Self-Regulatory Organizations; MIAX PEARL, LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend the MIAX PEARL Fee Schedule, 54205-54210 [2019-22010]
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Federal Register / Vol. 84, No. 196 / Wednesday, October 9, 2019 / Notices
subparagraph (f)(6) of Rule 19b–4
thereunder.29
A proposed rule change filed
pursuant to Rule 19b–4(f)(6) under the
Act 30 normally does not become
operative for 30 days after the date of its
filing. However, Rule 19b–4(f)(6)(iii) 31
permits the Commission to designate a
shorter time if such action is consistent
with the protection of investors and the
public interest. The Exchange has
requested that the Commission waive
the 30-day operative delay. The
Commission notes that waiver of the
operative delay would allow the
Exchange to effect the changes to its
Rulebook and By-Laws, which would
eliminate obsolete provisions in the
Exchange’s Rulebook and better align
provisions in the Exchange’s By-Laws
with those in the By-Laws of its
affiliates, in time for the Exchange
Board meeting on September 25, 2019.
The Commission believes that waiver of
the 30-day operative delay is consistent
with the protection of investors and the
public interest. Accordingly, the
Commission hereby waives the
operative delay and designates the
proposed rule change operative upon
filing.32
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
change should be approved or
disapproved.
IV. Solicitation of Comments
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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:
29 17 CFR 240.19b–4(f)(6). In addition, Rule 19b–
4(f)(6)(iii) requires a self-regulatory organization to
give the Commission written notice of its intent to
file the proposed rule change, along with a brief
description and text of 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.
30 17 CFR 240.19b–4(f)(6).
31 17 CFR 240.19b–4(f)(6)(iii).
32 For purposes only of waiving the 30-day
operative delay, the Commission also has
considered the proposed rule’s impact on
efficiency, competition, and capital formation. See
15 U.S.C. 78c(f).
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Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
MRX–2019–21 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–MRX–2019–21. 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
10:00 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–MRX–2019–21 and should
be submitted on or before October 30,
2019.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.33
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019–22020 Filed 10–8–19; 8:45 am]
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SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–87209; File No. SR–
PEARL–2019–26]
Self-Regulatory Organizations; MIAX
PEARL, LLC; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change To Amend the MIAX
PEARL Fee Schedule
October 3, 2019.
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
September 20, 2019, 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.
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 MIAX PEARL Fee Schedule
(the ‘‘Fee Schedule’’) to establish
Application Programming Interface
(‘‘API’’) Testing and Certification fees.
The Exchange previously filed to
establish API Testing and Certification
fees on June 28, 2019 (SR–PEARL–
2019–22).3 That filing was withdrawn
on August 27, 2019. It is replaced with
the current filing (SR–PEARL–2019–26).
The text of the proposed rule change
is available on the Exchange’s website at
https://www.miaxoptions.com/rulefilings/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
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 See Securities Exchange Act Release No. 86363
(July 12, 2019), 84 FR 34445 (July 18, 2019) (SR–
PEARL–2019–22) (the ‘‘Second Proposed Rule
Change’’).
2 17
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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
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1. Purpose
The Exchange proposes to amend the
Fee Schedule to establish API Testing
and Certification fees for Members 4 and
non-Members. MIAX PEARL
commenced operations as a national
securities exchange registered under
Section 6 of the Act 5 on February 6,
2017.6 The Exchange adopted its
transaction fees and certain of its nontransaction fees in its filing SR–PEARL–
2017–10.7 In that filing, the Exchange
expressly waived API Testing and
Certification fees for Members and nonMembers to provide an incentive to
prospective Members and non-Members
to engage in early API testing and
certification to be able to utilize the
services of MIAX PEARL as soon as
possible. At that time, the Exchange
waived API Testing and Certification
fees for the Waiver Period 8 and stated
that it would provide notice to market
participants when the Exchange
intended to terminate the Waiver
Period.
On March 14, 2019, the Exchange
issued a Regulatory Circular which
announced that the Exchange would
terminate the Waiver Period for API
Testing and Certification fees, among
other non-transaction fees, beginning on
April 1, 2019.9 The Exchange initially
filed the proposal to adopt API Testing
and Certification fees, certain other non4 ‘‘Member’’ means an individual or organization
that is registered with the Exchange pursuant to
Chapter II of the Exchange 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 15 U.S.C. 78f.
6 See Securities Exchange Act Release No. 79543
(December 13, 2016), 81 FR 92901 (December 20,
2016) (File No. 10–227) (order approving
application of MIAX PEARL, LLC for registration as
a national securities exchange).
7 See Securities Exchange Act Release No. 80061
(February 17, 2017), 82 FR 11676 (February 24,
2017) (SR–PEARL–2017–10).
8 ‘‘Waiver Period’’ means, for each applicable fee,
the period of time from the initial effective date of
the MIAX PEARL Fee Schedule until such time that
the Exchange has an effective fee filing establishing
the applicable fee. The Exchange will issue a
Regulatory Circular announcing the establishment
of an applicable fee that was subject to a Waiver
Period at least fifteen (15) days prior to the
termination of the Waiver Period and effective date
of any such applicable fee. See the Definitions
Section of the Fee Schedule.
9 See MIAX PEARL Regulatory Circular 2019–09
available at https://www.miaxoptions.com/sites/
default/files/circular-files/MIAX_PEARL_RC_2019_
09.pdf.
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transaction fees, and to terminate the
three-month New Member NonTransaction Fee Waiver 10 on March 27,
2019, designating the proposed fees
effective April 1, 2019.11 The First
Proposed Rule Change was published
for comment in the Federal Register on
April 12, 2019.12 The proposed fees
remained in effect until the Exchange
withdrew the First Proposed Rule
Change on May 20, 2019.13
The Exchange refiled the proposal on
June 28, 2019, designating the proposed
fees effective July 1, 2019.14 The Second
Proposed Rule Change was published
for comment in the Federal Register on
July 18, 2019.15 The proposed fee
changes remained in effect until the
Exchange withdrew the Second
Proposed Rule Change on August 27,
2019.16
The Exchange is now re-filing the
proposal to establish API Testing and
Certification fees for Members and nonMembers. The Exchange will file
separate proposals to establish certain
other non-transaction fees and to
terminate the New Member NonTransaction Fee Waiver and remove the
definitions for the Waiver Period and
New Member Non-Transaction Fee
Waiver from the Fee Schedule.
