[Federal Register Volume 87, Number 224 (Tuesday, November 22, 2022)]
[Notices]
[Pages 71375-71378]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-25356]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-96332; File No. SR-PEARL-2022-50]


Self-Regulatory Organizations; MIAX PEARL, LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Amend Rule 2617 
Order Execution and Routing

November 16, 2022.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on November 7, 2022, MIAX PEARL, LLC (``MIAX Pearl'' or the 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I and 
II 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 proposed rule change to amend the Route to 
Primary Auction (``PAC'') routing option under Exchange Rule 
2617(b)(5)(B).
    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 purpose of the proposed rule change is to amend the PAC routing 
option under Exchange Rule 2617(b)(5)(B) that is available to orders in 
equity securities traded on the Exchange's equity trading platform 
(referred to herein as ``MIAX Pearl Equities'').\3\ Specifically, the 
Exchange proposes to amend Exchange Rule 2617(b)(5)(B)(1)(i) to 
harmonize the timeline by which displayed Limit Orders \4\ and Market 
Orders \5\ with a time-in-force of Regular Hours Only (``RHO'') \6\ are 
routed to participate in the primary listing market's opening process 
with the timeline by which the Exchange currently routes displayed 
Limit Orders to participate in the primary listing market's closing 
process.
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    \3\ The Exchange notes that provisions of Exchange Rule 
2617(b)(5) that are not subject to this proposed rule change were 
amended in a separate filing, but those amendments have not yet been 
implemented. See Securities Exchange Act Release No. 95298 (July 15, 
2022), 87 FR 43579 (July 21, 2022) (SR-PEARL-2022-29).
    \4\ See Exchange Rule 2614(a)(1).
    \5\ See Exchange Rule 2614(a)(2).
    \6\ Exchange Rule 2614(b)(2) defines ``Regular Hours Only'' or 
``RHO'' as ``[a]n order that is designated for execution only during 
Regular Trading Hours, which includes the Opening Process for equity 
securities. An order with a time-in-force of RHO entered into the 
System before the opening of business on the Exchange as determined 
pursuant to Exchange Rule 2600 will be accepted but not eligible for 
execution until the start of Regular Trading Hours.''
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    The Exchange offers its Equity Members \7\ optional routing 
functionality that allows them to use the Exchange to access liquidity 
on other trading centers. The functionality

[[Page 71376]]

