[Federal Register Volume 83, Number 199 (Monday, October 15, 2018)]
[Notices]
[Pages 52039-52042]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-22293]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-84387; File No. SR-PEARL-2018-21]


Self-Regulatory Organizations; MIAX PEARL, LLC; Notice of Filing 
and Immediate Effectiveness of a Proposed Rule Change To Amend the MIAX 
PEARL Fee Schedule

October 9, 2018.
    Pursuant to the provisions of Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice 
is hereby given that on September 28, 2018, MIAX PEARL, LLC (``MIAX 
PEARL'' or ``Exchange'') filed with the Securities and Exchange 
Commission (``Commission'') a proposed rule change as described in 
Items I, II, and III below, which Items have been prepared by the 
Exchange. The Commission is publishing this notice to solicit comments 
on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.

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[[Page 52040]]

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange is filing a proposal to amend the MIAX PEARL Fee 
Schedule (the ``Fee Schedule'').
    The text of the proposed rule change is available on the Exchange's 
website at http://www.miaxoptions.com/rule-filings/pearl at MIAX 
PEARL's principal office, and at the Commission's Public Reference 
Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
sections A, B, and C below, of the most significant aspects of such 
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend the Add/Remove Tiered Rebates/Fees 
set forth in Section (1)(a) of the Fee Schedule to decrease the 
``Taker'' fee in Tier 1 assessable to Priority Customers \3\ orders for 
options in the symbol SPY.
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    \3\ ``Priority Customer'' means a person or entity that (i) is 
not a broker or dealer in securities, and (ii) does not place more 
than 390 orders in listed options per day on average during a 
calendar month for its own beneficial account(s). See Exchange Rule 
100, including Interpretations and Policies .01.
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    The Exchange currently assesses transaction rebates and fees to all 
market participants which are based upon the total monthly volume 
executed by the Member \4\ on MIAX PEARL in the relevant, respective 
origin type (not including Excluded Contracts) \5\ expressed as a 
percentage of TCV.\6\ In addition, the per contract transaction rebates 
and fees are applied retroactively to all eligible volume for that 
origin type once the respective threshold tier (``Tier'') has been 
reached by the Member. The Exchange aggregates the volume of Members 
and their Affiliates.\7\ Members that place resting liquidity, i.e., 
orders resting on the book of the MIAX PEARL System,\8\ are paid the 
specified ``maker'' rebate (each a ``Maker''), and Members that execute 
against resting liquidity are assessed the specified ``taker'' fee 
(each a ``Taker''). For opening transactions and ABBO uncrossing 
transactions, per contract transaction rebates and fees are waived for 
all market participants. Finally, Members are assessed lower 
transaction fees and receive lower rebates for order executions in 
standard option classes in the Penny Pilot Program \9\ (``Penny 
classes'') than for order executions in standard option classes which 
are not in the Penny Pilot Program (``Non-Penny classes''), where 
Members are assessed higher transaction fees and receive higher 
rebates. Transaction rebates and fees in Section (1)(a) of the Fee 
Schedule are currently assessed for Priority Customer orders according 
to the following table:
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    \4\ ``Member'' means an individual or organization that is 
registered with the Exchange pursuant to Chapter II of the Exchange 
Rules for purposes of trading on the Exchange as an ``Electronic 
Exchange Member'' or ``Market Maker.'' Members are deemed 
``members'' under the Exchange Act. See the Definitions Section of 
the Fee Schedule and Exchange Rule 100.
    \5\ ``Excluded Contracts'' means any contracts routed to an away 
market for execution. See the Definitions Section of the Fee 
Schedule.
    \6\ ``TCV'' means total consolidated volume calculated as the 
total national volume in those classes listed on MIAX PEARL for the 
month for which the fees apply, excluding consolidated volume 
executed during the period time in which the Exchange experiences an 
``Exchange System Disruption'' (solely in the option classes of the 
affected Matching Engine (as defined below)). The term Exchange 
System Disruption, which is defined in the Definitions section of 
the Fee Schedule, means an outage of a Matching Engine or collective 
Matching Engines for a period of two consecutive hours or more, 
during trading hours. The term Matching Engine, which is also 
defined in the Definitions section of the Fee Schedule, is a part of 
the MIAX PEARL electronic system that processes options orders and 
trades on a symbol-by-symbol basis. Some Matching Engines will 
process option classes with multiple root symbols, and other 
Matching Engines may be dedicated to one single option root symbol 
(for example, options on SPY may be processed by one single Matching 
Engine that is dedicated only to SPY). A particular root symbol may 
only be assigned to a single designated Matching Engine. A 
particular root symbol may not be assigned to multiple Matching 
Engines. The Exchange believes that it is reasonable and appropriate 
to select two consecutive hours as the amount of time necessary to 
constitute an Exchange System Disruption, as two hours equates to 
approximately 1.4% of available trading time per month. The Exchange 
notes that the term ``Exchange System Disruption'' and its meaning 
have no applicability outside of the Fee Schedule, as it is used 
solely for purposes of calculating volume for the threshold tiers in 
the Fee Schedule. See the Definitions Section of the Fee Schedule.
    \7\ ``Affiliate'' means (i) an affiliate of a Member of at least 
75% common ownership between the firms as reflected on each firm's 
Form BD, Schedule A, or (ii) the Appointed Market Maker of an 
Appointed EEM (or, conversely, the Appointed EEM of an Appointed 
Market Maker). An ``Appointed Market Maker'' is a MIAX PEARL Market 
Maker (who does not otherwise have a corporate affiliation based 
upon common ownership with an EEM) that has been appointed by an EEM 
and an ``Appointed EEM'' is an EEM (who does not otherwise have a 
corporate affiliation based upon common ownership with a MIAX PEARL 
Market Maker) that has been appointed by a MIAX PEARL Market Maker, 
pursuant to the process described in the Fee Schedule. See the 
Definitions Section of the Fee Schedule.
    \8\ The term ``System'' means the automated trading system used 
by the Exchange for the trading of securities. See Exchange Rule 
100.
    \9\ See Securities Exchange Act Release No. 79778 (January 12, 
2017), 82 FR 6662 (January 19, 2017) (SR-PEARL-2016-01).