API Testing and Certification Fees for
Members
The Exchange proposes to adopt an
API Testing and Certification fee for
Members. An API makes it possible for
Member software to communicate with
MIAX PEARL software applications,
and is subject to Member testing with,
and certification by, MIAX PEARL. API
testing and certification includes, for
10 ‘‘New Member Non-Transaction Fee Waiver’’
means the waiver of certain non-transaction fees, as
explicitly set forth in specific sections of the Fee
Schedule, for a new Member of the Exchange, for
the waiver period. For purposes of this definition,
the waiver period consists of the calendar month
the new Member is credentialed to use the System
in the production environment following approval
as a new Member of the Exchange and the two (2)
subsequent calendar months thereafter. For
purposes of this definition, a new Member shall
mean any Member who has not previously been
approved as a Member of the Exchange. See the
Definitions Section of the Fee Schedule.
11 See Securities Exchange Act Release No. 85541
(April 8, 2019), 84 FR 14983 (April 12, 2019) (SR–
PEARL–2019–12) (the ‘‘First Proposed Rule
Change’’).
12 See id.
13 See Letter from Gregory P. Ziegler, AVP and
Senior Associate Counsel, MIAX PEARL, LLC, to
Vanessa Countryman, Acting Secretary,
Commission, dated May 17, 2019.
14 See supra note 3.
15 See id.
16 See Letter from Joseph Ferraro, SVP and
Deputy General Counsel, MIAX PEARL, LLC, to
Vanessa Countryman, Acting Secretary,
Commission, dated August 26, 2019.
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Electronic Exchange Members 17
(‘‘EEMs’’), testing all available order
types, new order entry, order
management, order throughput and
mass order cancellation. For Market
Makers,18 API testing and certification
also includes testing of all available
quote types, quote throughput, quote
management and cancellation,
Aggregate Risk Manager settings and
triggers, and confirmation of quotes
within the trading engines.
The API Testing and Certification fees
for Members are based upon the type of
interface that the Member has been
credentialed to use. The Exchange
proposes to adopt an API testing and
certification fee for Members (i) initially
per API for FIX,19 MEO,20 FXD 21 and
CTD 22 in the month the Member has
been credentialed to use one or more
ports in the production environment for
the tested API, and (ii) each time a
Member initiates a change to its system
that requires testing and certification.
The Exchange also proposes that API
Testing and Certification fees will not be
assessed in situations where the
17 ‘‘Electronic Exchange Member’’ or ‘‘EEM’’
means the holder of a Trading Permit who is a
Member representing as agent Public Customer
Orders or Non-Customer Orders on the Exchange
and those non-Market Maker Members conducting
proprietary trading. Electronic Exchange Members
are deemed ‘‘members’’ under the Exchange Act.
See Exchange Rule 100. See the Definitions Section
of the Fee Schedule.
18 ‘‘Market Maker’’ means a Member registered
with the Exchange for the purpose of making
markets in options contracts traded on the
Exchange and that is vested with the rights and
responsibilities specified in Chapter VI of Exchange
Rules. See Exchange Rule 100. See the Definitions
Section of the Fee Schedule.
19 ‘‘FIX Interface’’ means the Financial
Information Exchange interface for certain order
types as set forth in Exchange Rule 516. See
Exchange Rule 100. See the Definitions Section of
the Fee Schedule.
20 ‘‘MEO Interface’’ means a binary order interface
for certain order types as set forth in Rule 516 into
the MIAX PEARL System. See Exchange Rule 100.
See the Definitions Section of the Fee Schedule.
21 ‘‘FXD Interface’’ or ‘‘FIX Drop Copy Port’’
means a messaging interface that provides a copy
of real-time trade execution, trade correction and
trade cancellation information to FIX Drop Copy
Port users who subscribe to the service. FXD Port
users are those users who are designated by an EEM
to receive the information and the information is
restricted for use by the EEM only. See the
Definitions Section of the Fee Schedule.
22 ‘‘CTD Port’’ or ‘‘Clearing Trade Drop Port’’
provides an Exchange Member with a real-time
clearing trade updates. The updates include the
Member’s clearing trade messages on a low latency,
real-time basis. The trade messages are routed to a
Member’s connection containing certain
information. The information includes, among other
things, the following: (i) Trade date and time; (ii)
symbol information; (iii) trade price/size
information; (iv) Member type (for example, and
without limitation, Market Maker, Electronic
Exchange Member, Broker-Dealer); and (v)
Exchange MPID for each side of the transaction,
including Clearing Member MPID. See the
Definitions Section of the Fee Schedule.
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Exchange initiates a mandatory change
to the Exchange’s System 23 that requires
testing and certification.
Any Member can select any type of
interface (FIX Interface, MEO Interface,
FXD Interface, and/or the CTD Port) to
test and certify. The Exchange proposes
the following fees: Each Member who
uses the FIX Interface to connect to the
System will be assessed an API Testing
and Certification fee of $1,000; each
Member who uses the MEO Interface to
connect to the System will be assessed
an API Testing and Certification fee of
$1,500; each Member who uses the FXD
Interface to connect to the system will
be assessed an API Testing and
Certification fee of $500; and each
Member who uses the CTD Port to
connect to the system will be assessed
an API Testing and Certification fee of
$500.
Below is the proposed fee table for
API Testing and Certification fees for
Members:
Type of
interface
API testing
and
certification fee
FIX .................
MEO ...............
FXD ................
CTD ...............
$1,000.00
1,500.00
500.00
500.00
API Testing and Certification Fees
will be assessed (i) initially per API for
FIX, MEO, FXD and CTD in the month
the Member has been credentialed to
use one or more ports in the production
environment for the tested API, and (ii)
each time a Member initiates a change
to its system that requires testing and
certification. API Testing and
Certification Fees will not be assessed in
situations where the Exchange initiates
a mandatory change to the Exchange’s
system that requires testing and
certification.
