[Federal Register Volume 85, Number 96 (Monday, May 18, 2020)]
[Notices]
[Pages 29759-29766]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-10519]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-88859; File No. SR-PEARL-2020-03]


Self-Regulatory Organizations; MIAX PEARL, LLC; Notice of Filing 
of Amendment No. 1 and Order Instituting Proceedings To Determine 
Whether To Approve or Disapprove a Proposed Rule Change, as Modified by 
Amendment No. 1, To Establish Rules Governing the Trading of Equity 
Securities

May 12, 2020.

I. Introduction

    On January 24, 2020, MIAX PEARL, LLC (``MIAX PEARL'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission''), pursuant to Section 19(b)(1) of the Securities

[[Page 29760]]

Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a 
proposed rule change to adopt rules to govern the trading of cash 
equities and establish an equities trading facility of the Exchange. 
The proposed rule change was published for comment in the Federal 
Register on February 12, 2020.\3\ On March 25, 2020, the Commission 
extended the time period within which to approve the proposed rule 
change, disapprove the proposed rule change, or institute proceedings 
to determine whether to approve or disapprove the proposed rule change, 
to May 12, 2020.\4\ On May 8, 2020, the Exchange filed Amendment No. 1 
to the proposed rule change.\5\ The Commission has received no comments 
on the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 88132 (February 6, 
2020), 85 FR 8053 (February 12, 2020) (``Notice'').
    \4\ See Securities Exchange Act Release No. 88476 (March 25, 
2020), 85 FR 17929 (March 31, 2020).
    \5\ Amendment No. 1 makes the following changes to the proposed 
rule change: (i) Deletes the definition of ``Equity Securities'' 
from proposed Exchange Rule 1901 and makes corresponding changes 
throughout the proposed Exchange Rules to eliminate unnecessary 
confusion; (ii) substitutes references to ``PEARL Equities'' with 
``MIAX PEARL Equities'' throughout the proposed Exchange Rules; 
(iii) updates proposed Exchange Rule 2622 (Limit Up-Limit Down Plan 
and Trading Halts) regarding a Level 3 Market Decline to conform it 
to recent changes made by each of the national securities exchanges 
that trade equities and the Financial Industry Regulatory Authority 
(``FINRA''), and makes a corresponding change to proposed Exchange 
Rule 2615 (Opening Process); and (iv) amends proposed Exchange Rule 
2617(a)(4)(C) and (D) to account for the potential for orders to 
post and rest at prices that cross contra-side liquidity and also to 
correct a typographical error in proposed Exchange Rule 
2617(a)(4)(D). Amendment No. 1 is available on the Commission's 
website at: https://www.sec.gov/comments/sr-pearl-2020-03/srpearl202003-7168815-216600a.pdf.
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    The Commission is publishing this notice and order to solicit 
comments on the proposed rule change, as modified by Amendment No. 1, 
from interested persons and to institute proceedings pursuant to 
Section 19(b)(2)(B) of the Act \6\ to determine whether to approve or 
disapprove the proposed rule change, as modified by Amendment No. 1.
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    \6\ 15 U.S.C. 78s(b)(2)(B).
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II. Description of the Proposed Rule Change, as Modified by Amendment 
No. 1

    As more fully set forth in the Notice and Amendment No. 1, and 
summarized below, the Exchange proposes to establish a platform for the 
trading of cash equity securities (referred to herein as ``MIAX PEARL 
Equities'') to be regulated as an equities trading facility of the 
Exchange. MIAX PEARL Equities would operate pursuant to the proposed 
rules (``MIAX PEARL Equities Rules'') and regulatory requirements 
described below. This description summarizes but does not review every 
detail of the proposal, as modified by Amendment No. 1.

A. MIAX PEARL Equity Members

    As proposed, MIAX PEARL Equities will operate an electronic trading 
system for equity securities (the ``System'') that will provide for the 
electronic execution of orders pursuant to a price/time priority 
execution model.\7\ The Exchange will have a new category of Exchange 
Member participation called ``Equity Member.'' \8\
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    \7\ See Notice, supra note 3 at 8053, 8056.
    \8\ See proposed MIAX PEARL Equities Rules 2000-2003.
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    As proposed, an Equity Member must be or become a member of the 
Exchange pursuant to Chapter II (Access) and continue to abide by the 
requirements of Chapter II of Exchange Rules and the additional 
requirements of Chapter XX governing participation in MIAX PEARL 
Equities.\9\ An Equity Member must also be a member of another 
registered exchange that is not registered solely under Section 6(g) of 
the Exchange Act, or be a member of FINRA.\10\ Further, an Equity 
Member that transacts business with public customers must at all times 
be a member of FINRA.\11\
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    \9\ See proposed MIAX PEARL Equities Rule 2000(b).
    \10\ See proposed MIAX PEARL Equities Rule 2001(f). If such 
other registered exchange has not been designated by the Commission, 
pursuant to Rule 17d-1 under the Exchange Act, to examine Members 
for compliance with financial responsibility rules, then such 
applicant must have and maintain a membership in FINRA. See id.
    \11\ See proposed MIAX PEARL Equities Rule 2001(f).
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    There would be two types of Equity Members: (1) Equities Order 
Entry Firms (``OEFs'') and (2) Equities Market Makers. Each Equity 
Member must be registered as a broker-dealer and have as the principal 
purpose of being an Equity Member the conduct of a securities business, 
which shall be deemed to exist if and so long as: (1) The Equity Member 
has qualified and acts in respect of its business on MIAX PEARL 
Equities as an OEF, or an Equities Market Maker, or both; and (2) all 
transactions effected by the Equity Member are in compliance with 
Section 11(a) of the Act \12\ and the rules and regulations adopted 
thereunder.\13\ Equity Members may trade equity securities for their 
own proprietary accounts or, if authorized to do so under applicable 
law, may conduct business on behalf of customers.\14\ OEFs are Equity 
Members representing orders as agent on MIAX PEARL Equities or non-
Equities Market Makers conducting proprietary trading as principal.\15\ 
An Equity Member may also register as an Equities Market Maker by 
filing a registration request with the Exchange.\16\
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    \12\ 15 U.S.C. 78k(a).
    \13\ See proposed MIAX PEARL Equities Rule 2001(e).
    \14\ See id.
    \15\ See proposed MIAX PEARL Equities Rule 1901.
    \16\ See proposed MIAX PEARL Equities Rule 2605. The Exchange 
represents that an unlimited number of Equities Market Makers may be 
registered in each equity security unless the number of Market 
Makers registered to make a market in a particular equity security 
should be limited whenever, in the Exchange's judgment, quotation 
system capacity in an equity security is not sufficient to support 
additional Market Makers in such equity security. See Notice, supra 
note 3, at 8053. The Exchange further represents that it will not 
restrict access in any particular equity security until the Exchange 
has submitted objective standards for restricting access to the 
Commission for the Commission's review and approval. See id.
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    An Equity Member registered as an Equities Market Maker would be 
required to engage in a course of dealing for its own account and to 
assist in the maintenance of a fair and orderly market.\17\ Among other 
things, each Equities Market Maker must, on a daily basis, maintain a 
two-sided market on a continuous basis during regular market hours for 
each equity security in which it is registered as an Equities Market 
Maker.\18\ Equities Market Makers may withdraw their quotations,\19\ 
and may voluntarily terminate their registration with the Exchange.\20\ 
Pursuant to the existing procedures set forth in Chapter IX of current 
Exchange Rules, the Exchange could suspend, condition, limit, prohibit 
or terminate the authority of an Equities Market Maker to enter 
quotations in one or more authorized securities for violations of 
applicable requirements or prohibitions.\21\
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    \17\ See proposed MIAX PEARL Equities Rule 2606.
    \18\ See proposed MIAX PEARL Equities Rule 2606(a)(1).
    \19\ See proposed MIAX PEARL Equities Rule 2607.
    \20\ See proposed MIAX PEARL Equities Rule 2608.
    \21\ See proposed MIAX PEARL Equities Rule 2609.
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    While using the System, Equity Members and persons employed by or 
associated with any Equity Member would be prohibited from conduct that 
is: (1) Inconsistent with the maintenance of a fair and orderly market; 
(2) apt to impair public confidence in the operations of the Exchange; 
or (3) inconsistent with the ordinary and efficient conduct of 
business.\22\ Should any such conduct occur, the Exchange may suspend 
an Equity Member's access to the System following a warning, or 
terminate an