includes routing algorithms that determine the destination or pattern 
of routing. Exchange Rule 2617(b)(5) sets forth that there is a 
particular pattern of routing to other trading centers, known as the 
``System routing table'', as well as sets forth the Exchange's 
available routing options. All routing is designed to be conducted in a 
manner consistent with Regulation NMS.
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    \7\ The term ``Equity Member'' is a Member authorized by the 
Exchange to transact business on MIAX Pearl Equities. See Exchange 
Rule 1901.
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    The Exchange recently launched the PAC routing option,\8\ which 
enables an Equity Member to designate that their order be routed to 
participate in the primary listing market's opening, re-opening, or 
closing process. In sum, Exchange Rule 2617(b)(5)(B) describes PAC as a 
routing option for Market Orders and displayed Limit Orders designated 
as RHO that the entering firm wishes to designate for participation in 
the opening, re-opening (following a regulatory halt, suspension, or 
pause), or closing process of a primary listing market (Cboe BZX 
Exchange, Inc. (``BZX''), the New York Stock Exchange LLC (``NYSE''), 
The Nasdaq Stock Market LLC (``Nasdaq''), NYSE American LLC (``NYSE 
American''), or NYSE Arca, Inc. (``NYSE Arca'')) if received before the 
opening, re-opening, or closing process of such market.
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    \8\ See Securities Exchange Act Release No. 94301 (February 23, 
2022), 87 FR 11739 (March 2, 2002) (SR-PEARL-2022-06). See also MIAX 
Pearl Equities--Expansion of Functionality Through New Route to 
Primary Auction (PAC) Strategy--Rollout Postponed until June 27, 
2022, dated June 8, 2022, available at https://www.miaxoptions.com/alerts/2022/06/08/miax-pearl-equities-expansion-functionality-through-new-route-primary-auction-pac (last visited June 28, 2022).
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    According to Exchange Rule 2617(b)(5)(B)(1)(i), the Exchange routes 
upon receipt displayed Limit Orders and Market Orders designated as RHO 
coupled with the PAC routing option to participate in the primary 
listing market's opening process that are received before the security 
has opened on the primary listing market. Meanwhile, the Exchange 
handles displayed Limit Orders designated as RHO coupled with the PAC 
routing option that are to be routed to the primary listing market's 
closing process differently. In sum, the Exchange accepts displayed 
Limit Orders that include a time-in-force of RHO and designated to be 
routed to the primary listing market's closing process throughout the 
trading day \9\ and, pursuant to Exchange Rule 2617(b)(5)(B)(1)(ii)(a), 
routes those orders to participate in the primary listing market's 
closing process prior to the primary listing market's order entry cut-
off time. The Exchange currently routes such orders at 3:49:59 p.m. 
Eastern Time.\10\ Such orders received after 3:49:59 p.m. Eastern Time, 
but before the primary listing market performs its closing process are, 
however, routed upon receipt after first checking the System for 
available shares pursuant to Exchange Rule 2617(b)(5)(B)(1)(ii)(a).\11\
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    \9\ See Exchange Rule 2600(a) (providing that ``[o]rders may be 
entered into the System from 7:30 a.m. until 4:00 p.m. Eastern Time 
(or such earlier time as may be designated by the Exchange on a day 
when MIAX Pearl Equities closes early)'').
    \10\ See MIAX Pearl Equities Exchange Regulatory Circular 2022-
09, September 28, 2022, available at https://www.miaxoptions.com/sites/default/files/circular-files/MIAX_Pearl_Equities_RC_2022-09.pdf. The Exchange publicly announces any updates to the time at 
which it would route Limit Orders to participate in the primary 
listing market's closing process via a regulatory circular or alert. 
See Securities Exchange Act Release No. 94301 (February 23, 2022), 
87 FR 11739, 11742, n. 20 (March 2, 2022) (SR-PEARL-2022-06).
    \11\ Today Market Orders are generally ineligible to be routed 
to participate in primary listing market's closing process. At a 
future date, the Exchange will begin to route Market Orders 
designated as RHO to participate in the primary listing market's 
closing process where that order is received after 3:50:00 p.m. 
Eastern Time and the primary listing market declared a regulatory 
halt. See supra note 3. Amended Exchange Rule 
2617(b)(5)(B)(1)(ii)(b) provides that the Exchange will only route a 