API Testing and Certification Fee for
Non-Members
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The Exchange proposes to adopt an
API Testing and Certification fee for
Third Party Vendors,24 Service
Bureaus 25 and other non-Members
(such as clearing firms) (i) initially per
23 The term ‘‘System’’ means the automated
trading system used by the Exchange for the trading
of securities. See Exchange Rule 100.
24 Third party vendors are subscribers of MIAX
PEARL’s market and other data feeds, which they
in turn use for redistribution purposes. Third party
vendors do not provide connectivity and therefore
are not subject to Network testing and certification.
See the Definitions Section of the Fee Schedule.
25 ‘‘Service Bureau’’ means a technology provider
that offers and supplies technology and technology
services to a trading firm that does not have its own
proprietary system. See the Definitions Section of
the Fee Schedule.
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API for FIX, MEO, FXD, and CTD in the
month the non-Member has been
credentialed to use one or more ports in
the production environment for the
tested API, and (ii) each time a Third
Party Vendor, Service Bureau, or other
non-Member initiates a change to its
system that requires testing and
certification. The Exchange also
proposes that API Testing and
Certification fees will not be assessed to
non-Members in situations where the
Exchange initiates a mandatory change
to the Exchange’s System that requires
testing and certification.
The Exchange proposes to adopt API
Testing and Certification fees for nonMembers based upon the type of
interface used by the non-Member to
connect to the Exchange—the FIX
Interface, the MEO Interface, the FXD
Interface, and/or the CTD Port. Any
non-Member can select any type of
interface (FIX Interface, MEO Interface,
FXD Interface, and/or the CTD Port) to
test and certify. As with Members, an
API makes it possible for Third Party
Vendors’ and Service Bureaus’ software
to communicate with MIAX PEARL’s
software applications, and is subject to
testing with, and certification by, MIAX
PEARL. The higher proposed fee
charged to non-Members reflects the
greater amount of time spent by MIAX
PEARL employees testing and certifying
non-Members. It has been MIAX
PEARL’s experience that Member
testing takes less time than non-Member
testing because Members have more
experience testing these systems with
exchanges, resulting in generally fewer
questions and issues arising during the
testing and certification process. Also,
because Third Party Vendors and
Service Bureaus are redistributing data
and reselling services to other Members
and market participants, the number
and types of scenarios that need to be
tested are more numerous and complex
than those tested and certified for a
single Member.
The Exchange proposes the following
fees: each non-Member who uses the
FIX Interface to connect to the System
will be assessed an API Testing and
Certification fee of $1,200; each nonMember who uses the MEO Interface to
connect to the System will be assessed
an API Testing and Certification fee of
$2,000; each non-Member who uses the
FXD Interface to connect to the system
will be assessed an API Testing and
Certification fee of $600; and each nonMember who uses the CTD Port to
connect to the system will be assessed
an API Testing and Certification fee of
$600.
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Below is the proposed fee table for
API Testing and Certification fees for
non-Members:
Type of
interface
FIX .................
MEO ...............
FXD ................
CTD ...............
API testing and
certification fee
$1,200.00
2,000.00
600.00
600.00
API Testing and Certification Fees for
Third Party Vendors, Service Bureaus
and other non-Members will be assessed
(i) initially per API for FIX, MEO, FXD,
and CTD in the month the non-Member
has been credentialed to use one or
more ports in the production
environment for the tested API, and (ii)
each time a Third Party Vendor, Service
Bureau, or other non-Member initiates a
change to its system that requires testing
and certification. API Testing and
Certification Fees will not be assessed in
situations where the Exchange initiates
a mandatory change to the Exchange’s
system that requires testing and
certification.
The Exchange believes it is necessary
to charge an API Testing and
Certification fee to Members and nonMembers because of the time and
resources spent to ensure that Member
and non-Member APIs function
correctly to prevent any System
malfunction. Further, the Exchange
believes the price differential in API
Testing and Certification fees for
Members and non-Members is not
unfairly discriminatory because, in the
Exchange’s experience, Member testing
takes less time than non-Member testing
as Members have more experience
testing these systems with exchanges,
resulting generally in fewer questions
and issues arising during the testing and
certification process.
The Commission has repeatedly
expressed its 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.’’ 26
There are currently 16 registered
options exchanges competing for order
flow. Based on publicly-available
information, and excluding index-based
options, no single exchange has more
26 See Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37496 (June 29, 2005).
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than approximately 16% market
share.27 Therefore, no exchange
possesses significant pricing power.
More specifically, as of September 9,
2019, the Exchange had an
approximately 5.30% market share of
executed volume of multiply-listed
equity and exchange traded fund
(‘‘ETF’’) options.28 The Exchange
believes that the ever-shifting market
share among the exchanges from month
to month demonstrates that market
participants can discontinue or reduce
use of certain categories of products, or
shift order flow, in response to nontransaction and transaction fee changes.
For example, on September 28, 2018,
the Exchange filed with the Commission
a proposal to decrease a transaction fee
for certain types of orders (which fee
was to be effective October 1, 2018).29
The Exchange experienced an increase
in total market share in the month of
October 2018, after the proposal went
into effect. Accordingly, the Exchange
believes that the October 1, 2018 fee
change, decreasing a transaction fee,
may have contributed to the increase in
the Exchange’s market share and, as
such, the Exchange believes competitive
forces constrain MIAX PEARL’s, and
other options exchanges, ability to set
non-transaction and transaction fees and
market participants can shift order flow
based on fee changes instituted by the
exchanges.
Further, as there are currently 16
registered options exchanges competing
for order flow with no single exchange
accounting for more than approximately
16% of market share,30 the Exchange
cannot predict with certainty whether
any market participant is planning to
utilize any of the services of the
Exchange such that API testing and
certification would be required, in
which the Member or non-Member
would be subject to the proposed API
Testing and Certification fees
established herein.
