[Federal Register Volume 86, Number 50 (Wednesday, March 17, 2021)]
[Notices]
[Pages 14653-14656]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-05445]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-91302; File No. SR-PEARL-2021-06]


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

March 11, 2021.
    Pursuant to 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 March 1, 2021, 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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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'') for the Exchange's options market.
    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) the Fee Schedule for the Exchange's options 
market to: (i) Increase Taker (as defined below) fees in certain Tiers 
(defined below) for options transactions in Penny classes (as defined 
below) (excluding SPY, QQQ, and IWM) for Priority Customers; \3\ (ii) 
increase Taker fees in certain Tiers for options transactions in Penny 
classes for MIAX PEARL Market Makers \4\ when trading against origins 
other than Priority Customer; (iii) increase the Taker fees in certain 
Tiers for options transactions in Penny classes for MIAX PEARL Market 
Makers when trading against Priority Customer origins and when the 
executing buyer and seller are not the same Member \5\ or Affiliates; 
\6\ and (iv) increase Taker fees in certain Tiers for options 
transactions in Penny classes for ``Professional Members'' (listed in 
the table in Section (1)(a) of the Fee Schedule as Non-Priority 
Customer, Firm, BD, and Non-MIAX PEARL Market Makers).
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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 accounts(s). The number of 
orders shall be counted in accordance with Interpretation and Policy 
.01 of Exchange Rule 100. See the Definitions Section of the Fee 
Schedule and Exchange Rule 100.
    \4\ ``Market Maker'' means a Member registered with the Exchange 
for the purpose of making markets in options contracts traded on the 
Exchange and that is vested with the rights and responsibilities 
specified in Chapter VI of Exchange Rules. See the Definitions 
Section of the Fee Schedule and Exchange Rule 100.
    \5\ ``Member'' means an individual or organization that is 
registered with the Exchange pursuant to Chapter II of 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.
    \6\ ``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 following process. A MIAX PEARL Market Maker 
appoints an EEM and an EEM appoints a MIAX PEARL Market Maker, for 
the purposes of the Fee Schedule, by each completing and sending an 
executed Volume Aggregation Request Form by email to 
[email protected] no later than 2 business days prior to 
the first business day of the month in which the designation is to 
become effective. Transmittal of a validly completed and executed 
form to the Exchange along with the Exchange's acknowledgement of 
the effective designation to each of the Market Maker and EEM will 
be viewed as acceptance of the appointment. The Exchange will only 
recognize one designation per Member. A Member may make a 
designation not more than once every 12 months (from the date of its 
most recent designation), which designation shall remain in effect 
unless or until the Exchange receives written notice submitted 2 
business days prior to the first business day of the month from 
either Member indicating that the appointment has been terminated. 
Designations will become operative on the first business day of the 
effective month and may not be terminated prior to the end of the 
month. Execution data and reports will be provided to both parties. 
See the Definitions Section of the Fee Schedule.
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Background
    The Exchange currently assesses transaction rebates and fees to all 
market participants which are based upon the total monthly volume 
executed by the Member on MIAX PEARL in the relevant, respective origin 
type (not including Excluded Contracts) \7\ (as the numerator) 
expressed as a percentage of (divided by) TCV \8\ (as the denominator). 
In

[[Page 14654]]