Market Order designated as RHO to participate in the primary listing 
market's closing process when that Market Order is: (i) entered at 
or after 3:50 p.m. Eastern Time, but before market close, (ii) the 
primary listing market has declared a regulatory halt; and (iii) the 
primary listing market is to conduct its closing process according 
to their applicable rules. All other Market Orders designated as RHO 
received at or after the time the Exchange begins to route existing 
orders to participate in the primary listing market's closing 
process, but before market close, will be cancelled.
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    The Exchange proposes to route displayed Limit Orders and Market 
Orders designated as RHO coupled with the PAC routing option to the 
primary listing market's opening process in a similar fashion as Limit 
Orders that are to be routed to the primary listing market's closing 
process. As it does for displayed Limit Orders routed to the primary 
listing market's closing process, the Exchange proposes to route 
displayed Limit Orders and Market Orders designated as RHO and coupled 
with the PAC routing option to participate in the primary listing 
market's opening process prior to the primary listing market's order 
entry cut-off time. Displayed Limit Orders and Market Orders designated 
as RHO that are to be routed to participate in the primary listing 
market's opening process may continue to be entered as early as 7:30 
a.m. Eastern Time and, pursuant to this change, the Exchange would 
route those orders at a set time prior to the primary listing market's 
order entry cut-off time. The Exchange initially intends to route 
orders pursuant to the PAC routing option to participate in the primary 
listing market's opening process at 8:00:00 a.m. Eastern Time.\12\ Any 
order received at or between 7:30:00 a.m. and 8:00:00 a.m. Eastern Time 
would be routed to participate in the primary listing market's opening 
process at 8:00:00 a.m. Eastern Time. Orders routed at 8:00:00 a.m. 
Eastern Time are prioritized among each other based on the time of 
receipt. Any orders entered after 8:00:00 a.m. Eastern Time, but before 
the primary listing market conducts its opening auction, would be 
routed upon receipt, as is the case today.
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    \12\ The Exchange will publicly announce this initial time at 
which it would route orders to participate in the primary listing 
market's opening process and any updates to that time via a 
regulatory circular or alert.
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    Accordingly, the Exchange proposes to amend Exchange Rule 
2617(b)(5)(B)(1)(i) to provide that ``[a] displayed Limit Order or 
Market Order designated as RHO received before the security has opened 
on the primary listing market will be routed to participate in the 
primary listing market's opening process prior to the primary listing 
market's order entry cut-off time.'' Amended Exchange Rule 
2617(b)(5)(B)(1)(i) would further provide that ``[i]f a displayed Limit 
Order or Market Order designated as RHO is received at or after the 
time the Exchange begins to route existing orders to participate in the 
primary listing exchange's opening process, but before market open, the 
Exchange will route such orders to participate in the primary listing 
market's opening process upon receipt.'' These provisions are based on 
Exchange Rule 2617(b)(5)(B)(1)(ii)(a), which describes the timeline by 
which displayed Limit Orders designated as RHO are routed to 
participate in the primary listing market's closing process pursuant to 
the PAC routing option.\13\
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    \13\ Unlike when routing orders pursuant to the PAC routing 
option to participate in the primary listing market's closing 
process, the Exchange does not first check the System for available 
shares prior to routing orders pursuant to the PAC routing option to 
participate in the primary listing market's opening process because 
the Exchange does not offer an pre-market trading session at this 
time.
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    Like Exchange Rule 2617(b)(5)(B)(1)(ii)(a), amended Exchange Rule 
2617(b)(5)(B)(1)(i) would not provide a deadline for order entry 
because the Exchange will continue to route displayed Limit Orders and 
Market Orders designated as RHO to participate in the primary listing 
market's opening process after their order entry cut-off time. This is 
intended to provide Equity Members with increased opportunities to 
participate in the primary listing

