[Federal Register Volume 89, Number 162 (Wednesday, August 21, 2024)]
[Notices]
[Pages 67693-67696]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-18697]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-100732; File No. SR-SAPPHIRE-2024-07]


Self-Regulatory Organizations; MIAX Sapphire, LLC; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To 
Describe the Access Methods to the Exchange's Testing Systems 
Environment and Discontinue One Access Method

August 15, 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 5, 2024, MIAX Sapphire, LLC (``MIAX Sapphire'' 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 is filing a proposal to describe the three methods to 
access the Exchange's optional testing systems environment and the 
timeline and process by which one of the three access methods would be 
discontinued. The text of the proposed rule change is available on the 
Exchange's website at https://www.miaxglobal.com/markets/us-options/all-options-exchanges/rule-filings, at MIAX Sapphire'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
    On July 15, 2024, the Securities and Exchange Commission 
(``Commission'') approved the Exchange's Form 1 application to register 
as a national securities exchange under Section 6 of the Exchange 
Act.\3\ As previously announced, the Exchange anticipates that it will 
begin electronic operations on August 12, 2024.\4\
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    \3\ See Securities Exchange Act Release No. 100539 (July 15, 
2024) (File No. 10-240) (In the Matter of the Application of MIAX 
Sapphire, LLC for Registration as a National Securities Exchange) 
(the ``Approval Order'').
    \4\ See MIAX Sapphire Options Alert, dated March 6, 2024, 
available at https://www.miaxglobal.com/alert/2024/03/06/miax-sapphire-options-exchange-rescheduled-launch-date-august-12-2024.
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    In anticipation of the launch of electronic equity options trading, 
the Exchange submits this filing to describe the three methods to 
access the Exchange's optional testing systems environment and the 
timeline and process by which the 1 Gigabit (``Gb'') or 10Gb ultra-low 
latency (``ULL'') connection access method described below would be 
discontinued.
    The testing systems environment is a virtual trading system 
environment for Members \5\ and non-Members to test (i) upcoming 
Exchange software and code releases, (ii) product enhancements, and 
(iii) firm-developed software, prior to

[[Page 67694]]

