In the Matter of the Application of MIAX EMERALD, LLC for Registration as a National Securities Exchange; Findings, Opinion, and Order of the Commission

I. Introduction

On August 16, 2018, MIAX EMERALD, LLC (“MIAX EMERALD” or “Exchange”) submitted to the Securities and Exchange Commission (“Commission”) an application for Registration as a National Securities Exchange (“Form 1 Application”) under Section 6 of the Securities Exchange Act of 1934 (“Act”), seeking registration as a national securities exchange under Section 6 of the Act. Notice of the Form 1 Application was published for comment in the Federal Register on October 3, 2018. The Commission received no comments.

II. Statutory Standards

Under Sections 6(b) and 19(a) of the Act, the Commission shall by order grant an application for registration as a national securities exchange if the Commission finds, among other things, that the proposed exchange is so organized and has the capacity to carry out the purposes of the Act and to comply, and to enforce compliance by its members and persons associated with its members, with the provisions of the Act, the rules and regulations thereunder, and the rules of the exchange.

As discussed in greater detail below, the Commission finds that MIAX EMERALD's application for exchange registration meets the requirements of the Act and the rules and regulations thereunder. Further, the Commission finds that the proposed rules of MIAX EMERALD are consistent with Section 6 of the Act in that, among other things, they assure a fair representation of the Exchange's members in the selection of its directors and administration of its affairs and provide that one or more directors will be representative of issuers and investors and not be associated with a member of the exchange, or with a broker or dealer; and that they are 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 mechanisms of a free and open market and a national market system and, in general, protect investors and the public interest and are not designed to permit unfair discrimination between customers, issuers, or broker-dealers. Finally, the Commission finds that MIAX EMERALD's proposed rules do not impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act.

III. Discussion

A. Governance of MIAX EMERALD

1. MIAX EMERALD Board of Directors

The board of directors of MIAX EMERALD (“Exchange Board” or “MIAX EMERALD Board”) will be its governing body and will possess all of the powers necessary for the management of its business and affairs, including governance of MIAX EMERALD as a self-regulatory organization (“SRO”).

Under the By-Laws of MIAX EMERALD (“MIAX EMERALD By-Laws”):

• The Exchange Board will be composed of not less than ten directors;

• One director will be the Chief Executive Officer of MIAX EMERALD;

• The number of Non-Industry Directors, including at least one Independent Director, will equal or exceed the sum of the number of Industry Directors and Member Representative Directors; and

• At least 20% of the directors on the Exchange Board will be Member Representative Directors.

For the interim board (discussed below), and subsequently at the first annual meeting and each annual meeting thereafter, Miami International Holdings, Inc. (“Miami Holdings”), as the sole LLC Member of MIAX EMERALD, will elect the MIAX EMERALD Board pursuant to the MIAX EMERALD By-Laws. In addition, Miami Holdings will appoint the initial Nominating Committee and Member Nominating Committee, consistent with each committee's compositional requirements, to nominate candidates for election to the Exchange Board. Each of the Nominating Committee and Member Nominating Committee, after completion of its respective duties for nominating directors for election to the Board for that year, shall nominate candidates to serve on the succeeding year's Nominating Committee or Member Nominating Committee, as applicable. Additional candidates for the Member Nominating Committee may be nominated and elected by MIAX EMERALD members pursuant to a petition process.

The Nominating Committee will nominate candidates for each director position, and Miami Holdings, as the sole LLC Member, will elect those directors. For Member Representative Director positions, the Nominating Committee will nominate those candidates submitted to it, and approved, by the Member Nominating Committee. Additional candidates, however, may be nominated for the Member Representative Director positions by MIAX EMERALD members pursuant to a petition process. If no candidates are nominated pursuant to a petition process, then the initial nominees submitted by the Member Nominating Committee will be nominated as Member Representative Directors by the Nominating Committee. If a petition process produces additional candidates, then the candidates nominated pursuant to the petition process, together with those nominated by the Member Nominating Committee, will be presented to MIAX EMERALD members for a run-off election to determine the final slate of candidates for the vacant Member Representative Director positions. In the event of a contested run-off election, the candidates who receive the most votes will be nominated as the final slate of Member Representative Director candidates by the Nominating Committee. Miami Holdings, as the sole LLC Member, is obligated to elect the final slate of the Member Representative Director candidates that are nominated by the Nominating Committee.

The Commission believes that the requirement in the MIAX EMERALD By-Laws that 20% of the directors be Member Representative Directors and the means by which they will be chosen by MIAX EMERALD members provide for the fair representation of members in the selection of directors and the administration of MIAX EMERALD and therefore is consistent with Section 6(b)(3) of the Act. The Commission notes that this requirement helps to ensure that members have a voice in the use of self-regulatory authority by MIAX EMERALD.

In addition, with respect to the requirement that the number of Non-Industry Directors, including at least one Independent Director, will equal or exceed the sum of the number of Industry Directors and Member Representative Directors, the Commission believes that the proposed composition of the Exchange Board satisfies the requirements in Section 6(b)(3) of the Act, which requires in part that one or more directors be representative of issuers and investors and not be associated with a member of the exchange, or with a broker or dealer. The Commission notes that the inclusion of public, non-industry representatives on exchange oversight bodies is an important mechanism to support an exchange's ability to protect the public interest. Further, the presence of public, non-industry representatives can help to ensure that no single group of market participants has the ability to systematically disadvantage other market participants through the exchange governance process. The Commission believes that public, non-industry directors can provide unique, unbiased perspectives, which are designed to enhance the ability of the Exchange Board to address issues in a non-discriminatory fashion and foster the integrity of the Exchange.

2. Interim Exchange Board

Prior to commencing operations, Miami Holdings will appoint an interim Exchange board of directors (“Interim Exchange Board”), which will include interim Member Representative Directors. With respect to the selection of the interim Member Representative Directors for the Interim Exchange Board, prior to the commencement of operations as an exchange, Miami Holdings will submit the names of its nominees for the interim Member Representative Directors positions to persons that have begun the process of becoming members in the new Exchange. Such persons and firms will be allowed 14 days to submit the names of alternative candidates. Voting will occur no sooner than 5 days after the interim election notice is delivered to confirm the final slate of candidates to become an interim Member Representative Director. All other interim directors, except for the interim Member Representative Directors, will be appointed and elected by Miami Holdings, and must meet the MIAX EMERALD board composition requirements as set forth in the MIAX EMERALD By-Laws. Once these interim Member Representative Directors are seated on the Interim Exchange Board, then the Interim Exchange Board will meet the board composition requirements set forth in the governing documents of MIAX EMERALD.

The Interim Exchange Board will serve until the first initial Exchange Board is elected pursuant to the full nomination, petition, and voting process set forth in the MIAX EMERALD By-Laws. MIAX EMERALD will complete such process within 90 days after its application for registration as a national securities exchange is granted by the Commission.

The Commission believes that the process for electing the Interim Exchange Board, as proposed, is consistent with the requirements of the Act, including that the rules of the exchange assure fair representation of the exchange's members in the selection of its directors and administration of its affairs. As noted above, MIAX EMERALD represents that the initial members of MIAX EMERALD will consist substantially of the current group of persons and firms that have begun the membership application process with MIAX EMERALD. MIAX EMERALD will engage these persons and firms in the interim board election process by, prior to the commencement of operations as an exchange, providing each of them with the opportunity to participate in the selection of interim Member Representative Directors consistent with the MIAX EMERALD By-Laws. Further, MIAX EMERALD represents that it will complete the full nomination, petition, and voting process as set forth in the MIAX EMERALD By-Laws, which will provide persons that are approved as members after the effective date of this Order with the opportunity to participate in the selection of the Member Representative Directors, within 90 days of when MIAX EMERALD's application for registration as a national securities exchange is granted. Therefore, the Commission believes that MIAX EMERALD's initial interim board process is consistent with the Act, including Section 6(b)(3), in that it is designed to provide representation among the persons and firms likely to become members when MIAX EMERALD commences operations and is sufficient to allow MIAX EMERALD to commence operations for an interim period prior to going through the process to elect a new Exchange Board pursuant to the full nomination, petition, and voting process set forth in the MIAX EMERALD By-Laws.