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. 
Members that place resting liquidity, i.e., orders resting on the book 
of the MIAX PEARL System,\9\ 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 \10\ 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 Interval Program \11\ (``Penny Classes'') than for order 
executions in standard option classes which are not in the Penny 
Interval Program (``Non-Penny Classes''), where Members are assessed 
higher transaction fees and receive higher rebates.
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    \7\ ``Excluded Contracts'' means any contracts routed to an away 
market for execution. See the Definitions Section of the Fee 
Schedule.
    \8\ ``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.
    \9\ The term ``System'' means the automated trading system used 
by the Exchange for the trading of securities. See Exchange Rule 
100.
    \10\ ``ABBO'' means the best bid(s) or offer(s) disseminated by 
other Eligible Exchanges (defined in Exchange Rule 1400(g) and 
calculated by the Exchange based on market information received by 
the Exchange from OPRA. See the Definitions Section of the Fee 
Schedule and Exchange Rule 100.
    \11\ See Securities Exchange Act Release No. 88992 (June 2, 
2020), 85 FR 35142 (June 8, 2020) (SR-PEARL-2020-06).
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Taker Fees
    The Exchange proposes to amend the Fee Schedule for the Exchange's 
options market to: (i) Increase Taker fees in certain Tiers for options 
transactions in Penny classes (excluding SPY, QQQ, and IWM) for 
Priority Customers; (ii) increase Taker fees in certain Tiers for 
options transactions in Penny classes for MIAX PEARL Market Makers when 
trading against origins other than Priority Customer; (iii) increase 
the Taker fees in certain Tiers for options transactions in Penny 
classes for MIAX PEARL Market Makers when trading against Priority 
Customer origins and when the executing buyer and seller are not the 
same Member or Affiliates; and (iv) increase Taker fees in certain 
Tiers for options transactions in Penny classes for Professional 
Members.
    In particular, the Exchange proposes to increase the Taker fees for 
Priority Customer orders in options in certain Penny classes (excluding 
SPY, QQQ, and IWM) in Tier 3 from $0.48 to $0.50, in Tier 4 from $0.47 
to $0.49, in Tier 5 from $0.46 to $0.48, and in Tier 6 from $0.45 to 
$0.47. The Exchange next proposes to increase the Taker fees for 
options transactions in Penny classes for MIAX PEARL Market Makers when 
trading against origins other than Priority Customer in Tier 4 from 
$0.49 to $0.50, in Tier 5 from $0.47 to $0.50, and in Tier 6 from $0.46 
to $0.50.
    The Exchange also proposes to increase the Taker fees for options 
transactions in Penny classes for MIAX PEARL Market Makers when trading 
against Priority Customer origins in Tiers 5 and 6 when the executing 
buyer and seller are not the same Member or Affiliates. In particular, 
the Exchange proposes to increase the Taker fees for options 
transactions in Penny classes for MIAX PEARL Market Makers when trading 
against Priority Customer origins in Tiers 5 and 6 from the current 
$0.48 and $0.47, respectively, to the proposed $0.50 per contract when 
the executing buyer and seller are not the same Member or Affiliates. 
The Exchange proposes that Taker fees for options transactions in Penny 
classes for MIAX PEARL Market Makers when trading against Priority 
Customer origins in Tiers 5 and 6 will remain at their current levels 
of $0.48 and $0.47, respectively, when the executing buyer and seller 
are the same Member or Affiliates.
    In order to differentiate between the proposed increased Taker fees 
for options transactions in Penny classes for MIAX PEARL Market Makers 
when trading against Priority Customer origins in Tiers 5 and 6 when 
the executing buyer and seller are not the same Member or Affiliates, 
the Exchange proposes to insert two new symbols immediately following 
the table of fees and rebates for Professional Members in Section 
(1)(a) of the Fee Schedule. In particular, the Exchange proposes to 
adopt new symbol ``[starf],'' and the following explanatory sentence: 
``This Taker rate is for executed MIAX PEARL Market Maker Orders when 
the executing buyer and seller are the same Member or Affiliates.'' The 
Exchange also proposes to adopt new symbol ``[loz],'' and the following 
explanatory sentence: ``This Taker rate is for executed MIAX PEARL 
Market Maker Orders when the executing buyer and seller are not the 
same Member or Affiliates.'' Accordingly, the Exchange proposes to 
insert each symbol following the corresponding Taker fee for options 
transactions in Penny classes for MIAX PEARL Market Makers when trading 
against Priority Customer origins in Tiers 5 and 6.
    The Exchange also proposes to increase the Taker fees for options 
transactions in Penny classes for Professional Members when trading 
against origins other than Priority Customer in Tier 5 from $0.49 to 
$0.50 and in Tier 6 from $0.49 to $0.50.
    The purpose of adjusting the specified Taker fees is for business 
and competitive reasons. In order to attract order flow, the Exchange 
initially set its Taker fees so that they were meaningfully lower than 
other options exchanges that operate comparable maker/taker pricing 
models.\12\ The Exchange now believes that it is appropriate to further 
adjust these specified Taker fees so that they are more in line with 
other exchanges, but will still remain highly competitive such that 
they should enable the Exchange to continue to attract order flow and 
maintain market share.\13\
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    \12\ See Securities Exchange Act Release Nos. 80915 (June 13, 
2017), 82 FR 27912 (June 19, 2017) (SR-PEARL-2017-29); 80914 (June 
13, 2017), 82 FR 27910 (June 19, 2017) (SR-PEARL-2017-30).
    \13\ See Cboe BZX Options Exchange Fee Schedule, under 
``Transaction Fees.''
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2. Statutory Basis
    The Exchange believes that its proposal to amend its Fee Schedule 
is consistent with Section 6(b) of the Act \14\ in general, and 
furthers the objectives of Section 6(b)(4) of the Act,\15\ 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

