[Federal Register Volume 89, Number 163 (Thursday, August 22, 2024)]
[Notices]
[Pages 67999-68005]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-18784]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-100749; File No. SR-SAPPHIRE-2024-08]


Self-Regulatory Organizations; MIAX Sapphire, LLC; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Adopt 
Fees for the Liquidity Taker Event Report--Simple Orders, the Liquidity 
Taker Event Report--Complex Orders, and the Liquidity Taker Event 
Report--Resting Simple Orders

August 16, 2024.
    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 August 6, 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, 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 adopt fees for three data 
products: (i) the Liquidity Taker Event Report--Simple Orders; (ii) 
Liquidity Taker Event Report--Complex Orders; and (iii) Liquidity Taker 
Event Report--Resting Simple Orders.\3\
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    \3\ See Exchange Rules 531(a)-(c).
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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.

[[Page 68000]]

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 offers three Member \4\-specific reports: (1) the 
Liquidity Taker Event Report--Simple Orders (referred to herein as the 
``Simple Order Report''); (2) the Liquidity Taker Event Report--Complex 
Orders (the ``Complex Order Report''); and (3) the Liquidity Taker 
Event Report--Resting Simple Orders (the ``Resting Simple Order 
Report''), which are available for purchase by Exchange Members on a 
voluntary basis.
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    \4\ 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.
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    The Exchange proposes to adopt fees for these three reports. The 
Exchange reports are described under Exchange Rules 531(a)-(c).\5\ The 
reports are optional products available to Members. As further 
described below, the Exchange also proposes to offer a discounted 
combined fee for Members who purchase annual subscriptions to both the 
Simple Order Report and Complex Order Report. The Exchange notes that 
the proposed fees and proposed discount are identical to the fees and 
discounts currently provided by the Exchange's affiliated options 
exchanges, Miami International Securities Exchange, LLC (``MIAX''), 
MIAX PEARL, LLC (``MIAX Pearl''),\6\ and MIAX Emerald, LLC (``MIAX 
Emerald''), for the same liquidity taker event reports available on 
those exchanges.\7\ The proposed fees are also identical to the fees 
charged by a competing options exchange, BOX Exchange, LLC (``BOX''), 
for BOX's version of the Simple Order Report and Complex Order 
Report.\8\
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    \5\ See supra note 3; see also Securities Exchange Act Release 
Nos. 100539 (July 15, 2024), 89 FR 58848 (July 19, 2024) (File No. 
10-240) and 100642 (August 2, 2024) (SR-SAPPHIRE-2024-05).
    \6\ All references to ``MIAX Pearl'' in this filing are to the 
options trading facility of MIAX Pearl, and not the equities trading 
facility, which is referred to as ``MIAX Pearl Equities.''
    \7\ See MIAX Fee Schedule, Section 7); MIAX Pearl Fee Schedule, 
Section 7); and MIAX Emerald Fee Schedule, Section 7). The Exchange 
notes that MIAX Pearl does not offer complex order functionality; 
accordingly, it only offers its version of the Simple Order Report 
and Resting Simple Order Report.
    \8\ See BOX Fee Schedule, Section III.C.2. At the time of this 
filing, BOX does not offer a version of the Resting Simple Order 
Report.
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    By way of background, the reports are daily reports that provide a 
Member (``Recipient Member'') with its liquidity response time details 
for executions of an order (or complex order,\9\ as the case may be) 
resting on the Electronic Book,\10\ where that Recipient Member 
attempted to execute against such resting order \11\ within a certain 
timeframe. It is important to note that the content of each report is 
specific to the Recipient Member and each report will not include any 
information related to any Member other than the Recipient Member.
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    \9\ In sum, a ``complex order'' is ``any order involving the 
concurrent purchase and/or sale of two or more different options in 
the same underlying security (the `legs' or `components' of the 
complex order), for the same account, in a conforming or non-
conforming ratio . . . .'' See Exchange Rule 518(a).
