 
Options Exchange Rule 518, Complex Orders, to adopt a new Complex 
Attributable Order type); see also MIAX Options Exchange Rule 
518(b)(8).
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    Currently, the Exchange offers an Attributable Order \25\ in its 
simple market.\26\ Current Exchange Rule 516(e) states that an 
Attributable Order is a market \27\ or limit order \28\ which displays 
the user firm ID for purposes of trading on the Exchange. Use of 
Attributable Orders is voluntary. Attributable Orders entered into the 
Exchange System will be available for execution but may not display the 
user firm ID for all Exchange processes. The Exchange will issue a 
Regulatory Circular specifying the Exchange processes and the class(es) 
of securities for which the Attributable Order type shall be 
available.\29\ Currently, an Attributable Order is available for all 
option classes \30\ and will display the Executing Broker MPID \31\ for 
new and updated simple orders on the MIAX Order (``MOR'') Feed and will 
also display the Executing Broker MPID for certain liquidity seeking 
events such as opening/reopening imbalances or the opening route 
mechanism on the Administrative Information Subscriber (``AIS'') Feed.
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    \25\ See Exchange Rule 516(e).
    \26\ The Exchange has a Simple Order Book, which is the 
Exchange's regular electronic book of orders and quotes. See 
Exchange Rule 518(a)(15). The Exchange also has a Strategy Order 
book, which is the Exchange's electronic book of complex orders and 
complex quotes. See Exchange Rule 518(a)(17).
    \27\ A market order is an order to buy or sell a stated number 
of option contracts at the best price available at the time of 
execution. See Exchange Rule 516(a).
    \28\ A limit order is an order to buy or sell a stated number of 
option contracts at a specified price or better. See Exchange Rule 
516(b).
    \29\ See Exchange Rule 516(e).
    \30\ See MIAX Emerald Regulatory Circular 2019-28, Attributable 
Order (February 28, 2019) available at https://www.miaxoptions.com/sites/default/files/circular-files/MIAX_Emerald_RC_2019_28.pdf.
    \31\ An MPID is a Market Participant Identifier used by the 
Exchange.
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    The Exchange now proposes to adopt new subparagraph (8) to Exchange 
Rule 518(b) which will similarly provide that a Complex Attributable 
Order is a complex market or limit order which displays the user firm 
ID for purposes of trading on the Exchange. Proposed Rule 518(b)(8) 
further states that the use of Complex Attributable Orders is 
voluntary. Complex Attributable Orders entered into the Exchange System 
will be available for execution but may not display the Executing 
Broker ID for all Exchange processes. Complex Attributable Orders will 
be used similarly to Attributable Orders on the simple market.
    If enabled, the Executing Broker MPID will be displayed on the MOR 
Feed for new and updated complex orders, and on the AIS Feed when a 
Complex Attributable Order initiates or participates in the following 
events: a cPRIME Auction, a Complex Auction, or a Complex Liquidity 
Exposure Process (``cLEP'') Auction. The Complex Attributable Order 
type can be activated on an order-by-order basis with the default set 
to off. The Exchange will issue a Regulatory Circular specifying the 
Exchange processes and the class(es) of securities for which the 
Complex Attributable Order type shall be available.\32\
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    \32\ The ability to display information pertaining to a single 
order depends upon the Exchange's ability to broadcast that 
information to its members. This is currently accomplished through 
the Exchange's market data products, which, for example, includes 
the Administrative Information Subscriber Feed (``AIS''). Thus, the 
functionality of a Complex Attributable Order is linked to what is 
technologically feasible through the Exchange's market data 
products. The definition of a Complex Attributable Order will 
acknowledge this relationship and allow the functionality of the 
Complex Attributable Order type to develop and be deployed 
correspondingly with technical advances related to its market data 
products. In its definition of a Complex Attributable Order, the 
Exchange proposes to state that, ``Complex Attributable Orders 
entered into the Exchange System will be available for execution but 
may not display the user firm ID for all Exchange processes.'' This 
will serve to put Emerald members on notice that the functionality 
of a Complex Attributable Order to display the user firm ID, as it 
continually develops, may not be available during all Exchange 
processes.
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iii. Complex PRIME Through MPC
    The Exchange proposes to amend Interpretation and Policy .05 of 
Exchange Rule 518 to exclude cPRIME Orders from the Complex MIAX 
Emerald Price Collar Protection provided to complex orders as described 
in paragraph (f)(1) of the Rule. This proposed rule change is identical 
to a rule change filed by the Exchange's affiliate, MIAX Options.\33\
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    \33\ See Securities Exchange Act Release No. 89206 (July 1, 
2020), 85 FR 41079 (July 8, 2020) (SR-MIAX-2020-19) (amending MIAX 
Options Exchange Rule 518, Complex Orders, to exclude cPRIME Orders 
from the Complex MIAX Options Price Collar Protection provided to 
complex orders as described in the Rule); see also MIAX Options 
Exchange Rule 532(b)(6)(i).
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Background
    In December of 2018, the Exchange adopted rules governing the 
trading in, and detailing the functionality of the MIAX Emerald System 
in the handling of, complex orders on the Exchange.\34\ In order to 
further support the trading of complex orders on the Exchange, the 
Exchange adopted an additional price protection feature for complex 
orders, the Complex MIAX Emerald Price Collar (``MPC'').\35\ The MPC 
price protection feature is designed to help maintain a fair and 
orderly market by helping to mitigate the potential risk of executions 
at prices that are extreme and potentially erroneous.
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    \34\ 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).
    \35\ Id.
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    More specifically, the MPC price protection feature is an Exchange-
wide price protection mechanism under which a complex order or eQuote 
to sell will not be displayed or executed at a price that is lower than 
the opposite side cNBBO \36\ at the time the MPC is assigned by the 
System (i.e., upon receipt or upon opening) by more than a specific 
dollar amount expressed in $0.01 increments (the ``MPC Setting''), and 
under which a complex order or eQuote to buy will not be displayed or 
executed at a price that is higher than the opposite side cNBBO offer 
at the time the MPC is assigned by the System by more than the MPC 
Setting (each the ``MPC Price'').\37\ All complex orders, together with 
cAOC eQuotes and cIOC eQuotes (as defined in Interpretations and 
Policies .02(c)(1) and (2) of Exchange Rule 518) (collectively, 
``eQuotes''), are subject to the MPC price protection feature.\38\
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    \36\ The cNBBO is calculated using the NBBO for each component 
of a complex strategy to establish the best net bid and offer for a 
complex strategy. See Exchange Rule 518(a)(2).
    \37\ See Interpretations and Policies .05(f) of Exchange Rule 
518.
    \38\ See Interpretations and Policies .05(f)(1) of Exchange Rule 
518.
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    When the Exchange began its operations in December of 2018, the 
Exchange Rulebook contained three complex order types: Complex

[[Page 45374]]

