On December 18, 2025, the Securities and Exchange Commission published a notice in the Federal Register regarding a proposed rule change by MIAX Emerald, LLC. The exchange filed the proposal under Section 19(b)(1) of the Securities Exchange Act of 1934 and Rule 19b-4, seeking to amend its fee schedule. The amendment establishes alternative simple maker rebates for Priority Customer orders in Tier 4, applicable to penny and non-penny classes, when the contra-side is an Affiliated Market Maker and specific volume thresholds are achieved. This filing, effective immediately, highlights MIAX Emerald's strategy to enhance market participation and liquidity in a competitive options trading landscape.
Background on MIAX Emerald and Fee Structures
MIAX Emerald operates as a national securities exchange focused on options trading. It employs a tiered fee structure that provides rebates and assesses fees based on transaction volume. Tiers are calculated monthly using three methods, each measuring a member's executed sides as a percentage of Customer Total Consolidated Volume, excluding certain contracts. The exchange distinguishes between maker and taker roles, with makers receiving rebates for providing liquidity and takers paying fees for removing it. Penny classes, part of the Penny Interval Program, involve lower rebates and fees compared to non-penny classes.
Priority Customers, defined as non-broker-dealer entities not exceeding 390 orders per day on average, receive favorable treatment to encourage retail participation. Affiliated Market Makers include entities with at least 75% common ownership or appointed relationships, as outlined in the fee schedule. The proposal builds on existing reduced rebates for transactions involving these affiliates, aiming to refine incentives without altering the core framework.
Key Details of the Proposed Changes
The amendment targets Tier 4 rebates for simple maker transactions. Currently, Priority Customer orders in penny classes receive a $0.53 rebate when not against an Affiliated Market Maker, reduced to $0.37 if affiliated. For non-penny classes, the figures are $1.05 and $0.85, respectively. The new alternative rebates apply when the member exceeds 0.90% of total Market Maker sides volume and 0.60% of total Priority Customer maker sides volume, both as percentages of Customer Total Consolidated Volume.
Under these thresholds, the penny class rebate increases to $0.49, and the non-penny class rebate to $0.95, for qualifying Priority Customer orders against Affiliated Market Makers. These adjustments are denoted in footnotes to the fee schedule tables. The exchange refiled the proposal on December 10, 2025, after withdrawing an initial version, correcting terminology from 'at least' to 'above' for the volume thresholds.
Legal and Regulatory Context
The proposal aligns with Section 6(b) of the Securities Exchange Act, emphasizing equitable fee allocation and the promotion of just and equitable trade principles. MIAX Emerald argues that the changes foster competition by attracting Priority Customer volume, potentially leading to tighter spreads and better price discovery. This echoes precedents like NYSE Arca's tiered discounts for affiliates meeting volume criteria and Nasdaq ISE's reduced fees for executions against Priority Customers by affiliates.
The filing's immediate effectiveness under Rule 19b-4(f)(2) allows implementation without prior approval, subject to potential suspension by the Commission within 60 days. No comments were received, as noted in the notice, underscoring the routine nature of such fee adjustments in the options industry.
Perspectives and Implications
From the exchange's viewpoint, the rebates incentivize Market Makers to engage more with Priority Customer liquidity, enhancing overall market depth. Market participants, including members and affiliates, may benefit from increased order flow, though only those meeting the thresholds qualify, creating a merit-based system.
Regulators might view this as a balanced approach to competition, given the Act's emphasis on preventing unfair burdens. However, competitors could argue it favors larger affiliates, potentially concentrating volume. Investors and policymakers may appreciate the liquidity boost, but smaller firms might see it as disadvantaging non-affiliated entities.
Short-term implications include possible shifts in order routing to MIAX Emerald, with its 3.26% market share in multiply-listed equity options as of October 2025. Long-term, this could influence industry-wide pricing strategies, amid a landscape where no exchange exceeds 10.28% share.
Forward-Looking Conclusion
The proposed rebates represent a targeted effort to stimulate trading activity on MIAX Emerald. Key takeaways include the potential for improved liquidity through refined incentives and the exchange's responsiveness to competitive dynamics. Ongoing debates may center on the equity of affiliate-based pricing, with future challenges involving regulatory scrutiny or market share fluctuations. Possible trajectories include similar filings from other exchanges or adjustments based on volume data.