[[Page 29761]]

Equity Member's access to the System by notice in writing.\23\
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    \22\ See proposed MIAX PEARL Equities Rule 2602(b).
    \23\ See proposed MIAX PEARL Equities Rule 2602(d). The timing 
of such notice would depend on the severity of the Equity Member's 
misconduct. See Notice, supra note 3, at 8055.
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B. MIAX PEARL Equities Trading System

    As proposed, the Exchange's equities trading System, like its 
system for options, will be operated as a fully automated electronic 
order book, and the Exchange will not maintain or operate a physical 
trading floor.\24\ The Exchange has proposed to be a trading center 
(``Trading Center'') whose quotations can be ``automated quotations'' 
under Rule 600(b)(4).\25\ In addition, the Exchange is designed to be 
an ``automated trading center'' under Rule 600(b)(5) whose best-priced, 
displayed quotation will be a ``protected quotation'' under Rules 
600(b)(61) and 600(b)(62), and for purposes of Rule 611.\26\ Only 
Equity Members and their Sponsored Participants (``Users'') would be 
permitted to transact business on MIAX PEARL via the System.\27\
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    \24\ The Exchange represents that the System will leverage the 
Exchange's current technology, including its customer connectivity, 
messaging protocols, quotations and execution engine, order router, 
data feeds, and network infrastructure. See Notice, supra note 3, at 
8056. In addition, the Exchange represents that it will become a 
member of the Depository Trust Company (``DTC''), and that the 
System will be linked to DTC for the Exchange to transmit locked-in 
trades for clearance and settlement. Id.
    \25\ 17 CFR 242.600(b)(4); see proposed MIAX PEARL Equities Rule 
2617(c).
    \26\ 17 CFR 242.600(b)(5), (b)(61) and (b)(62); 17 CFR 242.611; 
see MIAX PEARL Equities Rule 2617(c).
    \27\ See proposed MIAX PEARL Equities Rules 2000 and 2602(a)(1). 
See also Exchange Rule 210 (Sponsored Access to the Exchange).
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1. Order Types and Instructions
    The Exchange proposes that Users may submit orders to the System as 
Limit Orders, Market Orders, or Midpoint Peg Orders.\28\ Orders may be 
entered as an odd lot, round lot, or mixed lot.\29\ The System will 
support two time-in-force instructions: Immediate-or-Cancel (``IOC'') 
or Regular Hours Only (``RHO'').\30\ Users may submit orders with the 
display instructions of Displayed or Non-Displayed, but all orders 
eligible for display will be automatically defaulted to Displayed 
unless a User elects otherwise.\31\ Users also may submit orders with 
instructions of: Do Not Route,\32\ Post Only,\33\ Attributable,\34\ and 
Non-Attributable.\35\ In addition, Users may mark Limit Orders as 
Intermarket Sweep Orders, which will allow orders so designated to be 
automatically matched and executed without reference to Protected 
Quotations at other Trading Centers.\36\ Users may also choose to 
designate orders with self-trade protection modifiers to prevent 
executions against a resting opposite side order originating from the 
same market participant, Exchange Member, or trading group 
identifier.\37\
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    \28\ See proposed MIAX PEARL Equities Rule 2614(a)(1)-(3). 
Midpoint Peg Orders are non-displayed Limit Orders that are assigned 
a ``working price'' pegged to the midpoint of the Protected NBBO. A 
Midpoint Peg Order receives a new timestamp each time its working 
price changes in response to changes to the midpoint of the 
Protected NBBO.
    \29\ See proposed MIAX PEARL Equities Rule 2614(a). The Exchange 
proposes that odd lot, round lot, and mixed lot orders are to be 
treated in the same manner on the Exchange, except as discussed 
below regarding the adjustment of an odd-lot price that locks or 
crosses the Protected NBBO. See infra note 74 and accompanying text.
    \30\ See proposed MIAX PEARL Equities Rule 2614(b). A Market 
Order may only include a time in force of IOC. See MIAX PEARL 
Equities Rule 2614(a)(2).
    \31\ See proposed MIAX PEARL Equities Rule 2614(c)(3) and (4). 
Market Orders and Mid-Point Peg Orders are not eligible for display. 
See proposed MIAX PEARL Equities Rule 2614(a)(2) and (3).
    \32\ An order designated as Do Not Route is a non-routable order 
that will be ranked and executed on the MIAX PEARL Equities Book 
pursuant to proposed MIAX PEARL Equities Rules 2616 and 2617(a)(4) 
or cancelled. Unless otherwise instructed by the User, an order 
designated as Do Not Route will be subject to the price sliding 
processes set forth in proposed MIAX PEARL Equities Rule 2614(g) and 
proposed MIAX PEARL Equities Rule 2622(e). See proposed MIAX PEARL 
Equities Rule 2614(c)(1).
