[Federal Register Volume 89, Number 171 (Wednesday, September 4, 2024)]
[Notices]
[Pages 71950-71953]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-19766]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-100856; File No. SR-PEARL-2024-38]


Self-Regulatory Organizations; MIAX PEARL, LLC; Notice of Filing 
and Immediate Effectiveness of a Proposed Rule Change To Describe the 
Access Methods to the MIAX Pearl Options Testing Systems Environment 
and Discontinue One Access Method

August 28, 2024.
    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 August 22, 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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.

---------------------------------------------------------------------------

[[Page 71951]]

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange is filing a proposal to describe the two methods to 
access the Exchange's \3\ optional testing systems environment, 
establish a third method to access the testing systems environment, and 
establish the timeline and process by which one of the three access 
methods would be discontinued.
---------------------------------------------------------------------------

    \3\ All references in this filing to ``MIAX Pearl'' or the 
``Exchange'' are to the options trading facility of MIAX PEARL, LLC. 
References to the equities trading facility of MIAX PEARL, LLC will 
be to ``MIAX Pearl Equities''.
---------------------------------------------------------------------------

    The text of the proposed rule change is available on the Exchange's 
website at https://www.miaxglobal.com/markets/us-options/all-options-exchanges/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 submits this filing to describe the two methods to 
access the Exchange's optional testing systems environment, establish a 
third method to access the testing systems environment, and establish 
the timeline and process by which the 1 Gigabit (``Gb'') or 10Gb ultra-
low latency (``ULL'') production (i.e., live trading) connection access 
method described below would be discontinued.
    The testing systems environment is a virtual trading system 
environment for Members \4\ and non-Members to test (i) upcoming 
Exchange software and code releases, (ii) product enhancements, and 
(iii) firm-developed software, prior to implementation in the 
Exchange's production (e.g., live trading) environment. Further, the 
testing systems environment allows unlimited testing of existing 
functionality, such as order types, order entry, order management, 
order throughput, acknowledgements, risk settings, mass cancelations, 
and purge requests. The testing systems environment is built to closely 
approximate the production environment to enable users the ability to 
test their systems and mimics the real life trading environment.\5\
---------------------------------------------------------------------------

    \4\ The term ``Member'' means an individual or organization that 
is registered with the Exchange pursuant to Chapter II of these 
Rules for purposes of trading on the Exchange as an ``Electronic 
Exchange Member'' or ``Market Maker.'' Members are deemed 
``members'' under the Exchange Act. See Exchange Rule 100.
    \5\ Business continuity and disaster recovery testing is 
performed separately and not within the testing systems environment 
that is the subject of this filing.
---------------------------------------------------------------------------

Existing Two Access Methods
    There are two methods by which Members and non-Members may access 
the Exchange's testing systems environment. One, Members and non-
Members may access the Exchange's testing systems environment via a 
virtual private network (``VPN'') that operates over the internet and 
provides site-to-site access. VPN access is provided for free to all 
Members and non-Members. Two, access is also provided through the 
production connections for each 1Gb \6\ or 10Gb ULL connection for the 
applicable fee \7\ for such connection and no additional charge. These 
1Gb and 10Gb ULL connections provide access to the Exchange's 
production environment (i.e., live trading) and allow the receipt of 
proprietary real-time market data.
---------------------------------------------------------------------------

    \6\ Like VPN access, the 1Gb connection will allow Members and 
non-Members to reach all testing systems environments of the 
Exchange's affiliated options markets.
    \7\ See MIAX Pearl Fee Schedule, Sections 5)a)-b) for the fees 
for 1Gb and 10Gb ULL production connectivity.
---------------------------------------------------------------------------

    Members and non-Members that utilize a VPN or 1Gb production 
connection to access the testing systems environment of the Exchange 
are also able to access the testing systems environments of each of the 
Exchange's affiliated options markets--MIAX Sapphire, LLC (``MIAX 
Sapphire''), Miami International Securities Exchange, LLC (``MIAX''), 
and MIAX Emerald, LLC (``MIAX Emerald'').\8\ Also, unlike VPN and 1Gb, 
10Gb ULL connections only provide access the Exchange's testing systems 
environment and not those of its affiliated options markets. This is 
because of the nature of those connections, which are utilized to 
access the Exchange only, not just for testing, but for other Exchange 
specific items, such as access the Exchange's production environment 
and for the receipt of proprietary Exchange market data.
---------------------------------------------------------------------------

    \8\ Members and non-Members that choose to utilize the testing 
systems environment of MIAX Pearl Equities, the equities trading 
facility of MIAX PEARL, LLC, must utilize a separate dedicated cross 
connect as MIAX Pearl Equities' testing systems environment operates 
on a separate network from the affiliated options markets.
---------------------------------------------------------------------------

