[Federal Register Volume 89, Number 136 (Tuesday, July 16, 2024)]
[Notices]
[Pages 57974-57978]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-15505]



[[Page 57974]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-100491; File No. SR-PEARL-2024-28]


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

July 10, 2024.
    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 June 28, 2024, 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 https://www.miaxglobal.com/markets/us-equities/pearl-equities/rule-filings, 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 establish an 
alternative volume calculation method for Equity Members \3\ to achieve 
the additive Step-Up Rebate described in the NBBO Setter Plus Program 
(referred to in this filing as the ``NBBO Program'').\4\
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    \3\ The term ``Equity Member'' is a Member authorized by the 
Exchange to transact business on MIAX Pearl Equities. See Exchange 
Rule 1901.
    \4\ See Fee Schedule, Section 1)c), note #4.
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Background of the NBBO Program and Additive Rebates
    The NBBO Program was implemented beginning September 1, 2023 and 
subsequently amended several times.\5\ In general, the NBBO Program 
provides enhanced rebates \6\ for Equity Members that add displayed 
liquidity (``Added Displayed Volume'') in securities priced at or above 
$1.00 per share in all Tapes based on increasing volume thresholds and 
increasing market quality levels (described below). Pursuant to the 
NBBO Setter Plus Table in Section 1)c) of the Fee Schedule, the NBBO 
Program provides six volume tiers enhanced by three market quality 
levels to provide increasing rebates in this segment. The six volume 
tiers are achievable by greater volume from the best of four 
alternative volume calculation methods. The three market quality levels 
are achievable by greater NBBO participation in a minimum number of 
specific securities (described below).
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    \5\ See, e.g., Securities Exchange Act Release Nos. 98472 
(September 21, 2023), 88 FR 66533 (September 27, 2023) (SR-PEARL-
2023-45); 99318 (January 11, 2024), 89 FR 3488 (January 18, 2024) 
(SR-PEARL-2023-73); 99695 (March 8, 2024), 89 FR 18694 (March 14, 
2024) (SR-PEARL-2024-11); and 100338 (June 14, 2024), 89 FR 52141 
(June 21, 2024) (SR-PEARL-2024-26).
    \6\ Rebates are indicated by parentheses in the Fee Schedule. 
See the General Notes section of the Fee Schedule.
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    MIAX Pearl Equities first determines the applicable NBBO Program 
tier based on four different volume calculation methods. The four 
volume-based methods to determine the Equity Member's tier for purposes 
of the NBBO Program are calculated in parallel in each month, and each 
Equity Member receives the highest tier achieved from any of the four 
methods each month. The first three volume calculation methods are 
based on an Equity Member's respective ADAV, NBBO Set Volume, or 
ADV,\7\ each as a percent of industry TCV \8\ as the denominator, 
inclusive of executions of orders in securities priced below $1.00 per 
share across all Tapes. The fourth volume calculation method is based 
on an Equity Member's ADAV as a percentage of industry TCV as the 
denominator, exclusive of executions of orders in securities priced 
below $1.00 per share across all Tapes.\9\ The Exchange does not 
propose to amend the four volume calculation methods or tier threshold 
percentages pursuant to this proposal.
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    \7\ ``ADAV'' means average daily added volume calculated as the 
number of shares added per day and ``ADV'' means average daily 
volume calculated as the number of shares added or removed, 
combined, per day. ADAV and ADV are calculated on a monthly basis. 
``NBBO Set Volume'' means the ADAV in all securities of an Equity 
Member that sets the NBB or NBO on MIAX Pearl Equities. See the 
Definitions section of the Fee Schedule. The Exchange excludes from 
its calculation of ADAV, ADV, and TCV: (1) any trading day that the 
Exchange's system experiences a disruption that lasts for more than 
60 minutes during regular trading hours; (2) any day with a 
scheduled early market close; (3) the ``Russell Reconstitution Day'' 
(typically the last Friday in June); (4) any day that the MSCI 
Equities Indexes are rebalanced (i.e., on a quarterly basis); and 
(5) any day that the S&P 400, S&P 500, and S&P 600 Indexes are 
rebalanced (i.e., on a quarterly basis). See id.
    \8\ ``TCV'' means total consolidated volume calculated as the 
volume in shares reported by all exchanges and reporting facilities 
to a consolidated transaction reporting plan for the month for which 
the fees apply. See id.
    \9\ See supra note 5 (recent filings amending the NBBO Program, 
which provide a description of the different volume calculation 
methods and tier threshold percentages); see also Fee Schedule, 
Section 1)c).
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    After the volume calculation is performed to determine highest tier 
achieved by the Equity Member, the applicable rebate is calculated 
based on two different measurements based on the Equity Member's 
participation at the NBBO on the Exchange in certain securities 
(referenced below). The Exchange provides one column of base rebates 
(referred to in the NBBO Setter Plus Table as ``Level A'') and two 
columns of enhanced rebates (referred to in the NBBO Setter Plus Table 
as ``Level B'' and ``Level C'') \10\, depending on the Equity Member's 
Percent Time at NBBO \11\ on MIAX Pearl Equities in a