3. Exchange Committees

In the MIAX EMERALD By-Laws, the Exchange proposed to establish several standing committees, which would be divided into two categories: Committees of the Board (composed of MIAX EMERALD directors) and Committees of the Exchange (composed of a mixture of MIAX EMERALD directors and persons that are not MIAX EMERALD directors). The standing Committees of the Board would be the Audit, Compensation, Appeals, and Regulatory Oversight Committees. In addition, the Exchange Chairman, with approval of the Exchange Board, may appoint an Executive Committee and a Finance Committee, which also would be Committees of the Board.

The Audit Committee will consist of three or more directors, a majority of which will be Non-Industry Directors. Each of the Compensation and Regulatory Oversight Committees will consist of three or more directors, all of which will be required to be Non-Industry Directors. The Appeals Committee will consist of one Independent Director, one Industry Director, and one Member Representative Director. If established, the Finance Committee will consist of at least three persons (who may, but are not required to, be directors) a majority of whom will be Non-Industry Directors. The Executive Committee, if established, will consist of at least three directors. Because the Executive Committee will have the powers and authority of the Exchange Board in the management of the business and affairs of the Exchange between meetings of the Exchange Board, its composition must reflect that of the Exchange Board. Accordingly, the number of Non-Industry Directors on the Executive Committee must equal or exceed the number of Industry Directors and the percentages of Independent Directors and Member Representative Directors must be at least as great as the corresponding percentages on the Exchange Board as a whole.

With respect to Committees of MIAX EMERALD, the Exchange has proposed to establish a Nominating Committee and a Member Nominating Committee. As discussed above, these committees will have responsibility for, among other things, nominating candidates for election to the Exchange Board. On an annual basis, the members of these committees will nominate candidates for the succeeding year's respective committees to be elected by Miami Holdings, as the sole LLC Member. In addition, MIAX EMERALD has proposed to establish a Quality of Markets Committee, which will provide advice and guidance to the Exchange Board on issues related to the fairness, integrity, efficiency and competiveness of the information, order handling and execution mechanisms of the Exchange from the perspective of individual and institutional investors, retail and market making firms, and other market participants. The Quality of Markets Committee will include a broad representation of participants in the Exchange. Additionally, at least 20% of the members of the committee will be Member Representative members, and the number of Non-Industry members must equal or exceed the total number of Industry and Member Representative members. MIAX EMERALD also has proposed to establish a Business Conduct Committee, which shall be appointed by the Chairman of the Exchange Board. Specifically, the Business Conduct Committee, which will not be a Board committee, will have a minimum of three members and will be composed of a number of individuals as determined by the Exchange Chairman, none of whom shall be Directors of MIAX EMERALD. In addition, at least one member of the Business Conduct Committee and any panel thereof must be an officer, director or employee of a MIAX EMERALD member.

The Commission believes that MIAX EMERALD's proposed committees, which are similar to the committees maintained by other exchanges, are designed to help enable MIAX EMERALD to carry out its responsibilities under the Act and are consistent with the Act, including Section 6(b)(1), which requires, in part, an exchange to be so organized and have the capacity to carry out the purposes of the Act.

B. Regulation of MIAX EMERALD

When MIAX EMERALD commences operations as a national securities exchange, the Exchange will have all the attendant regulatory obligations under the Act. In particular, MIAX EMERALD will be responsible for the operation and regulation of its trading system and the regulation of its members. Certain provisions in the MIAX EMERALD and Miami Holdings governance documents are designed to facilitate the ability of MIAX EMERALD and the Commission to fulfill their regulatory obligations. The discussion below summarizes some of these key provisions.

1. Ownership Structure: Ownership and Voting Limitations

MIAX EMERALD will be structured as a Delaware limited liability company, which will be wholly owned by the sole member of the LLC, Miami Holdings. The Miami Holdings' proposed Amended and Restated Certificate of Incorporation (“Miami Holdings Certificate”) includes restrictions on the ability to own and vote shares of capital stock of Miami Holdings. These limitations are designed to prevent any Miami Holdings shareholder from exercising undue control over the operation of MIAX EMERALD and to assure that MIAX EMERALD and the Commission are able to carry out their regulatory obligations under the Act.

In particular, for so long as Miami Holdings (directly or indirectly) controls MIAX EMERALD, no person, either alone or together with its related persons, may beneficially own more than 40% of any class of capital stock of Miami Holdings. There would be a more conservative restriction for MIAX EMERALD members, wherein MIAX EMERALD members, either alone or together with their related persons, are prohibited from beneficially owning more than 20% of shares of any class of capital stock of Miami Holdings. If any stockholder violates these ownership limits, Miami Holdings would redeem the shares in excess of the applicable ownership limit at their par value. In addition, no person, alone or together with its related persons, may vote or cause the voting of more than 20% of the voting power of the then issued and outstanding capital stock of Miami Holdings. If any stockholder purports to vote, or cause the voting of, shares that would violate this voting limit, Miami Holdings would not honor such vote in excess of the voting limit.

Any person that proposes to own shares of capital stock in excess of the 40% ownership limitation, or vote or grant proxies or consents with respect to shares of capital stock in excess of the 20% voting limitation, must deliver written notice to the Miami Holdings board to notify the Board of its intention. The notice must be delivered to the Board not less than 45 days before the proposed ownership of such shares or proposed exercise of such voting rights or the granting of such proxies or consents. The Miami Holdings board may waive the 40% ownership limitation and the 20% voting limitation, pursuant to a resolution duly adopted by the Board of Directors, if it makes certain findings, except that the Miami Holdings board cannot waive the voting and ownership limits above 20% for MIAX EMERALD members and their related persons. Any such waiver would not be effective unless and until approved by the Commission pursuant to Section 19 of the Act.

The Miami Holdings Certificate also contains provisions that are designed to further safeguard the ownership and voting limitation described above, or are otherwise related to direct and indirect changes in control. Specifically, any person that, either alone or together with its related persons owns, directly or indirectly, of record or beneficially, 5% or more of the capital stock of Miami Holdings will be required to immediately notify Miami Holdings in writing upon acquiring knowledge of such ownership. Thereafter, such persons will be required to update Miami Holdings of any increase or decrease of 1% or more in their previously reported ownership percentage.

The MIAX EMERALD LLC Agreement does not include change of control provisions that are similar to those in the Miami Holdings Certificate; however the MIAX EMERALD LLC Agreement explicitly provides that Miami Holdings is the sole LLC Member of MIAX EMERALD. Thus, if Miami Holdings ever proposes to no longer be the sole LLC Member of MIAX EMERALD (and therefore no longer its sole owner), MIAX EMERALD would be required to amend the MIAX EMERALD LLC Agreement and the MIAX EMERALD By-Laws. Any changes to the MIAX EMERALD LLC Agreement or the MIAX EMERALD By-Laws, including any change in the provisions that identify Miami Holdings as the sole owner of MIAX EMERALD, must be filed with, or filed with and approved by, the Commission pursuant to Section 19 of the Act, as the case may be. Further, pursuant to the MIAX EMERALD By-Laws, Miami Holdings may not transfer or assign, in whole or in part, its ownership interest in MIAX EMERALD, unless such transfer is filed with and approved by the Commission pursuant to Section 19 of the Act.

As described above, the provisions applicable to direct and indirect changes in control of Miami Holdings and MIAX EMERALD, as well as the voting limitation imposed on owners of Miami Holdings who also are MIAX EMERALD members, are designed to help prevent any owner of Miami Holdings from exercising undue influence or control over the operation of MIAX EMERALD. In addition, these limitations are designed to address the conflicts of interests that might result from a member of a national securities exchange owning interests in the exchange. A member's interest in an exchange, including an entity that controls an exchange, could become so large as to cast doubts on whether the exchange may fairly and objectively exercise its self-regulatory responsibilities with respect to such member. A member that is a controlling shareholder of an exchange could seek to exercise that controlling influence by directing the exchange to refrain from, or the exchange may hesitate to, diligently monitor and conduct surveillance of the member's conduct or diligently enforce the exchange's rules and the federal securities laws with respect to conduct by the member that violates such provisions. As such, the Commission believes that these voting and ownership limitations are designed to minimize the potential that a person or entity can improperly interfere with or restrict the ability of MIAX EMERALD to effectively carry out its regulatory oversight responsibilities under the Act.