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                                                                    Per contract rebates/fees for penny classes            Per contract rebates/fees for
                                                         ----------------------------------------------------------------        non-penny classes
            Origin/Tier                Volume criteria                                                     QQQ, IWM, VXX -------------------------------
                                                               Maker          Taker *        SPY taker         taker           Maker           Taker
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Priority Customer:
    1.............................  0.00%-0.10%.........         ($0.25)           $0.48           $0.44           $0.47         ($0.85)           $0.87
    2.............................  Above 0.10%-0.35%...          (0.40)            0.46            0.43            0.46          (0.95)            0.86
    3.............................  Above 0.35%-0.50%...          (0.45)            0.44            0.42            0.44          (1.00)            0.85
    4.............................  Above 0.50%-0.75%...          (0.52)            0.44            0.41            0.43          (1.03)            0.84
    5.............................  Above 0.75%-1.25%...          (0.53)            0.44            0.40            0.42          (1.04)            0.84
    6.............................  Above 1.25%.........          (0.53)            0.43            0.38            0.40          (1.04)            0.84
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* For all Penny Classes other than SPY, QQQ, IWM, and VXX.


[[Page 52041]]

    The Exchange currently charges Taker fees for orders for options in 
the symbol SPY corresponding to the Tiers and volume thresholds which 
are applicable to Priority Customer orders. The Exchange currently 
charges a Taker fee in Tier 1 of $0.44 for Priority Customer orders for 
options in the symbol SPY.
    The Exchange proposes to decrease the Taker fee for Priority 
Customer orders for options in the symbol SPY in Tier 1 from $0.44 to 
$0.43. The purpose of decreasing the Taker fee for Priority Customer 
orders for options in the symbol SPY to $0.43 in Tier 1 is for business 
and competitive reasons to encourage greater volume on the Exchange of 
Priority Customer orders by offering a lower rate in Tier 1. The 
Exchange believes that reducing the Taker fee for Priority Customer 
orders for options in the symbol SPY to $0.43 per contract fee in Tier 
1 will incentivize Members to execute more volume on the Exchange in 
Priority Customer orders due to favorable pricing for this liquidity 
type in Tier 1. There are no other changes proposed to the fee table.
    The proposed change is scheduled to become operative October 1, 
2018.
2. Statutory Basis
    The Exchange believes that its proposal to amend its Fee Schedule 
is consistent with Section 6(b) of the Act \10\ in general, and 
furthers the objectives of Section 6(b)(4) of the Act,\11\ in that it 
is an equitable allocation of reasonable dues, fees and other charges 
among Exchange members and issuers and other persons using its 
facilities, and 6(b)(5) of the Act,\12\ in that it is designed to 
prevent fraudulent and manipulative acts and practices, to promote just 
and equitable principles of trade, to foster cooperation and 
coordination with persons engaged in facilitating transactions in 
securities, to remove impediments to and perfect the mechanisms of a 
free and open market and a national market system and, in general, to 
protect investors and the public interest.
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    \10\ 15 U.S.C. 78f(b).
    \11\ 15 U.S.C. 78f(b)(4).
    \12\ 15 U.S.C. 78f(b)(1) and (b)(5).
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    The proposed Taker fee decrease for Priority Customer orders for 
options in the symbol SPY in Tier 1 is reasonable, equitable, and not 