[[Page 57975]]

certain amount of specified securities (``Market Quality Securities'' 
or ``MQ Securities'').\12\ The NBBO Setter Plus Table specifies the 
percentage of time that the Equity Member must be at the NBB or NBO on 
MIAX Pearl Equities in at least 200 symbols out of the full list of 
1,000 MQ Securities (which symbols may vary from time to time based on 
market conditions). The list of MQ Securities is generally based on the 
top multi-listed 1,000 symbols by ADV across all U.S. securities 
exchanges. The list of MQ Securities is updated monthly by the Exchange 
and published on the Exchange's website.\13\ The Exchange does not 
propose to amend the rebates described in Level A, Level B, or Level C 
pursuant to this proposal.\14\
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    \10\ For the purpose of determining qualification for the 
rebates described in all Levels of the Market Quality Tier columns 
in the NBBO Setter Plus Table, the Exchange will exclude from its 
calculation: (1) any trading day that the Exchange's system 
experiences a disruption that lasts for more than 60 minutes during 
regular trading hours; (2) any day with a scheduled early market 
close; (3) the ``Russell Reconstitution Day'' (typically the last 
Friday in June); (4) any day that the MSCI Equities Indexes are 
rebalanced (i.e., on a quarterly basis); and (5) any day that the 
S&P 400, S&P 500, and S&P 600 Indexes are rebalanced (i.e., on a 
quarterly basis). See the General Notes section of the Fee Schedule.
    \11\ ``Percent Time at NBBO'' means the aggregate of the 
percentage of time during regular trading hours where a Member has a 
displayed order of at least one round lot at the national best bid 
(``NBB'') or national best offer (``NBO''). See the Definitions 
section of the Fee Schedule.
    \12\ ``Market Quality Securities'' or ``MQ Securities'' shall 
mean a list of securities designated as such, that are used for the 
purposes of qualifying for the rebates described in Level B and 
Level C of the Market Quality Tier columns in the NBBO Setter Plus 
Program. The universe of these securities will be determined by the 
Exchange and published on the Exchange's website. See id.
    \13\ See e.g, MIAX Pearl Equities Exchange--Market Quality 
Securities (MQ Securities) List, effective June 1 through June 30, 
2024, available at https://www.miaxglobal.com/markets/us-equities/pearl-equities/fees (last visited June 26, 2024).
    \14\ See supra note 5 for a complete description of the Level A, 
Level B, and Level C rebates; see also Fee Schedule, Section 1)c).
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    The NBBO Program provides the following additional incentives: (1) 
an NBBO Setter Additive Rebate \15\ applied to executions of orders in 
securities priced at or above $1.00 per share that set the NBB or NBO 
upon entry; (2) an NBBO First Joiner Additive Rebate \16\ applied to 
executions of orders in securities priced at or above $1.00 per share 
that bring MIAX Pearl Equities to the established NBB or NBO; and (3) 
an additive Step-Up Rebate \17\ (described further below) for Equity 
Members that satisfy the (i) minimum displayed ADAV as a percentage of 
TCV of 0.35% and (ii) an increase in the percentage of displayed ADAV 
as a percentage of TCV of at least 0.05% as compared to the Equity 
Member's February 2024 displayed ADAV percentage.
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    \15\ The Exchange does not propose to amend the NBBO Setter 
Additive Rebate, which is an additive rebate of ($0.0004) per share 
for executions of orders in securities priced at or above $1.00 per 
share that set the NBB or NBO on MIAX Pearl Equities with a minimum 
size of a round lot. See Fee Schedule, Section 1)c).
    \16\ The Exchange does not propose to amend the NBBO First 