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2. Statutory Basis
The Exchange believes that its
proposal to amend its Fee Schedule is
consistent with Section 6(b) of the Act 31
in general, and furthers the objectives of
Section 6(b)(4) of the Act 32 in
particular, in that it is an equitable
27 The Options Clearing Corporation (‘‘OCC’’)
publishes options and futures volume in a variety
of formats, including daily and monthly volume by
exchange, available here: https://www.theocc.com/
market-data/volume/default.jsp.
28 See id.
29 See Securities Exchange Act Release No. 84387
(October 9, 2018), 83 FR 52039 (October 15, 2018)
(SR–PEARL–2018–21).
30 See supra note 27.
31 15 U.S.C. 78f(b).
32 15 U.S.C. 78f(b)(4) and (5).
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allocation of reasonable dues, fees and
other charges among its members and
issuers and other persons using its
facilities. The Exchange also believes
the proposal furthers the objectives of
Section 6(b)(5) of the Act in that it is
designed to promote just and equitable
principles of trade, 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 is not designed to
permit unfair discrimination between
customers, issuers, brokers and dealers.
The Exchange believes its proposal to
adopt API Testing and Certification fees
provides for the equitable allocation of
reasonable dues and fees and is not
unfairly discriminatory for the following
reasons. First, the Exchange operates in
a highly competitive market. The
Commission has repeatedly expressed
its 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.’’ 33
There are currently 16 registered
options exchanges competing for order
flow. Based on publicly-available
information, and excluding index-based
options, no single exchange has more
than approximately 16% of the market
share of executed volume of multiplylisted equity and ETF options.34
Therefore, no exchange possesses
significant pricing power. More
specifically, as of September 9, 2019,
the Exchange had approximately a
5.30% market share of executed volume
of multiply-listed equity and ETF
options.35
The Exchange also believes that the
ever-shifting market share among the
exchanges from month to month
demonstrates that market participants
can discontinue or reduce use of certain
categories of products, or shift order
flow, in response to non-transaction and
transaction fee changes. For example, on
September 28, 2018, the Exchange filed
with the Commission a proposal to
33 See Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37496 (June 29, 2005).
34 The Options Clearing Corporation (‘‘OCC’’)
publishes options and futures volume in a variety
of formats, including daily and monthly volume by
exchange, available here: https://www.theocc.com/
market-data/volume/default.jsp.
35 See id.
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decrease a transaction fee for certain
types of orders (which fee was to be
effective October 1, 2018).36 The
Exchange experienced an increase in
total market share in the month of
October 2018, after the proposal went
into effect. Accordingly, the Exchange
believes that the October 1, 2018 fee
change, decreasing a transaction fee,
may have contributed to the increase in
the Exchange’s market share and, as
such, the Exchange believes competitive
forces constrain MIAX PEARL’s, and
other options exchanges, ability to set
non-transaction and transaction fees and
market participants can shift order flow
based on fee changes instituted by the
exchanges.
Second, the Exchange believes its
proposal to adopt API Testing and
Certification fees for Member and nonMembers is an equitable allocation of
reasonable dues and fees pursuant to
Section 6(b)(4) of the Act 37 because of
the time and resources spent to ensure
that Member and non-Member APIs
function correctly to prevent any
System malfunction. Further, the
Exchange believes the price differential
in API Testing and Certification fees for
Members and non-Members is not
unfairly discriminatory because, in the
Exchange’s experience, Member testing
utilizes less Exchange resources and
employee time than non-Member testing
as Members have more experience
testing these systems with exchanges,
resulting generally in fewer questions
and issues arising during the testing and
certification process. Also, with respect
to API testing and certification, because
Third Party Vendors and Service
Bureaus are redistributing data and
reselling services to other Members and
market participants the number and
types of scenarios that need to be tested
are more numerous and complex than
those tested and certified for Members.
Accordingly, the Exchange no longer
believes it is necessary to waive API
Testing and Certification fees to attract
market participants to the MIAX PEARL
market since this market is now
established and MIAX PEARL no longer
needs to rely on such waivers to attract
market participants. The Exchange
believes its proposed API Testing and
Certification fees are reasonable and
well within the range of non-transaction
fees assessed among other exchanges,
including the Exchange’s affiliate,
Miami International Securities
Exchange, LLC (‘‘MIAX).38
36 See Securities Exchange Act Release No. 84387
(October 9, 2018), 83 FR 52039 (October 15, 2018)
(SR–PEARL–2018–21).
37 15 U.S.C. 78f(b)(4).
38 See the MIAX Options Fee Schedule, Section
(4)a and (4)b.
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Federal Register / Vol. 84, No. 196 / Wednesday, October 9, 2019 / Notices
Finally, the Exchange notes that it
operates in a highly competitive market
in which market participants can
readily favor competing venues if they
deem fee levels at a particular venue to
be excessive. In such an environment,
the Exchange must continually adjust its
fees for services and products, in
addition to order flow, to remain
competitive with other exchanges. The
Exchange believes that the proposed
changes reflect this competitive
environment.
khammond on DSKJM1Z7X2PROD with NOTICES
B. Self-Regulatory Organization’s
Statement on Burden on Competition
MIAX PEARL does not believe that
the proposed rule change will impose
any burden on competition not
necessary or appropriate in furtherance
of the purposes of the Act.
Intra-Market Competition
The Exchange does not believe that
the proposed rule change would place
certain market participants at the
Exchange at a relative disadvantage
compared to other market participants
or affect the ability of such market
participants to compete. Unilateral
action by MIAX PEARL in the
assessment of certain non-transaction
fees for services provided to its
Members and others using its facilities
will not have an impact on competition.
As a more recent entrant in the already
highly competitive environment for
equity options trading, MIAX PEARL
does not have the market power
necessary to set prices for services that
are unreasonable or unfairly
discriminatory in violation of the Act.
MIAX PEARL’s proposed API Testing
and Certification fee levels, as described
herein, are comparable to fee levels
charged by other options exchanges for
the same or similar services, including
those fees assessed by the Exchange’s
affiliate, MIAX.39
The Exchange believes that the
proposed API Testing and Certification
fees do not place certain market
participants at a relative disadvantage to
other market participants because the
fees do not apply unequally to different
size market participants, but instead
would allow the Exchange charge for
the time and resource necessary for API
testing and certification for Members
and non-Members to ensure proper
functioning of all available order types,
new order entry, order management,
order throughput and mass order
cancellation (as well as, for Market
Makers, all available quote types, quote
throughput, quote management and
cancellation, Aggregate Risk Manager
settings and triggers, and confirmation
of quotes within the trading engines).