Customer Cross (``cC2C''),\39\ Complex Qualified Contingent Cross 
(``cQCC''),\40\ and cPRIME,\41\ which, by definition, became subject to 
the MPC price protection. The Exchange rules exclude these three new 
complex order types from certain price protection features available on 
the Exchange.\42\ Specifically, in Interpretation and Policy .05(d) of 
Rule 518, it is stated that the Implied Away Best Bid or Offer 
(``ixABBO'') Price Protection feature is not available for cPRIME 
Orders, cC2C Orders, and cQCC Orders. The ixABBO protection was not 
available initially because this type of protection wasn't necessary 
for these complex order types. Specifically, with respect to cPRIME 
Orders, a cPRIME Agency Order is received by the Exchange, and 
guaranteed an execution against, a contra-side order at a single price 
or at multiple prices with a ``stop'' price outside of which the cPRIME 
Agency Order, the contra-side order, and auction responses will not be 
executed.
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    \39\ See Exchange Rule 518(b)(5).
    \40\ See Exchange Rule 518(b)(6).
    \41\ See Exchange Rule 518(b)(7).
    \42\ See supra note 34.
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    The Exchange also excluded cPRIME Orders, cC2C Orders and cQCC 
Orders from the MIAX Emerald Order Monitor for Complex Orders 
(``cMOM'') stating in its filing, ``that cPRIME Orders, cC2C Orders and 
cQCC Orders are all guaranteed an execution at a price or prices 
determined by the participants, and cPRIME Orders are subject to 
further price improvement. Therefore, the cMOM price protection feature 
isn't necessary for these complex order types, and thus these complex 
orders types will not be rejected based upon cMOM price parameters.'' 
\43\
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    \43\ Id.
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    For similar reasons, the Exchange now proposes to amend 
Interpretation and Policy .05(f)(1) of Exchange Rule 518. As amended, 
Interpretation and Policy .05(f)(1) of Exchange Rule 518 will state 
that, all complex orders (excluding cPRIME Orders),\44\ together with 
AOC eQuotes and cIOC eQuotes (as defined in Interpretation and Policy 
.02(c)(1) and (c) of Exchange Rule 518) (collectively ``eQuotes''), are 
subject to the MPC price protection feature.
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    \44\ The Exchange notes that while cPRIME, cQCC, and cC2C Orders 
are all paired orders, the proposal is limited in scope to cPRIME 
Orders only.
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    A cPRIME Order is a paired order with an established minimum 
execution price that must meet certain defined internal criteria to be 
eligible to participate in a cPRIME Auction. Specifically, the 
initiating price for a cPRIME Agency Order must be better than (inside) 
the icEBBO \45\ for the strategy and any other complex orders on the 
Strategy Book.\46\ The System will reject cPRIME Agency Orders 
submitted with an initiating price that is equal to or worse than 
(outside) the icEBBO or any other complex orders on the Strategy 
Book.\47\ Because of these requirements, the Exchange believes that the 
MPC protection for cPRIME Orders is unnecessary, and in certain 
occasions, prevents orders that are otherwise eligible for 
participation in the cPRIME process from being accepted by the 
Exchange. Further, a cPRIME Order is a paired order, and the Agency 
side of a cPRIME Order is effectively executed when received (and, in 
the case of cPRIME Orders, subject to price improvement) because it is 
a paired order with a guaranteed execution.
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    \45\ The Implied Complex MIAX Emerald Best Bid or Offer or 
``icEBBO'' is a calculation that uses the best price from the Simple 
Order Book for each component of a complex strategy including 
displayed and non-displayed interest. For stock-option orders, the 
icEBBO for a complex strategy will be calculated using the best 
price (whether displayed or non-displayed) on the Simple Order Book 
in the individual option component(s), and the NBBO in the stock 
component. See Exchange Rule 518(a)(12).
    \46\ The ``Strategy Book'' is the Exchange's electronic book of 
complex orders and complex quotes. See Exchange Rule 518(a)(17).
    \47\ See Interpretations and Policies .12(a)(i) of Exchange Rule 
515A.
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    The following examples demonstrate the current behavior as compared 
to the proposed behavior.
Current cPRIME Evaluation Subject to MPC Protection
Example 1A The auction start price (``ASP'') of a Complex PRIME order 
cannot be outside the MPC opposite the Agency side

MIAX Emerald Price Collar Value (MPCV) = 0.25
cEBBO 3.00 x 4.00
cNBBO 3.00 x 3.50
MPC = (3.00 - 0.25) x (3.50 + 0.25) = 2.75 x 3.75

    An incoming cPRIME Order is received where the ASP of the Agency 
order is to buy complex strategies at a price of 3.80. Because the ASP 
of the Agency order to buy at 3.80 is outside the opposite side MPC of 
3.75 (cNBO plus the MPCV), the cPRIME Order is rejected.
Proposed cPRIME Evaluation Without MPC Protection
Example 1B The auction start price of a Complex PRIME Order CAN be 
outside the MPC opposite the Agency side

MIAX Emerald Price Collar Value (MPCV) = 0.25
cEBBO 3.00 x 4.00
cNBBO 3.00 x 3.50
    MPC = (3.00 - 0.25) x (3.50 + 0.25) = 2.75 x 3.75

    An incoming cPRIME Order is received where the ASP of the Agency 
Order is to buy complex strategies at a price of 3.80. Although the ASP 
of the Agency Order to buy at 3.80 is outside the opposite side MPC of 
3.75 (cNBO plus the MPCV), the cPRIME Order is accepted and initiates 
an auction.
Proposed cPRIME Evaluation Without MPC Protection When Inside the 
icEBBO
Example 2A The auction start price of a Complex PRIME Order CAN be 
outside the MPC opposite the Agency side, and accepted if inside the 
icEBBO

MIAX Emerald Price Collar Value (MPCV) = 0.25
Strategy +1A+1B
Option A EBBO \48\ 1.00 x 1.50
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    \48\ The term ``EBBO'' means the best bid or offer on the Simple 
Order Book on the Exchange. See Exchange Rule 518(a)(10).
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Option B EBBO 2.00 x 2.50
icEBBO 1(1.00 + 2.00) x 1(1.50 + 2.50) = 3.00 x 4.00
Option A NBBO 1.00 x 1.30
Option B NBBO 2.00 x 2.20
cNBBO 1(1.00 + 2.00) x 1(1.30 + 2.20) = 3.00 x 3.50
MPC = (3.00 - 0.25) x (3.50 + 0.25) = 2.75 x 3.75

    An incoming cPRIME Order is received where the ASP of the Agency 
Order is to buy complex strategies at a price of 3.80. The ASP of the 
Agency Order to buy at 3.80 is permitted outside the opposite side MPC 
of 3.75 (cNBO plus the MPCV), and it is inside the icEBBO of 3.00 x 
4.00; therefore the cPRIME Order is accepted and initiates an auction.
Proposed cPRIME Evaluation Without MPC Protection When Outside the 
icEBBO
Example 2B The auction start price of a Complex PRIME Order CAN be 
outside the MPC opposite the Agency side, but is rejected if outside 
the icEBBO \49\
---------------------------------------------------------------------------

    \49\ The initiating price for a cPRIME Agency Order must be 
better than (inside) the icEBBO for the strategy and any other 
complex orders on the Strategy Book. The System will reject cPRIME 
Agency Orders submitted with an initiating price that is equal to or 
worse than (outside) the icEBBO or any other complex orders on the 
Strategy Book. See Interpretations and Policies .12(a)(i) of 
Exchange Rule 515A.
---------------------------------------------------------------------------

MIAX Emerald Price Collar Value (MPCV) = 0.25
Strategy +1A+1B
Option A EBBO 1.00 x 1.50

[[Page 45375]]

Option B EBBO 2.00 x 2.25
icEBBO 1(1.00 + 2.00) x 1(1.50 + 2.25) = 3.00 x 3.75
Option A NBBO \50\ 1.00 x 1.30
---------------------------------------------------------------------------

    \50\ The term ``NBBO'' means the national best bid or offer as 
calculated by the Exchange based on market information received by 
the Exchange from the appropriate Securities Information Processor 
(``SIP''). See Exchange Rule 518(a)(14).
---------------------------------------------------------------------------

Option B NBBO 2.00 x 2.20
cNBBO 1(1.00 + 2.00) x 1(1.30 + 2.20) = 3.00 x 3.50
MPC = (3.00 - 0.25) x (3.50 + 0.25) = 2.75 x 3.75
    An incoming cPRIME Order is received where the ASP of the Agency 
Order is to buy complex strategies at a price of 3.80. Although the ASP 
of the Agency Order to buy at 3.80 is permitted outside the opposite 
side MPC of 3.75 (cNBO plus the MPCV), it is outside the icEBBO of 3.00 
x 3.75; therefore the cPRIME Order is rejected.
iv. Complex Last To Fill
    The Exchange proposes to amend Interpretation and Policy .12 of 
Exchange Rule 515A to remove the provision that precludes last priority 
in allocation from being available to Initiating Members \51\ that 
submit cPRIME Agency Orders. This proposed rule change is identical to 
a rule change filed by the Exchange's affiliate, MIAX Options.\52\
---------------------------------------------------------------------------