    \10\ The term ``Electronic Book'' means the Exchange's Simple 
Order Book and Strategy Book. See Exchange Rule 100. The ``Simple 
Order Book'' is the Exchange's regular electronic book of orders and 
quotes. Id. The ``Strategy Book'' is the Exchange's electronic book 
of complex orders. Id.
    \11\ Only displayed orders will be included in the reports. The 
Exchange notes that it does not currently offer any non-displayed 
orders.
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Report Content
    The content of the Simple Order Report, Complex Order Report, and 
Resting Simple Order Report are substantially similar to one another. 
The following paragraphs explain the content of three reports by 
delineating which information would be provided regarding the resting 
order, the response that successfully executed against the resting 
order, and the response submitted by the Recipient Member that missed 
executing against the resting order.
    Resting Order Information. The following information is included in 
the Simple Order Report, Complex Order Report, and Resting Simple Order 
Report regarding the resting order: (A) the time the resting order was 
received by the Exchange; \12\ (B) symbol; (C) order reference number, 
which is a unique reference number assigned to a new order at the time 
of receipt; (D) whether the Recipient Member is an affiliate \13\ of 
the Member that entered the resting order \14\; (E) origin type (e.g., 
Priority Customer,\15\ Market Maker \16\); (F) side (buy or sell); and 
(G) displayed price and size of the resting order.\17\ The Simple Order 
Report and Resting Simple Order Report include the same information 
about incoming orders seeking to remove resting orders from the Simple 
Order Book. Meanwhile, the content of the Complex Order Report includes 
the same information about incoming complex orders that seek to remove 
liquidity from the Exchange's Strategy Book.\18\
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    \12\ The time the Exchange received the resting order would be 
in nanoseconds and is the time the resting order was received by the 
Exchange's System. The term ``System'' means the automated trading 
system used by the Exchange for the trading of securities. See 
Exchange Rule 100.
    \13\ The term ``affiliate'' of or person ``affiliated with'' 
another person means a person who, directly, or indirectly, 
controls, is controlled by, or is under common control with, such 
other person. See Exchange Rule 100.
    \14\ Each report will simply indicate whether the Recipient 
Member is an Affiliate of the Member that entered the resting order 
and will not include any other information that may indicate the 
identity of the Member that entered the resting order.
    \15\ 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). The 
number of orders shall be counted in accordance with Interpretation 
and Policy .01 to Exchange Rule 100. See Exchange Rule 100.
    \16\ The term ``Market Maker'' or ``MM'' means a Member 
registered with the Exchange for the purpose of making markets in 
options contracts traded on the Exchange and that is vested with the 
rights and responsibilities specified in Chapter VI of the 
Exchange's Rules. See Exchange Rule 100.
    \17\ The Exchange notes that the displayed price and size are 
also disseminated via the Exchange's proprietary data feeds and the 
Options Price Reporting Authority (``OPRA''). The Exchange also 
notes that the displayed price of the resting order may be different 
than the ultimate execution price. This may occur when a resting 
order is displayed and ranked at different prices upon entry to 
avoid a locked or crossed market.
    \18\ The term ``complex strategy'' means a particular 
combination of components and their ratios to one another. New 
complex strategies can be created as the result of the receipt of a 
complex order or by the Exchange for a complex strategy that is not 
currently in the System. The Exchange may limit the number of new 
complex strategies that may be in the System at a particular time 
and will communicate this limitation to Members via Regulatory 
Circular. See Exchange Rule 518(a). The Strategy Book is organized 
by complex strategy in that individual orders for a defined complex 
strategy are organized together in a book that is separate from the 
orders for a different complex strategy.
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    Execution Information. The following information is included in the 
Simple Order Report regarding the execution of the resting order: (A) 
the SBBO \19\ at the

