[Federal Register Volume 89, Number 158 (Thursday, August 15, 2024)]
[Notices]
[Pages 66467-66470]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-18201]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-100683; File No. SR-SAPPHIRE-2024-13]


Self-Regulatory Organizations; MIAX Sapphire LLC; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To 
Establish a Fee Schedule

August 9, 2024.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on August 6, 2024, MIAX Sapphire, LLC (``MIAX Sapphire'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the 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 is filing a proposal to establish a Fee Schedule (the 
``Fee Schedule'') for fees and rebates applicable to participants 
trading options on and/or using services provided by MIAX Sapphire. 
MIAX Sapphire will commence operations as a national securities 
exchange registered under Section 6 of the Act \3\ on August 12, 
2024.\4\
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    \3\ 15 U.S.C. 78f.
    \4\ See Securities Exchange Act Release No. 100539 (July 15, 
2024), 89 FR 58848 (July 19, 2024) (File No. 10-240) (order 
approving application of MIAX Sapphire, LLC for registration as a 
national securities exchange).
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    While changes to the Fee Schedule pursuant to this proposal are 
effective upon filing, the Exchange has designated these changes to be 
operative on August 12, 2024.
    The text of the proposed rule change is available on the Exchange's 
website at https://www.miaxglobal.com/markets/us-options/miax-sapphire/rule-filings, at the Exchange'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
Definitions
    The Exchange has included a Definitions section at the beginning of 
its Fee Schedule. The purpose of the Definitions section is to 
streamline the Fee Schedule by placing many of the defined terms used 
in the Fee Schedule in one location at the beginning of the Fee 
Schedule. Many of the defined terms are also defined in the Exchange 
Rules, particularly in Exchange Rule 100. Any defined terms that are 
also defined or otherwise explained in the Exchange Rules contain a 
cross reference to the relevant Exchange Rule. The Exchange notes that 
other exchanges have Definitions sections in their respective fee 
schedules,\5\ and the Exchange believes that including a Definitions 
section in the front of the Exchange's Fee Schedule makes the Fee 
Schedule more user-friendly. The Exchange notes that the proposed 
definitions to be included in the Definitions section of the Exchange's 
Fee Schedule are substantially similar to those definitions found in 
the Fee Schedule of the Exchange's affiliate, MIAX PEARL, LLC (``MIAX 
Pearl''), with the following few exceptions.
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    \5\ See Securities Exchange Act Release Nos. 70200 (August 14, 
2013), 78 FR 51242 (August 20, 2013)(SR-Topaz-2013-10); 76453 
(November 17, 2015), 80 FR 72999 (November 23, 2015)(SR-EDGX-2015-
56); 80061 (February 17, 2017), 82 FR 11676 (February 24, 2017)(SR-
PEARL-2017-10); and 85393 (March 21, 2019), 84 FR 11599 (March 27, 
2019)(SR-EMERALD-2019-15).
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    The MIAX Sapphire term ``Full Service MEO Port'' is defined in the

[[Page 66468]]

same fashion as the term ``Full Service MEO Port--Bulk'' is defined in 
the Definitions section of the MIAX Pearl Options Fee Schedule.
    The MIAX Sapphire term `` `Dedicated' cross-connect'' is integrated 
into the definition of ``cross connect'' in the Definitions section of 
the MIAX Sapphire Fee Schedule and is identical to the definition of 
```Dedicated' cross-connect'' used in the Definitions section of the 
Fee Schedule of the Exchange's affiliate, MIAX Emerald, LLC (``MIAX 
Emerald'').
    The MIAX Sapphire term ``MENI'' described in the Definitions 
section of the MIAX Sapphire Fee Schedule provides a more fulsome 
description of the MIAX Express Network Interconnect than the 
definition provided in the MIAX Pearl Options Fee Schedule.
    The MIAX Sapphire term ``Purge Ports'' is defined in the same 
fashion as the term ``MEO Purge Ports'' is defined in the Definitions 
section of the MIAX Pearl Options Fee Schedule.
    These minor deviations from the established definitions of like 
terms in the MIAX Pearl Options Fee Schedule are de minimis in nature 
and not reflective of new functionality being introduced on the MIAX 
Sapphire Exchange.