    \51\ An ``Initiating Member'' initiates a PRIME Auction. See 
Exchange Rule 515A(a)(1). The term ``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.
    \52\ See Securities Exchange Act Release No. 89206 (July 1, 
2020), 85 FR 41079 (July 8, 2020) (SR-MIAX-2020-19) (amending 
Interpretation and Policy .12 of MIAX Options Exchange Rule 515A to 
remove the provision that precludes last priority in allocation from 
being available to Initiating Members that submit cPRIME Agency 
Orders); see also Interpretations and Policies .12(c)(v) of MIAX 
Options Exchange Rule 515A.
---------------------------------------------------------------------------

    Currently Interpretation and Policy .12(c)(v) of Exchange Rule 515A 
provides that the order allocation provisions contained in Rule 
515A(a)(2)(iii) shall apply to cPRIME Auctions, provided that: (A) all 
references to contracts shall be deemed to be references to complex 
strategies as defined in Rule 518(a)(6); and (B) the last priority 
allocation option described in Rule 515A(a)(2)(iii)(L) is not available 
for Initiating Members that submit cPRIME Agency Orders. When the 
Exchange launched and adopted cPRIME functionality,\53\ the Exchange 
stated that the last priority in allocation option described in Rule 
515A(a)(2)(iii)(L) \54\ is not available for Initiating Members that 
submit cPRIME Agency Orders. As, at that time, the Exchange did not 
believe that there was significant Member demand for the use of the 
last priority in allocation option in cPRIME Auctions, there was 
therefore no need to include it in the allocation model then in use for 
cPRIME Auctions.
---------------------------------------------------------------------------

    \53\ See supra note 34.
    \54\ If the Initiating Member elected to have last priority in 
allocation when submitting an Agency Order to initiate an Auction 
against a single-price submission, the Initiating Member will be 
allocated only the amount of contracts remaining, if any, after the 
Agency Order is allocated to all other responses at the single price 
specified by the Initiating Member. See Exchange Rule 
515A(a)(2)(iii)(L).
---------------------------------------------------------------------------

    The Exchange now believes that there is significant Member demand 
for the use of the last priority in [sic] allocation option in cPRIME 
Auctions, and proposes to amend its current rule to remove the 
provision that makes it unavailable for Initiating Members that submit 
cPRIME Agency Orders. The Exchange proposes to remove subsection 
(c)(v)(B) of Interpretation and Policy .12 in its entirety. New 
proposed subsection (c)(v) will provide that, the order allocation 
provisions contained in Rule 515A(a)(2)(iii) shall apply to cPRIME 
Auctions, provided that all references to contracts shall be deemed to 
be references to complex strategies as defined in Rule 518(a)(6).
v. ISO PRIME
    The Exchange proposes to amend Exchange Rule 515A, MIAX Emerald 
Price Improvement Mechanism (``PRIME'') and PRIME Solicitation 
Mechanism, to adopt a new ISO PRIME order type. This proposed rule 
change is identical to a rule change filed by the Exchange's affiliate, 
MIAX Options.\55\
---------------------------------------------------------------------------

    \55\ See Securities Exchange Act Release No. 89991 (September 
24, 2020), 85 FR 61782 (September 30, 2020) (SR-MIAX-2020-31) 
(amending MIAX Options Exchange Rule 515A, MIAX PRIME and PRIME 
Solicitation Mechanism, to adopt a new ISO PRIME Order type); see 
also Interpretations and Policies .08 of MIAX Options Exchange Rule 
515A.
---------------------------------------------------------------------------

    PRIME is a process by which a Member may electronically submit for 
execution (``Auction'') an order it represents as agent (``Agency 
Order'') against principal interest, and/or an Agency Order against 
solicited interest.\56\ A Member (the ``Initiating Member'') may 
initiate an Auction provided all of the following are met: (i) the 
Agency Order is in a class designated as eligible for PRIME as 
determined by the Exchange and within the designated Auction order 
eligibility size parameters as such size parameters are determined by 
the Exchange; (ii) the Initiating Member must stop the entire Agency 
Order as principal or with a solicited order at the better of the NBBO 
or the Agency Order's limit price (if the order is a limit order); 
(iii) with respect to Agency Orders that have a size of less than 50 
contracts, if at the time of receipt of the Agency Order, the NBBO has 
a bid/ask differential of $0.01, the System will reject the Agency 
Order; and (iv) Post-Only OQs \57\ may not participate in PRIME as an 
Agency Order, principal interest or solicited interest.\58\
---------------------------------------------------------------------------

    \56\ See Exchange Rule 515A(a).
    \57\ Post-Only Orders are defined in Rule 516(m). Post-Only 
Quotes are defined in Rule 517(a)(1)(i). Post-Only Orders and Post-
Only Quotes are together referred to as ``Post-Only OQ.'' See 
Exchange Rule 515(a).
    \58\ See Exchange Rule 515A(a)(1).
---------------------------------------------------------------------------

    An Intermarket Sweep Order (``ISO'') is defined in Exchange Rule 
1400(i) as a limit order for an options series that, simultaneously 
with the routing of the ISO, one or more additional ISOs, as necessary, 
are routed to execute against the full displayed size of any Protected 
Bid,\59\ in the case of a limit order to sell, or any Protected 
Offer,\60\ in the case of a limit order to buy, for the options series 
with a price that is superior to the limit price of the ISO. A Member 
may submit an ISO to the Exchange only if it has simultaneously routed 
one or more additional Intermarket Sweep Orders to execute against the 
full displayed size of any Protected Bid, in the case of a limit order 
to sell, or Protected Offer, in the case of a limit order to buy, for 
an options series with a price that is superior to the limit price of 
the ISO. An ISO may be either an Immediate-Or-Cancel Order \61\ or an 
order that expires on the day it is entered.\62\
---------------------------------------------------------------------------

    \59\ A ``Protected Bid'' or ``Protected Offer'' means a Bid or 
Offer in an options series, respectively, that: (a) is disseminated 
pursuant to the OPRA Plan; and (b) is the Best Bid or Best Offer, 
respectively, displayed by an Eligible Exchange. See MIAX Options 
Exchange Rule 1400(p), which is incorporated into the Exchange Rules 
by reference.
    \60\ Id.
    \61\ An immediate-or-cancel order is an order that is to be 
executed in whole or in part upon receipt. Any portion not so 
executed is cancelled. An immediate-or-cancel order is not valid 
during the opening rotation process described in Rule 503. See 
Exchange Rule 516(c).
    \62\ See Exchange Rule 1400(i).
---------------------------------------------------------------------------

    The Exchange now proposes to implement an ISO PRIME order type 
(``ISO PRIME'') that will allow the submission of an ISO into the 
PRIME. Specifically, an ISO PRIME is the transmission of two orders for 
crossing pursuant to Rule 515A, MIAX Emerald Price Improvement 
Mechanism (``PRIME'') and PRIME Solicitation Mechanism, without regard 
for better priced Protected Bids or Protected Offers because the Member 
transmitting the ISO PRIME order to the Exchange has, simultaneously 
with the submission of the ISO PRIME order, routed one or more ISOs, as 
necessary,

[[Page 45376]]

to execute against the full displayed size of any Protected Bid or 
Protected Offer that is superior to the starting PRIME Auction price, 
and has swept all interest in the Exchange's Book \63\ priced better 
than the proposed Auction starting price.\64\ Any execution(s) 
resulting from such sweeps shall accrue to the PRIME Order, meaning 
that any executions will be given to the agency side of the order.
---------------------------------------------------------------------------