[[Page 68001]]

time of execution; \20\ (B) the ABBO \21\ at the time of execution; 
\22\ (C) the time the first response that executes against the resting 
order was received by the Exchange and the size of the execution and 
type of the response; \23\ (D) the time difference between the time the 
resting order was received by the Exchange and the time the first 
response that executes against the resting order was received by the 
Exchange; \24\ and (E) whether the response was entered by the 
Recipient Member. If the resting order executes against multiple 
contra-side responses, only the SBBO and ABBO at the time of the 
execution against the first response will be included.
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    \19\ The term ``SBBO'' means the best bid or offer on the Simple 
Order Book of the Exchange. See Exchange Rule 100.
    \20\ Exchange Rule 531(a)(1)(ii)(B) [sic] provides that if the 
resting order executes against multiple contra-side responses, only 
the ABBO [sic] at the time of the execution against the first 
response will be included.
    \21\ The term ``ABBO'' or ``Away Best Bid or Offer'' means the 
best bid(s) or offer(s) disseminated by other Eligible Exchanges 
(defined in Exchange Rule 1400(g)) and calculated by the Exchange 
based on market information received by the Exchange from OPRA. See 
Exchange Rule 100.
    \22\ Exchange Rule 531(a)(1)(ii)(A) [sic] further provides that 
if the resting order executes against multiple contra-side 
responses, only the ABBO at the time of the execution against the 
first response will be included.
    \23\ The time the Exchange received the response order would be 
in nanoseconds and would be the time the response was received by 
the Exchange's network, which is before the time the response would 
be received by the System.
    \24\ The time difference would be provided in nanoseconds.
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    The Simple Order Report and Resting Simple Order Report include the 
SBBO, which is the Exchange's best bid or offer, and the ABBO, which is 
the best bid or offer of away exchanges. The content of the Complex 
Order Report is identical to the content of the Simple Order Report 
with three minor differences. The Complex Order Report includes the 
Complex SBBO \25\ in place of the SBBO and Complex ABBO \26\ in place 
of the ABBO. The Complex SBBO is calculated using the SBBO for each 
component of a complex strategy to establish the Exchange's best net 
bid or offer for a complex strategy. The Complex SBBO is calculated 
using the icSBBO combined with the best price currently available on 
the Strategy Book to establish the Exchange's best net bid or offer for 
a complex strategy.\27\ The Complex ABBO is calculated using the ABBO 
for each component of a complex strategy to establish the away markets' 
best net bid or offer for a complex strategy using OPRA data. The 
Exchange is providing the Complex SBBO and Complex ABBO because both 
are relevant and tailored to a Member that is entering a complex order 
to remove liquidity as part of a complex strategy and, therefore, more 
germane to the purpose of the Complex Order Report. The third 
difference is that the Complex Order Report includes the data listed in 
Exchange Rule 531(b)(1) for executions and contra-side responses that 
occurred within 400 microseconds of the time the resting order was 
received by the Exchange, rather than 200 microseconds, which is the 
timeframe utilized by the Simple Order Report.
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    \25\ The Complex SBBO for a particular complex strategy is 
calculated using the Implied Complex Sapphire Best Bid or Offer 
(``icSBBO'') combined with the best price currently available for 
that particular complex strategy on the Strategy Book to establish 
the Exchange's best net bid or offer for that complex strategy. The 
icSBBO is calculated using 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 icSBBO 
for a Complex Strategy is 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). 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.
    \26\ The Complex ABBO is calculated using the ABBO for each 