    \33\ An order designated as Post Only is a non-routable order 
that will be ranked and executed on the MIAX PEARL Equities Book 
pursuant to proposed MIAX PEARL Equities Rule 2616 and proposed MIAX 
PEARL Equities Rule 2617(a)(4). An order designated as Post Only 
will only remove liquidity from the MIAX PEARL Equities Book when: 
(A) The order is for a security priced below $1.00; or (B) the value 
of such execution when removing liquidity equals or exceeds the 
value of such execution if the order instead posted to the MIAX 
PEARL Equities Book and subsequently provided liquidity including 
the applicable fees charged or rebates paid. To determine at the 
time of a potential execution whether the value of such execution 
when removing liquidity equals or exceeds the value of such 
execution if the order were instead posted to the MIAX PEARL 
Equities Book and subsequently provided liquidity, the Exchange will 
use the highest possible rebate paid and highest possible fee 
charged for such executions on the Exchange. Lastly, unless 
otherwise instructed by the User, an order designated as Post Only 
will be subject to the price sliding processes set forth in proposed 
MIAX PEARL Equities Rule 2614(g). See proposed MIAX PEARL Equities 
Rule 2614(c)(2).
    \34\ ``Attributable'' is an instruction to include the User's 
market participant identifier (``MPID'') with an order that is 
designated for display (price and size) on an Exchange proprietary 
data feed. See proposed MIAX PEARL Equities Rule 2614(c)(5).
    \35\ ``Non-Attributable'' is an instruction on an order that is 
designated for display (price and size) on an Exchange proprietary 
data feed to display that order on an anonymous basis. See proposed 
MIAX PEARL Equities Rule 2614(c)(6).
    \36\ A User marking a Limit Order as ``ISO'' must simultaneously 
route one or more additional Limit Orders marked ``ISO,'' as 
necessary, to away Trading Centers to execute against the full 
displayed size of any Protected Quotation for the security. An order 
meeting such requirements may be immediately executed at one or 
multiple price levels in the System without regard to Protected 
Quotations at away Trading Centers consistent with Regulation NMS. 
An ISO is not eligible for routing and may include a time-in-force 
of IOC or RHO. See MIAX PEARL Equities Rule 2614(d). A User entering 
an ISO with a time-in-force of IOC represents that such User has 
simultaneously routed one or more additional Limit Orders marked 
``ISO,'' if necessary, to away Trading Centers to execute against 
the full displayed size of any Protected Quotation for the security 
with a price that is superior to the limit price of the ISO entered 
in the System. A User entering an ISO with a time-in-force of RHO 
makes the same representation but further represents that it 
simultaneously routed one or more additional Limit Orders marked 
``ISO,'' if necessary, to away Trading Centers to execute against 
the full displayed size of any Protected Quotation for the security 
with a price that is equal to the limit price of the ISO entered in 
the System.
    \37\ See proposed MIAX PEARL Equities Rule 2614(f).
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    As proposed, the MIAX PEARL Equities Rules will provide for Limit 
Order Price Protection.\38\ The Exchange has proposed that a Limit 
Order to buy (sell) will be rejected if it is priced at or above 
(below) the greater of a specified dollar and percentage away from: (1) 
The Protected Best Offer for Limit Orders to buy, the Protected Best 
Bid for Limit Orders to sell; or (2) if the Protected Best Offer or 
Protected Best Bid is unavailable, the consolidated last sale price 
disseminated during the Regular Trading Hours on trade date; or (3) if 
the Protected Best Offer or Protected Best Bid and a consolidated last 
sale price are unavailable, the prior day's Official Closing Price 
identified as such by the primary listing exchange, adjusted to account 
for events such as corporate actions and news events.\39\ The proposed 
functionality would differ from that provided by other equities 
exchanges by using a waterfall of reference prices and permitting 
Equity Members to customize the Limit Order Price Protection dollar and 
percentage limits on a per session basis, in lieu of using the 
Exchange's default parameters.\40\
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    \38\ See proposed MIAX PEARL Equities Rule 2614(a)(1)(I).
    \39\ See proposed MIAX PEARL Equities Rule 1900 (defining the 
term ``PBO'' or ``Protected NBO'' as the national best offer that is 
a Protected Quotation, and the term ``PBB'' or ``Protected NBB'' as 
the national best bid that is a Protected Quotation).
    \40\ See Notice, supra note 3, at 8061.
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2. Opening Procedures
    As proposed, the Exchange will conduct an Opening Process at the 
start