Proposed Third Access Method
    The Exchange proposes to establish a third method by which Members 
and non-Members may access the options testing systems environment. 
This third method is via a dedicated cross connection that will allow 
Members and non-Members to access the testing systems environment and 
would be available as either a 1Gb or 10Gb connection.\9\ Like access 
via a VPN and a 1Gb production connection, the dedicated cross 
connection would also provide access to the testing systems environment 
of the Exchange's affiliated options markets--MIAX Sapphire, MIAX, and 
MIAX Emerald. The proposed dedicated cross connect to the testing 
systems environment would not, however, provide access to any of the 
production environments (i.e., live trading) of the Exchange or its 
affiliates, or allow the receipt of proprietary real-time market data 
for which each Member or non-Member may subscribe.
---------------------------------------------------------------------------

    \9\ The Exchange notes that other exchange families offer a 
similar dedicated connection to their testing environment for their 
members and non-members. See, e.g., Nasdaq Options Test Facility 
(NTF) Abstract, Version 1.4.4 (March 2024), available at https://www.nasdaq.com/Nasdaq_Test_Facility_NTF_Guide (last visited July 16, 
2024) (``. . . the Nasdaq Test Facility . . . where market 
participants can test their trading applications with the INET 
trading system. The NTF environment allows members to test sending 
and executing quotes and orders offered by our six options exchanges 
. . .''); see also Securities Exchange Act Release No. 100442 (June 
27, 2024), 89 FR 55296 (July 3, 2024) (SR-CboeBZX-2024-058) (``. . . 
the Exchange also offers corresponding ports which provide Members 
and non-Members access to the Exchange's certification environment 
to test proprietary systems and applications. . . The certification 
environment facilitates testing using replicas of the Exchange's 
production environment process configurations which provide for a 
robust and realistic testing experience . . .'').
---------------------------------------------------------------------------

* * * * *
    Members and non-Members that access the testing systems environment 
through any one of the available access methods, including the proposed 
dedicated cross connection, receive functionally the same testing 
experience. Each Member or non-Member is free to decide how to access 
the testing systems environment based on their own needs and trading 
architecture. Again, use of the testing systems environment is entirely 
optional and no Member or non-Member is required by rule or regulation 
to make use of the testing systems

[[Page 71952]]

environment.\10\ Regardless of access method, all Members and non-
Members are provided the same testing systems environment experience 
and are able to perform all of the same functions.
---------------------------------------------------------------------------

    \10\ See supra note 5.
---------------------------------------------------------------------------

Phased Out of Production Connections
    The Exchange will phase out the ability to connect to the testing 
systems environment via the existing 1Gb and 10Gb ULL production 
connections over the next 6 to 12 months. The Exchange will issue an 
alert notifying market participants of the anticipated timeline by 
which it will phase out access to the testing systems environment via 
1Gb and 10Gb ULL production connections. During this phase out period, 
Members and non-Members that use a 1Gb or 10Gb ULL production 
connection to access the testing systems environment would continue to 
be able to do so. At the end of this period, Members and non-Members 
that currently elect to access the Exchange's testing systems 
environment via a 1Gb or 10Gb ULL connection that seek to continue to 
access the Exchange's testing systems environment would be required to 
transfer their access to one of the two remaining access methods, a VPN 
for free or by subscribing to a dedicated cross connection for an 
amount that is expected to be less than the current fee for a 1Gb or 
10Gb ULL production connection.\11\
---------------------------------------------------------------------------

    \11\ The Exchange will submit a separate proposed rule change 
for immediate effectiveness pursuant to Section 19(b)(3)(A) of the 
Act (15 U.S.C. 78s(b)(3)(A)) and Rule 19b-4(f)(2) (17 CFR 240.19b-
4(f)(2)) thereunder to establish a fee for the dedicated cross 
connect to the testing systems environment. The Exchange anticipates 
to waive such proposed fee for a period of time and that any 
potential fees at the end of the waiver will be less than the fees 
for a 1Gb and 10Gb ULL connection to the production environment.
---------------------------------------------------------------------------

2. Statutory Basis
    The Exchange believes the proposed change is consistent with the 
requirements of Section 6(b) of the Act,\12\ in general, and Section 
6(b)(5),\13\ in particular, because it is designed to prevent 
fraudulent and manipulative acts and practices, promote just and 
equitable principles of trade, foster cooperation and coordination with 
persons engaged in regulating, clearing, settling, processing 
information with respect to, and facilitating transactions in 
securities, and remove impediments to and perfect the mechanism of a 
free and open market and a national market system.
---------------------------------------------------------------------------