The Commission believes that MIAX EMERALD's and Miami Holding's proposed governance provisions are consistent with the Act, including Section 6(b)(1), which requires, in part, an exchange to be so organized and have the capacity to carry out the purposes of the Act. In particular, these requirements are designed to minimize the potential that a person could improperly interfere with or restrict the ability of the Commission or MIAX EMERALD to effectively carry out their regulatory oversight responsibilities under the Act.

2. Regulatory Independence and Oversight

Although Miami Holdings will not itself carry out regulatory functions, its activities with respect to the operation of MIAX EMERALD must be consistent with, and must not interfere with, MIAX EMERALD's self-regulatory obligations. In this regard, MIAX EMERALD and Miami Holdings propose to adopt certain provisions in their respective governing documents that are designed to help maintain the independence of the regulatory functions of MIAX EMERALD. These proposed provisions are substantially similar to those included in the governing documents of other exchanges that recently have been granted registration. Specifically:

• The directors, officers, employees, and agents of Miami Holdings must give due regard to the preservation of the independence of the self-regulatory function of MIAX EMERALD and must not take actions that would interfere with the effectuation of decisions by the MIAX EMERALD Board relating to its regulatory functions or that would interfere with MIAX EMERALD's ability to carry out its responsibilities under the Act.

• Miami Holdings must comply with federal securities laws and the rules and regulations promulgated thereunder, and agrees to cooperate with the Commission and MIAX EMERALD pursuant to, and to the extent of, their respective regulatory authority. In addition, Miami Holdings' officers, directors, employees, and agents must comply with federal securities laws and the rules and regulations promulgated thereunder and agree to cooperate with the Commission and MIAX EMERALD in respect of the Commission's oversight responsibilities regarding MIAX EMERALD and the self-regulatory functions and responsibilities of MIAX EMERALD.

• Miami Holdings, and its officers, directors, employees, and agents are deemed to irrevocably submit to the jurisdiction of the U.S. federal courts, the Commission, and MIAX EMERALD, for purposes of any action, suit, or proceeding pursuant to U.S. federal securities laws, and the rules and regulations thereunder, arising out of, or relating to, MIAX EMERALD activities.

• All books and records of MIAX EMERALD reflecting confidential information pertaining to the self-regulatory function of MIAX EMERALD (including but not limited to disciplinary matters, trading data, trading practices, and audit information) shall be retained in confidence by MIAX EMERALD and its personnel and will not be used by MIAX EMERALD for any non-regulatory purpose and shall not be made available to persons (including, without limitation, any MIAX EMERALD member) other than to personnel of the Commission, and those personnel of MIAX EMERALD, members of committees of MIAX EMERALD, members of the MIAX EMERALD Board, or hearing officers and other agents of MIAX EMERALD, to the extent necessary or appropriate to properly discharge the self-regulatory function of MIAX EMERALD.

• The books and records of MIAX EMERALD and Miami Holdings must be maintained in the United States and, to the extent they are related to the operation or administration of MIAX EMERALD, Miami Holdings books and records will be subject at all times to inspection and copying by the Commission.

• Furthermore, to the extent they relate to the activities of MIAX EMERALD, the books, records, premises, officers, directors, employees, and agents of Miami Holdings will be deemed to be the books, records, premises, officers, directors, employees, and agents of MIAX EMERALD, for purposes of, and subject to oversight pursuant to, the Act.

• Miami Holdings will take necessary steps to cause its officers, directors, employees, and agents, prior to accepting a position as an officer, director, employee or agent (as applicable) to consent in writing to the applicability of provisions regarding books and records, confidentiality, jurisdiction, and regulatory obligations, with respect to their activities related to MIAX EMERALD.

• Miami Holdings Certificate and By-Laws require that, so long as Miami Holdings controls MIAX EMERALD, any changes to those documents be submitted to the MIAX EMERALD Board, and, if such change is required to be filed with the Commission pursuant to Section 19(b) of the Act and the rules and regulations thereunder, such change shall not be effective until filed with, or filed with and approved by, the Commission.

The Commission believes that the provisions discussed in this section, which are designed to help maintain the independence of MIAX EMERALD's regulatory function and help facilitate the ability of MIAX EMERALD to carry out its regulatory responsibilities and operate in a manner consistent with the Act, are appropriate and consistent with the requirements of the Act, particularly with Section 6(b)(1), which requires, in part, an exchange to be so organized and have the capacity to carry out the purposes of the Act. Whether MIAX EMERALD operates in compliance with the Act, however, depends on how it and Miami Holdings in practice implement the governance and other provisions that are the subject of this Order.

Further, Section 19(h)(1) of the Act provides the Commission with the authority “to suspend for a period not exceeding twelve months or revoke the registration of [an SRO], or to censure or impose limitations upon the activities, functions, and operations of [an SRO], if [the Commission] finds, on the record after notice and opportunity for hearing, that [the SRO] has violated or is unable to comply with any provision of the Act, the rules or regulations thereunder, or its own rules or without reasonable justification or excuse has failed to enforce compliance” with any such provision by its members (including associated persons thereof). If Commission staff were to find, or become aware of, through staff review and inspection or otherwise, facts indicating any violations of the Act, including without limitation Sections 6(b)(1) and 19(g)(1), these matters could provide the basis for a disciplinary proceeding under Section 19(h)(1) of the Act.

The Commission also notes that, even in the absence of the governance provisions described above, under Section 20(a) of the Act, any person with a controlling interest in MIAX EMERALD would be jointly and severally liable with and to the same extent that MIAX EMERALD is liable under any provision of the Act, unless the controlling person acted in good faith and did not directly or indirectly induce the act or acts constituting the violation or cause of action. In addition, Section 20(e) of the Act creates aiding and abetting liability for any person who knowingly provides substantial assistance to another person in violation of any provision of the Act or rule thereunder. Further, Section 21C of the Act authorizes the Commission to enter a cease-and-desist order against any person who has been “a cause of” a violation of any provision of the Act through an act or omission that the person knew or should have known would contribute to the violation. These provisions are applicable to all entities' dealings with MIAX EMERALD, including Miami Holdings.

3. Regulation of MIAX EMERALD

As a prerequisite to the Commission's granting of an exchange's application for registration, an exchange must be so organized and have the capacity to carry out the purposes of the Act. Specifically, an exchange must be able to enforce compliance by its members, and persons associated with its members, with the Act and the rules and regulations thereunder and the rules of the exchange. The discussion below summarizes how MIAX EMERALD proposes to structure and conduct its regulatory operations.

a. Regulatory Oversight Committee

The regulatory operations of MIAX EMERALD will be monitored by the Regulatory Oversight Committee of the Exchange Board. The Regulatory Oversight Committee will consist of at least three directors, all of whom will be Non-Industry Directors. The Regulatory Oversight Committee will be responsible for overseeing the adequacy and effectiveness of MIAX EMERALD's regulatory and SRO responsibilities, assessing MIAX EMERALD's regulatory performance, and assisting the Exchange Board (and committees of the Exchange Board) in reviewing MIAX EMERALD's regulatory plan and the overall effectiveness of MIAX EMERALD's regulatory functions.

Further, a Chief Regulatory Officer (“CRO”) of MIAX EMERALD will have general supervision over MIAX EMERALD's regulatory operations. The Regulatory Oversight Committee also will be responsible for recommending compensation and personnel actions involving the CRO and senior regulatory personnel to the Compensation Committee of MIAX EMERALD for action. The CRO will report to the Regulatory Oversight Committee.

b. Regulatory Funding

To help assure the Commission that it has and will continue to have adequate funding to be able to meet its responsibilities under the Act, MIAX EMERALD represents in its Form 1 Application that, prior to beginning operations as a national securities exchange, Miami Holdings will provide sufficient funding to MIAX EMERALD for the exchange to carry out its responsibilities under the Act. Specifically, MIAX EMERALD represents that Miami Holdings has allocated sufficient operational assets to enable its operation and that prior to launching operations, Miami Holdings will make a capital contribution of not less than $5,000,000 into MIAX EMERALD's capital account, in addition to any previously-provided in-kind contributions, such as legal, regulatory, and infrastructure-related services. MIAX EMERALD represents that such cash and in-kind contributions by Miami Holdings will be adequate to begin operation of the Exchange, including the regulation of the Exchange.