Accordingly, the proposed API Testing
and Certification fees do not favor
certain categories of market participants
in a manner that would impose a
burden on competition.
Inter-Market Competition
The Exchange believes the proposed
API Testing and Certification fees do not
place an undue burden on competition
on other SROs that is not necessary or
appropriate. The Exchange operates in a
highly competitive market in which
market participants can readily favor
one of the 16 competing options venues
if they deem fee levels at a particular
venue to be excessive.40 Based on
publicly-available information, and
excluding index-based options, no
single exchange has more than 16%
market share. Therefore, no exchange
possesses significant pricing power in
the execution of multiply-listed equity
and ETF options order flow. As of
September 9, 2019, the Exchange had an
approximately 5.30% market share 41
and the Exchange believes that the evershifting market share among exchanges
from month to month demonstrates that
market participants can discontinue or
reduce use of certain categories of
products, or shift order flow, in
response to fee changes. In such an
environment, the Exchange must
continually adjust its fees and fee
waivers to remain competitive with
other exchanges and to attract order
flow to the Exchange.
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,42 and Rule
19b–4(f)(2) 43 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
40 See
42 15
39 See
the MIAX Options Fee Schedule.
VerDate Sep<11>2014
17:13 Oct 08, 2019
Jkt 250001
supra note 34.
41 Id.
43 17
PO 00000
U.S.C. 78s(b)(3)(A)(ii).
CFR 240.19b–4(f)(2).
Frm 00108
Fmt 4703
Sfmt 4703
54209
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 rule-comments@
sec.gov. Please include File Number SR–
PEARL–2019–26 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–2019–26. 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
10:00 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–2019–26 and
should be submitted on or before
October 30, 2019.
E:\FR\FM\09OCN1.SGM
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54210
Federal Register / Vol. 84, No. 196 / Wednesday, October 9, 2019 / Notices
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.44
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019–22010 Filed 10–8–19; 8:45 am]
BILLING CODE 8011–01–P
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
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–87211; File No. SR–Phlx–
2019–38]
Self-Regulatory Organizations; Nasdaq
PHLX LLC; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Amend Phlx’s Second
Amended Limited Liability Company
Agreement and By-Laws
October 3, 2019.
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
September 20, 2019, Nasdaq PHLX LLC
(‘‘Phlx’’ or ‘‘Exchange’’) filed with the
Securities and Exchange Commission
(‘‘SEC’’ or ‘‘Commission’’) the proposed
rule change as described in Items I and
II 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.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend its
Second Amended Limited Liability
Company Agreement (‘‘LLC
Agreement’’) and By-Laws (‘‘By-Laws’’),
as further discussed below
The text of the proposed rule change
is available on the Exchange’s website at
https://nasdaqphlx.cchwallstreet.com/,
at the principal office of the Exchange,
and at the Commission’s Public
Reference Room.
khammond on DSKJM1Z7X2PROD with NOTICES
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
44 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
VerDate Sep<11>2014
17:13 Oct 08, 2019
Jkt 250001
The Exchange proposes to amend its
LLC Agreement and By-Laws to (i)
harmonize certain provisions related to
the regulatory independence of the
Exchange with those of the Exchange’s
affiliates, Nasdaq ISE, LLC (‘‘ISE’’),
Nasdaq GEMX, LLC (‘‘GEMX’’), and
Nasdaq MRX, LLC (‘‘MRX’’), (ii) modify
Director categorizations, (iii) update
compositional requirements of the
Regulatory Oversight Committee
(‘‘ROC’’), and (iv) make additional, nonsubstantive edits. Each change is
discussed below.
LLC Agreement
The Exchange proposes to modify a
number of provisions in its LLC
Agreement related to the regulatory
independence of the Exchange. As
discussed below, the Exchange believes
that the proposed changes will make
these provisions more robust and will
serve to align the Exchange’s LLC
Agreement with the LLC Agreements of
its affiliates, ISE, GEMX, and MRX.
• Distributions: The Exchange
currently has distribution provisions in
Section 14 of the LLC Agreement that
prohibits the Exchange from making
distributions to its stockholder (i.e.,
Nasdaq, Inc.), using Regulatory Funds.3
The Exchange now proposes to amend
this provision to substantively conform
to Section 15 in the ISE, GEMX, and
MRX LLC Agreements by specifying that
Regulatory Funds shall not be used for
non-regulatory purposes, but rather
shall be used to fund the legal,
regulatory and surveillance operations
of the Exchange. The Exchange believes
these are minor changes that make the
distribution provisions more robust by
specifying how Regulatory Funds may
be used. Lastly, the Exchange proposes
to add that it would not be required to
make a distribution to the stockholder if
such distribution would otherwise be
required to fulfill the regulatory
3 ‘‘Regulatory Funds’’ means fees, fines, or
penalties derived from the regulatory operations of
the Exchange. ‘‘Regulatory Funds’’ shall not be
construed to include revenues derived from listing
fees, market data revenues, transaction revenues, or
any other aspect of the commercial operations of
the Exchange, even if a portion of such revenues are
used to pay costs associated with the regulatory
operations of the Exchange. See By-Law Article I,
Section (ii). The definition of Regulatory Funds is
not changing under this proposal.
PO 00000
Frm 00109
Fmt 4703
Sfmt 4703
functions or responsibilities of the
Exchange.
