MIAX Emerald, LLC, an options exchange, filed a proposed rule change with the Securities and Exchange Commission on January 20, 2026, to modify its Options Regulatory Fee, or ORF. Published in the Federal Register on February 2, 2026, the filing seeks to limit fee assessment to options transactions executed on the exchange that clear in the customer range at The Options Clearing Corporation. This shift aims to more precisely align the fee with the exchange's direct regulatory responsibilities, addressing evolving market dynamics and regulatory feedback. The change, if implemented, would take effect no earlier than July 1, 2026, contingent on similar adoptions by other U.S. options exchanges. This development reflects broader industry efforts to refine regulatory funding mechanisms amid increasing customer trading volumes and heightened scrutiny of fee structures.
Background on Options Regulatory Fees
The Options Regulatory Fee funds a portion of exchanges' costs for supervising and regulating members' customer options business. These costs include routine surveillances, investigations, policy development, and enforcement. As detailed in the filing, MIAX Emerald's current ORF applies to all options transactions cleared by a member in the customer range at OCC, regardless of execution venue. This approach ensures revenue covers regulatory expenses without exceeding them, with fines offsetting some costs. The exchange monitors revenues semi-annually to adjust as needed. Industry-wide, similar fees have evolved, with recent Commission feedback prompting reviews of assessment methods to better tie fees to specific exchange activities.
Current Methodology for ORF Assessment
Under the existing system, MIAX Emerald assesses ORF per contract on transactions cleared in the customer range, collected by OCC from the ultimate clearing firm. This includes transactions executed on away exchanges if a MIAX Emerald member is involved in clearing. The filing explains that the fee targets customer activity due to its higher regulatory intensity, such as main office examinations and customer complaint investigations. Non-customer transactions, like those in firm or market maker ranges, are exempt, as those participants bear other fees and obligations. For instance, market makers provide liquidity, supporting market stability. The exchange uses OCC reports to identify clearing firms, accounting for Clearing Member Trade Assignment transfers on the trade date.
Details of the Proposed Rule Change
The proposal introduces an 'On-Exchange ORF,' limiting assessment to customer-range transactions executed solely on MIAX Emerald. Fees would be based on clearing instructions at execution, ignoring post-trade CMTA changes at OCC except those on the same day. As stated in the filing, 'ORF would be assessed on each side of an options transaction cleared by the OCC in the customer range for executions that occur on the Exchange.' This means if a member executes a customer trade on MIAX Emerald and is the recorded clearing member, it pays the fee. If a non-member clears it, the fee applies to that non-member. Transactions on other exchanges, even if cleared by a MIAX Emerald member, would be exempt. The exchange plans to continue the current method until at least June 30, 2026, implementing the new approach only if all ORF-charging exchanges adopt similar limits by April 1, 2026. A separate filing would set the fee rate, with 30 days' notice to members.
Statutory Basis and Rationale
MIAX Emerald justifies the change under Section 6(b) of the Securities Exchange Act, emphasizing equitable allocation and investor protection. The filing argues the proposal is reasonable as it narrows fees to exchange-specific activities, reducing burdens on members for away-market trades. It promotes fairness by focusing on customer transactions, which demand more resources, while exempting market makers to encourage liquidity. The exchange notes, 'Regulating customer trading activity is more labor intensive and requires greater expenditure of human and technical resources than regulating non-customer trading activity.' Semi-annual monitoring ensures revenues do not exceed costs. No comments were received, and the filing became effective immediately under Rule 19b-4(f).
Potential Implications and Perspectives
Short-term, the change could simplify fee administration for members, potentially lowering costs for those routing orders away. Long-term, it may encourage consistent industry practices, reducing overlapping fees across exchanges. From a regulatory perspective, this aligns fees more closely with an exchange's oversight, as supported by Commission guidance. Members might view it positively for cost predictability, while customers could see indirect benefits through efficient markets. Critics, however, might argue it fragments regulatory funding, potentially shifting burdens elsewhere. The filing highlights that the exchange 'would consider alternative approaches for assessment and collection of the fee in order to achieve consistency across the industry,' reflecting ongoing debates on uniform standards.
In summary, this proposal refines MIAX Emerald's regulatory funding to focus on on-exchange customer activity, balancing cost recovery with market efficiency. Potential next steps include monitoring industry adoptions and adjusting rates based on cost reviews.
