[Federal Register Volume 83, Number 184 (Friday, September 21, 2018)]
[Notices]
[Pages 47953-47955]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-20545]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-84177; File No. SR-PEARL-2018-16]


Self-Regulatory Organizations; MIAX PEARL, LLC; Suspension of and 
Order Instituting Proceedings To Determine Whether To Approve or 
Disapprove a Proposed Rule Change To Amend the Fee Schedule Regarding 
Connectivity Fees for Members and Non-Members

September 17, 2018.

I. Introduction

    On July 31, 2018, MIAX PEARL, LLC (``MIAX PEARL'' or the 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission''), pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act''),\1\ and Rule 19b-4 thereunder,\2\ a 
proposed rule change (File Number SR-PEARL-2018-16) to amend the MIAX 
PEARL fee schedule to increase certain connectivity fees. The proposed 
rule change was immediately effective upon filing with the Commission 
pursuant to Section 19(b)(3)(A) of the Act.\3\ The proposed rule change 
was published for comment in the Federal Register on August 13, 
2018.\4\ The Commission has received one comment letter on the 
proposal.\5\ Under Section 19(b)(3)(C) of the Act,\6\ the Commission is 
hereby: (i) Temporarily suspending the proposed rule change; and (ii) 
instituting proceedings to determine whether to approve or disapprove 
the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A).
    \4\ See Securities Exchange Act Release No. 83785 (August 7, 
2018), 83 FR 40101 (``Notice'').
    \5\ See Letter from Tyler Gellasch, Executive Director, The 
Healthy Markets Association, to Brent J. Fields, Secretary, 
Commission, dated September 4, 2018 (``Healthy Markets Letter'').
    \6\ 15 U.S.C. 78s(b)(3)(C).
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II. Description of the Proposed Rule Change

    The Exchange proposes to amend its fee schedule to increase its 
monthly network connectivity fees. Specifically, the Exchange proposes 
to increase the connectivity fee for connectivity to the Exchange's 
primary/secondary facility from $1,100 to $1,400 for a 1 Gigabit 
(``Gb'') connection, from $5,500 to $6,100 for a 10Gb connection, and 
from $8,500 to $9,300 for a 10Gb ultra-low latency connection.\7\ In 
addition, the Exchange proposes to increase the network connectivity 
fees for connectivity to the Exchange's disaster recovery facility from 
$500 to $550 for a 1Gb connection and from $2,500 to $2,750 for a 10Gb 
connection.\8\
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    \7\ See Notice, supra note 4 at 40102.
    \8\ See id.
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III. Suspension of the Proposed Rule Change