MIAX EMERALD also represents in its Form 1 application that there is a written agreement (“Funding Agreement”) between MIAX EMERALD and Miami Holdings that requires Miami Holdings to provide adequate funding for MIAX EMERALD's ongoing operations, including the regulation of MIAX EMERALD. This Funding Agreement provides that MIAX EMERALD will receive all fees, including regulatory fees and trading fees, payable by MIAX EMERALD's members, as well as any funds received from any applicable market data fees and Options Price Reporting Authority tape revenue. The Funding Agreement further provides that Miami Holdings will reimburse MIAX EMERALD for its costs and expenses to the extent MIAX EMERALD's assets are insufficient to meets its costs and expenses. Based on the various financial statements for 2016 through 2018 that MIAX EMERALD has filed as part of its Form 1 for itself, its affiliates, and Miami Holdings, the Commission believes that the Funding Agreement appropriately will facilitate the ability of MIAX EMERALD to commence and continue operations.

Further, any revenues received by MIAX EMERALD from fees derived from its regulatory function or regulatory penalties will not be used for non-regulatory purposes. Any excess funds, as determined by MIAX EMERALD, may be remitted to Miami Holdings, however “Regulatory Funds” will not be remitted to Miami Holdings.

c. Rule 17d-2 Agreements; Regulatory Contract With FINRA

Unless the SRO is relieved of this responsibility pursuant to Section 17(d) or Section 19(g)(2) of the Act, Section 19(g)(1) of the Act, among other things, requires every SRO registered as a national securities exchange, absent reasonable justification or excuse, to enforce compliance by its members and persons associated with its members with the Act, the rules and regulations thereunder, and the SRO's own rules. Section 17(d) of the Act and Rule 17d-2 thereunder permit SROs to propose joint plans to allocate regulatory responsibilities among themselves for their common rules with respect to their common members. These agreements, which must be filed with and declared effective by the Commission, generally cover areas where each SRO's rules substantively overlap, including such regulatory functions as personnel registration and sales practices. Without this relief, the statutory obligation of each individual SRO could result in a pattern of multiple examinations of broker-dealers that maintain memberships in more than one SRO. Such regulatory duplication would add unnecessary expense for common members and their SROs. A 17d-2 plan that is declared effective by the Commission relieves the specified SRO of those regulatory responsibilities allocated by the plan to another SRO. Many SROs have entered into Rule 17d-2 agreements.

A 17d-2 plan that is declared effective by the Commission relieves the specified SRO of those regulatory responsibilities allocated by the plan to another SRO. MIAX EMERALD has represented to the Commission that it intends to become a party to the existing multiparty options Rule 17d-2 plans concerning sales practice regulation and market surveillance. MIAX EMERALD has also represented that it will enter into a bi-lateral 17d-2 agreement to allocate regulatory responsibility to FINRA for common rules of dual members between MIAX EMERALD and FINRA. Under these agreements, the examining SROs will examine firms that are common members of MIAX EMERALD and the particular examining SRO for compliance with certain provisions of the Act, certain rules and regulations adopted thereunder, and certain MIAX EMERALD Rules.

In addition, MIAX EMERALD has represented that it will enter into a Regulatory Services Agreement (“RSA”) with FINRA, under which FINRA will perform certain regulatory functions on behalf of MIAX EMERALD. Pursuant to the RSA, FINRA, in its capacity as service provider to MIAX EMERALD, will perform various services on MIAX EMERALD's behalf, including assisting MIAX EMERALD with member registration and related administrative support services; certain cross-market surveillance services; certain options trading examinations; at MIAX EMERALD's request, investigating potential violations of enumerated MIAX EMERALD market rules, as well as federal securities laws, and rules and regulations thereunder, related to MIAX EMERALD market activity; performing examinations of options, including routine and for cause examinations of MIAX EMERALD members under certain MIAX EMERALD rules and federal securities laws; bringing formal disciplinary actions, including hearing officer services; and providing arbitration, mediation, and other dispute resolution services to MIAX EMERALD member firms. Notwithstanding the RSA, MIAX EMERALD, as an SRO, has the ultimate legal responsibility for the regulation of its members and market.

The Commission believes that it is consistent with the Act for MIAX EMERALD to contract with other SROs to perform certain examination, enforcement, and disciplinary functions. This regulatory structure would be consistent with that of other SROs. These functions are fundamental elements of a regulatory program, and constitute core self-regulatory functions. The Commission believes that FINRA, as an SRO that provides contractual services to other SROs, should have the capacity to perform these functions for MIAX EMERALD. However, MIAX EMERALD, unless relieved by the Commission of its responsibility, bears the ultimate responsibility for self-regulatory responsibilities and primary liability for self-regulatory failures, not the SRO retained to perform regulatory functions on MIAX EMERALD's behalf. In performing these regulatory functions, however, the SRO retained to perform regulatory functions may nonetheless bear liability for causing or aiding and abetting the failure of MIAX EMERALD to perform its regulatory functions. Accordingly, although FINRA will not act on its own behalf in carrying out these regulatory services for MIAX EMERALD, as the SRO retained to perform certain regulatory functions, FINRA may have secondary liability if, for example, the Commission finds that the contracted functions are being performed so inadequately as to cause a violation of the federal securities laws by MIAX EMERALD.

C. Trading System

1. Access to MIAX EMERALD

Access to MIAX EMERALD will be granted to individuals or organizations who are approved to become Members. Approved Members will be issued Trading Permits that grant the Member the ability to transact on MIAX EMERALD through its electronic systems. Trading Permits will not convey upon Members any ownership interest in MIAX EMERALD, and they will not be transferable except in cases where a Member experiences a change in control or corporate reorganization. Membership will be open to any broker-dealer that: (1) Is registered under Section 15 of the Act; and (2) has and maintains membership in another registered options exchange (other than MIAX Exchange or MIAX PEARL) or FINRA. As explained below, a holder of a MIAX Exchange or MIAX PEARL trading permit will not be required to submit a full application for membership on MIAX EMERALD. There will be no limit to the number of Trading Permits that MIAX EMERALD can issue, although MIAX could determine in the future a limit or decrease in the number of Trading Permits issued. Members of MIAX EMERALD may be one of three classes of Market Maker, or they may be Electronic Exchange Members.

A holder of a MIAX Exchange or MIAX PEARL trading permit in good standing will be eligible to receive one MIAX EMERALD Trading Permit. MIAX Exchange and MIAX PEARL member applicants will not be required to submit a full application for membership on MIAX EMERALD, but rather will only need to complete selected MIAX EMERALD forms concerning their election to trade on MIAX EMERALD, consent to MIAX EMERALD's jurisdiction, and other operational matters. This waive-in application process is similar to arrangements in place at other exchanges.

Applicants that do not hold a MIAX Exchange or MIAX PEARL trading permit and seek to become members of MIAX EMERALD will need to submit a full application in accordance with procedures established by the Exchange. Individuals and entities that become members, and their associated persons, will be required to meet and maintain certain qualification and registration criteria similar to what is required by other options exchanges. In addition, MIAX EMERALD proposes further requirements on members that seek to do business with the public. Applicants who are denied membership may appeal MIAX EMERALD's decision pursuant to MIAX EMERALD's rules governing Hearings, Review, and Arbitration. Every Member will be subject to MIAX EMERALD's regulatory jurisdiction, including MIAX EMERALD's disciplinary jurisdiction.

The Commission finds that MIAX EMERALD's proposed membership rules are consistent with the Act, including Section 6(b)(2) of the Act, which requires the rules of an exchange to provide that any registered broker or dealer or natural person associated with a broker or dealer may become a member of such exchange or associated with a member thereof. MIAX EMERALD's proposed rules with respect to exchange membership are substantively similar to the rules of other exchanges.

The Commission notes that pursuant to Section 6(c) of the Act, an exchange must deny membership to any person, other than a natural person, that is not a registered broker or dealer, any natural person that is not, or is not associated with, a registered broker or dealer, and registered broker-dealers that do not satisfy certain standards, such as financial responsibility or operational capacity. As a registered exchange, MIAX EMERALD must independently determine if an applicant satisfies the standards set forth in the Act, regardless of whether an applicant is a member of another SRO.