[[Page 29762]]

of Regular Trading Hours.\41\ During the Opening Process, the Exchange 
attempts to match eligible buy and sell orders at the midpoint of the 
NBBO.\42\ Similar to the Opening Process conducted by other national 
securities exchanges,\43\ the midpoint of the NBBO will be calculated 
differently depending on whether the primary listing exchange is NYSE 
or NYSE American,\44\ or is any other primary listing exchange.\45\ If 
the conditions to establish the Opening Process do not occur by 9:45:00 
a.m. Eastern Time, the Exchange will conduct a Contingent Open, by 
matching all orders eligible to participate in the Opening Process at 
the midpoint of the then prevailing NBBO.\46\ If the midpoint of the 
NBBO is not available for the Contingent Open, all orders will be 
handled in time sequence, beginning with the order with the oldest 
timestamp, and be placed on the MIAX PEARL Equities Book, cancelled, 
executed, or routed to away Trading Centers in accordance with the 
terms of the order.\47\ Those Users that do not wish to participate in 
the Contingent Open may cancel their orders at any time and resubmit 
those orders after the Contingent Open occurs and continuous trading 
begins.\48\ While an equity security is subject to a halt, suspension, 
or pause in trading, the Exchange will accept orders for queuing prior 
to the resumption of trading in the security for participation in the 
Re-Opening Process.\49\ As proposed, the Re-Opening Process will occur 
in the same general manner as the Opening Process.\50\
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    \41\ Orders designated as Post Only, ISOs, Market Orders, and 
orders that include a time-in-force other than RHO are not eligible 
to participate in the Opening Process. See proposed MIAX PEARL 
Equities Rule 2615. Self-trade prevention modifiers will be honored 
during the Opening Process. See proposed MIAX PEARL Equities Rule 
2615(a)(2).
    \42\ All orders eligible to trade at the midpoint will be 
processed in time sequence, beginning with the order with the oldest 
timestamp. The Opening Process will conclude when no remaining 
orders, if any, can be matched at the midpoint of the NBBO. At the 
conclusion of the Opening Process, the unexecuted portion of orders 
that were eligible to participate in the Opening Process will be 
placed on the MIAX PEARL Equities Book in time sequence, cancelled, 
executed, or routed to away Trading Centers in accordance with the 
terms of the order. See proposed MIAX PEARL Equities Rule 2615(b).
    \43\ See, e.g., Cboe BZX Rule 11.24(c); Cboe EDGX Rule 11.7(c).
    \44\ When the primary listing exchange is the NYSE or NYSE 
American, the Opening Process will be priced at the midpoint of the: 
(i) First NBBO subsequent to the first reported trade and first two-
sided quotation on the primary listing exchange after 9:30:00 a.m. 
Eastern Time; or (ii) then prevailing NBBO when the first two-sided 
quotation is published by the primary listing exchange after 9:30:00 
a.m. Eastern Time, but before 9:45:00 a.m. Eastern Time if no first 
trade is reported by the primary listing exchange within one second 
of publication of the first two-sided quotation by the primary 
listing exchange. See proposed MIAX PEARL Equities Rule 2615(c)(1).
    \45\ For any other primary listing exchange, the Opening Process 
will be priced at the midpoint of the first NBBO subsequent to the 
first two-sided quotation published by the primary listing exchange 
after 9:30:00 a.m. Eastern Time. See proposed MIAX PEARL Equities 
Rules 2615(c)(2).
    \46\ See proposed MIAX PEARL Equities Rule 2615(d).
    \47\ Users not seeking an execution at the midpoint of the NBBO 
during the Contingent Open may cancel their orders before 9:45 a.m. 
and re-enter those orders after the Contingent Open occurs. See 
Notice, supra note 3, at 8063.
    \48\ See id.
    \49\ See proposed MIAX PEARL Equities Rule 2615(e).
    \50\ See proposed MIAX PEARL Equities Rule 2615(e)(1).
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3. Order Priority and Execution
    As proposed, following the Opening Process, the System will 
continuously and automatically match orders pursuant to price/time 
priority.\51\ For equally-priced trading interest, orders categorized 
as displayed will have priority over orders categorized as non-
displayed.\52\ Within each priority category, orders will be ranked 
based on time, with each order being assigned a timestamp equal to the 
time the order is first placed on the MIAX PEARL Equities Book.\53\ The 
System also will utilize certain collars and constraints in an effort 
to reduce the occurrence of erroneous trades.\54\ The best-ranked 
orders to buy and best-ranked orders to sell that are displayable in 
the MIAX PEARL Equities book and their aggregate displayed size will be 
available to quotation vendors for dissemination pursuant to the 
requirements of Rule 602 of Regulation NMS.\55\
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    \51\ See proposed MIAX PEARL Equities Rules 2616(a)(1) and 
2617(a)(4)(A). Orders to buy will be ranked from highest working 
price to lowest working price. Orders to sell will be ranked from 
lowest working price to highest working price. If the working price 
of an order changes, the price priority of the order will also 
change. See proposed MIAX PEARL Equities Rule 2616(a)(1). See also 
proposed MIAX PEARL Equities Rule 1900, defining ``working price'' 
to mean the price at which an order is eligible to trade at any 
given time, which may be different from the limit price or display 
price of the order.
    \52\ See proposed MIAX PEARL Equities Rule 2616(a)(2).
    \53\ See proposed MIAX PEARL Equities Rule 2616(a)(3). When 
Users elect that their orders not execute against an order with the 
same self-trade prevention modifier, the System will not permit such 
orders to execute against one another, regardless of priority 
ranking. See MIAX PEARL Equities Rule 2616(a)(4). When a User 
cancels or replaces an order resting on the MIAX PEARL Equities 
Book, the order will retain its timestamp and retain its priority 
only where the modification involves a decrease in the size of the 
order or a change in position from: (A) Sell to sell short; (B) sell 
to sell short exempt; (C) sell short to sell; (D) sell short to sell 
short exempt; (E) sell short exempt to sell; and (F) sell short 
exempt to sell short. See proposed MIAX PEARL Equities Rule 
2616(a)(5). In addition, the remainder of an order that is partially 
executed against an incoming order or Aggressing Order (as defined 
in proposed MIAX PEARL Equities Rule 1901) will retain its 
timestamp. See proposed MIAX PEARL Equities Rule 2616(a)(6).
    \54\ See MIAX PEARL Equities Rules 2618 and 2621.
    \55\ See proposed MIAX PEARL Rule 2216(b), providing that, 
pursuant to Rule 602 of Regulation NMS, the Exchange will transmit 
for display to the appropriate network processor for each System 
security the highest (lowest) price to buy (sell) wherein the 
aggregate size of all displayed buy (sell) interest in the System 
greater (less) than or equal to that price is one round lot or 
greater, and that the aggregate size of all displayed buy (sell) 
interest in the System greater (less) than or equal to that price 
will be transmitted rounded down to the nearest round lot.
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    Proposed MIAX PEARL Equities Rule 2617(a) addresses order 
execution.\56\ The proposed rule provides that an order will be 
cancelled back to the User if, based on market conditions, User 
instructions, applicable Exchange Rules and/or the Exchange Act and the 
rules and regulations thereunder, such order is not executable, cannot 
be routed to another Trading Center and cannot be posted to the MIAX 
PEARL Equities Book.\57\
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    \56\ The Exchange states that the order execution process for 
equity securities is based on functionality currently approved for 
use on the Cboe Equities Exchanges, NYSE, NYSE Arca, and Nasdaq. See 
Notice supra note 3 at 8065.
    \57\ See proposed MIAX Pearl Equities Rule 2617(a). The Exchange 
states that this is the same as on other equity exchanges. See 
Notice supra note 3 at 8065.
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    Proposed MIAX PEARL Equities Rule 2617(a)(1)-(3) provides that the 
System will comply with all applicable securities laws and regulations, 
including Regulation NMS Rule 611, Regulation SHO, and the Plan to 
Address Extraordinary Market Volatility (the ``LULD Plan'').\58\ 
Proposed Rule 2617(a)(4) addresses how (subject to the requirements of 
Rule 611 and other applicable Commission and Exchange requirements), an 
incoming order or Aggressing Order would be matched against orders on 
the MIAX PEARL Equities Book. Specifically, proposed MIAX PEARL 
Equities Rule 2617(a)(4)(A)-(B) provides that an Aggressing Order or an 
incoming order to buy (sell) will be automatically executed to the 
extent that it is priced at an amount that equals or exceeds (is less 
than) any order to sell (buy) in the MIAX PEARL Equities Book and is 
executable.\59\
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    \58\ See id. Proposed Rule 2617(a)(2) specifies that for any 
execution to occur during Regular Trading Hours, the price must be 
equal to, or better than, the Protected NBBO unless an exception to 
Rule 611 applies. See proposed MIAX PEARL Equities Rules 1901 
(defining ``Protected NBBO'') and 2617(a)(2).
    \59\ See proposed MIAX PEARL Equities Rule 2617(a)(4)(A)-(B).
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    In Amendment No. 1, the Exchange modifies proposed MIAX PEARL

[[Page 29763]]