    \63\ The term ``Book'' means the electronic book of buy and sell 
orders and quotes maintained by the System. See Exchange Rule 100.
    \64\ The Exchange notes that it has an ISO Trade Through 
surveillance in place that will identify and capture when an order 
provider marks an order (standard or PRIME) ISO and the order 
possibly trades through a protected bid or ask price at an away 
exchange. The Exchange will monitor the NBBO prior to and after the 
order trades on the Exchange to detect potential trade through 
violations.
---------------------------------------------------------------------------

    The Exchange will accept an ISO PRIME provided that the order 
adheres to the current PRIME Order acceptance criteria outlined above, 
except that the initiating Member is only required to stop the entire 
Agency Order as principal or with a solicited order at the Agency 
Order's limit price (if the order is a limit order). Therefore, the 
Initiating Member may initiate an Auction provided that all of the 
following are met: (i) the Agency Order is in a class designated as 
eligible for PRIME as determined by the Exchange and within the 
designated Auction order eligibility size parameters as such size 
parameters are determined by the Exchange; (ii) the Initiating Member 
must stop the entire Agency Order as principal or with a solicited 
order at the better of the NBBO or the Agency Order's limit price (if 
the order is a limit order); (iii) with respect to Agency Orders that 
have a size of less than 50 contracts, if at the time of receipt of the 
Agency Order, the NBBO has a bid/ask differential of $0.01, the System 
will reject the Agency Order; and (iv) Post-Only OQs may not 
participate in PRIME as an Agency Order, principal interest or 
solicited interest.\65\
---------------------------------------------------------------------------

    \65\ See Exchange Rule 515A(a)(1).
---------------------------------------------------------------------------

    The Exchange will process the ISO PRIME order in the same manner 
that it currently processes PRIME Orders, except that it will initiate 
a PRIME Auction without protecting away prices. The Member transmitting 
the ISO PRIME order will bear the responsibility to clear all better 
priced interest away simultaneously with the submission of the ISO 
PRIME order to the Exchange.\66\
---------------------------------------------------------------------------

    \66\ See supra note 64.
---------------------------------------------------------------------------

    The Exchange also proposes to adopt a new allocation methodology 
specifically for Market Maker \67\ interest that is executed during an 
ISO PRIME Auction.\68\ Currently, allocation in a PRIME Auction follows 
the order allocation methodology defined in Exchange Rule 
515A(a)(2)(iii), which provides that Priority Customer \69\ Orders 
resting on the Book before, or that are received during, the Response 
Time Interval \70\ and Priority Customer RFR \71\ responses shall, 
collectively have first priority to trade against the Agency Order. The 
allocation of an Agency Order against the Priority Customer Orders 
resting in the Book, Priority Customer Orders received during the 
Response Time Interval, and Priority Customer RFR responses shall be in 
the sequence in which they are received by the System.\72\ Market Maker 
priority quotes \73\ and RFR responses from Market Makers with priority 
quotes will collectively have second priority. The allocation of Agency 
Orders against these contra side quotes and RFR responses shall be on a 
size pro rata basis \74\ as defined in Rule 514(c)(2).\75\ Professional 
Interest \76\ Orders resting in the Book, Professional Interest Orders 
placed in the Book during the Response Time Interval, Professional 
Interest quotes, and Professional Interest RFR responses will 
collectively have third priority. The allocation of Agency Orders 
against these contra side orders and RFR Responses shall be on a size 
pro rata basis as defined in Rule 514(c)(2).\77\
---------------------------------------------------------------------------

    \67\ The term ``Market Makers'' refers to ``Lead Market 
Makers'', ``Primary Lead Market Makers'' and ``Registered Market 
Makers'' collectively. See Exchange Rule 100.
    \68\ See proposed Interpretations and Policies .12(c)(v) of Rule 
515A.
    \69\ The term ``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.
    \70\ The ``Response Time Interval'' means the period of time 
during which responses to the Request for Responses (``RFR'') may be 
entered. The RFR timer is 100 milliseconds. See MIAX Emerald 
Regulatory Circular 2019-65, MIAX Emerald PRIME Timer Effective 
August 26, 2019 (August 13, 2019) available at https://www.miaxoptions.com/sites/default/files/circular-files/MIAX_Emerald_RC_2019_65.pdf.
    \71\ When the Exchange receives a properly designated Agency 
Order for auction processing, a RFR detailing the option, side, 
size, and initiating price will be sent to all subscribers of the 
Exchange's data feeds. See Exchange Rule 515A(a)(2)(i)(B).
    \72\ See Exchange Rule 515A(a)(2)(iii)(B).
    \73\ To be considered a priority quote, at the time of 
execution, each of the following standards must be met: (A) the bid/
ask differential of a Market Maker's two-sided quote pair must be 
valid width (no wider than the bid/ask differentials outlined in 
Exchange Rule 603(b)(4)); (B) the initial size of both or the Market 
Maker's bid and the offer must be in compliance with the 
requirements of Exchange Rule 604(b)(2); (C) the bid/ask 
differential of a Market Maker's two-sided quote pair must meet the 
priority quote width requirements defined in Exchange Rule 
517(b)(1)(ii) for each option; and (D) either of the following are 
true: 1. At the time a locking or crossing quote or order enters the 
System, the Market Maker's two-sided quote pair must be valid width 
for that option and must have been resting on the Book; or 2. 
Immediately prior to the time the Market Maker enters a new quote 
that locks or crosses the EBBO, the Market Maker must have had a 
valid width quote already existing (i.e., exclusive of the Market 
Maker's new marketable quote or update) among his two-sided quotes 
for that option. See Exchange Rule 517(b). The term ``EBBO'' means 
the best bid or offer on the Exchange. See Exchange Rule 100.
    \74\ Exchange Rule 514(c)(2), Pro-Rata Allocation, states that, 
under this method, resting quotes and orders on the Book are 
prioritized according to price. If there are two or more quotes or 
orders at the best price then the contracts are allocated 
proportionally according to size (in a pro-rata fashion). If the 
executed quantity cannot be evenly allocated, the remaining 
contracts will be distributed one at a time based upon price-size-
time priority.
    \75\ See Exchange Rule 515A(a)(2)(iii)(C).
    \76\ The term ``Professional Interest'' means (i) an order that 
is for the account of a person or entity that is not a Priority 
Customer, or (ii) an order or non-priority quote for the account of 
a Market Maker. See Exchange Rule 100.
    \77\ See Exchange Rule 515A(a)(2)(iii)(D).
---------------------------------------------------------------------------

    The Exchange now proposes to amend Exchange Rule 515A(a)(2)(iii)(C) 
to adopt a new allocation for Market Maker priority quotes at the 
conclusion of an Auction for an ISO PRIME order. The Exchange notes 
that the proposed rule is identical to MIAX Options Exchange Rule 
515A(a)(2)(iii)(C). The proposed rule text will state that, at the 
conclusion of an Auction for an ISO PRIME order, the allocation of 
Agency Orders at the final Auction price shall be: (i) to Market Makers 
that traded in the associated ISO sweep, for up to the full size of 
such Market Makers' refreshed priority quotes, as well as any RFR 
responses submitted by those Market Makers; (ii) to those Market Makers 
with quotes at the Auction start price that were resting and any RFR 
responses submitted by those Market Makers at the final Auction price; 
and (iii) to all other Market Makers that did not trade in the 
associated ISO sweep and did not have resting quotes at the Auction 
start price with joining interest at the final Auction price that was 
submitted during the Auction. If two or more Market Makers are entitled 
to priority under (i), (ii) or (iii) above, priority will be afforded 
to the extent practicable on a pro-rata basis.
    This can be demonstrated in the following examples, which assume 
away markets priced better than the auction start price have been 
swept.