[[Page 14655]]

6(b)(5) of the Act,\16\ 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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    \14\ 15 U.S.C. 78f(b).
    \15\ 15 U.S.C. 78f(b)(4).
    \16\ 15 U.S.C. 78f(b)(1) and (b)(5).
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    The Commission has repeatedly expressed its preference for 
competition over regulatory intervention in determining prices, 
products, and services in the securities markets. In Regulation NMS, 
the Commission highlighted the importance of market forces in 
determining prices and SRO revenues and, also, recognized that current 
regulation of the market system ``has been remarkably successful in 
promoting market competition in its broader forms that are most 
important to investors and listed companies.'' \17\
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    \17\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496 (June 29, 2005).
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    There are currently 16 registered options exchanges competing for 
order flow. Based on publicly-available information, and excluding 
index-based options, no single exchange has more than approximately 15% 
market share for the month of February 2021.\18\ Therefore, no exchange 
possesses significant pricing power. More specifically, as of February 
26, 2021, the Exchange has a market share of approximately 4.75% of 
executed volume of multiply-listed equity and exchange traded fund 
(``ETF'') options for the month of February 2021.\19\ The Exchange 
believes that the ever-shifting market share among the exchanges from 
month to month demonstrates that market participants can discontinue or 
reduce use of certain categories of products and services, terminate an 
existing membership or determine to not become a new member, and/or 
shift order flow, in response to transaction fee changes. For example, 
on February 28, 2019, the Exchange filed with the Commission a proposal 
to increase Taker fees in certain Tiers for options transactions in 
certain Penny classes for Priority Customers and decrease Maker rebates 
in certain Tiers for options transactions in Penny classes for Priority 
Customers (which fee was to be effective March 1, 2019).\20\ The 
Exchange experienced a decrease in total market share for the month of 
March 2019, after the proposal went into effect. Accordingly, the 
Exchange believes that its March 1, 2019 fee change, to increase 
certain transaction fees and decrease certain transaction rebates, may 
have contributed to the decrease in MIAX PEARL's market share and, as 
such, the Exchange believes competitive forces constrain the 
Exchange's, and other options exchanges, ability to set transaction 
fees and market participants can shift order flow based on fee changes 
instituted by the exchanges.
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    \18\ The Options Clearing Corporation (``OCC'') publishes 
options and futures volume in a variety of formats, including daily 
and monthly volume by exchange, available here: https://www.theocc.com/market-data/volume/default.jsp.
    \19\ See id.
    \20\ See Securities Exchange Act Release No. 85304 (March 13, 
2019), 84 FR 10144 (March 19, 2019) (SR-PEARL-2019-07).
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    The Exchange believes its proposal to increase Taker fees in 
certain Tiers for options transactions in Penny classes for Priority 
Customers, Market Makers, and Professional Members is reasonable, 
equitable and not unfairly discriminatory because all similarly 
situated market participants in the same Origin type are subject to the 
same tiered Taker fees and access to the Exchange is offered on terms 
that are not unfairly discriminatory. For competitive and business 
reasons, the Exchange initially set its Taker fees for such orders 
generally lower than certain other options exchanges that operate 
comparable maker/taker pricing models.\21\ The Exchange now believes 
that it is appropriate to increase those specified Taker fees so that 
they are more in line with other exchanges, and will still remain 
highly competitive such that they should enable the Exchange to 