Equities Rule 2617(a)(4)(C) and (D), which further addresses executions 
on the MIAX PEARL Equities Book, by describing how the Exchange would 
handle internally locked or crossed interest on the MIAX PEARL Equities 
Book. Proposed MIAX PEARL Equities Rule 2617(a)(4)(C), as amended, 
acknowledges that certain orders, based on their operation and User 
instructions, are permitted to post and rest on the MIAX PEARL Equities 
Book at prices that lock or cross contra-side liquidity; provided, 
however, that the System would never display a locked or crossed 
market.\60\ The rule states further that, if an Aggressing Order or an 
incoming order to buy (sell) would execute upon entry against an order 
to sell (buy) at the same price as or a worse price than a resting 
displayed order to buy (sell), the Aggressing Order or incoming order 
to buy (sell) will be cancelled or posted to the MIAX PEARL Equities 
Book and ranked in accordance with proposed MIAX PEARL Equities Rule 
2616.\61\
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    \60\ See Amendment No. 1; Rule 2617(a)(4)(C).
    \61\ See Amendment No. 1; Rule 2617(a)(4)(C).
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    Proposed MIAX PEARL Equities Rule 2617(a)(4)(D), as modified by 
Amendment No. 1, governs the price at which an order is executable when 
it is posted non-displayed on the PEARL Equities Book and there is a 
contra-side displayed order at a price which results in an internally 
locked or crossed book.\62\ For securities priced equal to or greater 
than $1.00 per share, in the case where a non-displayed order to sell 
(buy) is posted on the MIAX PEARL Equities Book at a price that locks 
or crosses a displayed order to buy (sell) pursuant to proposed MIAX 
PEARL Equities Rule 2617(a)(4)(C) described above, an Aggressing Order 
or an incoming order to buy (sell) that is a market order or a limit 
order priced more aggressively than the order to buy (sell) displayed 
on the MIAX PEARL Equities Book will execute against the non-displayed 
order to sell (buy) resting on the PEARL Equities Book at one-half 
minimum price variation greater (less) than the price of the resting 
displayed order to buy (sell).\63\
---------------------------------------------------------------------------

    \62\ See Amendment No. 1; Rule 2617(a)(4)(D).
    \63\ See Amendment No. 1; Rule 2617(a)(4)(D).
---------------------------------------------------------------------------

    As initially proposed, MIAX PEARL Equities Rule 2617(a)(4)(C) and 
(D) set forth how the Exchange would process orders when the MIAX PEARL 
Equities Book is internally locked.\64\ In Amendment No. 1, the 
Exchange added language to these proposed rule provisions to account 
for the fact that certain orders also may post at prices that cross 
contra-side liquidity resting on the MIAX PEARL Equities Book.\65\ The 
Exchange states that such an internally crossed book may occur when an 
incoming order of odd lot size designated as Post Only does not execute 
against a resting Midpoint Peg order pursuant to the Exchange's 
proposed economic best interest functionality under proposed MIAX PEARL 
Equities Rule 2614(c)(2).\66\ The Exchange provides an example where 
this occurs when an incoming displayable odd lot Post Only order would 
cross a contra-side Midpoint Peg order resting at the midpoint of the 
PBBO by one half of one cent ($.005) and post and display at its limit 
price, crossing the Midpoint Peg order.\67\ The example further 
reflects where these internally crossed orders would be subsequently 
executable--specifically, the Midpoint Peg order would no longer be 
executable at the midpoint of the PBBO and instead would be executable 
at one-half minimum price variation more aggressive than the displayed 
price of the odd lot Post Only order, and the odd lot Post Only order 
would be executable at its displayed price.\68\
---------------------------------------------------------------------------

    \64\ See Amendment No. 1.
    \65\ Id.
    \66\ Id.
    \67\ Id. The example assumes that the PBBO is $10.00 by $10.05 
and there are no orders resting on the MIAX PEARL Equities book. The 
Exchange states that it has yet to determine the level of fees and 
rebates it intends to offer, so the example assumes a maker/taker 
fee structure with a $0.0030 fee for removing liquidity and a 
$0.0030 rebate for providing liquidity, requiring at least $0.0060 
of price improvement for a displayed order designated as Post Only 
to remove liquidity. The Exchange also states that, assuming it 
offers lower fees and rebates for non-displayed orders, if the 
incoming post only order in the example was non-displayed, it would 
execute against the resting contra-side Midpoint Peg order pursuant 
to the Exchange's proposed economic best interest functionality 
under proposed Exchange Rule 2614(c)(2). Further, the Exchange 
states that if the incoming post only order in the example instead 
was a displayed round lot, it would have updated the PBBO resulting 
in the contra-side Midpoint Peg Order being re-priced to the new 
midpoint of the PBBO and not resulting in a non-displayed internally 
crossed book. Id.
    \68\ Id.
---------------------------------------------------------------------------

    The MIAX PEARL Equities Rules also are designed to address 
intermarket locks and crosses, as required by Rule 610(d) of Regulation 
NMS,\69\ in that they are designed not to disseminate interest that 
would lock or cross a protected quote, require Users to reasonably 
avoid displaying interest that locks or crosses any protected 
quotation, and are reasonably designed to assure the reconciliation of 
locked or crossed interest.\70\ The MIAX PEARL Equities Rules also 
provide for the re-pricing of limit orders in order to comply with Rule 
201 of Regulation SHO \71\ and the LULD Plan,\72\ and the repricing of 
non-displayed limit orders to ensure compliance with Rule 611 of 
Regulation NMS.\73\ Further, with respect to odd lots, the Exchange has 
proposed that the working and display price of a displayable odd lot 
order will be adjusted both on arrival and when resting on the MIAX 
PEARL Equities Book depending on the odd lot order's limit price in 
relation the Protected NBBO and whether the Protected NBBO itself is 
locked or crossed, to reduce the potential for odd lot orders to be 
displayed on the Exchange's proprietary data feed at potentially 
unexecutable prices.\74\
---------------------------------------------------------------------------

    \69\ 17 CFR 242.610(d).
    \70\ See proposed MIAX PEARL Equities Rule 2624: see also 
proposed MIAX PEARL Equities Rule 2614(a)(1) and (g)(1) (relating to 
price sliding functionality for non-routable limit orders to avoid 
violations of Rule 610(d) of Regulation NMS, 17 CFR 242.610(d)).
    \71\ 17 CFR 242.201; see proposed MIAX PEARL Equities Rule 
2614(a)(1) and (g)(3).
    \72\ See proposed MIAX PEARL Equities Rules 2614(a)(1) and 2622; 
see also proposed MIAX PEARL Equities Rule 2617(a)(3) (providing 
that any executions that occur during Regular Trading Hours must 
comply with the LULD plan).
    \73\ 17 CFR 242.611; see proposed MIAX PEARL Equities Rule 
2614(a)(1) and (g)(2).
    \74\ See proposed MIAX PEARL Equities Rule 2611(b)(1). See also 
proposed MIAX PEARL Equities Rule 2611(b)(2) (regarding 
circumstances in which resting odd lot quantity could be joined with 
the returned quantity of a routed order and receive a new 
timestamp). See also Notice, supra note 3 at 8057.
---------------------------------------------------------------------------

C. Routing

    As proposed, MIAX PEARL Equities will support orders that are 
designated to be routed to the Protected NBBO as well as orders that 
will execute only within MIAX PEARL Equities.\75\ The System will 
provide a routing service (``Routing Services'') for orders when 
trading interest is not available on MIAX PEARL Equities.\76\ As the 
Exchange currently does for options,\77\ it will route orders in equity 
securities via one or more routing brokers that are not affiliated with 
the Exchange.\78\
---------------------------------------------------------------------------

