[Federal Register Volume 87, Number 228 (Tuesday, November 29, 2022)]
[Notices]
[Pages 73364-73365]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-25950]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-96378; File No. SR-EMERALD-2022-31]


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

November 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 November 10, 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, II, and III below, which Items have been prepared by the 
Exchange. The Commission is publishing this notice to solicit comments 
on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend Exchange Rule 518, Complex 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 Exchange Rule 518, Complex Orders, 
to adopt a new optional order instruction, ``Do Not Leg (`DNL'),'' to 
paragraph (b), Types of Complex Orders.
    The Exchange currently offers its Members \3\ a number of complex 
order types enumerated in paragraph (b) of Rule 518. The Exchange 
offers a Complex Auction-on-Arrival Order,\4\ a Complex Auction-or-
Cancel Order,\5\ a Complex Immediate-or-Cancel Order,\6\ a Complex 
Customer Cross Order,\7\ a Complex Qualified Contingent Cross Order,\8\ 
a Complex PRIME Order,\9\ a Complex Attributable Order,\10\ and a 
Complex Auction-on-Arrival-Only Order.\11\
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    \3\ 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.
    \4\ See Exchange Rule 518(b)(2).
    \5\ See Exchange Rule 518(b)(3).
    \6\ See Exchange Rule 518(b)(4).
    \7\ See Exchange Rule 518(b)(5).
    \8\ See Exchange Rule 518(b)(6).
    \9\ See Exchange Rule 518(b)(7).
    \10\ See Exchange Rule 518(b)(8).
    \11\ See Exchange Rule 518(b)(9).
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    The Exchange now proposes to adopt a new optional order instruction 
for complex orders entitled, ``Do Not Leg'' or ``DNL.'' A complex order 
that is marked with the DNL instruction will not leg into the Simple 
Order Book.\12\ Additionally, a complex order that is marked with the 
DNL instruction must be executed at a price that complies with Exchange 
Rule 518(c)(2)(ii). The DNL order instruction will be available for use 
with all complex order types (excluding Complex Customer Cross Orders, 
Complex Qualified Contingent Cross Orders, and cPRIME Orders) offered 
on the Exchange.
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    \12\ The ``Simple Order Book'' is the Exchange's regular 
electronic book of orders and quotes. See Exchange Rule 518(a)(15).
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    Complex Customer Cross Orders \13\ and Complex Qualified Contingent 
Cross Orders \14\ are order types that execute immediately upon entry 
(provided that they satisfy certain criteria) and would therefore not 
leg into the Simple Order Book. Specifically, Complex Customer Cross 
(``cC2C'') Orders as defined in Rule 518(b)(5), are automatically 
executed upon entry provided that the execution is at least $0.01 
better than (inside) the icEBBO \15\ (as defined in Rule 518(a)(12)) 
price or the best net price of a complex order (as defined in Rule 
518(a)(5)) on the Strategy Book \16\ (as defined in Rule 518(a)(17)), 
whichever is more aggressive.\17\ Complex Qualified Contingent Cross 
(``cQCC'') Orders, as defined in Rule 518(b)(6), are automatically 
executed upon entry provided that, with respect to each option leg of 
the cQCC Order, the execution (i) is not at the same price as a 
Priority Customer Order \18\ on the Exchange's Book; \19\ and (ii) is 
at or between the NBBO.\20\
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    \13\ See Exchange Rule 518(b)(5).
    \14\ See Exchange Rule 518(b)(6).
    \15\ The Implied Complex MIAX Emerald Best Bid or Offer 
(``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 trading 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).
    \16\ The ``Strategy Book'' is the Exchange's electronic book of 
complex orders and complex quotes. See Exchange Rule 518(a)(17).
    \17\ See Exchange Rule 515(h)(3).
    \18\ 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.
    \19\ The term ``Book'' means the electronic book of buy and sell 
orders and quotes maintained by the System. See Exchange Rule 100.
    \20\ See Exchange Rule 515(h)(4). The term ``NBBO'' means the 
national best bid or offer as calculated by the Exchange based on 
market information received by the Exchange from OPRA. See Exchange 
Rule 100.
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    Additionally, the DNL instruction will not be available for cPRIME 
Orders, as cPRIME Orders are another type of a crossing order. 
Specifically, 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.\21\ 
Specifically, 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.\22\ Currently, a cPRIME Auction has a duration of 100 
milliseconds.\23\
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    \21\ See Interpretations and Policies .12(a) of Exchange Rule 
515A.
    \22\ See Interpretations and Policies .12(a)(i) of Exchange Rule 
515A.
    \23\ See MIAX Emerald Exchange System Settings on the Exchange's 
public website, available at https://www.miaxoptions.com/sites/default/files/page-files/MIAX_EMERALD_System_Settings_11122018.pdf.

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[[Page 73365]]

    Additionally, the Exchange notes that at least two other option 
exchanges provide similar functionality.\24\
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    \24\ See Cboe Exchange Rule 5.33(b), Complex Only, which defines 
a ``Complex Only'' order as a Day or IOC complex order a Market-
Maker may designate to execute only against complex orders in the 
COB and not Leg into the Simple Book. The terms ``Complex Order 
Book'' and ``COB'' mean the Cboe Exchange's electronic book of 
complex orders used for all trading sessions. See Cboe Exchange Rule 
5.33(b); see also NYSEArca Options Exchange Rule 6.91P-O(e)(1)(C).
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2. Statutory Basis
    The Exchange believes that its proposed rule change is consistent 
with Section 6(b) of the Act \25\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act \26\ 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.
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    \25\ 15 U.S.C. 78f(b).
    \26\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that its proposal to adopt a new order 
instruction for complex orders 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 investors additional control over the disposition 
of their complex orders, in connection with their attempt to provide 
and not remove liquidity, or in connection with applicable fees for 
executions.
    The Exchange believes its proposed rule change 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 allowing 
investors to have greater control over the execution of their orders.

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 intra-market competition as the DNL order 
instruction is optional and will be available for all Members on the 
Exchange that submit complex orders to the Exchange.
    The Exchange does not believe that the proposed rule change will 
impose any burden on inter-market competition but may enhance inter-
market competition. 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.

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 after the date of the filing, or such 
shorter time as the Commission may designate, it has become effective 
pursuant to 19(b)(3)(A) of the Act \27\ and Rule 19b-4(f)(6) \28\ 
thereunder.
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    \27\ 15 U.S.C. 78s(b)(3)(A).
    \28\ 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.
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission shall institute proceedings to 
determine whether the proposed rule should be approved or disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-EMERALD-2022-31 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-2022-31. 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 such 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-2022-31 and should be submitted 
on or before December 20, 2022.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\29\
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    \29\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2022-25950 Filed 11-28-22; 8:45 am]
BILLING CODE 8011-01-P