component of a complex strategy to establish the away markets' best 
net bid or offer for a complex strategy.
    \27\ See supra note 25.
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    But for the timeframe and one difference described below, the 
Resting Simple Order Report would include the same data as the Simple 
Order Report currently described under Exchange Rule 531(a), except 
that the Resting Simple Order Report will focus on executions and 
contra-side responses that occurred after 200 microseconds of the time 
the resting order was received by the Exchange and within 200 
microseconds of receipt of any Member's first attempt to execute 
against the resting order after the initial 200 microsecond time period 
under subparagraph (c)(2)(i) of Exchange Rule 531 has expired. The 
Simple Order Report includes the time difference between the time the 
resting order was received by the Exchange and the time the first 
response that executes against the resting order was received by the 
Exchange. The Resting Simple Order Report does not include the same 
information because that timeframe could be for an extended period of 
time since the proposed Resting Simple Order Report focuses on orders 
that have been resting on the Simple Order Book for longer than 200 
microseconds and, therefore, the Exchange believes is less likely to be 
valuable to the Recipient Member. The Simple Order Report and Resting 
Simple Order Report focus on 200 microsecond windows with the Simple 
Order Report's window starting at the time of receipt of the resting 
order and the Resting Simple Order Report's window starting with the 
first attempt to execute against the resting order after the order was 
resting on the Simple Order Book for at least 200 microseconds.
    Recipient Member's Response Information. The following information 
is included in the Simple Order Report, Complex Order Report, and 
Resting Simple Order Report regarding response(s) sent by the Recipient 
Member: (A) Recipient Member identifier; (B) the time difference 
between the time the first response that executes against the resting 
order was received by the Exchange and the time of each response sent 
by the Recipient Member, regardless of whether it executed or not; \28\ 
(C) size and type of each response submitted by Recipient Member; and 
(D) response reference number, which is a unique reference number 
attached to the response by the Recipient Member.
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    \28\ For purposes of calculating this duration of time, the 
Exchange will use the time the first response that executes against 
the resting order and the Recipient Member's response(s) is received 
by the Exchange's network, both of which would be before the order 
and response(s) would be received by the System. This time 
difference would be provided in nanoseconds.
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Timeframe
    The Simple Order Report provides data for executions and contra-
side responses that occurred within 200 microseconds of the time the 
resting order was received by the Exchange. The Complex Order Report 
provides data for executions and contra-side responses that occurred 
within 400 microseconds of the time the resting order was received by 
the Exchange. The minor difference in timeframes for the Simple Order 
Report and Complex Order Report is to allow sufficient time for the 
System to develop new complex strategies, which generally takes longer 
than 200 microseconds. Accordingly, the Complex Order Report provides 
for a timeframe of 400 microseconds to allow for the intended 
information to be captured by the Complex Order Report.
    The Resting Simple Order Report includes the same data as the 
Simple Order Report and Complex Order Report but focuses on executions 
and contra-side responses that occurred after 200 microseconds of the 
time the resting order was received by the Exchange, and within 200 
microseconds of receipt of any Member's first attempt to execute 
against the resting order after the initial 200 microsecond time period 
has expired. More specifically, the resting order must rest on the 
Simple Order Book for at least 200 microseconds and once that initial 
200 microsecond period