• Books and Records: Section 15 of
the LLC Agreement presently sets forth
certain information relating to general
administrative matters with respect to
the books and records of the Exchange,
including requirements as to where the
Exchange’s books and records are kept,
the maintenance of such books and
records, and inspection rights, among
other provisions. The Exchange
proposes to amend Section 15 to add
substantively conforming language as
set forth in Section 16 of the LLC
Agreements of ISE, GEMX, and MRX by
providing that all confidential
information relating to the selfregulatory function of the Exchange
(including but not limited to
disciplinary matters, trading data,
trading practices and audit information)
contained in the books and records of
the Exchange shall: (i) Not be made
available to any persons other than to
those officers, directors, employees and
agents of the Exchange that have a
reasonable need to know the contents
thereof, (ii) be retained in confidence by
the Exchange and the officers, directors,
employees and agents of the Exchange,
and (iii) must not be used for any nonregulatory purpose. Furthermore, the
Exchange proposes to add, similar to the
ISE, GEMX, and MRX LLC Agreements,
that nothing in the LLC Agreement shall
be interpreted as to limit or impede the
rights of the Commission to access and
examine such confidential information
pursuant to federal securities laws and
the rules and regulations thereunder, or
to limit or impede the ability of any
officers, directors, employees or agents
of the Exchange to disclose such
confidential information to the
Commission. The Exchange believes
that the proposed changes will add
more specificity as to who may access
the Exchange’s books and records,
especially relating to confidential
information on the self-regulatory
function of the Exchange, and the use of
such information.
• Assignments: Section 20 of the LLC
Agreement currently prohibits the
Exchange’s stockholder from
transferring or assigning in whole or in
part its limited liability company
interest in the Exchange, except to an
affiliate of the stockholder. The
Exchange now proposes to provide in
Section 20 that any transfer or
assignment by the stockholder of its
equity ownership interest in the
Exchange is prohibited unless it is filed
and approved by the Commission
pursuant to a rule filing, and to delete
the stockholder affiliate exception to the
general prohibition on transfers and
E:\FR\FM\09OCN1.SGM
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]]>Agencies
[Federal Register Volume 84, Number 196 (Wednesday, October 9, 2019)]
[Notices]
[Pages 54205-54210]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-22010]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-87209; File No. SR-PEARL-2019-26]
Self-Regulatory Organizations; MIAX PEARL, LLC; Notice of Filing
and Immediate Effectiveness of a Proposed Rule Change To Amend the MIAX
PEARL Fee Schedule
October 3, 2019.
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 September 20, 2019, 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.
---------------------------------------------------------------------------
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 MIAX PEARL Fee
Schedule (the ``Fee Schedule'') to establish Application Programming
Interface (``API'') Testing and Certification fees.
The Exchange previously filed to establish API Testing and
Certification fees on June 28, 2019 (SR-PEARL-2019-22).\3\ That filing
was withdrawn on August 27, 2019. It is replaced with the current
filing (SR-PEARL-2019-26).
---------------------------------------------------------------------------
\3\ See Securities Exchange Act Release No. 86363 (July 12,
2019), 84 FR 34445 (July 18, 2019) (SR-PEARL-2019-22) (the ``Second
Proposed Rule Change'').
---------------------------------------------------------------------------
The text of the proposed rule change is available on the Exchange's
website at https://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
[[Page 54206]]
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 API
Testing and Certification fees for Members \4\ and non-Members. MIAX
PEARL commenced operations as a national securities exchange registered
under Section 6 of the Act \5\ on February 6, 2017.\6\ The Exchange
adopted its transaction fees and certain of its non-transaction fees in
its filing SR-PEARL-2017-10.\7\ In that filing, the Exchange expressly
waived API Testing and Certification fees for Members and non-Members
to provide an incentive to prospective Members and non-Members to
engage in early API testing and certification to be able to utilize the
services of MIAX PEARL as soon as possible. At that time, the Exchange
waived API Testing and Certification fees for the Waiver Period \8\ and
stated that it would provide notice to market participants when the
Exchange intended to terminate the Waiver Period.
---------------------------------------------------------------------------
\4\ ``Member'' means an individual or organization that is
registered with the Exchange pursuant to Chapter II of the Exchange
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\ 15 U.S.C. 78f.
\6\ See Securities Exchange Act Release No. 79543 (December 13,
2016), 81 FR 92901 (December 20, 2016) (File No. 10-227) (order
approving application of MIAX PEARL, LLC for registration as a
national securities exchange).
\7\ See Securities Exchange Act Release No. 80061 (February 17,
2017), 82 FR 11676 (February 24, 2017) (SR-PEARL-2017-10).
\8\ ``Waiver Period'' means, for each applicable fee, the period
of time from the initial effective date of the MIAX PEARL Fee
Schedule until such time that the Exchange has an effective fee
filing establishing the applicable fee. The Exchange will issue a
Regulatory Circular announcing the establishment of an applicable
fee that was subject to a Waiver Period at least fifteen (15) days
prior to the termination of the Waiver Period and effective date of
any such applicable fee. See the Definitions Section of the Fee
Schedule.
---------------------------------------------------------------------------
On March 14, 2019, the Exchange issued a Regulatory Circular which
announced that the Exchange would terminate the Waiver Period for API
Testing and Certification fees, among other non-transaction fees,
beginning on April 1, 2019.\9\ The Exchange initially filed the
proposal to adopt API Testing and Certification fees, certain other
non-transaction fees, and to terminate the three-month New Member Non-
Transaction Fee Waiver \10\ on March 27, 2019, designating the proposed
fees effective April 1, 2019.\11\ The First Proposed Rule Change was
published for comment in the Federal Register on April 12, 2019.\12\
The proposed fees remained in effect until the Exchange withdrew the
First Proposed Rule Change on May 20, 2019.\13\
---------------------------------------------------------------------------
\9\ See MIAX PEARL Regulatory Circular 2019-09 available at
https://www.miaxoptions.com/sites/default/files/circular-files/MIAX_PEARL_RC_2019_09.pdf.
\10\ ``New Member Non-Transaction Fee Waiver'' means the waiver
of certain non-transaction fees, as explicitly set forth in specific
sections of the Fee Schedule, for a new Member of the Exchange, for
the waiver period. For purposes of this definition, the waiver
period consists of the calendar month the new Member is credentialed
to use the System in the production environment following approval
as a new Member of the Exchange and the two (2) subsequent calendar
months thereafter. For purposes of this definition, a new Member
shall mean any Member who has not previously been approved as a
Member of the Exchange. See the Definitions Section of the Fee
Schedule.