implementation in the Exchange's production (e.g., live trading) 
environment. Further, the testing systems environment allows unlimited 
testing of existing functionality, such as order types, order entry, 
order management, order throughput, acknowledgements, risk settings, 
mass cancelations, and purge requests. The testing systems environment 
is built to closely approximate the production environment (once live 
trading begins) to enable users the ability to test their systems and 
mimics the real life trading environment.\6\
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    \5\ The term ``Member'' means an individual or organization that 
is registered with the Exchange pursuant to Chapter II of the 
Exchange's 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.
    \6\ Business continuity and disaster recovery testing is 
performed separately and not within the testing systems environment 
that is the subject of this filing.
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    There are three methods by which Members and non-Members may access 
the Exchange's testing systems environment. One, Members and non-
Members may access the Exchange's testing systems environment via a 
virtual private network (``VPN'') that operates over the internet and 
provides site-to-site access. VPN access is provided for free to all 
Members and non-Members. Two, Members and non-Members may also access 
the testing systems environment via a dedicated cross connection that 
is available as either a 1Gb or 10Gb ULL connection.\7\ Firms that 
utilize a VPN or dedicated cross connection to access the testing 
systems environment of the Exchange are also able to access the testing 
systems environments of each of the Exchange's affiliated options 
markets--Miami International Securities Exchange, LLC (``MIAX''), MIAX 
PEARL, LLC \8\ (``MIAX Pearl Options''), and MIAX Emerald, LLC (``MIAX 
Emerald''). The dedicated cross connect to the testing systems 
environment does not provide access to any of the production 
environments (i.e., live trading) of the Exchange or its affiliates, or 
allow the receipt of proprietary real-time market data for which each 
Member or non-Member may subscribe.
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    \7\ The Exchange notes that other exchange families offer a 
similar dedicated connection to their testing environment for their 
members and non-members. See, e.g., Nasdaq Options Test Facility 
(NTF) Abstract, Version 1.4.4 (March 2024), available at https://www.nasdaq.com/Nasdaq_Test_Facility_NTF_Guide (last visited July 16, 
2024) (``. . . the Nasdaq Test Facility . . . where market 
participants can test their trading applications with the INET 
trading system. The NTF environment allows members to test sending 
and executing quotes and orders offered by our six options exchanges 
. . .''); see also Securities Exchange Act Release No. 100442 (June 
27, 2024), 89 FR 55296 (July 3, 2024) (SR-CboeBZX-2024-058) (``. . 
.the Exchange also offers corresponding ports which provide Members 
and non-Members access to the Exchange's certification environment 
to test proprietary systems and applications . . . The certification 
environment facilitates testing using replicas of the Exchange's 
production environment process configurations which provide for a 
robust and realistic testing experience . . .'').
    \8\ All references to ``MIAX PEARL'' in this filing are to the 
options trading facility of MIAX PEARL, LLC, referred to herein as 
``MIAX Pearl Options.'' Firms that choose to utilize the testing 
systems environment of MIAX Pearl Equities, the equities trading 
facility of MIAX PEARL, LLC, must utilize a separate dedicated cross 
connect as MIAX Pearl Equities' testing systems environment operates 
on a separate network from the affiliated options markets.
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    Three, access is also provided through the production connections 
for each 1Gb \9\ or 10Gb ULL connection for the applicable fee for such 
connection and no additional charge.\10\ Unlike a dedicated cross 
connection to the testing systems environment described above, these 
1Gb and 10Gb ULL connections provide access to the Exchange's 
production environment (i.e., live trading) and allow the receipt of 
proprietary real-time market data. Also, unlike VPN, 1Gb, and the 
dedicated cross connection access described above, the 10Gb ULL 
connections only provide access the Exchange's testing systems 
environment and not those of its affiliated options markets. This is 
because of the nature of those connections, which are utilized to 
access the Exchange only, not just for testing, but for other Exchange 
specific items, such as access the Exchange's production environment 
and for the receipt of proprietary Exchange market data.
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    \9\ Like VPN access, the 1Gb connection will allow firms to 
reach all testing systems environments of the Exchange's affiliates, 
upon launch of the Exchange.
    \10\ As noted above, the Exchange has not begun live trading at 
the time of this filing; however, the Exchange anticipates filing a 
separate rule filing with the Commission to establish fees for 
connectivity to the production environment ahead of the commencement 
of live trading. Such fees may also be waived for a period of time, 
which will be stated in the respective filing. See, e.g., infra note 
12.
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    Firms that access the testing systems environment through any one 
of the three available access methods receive functionally the same 
testing experience. Each firm is free to decide how to access the 
testing systems environment based on their own needs and trading 
architecture. Again, use of the testing systems environment is entirely 
optional and no firm is required by rule or regulation to make use of 
the testing systems environment.\11\ Regardless of access method, all 
firms are provided the same testing systems environment experience and 
are able to perform all of the same functions.
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    \11\ Access to the Exchange's testing systems environment was 
provided to firms prior to the Exchange's Form 1 application being 
approved. During that time, fourteen firms accessed the testing 
systems environment via the dedicated cross connections and five 
firms accessed the testing systems environment via a VPN.
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    The Exchange will phase out the ability to connect to the testing 
systems environment via the existing 1Gb and 10Gb ULL production 
connections over the next 6 to 12 months. The Exchange will issue an 
alert notifying market participants of the anticipated timeline by 
which it will phase out access to the testing systems environment via 
1Gb and 10Gb ULL production connections. During this phase out period, 
firms that use a 1Gb or 10Gb ULL production connection to access the 
testing systems environment would continue to be able to do so. At the 
end of this period, Members and non-Members that currently elect to 
access the Exchange's testing systems environment via a 1Gb or 10Gb ULL 
connection that seek to continue to access the Exchange's testing 
systems environment would be required to transfer their access to one 
of the two remaining access methods, a VPN for free or by subscribing 
to a dedicated cross connection for an amount that is expected to be 
less than the current fee for a 1Gb or 10Gb ULL production 
connection.\12\
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    \12\ The Exchange will submit a separate proposed rule change 
for immediate effectiveness pursuant to Section 19(b)(3)(A) of the 
Act (15 U.S.C. 78s(b)(3)(A)) and Rule 19b-4(f)(2) (17 CFR 240.19b-
4(f)(2)) thereunder to establish a fee for the dedicated cross 
connect to the testing systems environment. The Exchange anticipates 
to waive such proposed fee for a period of time and that any 
potential fees at the end of the waiver prior to be less than the 
anticipated fees for a 1Gb and 10Gb ULL connection to the production 
environment.
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2. Statutory Basis
    The Exchange believes the proposed change is consistent with the 
requirements of Section 6(b) of the Act,\13\ in general, and Section 
6(b)(5),\14\ in particular, because it is designed to prevent 
fraudulent and manipulative acts and practices, promote just and 
equitable principles of trade, foster cooperation and coordination with 
persons engaged in regulating, clearing, settling, processing 
information with respect to, and facilitating transactions in 
securities, and remove impediments to and perfect the mechanism of a 
free and open market and a national market system.
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    \13\ 15 U.S.C. 78f(b).
    \14\ 15 U.S.C. 78f(b)(5).
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    This filing simply describes the three methods to access the 
Exchange's optional testing systems environment and the timeline and 
process by which one of the three access methods would be discontinued. 
Access to the Exchange's testing systems environment