[[Page 71377]]

market's opening process while also accounting for whether the order 
entry cut-off time is changed/extended or should the primary listing 
market continue to accept orders after their established order entry 
cut-off time in accordance with their rules.\14\ If the primary listing 
market rejects or cancels the order for any reason, the Exchange will 
pass that rejection or cancellation along to the Equity Member that 
entered the order. Like for the closing process, Equity Members that 
seek greater certainty that their orders coupled with the PAC routing 
option would participate in the opening process at the primary listing 
market may enter their orders prior to the primary listing market's 
order entry cut-off time.
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    \14\ See, e.g., NYSE Rule 7.35A(a) (providing that ``[i]t is the 
responsibility of each DMM to ensure that registered securities open 
as close to the beginning of Core Trading Hours as possible'') and 
NYSE Rule 7.35A(a)(4)(A) (allowing for a delayed opening). See, 
e.g., BZX Rule 11.23(b)(1)(A) (providing for the entry of Late Limit 
On Open Orders between 9:28 a.m. and 9:30 a.m.). This behavior is 
also similar to Nasdaq's LIST routing option that will continue to 
route orders to participate in the primary listing market's opening 
process after its order entry cut-off time. See Nasdaq Rule 
4758(a)(1)(A)(x) (stating that ``[a] LIST order received before the 
security has opened on its primary listing market will be routed to 
the primary listing market for participation in that market's 
opening process. . . . If a LIST order has been designated to 
participate in the opening only and is entered after the security 
has opened, the order will nevertheless be routed to the primary 
listing market; based on its designation as opening only, such an 
order would be expected to be rejected by the destination market, 
and would also be cancelled by Nasdaq if returned by the destination 
market.'').
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    Pursuant to Exchange Rule 2617(b)(5)(B)(1)(i)(a), any shares of a 
Limit Order that remain unexecuted after attempting to execute in the 
primary listing market's opening process will continue to be posted to 
the MIAX Pearl Equities Book, executed, or routed pursuant to the Price 
Improvement routing option.\15\ Because displayed Limit Orders must be 
designated as RHO upon entry to be routed pursuant to the PAC routing 
option, an Equity Member that wants any returned unexecuted quantity of 
such order to be immediately returned to them would continue to need to 
submit an instruction to cancel any unexecuted shares upon their return 
to the Exchange. Any shares of a Market Order that remain unexecuted 
after attempting to execute in the primary listing market's opening 
process will continue to be cancelled pursuant to Exchange Rule 
2617(b)(5)(B)(1)(i)(b).
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    \15\ See Exchange Rule 2617(b)(5)(C) for a description of the 
Price Improvement routing option.
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Implementation
    The Exchange will issue a trading alert publicly announcing the 
implementation date of this proposed rule change.
2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the 
Act,\16\ in general, and furthers the objectives of Section 
6(b)(5),\17\ in particular, because it is designed to promote just and 
equitable principles of trade, remove impediments to and perfect the 
mechanism of a free and open market and a national market system, and, 
in general, to protect investors and the public interest. The proposed 
rule change would remove impediments to a free and open market and 
promote just and equitable principles of trade because it would provide 
for consistent order handling by harmonizing the timeline by which it 
would route orders coupled with the PAC routing option to the primary 
listing market's opening process with the timeline it currently routes 
such displayed Limit Orders to participate in the primary listing 
market's closing process.
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    \16\ 15 U.S.C. 78f(b).
    \17\ 15 U.S.C. 78f(b)(5).
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    This proposed change is intended to provide Equity Members with 
consistent treatment of their orders when being routed to participate 
in the primary listing market's opening or closing process. Doing so 
would provide Equity Members with consistent order handling in both 
situations and remove any potential confusion with regard to how their 
orders would be handled when being routed pursuant to the PAC routing 
option. Retaining and queuing orders received prior to the primary 
listing market's order entry cut off time simplifies the Exchange's 
order handling processes because, for example, the Exchange is able to 
retain those orders for a period of time and more easily process 
potential order modification or cancellation requests. The Exchange 
also notes that use of the PAC routing option remains completely 
voluntary and no Equity Member is required to route orders through the 
Exchange and may choose other methods to access liquidity on other 
trading centers.
    The proposal would not impede the national market system because it 
is not designed to disrupt the ability of the primary listing market to 
conduct their opening processes. The proposed rule change is similar to 
existing routing options already provided by other equity exchanges 
\18\ that route orders to participate in the primary listing market's 
opening process at varying times. The Exchange understands other 
exchange's similar routing options have not disrupted the primary 
listing market's ability to conduct their opening process. The primary 
listing markets are free to reject or cancel such orders should they 
deem them to be inconsistent with their applicable rules.
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    \18\ See BZX Rule 11.13(b)(3)(N), Cboe EDGX Exchange, Inc. 
(``EDGX'') Rule 11.11(g)(8) and Nasdaq Rule 4758(a)(1)(A)(x).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. In fact, the Exchange 
believes this particular proposed change to the PAC routing option 
would have no effect on competition because it does not believe the 
proposed changes would impact whether Equity Members chose to use the 
PAC routing option. The proposal simply seeks to provide for consistent 
order handling by harmonizing the timeline by which it would route 
orders coupled with the PAC routing option to the primary listing 
market's opening process with the timeline it currently routes such 
displayed Limit Orders to participate in the primary listing market's 
closing process. Also, any orders entered after the time the Exchange 
begins to route orders to the primary listing market's opening process, 
but before market open, would continue to be routed upon receipt. 
Therefore, the Exchange believes this proposed rule change would not 
burden competition in any manner.
    Use of the Exchange's PAC routing option is voluntary and Equity 
Members have numerous alternative mechanisms for order routing, the 
changes will not impair the ability of Equity Members to use other 
means to access the primary listing market's opening process. The PAC 
routing option, in general, improves inter-market competition because 
it allows the Exchange to provide another means by which market 
participants may route orders to participate in the primary listing 
market's opening, re-opening, or closing processes that the Exchange 
believes is similar to that currently provided by other exchanges.\19\
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    \19\ See BZX Rule 11.13(b)(3)(N) (describing the ROOC routing 
option), EDGX Rule 11.11(g)(8) (describing the ROOC routing option), 
and Nasdaq Rule 4758(a)(1)(A)(x) (describing the LIST routing 
option). See also supra note 14.