Example 1--(Current PRIME Allocation) Single Price Submission, Priority 
Customer has first priority and Market Maker with priority quotes has 
second priority


[[Page 45377]]


MM3 = $1.15 - $1.25 100 x 100 (priority quote) \78\
---------------------------------------------------------------------------

    \78\ The term ``priority quote'' has the meaning set forth in 
Rule 517(b)(1)(i). See Exchange Rule 100. See also supra note 73.
---------------------------------------------------------------------------

EBBO = $1.15 - $1.25 100 x 100
NBBO = $1.15 - $1.25 200 x 200

Agency Order to buy 50 contracts with a limit price of $1.20
Initiating Member's Contra Order selling 50 contracts with a single 
stop price of $1.20
RFR sent identifying the option, side and size, with initiating price 
of $1.20
(Auction Starts)
 @10 milliseconds MM1 response received (did not have a 
priority quote on the Book), AOC eQuote to Sell 10 at $1.18
 @30 milliseconds BD4 response received, AOC order to Sell 10 
at $1.18
 @50 milliseconds Priority Customer response received, AOC 
order to Sell 15 at $1.18
 @75 milliseconds MM3 response received, AOC eQuote to Sell 20 
at $1.18
 100 milliseconds (Auction Ends)

    Under this scenario the Agency Order would be executed as follows:

1. 15 contracts trade with Priority Customer @$1.18
2. 20 contracts trade with MM3 @$1.18
3. 8 contracts trade with MM1 @$1.18
4. 7 contracts trade with BD4 @$1.18 (This fills the entire Agency 
Order and Contra Order does not receive an execution)

Example 2--(Proposed ISO PRIME Allocation) Single Price Submission, 
Priority Customer has first priority and Market Maker (who initially 
traded as part of the associated ISO Sweep) with joining quotes at the 
final Auction price has second priority

MM3 = $1.15 - $1.17 100 x 10 (priority quote)
EBBO = $1.15 - $1.17 100 x 10
NBBO = $1.15 - $1.17 300 x 210

    ISO PRIME Agency Order to buy 50 contracts with a limit price of 
$1.20 is received.
    It will ISO Sweep resting liquidity priced better than the Auction 
start price of $1.20.
    Under this scenario the Agency Order would be executed as follows:

1. 10 contracts trade with MM3 @1.17
Contemporaneously the balance of the ISO PRIME Agency Order initiates a 
PRIME Auction to buy 40 contracts with a limit price of $1.20
Initiating Member's Contra Order selling 50 contracts with a single 
stop price of $1.20
RFR sent identifying the option, side and size, with initiating price 
of $1.20
(Auction Starts)
 @10 milliseconds MM1 response received, AOC eQuote to Sell 10 
at $1.18
 @30 milliseconds BD4 response received, AOC order to Sell 10 
at $1.18
 @40 milliseconds Priority Customer response received, AOC 
order to Sell 15 at $1.18
 @65 milliseconds MM3 (who traded as part of the initial 
sweep), response received, AOC eQuote to Sell 40 at $1.18
 100 milliseconds (Auction Ends)

    Under this scenario the Agency Order would be executed as follows:
2. 15 contracts trade with Priority Customer @$1.18
3. 25 contracts trade with MM3 @$1.18 (This fills the entire Agency 
Order and Contra Order does not receive an execution)

Example 3--(Proposed ISO PRIME Allocation) Single Price Submission, 
Market Maker who has a joining quote at a better price has priority and 
Market Maker (who has a resting quote at the Auction start price) that 
submits an RFR response at the final Auction price has priority

MM1 = $1.15 - $1.17 10 x 10 (priority quote)
MM2 = $1.15 - $1.20 20 x 20 (priority quote)
MM3 = $1.15 - $1.21 20 x 20 (priority quote)
EBBO = $1.15 - $1.17 50 x 10
NBBO = $1.15 - $1.17 150 x 110

    ISO PRIME Agency Order to buy 50 contracts with a limit price of 
$1.20 is received.
    It will ISO Sweep resting liquidity priced better than the Auction 
start price of $1.20.
    Under this scenario the Agency Order would be executed as follows:

1. 10 contracts trade with MM1 @$1.17
Contemporaneously the balance of the ISO PRIME Agency Order initiates a 
PRIME Auction to buy 40 contracts with a limit price of $1.20
Initiating Member's Contra Order selling 50 contracts with a single 
stop price of $1.20
RFR sent identifying the option, side and size, with initiating price 
of $1.20
(Auction Starts)
 @10 milliseconds MM4 response received, AOC eQuote to Sell 30 
at $1.18
 @30 milliseconds MM3 response received, AOC eQuote to Sell 20 
at $1.19
 @75 milliseconds MM2 (who has a resting quote at the Auction 
Start Price), response received, AOC eQuote to Sell 20 at $1.19
 100 milliseconds (Auction Ends)

    Under this scenario, the Agency Order would be executed as follows:

2. 30 contracts trade with MM4 @$1.18
3. 10 contracts trade with MM2 @$1.19 (This is the final Auction price 
and fills the entire Agency Order and Contra Order and MM3 does not 
receive an execution)

Example 4--(Proposed ISO PRIME Allocation) Single Price Submission, 
Priority Customer has first priority and Market Maker (who initially 
traded as part of an ISO Sweep) with joining quotes has second 
priority, Market Maker with joining interest that is received during 
the associated ISO PRIME Auction that did not trade in the associated 
ISO sweep and did not have resting interest at the Auction start price 
receives last priority among Market Makers

MM3 = $1.15 - $1.17 100 x 10 (priority quote)
EBBO = $1.15 - $1.17 100 x 10
NBBO = $1.15 - $1.17 300 x 210

    ISO PRIME Agency Order to buy 50 contracts with a limit price of 
$1.20 is received.
    It will ISO Sweep resting liquidity priced better than the Auction 
start price of $1.20.
    Under this scenario, the Agency Order would be executed as follows:

1. 10 contracts trade with MM3 @1.17
Contemporaneously, the balance of the ISO PRIME Agency Order initiates 
a PRIME Auction to buy 40 contracts with a limit price of $1.20
Initiating Member's Contra Order selling 50 contracts with a single 
stop price of $1.20
RFR sent identifying the option, side and size, with an initiating 
price of $1.20
(Auction Starts)
 @10 milliseconds MM1 response received (did not have a 
priority quote on the Book), AOC eQuote to Sell 20 at $1.18
 @30 milliseconds BD4 response received, AOC order to Sell 20 
at $1.18
 @40 milliseconds Priority Customer response received, AOC 
order to Sell 15 at $1.18
 @65 milliseconds MM3 (who traded as part of the initial 
sweep), quote response received, AOC eQuote to Sell 20 at $1.18
 @100 milliseconds (Auction Ends)

    Under this scenario, the Agency Order would be executed as follows:

2. 15 contracts trade with Priority Customer @$1.18
3. 20 contracts trade with MM3 @$1.18
4. 3 contracts trade with MM1 @$1.18

[[Page 45378]]

5. 2 contracts trade with BD4 @$1.18 (This fills the entire Agency 
Order and the Contra Order does not receive an execution)

