[Federal Register Volume 87, Number 240 (Thursday, December 15, 2022)]
[Notices]
[Pages 76645-76648]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-27162]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-96472; File No. SR-PEARL-2022-53]


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

December 9, 2022.
    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 November 30, 2022, 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 fee schedule (the 
``Fee Schedule'') applicable to MIAX Pearl Equities, an equities 
trading facility of the Exchange.
    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 Exchange's 
Fee Schedule to (i) adopt a reduced fee for executions of Midpoint Peg 
Orders \3\ that remove liquidity and execute at the midpoint of the 
Protected NBBO (``PBBO''); \4\ (ii) adopt a new Liquidity Code and 
associated fee to the Liquidity Indicator Codes and Associated Fees 
table for a Midpoint Peg Order; and (iii) update the Standard Rates 
table to include the new Liquidity Indicator Code in the Removing 
Liquidity column.
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    \3\ A Midpoint Peg Order is a non-displayed Limit Order that is 
assigned a working price pegged to the midpoint of the PBBO. A 
Midpoint Peg Order receives a new timestamp each time its working 
price changes in response to changes to the midpoint of the PBBO. 
See Exchange Rule 2614(a)(3).
    \4\ With respect to the trading of equity securities, the term 
``Protected NBB'' or ``PBB'' shall mean the national best bid that 
is a Protected Quotation, the term ``Protected NBO'' or ``PBO'' 
shall mean the national best offer that is a Protected Quotation, 
and the term ``Protected NBBO'' or ``PBBO'' shall mean the national 
best bid and offer that is a Protected Quotation. See Exchange Rule 
1901.
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    The Exchange first notes that it operates in a highly competitive 
market in which market participants can readily direct order flow to 
competing venues if they deem fee levels at a particular venue to be 
excessive or incentives to be insufficient. More specifically, the 
Exchange is only one of 16 registered equities exchanges, as well as a 
number of alternative trading systems and other off-exchange venues, to 
which market participants may direct their order flow. Based on 
publicly available information, no single registered equities exchange 
currently has more than approximately 17% of the total market share of 
executed volume of equities trading, and the Exchange currently 
represents approximately 1.06% of the overall market share.\5\
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    \5\ See MIAX's ``The market at a glance/Equities/MTD AVERAGE'', 
available at https://www.miaxoptions.com/ (Data as of 11/1/2022-11/
18/2022).
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Midpoint Peg Orders
    The Exchange currently charges a standard fee of $0.0029 per share 
for executions of orders in securities priced at or above $1.00 per 
share that remove liquidity from the Exchange in all Tapes (such 
orders, ``Removed Liquidity''). The Exchange now proposes to adopt a 
reduced fee of $0.00265 per share for executions of Midpoint Peg Orders 
in securities priced at or above $1.00 that execute at the midpoint of 
the PBBO and remove liquidity from the Exchange in all Tapes. As 
proposed, executions of Midpoint Peg Orders in securities priced below 
$1.00 per share that execute at the midpoint of the PBBO and remove 
liquidity from the Exchange will be charged a fee of 0.20% of the total 
dollar of the transaction, which is the same fee that is currently 
charged for all such executions.
    The purpose of reducing the fee for executions of Midpoint Peg 
Orders is to incentivize Equity Members \6\ (or ``Members'') to submit 
additional liquidity-removing orders designed to execute at the 
midpoint to the Exchange, as the cost of such executions would be lower 
than it is today. In turn, the Exchange believes the submission of 
additional Midpoint Peg Orders would encourage firms that post 
liquidity at the midpoint to submit additional liquidity-providing 
orders designed to execute at the midpoint to the Exchange, as such 
orders would have a greater chance of being executed as a