In addition, Members may enter into arrangements with other parties, including non-Members and other Members, to provide “Sponsored Access” to trading on MIAX EMERALD. Members who provide such Sponsored Access will be responsible for all trading conducted pursuant to the access agreement, and to the same extent as if the Member were trading directly. Accordingly, Members that provide Sponsored Access must maintain and implement policies and procedures to supervise and monitor sponsored trading activity. Additionally, non-Members who seek to trade on MIAX EMERALD through Sponsored Access agreements will need to agree to comply with all applicable federal securities laws and rules and Exchange rules. MIAX EMERALD's rules governing Sponsored Access arrangements are similar to the rules of other exchanges.

2. Linkage

MIAX EMERALD intends to become a participant in the Options Order Protection and Locked/Crossed Markets Plan or any successor plan (“Linkage Plan”). If admitted as a participant to the Linkage Plan, other plan participants would be able to send orders to MIAX EMERALD in accordance with the terms of the plan as applied to the Exchange. The MIAX EMERALD Rules include relevant definitions, establish the conditions pursuant to which members may enter orders in accordance with the Linkage Plan, impose obligations on the Exchange regarding how it must process incoming orders, establish a general standard that members and MIAX EMERALD should avoid trade-throughs, establish potential regulatory liability for members that engage in a pattern or practice of trading through other exchanges, and establish obligations with respect to locked and crossed markets.

The Commission believes that MIAX EMERALD has proposed rules that are designed to comply with the requirements of the Linkage Plan. Further, as provided below, before MIAX EMERALD can commence operations as a national securities exchange, it must become a participant in the Linkage Plan.

3. Market Makers

a. Registration and Appointment

Members of MIAX EMERALD may apply to become one of three types of market maker: Primary Lead Market Maker, Lead Market Maker, or Registered Market Maker (collectively, “Market Makers”). Market Makers are entitled to receive certain benefits and privileges in exchange for fulfilling certain affirmative and negative market-making obligations. Each class of Market Maker will receive a specific level of benefits and privileges in exchange for a specific level of obligation that such Market Maker assumes to the MIAX EMERALD market.

To begin the process of registering as a Registered Market Maker or Lead Market Maker, a member will be required to file a written application with MIAX EMERALD. In reviewing a member's application for membership, MIAX EMERALD will consider, among other things, the applicant's market making ability. Only approved Lead Market Makers may apply to be considered for appointment as a Primary Lead Market Maker in one or more option classes traded on MIAX EMERALD. All members who are approved to become Market Makers will be designated as specialists on MIAX EMERALD for all purposes under the Act and rules thereunder.

In addition, all MIAX Exchange and MIAX PEARL market makers in good standing will be eligible to receive a MIAX EMERALD Trading Permit in the same membership category in which they operate on MIAX Exchange and MIAX PEARL, respectively, to trade on MIAX EMERALD. For example, a Lead Market Maker in good standing in MIAX Exchange will be eligible to become a Lead Market Maker on MIAX EMERALD, through the submission and approval of a MIAX EMERALD waive-in membership application.

Once approved, a Market Maker would seek appointment to make markets in one or more options classes traded on MIAX EMERALD. Either the Exchange Board or a committee thereof will appoint classes of options contract traded on MIAX EMERALD to Market Makers taking into consideration: (1) The financial resources available to the Market Maker; (2) the Market Maker's experience and expertise in market making or options trading; (3) the preferences of the Market Maker to receive appointment(s) in specific option class(es); and (4) the maintenance and enhancement of competition among Market Makers in each option class. MIAX EMERALD will allow one Primary Lead Market Maker appointment per class, and will have a maximum class quoting limit of fifty Market Makers per class. Once appointed, MIAX EMERALD will surveil a Market Maker's activity for continued compliance with all applicable rules and requirements, which are discussed in more detail below.

The Commission finds that MIAX EMERALD's rules for the registration and appointment of Market Makers are consistent with the Act. In particular, MIAX EMERALD's rules provide an objective process by which a member could become a Market Maker on MIAX EMERALD and provide for oversight by MIAX EMERALD to monitor for continued compliance by Market Makers with the terms of their application for such status. The Commission notes that MIAX EMERALD's proposed Market Maker registration and appointment requirements are similar to those of other options exchanges.

b. Market Maker Obligations

Pursuant to MIAX EMERALD rules, all Market Makers will be subject to a number of general obligations. In particular, the transactions of a Market Maker must constitute a course of dealings reasonably calculated to contribute to the maintenance of a fair and orderly market. Among other things, a Market Maker must: (1) Compete with other Market Makers to improve the market; (2) make markets that, absent changed market conditions, will be honored for the number of contracts entered; (3) update quotations in response to changed market conditions; (4) price option contracts fairly by, among other things, bidding and offering so as to create differences of no more than $5 between the bid and offer following the opening rotation. In addition, Market Makers must maintain minimum net capital in accordance with MIAX EMERALD rules and the federal securities laws.

MIAX EMERALD's rules governing Market Maker quoting obligations are tailored to the specific class of Market Maker. Specifically, a Primary Lead Market Maker will be subject to the highest standard applicable on MIAX EMERALD, as they will be required to provide continuous two-sided Standard quotes throughout the trading day 90% of the time in the lesser of 99% of the series, or 100% of the series minus one put-call pair, in each appointed class. Lead Market Makers must provide continuous two-sided quotes (consisting of Standard quotes) throughout the trading day 90% of the time in 90% of the series in each of their appointed classes. Lastly, Registered Market Makers must provide continuous two-sided quotes (consisting of Standard quotes) 90% of the time in 60% of the series in each of its appointed classes. Further, Registered Market Makers may be called upon by a MIAX EMERALD official to submit a single quote or maintain continuous quotes in one or more series of its appointed classes whenever, in the judgment of such official, it is necessary to do so in the interest of fair and orderly markets. For purposes of meeting the continuous quoting obligations discussed herein, a Market Maker's quote must meet the bid/ask differential requirements of MIAX EMERALD Rule 603(b)(4).

In options classes other than to which they are appointed, a Market Maker is prohibited from engaging in transactions in an account in which it has an interest that are disproportionate to, or in derogation of, the performance of its market making obligations as set forth in the MIAX EMERALD rules. Further, the total number of contracts executed during a quarter by a Registered Market Maker in options classes to which it is not appointed may not exceed 25% of the total number of contracts traded by such Registered Market Maker in classes to which it is appointed. Similarly, the total number of contracts executed during a quarter by a Lead Market Maker (including a Primary Lead Market Maker) in options classes to which it is not appointed may not exceed 10% of the total number of contracts traded by such Lead Market Maker in classes to which it is appointed.

If MIAX EMERALD finds any failure by a Market Maker to meet minimum performance standards or properly perform as a Market Maker, such Market Maker may be subject to suspension, termination, or restriction of registration in one or more of the securities in which the Market Maker is registered.

Market Makers will receive certain benefits in return for satisfying their responsibilities. For example, a broker-dealer or other lender may extend “good faith” credit to a member of a national securities exchange or registered broker-dealer to finance its activities as a market maker or specialist. In addition, market makers are excepted from the prohibition in Section 11(a) of the Act. The Commission believes that a market maker must be subject to sufficient and commensurate affirmative obligations, including the obligation to hold itself out as willing to buy and sell options for its own account on a regular or continuous basis, to justify favorable treatment. The Commission further believes that the rules of all U.S. options markets need not provide the same standards for market maker participation, so long as they impose affirmative obligations that are consistent with the Act.

The Commission believes that MIAX EMERALD's Market Maker participation requirements impose appropriate affirmative obligations on MIAX EMERALD's Market Makers that are commensurate with the benefits afforded to such participants and, accordingly, are consistent with the Act.

Specifically, with regard to MIAX EMERALD's proposed continuous quoting obligations, only those quotes that are liquidity providing—Standard quotes, including Post-Only Quotes—will be counted towards a Market Maker's quoting obligations, rather than all types of eQuotes that a Market Maker will be permitted to utilize. The Commission believes that this treatment is appropriate under the Act and consistent with a Market Maker's obligation to contribute to the maintenance of a fair and orderly market. Further, the Commission believes that the specific levels of benefits conferred on the different classes of Market Makers are appropriately balanced by the obligations imposed by MIAX EMERALD's rules. For example, as discussed below, Primary Lead Market Makers and Lead Market Makers are entitled to certain participation entitlements, and at the same time, are subject to heightened continuous quoting obligations to justify these special benefits.