    Pursuant to Section 19(b)(3)(C) of the Act,\9\ at any time within 
60 days of the date of filing of a proposed rule change pursuant to 
Section 19(b)(1) of the Act,\10\ the Commission summarily may 
temporarily suspend the change in the rules of a self-regulatory 
organization (``SRO'') if it appears to the Commission that such action 
is necessary or appropriate in the public interest, for the protection 
of investors, or otherwise in furtherance of the purposes of the Act. 
As discussed below, the Commission believes a temporary suspension of 
the proposed rule change is necessary and appropriate to allow for 
additional analysis of the proposed rule change's consistency with the 
Act and the rules thereunder.
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    \9\ 15 U.S.C. 78s(b)(3)(C).
    \10\ 15 U.S.C. 78s(b)(1).
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    As noted above, the Commission received one comment letter on the 
proposal.\11\ The commenter argues that the Exchange did not provide 
sufficient information in its filing to support a finding that the 
proposal is consistent with the Act.\12\ Specifically, the commenter 
objects to the Exchange's reliance on the fees of other exchanges to 
demonstrate that its fee increases are consistent with the Act. In 
addition, the commenter argues that the Exchange did not offer any 
details to support its basis for asserting that the proposed fee 
increases are consistent with the Act.\13\ The Exchange has not 
responded to the comment letter.
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    \11\ See Healthy Markets Letter, supra note 5.
    \12\ See id. at 5.
    \13\ See id. at 6-7, 12.
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    When exchanges file their proposed rule changes with the 
Commission, including fee filings like the Exchange's present proposal, 
they are required to provide a statement supporting the proposal's 
basis under the Act and the rules and regulations thereunder applicable 
to the exchange.\14\ The instructions to Form 19b-4, on which exchanges 
file their proposed rule changes, specify that such statement ``should 
be sufficiently detailed and specific to support a finding that the 
proposed rule change is consistent with [those] requirements.'' \15\
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    \14\ See 17 CFR 240.19b-4 (Item 3 entitled ``Self-Regulatory 
Organization's Statement of the Purpose of, and Statutory Basis for, 
the Proposed Rule Change'').
    \15\ Id.
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    Among other things, exchange proposed rule changes are subject to 
Section 6 of the Act, including Sections 6(b)(4), (5), and (8), which 
requires the rules of an exchange to (1) provide for the equitable 
allocation of reasonable fees among members, issuers, and other persons 
using the exchange's facilities; \16\ (2) perfect the mechanism of a 
free and open market and a national market system, protect investors 
and the public interest, and not be designed to permit unfair 
discrimination between customers, issuers, brokers, or dealers; \17\ 
and (3) not impose any burden on competition not necessary or 
appropriate in furtherance of the purposes of the Act.\18\
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    \16\ 15 U.S.C. 78f(b)(4).
    \17\ 15 U.S.C. 78f(b)(5).
    \18\ 15 U.S.C. 78f(b)(8).
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    In temporarily suspending the Exchange's fee change, the Commission 
intends to further consider whether increasing certain connectivity 
fees to the Exchange is consistent with the statutory requirements 
applicable to a national securities exchange under the Act. In 
particular, the Commission will consider whether the proposed rule 
change satisfies the standards under the Act and the rules thereunder 
requiring, among other things, that an exchange's rules provide for the 
equitable allocation of reasonable fees among members, issuers, and 
other persons using its facilities; not permit unfair discrimination 
between customers, issuers, brokers or dealers; and do not impose any 
burden on competition not necessary or appropriate in furtherance of 
the purposes of the Act.\19\
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    \19\ See 15 U.S.C. 78f(b)(4), (5), and (8), respectively.
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    Therefore, the Commission finds that it is appropriate in the 
public interest, for the protection of investors, and

[[Page 47954]]

otherwise in furtherance of the purposes of the Act, to temporarily 
suspend the proposed rule changes.\20\
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    \20\ For purposes of temporarily suspending the proposed rule 
change, the Commission has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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IV. Proceedings To Determine Whether To Approve or Disapprove the 
Proposed Rule Change

    The Commission is instituting proceedings pursuant to Sections 
19(b)(3)(C) \21\ and 19(b)(2)(B) of the Act \22\ to determine whether 
the proposed rule change should be approved or disapproved. Institution 
of proceedings does not indicate that the Commission has reached any 
conclusions with respect to any of the issues involved. Rather, the 
Commission seeks and encourages interested persons to provide 
additional comment on the proposed rule change to inform the 
Commission's analysis of whether to disapprove the proposed rule 
change.
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    \21\ 15 U.S.C. 78s(b)(3)(C). Once the Commission temporarily 
suspends a proposed rule change, Section 19(b)(3)(C) of the Act 
requires that the Commission institute proceedings under Section 
19(b)(2)(B) to determine whether a proposed rule change should be 
approved or disapproved.
    \22\ 15 U.S.C. 78s(b)(2)(B).
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    Pursuant to Section 19(b)(2)(B) of the Act,\23\ the Commission is 
providing notice of the grounds for possible disapproval under 
consideration:
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    \23\ 15 U.S.C. 78s(b)(2)(B).
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     Section 6(b)(4) of the Act, which requires that the rules 
of a national securities exchange ``provide for the equitable 
allocation of reasonable dues, fees, and other charges among its 
members and issuers and other persons using its facilities,'' \24\
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    \24\ 15 U.S.C. 78f(b)(4).
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     Section 6(b)(5) of the Act, which requires, among other 
things, that the rules of a national securities exchange be ``designed 
to perfect the operation of a free and open market and a national 
market system'' and ``protect investors and the public interest,'' and 
not be ``designed to permit unfair discrimination between customers, 
issuers, brokers, or dealers,'' \25\ and
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    \25\ 15 U.S.C. 78f(b)(5).
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     Section 6(b)(8) of the Act, which requires that the rules 
of a national securities exchange ``not impose any burden on 
competition not necessary or appropriate in furtherance of the purposes 
of [the Act].'' \26\
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    \26\ 15 U.S.C. 78f(b)(8).
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    As noted above, the proposal increases connectivity fees for 
physical connections to the Exchange. The Exchange states that this fee 
increase would allow the Exchange to offset costs associated with 
providing and maintaining this technology.\27\ The commenter, among 
other concerns, asserts that the Exchange has not offered sufficient 
detail to support that the proposed fees are consistent with the Act 
and, in particular, whether the proposed fees are reasonable.\28\
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    \27\ See Notice, supra note 4, at 40102.
    \28\ See Healthy Markets Letter, supra note 5, at 6.
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    Under the Commission's Rules of Practice, the ``burden to 
demonstrate that a proposed rule change is consistent with the [Act] 
and the rules and regulations issued thereunder . . . is on the [SRO] 
that proposed the rule change.'' \29\ The description of a proposed 
rule change, its purpose and operation, its effect, and a legal 
analysis of its consistency with applicable requirements must all be 
sufficiently detailed and specific to support an affirmative Commission 
finding,\30\ and any failure of an SRO to provide this information may 
result in the Commission not having a sufficient basis to make an 
affirmative finding that a proposed rule change is consistent with the 
Act and the applicable rules and regulations.\31\
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    \29\ Rule 700(b)(3), Commission Rules of Practice, 17 CFR 
201.700(b)(3).
    \30\ See id.
    \31\ See id.
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    The Commission is instituting proceedings to allow for additional 
consideration and comment on the issues raised herein, including as to 
whether the proposed fees are consistent with the Act, and 
specifically, with its requirements that exchange fees be reasonable 
and equitably allocated; be designed to perfect the mechanism of a free 
and open market and the national market system, protect investors and 
the public interest, and not be unfairly discriminatory; or not impose 
an unnecessary or inappropriate burden on competition.\32\
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    \32\ See 15 U.S.C. 78f(b)(4), (5), and (8).
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V. Commission's Solicitation of Comments