[[Page 76646]]

result of additional contra-side liquidity-removing Midpoint Peg Orders 
to interact with. Thus, the Exchange's proposal to reduce the fee for 
executions of Midpoint Peg Orders is designed to deepen liquidity and 
increase execution opportunities at the midpoint on the Exchange, 
thereby improving the Exchange's market quality to the benefit of all 
Members and enhancing its attractiveness as a trading venue.
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    \6\ 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 proposes to update the Liquidity Indicator Code and 
Associated Fees Table as follows:
     Add new liquidity indicator code Rp, Removes Liquidity and 
Executes at the Midpoint, Non-Displayed Midpoint Peg Order (All Tapes). 
The Liquidity Indicator Code and Associated Fees table would specify 
that orders that yield liquidity indicator code Rp would be assessed a 
fee of $0.00265 per share in securities priced at or above $1.00 and 
0.20% of the transaction's dollar value in securities priced below 
$1.00.
    The Exchange also proposes to add the above liquidity indicator 
code to the Standard Rates table. Specifically, liquidity indicator 
code Rp would be added to the ``Remove Liquidity'' column.
Implementation
    The Exchange proposes to implement the changes to the Fee Schedule 
pursuant to this proposal on December 1, 2022.
2. Statutory Basis
    The Exchange believes that its proposal to amend its Fee Schedule 
is consistent with Section 6(b) of the Act \7\ in general, and furthers 
the objectives of section 6(b)(4) of the Act \8\ in particular, in that 
it is an equitable allocation of reasonable fees and other charges 
among its Equity Members and issuers and other persons using its 
facilities. The Exchange also believes that the proposed rule change is 
consistent with the objectives of section 6(b)(5) \9\ requirements that 
the rules of an exchange be designed to prevent fraudulent and 
manipulative acts and practices, and to promote just and equitable 
principles of trade, to foster cooperation and coordination with 
persons engaged in regulating, clearing, settling, processing 
information with respect to, and facilitating transactions in 
securities, to 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, and, particularly, is not 
designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers.
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    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(4).
    \9\ 15 U.S.C 78f(b)(5).
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    The Exchange operates in a highly fragmented and competitive market 
in which market participants can readily direct their order flow to 
competing venues if they deem fee levels at a particular venue to be 
excessive or incentives to be insufficient. More specifically, the 
Exchange is only one of sixteen registered equities exchanges, and 
there are a number of alternative trading systems and other off-
exchange venues, to which market participants may direct their order 
flow. Based on publicly available information, no single registered 
equities exchange currently has more than approximately 17% of the 
total market share of executed volume of equities trading.\10\ Thus, in 
such a low-concentrated and highly competitive market, no single 
equities exchange possesses significant pricing power in the execution 
of order flow, and the Exchange currently represents less than 1.06% of 
the overall market share. The Commission and the courts have repeatedly 
expressed their 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.'' \11\
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    \10\ See supra note 5.
    \11\ Securities Exchange Act Release No. 51808 (June 9, 2005), 
70 FR 37499 (June 29, 2005).
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    The Exchange believes that the ever-shifting market share among the 
exchanges from month to month demonstrates that market participants can 
shift order flow or discontinue to reduce use of certain categories of 
products, in response to new or different pricing structures being 
introduced into the market. Accordingly, competitive forces constrain 
the Exchange's transaction fees and rebates, and market participants 
can readily trade on competing venues if they deem pricing levels at 
those other venues to be more favorable. The Exchange believes the 
proposal reflects a reasonable and competitive pricing structure 
designed to incentivize market participants to direct their order flow 
to the Exchange, which the Exchange believes would enhance liquidity 
and market quality to the benefit of all Members and market 
participants.
    The Exchange believes that its proposal to charge a reduced fee for 
Midpoint Peg Orders that remove liquidity and execute at the midpoint 
is reasonable, equitable, and not unfairly discriminatory. 
Specifically, the Exchange believes such proposal is reasonable, as it 
is reasonably designed to incentivize Members to submit additional 
Midpoint Peg Orders to the Exchange, which, in turn, the Exchange 
believes would encourage firms that post midpoint liquidity to submit 
additional liquidity-adding orders designed to execute at the midpoint 
to the Exchange in order to interact with such Midpoint Peg Orders, as 
described above. Thus, the Exchange believes the proposal reflects a 
reasonable attempt to deepen liquidity and increase execution 
opportunities at the midpoint on the Exchange, thereby improving the 
Exchange's market quality to the benefit of all Members and enhancing 
its attractiveness as a trading venue, particularly as the Exchange 
believes the proposed reduction in the fee for executions of Midpoint 
Peg Orders (i.e., $0.00025 per share lower than the standard fee for 
Removed Liquidity) is not excessive and is reasonably related to the 
market quality benefits it is intended to achieve. The Exchange also 
believes that the proposed fee for executions of Midpoint Peg Orders is 
equitable and not unfairly discriminatory, as such fee would be charged 
uniformly to all executions of such orders for all Members.
New Liquidity Indicator Code
    The Exchange believes its proposal to add new liquidity indicator 
code ``Rp'' to the Liquidity Indicator Codes and Associated Fees table 
and to add liquidity indicator code ``Rp'' to the ``Removing 
Liquidity'' column of the Standard Rates table, is reasonable and 
equitable because it will apply equally to all Members of the Exchange 
that submit Midpoint Peg Orders that remove liquidity at the midpoint. 
This liquidity indicator code would be returned on the real-time trade 
reports sent to the Member that submitted the order. The use of 
liquidity indicator codes is not unique to the Exchange as liquidity 
indicator codes are currently utilized and described in the fee 
schedules of other equity exchanges.\12\ Further, the Exchange's 
proposed fee of

