[Federal Register Volume 88, Number 99 (Tuesday, May 23, 2023)]
[Notices]
[Pages 33181-33184]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-10904]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-97519; File No. SR-PEARL-2023-22]


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

May 17, 2023.
    Pursuant to the provisions of 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 May 9, 2023, 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 Exchange proposes to amend the Fee Schedule to: (i) reduce the 
fees for orders in securities priced at or above $1.00 per share that 
are routed to the primary listing market's opening or re-opening 
process pursuant to the Route to Primary Auction (``PAC'') routing 
option; \3\ and (ii) reduce the fees for orders in securities priced 
below $1.00 per share that are routed to the primary listing market's 
opening or re-opening process pursuant to the PAC routing option. The 
Exchange initially filed this proposal on April 28, 2023, with the 
proposed fee changes effective beginning May 1, 2023 (SR-PEARL-2023-
20). On May 9, 2023, the Exchange withdrew SR-PEARL-2023-20 and refiled 
this proposal as SR-PEARL-2023-22.
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    \3\ See Exchange Rule 2617(b)(5)(B).
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Background
    The PAC routing option enables an Equity Member \4\ to designate 
that their order be routed to the primary listing market to participate 
in the primary listing market's opening, re-opening or closing 
process.\5\ Exchange Rule 2617(b)(5)(B) provides that PAC is a routing 
option for Market Orders \6\ and displayed Limit Orders \7\ designated 
with a time-in-force of Regular Hours Only (``RHO'') \8\ that the 
entering firm wishes to designate for participation in the opening, re-
opening (following a regulatory halt, suspension, or pause), or closing 
process \9\ of a primary listing market (Cboe BZX Exchange, Inc. 
(``Cboe 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. For displayed Limit 
Orders designated with the PAC routing option, any shares that remain 
unexecuted after attempting to execute in the primary listing market's 
opening or re-opening process will either be posted to the MIAX Pearl 
Equities Book, executed, or routed pursuant to the Price Improvement 
(``PI'') routing option.\10\
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    \4\ The term ``Equity Member'' is a Member authorized by the 
Exchange to transact business on MIAX Pearl Equities. See Exchange 
Rule 1901.
    \5\ See Exchange Rule 2617(b)(5)(B).
    \6\ See Exchange Rule 2614(a)(2).
    \7\ See Exchange Rule 2614(a)(1).
    \8\ 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.''
    \9\ The Exchange notes that it will route Market Orders to the 
primary listing market's closing process in certain limited 
circumstances. See Exchange Rule 2617(b)(5)(B)(1)(ii)(b).
    \10\ See Exchange Rule 2617(b)(5)(B)(1)(i)(a).
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    The Exchange adopted the standard liquidity indicator code of ``X'' 
in its Fee Schedule for routed liquidity. This code applies to an order 
that is routed to and executed on an away market. Additionally, this 
code is used to identify orders that were routed to an away market 
(including orders that were routed using the PAC routing strategy) and 
executed as ``Taker.''
    On July 5, 2022, the Exchange filed its proposal to, among other 
things, adopt new liquidity indicator codes and associated fees and 
rebates for orders that the Exchange routes pursuant to the PAC routing 
option.\11\ In particular, the Exchange adopted the following liquidity 
indicator codes and associated fees for orders that the Exchange routes 
to the primary listing market's opening

[[Page 33182]]