Finally, the Commission believes that the Act does not mandate a particular market model for exchanges, and while Market Makers may become an important source of liquidity on MIAX EMERALD, they will likely not be the only source, as MIAX EMERALD is designed to match buying and selling interest of all MIAX EMERALD participants.

4. Order Display, Execution, and Priority

MIAX EMERALD will operate a fully automated electronic options marketplace. Liquidity will be derived from orders to buy and orders to sell, as well as Market Maker quotations, submitted to MIAX EMERALD electronically by its members from remote locations. There will be no physical trading floor. Options traded on the Exchange will be subject to Minimum Price Variations (“MPV”) that will begin at $0.05 for option contracts trading at less than $3.00 per option, and $.10 for option contracts trading at $3.00 per option or higher. In addition, MIAX EMERALD will participate in the penny pilot program pursuant to which it will permit certain options with premiums under $3 (as well as heavily traded options on certain indices) to be quoted and traded in increments as low as $.01.

All orders and quotes submitted to MIAX EMERALD will be displayed unless the order or quote is immediately marketable, is a contingent order (such as an immediate-or-cancel (“IOC”) order), or is a certain type of eQuote (such as an Auction-or-Cancel (“AOC”) eQuote or IOC eQuote). Displayed orders and quotes will be displayed on an anonymous basis at a specified price (except for Attributable Orders, which allow voluntary disclosure of firm identification information). Non-displayed orders and quotes will not be displayed to any participant. Additionally, orders and quotes may have a non-displayed price that is different than the displayed price, as further described below.

Members may submit the following types of orders: Market; Marketable Limit; Fill-or-Kill; Auction-or-Cancel; Immediate-or-Cancel; Attributable Order; Intermarket Sweep; Do Not Route; Opening; Customer Cross; Qualified Contingent Cross; Day Limit; Good `Til Cancelled; and Post-Only. All of these order types are based on similar order types available on other options exchanges. The Commission believes that these order types are substantially similar to order types approved by the Commission on other exchanges.

MIAX EMERALD Market Makers will be permitted to submit Standard quotes, including Post-Only Quotes. MIAX EMERALD Market Makers will also be allowed to submit eQuotes, which are quotes with a specific time in force that do not automatically cancel and replace a previous Standard quote or eQuote. The types of eQuotes permitted on MIAX EMERALD will be AOC, Opening Only, IOC, Fill-or-Kill and Intermarket Sweep. Only Standard quotes (including Post-Only Quotes) will be permitted to count towards a Market maker's continuous quoting obligations. MIAX EMERALD's proposed quote types are based on similar quote types on other options exchanges. The Commission believes that the MIAX EMERALD quote types are substantially similar to those approved by the Commission on other exchanges.

After the opening, trades will execute on MIAX EMERALD when a buy order/quote and a sell order/quote match one another on the MIAX EMERALD order book (“MIAX EMERALD Book” or “Book”). The highest bid and lowest offer shall have priority on the Exchange. The MIAX EMERALD system will continuously and automatically match orders/quotes pursuant to either price-time allocation or pro-rata allocation, as determined by MIAX EMERALD on a class-by-class basis.

On MIAX EMERALD all Market Maker quotes will be designated as either “priority quotes” or “non-priority quotes.” In the event a Market Maker has a priority quote on MIAX EMERALD, all of that Market Maker's quotes (including all Standard quotes and eQuotes) would be entitled to have precedence over all other “Professional Interest” (i.e., non-Priority Customer orders, Market Maker orders and non-priority quotes) at the same price. The Commission notes that this is substantially similar to the MIAX Exchange which was previously approved by the Commission.

MIAX EMERALD also will offer additional priority overlays at its discretion on a class-by-class basis, which include “Priority Customer” and “Market Turner” overlays. Priority overlays would only be applicable for pro-rata allocation. These priority overlays are the same as the priority overlays that were approved by the Commission for use on the MIAX Exchange.

In addition, proposed MIAX EMERALD rules provide that it may grant Primary Lead Market Makers and Lead Market Makers certain participation entitlements. For example, Primary Lead Market Makers may be entitled to a participation entitlement with respect to each incoming order if they have a priority quote at the National Best Bid and Offer (“NBBO”). The Primary Lead Market Maker participation entitlements will only be in effect if the Priority Customer Overlay also is in effect and will apply only to any remaining balance after any Priority Customer orders have first been satisfied. Another proposed Primary Lead Market Maker entitlement provides that small size orders (i.e., five or fewer contracts) will be allocated in full to the Primary Lead Market Maker if it has a priority quote at the NBBO.

MIAX EMERALD also permits Electronic Exchange Members to utilize Directed Orders. A “Directed Order” refers to an order that an Electronic Exchange Member enters into the Exchange system and directs to a particular Lead Market Maker, including a Primary Lead Market Maker (“Directed Lead Market Maker”). The Lead Market Maker must have an appointment in the relevant options class to receive a Directed Order in that class. A Directed Lead Market Maker may be granted a participation entitlement if he or she has a priority quote at the NBBO. The Directed Lead Market Maker participation entitlement will only be in effect if the Priority Customer Overlay also is in effect and will apply only to any remaining balance after Priority Customer orders have first been satisfied.

These participation entitlements for Primary Lead Market Makers and Directed Lead Market Makers are identical to those that the Commission has approved for the MIAX Exchange. Further, the Commission believes that these entitlements are appropriately balanced by the obligations imposed on these classes of market makers, as discussed in detail above. In particular, the Commission notes that Primary Lead Market Makers and Lead Market Makers are subject to higher quoting obligations than other Registered Market Makers who are not eligible to receive the aforementioned participation entitlements. Therefore, the Commission believes that the proposed rules regarding participation entitlements are consistent with the Act.

MIAX EMERALD proposes to make available order processing and matching features, which are based on those features available on MIAX Exchange and MIAX PEARL. MIAX EMERALD's system will automatically execute incoming orders/quotes that are executable against orders/quotes in its system, provided that such incoming orders/quotes will not be executed at prices inferior to the NBBO. MIAX EMERALD Rule 515 sets forth how the MIAX EMERALD system will handle incoming orders that cannot be executed in part or in full. In particular, MIAX EMERALD Rule 515 specifies a “price protection process,” a Managed Interest Process for non-Market Maker orders, a parallel process for handling Market Maker orders and quotes, and a Post Only Process, each discussed more fully below.

The MIAX EMERALD system offers a “price protection” process for non-Market Maker orders. Price protection prevents an order from being executed beyond the price designated in the order's price protection instructions (“the price protection limit”). The price protection limit is expressed in units of MPV away from the national best bid and offer (“NBBO”) at the time of the order's receipt, or the MIAX EMERALD Best Bid and Offer (“EBBO”) if the best bid or offer on away markets (“ABBO”) is crossing the EBBO. When triggered, price protection will cancel an order or the remaining contracts of an order. The MIAX EMERALD system will not execute such orders at prices inferior to the current NBBO.

The MIAX EMERALD price protection process is substantially similar to that adopted by MIAX Exchange. The Commission believes that this price protection functionality can benefit all market participants.

The Exchange's rules also provide for processes for managing non-routable orders for non-Market Makers (“Managed Interest Process”), and for Market Maker orders or quotes (“Rule 515(d) Process”), that would either lock or cross the current opposite side ABBO where the EBBO is inferior to the ABBO (such non-Market Maker orders handled under the Managed Interest Process and Market Maker orders or quotes handled under the Rule 515(d) Process will, for purposes of this Order, be referred to collectively as “managed orders or quotes”). The MIAX EMERALD system will not execute such managed orders or quotes at prices inferior to the current NBBO. The managed order or quote would be displayed at one MPV away from the current opposite side ABBO and placed on the MIAX EMERALD Book at a price equal to the opposite side ABBO. Should the ABBO price change to an inferior price level, the managed order or quote's displayed price will continue to re-price so that it is displayed one MPV away from the new ABBO, and the managed order or quote's Book price will continuously re-price to lock the new ABBO. Such re-pricing will continue until the managed order or quote is fully executed, reaches its limit price, reaches its price protection limit, or is cancelled. During these processes, if the Exchange receives a new order or quote on the opposite side of the market from the managed order or quote that could be executed, the MIAX EMERALD system will immediately execute the remaining contracts to the extent possible at the managed order or quote's current booked bid or offer price, provided that it does not trade through the current NBBO.

