[Federal Register Volume 87, Number 247 (Tuesday, December 27, 2022)]
[Notices]
[Pages 79376-79378]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-28083]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-96546; File No. SR-PEARL-2022-59]


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

December 20, 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 December 9, 2022 MIAX PEARL, LLC (``MIAX Pearl'' or the 
``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 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 Exchange proposes to establish a $200 monthly Membership Fee 
for Equity Members of the Exchange. The Exchange proposes to assess the 
monthly Membership Fee to each active Equity Member at the close of 
business on the first day of each month. The Exchange proposes to 
specify within the Fee Schedule that an active membership means any 
month the Equity Member is certified in the membership system and the 
Equity Member is credentialed to use one or more ports in the 
production environment. For example, the monthly Membership Fee for 
January 2023 will be assessed to all active Equity Members at the close 
of business on January 2, 2023, the first business day of the month. 
This filing and the proposed fee amount ($200 per month per Equity 
Member) are identical to a recent monthly Membership fee adopted by 
MEMX, LLC (``MEMX''). The Exchange is not proposing anything different 
than what was adopted in the MEMX filing.
    The Exchange also proposes that if an Equity Member is pending a 
voluntary termination of rights as a Member pursuant to Exchange Rule 
206 prior to

[[Page 79377]]

the time any monthly Membership Fee will be assessed (i.e., the close 
of business on January 2, 2023), and the Equity Member does not utilize 
the facilities of the Exchange while such voluntary termination of 
rights is pending, then the Equity Member will not be obligated to pay 
the monthly Membership Fee, as such Member will not be considered to 
have an ``active'' membership. The Exchange believes this to be 
appropriate because there are several pre-conditions before a voluntary 
resignation shall take effect pursuant to Exchange Rule 206. This is 
also similar to the MEMX filing to adopt the MEMX monthly Membership 
fee.
    As proposed, the monthly Membership Fee for an Equity Member will 
not be pro-rated, which the Exchange believes is reasonable based on 
the frequency that the proposed fee would be assessed (i.e., monthly 
instead of applying to a longer period) and the relatively low proposed 
fee amount of $200 for the monthly Membership Fee. This is also similar 
to the MEMX filing to adopt the MEMX monthly Membership fee. The 
Exchange does not presently contemplate proposing any application fees, 
trading rights or trading permit fees, market participant identifier 
(``MPID'') fees or so-called ``headcount'' fees. The Exchange further 
notes that it is separately filing a proposal to amend fees for 
physical connectivity and ports (with the same implementation date as 
the proposed changes in this filing).
    The Exchange proposes to establish the monthly Membership fee as 
Section 4), Membership Fees, and move current Section 4), Additional 
Fees, to new Section 5 in the Fee Schedule.
Implementation Date
    The Exchange proposes to implement the proposed Membership Fee 
beginning January 1, 2023.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the provisions of 6 of the Act,\3\ in general, and with s 6(b)(4) 
and 6(b)(5) of the Act,\4\ in particular, in that it provides for the 
equitable allocation of reasonable dues, fees and other charges among 
its Equity Members and other persons using its facilities and is not 
designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers.
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    \3\ 15 U.S.C. 78f.
    \4\ 15 U.S.C. 78f(b)(4) and (5).
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    The Exchange believes that there is value in becoming an Equity 
Member of the Exchange and that the proposed monthly Membership Fee is 
reasonable. The proposed monthly Membership Fee is identical in amount 
and the way the Exchange proposes to assess it as the monthly 
Membership fee recently adopted by MEMX.\5\ The proposed monthly 
Membership fee is also lower than or comparable to the membership fees 
imposed by several other national securities exchanges that charge such 
fees.\6\ Moreover, insofar as the Exchange does not charge--nor does it 
presently contemplate charging--application fees, trading rights fees, 
trading permit fees, or fees for multiple MPIDs, the comparative price 
of membership is less or significantly less than comparative prices at 
other exchanges. The Exchange also does not charge--nor does it 
presently contemplate charging--so-called ``headcount fees,'' e.g., 
fees charged for each Form U-4 filed for registration of a 