Joiner Additive Rebate, which is an additive rebate of ($0.0002) per 
share for executions of orders in securities priced at or above 
$1.00 per share that bring MIAX Pearl Equities to the established 
NBB or NBO with a minimum size of a round lot. See Fee Schedule, 
Section 1)c).
    \17\ See supra note 4.
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Proposal To Amend the NBBO Setter Plus Table To Establish an 
Alternative Volume Calculation Method for Equity Members To Achieve the 
Step-Up Rebate
    The Exchange proposes to amend the Step-Up Rebate in footnote #4 of 
the NBBO Setter Plus Table in Section 1)c) of the Fee Schedule to 
establish an alternative volume calculation method for Equity Members 
to achieve the additive Step-Up Rebate. Currently, the Exchange offers 
a Step-Up Rebate of ($0.0001) per share for executions of orders in 
securities priced at or above $1.00 per share for Added Displayed 
Volume (other than Retail Orders) \18\ for Equity Members that satisfy 
the following requirements in the relevant month: (1) minimum displayed 
ADAV of 0.35% of TCV; and (2) increase in the percentage of displayed 
ADAV of at least 0.05% of TCV as compared to the Equity Member's 
February 2024 \19\ displayed ADAV percentage.\20\ The Step-Up Rebate is 
set to expire no later than August 31, 2024 (referred to herein as the 
``sunset period''),\21\ which is stated in the Fee Schedule.\22\
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    \18\ The Exchange excludes Retail Orders from participating in 
the Step-Up Rebate because executions of orders in securities priced 
at or above $1.00 per share for Added Displayed Volume in Retail 
Orders already receive an enhanced rebate of ($0.0037) per share. 
See Fee Schedule, Section 1)b), Liquidity Indicator Code ``AR''.
    \19\ The Exchange uses a baseline ADAV of 0.00% of TCV for firms 
that become Equity Members of the Exchange after February 2024 for 
the purpose of the Step-Up Rebate calculation. See Securities 
Exchange Act Release No. 99982 (April 17, 2024), 89 FR 30408 (April 
23, 2024) (SR-PEARL-2024-18).
    \20\ The Exchange notes that the proposed Step-Up Rebate will 
not apply to executions of orders in securities priced below $1.00 
per share or executions of orders that constitute added non-
displayed liquidity. See id.
    \21\ The Exchange notes that at the end of the sunset period, 
the Step-Up Rebate will no longer apply unless the Exchange files a 
rule filing pursuant to Rule 19b-4 of the Exchange Act with the U.S. 
Securities and Exchange Commission (``Commission'') to amend the 
criteria terms or update the baseline month to a more recent month. 
See id.
    \22\ The Exchange will issue an alert to market participants 
should the Exchange determine that the Step-Up Rebate will expire 
earlier than August 31, 2024 or if the Exchange determines to amend 
the criteria or rate applicable to the Step-Up Rebate prior to the 
end of the sunset period. See id.
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    The Exchange proposes to amend the Step-Up Rebate described in 
footnote #4 of the NBBO Setter Plus Table to establish an alternative 
volume calculation method for Equity Members to achieve the Step-Up 
Rebate, which will be in addition to the current volume calculation 
method for the Step-Up Rebate. The proposed alternative volume 
calculation method will provide the same requirements as the current 
Step-Up Rebate volume calculation requirements, except when calculating 
both the numerator (ADAV) and the denominator (TCV), executions of 
orders in securities priced below $1.00 per share (``sub-dollar 
volume'') across all Tapes will be excluded. Accordingly, with the 
addition of the alternative volume calculation method to the footnote 
describing the Step-Up Rebate, footnote #4 of the NBBO Setter Plus 
Table will provide as follows:

    An Equity Member may qualify for a Step-Up Rebate of ($0.0001) 
per share by satisfying the following requirements in the relevant 
month: (1) minimum Displayed ADAV as a percentage of TCV of 0.35%; 
and (2) increase in the percentage of Displayed ADAV as a percentage 
of TCV of at least 0.05% as compared to the Equity Member's February 
2024 Displayed ADAV percentage. Alternatively, an Equity Member may 
qualify for a Step-Up Rebate of ($0.0001) per share by satisfying 
the following requirements in the relevant month: (1) minimum 
Displayed ADAV as a percentage of TCV of 0.35% (excluding sub-dollar 
volume); and (2) increase in the percentage of Displayed ADAV as 
percentage of TCV of at least 0.05% as compared to the Equity 
Member's February 2024 Displayed ADAV percentage (excluding sub-
dollar volume). The Step-Up Rebate will expire no later than August 
31, 2024.\23\
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    \23\ The Exchange proposes to use a baseline ADAV of 0.00% of 
TCV for firms that become Equity Members of the Exchange after 
February 2024 for the purpose of the alternative volume calculation 
method for the Step-Up Rebate calculation, just as the Exchange does 
now for the current Step-Up Rebate calculation. See id.

    The Step-Up Rebate, as proposed to be amended, will still expire no 
later than August 31, 2024,\24\ which will continue to be stated in the 
Fee Schedule. The Exchange will issue an alert to market participants 
should the Exchange determine that the Step-Up Rebate will expire 
earlier than August 31, 2024 or if the Exchange determines to amend the 
criteria or rate applicable to the Step-Up Rebate prior to the end of 
the sunset period.
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    \24\ The Exchange notes that at the end of the sunset period, 
the Step-Up Rebate will no longer apply unless the Exchange files a 
rule filing pursuant to Rule 19b-4 of the Exchange Act with the 
Commission to amend the criteria terms or update the baseline month 
to a more recent month.
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    The purpose of establishing the proposed alternative volume 
calculation method for Equity Members to achieve the Step-Up Rebate, 
which excludes sub-dollar volume, is for business and competitive 
reasons. Generally, the ratio of consolidated volumes in securities 
priced at or above $1.00 per share relative to consolidated volumes 
inclusive of securities priced below $1.00 per share is usually stable 
from month to month, such that TCV has

[[Page 57976]]

been a reasonable baseline for determining tiered and additive 
incentives for Equity Members that execute order in securities priced 
at or above $1.00 per share on the Exchange. However, there have been 
recent months where volumes in securities priced below $1.00 per share 
have been elevated, thereby impacting the ratio mentioned above.
    Anomalous rises in sub-dollar volume may have a material adverse 
impact on Equity Members' qualifications for the pricing tiers and 
enhanced rebates in the NBBO Program, including the additive Step-Up 
Rebate, because such qualifications depend upon Equity Members 
achieving threshold percentages of volumes as a percentage of TCV, and 
an extraordinary rise in sub-dollar volume may significantly elevate 
TCV. As a result, Equity Members may find it more difficult to qualify 
for or to continue to qualify for their existing incentives during 
months where there are such rises in sub-dollar volumes, even if their 
volume of executions of orders in securities priced at or above $1.00 
per share have not diminished relative to prior months. The Exchange 
believes that it would be unfair for its Equity Members that execute 
significant volumes in securities priced at or above $1.00 per share on 
the Exchange to fail to achieve or to lose their existing incentives 
for such volumes due to anomalous behavior that is extraneous to them. 
Therefore, the Exchange proposes to amend the NBBO Program to establish 
the proposed alternative volume calculation method for the Step-Up 