unfairly discriminatory, since it is intended to incentivize order flow 
to be sent to the Exchange for execution in an actively traded options 
class. SPY options are the most actively traded class. The Exchange 
therefore believes that incentivizing Members will benefit all market 
participants through increased liquidity, tighter markets and order 
interaction.
    Furthermore, the proposed decrease to the Taker fee for Priority 
Customer orders for options in the symbol SPY in Tier 1 promotes just 
and equitable principles of trade, fosters cooperation and coordination 
with persons engaged in facilitating transactions in securities, and 
protects investors and the public interest because the proposed 
decrease in the fee will encourage Members to send more Priority 
Customer orders to the Exchange since they will be assessed a reduced 
Taker fee in Tier 1. To the extent that Priority Customer order flow in 
the symbol SPY is increased by the proposal, market participants will 
increasingly compete for the opportunity to trade on the Exchange, 
including sending more orders which will have the potential to be 
assessed lower fees and higher rebates. The resulting increased volume 
and liquidity will benefit all Exchange participants by providing more 
trading opportunities and tighter spreads.

B. Self-Regulatory Organization's Statement on Burden on Competition

    MIAX PEARL does not believe that the proposed rule change will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act. The proposed Taker fee decrease 
is intended to encourage execution of more volume on the Exchange. The 
decrease in the Taker fee for Priority Customer orders of options in 
the symbol SPY should enable the Exchange to attract and compete for 
order flow with other exchanges which assess higher Taker fees in that 
symbol. Further, the Exchange believes that the proposed decrease in 
the Taker fee in Tier 1 for Priority Customer orders for options in the 
symbol SPY creates further opportunities for bringing additional 
liquidity to the market.
    The Exchange notes that it operates in a highly competitive market 
in which market participants can readily favor competing venues if they 
deem fee levels at a particular venue to be excessive. In such an 
environment, the Exchange must continually adjust its rebates and fees 
to remain competitive with other exchanges and to attract order flow. 
The Exchange believes that the proposed rule change reflects this 
competitive environment because it modifies the Exchange's fees in a 
manner that encourages market participants to continue to provide 
liquidity and to send order flow to the Exchange.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    Written comments were neither solicited nor received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A)(ii) of the Act,\13\ and Rule 19b-4(f)(2) \14\ thereunder. 
At any time within 60 days of the filing of the proposed rule change, 
the Commission summarily may temporarily suspend such rule change if it 
appears to the Commission that such action is necessary or appropriate 
in the public interest, for the protection of investors, or otherwise 
in furtherance of the purposes of the Act. If the Commission takes such 
action, the Commission shall institute proceedings to determine whether 
the proposed rule should be approved or disapproved.
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    \13\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \14\ 17 CFR 240.19b-4(f)(2).
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-PEARL-2018-21 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-PEARL-2018-21. 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

[[Page 52042]]

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. 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-2018-21, and should be 
submitted on or before November 5, 2018.
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    \15\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-22293 Filed 10-12-18; 8:45 am]
 BILLING CODE 8011-01-P