The Commission believes that MIAX EMERALD's processes for handling managed orders or quotes are consistent with the processes that the Commission approved for handling such orders and quotes on MIAX Exchange and MIAX PEARL.

MIAX EMERALD will also have a process for the handling of certain Post-Only Orders and Quotes (together, “Post-Only OQs”) (“POP Process”). The POP Process will apply to Post-Only OQs where the limit price of the Post-Only OQ locks or crosses the current opposite side EBBO where the EBBO is the NBBO (i.e., locks or crosses an order or quote on the MIAX EMERALD Book). The MIAX EMERALD system will display and book such Post-Only OQ one MPV away from the current opposite side EBBO. Should the EBBO price change to an inferior price level, the Post-Only OQ's Book price and displayed price would continuously re-price to one MPV away from new PBBO until the Post-Only OQ is fully executed, reaches its limit price, reaches its price protection limit, or is cancelled.

Under the POP Process, if the Exchange receives a new order or quote on the opposite side of the market from the Post-Only OQ that could be executed, the MIAX EMERALD system would immediately execute the remaining contracts to the extent possible at the Post-Only OQ's current booked bid or offer price, provided that it does not trade through the current NBBO. If the Exchange receives a new Post-Only OQ on the opposite side of the market from a Post-Only OQ being managed under the POP Process, and the new Post-Only OQ locks or crosses the Book price of the resting Post-Only OQ, the Exchange will book and display the new Post-Only OQ one MPV away from the current opposite side EBBO.

The POP Process under MIAX EMERALD's rules is consistent with the POP Process that the Commission approved for MIAX PEARL.

MIAX EMERALD also proposes to establish certain additional crossing and price improvement functionalities based on features available on MIAX Exchange. Mechanisms proposed by MIAX EMERALD that are substantially the same as those available on MIAX Exchange are: A Price Improvement Mechanism (“PRIME”) (which affords the opportunity for price improvement above the NBBO after an auction for eligible orders); a PRIME Solicitation Mechanism (which allows members representing agency orders the opportunity to cross large size solicited orders after an auction); and a PRIME for Complex Orders (which makes the MIAX EMERALD PRIME functionality available for complex orders). These mechanisms are consistent with substantially similar mechanisms currently existing on other options exchanges, as well as those offered by MIAX Exchange.

MIAX EMERALD will permit the trading of complex orders and quotes on the Exchange. The proposed rule defines the types of complex orders and quotes, and also describes the priority, execution, and allocation of complex orders and quotes, including a managed interest process for complex orders. MIAX EMERALD also proposes price and order protection features. In addition, MIAX EMERALD will establish a Complex Auction Process. MIAX EMERALD's rules governing the trading of complex orders and quotes are consistent with the complex order rules that the Commission approved for MIAX Exchange.

The Commission believes that MIAX EMERALD's proposed display, execution, and priority rules discussed above in this section are consistent with the Act. In particular, the Commission finds that the proposed rules are consistent with Section 6(b)(5) of the Act, which, among other things, requires that the rules of a national securities exchange be designed to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in regulating transactions in securities, 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 to not permit unfair discrimination between customers, issuers, or dealers. The Commission also finds that the proposed rules are consistent with Section 6(b)(8) of the Act, which requires that the rules of an exchange not impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. The trading rules of MIAX EMERALD are substantially similar to the current trading rules of MIAX Exchange, MIAX PEARL, and other exchanges, as noted above, which were filed with and approved by the Commission (or otherwise became effective) pursuant to Section 19(b) of the Act. Therefore, the Commission believes that these rules are consistent with the Act.

5. Section 11(a) of the Act

Section 11(a)(1) of the Act prohibits a member of a national securities exchange from effecting transactions on that exchange for its own account, the account of an associated person, or an account over which it or its associated person exercises discretion (collectively, “covered accounts”), unless an exception applies. The Exchange has represented that it has analyzed its rules proposed hereunder, and believes that they are consistent with Section 11(a) of the Act and rules thereunder.

Rule 11a2-2(T) under the Act, known as the “effect versus execute” rule, provides exchange members with an exemption from the Section 11(a)(1) prohibition. Rule 11a2-2(T) permits an exchange member, subject to certain conditions, to effect transactions for covered accounts by arranging for an unaffiliated member to execute the transactions on the exchange. To comply with Rule 11a2-2(T)'s conditions, a member: (1) Must transmit the order from off the exchange floor; (2) may not participate in the execution of the transaction once it has been transmitted to the member performing the execution; (3) may not be affiliated with the executing member; and (4) with respect to an account over which the member has investment discretion, neither the member nor its associated person may retain any compensation in connection with effecting the transaction except as provided in the Rule.

In a letter to the Commission, MIAX EMERALD requested that the Commission concur with its conclusion that MIAX EMERALD members that enter orders into the MIAX EMERALD trading system satisfy the requirements of Rule 11a2-2(T). For the reasons set forth below, the Commission believes that MIAX EMERALD members entering orders into the MIAX EMERALD trading system will satisfy the conditions of Rule 11a2-2(T).

First, Rule 11a2-2(T) requires that orders for covered accounts be transmitted from off the exchange floor. MIAX EMERALD will not have a physical trading floor, and the MIAX EMERALD trading system will receive orders from members electronically through remote terminals or computer-to-computer interfaces. In the context of other automated trading systems, the Commission has found that the off-floor transmission requirement is met if a covered account order is transmitted from a remote location directly to an exchange's floor by electronic means. Since the MIAX EMERALD trading system receives all orders electronically through remote terminals or computer-to- computer interfaces, the Commission believes that the trading system satisfies the off-floor transmission requirement.

Second, Rule 11a2-2(T) requires that the member not participate in the execution of its order once it has been transmitted to the member performing the execution. MIAX EMERALD has represented that the MIAX EMERALD trading system will at no time following the submission of an order allow a member or an associated person of such member to acquire control or influence over the result or timing of an order's execution. According to MIAX EMERALD, the execution of a member's order is determined solely by what orders, bids, or offers are present in the MIAX EMERALD trading system at the time the member submits the order and the order priority based on MIAX EMERALD rules. Accordingly, the Commission believes that a MIAX EMERALD member will not participate in the execution of its order submitted into the trading system.

Rule 11a2-2(T)'s third condition is that the order be executed by an exchange member who is unaffiliated with the member initiating the order. The Commission has stated that the requirement is satisfied when automated exchange facilities, such as the MIAX EMERALD trading system, are used, as long as the design of these systems ensures that members do not possess any special or unique trading advantages over non-members in handling their orders after transmitting them to MIAX EMERALD. MIAX EMERALD has represented that the design of its trading system ensures that no member has any special or unique trading advantage over non-members in the handling of its orders after transmitting its orders to MIAX EMERALD. Based on MIAX EMERALD's representation, the Commission believes that the MIAX EMERALD trading system satisfies this requirement.”

Fourth, in the case of a transaction effected for an account with respect to which the initiating member or an associated person thereof exercises investment discretion, neither the initiating member nor any associated person thereof may retain any compensation in connection with effecting the transaction, unless the person authorized to transact business for the account has expressly provided otherwise by written contract referring to Section 11(a) of the Act and Rule 11a2-2(T). MIAX EMERALD members trading for covered accounts over which they exercise investment discretion must comply with this condition in order to rely on the rule's exemption.

D. Discipline and Oversight of Members

As noted above, one prerequisite for the Commission's grant of an exchange's application for registration is that a proposed exchange must be so organized and have the capacity to be able to carry out the purposes of the Act. Specifically, an exchange must be able to enforce compliance by its members and persons associated with its members with the Act and the rules and regulations thereunder and the rules of the exchange.