Rebate to provide an alternative option when extraordinary spikes in 
sub-dollar volumes may adversely affect an Equity Member's 
qualification for such incentive for their executions of orders in 
securities priced at or above $1.00 per share.
    The NBBO Program currently provides a similar volume calculation 
that excludes sub-dollar volume (i.e., volume calculation Method 4), 
which calculates Equity Members' volume for purposes of pricing tiers 
and incentives by excluding sub-dollar volumes from the calculation, 
which may result in the most advantageous volume calculation for such 
pricing tiers and incentives.\25\ In addition, at least one competing 
equities exchange calculates their members' volume for purposes of 
pricing tiers and incentives by excluding sub-dollar volumes from one 
calculation and utilizing the most advantageous volume calculation for 
such pricing tiers and incentives.\26\ Accordingly, this proposal is 
not new or novel.
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    \25\ See supra note 9.
    \26\ See the Nasdaq Stock Market LLC (``Nasdaq'') Rules, Equity 
7: Pricing Schedule, Section 114. Market Quality Incentive Programs, 
Section (h)(5) (``For purposes of calculating a member's 
qualifications for Tiers 1 and 2 of the QMM Program credits . . . 
the Exchange will calculate a member's volume and total Consolidated 
Volume twice. First, the Exchange will calculate a member's volume 
and total Consolidated Volume inclusive of volume that consists of 
executions in securities priced less than $1. Second, the Exchange 
will calculate a member's volume and total Consolidated Volume 
exclusive of volume that consists of executions in securities priced 
less than $1, while also applying distinct qualifying volume 
thresholds to each Tier . . . . The Exchange will then assess which 
of these two calculations would qualify the member for the most 
advantageous credits for the month and then it will apply those 
credits to the member.''). See also Securities Exchange Act Release 
No. 99535 (February 14, 2024), 89 FR 13125 (February 21, 2024) (SR-
NASDAQ-2024-005).
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Implementation
    The proposed fee change is effective beginning July 1, 2024.
2. Statutory Basis
    The Exchange believes that its proposal to amend its Fee Schedule 
is consistent with Section 6(b) of the Act \27\ in general, and 
furthers the objectives of Section 6(b)(4) of the Act \28\ 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) \29\ 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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    \27\ 15 U.S.C. 78f(b).
    \28\ 15 U.S.C. 78f(b)(4).
    \29\ 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. For the month of May 2024, based on publicly available 
information, no single registered equities exchange had more than 
approximately 14-15% of the total market share of executed volume of 
equities trading.\30\ Thus, in such a low-concentrated and highly 
competitive market, no single equities exchange possesses significant 
pricing power in the execution of order flow. For the month of May 
2024, the Exchange represented 1.68% of the total market share of 
executed volume of equities trading.\31\ 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.'' \32\
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    \30\ See the ``Market Share'' section of the Exchange's website, 
available at https://www.miaxglobal.com/.
    \31\ Id.
    \32\ 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 the 
proposal reflects a reasonable and competitive pricing structure 
designed to continue to incentivize market participants to direct their 
order flow to the Exchange, which the Exchange believes would continue 
to enhance liquidity and market quality to the benefit of all Equity 
Members and market participants.
    The Exchange believes its proposal to amend the NBBO Setter Plus 
Table to establish an alternative volume calculation method for Equity 
Members to achieve the Step-Up Rebate is reasonable and equitable 
because, in its