    The Exchange believes this allocation methodology, used only for 
Market Maker priority interest and only at the conclusion of an ISO 
PRIME Auction, will provide an additional incentive for Market Makers 
to provide their most aggressive quotes to the market throughout the 
entire trading session. The proposed allocation methodology is 
identical to MIAX Options Exchange Rule 515A(a)(2)(iii)(C).
    The Exchange also proposes to amend Rule 515A(a)(2)(iii)(J) which 
currently states, notwithstanding (a)(2)(iii)(C), (D) above, if the 
Auction does not result in price improvement over the Exchange's 
disseminated price at the time the Auction began, resting unchanged 
quotes or orders that were disseminated at the best price before the 
Auction began shall have priority after any Priority Customer order 
priority and the Initiating Member's priority (40%) have been 
satisfied. The new proposed rule text will provide, notwithstanding 
(a)(2)(iii)(C), (D) above, provided the Auction is not for an ISO PRIME 
order, if the Auction does not result in price improvement over the 
Exchange's disseminated price at the time the Auction began, resting 
unchanged quotes or orders that were disseminated at the best price 
before the Auction began shall have priority after any Priority 
Customer order priority and the Initiating Member's priority (40%) have 
been satisfied. The Exchange notes that the proposed rule is identical 
to MIAX Options Exchange Rule 515A(a)(2)(iii)(J).
Implementation
    The Exchange will announce the implementation of these changes in a 
Regulatory Circular to be published no later than 90 days following the 
operative date of the proposed rule. The implementation date will be no 
later than 90 days following the issuance of the Regulatory Circular.
2. Statutory Basis
i. cAOAO Order Type
    MIAX believes that its proposed rule change regarding adopting a 
new Complex Auction-on-Arrival-Only (``cAOAO'') order type is 
consistent with Section 6(b) of the Act \79\ in general, and furthers 
the objectives of Section 6(b)(5) of the Act \80\ in particular, 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 regulating, 
clearing, settling, processing information with respect to, and 
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.
---------------------------------------------------------------------------

    \79\ 15 U.S.C. 78f(b).
    \80\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Exchange believes that its proposal to adopt a cAOAO order type 
promotes just and equitable principles of trade, removes impediments to 
and perfects the mechanisms of a free and open market and a national 
market system and, in general, protects investors and the public 
interest. The Exchange believes it is reasonable to provide an 
opportunity for investors to seek to have their complex orders exposed 
for an opportunity for price improvement and to also provide investors 
the option to have such orders canceled if they are not filled. The 
Exchange believes its proposal to amend other portions of Exchange Rule 
518 to describe the operation and behavior of a cAOAO order benefits 
investors and the public interest by providing information that 
investors can use to ascertain the suitability of this order type in 
relation to their investment objectives. Moreover, this proposed rule 
change is identical to a rule change filed by the Exchange's affiliate, 
MIAX Options to adopt a cAOAO order type.\81\
---------------------------------------------------------------------------

    \81\ See supra note 10.
---------------------------------------------------------------------------

    The Exchange believes its proposed rule change regarding a cAOAO 
order type promotes just and equitable principles of trade and removes 
impediments to and perfects the mechanisms of a free and open market 
and a national market system and, in general, protects investors and 
the public interest by providing an opportunity for investors to have 
their complex orders exposed for an opportunity for price improvement. 
Furthermore, the Exchange believes that it is appropriate to provide an 
order type that will (i) initiate a complex auction if eligible, and 
(ii) cancel the balance of such order if there is interest remaining at 
the conclusion of the auction.
ii. Complex Attributable Order Type
    The Exchange believes that its proposed rule change regarding 
adopting a new Complex Attributable Order type is consistent with 
Section 6(b) of the Act \82\ in general, and furthers the objectives of 
Section 6(b)(5) of the Act \83\ in particular, 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 regulating, clearing, settling, 
processing information with respect to, and 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.
---------------------------------------------------------------------------

    \82\ 15 U.S.C. 78f(b).
    \83\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Exchange believes its proposal to adopt a Complex Attributable 
Order promotes just and equitable principles of trade, and removes 
impediments to and perfects the mechanisms of a free and open market 
system and, in general, protects investors and the public interest by 
introducing an order type for use on the complex market that is 
currently available for use on the Exchange's simple market. Use of 
Complex Attributable Orders will be voluntary and will provide Members 
of the Exchange similar order types for use on both the simple market 
and the complex market for use during liquidity seeking events to 
facilitate executions. Additionally, this proposed rule change is 
substantively identical to a rule change filed by the Exchange's 
affiliate, MIAX Options to adopt a Complex Attributable Order type.\84\
---------------------------------------------------------------------------

    \84\ See supra note 24.
---------------------------------------------------------------------------

iii. Complex PRIME Through MPC
    The Exchange believes that its proposed rule change regarding 
excluding cPRIME Orders from the Complex MIAX Emerald Price Collar 
Protection (``MPC'') is consistent with Section 6(b) of the Act \85\ in 
general, and furthers the objectives of Section 6(b)(5) of the Act \86\ 
in particular, 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.
---------------------------------------------------------------------------

    \85\ 15 U.S.C. 78f(b).
    \86\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Exchange believes its proposal to exclude cPRIME Orders from 
the MPC promotes just and equitable principles of trade, removes 
impediments to and perfects the mechanisms of a free and open market 
and a national market system, and in general, protects investors and 
the public interest by

[[Page 45379]]

allowing otherwise eligible orders to benefit from submission to the 
cPRIME mechanism. The Exchange believes that, if not excluded, the MPC 
feature could unnecessarily impede certain transactions in this order 
type that are submitted with contra-side participation and guaranteed 
executions for the Agency side. The Agency side of a cPRIME Order is 
effectively executed when received (and, in the case of cPRIME Orders, 
subject to price improvement) because it is a paired order with a 
guaranteed execution. The Exchange believes that accepting these 
orders, rather than rejecting them, protects investors that have 
established crossing orders at a specific execution price, and in the 
case of cPRIME Orders, allows the opportunity for further price 
improvement. Additionally, this proposed rule change is identical to a 
rule change filed by the Exchange's affiliate, MIAX Options, which 
excluded cPRIME Orders from MPC Protection.\87\
---------------------------------------------------------------------------

    \87\ See supra note 33.
---------------------------------------------------------------------------

iv. Complex Last To Fill
    The Exchange believes that its proposed rule change regarding last 
priority in allocation for Initiating Members submitting cPRIME Agency 
Orders is consistent with Section 6(b) of the Act \88\ in general, and 
furthers the objectives of Section 6(b)(5) of the Act \89\ in 
particular, 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.
---------------------------------------------------------------------------

    \88\ 15 U.S.C. 78f(b).
    \89\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Exchange believes that its proposal to allow Initiating Members 
that submit cPRIME Agency Orders to the Exchange to elect to have last 
priority in allocation promotes just and equitable principles of trade, 
removes impediments to and perfects the mechanisms of a free and open 
market and a national market system and, in general, protects investors 
and the public interest by offering an additional allocation choice 
which could result in an increase of cPRIME Agency Orders being 
submitted to the Exchange. The Exchange believes offering last priority 
in allocation gives the Initiating Member additional flexibility and 
control over cPRIME Agency Orders which and may result in the 
submission of more cPRIME Orders to the Exchange resulting in an 
increase of price improvement opportunities.
    Additionally, this proposed rule change is identical to a rule 
change filed by the Exchange's affiliate, MIAX Options, which removed 
the provision that precluded last priority in allocation from being 
available to Initiating Members that submit cPRIME Agency Orders.\90\
---------------------------------------------------------------------------

    \90\ See supra note 52.
---------------------------------------------------------------------------

v. ISO PRIME
    The Exchange believes that its proposed rule change regarding a new 
ISO PRIME order is consistent with Section 6(b) of the Act \91\ in 
general, and furthers the objectives of Section 6(b)(5) of the Act \92\ 
in particular, 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 regulating, clearing, settling, processing 
information with respect to, and 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.
---------------------------------------------------------------------------