representative or a principal or the transfer or re-licensing of such 
personnel,\7\ further highlighting the reasonableness of the proposed 
monthly Membership Fee.
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    \5\ See supra note 4 [sic].
    \6\ See, e.g., the New York Stock Exchange LLC (``NYSE'') annual 
trading license fee for member organizations ranges from 
approximately $2,080 per month to $4,165 per month based on the type 
of member organization and number of trading licenses. See NYSE 
Price List 2022, Trading Licenses, page 23, available at: https://www.nyse.com/publicdocs/nyse/markets/nyse/NYSE_Price_List.pdf (last 
visited December 6, 2022). The Nasdaq Stock Market LLC (``Nasdaq'') 
annual membership fee is $3,000 plus a monthly $1,250 trading rights 
fee (together with the annual membership fee, totaling $18,000 per 
year). See ``NASDAQ Membership Fees,'' Nasdaq Price List, available 
at: http://nasdaqtrader.com/Trader.aspx?id=PriceListTrading2#membership (last visited December 
6, 2022). See also Securities Exchange Act Release No. 81133 (July 
12, 2017), 82 FR 32904 (July 18, 2017) (SR-NASDAQ-2017-065) 
(discussing the reasonableness of Nasdaq's fees). Finally, Cboe BZX 
Exchange, Inc. (``Cboe BZX'') charges an annual membership fee of 
$2,500 plus an additional fee of $350 per month for each additional 
MPID a member maintains other than their first (i.e., an annual fee 
of $4,200 per additional MPID). See ``Membership Fees'' and ``Market 
Participant Identifier (`MPID') Fees'' sections of the Cboe BZX Fee 
Schedule, available at: Cboe BZX Fee Schedule (last visited December 
6, 2022).
    \7\ See, e.g., ``NASDAQ Membership Fees,'' supra note 11 [sic] 
($55 for each Form U-4 filed for the registration of a 
Representative or Principal, and $55 for each Form U-4 filed for the 
transfer or re-licensing of a Representative or Principal).
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    The Exchange believes that the proposed monthly Membership Fee is 
not unfairly discriminatory because it would be assessed equally across 
all Equity Members or firms that seek to become Equity Members. The 
Exchange believes that the proposed monthly Membership Fee is not 
unfairly discriminatory because no broker-dealer is required to become 
a member of the Exchange. Instead, many market participants awaited the 
Exchange growing to a certain percentage of market share before they 
would join as an Equity Member of the Exchange. In addition, many 
market participants still have not joined the Exchange despite the 
Exchange's growth in one year to more than 1% of the overall equities 
market share. To illustrate, the Exchange currently has 49 Equity 
Members.\8\ However, based on publicly available information regarding 
a sample of the Exchange's competitors, MEMX has 66 members, NYSE has 
142 members, Cboe BZX has 140 members, and Investors Exchange LLC 
(``IEX'') has 133 members.\9\
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    \8\ See MIAX Pearl Equities Exchange Member Directory, available 
at https://www.miaxoptions.com/sites/default/files/page-files/MIAX_Pearl_Equities_Exchange_Members_11012022.pdf (last visited 
December 6, 2022).
    \9\ See supra note 4 [sic]; see also NYSE Membership Directory, 
available at: https://www.nyse.com/markets/nyse/membership; Cboe BZX 
Form 1 filed November 19, 2021, available at: https://www.sec.gov/Archives/edgar/vprr/2100/21009368.pdf; IEX Current Members list, 
available at: https://exchange.iex.io/resources/trading/current- 
membership/.
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    Accordingly, the vigorous competition among national securities 
exchanges provides many alternatives for firms to voluntarily decide 
whether membership to the Exchange is appropriate and worthwhile, and 
no broker-dealer is required to become a member of the Exchange. 
Specifically, neither the trade-through requirements under Regulation 
NMS nor broker-dealers' best execution obligations require a broker-
dealer to become a member of every exchange. The Exchange acknowledges 
that competitive forces may require certain broker-dealers to be 
members of all equities exchanges. However, the Exchange believes that 
the proposed fee of $200 as a monthly Membership Fee is reasonable, 
equitably allocated and not unfairly discriminatory, even for a broker-
dealer that deemed it necessary to join the Exchange for business 
purposes, as those business reasons should presumably result in revenue 
capable of covering the proposed fee.
    The Exchange further believes that the proposed fee would be an 
equitable allocation of reasonable dues, fees, and other charges among 
its Equity Members and issuers and other persons using its facilities, 
and are not unfairly discriminatory. As the Commission noted in its 
Concept Release Concerning Self-Regulation:

    The Commission to date has not issued detailed rules specifying 
proper funding levels of [self-regulatory organization (``SRO'')] 
regulatory programs, or how costs should be allocated among the 
various SRO constituencies. Rather, the Commission has

[[Page 79378]]

examined the SROs to determine whether they are complying with their 
statutory responsibilities. This approach was developed in response 
to the diverse characteristics and roles of the various SROs and the 
markets they operate. The mechanics of SRO funding, including the 
amount of revenue that is spent on regulation and how that amount is 
allocated among various regulatory operations, is related to the 
type of market that an SRO is operating. Thus, each SRO and its 
financial structure is, to a certain extent, unique. While this 
uniqueness can result in different levels of SRO funding across 
markets, it also is a reflection of one of the primary underpinnings 
of the National Market System. Specifically, by fostering an 
environment in which diverse markets with diverse business models 
compete within a unified National Market System, investors and 
market participants benefit.\10\
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    \10\ See Securities Exchange Act Release No. 50700 (November 22, 
2004), 69 FR 71255, 71267-68 (December 8, 2004) (File No. S7-40-04).

    For the reasons discussed above, the Exchange submits that the 
proposal satisfies the requirements of s 6(b)(4) and 6(b)(5) of the Act 
\11\ in that it provides for the equitable allocation of reasonable 
dues, fees and other charges among its Equity Members and other persons 
using its facilities and is not designed to unfairly discriminate 
between customers, issuers, brokers, or dealers. Effective regulation 
is central to the proper functioning of the securities markets. 
Recognizing the importance of such efforts, Congress decided to require 
national securities exchanges to register with the Commission as self-
regulatory organizations to carry out the purposes of the Act. The 
Exchange therefore believes that it is critical to ensure that 
regulation is appropriately funded. The monthly Membership Fee is 
expected to provide a source of funding towards the Exchange's costs 
related to onboarding Equity Members and providing ongoing support.
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    \11\ 15 U.S.C. 78f(b)(4) and (5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    In accordance with 6(b)(8) of the Act,\12\ the Exchange believes 
that the proposed rule change would not impose any burden on 
intermarket or intramarket competition that is not necessary or 
appropriate in furtherance of the purposes of the Act. The Exchange's 
proposed Membership Fee will be lower than the cost of membership on 
other exchanges,\13\ and therefore, may stimulate intramarket [sic] 
competition by attracting additional firms to become Equity Members on 
the Exchange or at least should not deter interested participants from 
joining the Exchange. In addition, membership fees are subject to 
competition from other exchanges. Accordingly, if the changes proposed 
herein are unattractive to market participants, it is likely the 
Exchange will see a decline in membership as a result.
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    \12\ 15 U.S.C. 78f(b)(8).
    \13\ See supra note 11 [sic].
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    The Exchange believes that the proposed fee change will not impact 
intermarket [sic] competition because it will apply to all Equity 
Members equally. The Exchange operates in a highly competitive market 
in which market participants can determine whether or not to join the 
Exchange based on the value received compared to the cost of joining 
and maintaining membership on the Exchange.

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

    The foregoing rule change has become effective pursuant to 
19(b)(3)(A)(ii) of the Act,\14\ and Rule 19b-4(f)(2) \15\ 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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    \14\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \15\ 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-2022-59 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-2022-59. 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-2022-59 and 
should be submitted on or before January 17, 2023. For the Commission, 
by the Division of Trading and Markets, pursuant to delegated 
authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).

Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2022-28083 Filed 12-23-22; 8:45 am]
BILLING CODE 8011-01-P