    \75\ However, an order marked ``short'' when a short sale price 
test restriction pursuant to Rule 201 of Regulation SHO is in effect 
is not eligible for routing by the Exchange. See MIAX Pearl Equities 
Rule 2617(b)(2). An order that is ineligible for routing due to a 
short sale price test restriction and that includes a time-in-force 
of IOC will be cancelled upon entry. Id. The Exchange will handle 
routable orders in connection with the LULD Plan as described in 
proposed MIAX PEARL Equities Rule 2622(b)(2) and (3).
    \76\ See Notice, supra note 3, at 8053.
    \77\ See Exchange Rule 529.
    \78\ See Notice, supra note 3, at 8066. The Exchange notes that 
this routing process is described under proposed MIAX PEARL Equities 
Rule 2617(b)(1), which is identical to current Exchange Rule 529 
that is applicable to options. See id.
---------------------------------------------------------------------------

    For all Routing Services, the Exchange will determine the logic 
that provides

[[Page 29764]]

when, how, and where orders are routed away to other Trading 
Centers.\79\ The Exchange represents that the Exchange's routing logic 
will not provide any advantage to Users when routing orders to away 
Trading Centers as compared to other routing methods.\80\ The routing 
broker will receive routing instructions from the Exchange to route 
orders to other Trading Centers and report such executions back to the 
Exchange.\81\ The routing broker cannot change the terms of an order or 
the routing instructions, nor does the routing broker have any 
discretion about where to route an order.\82\
---------------------------------------------------------------------------

    \79\ See proposed MIAX PEARL Equities Rule 2617(b)(1)(A)(iv).
    \80\ See Notice, supra note 3, at 8066.
    \81\ See proposed MIAX PEARL Equities Rule 2617(b)(1)(A)(v).
    \82\ See proposed MIAX PEARL Equities Rule 2617(b)(1)(A)(v).
---------------------------------------------------------------------------

    The Exchange represents that for each routing broker used by the 
Exchange, an agreement will be in place between the Exchange and the 
routing broker that will, among other things, restrict the use of any 
confidential and proprietary information that the routing broker 
receives to legitimate business purposes necessary for routing orders 
at the direction of the Exchange.\83\ Further, the Exchange will 
establish and maintain procedures and internal controls reasonably 
designed to adequately restrict the flow of confidential and 
proprietary information between the Exchange and the routing broker, 
and any other entity, including any affiliate of the routing broker; 
and, if the routing broker or any of its affiliates engages in any 
other business activities other than providing routing services to the 
Exchange, between the segment of the routing broker or affiliate that 
provides the other business activities and the segment of the routing 
broker that provides the Routing Services.\84\
---------------------------------------------------------------------------

    \83\ See Notice, supra note 3, at 8066. See also proposed MIAX 
PEARL Equities Rule 2617(b)(1)(A).
    \84\ See proposed MIAX PEARL Equities Rule 2617(b)(1)(A)(i).
---------------------------------------------------------------------------

    The Exchange may not use a routing broker for which the Exchange or 
any affiliate of the Exchange is the designated examining 
authority.\85\ In addition, the Exchange will provide its Routing 
Services in compliance with the provisions of the Act and the rules 
thereunder, including, but not limited to, the requirements in Section 
6(b)(4) and (5) of the Act that the rules of a national securities 
exchange provide for the equitable allocation of reasonable dues, fees, 
and other charges among an exchange's members and other persons using 
its facilities, and not be designed to permit unfair discrimination 
between customers, issuers, brokers, or dealers.\86\ The Exchange also 
represents that it will file a proposed rule change with the Commission 
pursuant to Section 19(b) of the Act prior to offering additional 
routing options.\87\
---------------------------------------------------------------------------

    \85\ See proposed MIAX PEARL Equities Rule 2617(b)(1)(A)(ii).
    \86\ See proposed MIAX PEARL Equities Rule 2617(b)(1)(A)(iii).
    \87\ See Notice, supra note 3, at 8066 n.78.
---------------------------------------------------------------------------

    The Exchange notes that use of its routing services to route orders 
to other market centers is optional.\88\ Parties that do not desire to 
use these services must designate their orders as not available for 
routing.\89\ In addition, any bid or offer entered on the Exchange 
routed to another Trading Center through a routing broker that results 
in an execution shall be binding on the Member that entered such bid or 
offer.\90\
---------------------------------------------------------------------------

    \88\ See id. at 8066.
    \89\ See id.
    \90\ See proposed MIAX PEARL Equities Rule 2617(b)(1)(A)(vi).
---------------------------------------------------------------------------

D. Securities Traded: Unlisted Trading Privileges

    The Exchange is not proposing to be a listing market for equity 
securities, but instead proposes to trade equity securities pursuant to 
unlisted trading privileges (``UTP''). MIAX PEARL Equities Rule 2900 
establishes the Exchange's authority to trade securities on a UTP 
basis. MIAX PEARL Equities Rule 2900(a) provides that the Exchange may 
extend UTP any NMS Stock that is listed on another national securities 
exchange or with respect to which UTP may otherwise be extended in 
accordance with Section 12(f) of the Act.\91\ MIAX PEARL Equities Rule 
2900(a) further provides that any such security would be subject to all 
Exchange rules applicable to trading on the Exchange, unless otherwise 
noted. For any UTP security that is a UTP Exchange Traded Product, the 
Exchange will distribute an information circular prior to the 
commencement of trading in each such UTP Exchange Traded Product that 
generally includes the same information as is contained in the 
information circular provided by the listing exchange.\92\ Equity 
Members must provide each purchaser of UTP Exchange Traded Products a 
written description of the terms and characteristics of those 
securities, in a form approved by the Exchange or prepared by the open-
ended management company issuing such securities, not later than the 
time a confirmation of the first transaction in such securities is 
delivered to such purchaser.\93\ Upon request of a customer, an Equity 
Member must also provide a prospectus for the particular UTP Exchange 
Traded Product.\94\
---------------------------------------------------------------------------

    \91\ Any such security will be subject to all Exchange rules 
applicable to trading on the Exchange, unless otherwise noted. See 
proposed MIAX PEARL Equities Rule 2900. The Exchange states that 
this rule is identical to the rules of other equities exchanges. See 
Notice, supra note 3, at 8070. See also Amendment No. 1, supra note 
5, deleting from the proposed MIAX PEARL Equities Rules the 
originally proposed definition of Equity Securities as unnecessary.
    \92\ This includes: (a) The special risks of trading the new 
Exchange Traded Product; (b) the Exchange Rules that will apply to 
the new Exchange Traded Product; and (c) information about the 
dissemination of value of the underlying assets or indices. See 
proposed MIAX PEARL Equities Rules 2900(b)(1).
    \93\ In addition, Equity Members will include a written 
description with any sales material relating to UTP Exchange Traded 
Products that is provided to customers or the public, as well as a 
disclaimer (Any other written materials provided by an Equity Member 
to customers or the public making specific reference to the UTP 
Exchange Traded Products as an investment vehicle) with any other 
written materials provided by an Equity Member to customers or the 
public making specific reference to the UTP Exchange Traded Products 
as an investment vehicle substantially in in a form prescribed by 
the Exchange. See proposed MIAX PEARL Equities Rules 2900(b)(2)(B).
    \94\ See proposed MIAX PEARL Equities Rule 2900(b)(2)(C).
---------------------------------------------------------------------------