[[Page 68002]]

has passed, a Member must then submit an order to attempt to execute 
against that resting order. This event starts a second 200 microsecond 
period within which the Resting Simple Order Report would include data 
on executions and contra-side responses submitted by the Recipient 
Member to execute against that resting order.
Scope of Data Included in the Reports
    The Simple Order Report, Complex Order Report, and Resting Simple 
Order Report include trading data related to the Recipient Member and 
subject to the historical data requirement described below, and do not 
include information related to any other Member's trading data other 
than resting order information and execution information described 
above.
Historical Data
    The Simple Order Report, Complex Order Report, and Resting Simple 
Order Report contain historical data from the prior trading day and 
will be available after the end of the trading day, generally on a T+1 
basis. These reports do not include real-time data.
    The Exchange believes the additional data points from the matching 
engine outlined above may help Members gain a better understanding 
about their own interactions with the Exchange. The Exchange believes 
the Simple Order Report, Complex Order Report, and Resting Simple Order 
Report will provide Members with an opportunity to learn more about 
better opportunities to access liquidity and receive better execution 
rates. The Simple Order Report, Complex Order Report, and Resting 
Simple Order Report will increase transparency and democratize 
information so that all firms that subscribe to these reports have 
access to the same information on an equal basis, even for firms that 
do not have the appropriate resources to generate a similar report 
regarding interactions with the Exchange.
    Members generally would use a liquidity accessing order if there is 
a high probability that it will execute against an order resting on the 
Simple Order Book or Strategy Book. The Simple Order Report, Complex 
Order Report, and Resting Simple Order Report identify by how much time 
an order that may have been marketable missed an execution. The Simple 
Order Report, Complex Order Report, and Resting Simple Order Report 
will provide greater visibility into the missed trading execution, 
which will allow Members to optimize their models and trading patterns 
to yield better execution results.
    The Simple Order Report, Complex Order Report, and Resting Simple 
Order Report will be Member-specific reports and will help Members to 
better understand by how much time a particular order missed executing 
against a specific resting order, thus allowing that Member to 
determine whether it wants to invest in the necessary resources and 
technology to mitigate missed executions against certain resting orders 
on the Electronic Book.
    The reports are being offered to Members on a completely voluntary 
basis in that the Exchange is not required by any rule or regulation to 
make this data available and potential subscribers may purchase any 
report only if they voluntarily choose to do so. It is a business 
decision of each Member whether to subscribe to each report or not.
    The Exchange proposes to adopt new Section 7), Reports, in its Fee 
Schedule, which will provide that Members may purchase each report on a 
monthly or annual (12-month) basis. The Exchange proposes to assess a 
monthly fee of $4,000 per month and a fee of $24,000 per year for a 12-
month subscription for each of the Simple Order Report and Complex 
Order Report. The Exchange proposes to assess a monthly fee of $2,000 
per month and a fee of $12,000 per year for a 12-month subscription for 
the Resting Simple Order Report. The proposed fees are identical to the 
fees currently charged by the Exchange's affiliates, MIAX, MIAX Pearl 
(for the Simple Order Report and Resting Simple Order Report), and MIAX 
Emerald, for the same reports available on those exchanges.\29\ The 
proposed fees for the Simple Order Report and Complex Order Report are 
identical to the fees charged by a competing options exchange, BOX, for 
its version of the Simple Order Report and Complex Order Report.\30\
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    \29\ See supra note 7.
    \30\ See supra note 8. At the time of this filing, BOX does not 
offer a version of the Resting Simple Order Report.
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    Members may cancel their subscription to any report at any time. 
The Exchange also proposes to specify that for mid-month subscriptions, 
new subscribers will be charged for the full calendar month for which 
they subscribe and will be provided report data for each trading day of 
the calendar month prior to the day on which they subscribed to any of 
the reports. The Exchange proposes to waive the monthly fees for the 
Simple Order Report, Complex Order Report and Resting Simple Order 
Report for the Initial Waiver Period.\31\ Even though the Exchange 
proposes to waive these particular fees during the Initial Waiver 
Period, the Exchange believes that it is appropriate to provide market 
participants with the overall structure of the fees by outlining the 
structure and amounts in the Fee Schedule so that there is general 
awareness that the Exchange intends to assess such fees upon expiration 
of the defined term of the Initial Waiver Period.
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    \31\ The term ``Initial Waiver Period'' means, for each 
applicable fee, the period of time from the initial effective date 
of the MIAX Sapphire Fee Schedule plus an additional six (6) full 
calendar months after the completion of the partial month of the 
Exchange launch. See the Definitions Section of the Fee Schedule.
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    The Exchange also proposes to provide a discounted rate of $40,000 
per year to Members that purchase 12-month subscriptions to both the 
Simple Order Report and Complex Order Report (as compared to a total of 
$48,000 for each 12-month subscription at a rate of $24,000 for each 
report on an individual subscription basis). The Exchange also proposes 
to prorate the discounted 12-month subscription fee for Members that 
seek to add either their Simple Order Report or the Complex Order 
Report to an existing subscription. In particular, the Exchange 
proposes that for those Members with an existing 12-month subscription 
to either the Simple Order Report or Complex Order Report, but not 
both, may add a subscription to the Simple Order Report or Complex 
Order Report during their current 12-month subscription. In such case, 
the fee for the added report will be prorated based on the $40,000 
combined rate for the 12-month subscription discount for the remainder 
of the subscriber's current 12-month subscription, and the number of 
months remaining in the existing subscription until the Member's 
renewal date. Members would then receive the 12-month discount ($40,000 
annually) for subscribing to both reports on the renewal date of their 
original subscription.
    For example, assume ``Member A'' previously subscribed to the 
Simple Order Report on September 1, 2024, and paid $24,000 for a 12 
month subscription to the Simple Order Report. ``Member A's'' current 
subscription expires on August 31, 2025, for the Simple Order Report. 
Before ``Member A's'' subscription to the Simple Order Report expires, 
``Member A'' decides to subscribe to the Complex Order Report, 
beginning March 1, 2025. Rather than being immediately charged $40,000 
for the 12 month subscription discount for subscribing to both reports 
(``Member