    The Commission requests written views, data, and arguments with 
respect to the concerns identified above as well as any other relevant 
concerns. Such comments should be submitted by October 12, 2018. 
Rebuttal comments should be submitted by October 26, 2018. Although 
there do not appear to be any issues relevant to approval or 
disapproval which would be facilitated by an oral presentation of 
views, data, and arguments, the Commission will consider, pursuant to 
Rule 19b-4, any request for an opportunity to make an oral 
presentation.\33\
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    \33\ 15 U.S.C. 78s(b)(2). Section 19(b)(2) of the Act grants the 
Commission flexibility to determine what type of proceeding--either 
oral or notice and opportunity for written comments--is appropriate 
for consideration of a particular proposal by an SRO. See Securities 
Acts Amendments of 1975, Report of the Senate Committee on Banking, 
Housing and Urban Affairs to Accompany S. 249, S. Rep. No. 75, 94th 
Cong., 1st Sess. 30 (1975).
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    The Commission asks that commenters address the sufficiency and 
merit of the Exchange's statements in support of the proposal, in 
addition to any other comments they may wish to submit about the 
proposed rule change.
    Interested persons are invited to submit written data, views, and 
arguments concerning the proposed rule change, including whether the 
proposed rule change is consistent with the Act. Comments may be 
submitted by any of the following methods:

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-PEARL-2018-16 on the subject line.

Paper Comments

     Send paper comments in triplicate to Brent J. Fields, 
Secretary, Securities and Exchange Commission, 100 F Street NE, 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-PEARL-2018-16. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (http://www.sec.gov/rules/sro.shtml). 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for website viewing and printing in 
the Commission's Public Reference Room, 100 F Street NE, Washington, DC 
20549 on official business days between the hours of 10:00 a.m. and 
3:00 p.m. Copies of the filing also will be available for inspection 
and copying at the principal office of the Exchange. All comments 
received will be posted without change.

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Persons submitting comments are cautioned that we do not redact or edit 
personal identifying information from comment submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-PEARL-2018-16 and should be 
submitted on or before October 12, 2018. Rebuttal comments should be 
submitted by October 26, 2018.

VI. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(3)(C) of the 
Act,\34\ that File Number SR-PEARL-2018-16 be and hereby is, 
temporarily suspended. In addition, the Commission is instituting 
proceedings to determine whether the proposed rule change should be 
approved or disapproved.
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    \34\ 15 U.S.C. 78s(b)(3)(C).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\35\
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    \35\ 17 CFR 200.30-3(a)(57) and (58).
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Brent J. Fields,
Secretary.
[FR Doc. 2018-20545 Filed 9-20-18; 8:45 am]
 BILLING CODE 8011-01-P