Routing Fees
    MIAX Sapphire proposes to assess Routing Fees in order to recoup 
costs incurred by MIAX Sapphire when routing orders to various away 
markets. The Exchange notes that the proposed fees are substantially 
similar to those of the Exchange's affiliates, Miami International 
Securities Exchange LLC (``MIAX''), MIAX Pearl, and MIAX Emerald.\6\ 
The amount of the applicable fee is based upon (i) the Origin type of 
the order, (ii) whether it is an order for an option in a Penny or Non-
Penny class (or other explicitly identified classes) and (iii) to which 
away market it is being routed, according to the following table: \7\
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    \6\ See MIAX Fee Schedule, Section (1) (c), Fees for Customer 
Orders Routed to Another Options Exchange, MIAX Pearl Options Fee 
Schedule, Section (1) (b), Fees for Customer Orders Routed to 
Another Options Exchange, and MIAX Emerald Options Fee Schedule, 
Section (1) (b), Fees for Customer Orders Routed to Another Options 
Exchange.
    \7\ This is similar to the methodologies utilized by the 
Exchange's affiliates, MIAX, MIAX Pearl, and MIAX Emerald in 
assessing Routing Fees. See id.

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                       Description                             Fees
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Routed, Priority Customer, Penny Program, to: NYSE                 $0.15
 American, Cboe, Cboe EDGX Options, MIAX, Nasdaq PHLX
 (except SPY), Nasdaq MRX...............................
Routed, Priority Customer, Penny Program, to: BOX.......            0.30
Routed, Priority Customer, Penny Program, to: NYSE Arca             0.65
 Options, Cboe BZX Options, Cboe C2, Nasdaq GEMX, Nasdaq
 ISE, NOM, Nasdaq PHLX (SPY only), MIAX Pearl, MIAX
 Emerald, Nasdaq BX Options, MEMX.......................
Routed, Priority Customer, Non-Penny Program, to: NYSE              0.15
 American, BOX, Cboe, Cboe EDGX Options, MIAX, Nasdaq
 PHLX, Nasdaq MRX.......................................
Routed, Priority Customer, Non-Penny Program, to: NYSE              1.00
 Arca Options, Cboe BZX Options, Cboe C2, Nasdaq GEMX,
 NOM, MIAX Pearl, MIAX Emerald, Nasdaq BX Options,
 Nasdaq ISE, MEMX.......................................
Routed, Public Customer that is not a Priority Customer,            0.65
 Penny Program, to: NYSE American, NYSE Arca Options,
 Cboe BZX Options, BOX, Cboe, Cboe C2, Cboe EDGX
 Options, Nasdaq GEMX, Nasdaq ISE, Nasdaq MRX, MIAX,
 MIAX Pearl, MIAX Emerald, NOM, Nasdaq PHLX, Nasdaq BX
 Options, MEMX..........................................
Routed, Public Customer that is not a Priority Customer,            1.00
 Non-Penny Program, to: NYSE American, MIAX, Cboe,
 Nasdaq PHLX, Cboe EDGX Options, NOM....................
Routed, Public Customer that is not a Priority Customer,            1.15
 Non-Penny Program, to: Cboe C2, BOX....................
Routed, Public Customer that is not a Priority Customer,            1.25
 Non-Penny Program, to: NYSE Arca Options, Nasdaq GEMX,
 Nasdaq MRX, MIAX Pearl, MIAX Emerald, MEMX.............
Routed, Public Customer that is not a Priority Customer,            1.40
 Non-Penny Program, to: Cboe BZX Options, Nasdaq ISE,
 Nasdaq BX Options......................................
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    In determining its proposed Routing Fees, the Exchange took into 
account transaction fees and rebates assessed by the away markets to 
which the Exchange routes orders, as well as the Exchange's clearing, 
administrative, regulatory, and technical costs associated with routing 
orders to an away market. The Exchange uses unaffiliated routing 
brokers to route orders to the away markets; the costs associated with 
the use of these services are included in the Routing Fees specified in 
the Fee Schedule. These fees are substantially similar to the 
Exchange's affiliates.\8\ Additionally, this Routing Fees structure is 
substantially similar to the Exchange's affiliates as well,\9\ and is 
also comparable to the fee structure in place on at least one other 
options exchange, Cboe BZX Options.\10\
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    \8\ See supra note 6.