[[Page 76647]]

$0.00265 is competitive with other exchanges that provide a similar 
pricing incentive.\13\
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    \12\ See the fee schedule of MEMX LLC (``MEMX'') available on 
their public website at https://info.memxtrading.com/fee-schedule/; 
and the fee schedule of the Investors Exchange LLC (``IEX'') 
available on their public website at https://exchange.iex.io/resources/trading/fee-schedule/.
    \13\ See fee code ``Rm'' of the MEMX fee schedule that assesses 
a $0.0027 fee for removed volume from the MEMX Book, Midpoint Peg, 
available on their public website at https://info.memxtrading.com/fee-schedule/.
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    For the reasons discussed above, the Exchange submits that the 
proposal satisfies the requirements of sections 6(b)(4) and 6(b)(5) of 
the Act in that it provides for the equitable allocation of reasonable 
dues, fees and other charges among its Members and other persons using 
its facilities and is not designed to unfairly discriminate between 
customers, issuers, brokers, or dealers. As described more fully below 
in the Exchange's statement regarding the burden on competition, the 
Exchange believes that its transaction pricing is subject to 
significant competitive forces, and that the proposed fees and rebates 
described herein are appropriate to address such forces.

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

    The Exchange does not believe that the proposed change will impose 
any burden on competition not necessary or appropriate in furtherance 
of the purposes of the Act. The Exchange believes the proposed change 
would encourage Members to maintain or increase their order flow to the 
Exchange, thereby contributing to a deeper and more liquid market to 
the benefit of all market participants and enhancing the attractiveness 
of the Exchange as a trading venue. As a result, the Exchange believes 
the proposal would enhance its competitiveness as a market that 
attracts actionable orders, thereby making it a more desirable 
destination venue for its customers. For these reasons, the Exchange 
believes that the proposal furthers the Commission's goal in adopting 
Regulation NMS of fostering competition among orders, which promotes 
``more efficient pricing of individual stocks for all types of orders, 
large and small.'' \14\
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    \14\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496 (June 29, 2005).
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Intramarket Competition
    The Exchange believes that the proposal would incentivize Members 
to submit additional order flow, including liquidity-adding and 
liquidity-removing orders designed to execute at the midpoint, to the 
Exchange, thereby enhancing liquidity and market quality on the 
Exchange to the benefit of all Members, as well as enhancing the 
attractiveness of the Exchange as a trading venue, which the Exchange 
believes, in turn, would continue to encourage market participants to 
direct additional order flow to the Exchange. Greater liquidity 
benefits all Members by providing more trading opportunities and 
encourages Members to send additional orders to the Exchange, thereby 
contributing to robust levels of liquidity, which benefits all market 
participants. The proposed reduced fee for executions of Midpoint Peg 
Orders that remove liquidity at the midpoint from the Exchange will 
apply to all such executions for all Members on the Exchange. As such, 
the Exchange believes the proposed changes would not impose any burden 
on intramarket competition that is not necessary or appropriate in 
furtherance of the purposes of the Act.
Intermarket Competition
    The Exchange believes its proposal will benefit competition, and 
the Exchange notes that it operates in a highly competitive market. 
Members have numerous alternative venues they may participate on and 
direct their order flow to, including fifteen other equities exchanges 
and numerous alternative trading systems and other off-exchange venues. 
As noted above, no single registered equities exchange currently has 
more than 17% of the total market share of executed volume of equities 
trading.\15\ Thus, in such a low-concentrated and highly competitive 