[[Page 67695]]

is completely voluntary.\15\ The testing systems environment is a 
useful tool for Members and non-Members to test (i) upcoming Exchange 
software and code releases, (ii) product enhancements, and (iii) firm-
developed software, prior to implementation in the Exchange's 
production environment. In addition, the testing systems environment 
allows unlimited firm-level testing of order types, order entry, order 
management, order throughput, acknowledgements, risk settings, mass 
cancelations, and purge requests.
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    \15\ As noted above, business continuity and disaster recovery 
testing is performed separately and not within the testing systems 
environment that is the subject of this filing.
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    There is no functional difference between access alternatives. It 
is simply a technical decision of each firm regarding how to access the 
testing systems environment. The testing systems environment, whether 
accessed via the proposed dedicated connection or otherwise, provides 
firms the same scope of abilities to test their systems and software in 
the Exchange's testing systems environment, which replicates the 
Exchange's anticipated production trading environment. The testing 
systems environment serves to improve live trading on the Exchange and 
the national market system by permitting Members and non-Members the 
ability to accurately test software and code changes prior to 
implementing them in their systems in the live trading environment. 
This should, in turn, reduce the likelihood of a potentially disruptive 
issues in the live trading environment, which has the potential to 
affect all market participants.
    The Exchange is not proposing new functionality. This filing simply 
describes the means of access to the Exchange's testing systems 
environment and the process by which one of those access methods would 
be discontinued. Doing so provides clarity to market participants and 
seeks to avoid potential investor confusion. Therefore, for the above 
reasons, the Exchange believes the proposed rule change is consistent 
with the Act.

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

    The Exchange does not believe that the proposed rule change will 
result in any burden on competition that is not necessary or 
appropriate in furtherance of the purposes of the Act. There would be 
no competitive advantage for firms that access the testing systems 
environment via one access method versus another. All modes of access 
allow firms to perform the same testing functions in the same manner. 
As such, the Exchange does not believe that the proposed change will 
impose any burden on intermarket competition not necessary or 
appropriate in furtherance of the purposes of the Act.
    The Exchange believes the proposed rule change may have a positive 
impact on or intramarket competition. Among other things, the proposed 
rule change is intended to keep pace with technological changes in the 
industry and evolving customer needs and demands, and believes the 
dedicated connection to the testing systems environment will contribute 
to robust competition among national securities exchanges. As noted 
above, several exchanges already offer similar testing environments to 
their members and non-members.\16\ As a result, the Exchange believes 
this proposed rule change permits fair competition among national 
securities exchanges.
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    \16\ See supra note 7.
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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

    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, if consistent with 
the protection of investors and the public interest, the proposed rule 
change has become effective pursuant to Section 19(b)(3)(A)(iii) of the 
Act \17\ and Rule 19b-4(f)(6) thereunder.\18\
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    \17\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \18\ 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, along 
with a brief description and text of 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 under 
Section 19(b)(2)(B) \19\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \19\ 15 U.S.C. 78s(b)(2)(B).
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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-2024-07 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-2024-07. 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-2024-07 and should 
be

[[Page 67696]]

submitted on or before September 11, 2024.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\20\
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    \20\ 17 CFR 200.30-3(a)(12), (59).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-18697 Filed 8-20-24; 8:45 am]
BILLING CODE 8011-01-P