    \9\ See supra note 7.
    \10\ See Cboe U.S. Options Fee Schedules, BZX Options, Fee Codes 
and Associated Fees, available at https://www.cboe.com/us/options/membership/fee_schedule/bzx/. The Cboe BZX fee schedule has exchange 
groupings, whereby several exchanges are grouped into the same 
category, dependent on the order's Origin type and whether it is a 
Penny or Non-Penny Pilot class. For example, Cboe BZX fee code RQ 
covers routed customer orders in Penny classes to NYSE Arca Options, 
Cboe C2, Nasdaq ISE, Nasdaq GEMX, MIAX Emerald, MIAX Pearl, NOM or 
MEMX, with a single fee of $0.85 per contract.
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    The Exchange is proposing to have ten different exchange groupings, 
based on the exchange, order type, and option class. The Exchange 
believes that having these groupings will allow the Exchange to 
approximate its costs associated with routing orders to away markets. 
The per-contract transaction fee amount associated with each grouping 
closely approximates the Exchange's all-in cost (plus an additional, 
non-material amount) to execute that corresponding contract at that 
corresponding exchange. For example, to execute a Priority Customer 
order in a Penny Pilot symbol at NYSE American costs the Exchange 
approximately $0.15 a contract. Since this is also the approximate cost 
to execute that same order at Cboe, the Exchange is able to group NYSE 
American and Cboe together in the same grouping. The Exchange notes 
that in determining the appropriate groupings, the Exchange considered 
the transaction fees and rebates assessed by away markets, and grouped 
exchanges together that assess transaction fees for routed orders 
within a similar range. This same logic and structure applies to all of 
the groupings in the proposed Routing Fees table. By utilizing the same 
structure that is utilized by the Exchange's affiliates, MIAX, MIAX 
Pearl, and MIAX Emerald, those members which are also Members \11\ of 
the Exchange, will be assessed Routing Fees in the same amount and 
manner, which the Exchange believes will minimize any confusion as to 
the method of assessing Routing Fees between the four exchanges. The 
Exchange notes that this proposal is identical to the structure of the 
routing

[[Page 66469]]

fee table and the fees assessed by the Exchange's affiliates.\12\
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    \11\ The term ``Member'' means an individual or organization 
that is registered with the Exchange pursuant to Chapter II of MIAX 
Sapphire Rules for purposes of trading on the Exchange as an 
``Electronic Exchange Member'' or ``Market Maker.'' Members are 
deemed ``members'' under the Exchange Act. See Exchange Rule 100.
    \12\ See supra note 7.
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2. Statutory Basis
    The Exchange believes that its proposal to establish its Fee 
Schedule is consistent with Section 6(b) of the Act \13\ in general, 
and furthers the objectives of Section 6(b)(4) of the Act \14\ in 
particular, in that it is an equitable allocation of reasonable fees 
and other charges among its members and issuers and other persons using 
its facilities. The Exchange also believes the proposal furthers the 
objectives of Section 6(b)(5) of the Act \15\ in that it is designed to 
promote just and equitable principles of trade, to remove impediments 
to and perfect the mechanism of a free and open market and a national 
market system, and, in general to protect investors and the public 
interest and is not designed to permit unfair discrimination between 
customers, issuers, brokers and dealers. Additionally, the Exchange 
believes the proposal is consistent with Section 6(b)(5) \16\ 
requirement that the rules of an exchange not be designed to permit 
unfair discrimination between customers, issuers, brokers, or dealers.
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    \13\ 15 U.S.C. 78f(b).
    \14\ 15 U.S.C. 78f(b)(4) and (5) [sic].
    \15\ 15 U.S.C 78f(b)(5).
    \16\ Id.