[[Page 68003]]

A'' already paid $24,000 upfront for the Simple Order Report 12 month 
subscription), ``Member A'' would only be charged an additional $8,000 
to add the Complex Order Report for the remaining months of ``Member 
A's'' current 12 month subscription to the Simple Order Report. On 
September 1, 2025, assuming ``Member A'' decided to keep both reports, 
``Member A'' would then be charged the 12 month discounted rate of 
$40,000 for both reports for the next year.
    The Exchange proposes to determine the prorated fee described above 
as follows: on the date that ``Member A'' wanted to begin subscribing 
to the Complex Order Report (March 1, 2025), there were six months 
remaining on ``Member A's'' existing 12 month subscription to the 
Simple Order Report (March, April, May, June, July and August). The 
added cost would be calculated as ((6 months remaining/12 months total) 
* ($40,000 discounted annual subscription for both reports--$24,000 for 
annual subscription to each report individually) = $8,000 for remaining 
6 months. Beginning September 1, 2025 (the original renewal date for 
the Simple Order Report), ``Member A'' would then be charged the 
discounted 12 month subscription rate of $40,000, assuming ``Member A'' 
renews their subscriptions to both the Simple Order Report and the 
Complex Order Report.
    The Exchange intends to begin to offer the reports on August 12, 
2024.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\32\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act,\33\ in particular, in that it 
is designed to prevent fraudulent and manipulative acts and practices, 
promote just and equitable principles of trade, remove impediments to 
and perfect the mechanism of a free and open market and a national 
market system, and protect investors and the public interest, and is 
not designed to permit unfair discrimination among customers, brokers, 
or dealers. The Exchange also believes that its proposal to adopt fees 
for the reports is consistent with Section 6(b) of the Act \34\ in 
general, and furthers the objectives of Section 6(b)(4) of the Act \35\ 
in particular, in that it is an equitable allocation of dues, fees and 
other charges among its Members and other recipients of Exchange data.
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    \32\ 15 U.S.C. 78f(b).
    \33\ 15 U.S.C. 78f(b)(5).
    \34\ 15 U.S.C. 78f(b).
    \35\ 15 U.S.C. 78f(b)(4).
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    In adopting Regulation NMS, the Commission granted self-regulatory 
organizations (``SROs'') and broker-dealers increased authority and 
flexibility to offer new and unique market data to the public. It was 
believed that this authority would expand the amount of data available 
to consumers, and also spur innovation and competition for the 
provision of market data. The Exchange believes that the reports 
further broaden the availability of U.S. option market data to 
investors consistent with the principles of Regulation NMS. The reports 
also promote increased transparency through the dissemination of the 
data contained in each report. Particularly, the reports will benefit 
investors by facilitating their prompt access to the value added 
information that is included in each report. The reports will allow 
Members to access information regarding their trading activity that 
they may utilize to evaluate their own trading behavior and order 
interactions.
    The Exchange operates in a highly competitive environment. Indeed, 
with the launch of MIAX Sapphire, there are 17 registered exchanges 
that trade options. For the month of June 2024, based on publicly 
available information, no single options exchange had more than 
approximately 14-15% of the equity options market share.\36\ The 
Commission has repeatedly expressed its preference for competition over 
regulatory intervention in determining prices, products, and services 
in the securities markets. Particularly, 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.'' \37\ Making similar data products 
available to market participants fosters competition in the 
marketplace, and constrains the ability of exchanges to charge supra-
competitive fees. In the event that a market participant views one 
exchange's data product as more attractive than the competition, that 
market participant can, and often does, switch between similar 
products. The proposed fees are a result of the competitive environment 
of the U.S. options industry as the Exchange seeks to adopt fees to 
attract purchasers of the recently introduced reports.
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    \36\ See the ``Market Share'' section of the Exchange's website, 
available at https://www.miaxglobal.com/ (last visited July 25, 
2024).
    \37\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting 
Release'').
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    The Exchange believes the proposed fees are reasonable as the 
proposed fees are both modest and identical to fees charged by MIAX, 
MIAX Pearl, and MIAX Emerald for similar reports.\38\ Indeed, if the 
Exchange proposed fees that market participants viewed as excessively 
high, then the proposed fees would simply serve to reduce demand for 
the Exchange's data products, which as noted, are entirely optional. 
Other options exchanges are also free to introduce their own comparable 
data products with lower prices to better compete with the Exchange's 
offerings.\39\ As such, the Exchange believes that the proposed fees 
are reasonable and set at a level to compete with other options 
exchanges that may choose to offer similar reports. Moreover, if a 
market participant views another exchange's potential report as more 
attractive, then such market participant can merely choose not to 
purchase the Exchange's reports and instead purchase another exchange's 
similar data product(s), which may offer similar data points, albeit 
based on that other market's trading activity.
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    \38\ See supra note 7. See MIAX Rules 531(a)-(c) and MIAX 
Emerald Rules 531(a)-(c).
    \39\ This is supported by BOX introducing two nearly identical 
reports. See supra note 8; see also Securities Exchange Act Release 
Nos. 94563 (March 31, 2022), 87 FR 19985 (April 6, 2022) (SR-BOX-
2022-10); and 94920 (May 16, 2022), 87 FR 31013 (May 20, 2022) (SR-
BOX-2022-18).
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    The Exchange also believes providing an annual subscription for an 
overall lower fee than a monthly subscription is equitable and 
reasonable because it would enable the Exchange to gauge long-term 
interest in each of the reports. A lower annual subscription fee would 
also incentivize Members to subscribe to the reports on a long-term 
basis, thereby improving the efficiency by which the Exchange may 
deliver the reports by doing so on a regular basis over a prolonged and 
set period of time.
    The Exchange also believes the proposed fees are reasonable as they 
would support the introduction of new market data products to Members 
that are interested in gaining insight into latency in connection with 
orders that failed to execute against an order resting on the 
Exchange's Simple Order Book or Strategy Book, as the case may be. The 
reports accomplish this by providing those Members data to analyze by 
how much time their order may have missed an execution against a 
contra-side order resting on the Simple Order Book or Strategy Book. 
Members may use this data to optimize their models and