\11\ See Securities Exchange Act Release No. 85541 (April 8,
2019), 84 FR 14983 (April 12, 2019) (SR-PEARL-2019-12) (the ``First
Proposed Rule Change'').
\12\ See id.
\13\ See Letter from Gregory P. Ziegler, AVP and Senior
Associate Counsel, MIAX PEARL, LLC, to Vanessa Countryman, Acting
Secretary, Commission, dated May 17, 2019.
---------------------------------------------------------------------------
The Exchange refiled the proposal on June 28, 2019, designating the
proposed fees effective July 1, 2019.\14\ The Second Proposed Rule
Change was published for comment in the Federal Register on July 18,
2019.\15\ The proposed fee changes remained in effect until the
Exchange withdrew the Second Proposed Rule Change on August 27,
2019.\16\
---------------------------------------------------------------------------
\14\ See supra note 3.
\15\ See id.
\16\ See Letter from Joseph Ferraro, SVP and Deputy General
Counsel, MIAX PEARL, LLC, to Vanessa Countryman, Acting Secretary,
Commission, dated August 26, 2019.
---------------------------------------------------------------------------
The Exchange is now re-filing the proposal to establish API Testing
and Certification fees for Members and non-Members. The Exchange will
file separate proposals to establish certain other non-transaction fees
and to terminate the New Member Non-Transaction Fee Waiver and remove
the definitions for the Waiver Period and New Member Non-Transaction
Fee Waiver from the Fee Schedule.
API Testing and Certification Fees for Members
The Exchange proposes to adopt an API Testing and Certification fee
for Members. An API makes it possible for Member software to
communicate with MIAX PEARL software applications, and is subject to
Member testing with, and certification by, MIAX PEARL. API testing and
certification includes, for Electronic Exchange Members \17\
(``EEMs''), testing all available order types, new order entry, order
management, order throughput and mass order cancellation. For Market
Makers,\18\ API testing and certification also includes testing of all
available quote types, quote throughput, quote management and
cancellation, Aggregate Risk Manager settings and triggers, and
confirmation of quotes within the trading engines.
---------------------------------------------------------------------------
\17\ ``Electronic Exchange Member'' or ``EEM'' means the holder
of a Trading Permit who is a Member representing as agent Public
Customer Orders or Non-Customer Orders on the Exchange and those
non-Market Maker Members conducting proprietary trading. Electronic
Exchange Members are deemed ``members'' under the Exchange Act. See
Exchange Rule 100. See the Definitions Section of the Fee Schedule.
\18\ ``Market Maker'' means a Member registered with the
Exchange for the purpose of making markets in options contracts
traded on the Exchange and that is vested with the rights and
responsibilities specified in Chapter VI of Exchange Rules. See
Exchange Rule 100. See the Definitions Section of the Fee Schedule.
---------------------------------------------------------------------------
The API Testing and Certification fees for Members are based upon
the type of interface that the Member has been credentialed to use. The
Exchange proposes to adopt an API testing and certification fee for
Members (i) initially per API for FIX,\19\ MEO,\20\ FXD \21\ and CTD
\22\ in the month the Member has been credentialed to use one or more
ports in the production environment for the tested API, and (ii) each
time a Member initiates a change to its system that requires testing
and certification. The Exchange also proposes that API Testing and
Certification fees will not be assessed in situations where the
[[Page 54207]]
Exchange initiates a mandatory change to the Exchange's System \23\
that requires testing and certification.
---------------------------------------------------------------------------
\19\ ``FIX Interface'' means the Financial Information Exchange
interface for certain order types as set forth in Exchange Rule 516.
See Exchange Rule 100. See the Definitions Section of the Fee
Schedule.
\20\ ``MEO Interface'' means a binary order interface for
certain order types as set forth in Rule 516 into the MIAX PEARL
System. See Exchange Rule 100. See the Definitions Section of the
Fee Schedule.
\21\ ``FXD Interface'' or ``FIX Drop Copy Port'' means a
messaging interface that provides a copy of real-time trade
execution, trade correction and trade cancellation information to
FIX Drop Copy Port users who subscribe to the service. FXD Port
users are those users who are designated by an EEM to receive the
information and the information is restricted for use by the EEM
only. See the Definitions Section of the Fee Schedule.
\22\ ``CTD Port'' or ``Clearing Trade Drop Port'' provides an
Exchange Member with a real-time clearing trade updates. The updates
include the Member's clearing trade messages on a low latency, real-
time basis. The trade messages are routed to a Member's connection
containing certain information. The information includes, among
other things, the following: (i) Trade date and time; (ii) symbol
information; (iii) trade price/size information; (iv) Member type
(for example, and without limitation, Market Maker, Electronic
Exchange Member, Broker-Dealer); and (v) Exchange MPID for each side
of the transaction, including Clearing Member MPID. See the
Definitions Section of the Fee Schedule.
\23\ The term ``System'' means the automated trading system used
by the Exchange for the trading of securities. See Exchange Rule
100.
---------------------------------------------------------------------------
Any Member can select any type of interface (FIX Interface, MEO
Interface, FXD Interface, and/or the CTD Port) to test and certify. The
Exchange proposes the following fees: Each Member who uses the FIX
Interface to connect to the System will be assessed an API Testing and
Certification fee of $1,000; each Member who uses the MEO Interface to
connect to the System will be assessed an API Testing and Certification
fee of $1,500; each Member who uses the FXD Interface to connect to the
system will be assessed an API Testing and Certification fee of $500;
and each Member who uses the CTD Port to connect to the system will be
assessed an API Testing and Certification fee of $500.
Below is the proposed fee table for API Testing and Certification
fees for Members:
------------------------------------------------------------------------
API testing
and
Type of interface certification
fee
------------------------------------------------------------------------
FIX..................................................... $1,000.00
MEO..................................................... 1,500.00
FXD..................................................... 500.00
CTD..................................................... 500.00
------------------------------------------------------------------------
API Testing and Certification Fees will be assessed (i) initially
per API for FIX, MEO, FXD and CTD in the month the Member has been
credentialed to use one or more ports in the production environment for
the tested API, and (ii) each time a Member initiates a change to its
system that requires testing and certification. API Testing and
Certification Fees will not be assessed in situations where the
Exchange initiates a mandatory change to the Exchange's system that
requires testing and certification.