    The Exchange also proposes certain restrictions on Equity Members 
acting as Equities Market Makers on the Exchange in a UTP Exchange 
Traded Product that derives its value from one or more currencies, 
commodities, or derivatives based on one or more currencies or 
commodities, or is based on a basket or index composed of currencies or 
commodities.\95\ Further, the Exchange will enter into comprehensive 
surveillance sharing agreements with markets that trade components of 
the index or portfolio on which the UTP Exchange Traded Product is 
based to the same extent as the listing exchange's rules require the 
listing exchange to enter into comprehensive surveillance sharing 
agreements with such markets.\96\
---------------------------------------------------------------------------

    \95\ See proposed MIAX PEARL Equities Rule 2900(b)(4).
    \96\ See proposed MIAX PEARL Equities Rule 2900(b)(5).
---------------------------------------------------------------------------

E. Regulation

    The Exchange represents that it will regulate MIAX PEARL Equities 
using the Exchange's existing regulatory structure.\97\ Pursuant to the 
Exchange's By-Laws, the Chief Regulatory Office of the Exchange will 
have general supervision of the regulatory operations of the Exchange, 
which will include responsibility for overseeing the Exchange's 
surveillance, examination, and enforcement functions and for 
administering any regulatory services agreements applicable to MIAX 
PEARL

[[Page 29765]]

Equities.\98\ Similarly, the Exchange's existing Regulatory Oversight 
Committee will be responsible for overseeing the adequacy and 
effectiveness of Exchange's regulatory and self-regulatory organization 
responsibilities, including those applicable to MIAX PEARL 
Equities.\99\
---------------------------------------------------------------------------

    \97\ See id. at 8071-72.
    \98\ See proposed MIAX PEARL By-Laws, Section 6.10.
    \99\ See proposed MIAX PEARL By-Laws, Section 4.5(c).
---------------------------------------------------------------------------

    As more fully discussed in the Notice, the Exchange has proposed 
specific business conduct and operational rules for Equity Members 
consistent with the approved rules of other equities exchanges, which 
include rules covering similar subject matter as existing Exchange 
Rules, applicable to options Members.\100\ In addition, the Exchange 
proposes that existing rules applicable to the MIAX PEARL options 
market (current Chapters I though XVIII of the Exchange Rules) will 
apply to Equity Members and their associated persons, unless a specific 
MIAX PEARL Equities Rule (in proposed Chapters XIX through XXX of the 
Exchange Rules) governs or the context otherwise requires.\101\ The 
Exchange also proposes to incorporate certain rules of other self-
regulatory organizations (``SROs'') and represents that it will request 
an exemption from the rule filing requirements of Section 19(b) of the 
Exchange Act for those rules of another SRO that it proposes to 
incorporate by reference to the extent such rules are effected solely 
by virtue of a change to any of those rules.\102\
---------------------------------------------------------------------------

    \100\ See Notice, supra note 3, at 8069-70 (discussing MIAX 
PEARL Equities Rules regarding Fair Practice (Chapter XXI), Books, 
Records, and Reports (Chapter XXII), Supervision (Chapter XXIII), 
Margin (Chapter XXIV), Chapter XXVII (Trading Practice Rules), and 
other miscellaneous provisions (Chapter XXVIII).
    \101\ See proposed MIAX PEARL Rule 1900 (Applicability).
    \102\ See Notice supra note 3 at 8069.
---------------------------------------------------------------------------

    Further, the Exchange's By-Laws provide that it has disciplinary 
jurisdiction over its members, including Equity Members so that it can 
enforce its members' compliance with its rules and the federal 
securities laws.\103\ The Exchange's rules also permit it to sanction 
members for violations of its rules and of the federal securities laws 
by, among other things, expelling or suspending members, limiting 
members' activities, functions, or operations, fining or censuring 
members, or suspending or barring a person from being associated with a 
member.\104\
---------------------------------------------------------------------------

    \103\ See MIAX PEARL By-Laws Section 9.2; see also MIAX PEARL 
By-Laws Section 2.1(d).
    \104\ See Chapter X of Exchange Rules. The Exchange's rules also 
provide for the imposition of fines for minor rule violations in 
lieu of commencing disciplinary proceedings. The Commission approved 
the Exchange's Minor Rule Violation Plan (``MRVP'') in 2017. See 
Securities Exchange Act Release No. 82385 (December 21, 2017), 82 FR 
61613 (December 28, 2017) (File No. 4-715).
---------------------------------------------------------------------------

    In addition, the Exchange represents that: (1) The Exchange will 
join the existing equities industry agreements and establish new 
agreements, as necessary, pursuant to Section 17(d) of the Exchange 
Act, as it has with respect to its equities market; (2) the Exchange's 
Regulatory Services Agreement (``RSA'') with FINRA will govern many 
aspects of the regulation and discipline of Members that participate in 
equities trading, as it does for options market regulation; and (3) the 
Exchange will authorize Equity Members to trade on MIAX PEARL Equities 
and conduct surveillance of equities trading as it does for 
options.\105\
---------------------------------------------------------------------------

    \105\ See id. at 8071-72.
---------------------------------------------------------------------------

    The Exchange represents that it will establish Rule 17d-2 Plans for 
Allocation of Regulatory Responsibilities, including, subject to 
Commission approval: (i) A plan with FINRA pursuant to which the 
Exchange and FINRA will agree to allocate to FINRA, with respect to 
common members, regulatory responsibility for overseeing and enforcing 
certain applicable laws, rules, and regulations of MIAX PEARL Equities; 
(ii) joining the multi-party plan with FINRA and other national 
securities exchanges for the surveillance, investigation, and 
enforcement of common insider trading rules; and (iii) joining the 
multi-party plan with FINRA and other national securities exchanges for 
the allocation of regulatory responsibilities with respect to certain 
Regulation NMS Rules.\106\
---------------------------------------------------------------------------

    \106\ See Notice, supra note 3, at 8072. Rule 17d-2 provides 
that any two or more SROs may file with the Commission a plan for 
allocating among such SROs the responsibility to receive regulatory 
reports from persons who are members or participants of more than 
one of such SROs to examine such persons for compliance, or to 
enforce compliance by such persons, with specified provisions of the 
Act, the rules and regulations thereunder, and the rules of such 
SROs, or to carry out other specified regulatory functions with 
respect to such persons. See 17 CFR 240.17d-2.
---------------------------------------------------------------------------

    In addition, the Exchange represents that it will: (i) Expand its 
existing RSA with FINRA, pursuant to which FINRA performs various 
regulatory services on behalf of the Exchange, subject to the 
Exchange's ultimate responsibility, including the review of membership 
applications and the conduct of investigations, disciplinary and 
hearing services; (ii) join the Intermarket Surveillance Group 
(``ISG''); and (iii) submit an amended Minor Rule Violation Plan to the 
Commission under Rule 19d-1(c)(2) of the Exchange Act.\107\
---------------------------------------------------------------------------