MIAX EMERALD's rules codify MIAX EMERALD's disciplinary jurisdiction over its members, thereby facilitating its ability to enforce its members' compliance with its rules and the federal securities laws. MIAX EMERALD's rules permit it to sanction members for violations of its rules and violations of any provision of the Act or the rules and regulations promulgated thereunder, by, among other things, expelling or suspending members; limiting members' activities, functions, or operations; fining or censuring members; suspending or barring a person from being associated with a member; or any other fitting sanction in accordance with MIAX EMERALD rules.

MIAX EMERALD's disciplinary and oversight functions will be administered in accordance with Chapter X of the MIAX EMERALD rules which governs disciplinary actions and which incorporates by reference Chapter X of the MIAX Exchange rules. Unless delegated to another SRO pursuant to the terms of any effective 17d-2 plan, MIAX EMERALD regulatory staff (including regulatory staff of another SRO that may be acting on MIAX EMERALD's behalf pursuant to a regulatory services agreement) will, among other things, investigate potential securities laws violations and initiate charges pursuant to MIAX EMERALD rules.

Upon a finding of probable cause of a violation within the disciplinary jurisdiction of MIAX EMERALD and where further proceedings are warranted, MIAX EMERALD will conduct a hearing on disciplinary matters before a professional hearing officer and two members of the Business Conduct Committee (the “Panel”). The MIAX EMERALD member (or their associated person) or the MIAX EMERALD regulatory staff may petition for review of the decision of the Panel by the MIAX EMERALD Board. Any review would be conducted by the MIAX EMERALD Board or a committee thereof composed of at least three Directors of the MIAX EMERALD Board (whose decision must be ratified by the MIAX EMERALD Board) and such decision will be final. In addition, the MIAX EMERALD Board on its own motion may order review of a disciplinary decision.

Appeals from any determination that impacts access to MIAX EMERALD, such as termination or suspension of membership, will be instituted under, and governed by, the provisions in the Chapter XI of the MIAX EMERALD Rules which incorporates by reference Chapter XI of the MIAX Exchange Rules. MIAX EMERALD's Chapter XI applies to persons economically aggrieved by any of the following actions of MIAX EMERALD including, but not limited to: (a) Denial of an application to become a Member; (b) barring a person from becoming associated with a Member; (c) limiting or prohibiting services provided by MIAX EMERALD or services of any exchange member.

Any person aggrieved by an action of MIAX EMERALD within the scope of Chapter XI may file a written application to be heard within thirty days after such action has been taken. Applications for hearing and review will be referred to the Business Conduct Committee, which will appoint a hearing panel of no less than three members of such Committee. The decision of the hearing panel made pursuant to Chapter XI of the MIAX EMERALD rules is subject to review by the MIAX EMERALD Board, either on its own motion within 30 days after issuance of the decision, or upon written request submitted by the applicant or the President of MIAX EMERALD within 15 days after issuance of the decision. The review would be conducted by the MIAX EMERALD Board or a committee of the MIAX EMERALD Board composed of at least three directors.

The Commission finds that MIAX EMERALD's proposed disciplinary and oversight rules and structure, as well as its proposed process for persons economically aggrieved by certain MIAX EMERALD actions, are consistent with the requirements of Sections 6(b)(6) and 6(b)(7) of the Act in that they provide fair procedures for the disciplining of members and persons associated with members. The Commission further finds that the proposed MIAX EMERALD rules are designed to provide MIAX EMERALD with the ability to comply, and with the authority to enforce compliance by its members and persons associated with its members, with the provisions of the Act, the rules and regulations thereunder, and the rules of MIAX EMERALD. The Commission notes that MIAX EMERALD's proposed disciplinary and oversight rules and structures are similar to the rules of other exchanges.

E. Listing Requirements

MIAX EMERALD does not intend to initially list or trade common stock or non-option securities of operating companies but rather initially intends only to trade option contracts that meet the options listing standards of the Exchange. MIAX EMERALDS's listing rules, including the criteria for the underlying securities of the options to be traded, incorporate by reference all of the listing rules of the MIAX Exchange, and are substantially similar to the listing standards adopted by other options exchanges.

The Commission finds that MIAX EMERALD's proposed initial and continued listing rules are consistent with the Act, including Section 6(b)(5), in that they are designed to protect investors and the public interest, prevent fraudulent and manipulative acts and practices, and promote just and equitable principles of trade. Before beginning operation, MIAX EMERALD will need to become a participant in the Plan for the Purpose of Developing and Implementing Procedures Designed to Facilitate the Listing and Trading of Standardized Options Submitted Pursuant to Section 11A(a)(3)(B) of the Securities Exchange Act of 1934 (“OLPP”). In addition, before beginning operation, MIAX EMERALD will need to become a participant in the Options Clearing Corporation.

IV. Exemption From Section 19(b) of the Act With Regard to MIAX Exchange, Cboe, New York Stock Exchange (“NYSE”), and FINRA Rules Incorporated by Reference

MIAX EMERALD proposes to incorporate by reference certain MIAX Exchange, Cboe, NYSE, and FINRA rules. Thus, for certain MIAX EMERALD rules, MIAX EMERALD members will comply with a MIAX EMERALD rule by complying with the referenced MIAX Exchange, Cboe, NYSE, and FINRA rules.

In connection with the proposal to incorporate MIAX Exchange, Cboe, NYSE, and FINRA rules by reference, MIAX EMERALD requests, pursuant to Rule 240.0-12 under the Act, an exemption under Section 36 of the Act from the rule filing requirements of Section 19(b) of the Act for changes to the MIAX EMERALD rules that are effected solely by virtue of a change to a cross-referenced MIAX Exchange, Cboe, NYSE or FINRA rule. MIAX EMERALD proposes to incorporate by reference categories of rules, rather than individual rules within a category, that are not trading rules. In addition, MIAX EMERALD agrees to provide written notice to its members whenever MIAX Exchange, Cboe, NYSE or FINRA proposes a change to a cross-referenced rule and whenever any such proposed changes are approved by the Commission or otherwise become effective.

Using the authority under Section 36 of the Act, the Commission previously exempted certain SROs from the requirement to file proposed rule changes under Section 19(b) of the Act. The Commission is hereby granting MIAX EMERALD's request for exemption, pursuant to Section 36 of the Act, from the rule filing requirements of Section 19(b) of the Act with respect to the rules that MIAX EMERALD proposes to incorporate by reference. The exemption is conditioned upon MIAX EMERALD providing written notice to MIAX EMERALD members whenever MIAX Exchange, Cboe, NYSE or FINRA proposes to change an incorporated by reference rule and when the Commission approves any such changes. The Commission believes that the exemption is appropriate in the public interest and consistent with the protection of investors because it will promote more efficient use of Commission's and SROs' resources by avoiding duplicative rule filings based on simultaneous changes to identical rule text sought to be implemented by more than one SRO.

V. Conclusion

It is ordered that the application of MIAX EMERALD for registration as a national securities exchange be, and it hereby is, granted.

It is further ordered that operation of MIAX EMERALD is conditioned on the satisfaction of the requirements below:

A. Participation in National Market System Plans Relating to Options Trading. MIAX EMERALD must join: (1) The Plan for the Reporting of Consolidated Options Last Sale Reports and Quotation Information (Options Price Reporting Authority); (2) the OLPP; (3) the Linkage Plan; (4) the Plan of the Options Regulatory Surveillance Authority; and (5) the Plan Governing the Consolidated Audit Trail;

B. Participation in Multiparty Rule 17d-2 Plans. MIAX EMERALD must become a party to the multiparty Rule 17d-2 agreements concerning options sales practice regulation and market surveillance, and covered Regulation NMS rules;

C. Participation in the Options Clearing Corporation. MIAX EMERALD must become an Options Clearing Corporation participant exchange; and

D. Participation in the Intermarket Surveillance Group. MIAX EMERALD must join the Intermarket Surveillance Group.

It is further ordered, pursuant to Section 36 of the Act, that MIAX EMERALD shall be exempted from the rule filing requirements of Section 19(b) of the Act with respect to the MIAX Exchange, Cboe, NYSE and FINRA rules that MIAX EMERALD proposes to incorporate by reference, subject to the conditions specified in this order that MIAX EMERALD provide written notice to MIAX EMERALD members whenever MIAX Exchange,

Cboe, NYSE or FINRA proposes to change an incorporated by reference rule and when the Commission approves any such changes.