or re-opening process pursuant to the PAC routing option: \12\
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    \11\ See Securities Exchange Act Release No. 95210 (July 7, 
2022), 87 FR 41750 (July 13, 2022) (SR-PEARL-2022-26).
    \12\ The Exchange notes that the proposed changes in this filing 
will not amend the fees or rebates for the following liquidity 
indicator codes that also correspond to orders routed away from the 
Exchange pursuant to the PAC routing option: XA, XB, XD, XE, XG, XH, 
XJ, XK, XM, XN, XP, XQ. See Fee Schedule, section (1)(b).
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     Liquidity indicator code XC, Routed to NYSE, Opening/Re-
Opening Auction. Orders that yield liquidity indicator code XC are 
charged a fee $0.00105 per share in securities priced at or above $1.00 
and 0.30% of the transaction's dollar value in securities priced below 
$1.00.
     Liquidity indicator code XF, Routed to NYSE Arca, Opening/
Re-Opening Auction. Orders that yield liquidity indicator code XF are 
charged a fee of $0.00155 per share in securities priced at or above 
$1.00 and 0.105% of the transaction's dollar value in securities priced 
below $1.00.
     Liquidity indicator code XI, Routed to NYSE American, 
Opening/Re-Opening Auction. Orders that yield liquidity indicator code 
XI are charged a fee of $0.00055 per share in securities priced at or 
above $1.00 and 0.055% of the transaction's dollar value in securities 
priced below $1.00.
     Liquidity indicator code XL, Routed to Cboe BZX, Opening/
Re-Opening Auction. Orders that yield liquidity indicator code XL are 
charged a fee of $0.0008 per share in securities priced at or above 
$1.00 and 0.08% of the transaction's dollar value in securities priced 
below $1.00.
     Liquidity indicator code XO, Routed to Nasdaq, Opening/Re-
Opening Auction. Orders that yield liquidity indicator code XO are 
charged a fee of $0.00155 per share in securities priced at or above 
$1.00 and 0.30% of the transaction's dollar value in securities priced 
below $1.00.
Proposal To Reduce Fees for Orders in Securities Priced at or Above 
$1.00 per Share
    The Exchange now proposes to amend section (1)(b) of the Fee 
Schedule to reduce the fees for orders in securities priced at or above 
$1.00 per share that are routed to the primary listing market's opening 
or re-opening process pursuant to the PAC routing option. Specifically, 
the Exchange proposes to amend the fees for Liquidity Indicator Codes 
XC, XF, XI, XL and XO for securities priced at or above $1.00 per share 
from the current rates (described above) to now be $0.00005 per share. 
With the proposed changes, for securities priced at or above $1.00 per 
share: (i) the fee for Liquidity Indicator Code XC will be reduced from 
$0.00105 to $0.00005 per share; (ii) the fee for Liquidity Indicator 
Code XF will be reduced from $0.00155 to $0.00005 per share; (iii) the 
fee for Liquidity Indicator Code XI will be reduced from $0.00055 to 
$0.00005 per share; (iv) the fee for Liquidity Indicator Code XL will 
be reduced from $0.0008 to $0.00005 per share; and (v) the fee for 
Liquidity Indicator Code XO will be reduced from $0.00155 to $0.00005 
per share.
Proposal To Reduce Fees for Orders in Securities Priced Below $1.00 per 
Share
    The Exchange also proposes to amend section (1)(b) of the Fee 
Schedule to reduce the fees for orders in securities priced below $1.00 
per share that are routed to the primary listing market's opening or 
re-opening process pursuant to the PAC routing option. Specifically, 
the Exchange proposes to amend the fees for Liquidity Indicator Codes 
XC, XF, XI, XL and XO for securities priced below $1.00 per share from 
the current rates (described above) to now be 0.00% of the total dollar 
value of the transaction. With the proposed changes, for securities 
priced below $1.00 per share: (i) the fee for Liquidity Indicator Code 
XC will be reduced from 0.30% to 0.00% of the total dollar value of the 
transaction; (ii) the fee for Liquidity Indicator Code XF will be 
reduced from 0.105% to 0.00% of the total dollar value of the 
transaction; (iii) the fee for Liquidity Indicator Code XI will be 
reduced from 0.055% to 0.00% of the total dollar value of the 
transaction; (iv) the fee for Liquidity Indicator Code XL will be 
reduced from 0.08% to 0.00% of the total dollar value of the 
transaction; and (v) the fee for Liquidity Indicator Code XO will be 
reduced from 0.30% to 0.00% of the total dollar value of the 
transaction.
    The purpose of the proposed changes to reduce the fees for all 
orders that are routed to the primary listing market's opening or re-
opening process pursuant to the PAC routing option is for business and 
competitive reasons. The Exchange initially set such fees higher than, 
or similar to, the fees charged by competing equities exchanges for 
routing orders to the primary listing market's opening or re-opening 
process.\13\ The Exchange believes its proposal to reduce fees for all 
orders routed to the primary listing market's opening or re-opening 
process pursuant to the PAC routing option will encourage additional 
orders to be submitted to the Exchange with such designation, which 
should, in turn improve the Exchange's market quality. The Exchange 
believes that this will benefit all Equity Members by enhancing the 
attractiveness of the Exchange as a trading venue.
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    \13\ See, e.g., Cboe BZX U.S. Equities Exchange Fee Schedule, 
Fees Codes and Associated Fees, available at https://www.cboe.com/us/equities/membership/fee_schedule/bzx/ (Cboe BZX fee of $0.0015 to 
route orders to a listing market's opening or re-opening cross); 
NYSE Arca Equities Exchange Fee Schedule, Section V., Standard 
Rates-Routing, available at https://www.nyse.com/publicdocs/nyse/markets/nyse-arca/NYSE_Arca_Marketplace_Fees.pdf (NYSE Arca fee of 
$0.001 to route orders to NYSE Auctions; NYSE Arca fee of $0.003 to 
route orders to Cboe BZX opening/re-opening auction; NYSE Arca fee 
of $0.003 to route orders to Nasdaq auctions).
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Implementation
    The proposed changes are immediately effective.
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 
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.
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    \14\ 15 U.S.C. 78f(b).
    \15\ 15 U.S.C. 78f(b)(4).
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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 15-16% of the 
total market share of executed volume of equities trading.\16\ 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 represents approximately 1.64% of the 
overall market share as of April 27, 2023, for the month of April 2023. 
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