    \107\ See id. The Commission approved the Exchange's current 
MRVP in 2017. See Securities Exchange Act Release No. 82385 
(December 21, 2017), 82 FR 61613 (December 28, 2017) (File No. 4-
715).
---------------------------------------------------------------------------

    According to the Exchange, FINRA currently surveils options trading 
on behalf of the Exchange pursuant to an existing RSA designed to 
detect violations of Exchange rules and applicable federal securities 
laws.\108\ The Exchange represents that this RSA will be expanded to 
provide for FINRA to also surveil equities trading on MIAX PEARL 
Equities on behalf of the Exchange.\109\ The Exchange will remain 
responsible for FINRA's performance under the RSA.\110\
---------------------------------------------------------------------------

    \108\ See Notice, supra note 3, at 8072.
    \109\ See id.
    \110\ See id.
---------------------------------------------------------------------------

    In addition, with respect to exchange traded products traded on 
MIAX PEARL Equities pursuant to unlisted trading privileges, the 
Exchange represents that it will enter into a comprehensive 
surveillance sharing agreement with markets that trade components of 
the index or portfolio on which shares of an exchange-traded product is 
based to the same extent as the listing exchange's rules require the 
listing exchange to enter into a comprehensive surveillance sharing 
agreement with such markets.\111\
---------------------------------------------------------------------------

    \111\ See id. The Exchange states that FINRA, on behalf of the 
Exchange, may obtain information, and will communicate information 
as needed, regarding trading in the shares of exchange-traded 
products, as well as in the underlying exchange-traded securities 
and instruments with other markets and other entities that are 
members of ISG. The Exchange may also obtain information regarding 
trading in such shares and underlying securities and instruments 
from markets and other entities that are members of ISG or with 
which the Exchange has in place a comprehensive surveillance sharing 
agreement. Moreover, the Exchange states that FINRA, on behalf of 
the Exchange, is able to access, as needed, trade information for 
certain fixed income securities held by a fund reported to FINRA's 
Trade Reporting and Compliance Engine. See id.
---------------------------------------------------------------------------

    The Exchange has also proposed Rule 2622(e) to comply with the LULD 
Plan, and has represented that it is identical in all material respects 
to the rules of other equities exchanges.\112\ Proposed MIAX PEARL 
Equities Rule 2622(e) states that the Exchange is a Participant

[[Page 29766]]

in the LULD Plan \113\ and requires that Equity Members comply with the 
LULD Plan's provisions. Proposed MIAX PEARL Equities Rule 2622(e) also 
describes the Exchange's order handling procedures to comply with the 
LULD Plan.\114\
---------------------------------------------------------------------------

    \112\ See id. at 8068. In Amendment No. 1, the Exchange updated 
proposed MIAX PEARL Equities Rules 2615 and 2622 regarding trading 
halts to reflect recent proposed rule changes filed by all other 
equity exchanges and FINRA with respect to a Level 3 Market Decline. 
See supra note 5. When triggered, a Level 3 halt would halt trading 
market-wide until the next trading day. The changes in Amendment No. 
1 would allow for next-day trading to resume in all NMS stocks no 
differently from any other trading day, and would not need to wait 
for the primary listing market to reopen trading in a security.
    \113\ The Exchange represents that it intends to become a 
Participant in the LULD Plan prior to launching MIAX PEARL Equities. 
See Notice, supra note 3, at 8068, n.87.
    \114\ For a description of the order handling procedures under 
proposed Exchange Rule 2622(e), see id. at 8068.
---------------------------------------------------------------------------

III. Proceedings To Determine Whether To Approve or Disapprove the 
Proposed Rule Change, as Modified by Amendment No. 1

    The Commission is instituting proceedings pursuant to Section 
19(b)(2)(B) of the Act \115\ to determine whether the proposed rule 
change, as modified by Amendment No. 1, should be approved or 
disapproved. Institution of such proceedings is appropriate at this 
time in view of the legal and policy issues raised by the amended 
proposal. 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, as 
modified by Amendment No. 1, to inform the Commission's analysis of 
whether to approve or disapprove the proposal.
---------------------------------------------------------------------------

    \115\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------

    Pursuant to Section 19(b)(2)(B) of the Act,\116\ the Commission is 
providing notice of the grounds for possible disapproval under 
consideration. The Commission is instituting proceedings to allow for 
additional analysis of the amended proposal's consistency with:
---------------------------------------------------------------------------

    \116\ Id. Section 19(b)(2)(B) of the Act also provides that 
proceedings to determine whether to disapprove a proposed rule 
change must be concluded within 180 days of the date of publication 
of notice of the filing of the proposed rule change. See id. The 
time for conclusion of the proceedings may be extended for up to 60 
days if the Commission finds good cause for such extension and 
publishes its reasons for so finding, or if the exchange consents to 
the longer period. See id.
---------------------------------------------------------------------------

     Section 6(b)(1) of the Act, which requires, among other 
things, that a national securities exchange be so organized and have 
the capacity to carry out the purposes of the Act, and to comply and 
enforce compliance by its members and persons associated with its 
members, with the provisions of the Act, the rules and regulation 
thereunder, and the rules of the exchange; \117\ and
---------------------------------------------------------------------------

    \117\ 15 U.S.C. 78f(b)(1).
---------------------------------------------------------------------------

     Section 6(b)(5) of the Act, which requires, among other 
things, that the rules of a national securities exchange be ``designed 
to prevent fraudulent and manipulative acts and practices, to promote 
just and equitable principles of trade,'' and ``to protect investors 
and the public interest.'' \118\
---------------------------------------------------------------------------

    \118\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

IV. 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 June 8, 2020. Rebuttal 
comments should be submitted by June 22, 2020. Although there do not 
appear to be any issues relevant to approval or disapproval that 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.\119\
---------------------------------------------------------------------------

    \119\ 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).
---------------------------------------------------------------------------

    The Commission asks that commenters address the sufficiency and 
merit of the Exchange's statements in support of the proposed rule 
change, as modified by Amendment No. 1, in addition to any other 
comments they may wish to submit about the proposal.
    Interested persons are invited to submit written data, views, and 
arguments concerning the proposed rule change, as modified by Amendment 
No. 1, including whether the proposal 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 No. SR-PEARL-2020-03 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 No. SR-PEARL-2020-03. The 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 such 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 publicly available. All submissions 
should refer to File No. SR-PEARL-2020-03 and should be submitted on or 
before June 8, 2020. Rebuttal comments should be submitted by June 22, 
2020.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\120\
---------------------------------------------------------------------------

    \120\ 17 CFR 200.30-3(a)(57).
---------------------------------------------------------------------------

J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-10519 Filed 5-15-20; 8:45 am]
BILLING CODE 8011-01-P