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Definitions
    The Exchange also believes the proposal furthers the objectives of 
Section 6(b)(5) of the Act \17\ in that it is designed to promote just 
and equitable principles of trade, to remove impediments to and perfect 
the mechanism of a free and open market and a national market system, 
and, in general to protect investors and the public interest and is not 
designed to permit unfair discrimination between customers, issuers, 
brokers and dealers. The Exchange believes providing a Definitions 
section in its Fee Schedule protects investors and the public interest 
by clarifying terms and locating them in a dedicated section of the Fee 
Schedule for ease of reference, thereby reducing the chance of 
confusion. Additionally, the Exchange notes that the proposed 
definitions are substantially similar to those of the Exchange's 
affiliate, MIAX Pearl Options, and are intended to ensure that the Fee 
Schedule is clear and unambiguous.
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    \17\ 15 U.S.C 78f(b)(5).
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Routing Fees
    The Exchange believes the proposal to establish routing fees and a 
routing fee structure of groupings of options exchanges within the 
routing fee table furthers the objectives of Section 6(b)(4) of the Act 
and is an equitable allocation of reasonable fees and not unfairly 
discriminatory because all Members that are subject to routing fees are 
treated in a uniform manner.
    The Exchange believes the proposed routing fee table exchange 
groupings furthers the objectives of Section 6(b)(5) of the Act and is 
designed to promote just and equitable principles of trade and is not 
unfairly discriminatory as the proposal change seeks to recoup costs 
that are incurred by the Exchange when routing Priority and Public 
Customer Orders to away markets on behalf of Members and does so in the 
same manner for all Members that are subject to routing fees and 
therefore is not discriminatory and furthers just and equitable 
principles of trade. The costs to the Exchange to route orders to away 
markets for execution primarily includes transaction fees assessed by 
the away markets to which the Exchange routes orders, in addition to 
the Exchange's clearing, administrative, regulatory and technical 
costs.
    The Exchange believes that the proposed Routing Fees are 
reasonable, equitable and not unfairly discriminatory because they seek 
to recoup costs incurred by MIAX Sapphire when routing orders to 
various away markets. In determining its proposed Routing Fees, the 
Exchange took into account transaction fees and rebates assessed by the 
away markets to which the Exchange routes orders, as well as the 
Exchange's clearing costs, administrative, regulatory, and technical 
costs associated with routing orders to an away market. The Exchange 
uses unaffiliated routing brokers to route orders to the away markets; 
the costs associated with the use of these services are included in the 
Routing Fees specified in the Fee Schedule. This Routing Fees structure 
is not only similar to the Exchange's affiliates, MIAX, MIAX Pearl, and 
MIAX Emerald,\18\ but is also comparable to the structure in place on 
at least one other options exchange, Cboe BZX Options.\19\ The Exchange 
believes that having ten groupings for its proposed routing fees is 
reasonable, equitable and not unfairly discriminatory because the 
Exchange will be able to better approximate its costs associated with 
routing orders to away markets. The per-contract transaction fee amount 
associated with each grouping closely approximates the Exchange's all-
in cost (plus an additional, non-material amount) to execute that 
corresponding contract at that corresponding exchange. The Exchange 
notes that in determining the appropriate groupings, the Exchange 
considered the transaction fees and rebates assessed by away markets, 
and grouped exchanges together that assess transaction fees for routed 
orders within a similar range. This same logic and structure applies to 
all of the groupings in the proposed Routing Fees table. By utilizing 
the same structure that is utilized by the Exchange's affiliates, MIAX, 
MIAX Pearl, and MIAX Emerald, those members which are also Members of 
the Exchange will be assessed Routing Fees in the same manner, which 
the Exchange believes will minimize any confusion as to the method of 
assessing Routing Fees between the four exchanges. This proposal is 
identical to the routing fee tables of the Exchange's affiliates, MIAX, 
MIAX Pearl, and MIAX Emerald.\20\
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    \18\ See supra note 7.
    \19\ See supra note 10.
    \20\ See supra note 7.
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act. MIAX Sapphire's proposed fees, 
as described herein, are comparable to fees charged by its affiliates, 
MIAX, MIAX Pearl, and MIAX Emerald,\21\ for the same service.
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    \21\ See supra note 6.
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Definitions
    The Exchange does not believe that its proposal to adopt a 
Definitions section to its Fee Schedule imposes any unnecessary burden 
on intramarket competition that is not necessary or appropriate in 
furtherance of the purposes of the Act. The proposed definitions are 
designed to improve the clarity and precision of the Exchange's Fee 
Schedule and are not competitive in nature.