    \91\ 15 U.S.C. 78f(b).
    \92\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The proposed rule change promotes just and equitable principles of 
trade and removes impediments to and perfects the mechanisms of a free 
and open market in that it promotes competition as described below. 
Specifically, the proposal allows the Exchange to offer its Members an 
order type that is already offered by other exchanges.\93\ In addition, 
the proposal benefits traders and investors because it adds a new order 
type for seeking price improvement through the PRIME. ISO PRIME orders 
will also be subject to all eligibility requirements that currently 
apply to PRIME orders. The Initiating Member, simultaneous with the 
routing of the ISO PRIME order to the Exchange, remains responsible for 
(i) routing one or more ISOs, as necessary, to execute against the full 
displayed size of any Protected Bid or Protected Offer that is superior 
to the starting PRIME Auction price and (ii) sweeping all interest in 
the Exchange's Book priced better than the proposed Auction starting 
price. Finally, the proposal does not unfairly discriminate among 
Members because all Members of the Exchange are eligible to submit an 
ISO PRIME order.
---------------------------------------------------------------------------

    \93\ See Nasdaq ISE Exchange Rule, Options 3, Section 13, 
Supplementary Material .08 (stating that a PIM ISO Order is the 
transmission of two orders for crossing pursuant to this Rule 
without regard for better priced Protected Bids or Protected Offers 
(as defined in Options 5, Section 1) because the Member transmitting 
the PIM ISO to the Exchange has, simultaneously with the routing of 
the PIM ISO, routed one or more ISOs, as necessary, to execute 
against the full displayed size of any Protected Bid or Protected 
Offer that is superior to the starting PIM auction price and has 
swept all interest in the Exchange's book priced better than the 
proposed auction starting price); see also Interpretations and 
Policies .08 of MIAX Options Exchange Rule 515A.
---------------------------------------------------------------------------

    The Exchange's proposal to amend Emerald Rule 515A(a)(2)(iii)(C) to 
adopt a new allocation at the conclusion of an ISO PRIME Auction for 
Market Maker priority quotes and RFR responses from Market Makers with 
priority quotes, that participate in the associated ISO sweep, promotes 
just and equitable principles of trade, perfects the mechanisms of a 
free and open market and a national market system and, in general, 
benefits investors as it provides an additional incentive to Market 
Makers to provide their most aggressive quotes to the market at all 
times. Prioritizing Market Maker interest such that Market Makers that 
trade in the associated ISO sweep that also have joining interest at 
the final Auction price receive first priority in allocation provides 
an incentive to Market Makers to have their most aggressive quotes on 
the Book in order to participate in any potential ISO sweeps.
    The Exchange's proposal does not change the existing allocation 
priority for PRIME Auctions, and is narrowly tailored to allocation 
priority only among Market Makers and only at the conclusion of a PRIME 
Auction initiated by an ISO PRIME order. Additionally, the proposed 
rule is identical to a rule change filed by the Exchange's affiliate, 
MIAX Options, to adopt a new allocation methodology specifically for 
Market Maker interest executed during an ISO PRIME Auction.\94\
---------------------------------------------------------------------------

    \94\ See supra note 55; see also MIAX Options Exchange Rule 
515A(a)(2)(iii)(C).
---------------------------------------------------------------------------

    Additionally, the Exchange believes its proposal to amend Exchange 
Rule 515A(a)(2)(iii)(J) to clarify that the subsection does not apply 
to Auctions for ISO PRIME orders, promotes just and equitable 
principles of trade, and removes impediments to and perfects the 
mechanisms of a free and open market and a national market system and, 
in general, protects investors and the public interest by removing any 
ambiguity in the Exchange's Rulebook about the type of Auctions 
subsection (J) pertains to. Current subsection (J) provides additional 
clarifying language concerning the priority of allocations at the 
conclusion of a PRIME Auction that does not result in price improvement

[[Page 45380]]

over the Exchange's disseminated price at the time the Auction began 
stating that, ``resting unchanged quotes or orders that were 
disseminated at the best price before the Auction began shall have 
priority after any Priority Customer order priority. . . .'' \95\ The 
Exchange's proposal concerning allocation at the conclusion of an 
Auction for an ISO PRIME order provides a more nuanced and detailed 
hierarchy of allocation for Market Makers which would be applicable in 
the scenario contemplated by subsection (J). Therefore, the Exchange is 
proposing to exclude the application of subsection (J) to Auctions that 
are initiated by ISO PRIME orders. The Exchange believes this change 
eliminates any potential conflict regarding the application of the 
Exchange's rules and it is in the public interest for rules to be 
accurate and concise so as to eliminate the potential for confusion. 
The Exchange notes that the proposed rule is identical to MIAX Options 
Exchange Rule 515A(a)(2)(iii)(J).
---------------------------------------------------------------------------

    \95\ See Exchange Rule 515A(a)(2)(iii)(J).
---------------------------------------------------------------------------

    The Exchange believes this change will benefit market participants 
as it encourages Market Makers to participate in ISO PRIME Auctions and 
will provide additional incentive to Market Makers to provide their 
most aggressive quotes to the market throughout the trading session and 
may also result in increased liquidity being available during the 
Auction. Additionally, this proposed rule change is identical to a rule 
change filed by Exchange's affiliate, MIAX Options, to adopt ISO PRIME 
orders.\96\
---------------------------------------------------------------------------

    \96\ See supra note 55.
---------------------------------------------------------------------------

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 that is not necessary or appropriate 
in furtherance of the purposes of the Act.
(i) cAOAO Order Type
    The Exchange does not believe that the proposed rule change will 
impose any burden on inter-market competition but will rather promote 
inter-market competition as the Exchange is proposing an order type 
that operates and is functionally identical to an order type offered on 
other option exchanges.\97\ The Exchange notes that it operates in a 
highly competitive market in which market participants can readily 
direct order flow to competing venues who offer similar functionality. 
The Exchange believes the proposed rule change will enhance competition 
among the various markets for complex order execution, potentially 
resulting in more active complex order trading on all exchanges. 
Moreover, since the proposed rule change is identical to a rule change 
filed by the Exchange's affiliate, MIAX Options,\98\ the Exchange does 
not believe that its proposal will impose any burden on inter-market 
competition as it would offer its Members similar functionality to that 
of the Exchange's affiliate.
---------------------------------------------------------------------------

    \97\ See Nasdaq ISE Exchange Rule, Options 3, Section 14(b)(14) 
which provides that, ``[a]n Exposure Only Complex Order is an order 
that will be exposed upon entry . . . if eligible, or cancelled if 
not eligible'' and ``[a]ny unexecuted balance of an Exposure Only 
Complex Order remaining upon the completion of the exposure process 
will be cancelled.''; see also MIAX Options Exchange Rule 518(b)(9).
    \98\ See supra note 10.
---------------------------------------------------------------------------

    The Exchange does not believe that the proposed rule change will 
impose any burden on intra-market competition as the Rules of the 
Exchange apply equally to all Exchange Members, and any Member of the 
Exchange may use the cAOAO order type.
(ii) Complex Attributable Order Type
    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act.
    The Exchange does not believe that the proposed rule change to 
adopt a Complex Attributable Order will impose any burden on inter-
market competition but rather may increase competition among exchanges 
as the Exchange is proposing an order type that operates and is 
functionally identical to other options exchanges.\99\ The Exchange 
notes that it operates in a highly competitive market in which market 
participants can readily direct order flow to competing venues who 
offer similar functionality. The Exchange believes the proposed rule 
change will enhance competition among the various markets for complex 
order execution, potentially resulting in more active complex order 
trading on all exchanges. Moreover, since the proposed rule change is 
substantively identical to a rule change filed by the Exchange's 
affiliate, MIAX Options,\100\ the Exchange does not believe that its 
proposal will impose any burden on inter-market competition as it would 
offer its Members similar functionality to that of the Exchange's 
affiliate.
---------------------------------------------------------------------------