market, no single equities exchange possesses significant pricing power 
in the execution of order flow. Moreover, the Exchange believes that 
the ever-shifting market share among the exchanges from month to month 
demonstrates that market participants can shift order flow in response 
to new or different pricing structures being introduced to the market. 
Accordingly, competitive forces constrain the Exchange's transaction 
fees and rebates, including with respect to executions of Midpoint Peg 
Orders, and market participants can readily choose to send their orders 
to other exchanges and off-exchange venues if they deem fee levels at 
those other venues to be more favorable.
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    \15\ See supra note 5.
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    As described above, the proposed changes represent a competitive 
proposal through which the Exchange is seeking to encourage additional 
order flow to the Exchange through a reduced fee for executions of 
Midpoint Peg Orders. The proposed fee for executions of Midpoint Peg 
Orders that remove liquidity at the midpoint from the Exchange is 
competitive with fees charged by at least one other exchange that 
offers a similar pricing incentive.\16\ Accordingly, the Exchange 
believes its proposal would not burden, but rather promote, intermarket 
competition by enabling it to better compete with other exchanges that 
offer similar pricing incentives to market participants.
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    \16\ See supra note 13.
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    Additionally, the Commission has repeatedly expressed its 
preference for competition over regulatory intervention in determining 
prices, products, and services in the securities markets. Specifically, 
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\ The fact 
that this market is competitive has also long been recognized by the 
courts. In NetCoalition v. Securities and Exchange Commission, the D.C. 
circuit stated: ``[n]o one disputes that competition for order flow is 
`fierce.' . . . As the SEC explained, `[i]n the U.S. national market 
system, buyers and sellers of securities, and the broker-dealers that 
act as their routing agents, have a wide range of choices of where to 
route orders for execution'; [and] `no exchange can afford to take its 
market share percentages for granted' because `no exchange possess a 
monopoly, regulatory or otherwise, in the execution of order flow from 
broker dealers' . . .''.\18\ Accordingly, the Exchange does not believe 
its proposed pricing changes impose any burden on competition that is 
not necessary or appropriate in furtherance of the purposes of the Act.
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    \17\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005).
    \18\ NetCoalition v. SEC, 615 F.3d 525, 539 (D.C. Cir. 2010) 
(quoting Securities Exchange Act Release No. 59039 (December 2, 
2008), 73 FR 74770, 74782-83 (December 9, 2008) (SR-NYSE-2006-21)).
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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,\19\ and Rule

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19b-4(f)(2) \20\ 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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    \19\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \20\ 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

    [squ] Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
    [squ] Send an email to [email protected]. Please include File 
Number SR-PEARL-2022-53 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-PEARL-2022-53. 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 submissions. You should submit only information that 
you wish to make available publicly.
    All submissions should refer to File Number SR-PEARL-2022-53 and 
should be submitted on or before January 5, 2023. For the Commission, 
by the Division of Trading and Markets, pursuant to delegated 
authority.\21\
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    \21\ 17 CFR 200.30-3(a)(12).

Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2022-27162 Filed 12-14-22; 8:45 am]
BILLING CODE 8011-01-P