    \12\ 15 U.S.C. 78f(b).
    \13\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    This filing describes the two existing methods to access the 
Exchange's optional testing systems environment, proposes to establish 
a third access method, and describes the process by which one access 
method would be discontinued. Doing so provides clarity to market 
participants and seeks to avoid potential investor confusion.
    Access to the Exchange's testing systems environment is completely 
voluntary.\14\ The testing systems environment is a useful tool for 
Members and non-Members to test (i) upcoming Exchange software and code 
releases, (ii) product enhancements, and (iii) firm-developed software, 
prior to implementation in the Exchange's production environment. In 
addition, the testing systems environment allows unlimited firm-level 
testing of order types, order entry, order management, order 
throughput, acknowledgements, risk settings, mass cancelations, and 
purge requests.
---------------------------------------------------------------------------

    \14\ As noted above, business continuity and disaster recovery 
testing is performed separately and not within the testing systems 
environment that is the subject of this filing.
---------------------------------------------------------------------------

    This filing also proposes to establish a third access method, a 
dedicated cross connect, to the Exchange's optional testing systems 
environment. The Exchange believes the proposed dedicated cross connect 
access to the test environment is being proposed purely for convenience 
and, again, would be entirely optional. Access to the test environment 
via a dedicated cross connect would enable Members and non-Members to 
connect their software to the test environment allowing their 
applications to communicate directly with the test environment. Members 
and non-Members that choose to access the test environment via a 
dedicated cross connect are also provided access to the test 
environments of the Exchange's affiliate options markets via a single 
connection, and would not be required to subscribe to multiple cross 
connects to test in those environments.
    There is no functional difference between the two existing and 
proposed third access alternative. It is simply a technical decision of 
each Member or non-Member regarding how to access the testing systems 
environment. The testing systems environment, whether accessed via the 
proposed dedicated cross connection or otherwise, provides Members and 
non-Members the same scope of abilities to test their systems and 
software in the Exchange's testing systems environment, which 
replicates the Exchange's anticipated production trading environment. 
The testing systems environment serves to improve live trading on the 
Exchange and the national market system by permitting Members and non-
Members the ability to accurately test software and code changes prior 
to implementing them in their systems in the live trading environment. 
This should, in turn, reduce the likelihood of a potentially disruptive 
issues in the live trading environment, which has the potential to 
affect all market participants.
    Therefore, for the above reasons, the Exchange believes the 
proposed rule change is consistent with the Act.

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

    The Exchange does not believe that the proposed rule change will 
result in any burden on competition that is not necessary or 
appropriate in furtherance of the purposes of the Act. There would be 
no competitive advantage for Members and non-Members that access the 
testing systems environment via one access method versus another. All 
modes of access allow Members and non-Members to perform the same 
testing functions in the same manner. As such, the Exchange does not 
believe that the proposed change will impose any burden on intermarket 
competition not necessary or appropriate in furtherance of the purposes 
of the Act.
    The Exchange believes the proposed rule change may have a positive 
impact on or intramarket competition. Among other things, the proposed 
rule change is intended to keep pace with technological changes in the 
industry and evolving customer needs and demands, and believes the 
dedicated cross connection to the testing systems environment will 
contribute to robust competition among national securities exchanges. 
As noted above, several exchanges already offer similar testing 
environments to their members and non-members.\15\ As a result, the 
Exchange believes this proposed rule change permits fair competition 
among national securities exchanges.
---------------------------------------------------------------------------

    \15\ See supra note 9.
---------------------------------------------------------------------------

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

    Because the foregoing proposed rule change does not: (i) 
significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become

[[Page 71953]]

operative for 30 days after the date of the filing, or such shorter 
time as the Commission may designate, it has become effective pursuant 
to 19(b)(3)(A) of the Act \16\ and Rule 19b-4(f)(6) \17\ thereunder.
---------------------------------------------------------------------------

    \16\ 15 U.S.C. 78s(b)(3)(A).
    \17\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file the proposed rule change at 
least five business days prior to the date of filing of the proposed 
rule change, or such shorter time as designated by the Commission. 
The Exchange has satisfied this requirement.
---------------------------------------------------------------------------

    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission shall institute proceedings to 
determine whether the proposed rule should be approved or disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
file number SR-PEARL-2024-38 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-2024-38. 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-2024-38 and should be 
submitted on or before September 25, 2024.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
---------------------------------------------------------------------------

    \18\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-19766 Filed 9-3-24; 8:45 am]
BILLING CODE 8011-01-P