[[Page 57977]]

absence, Equity Members may experience material adverse impacts on 
their ability to qualify for the additive Step-Up Rebate during a month 
with an anomalous rise in sub-dollar volumes. The Exchange believes it 
is reasonable and equitable to not inadvertently penalize Equity 
Members that execute significant volumes on the Exchange due to 
anomalous and extraneous trading activities in sub-dollar securities. 
The proposed alternative volume calculation method would provide a 
means for Equity Members that add displayed liquidity an alternative 
method by determining whether calculating ADAV as a percentage of TCV 
to include or exclude sub-dollar volume would result in Equity Members 
qualifying for the additive Step-Up Rebate. The Exchange would then be 
able to apply the most advantageous volume calculation that would 
result in the Step-Up Rebate being achieved for each Equity Member. The 
Exchange believes that the proposed rule change is equitable and not 
unfairly discriminatory because the Exchange does not intend for the 
proposal to advantage any particular Equity Member.
    The Exchange believes that the proposal to establish the 
alternative volume calculation method for the Step-Up Rebate provides a 
reasonable means to continue to encourage Equity Members to not only 
increase their order flow to the Exchange but also to contribute to 
price discovery and market quality on the Exchange by submitting 
aggressively priced displayed liquidity in securities priced at or 
above $1.00 per share. The Exchange believes that the NBBO Program, as 
modified with this proposal, continues to be equitable and not unfairly 
discriminatory because it is open to all Equity Members on an equal 
basis and provides enhanced rebates that are reasonably related to the 
value of the Exchange's market quality associated with greater order 
flow by Equity Members that set the NBBO, and the introduction of 
higher volumes of orders into the price and volume discovery process. 
The Exchange believes the proposal is equitable and not unfairly 
discriminatory because it is designed to incentivize the entry of 
aggressively priced displayed liquidity that will create tighter 
spreads, thereby promoting price discovery and market quality on the 
Exchange to the benefit of all Equity Members and public investors.
    The Exchange's NBBO Program currently provides for volume 
calculation Method 4, which calculates Equity Members' volume for 
purposes of pricing tiers and incentives by excluding sub-dollar 
volumes from the calculation, which may result in the most advantageous 
volume calculation for such pricing tiers and incentives.\33\ The 
Exchange notes that at least one other competing equities exchange 
calculates their members' volume for purposes of pricing tiers and 
incentives by excluding sub-dollar volumes from one calculation and 
utilizing the most advantageous volume calculation for such pricing 
tiers and incentives.\34\
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    \33\ See supra note 9.
    \34\ See supra note 26.
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    The Exchange believes it is reasonable to continue to use February 
2024 as the baseline month for the proposed alternative volume 
calculation method for the Step-Up Rebate (with a sunset period of 
August 31, 2024) because it will provide a consistent baseline month 
for volume calculation purposes for both methods of determining the 
Step-Up Rebate. The Exchange believes it is equitable and not unfairly 
discriminatory to use February 2024 as the baseline month for the 
proposed alternative volume calculation method for the Step-Up Rebate 
because the Exchange will use a baseline of 0.00% ADAV for those market 
participants that became Equity Members of the Exchange post-February 
2024, providing a consistent and equitable approach for those Equity 
Members to achieve the Step-Up Rebate.
    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 Equity 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 
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 changes will impose 
any burden on competition not necessary or appropriate in furtherance 
of the purposes of the Act.
Intramarket Competition
    The Exchange believes that the proposed change to establish an 
alternative volume calculation method for the Step-Up Rebate will not 
impose any burden on intramarket competition because it will 
incentivize Equity Members to submit additional orders that add 
liquidity to the Exchange, thereby contributing to a deeper and more 
liquid market and promoting price discovery and market quality on the 
Exchange to the benefit of all market participants and enhancing the 
attractiveness of the Exchange as a trading venue. In turn, the 
Exchange believes that this will 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 Equity Members to send additional orders to the 
Exchange, thereby contributing to robust levels of liquidity, which 
benefits all market participants. As described above, the opportunity 
to qualify for the Step-Up Rebate, as amended, would be available to 
all Equity Members that meet the associated requirements, and the 
Exchange believes the proposed changes provide such incentives is 
reasonably related to the enhanced market quality that they are 
designed to promote.
    The Exchange intends for its proposal to establish an alternative 
volume calculation method for the Step-Up Rebate to provide an 
alternative option for Equity Members to achieve such additive rebate 
due to anomalous spikes in sub-dollar volumes and is not intended to 
provide a competitive advantage to any particular Equity Member. The 
proposed alternative volume calculation method will be eligible to all 
Equity Members equally in that the Exchange will calculate both volume 
calculation methods for the Step-Up Rebate in parallel each month and 
apply the most advantageous calculation to each Equity Member's volume 
to qualify for the additive Step-Up Rebate. For the foregoing reasons, 
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 as the 
Exchange 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 14-15% of the total market share of executed volume of 
equities trading.

[[Page 57978]]

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.
    As described above, the proposed change is a competitive proposal 
through which the Exchange seeks to encourage certain order flow to the 
Exchange and to promote market quality through an alternative pricing 
incentive that is similar in structure and purpose to a pricing program 
available at the Exchange, as well as at least one competing equities 
exchange.\35\ Accordingly, the Exchange believes the proposal would not 
burden, but rather promote, intermarket competition by enabling it to 
better compete with other exchanges that offer similar incentives to 
market participants that enhance market quality.
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    \35\ See supra notes 9 and 26.
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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.'' \36\ The fact 
that this market is competitive has also long been recognized by the 
courts. In NetCoalition v. Securities and Exchange Commission, the DC 
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' . . . .'' \37\ 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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    \36\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005).
    \37\ See 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,\38\ and Rule 19b-4(f)(2) \39\ 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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    \38\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \39\ 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 (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
file number
    SR-PEARL-2024-28 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-2024-28. 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 (https://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 
a.m. and 3 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. We 
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-2024-28 and should be 
submitted on or before August 6, 2024.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\40\
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    \40\ 17 CFR 200.30-3(a)(12).
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Vanessa A. Countryman,
Secretary.
[FR Doc. 2024-15505 Filed 7-15-24; 8:45 am]
BILLING CODE 8011-01-P