Routing Fees
    The Exchange does not believe that its proposal to adopt a Routing 
Fees imposes any unnecessary burden on intramarket competition that is 
not necessary or appropriate in furtherance of the purposes of the Act. 
The Exchange's Routing Fees reflect the

[[Page 66470]]

costs and fees incurred by the Exchange when routing orders to away 
markets on behalf of Members and are applied in a uniform manner to all 
similarly situated Members. Additionally, the Exchange notes that at 
least one other options exchange employs a similar routing fee 
structure.\22\
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    \22\ See supra note 10.
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    The Exchange does not believe that the proposal will impose any 
burden on intermarket competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. The Exchange notes that at 
least one other options exchange approximates its routing costs in a 
manner similar to that of the Exchange.\23\ Additionally, the Exchange 
operates in a highly competitive market in which market participants 
can readily direct order flow to competing venues if they deem fee 
levels at a particular venue to be excessive or incentives to be 
insufficient. Members have numerous alternative venues that they may 
participate on and direct their order flow to, including 16 other 
options exchanges. Based on publicly available information, no single 
options exchange has more than 16% of the market share.\24\ Therefore, 
no exchange possesses significant pricing power in the execution of 
option order flow. Additionally, the Commission has repeatedly 
expressed its preference for competition over regulatory intervention 
in determining prices, products, and services in the securities 
markets. Specifically, in Regulation NMS, the Commission highlighted 
the importance of market forces in determining prices and SRO revenues 
and, also, recognized that current regulation of the market system 
``has been remarkably successful in promoting market competition in its 
broader forms that are most important to investors and listed 
companies.\25\ The fact that this market is competitive has also long 
been recognized by the courts. In NetCoalition v. SEC, the D.C. Circuit 
stated as follows: ``[n]o one disputes that competition for order flow 
is `fierce.' . . . As the SEC explained, `[i]n the U.S. national market 
system, buyers and sellers of securities, and the broker-dealers that 
act as their order-routing agents, have a wide range of choices of 
where to route orders for execution'; [and] `no exchange can afford to 
take its market share percentages for granted' because `no exchanges 
possesses a monopoly, regulatory or otherwise, in the execution of 
order flow from broker dealers' . . .'' \26\ Accordingly, the Exchange 
does not believe that its proposal imposes any burden on competition 
that is not necessary or appropriate in furtherance of the purposes of 
the Act.
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    \23\ See supra note 10.
    \24\ See ``Market Share/MTD AVERAGE'', available at https://www.miaxglobal.com/ (data as of 7/1/2024-7/12/2024).
    \25\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005).
    \26\ NetCoalition v. SEC, 615 F.3d 525, 539 (D.C. Cir. 2010) 
(quoting Securities Exchange Act Release No. 59039 (December 2, 
2008), 73 FR 74770, 74782-83 (December 9, 2008) (SR-NYSE-2006-21)).
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C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    Written comments were neither solicited nor received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A)(ii) of the Act,\27\ and Rule 19b-4(f)(2) \28\ thereunder. 
At any time within 60 days of the filing of the proposed rule change, 
the Commission summarily may temporarily suspend such rule change if it 
appears to the Commission that such action is necessary or appropriate 
in the public interest, for the protection of investors, or otherwise 
in furtherance of the purposes of the Act. If the Commission takes such 
action, the Commission shall institute proceedings to determine whether 
the proposed rule should be approved or disapproved.
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    \27\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \28\ 17 CFR 240.19b-4(f)(2).
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IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
file number SR-SAPPHIRE-2024-13 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-SAPPHIRE-2024-13. 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 (https://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 
a.m. and 3 p.m. Copies of the filing also will be available for 
inspection and copying at the principal office of the Exchange. Do not 
include personal identifiable information in submissions; you should 
submit only information that you wish to make available publicly. We 
may redact in part or withhold entirely from publication submitted 
material that is obscene or subject to copyright protection. All 
submissions should refer to file number SR-SAPPHIRE-2024-13 and should 
be submitted on or before September 5, 2024.

    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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Vanessa A. Countryman,
Secretary.
[FR Doc. 2024-18201 Filed 8-14-24; 8:45 am]
BILLING CODE 8011-01-P