[[Page 68004]]

trading patterns in an effort to yield better execution results by 
calculating by how much time their order may have missed an execution.
    Selling market data, such as one of the reports, is also a means by 
which exchanges compete to attract business. To the extent that the 
Exchange is successful in attracting subscribers for the reports, it 
may earn trading revenues and further enhance the value of its data 
products. If the market deems the proposed fees to be unfair or 
inequitable, firms can decrease or discontinue their use of the data 
and/or avail themselves of similar products that may be offered by 
other exchanges.\40\ The Exchange, therefore, believes that the 
proposed fees for the reports reflect the competitive environment and 
would be properly assessed on Member users. The Exchange also believes 
the proposed fees are equitable and not unfairly discriminatory as the 
fees would apply equally to all users who choose to purchase such data. 
It is a business decision of each Member that chooses to purchase any 
of the reports. The Exchange's proposed fees would not differentiate 
between subscribers that purchase the reports and are set at modest 
levels that would allow any interested Member to purchase such data 
based on their business needs.
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    \40\ See supra note 8.
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    The Exchange reiterates that the decision as to whether or not to 
purchase the reports is entirely optional for all potential 
subscribers. Indeed, no market participant is required to purchase the 
reports, and the Exchange is not required to make the reports available 
to all investors. It is entirely a business decision of each Member to 
subscribe to the reports. The Exchange offers the reports as a 
convenience to Members to provide them with additional information 
regarding trading activity on the Exchange on a delayed basis after the 
close of regular trading hours. A Member that chooses to subscribe to 
the reports may discontinue receiving the reports at any time if that 
Member determines that the information contained in the reports is no 
longer useful.
    Further, the Exchange proposes to waive the fees for the reports 
for the Initial Waiver Period in order to encourage market participants 
to subscribe to the reports. The Exchange believes it is reasonable to 
waive the fees for the reports for the Initial Waiver Period in order 
for Members to determine whether they realize value from the reports 
prior to the expiration of the Initial Waiver Period. The believes that 
it is reasonable to provide market participants with the overall 
structure of the fees by outlining the structure and amounts in the Fee 
Schedule so that there is general awareness that the Exchange intends 
to assess such fees upon expiration of the defined term of the Initial 
Waiver Period.

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. The Exchange 
proposes to make the reports available in order to keep pace with 
changes in the industry and evolving customer needs and demands, and 
believes the reports will contribute to robust competition among 
national securities exchanges. As a result, the Exchange believes this 
proposed rule change permits fair competition among national securities 
exchanges.
    The Exchange also does not believe the proposed fees would cause 
any unnecessary or inappropriate burden on intermarket competition as 
other exchanges are free to introduce their own comparable reports with 
lower prices to better compete with the Exchange's offerings. The 
Exchange operates in a highly competitive environment, and its ability 
to price the reports is constrained by competition among exchanges who 
choose to adopt similar products. The Exchange must consider this in 
its pricing discipline in order to compete for subscribers of the 
Exchange's market data via the reports. For example, proposing fees 
that are excessively higher than fees for potentially similar data 
products would simply serve to reduce demand for the Exchange's 
reports, which as discussed, market participants are under no 
obligation to utilize. In this competitive environment, potential 
purchasers are free to choose which, if any, similar product to 
purchase to satisfy their need for market information. As a result, the 
Exchange believes this proposed rule change permits fair competition 
among national securities exchanges.
    The Exchange does not believe the proposed rule change would cause 
any unnecessary or inappropriate burden on intramarket competition. 
Particularly, the proposed fees apply uniformly to any purchaser in 
that the Exchange does not differentiate between subscribers that 
purchase the reports. The proposed fees are set at a modest level that 
would allow any interested Member to purchase such data based on their 
business needs.

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,\41\ and Rule 19b-4(f)(2) \42\ 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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    \41\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \42\ 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-2024-08 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-2024-08. 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

[[Page 68005]]

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-2024-08 and should 
be submitted on or before September 12, 2024.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\43\
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    \43\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2024-18784 Filed 8-21-24; 8:45 am]
BILLING CODE 8011-01-P