continue to attract order flow and maintain market share. The Exchange 
believes for these reasons that increasing certain Taker fees for 
transactions in the specified Tiers is equitable, reasonable and not 
unfairly discriminatory, and thus consistent with the Act.
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    \21\ See supra note 12.
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    The Exchange believes the proposal to adopt a higher Taker fee for 
certain Market Maker orders in Penny classes when trading against 
Priority Customer origins in Tiers 5 and 6 when the executing buyer and 
seller are not the same Member or Affiliates (versus when the executing 
buyer and seller are the same Member or Affiliates) provides for the 
equitable allocation of reasonable dues and fees and is not unfairly 
discriminatory since the Exchange already offers certain transaction 
fee discounts to Members and their Affiliates that aggregate their 
order flow on these types of transactions through various pricing 
structures in Section (1)(a) of the Fee Schedule.\22\ The Exchange 
further believes this proposal provides for the equitable allocation of 
reasonable dues and fees and is not unfairly discriminatory since the 
Exchange's affiliate, Miami International Securities Exchange, LLC 
(``MIAX''), provides similar pricing structures and offers certain 
transaction fee discounts to MIAX Members and their Affiliates that 
aggregate their order flow on certain types of transactions through 
various tier-based pricing structures.\23\ Accordingly, the Exchange 
believes it is reasonable, equitable, and not unfairly discriminatory 
to charge a higher Taker fee for certain Market Maker orders in Penny 
classes when trading against Priority Customer origins when the 
executing buyer and seller are not the same Member or Affiliates, as 
other discount programs currently exist for the same Member and 
Affiliates.
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    \22\ See Fee Schedule, Section (1)(a).
    \23\ See MIAX Fee Schedule, Sections 1(a)(i)-(ii) and Section 
1(a)(iii), notes ``K'' and ``[ssbox]''.
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule changes will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act. The Exchange believes that the 
proposed changes in the Taker fees for the applicable market 
participants should continue to encourage the provision of liquidity 
that enhances the quality of the Exchange's market and increases the 
number of trading opportunities on the Exchange for all participants 
who will be able to compete for such opportunities. The proposed rule 
changes should enable the Exchange to continue to attract and compete 
for order flow with other exchanges. However, this competition does not 
create an undue burden on competition but rather offers all market 
participants the opportunity to receive the benefit of competitive 
pricing.
    The proposed Taker fee adjustments are intended to keep the 
Exchange's fees highly competitive with those of other exchanges, and 
to encourage liquidity and should enable the Exchange to continue to 
attract and compete for order flow with other exchanges. 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

[[Page 14656]]

with other exchanges and to attract order flow. The Exchange believes 
that the proposed rule changes reflect this competitive environment 
because the proposal 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,\24\ and Rule 19b-4(f)(2) \25\ 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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    \24\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \25\ 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-2021-06 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-2021-06. 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. 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-2021-06 and should be submitted on 
or before April 7, 2021.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\26\
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    \26\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-05445 Filed 3-16-21; 8:45 am]
BILLING CODE 8011-01-P