[[Page 33183]]

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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    \16\ See the ``Market Share'' Section of the Exchange's website, 
available at https://www.miaxglobal.com/ (last visited April 27, 
2023).
    \17\ See 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 that its proposal to reduce the fees for all 
orders that are routed to the primary listing market's opening or re-
opening process pursuant to the PAC routing option is reasonable, 
equitable, and not unfairly discriminatory. The Exchange initially set 
such fees higher than, or similar to, the fees charged by competing 
equities exchanges for routing orders to the primary listing market's 
opening or re-opening process.\18\ The Exchange believes that its 
proposal to reduce such fees will encourage additional orders 
designated with the PAC routing option to be submitted to the Exchange, 
which should, in turn improve the Exchange's market quality. The 
Exchange believes that this will benefit all Equity Members by 
enhancing the attractiveness of the Exchange as a trading venue.
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    \18\ See supra note 13.
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    The Exchange also believes that the proposed changes are equitable 
and not unfairly discriminatory as the lower fees would apply to all 
Equity Members that submit orders designated with the PAC routing 
option that route to the primary listing market's opening or re-opening 
process. Further, routing through the Exchange is voluntary and the 
Exchange notes that it operates in a highly competitive market in which 
market participants can readily direct order flow to competing venues 
or providers of routing services if they deem fee levels to be 
excessive.

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 that the proposed 
fees are competitive in that they provide lower fees for routing orders 
pursuant to the PAC routing option to a primary listing market's 
opening or re-opening process as compared to competing exchanges. The 
Exchange notes that Equity Members may opt not to select the PAC 
routing option on orders submitted to the Exchange and accordingly will 
not incur the associated routing fees proposed herein.
Intramarket Competition
    The Exchange does not believe that the proposal will impose any 
burden on intramarket competition not necessary or appropriate in 
furtherance of the purposes of the Act. The proposed fees are available 
to all similarly situated market participants, and, as such the 
proposed change would not impose a disparate burden on competition 
among market participants on the Exchange. Specifically, all Equity 
Members that use the PAC routing option will be subject to the same 
fees and rebates. As such the Exchange does not believe the proposed 
changes would impose any burden on intramarket competition that is not 
necessary or appropriate in furtherance of the purpose 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. 
Equity 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 approximately 15-16% of the total market share 
of executed volume of equities trading.\19\ 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, the 
Exchange believes its proposal would not burden, but rather promote, 
intermarket competition by enabling it to better compete by providing 
lower fees than competing exchanges that offer similar routing 
strategies.
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    \19\ See supra note 16.
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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,\20\ and Rule 19b-4(f)(2) \21\ 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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    \20\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \21\ 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-2023-22 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-2023-22. 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

[[Page 33184]]

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. Do not include personal identifiable 
information in submissions. You should submit only information that you 
wish to make available publicly. The Commission may redact in part or 
withhold entirely from publication submitted material that is obscene 
or subject to copyright protection. All submissions should refer to 
File Number SR-PEARL-2023-22, and should be submitted on or before June 
13, 2023.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\22\
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    \22\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-10904 Filed 5-22-23; 8:45 am]
BILLING CODE 8011-01-P