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[[Page 71378]]

    The Exchange also believes that the proposal will not impose any 
burden on intra-market competition because it would be available to all 
Equity Members. Any Equity Member that seeks to have their order routed 
to participate in the primary listing market's opening process is free 
to select the PAC routing option or seek to access those markets 
through other means.

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

    No written comments were either solicited or received.

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

    Because the foregoing proposed rule change does not: (i) 
significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days after the date of the filing, or such 
shorter time as the Commission may designate if consistent with the 
protection of investors and the public interest, it has become 
effective pursuant to Section 19(b)(3)(A) of the Act \20\ and Rule 19b-
4(f)(6) \21\ thereunder.
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    \20\ 15 U.S.C. 78s(b)(3)(A).
    \21\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file the proposed rule change, along 
with a brief description and text of the proposed rule change, at 
least five business days prior to the date of filing of the proposed 
rule change, or such shorter time as designated by the Commission. 
The Exchange has satisfied this requirement.
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    A proposed rule change filed under Rule 19b-4(f)(6) \22\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\23\ the Commission 
may designate a shorter time if such action is consistent with the 
protection of investors and the public interest. The Exchange has asked 
the Commission to waive the 30-day operative delay so that the proposed 
rule change may become operative upon filing. The Exchange states that 
waiver of the operative delay would be consistent with the protection 
of investors and the public interest because it would enable the 
Exchange to implement the proposed rule change as soon as possible. The 
Exchange states that this would allow the Exchange to retain and queue 
orders received prior to the primary listing market's order entry cut 
off time during the operative delay period, which would simplify the 
Exchange's order handling processes in the near term by, for example, 
enabling the Exchange to retain those orders for a period of time and 
more easily process potential order modification or cancellation 
requests. The Exchange also states that waiver of the operative delay 
would provide Equity Members with immediate consistent treatment of the 
orders that are to be routed to participate in the primary listing 
market's opening and closing process, thereby removing the potential 
for investor confusion during the operative delay period. Further, the 
proposed functionality is similar to existing routing options already 
provided by other equity exchanges. For these reasons, and because the 
proposed rule change does not raise any novel regulatory issues, the 
Commission believes that waiving the 30-day operative delay is 
consistent with the protection of investors and the public interest. 
Therefore, the Commission hereby waives the operative delay and 
designates the proposal operative upon filing.\24\
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    \22\ 17 CFR 240.19b-4(f)(6).
    \23\ 17 CFR 240.19b-4(f)(6)(iii).
    \24\ For purposes only of waiving the 30-day operative delay, 
the Commission has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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    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.

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-2022-50 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-2022-50. 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-2022-50 and should be submitted on 
or before December 13, 2022.
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    \25\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\25\
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2022-25356 Filed 11-21-22; 8:45 am]
BILLING CODE 8011-01-P