    \99\ The Nasdaq ISE Exchange and Nasdaq MRX Exchange currently 
offer Attributable Complex Orders. See Nasdaq ISE Exchange, Options 
3, Section 14, Complex Orders (b)(4) (explaining that one of the 
types of Complex Orders that may be entered is an Attributable 
Complex Order, which is ``a Market or Limit Complex Order [that] may 
be designated as an Attributable Order''); and Nasdaq MRX Exchange, 
Options 3, Section 14, Complex Orders (b)(4) (explaining that one of 
the types of Complex Orders that may be entered is an Attributable 
Complex Order, which is ``a Market or Limit Complex Order [that] may 
be designated as an Attributable Order''); see also MIAX Options 
Exchange Rule 518(b)(8).
    \100\ See supra note 24.
---------------------------------------------------------------------------

    The Exchange does not believe that the proposed rule change to 
adopt a Complex Attributable Order will impose any burden on intra-
market competition as use of a Complex Attributable Order will be 
voluntary and all Members of the Exchange will have the option to use a 
Complex Attributable Order when submitting a complex order to the 
Exchange.
(iii) Complex PRIME Through MPC
    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act.
    The Exchange believes that the proposal to exclude cPRIME Orders 
from the Exchange's MPC price protection promotes inter-market 
competition by enabling the Exchange to better compete for this type of 
order flow with at least one other exchange that offers similar price 
improvement auctions.\101\ Moreover, since the proposed rule change is 
identical to a rule change filed by the Exchange's affiliate, MIAX 
Options,\102\ the Exchange does not believe that its proposal will 
impose any burden on inter-market competition as it would offer its 
Members similar functionality to that of the Exchange's affiliate.
---------------------------------------------------------------------------

    \101\ See Cboe Exchange Rule 5.38
    \102\ See supra note 33.
---------------------------------------------------------------------------

    The Exchange does not believe that its proposal will impose any 
burden on intra-market competition as all Members of the Exchange that 
submit cPRIME Orders will benefit equally from the Exchange's proposal. 
The proposed rule change is intended to promote competition and is 
designed to benefit all Exchange participants by ensuring that 
unnecessary price protections which would preclude executions on the 
Exchange are removed, thus enabling Exchange participants to execute 
more complex orders on the Exchange.
    For all the reasons stated, 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, and 
believes the proposed changes will in fact enhance competition.

[[Page 45381]]

(iv) Complex Last To Fill
    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act.
    The Exchange does not believe that its proposal will impose any 
burden on inter-market competition because the Exchange believes that 
the proposal to offer a last in priority allocation option to 
Initiating Members that submit cPRIME Agency Orders allows the Exchange 
to compete with at least one other options exchange that offers 
identical functionality.\103\ Moreover, since the proposed rule change 
is identical to a rule change filed by the Exchange's affiliate, MIAX 
Options,\104\ the Exchange does not believe that its proposal will 
impose any burden on inter-market competition as it would offer its 
Members similar functionality to that of the Exchange's affiliate, and 
allow MIAX Emerald to compete with other exchanges that provide this 
allocation option to exchange participants.
---------------------------------------------------------------------------

    \103\ See Cboe Exchange Rule 5.38(e)(5) (stating that if the 
Initiating Trading Permit Holder selects a single-price submission, 
it may elect for the Initiating Order to have last priority to trade 
against the Agency Order and then notwithstanding the Price 
Improvement provisions as laid out in subparagraphs (e)(1) and (2), 
the System only executes the Initiating Order against any remaining 
Agency Order contracts at the stop price after the Agency Order is 
allocated to all other contra-side interest at all prices equal to 
or better than the stop price).
    \104\ See supra note 52.
---------------------------------------------------------------------------

    The Exchange does not believe that its proposal will impose any 
burden on intra-market competition as all Members of the Exchange that 
submit cPRIME Orders will be able to elect last priority in allocation. 
Offering Initiating Members that submit cPRIME Agency Orders an 
additional allocation choice gives Members more flexibility and control 
over their orders and may result in the submission of more cPRIME 
Orders which would benefit competition on the Exchange.
    For all the reasons stated, 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, and 
believes the proposed changes will in fact enhance competition.
(v) ISO PRIME
    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. The Exchange believes the 
proposed rule change will benefit inter-market competition as it will 
allow the Exchange to compete with other markets that already allow an 
ISO Order type in their price improvement mechanisms.\105\
---------------------------------------------------------------------------

    \105\ See supra note 93.
---------------------------------------------------------------------------

    The Exchange's proposal to adopt an ISO PRIME order type benefits 
intra-market competition because it will enable the Exchange to provide 
market participants with an additional method of seeking price 
improvement through the PRIME. The Exchange does not believe that the 
proposed rule change will impose any burden on intra-market competition 
as the Rules of the Exchange apply equally to all Exchange Members, and 
all Exchange Members may submit an ISO PRIME order.
    The Exchange does not believe its proposal to amend Exchange Rule 
515A(a)(2)(iii)(C) to adopt a new allocation hierarchy to further 
apportion Market Maker allocation at the conclusion of an Auction of an 
ISO PRIME order will impose any burden on intra-market competition but 
rather promotes intra-market competition as it provides a further 
incentive to Market Makers to provide their most aggressive quotes to 
the market throughout the entire trading session and may increase 
liquidity available during a PRIME Auction. The proposal provides 
Market Makers with priority quotes on the Book, that participate in an 
associated ISO sweep, with priority over other Market Makers, which 
benefits intra-market competition as it also provides an incentive to 
Market Makers to provide their most aggressive quotes to the market 
during the entire trading session to be in position to participate in 
any potential ISO sweeps.
    The Exchange's proposal does not change existing order allocation 
under Exchange Rule 515A(2)(iii) and the Exchange does not believe its 
proposal will impose any burden on inter-market competition that is not 
necessary or appropriate in furtherance of the purposes of the Act, but 
rather will promote inter-market competition as it provides an 
additional incentive to Market Makers on the Exchange to provide their 
most aggressive quotes to the market at all times, which could result 
in tighter quotes and greater liquidity being available in the market 
place, which would benefit all investors. Moreover, since the proposed 
rule change is identical to a rule change filed by the Exchange's 
affiliate, MIAX Options,\106\ the Exchange does not believe that its 
proposal will impose any burden on inter-market competition as it would 
offer its Members similar functionality to that of the Exchange's 
affiliate.
---------------------------------------------------------------------------

    \106\ See supra note 52.
---------------------------------------------------------------------------

    The Exchange believes its proposal to amend Exchange Rule 
515A(a)(2)(iii)(J) promotes just and equitable principles of trade and 
removes impediments to and perfects the mechanism of a free and open 
market and a national market system because the proposed rule change 
provides additional detail and further clarifies the rule. The Exchange 
does not believe its proposal is a burden on inter-market competition 
as the change is not competitive in nature and only clarifies the 
operation of the rule. Additionally, the Exchange does not believe its 
proposal is a burden on intra-market competition as the Exchange's 
rules apply equally to all Members, and any Member may submit an ISO 
Prime order to the Exchange. Further, the Exchange believes the 
proposed change adds additional detail to the Exchange's rules, and it 
is in the public interest for rules to be clear and concise so as to 
eliminate the potential for confusion.

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

    Because the foregoing proposed rule change does not: (i) 
significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate, it has become 
effective pursuant to Section 19(b)(3)(A)(iii) of the Act \107\ and 
Rule 19b-4(f)(6) thereunder.\108\
---------------------------------------------------------------------------

    \107\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \108\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file the proposed rule change at 
least five business days prior to the date of filing of the proposed 
rule change, or such shorter time as designated by the Commission. 
The Exchange has satisfied this requirement.
---------------------------------------------------------------------------

    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

[[Page 45382]]

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 [email protected]. Please include 
File Number SR-EMERALD-2022-25 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-2022-25. 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-2022-25, and should be submitted 
on or before August 18, 2022.
---------------------------------------------------------------------------

    \109\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\109\
J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022-16148 Filed 7-27-22; 8:45 am]
BILLING CODE 8011-01-P