API Testing and Certification Fee for Non-Members
The Exchange proposes to adopt an API Testing and Certification fee
for Third Party Vendors,\24\ Service Bureaus \25\ and other non-Members
(such as clearing firms) (i) initially per API for FIX, MEO, FXD, and
CTD in the month the non-Member has been credentialed to use one or
more ports in the production environment for the tested API, and (ii)
each time a Third Party Vendor, Service Bureau, or other non-Member
initiates a change to its system that requires testing and
certification. The Exchange also proposes that API Testing and
Certification fees will not be assessed to non-Members in situations
where the Exchange initiates a mandatory change to the Exchange's
System that requires testing and certification.
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\24\ Third party vendors are subscribers of MIAX PEARL's market
and other data feeds, which they in turn use for redistribution
purposes. Third party vendors do not provide connectivity and
therefore are not subject to Network testing and certification. See
the Definitions Section of the Fee Schedule.
\25\ ``Service Bureau'' means a technology provider that offers
and supplies technology and technology services to a trading firm
that does not have its own proprietary system. See the Definitions
Section of the Fee Schedule.
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The Exchange proposes to adopt API Testing and Certification fees
for non-Members based upon the type of interface used by the non-Member
to connect to the Exchange--the FIX Interface, the MEO Interface, the
FXD Interface, and/or the CTD Port. Any non-Member can select any type
of interface (FIX Interface, MEO Interface, FXD Interface, and/or the
CTD Port) to test and certify. As with Members, an API makes it
possible for Third Party Vendors' and Service Bureaus' software to
communicate with MIAX PEARL's software applications, and is subject to
testing with, and certification by, MIAX PEARL. The higher proposed fee
charged to non-Members reflects the greater amount of time spent by
MIAX PEARL employees testing and certifying non-Members. It has been
MIAX PEARL's experience that Member testing takes less time than non-
Member testing because Members have more experience testing these
systems with exchanges, resulting in generally fewer questions and
issues arising during the testing and certification process. Also,
because Third Party Vendors and Service Bureaus are redistributing data
and reselling services to other Members and market participants, the
number and types of scenarios that need to be tested are more numerous
and complex than those tested and certified for a single Member.
The Exchange proposes the following fees: each non-Member who uses
the FIX Interface to connect to the System will be assessed an API
Testing and Certification fee of $1,200; each non-Member who uses the
MEO Interface to connect to the System will be assessed an API Testing
and Certification fee of $2,000; each non-Member who uses the FXD
Interface to connect to the system will be assessed an API Testing and
Certification fee of $600; and each non-Member who uses the CTD Port to
connect to the system will be assessed an API Testing and Certification
fee of $600.
Below is the proposed fee table for API Testing and Certification
fees for non-Members:
------------------------------------------------------------------------
API testing
and
Type of interface certification
fee
------------------------------------------------------------------------
FIX..................................................... $1,200.00
MEO..................................................... 2,000.00
FXD..................................................... 600.00
CTD..................................................... 600.00
------------------------------------------------------------------------
API Testing and Certification Fees for Third Party Vendors, Service
Bureaus and other non-Members will be assessed (i) initially per API
for FIX, MEO, FXD, and CTD in the month the non-Member has been
credentialed to use one or more ports in the production environment for
the tested API, and (ii) each time a Third Party Vendor, Service
Bureau, or other non-Member initiates a change to its system that
requires testing and certification. API Testing and Certification Fees
will not be assessed in situations where the Exchange initiates a
mandatory change to the Exchange's system that requires testing and
certification.
The Exchange believes it is necessary to charge an API Testing and
Certification fee to Members and non-Members because of the time and
resources spent to ensure that Member and non-Member APIs function
correctly to prevent any System malfunction. Further, the Exchange
believes the price differential in API Testing and Certification fees
for Members and non-Members is not unfairly discriminatory because, in
the Exchange's experience, Member testing takes less time than non-
Member testing as Members have more experience testing these systems
with exchanges, resulting generally in fewer questions and issues
arising during the testing and certification process.
The Commission has repeatedly expressed its 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.'' \26\
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\26\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496 (June 29, 2005).
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There are currently 16 registered options exchanges competing for
order flow. Based on publicly-available information, and excluding
index-based options, no single exchange has more
[[Page 54208]]
than approximately 16% market share.\27\ Therefore, no exchange
possesses significant pricing power. More specifically, as of September
9, 2019, the Exchange had an approximately 5.30% market share of
executed volume of multiply-listed equity and exchange traded fund
(``ETF'') options.\28\ The Exchange believes that the ever-shifting
market share among the exchanges from month to month demonstrates that
market participants can discontinue or reduce use of certain categories
of products, or shift order flow, in response to non-transaction and
transaction fee changes. For example, on September 28, 2018, the
Exchange filed with the Commission a proposal to decrease a transaction
fee for certain types of orders (which fee was to be effective October
1, 2018).\29\ The Exchange experienced an increase in total market
share in the month of October 2018, after the proposal went into
effect. Accordingly, the Exchange believes that the October 1, 2018 fee
change, decreasing a transaction fee, may have contributed to the
increase in the Exchange's market share and, as such, the Exchange
believes competitive forces constrain MIAX PEARL's, and other options
exchanges, ability to set non-transaction and transaction fees and
market participants can shift order flow based on fee changes
instituted by the exchanges.
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\27\ The Options Clearing Corporation (``OCC'') publishes
options and futures volume in a variety of formats, including daily
and monthly volume by exchange, available here: https://www.theocc.com/market-data/volume/default.jsp.
\28\ See id.
\29\ See Securities Exchange Act Release No. 84387 (October 9,
2018), 83 FR 52039 (October 15, 2018) (SR-PEARL-2018-21).
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Further, as there are currently 16 registered options exchanges
competing for order flow with no single exchange accounting for more
than approximately 16% of market share,\30\ the Exchange cannot predict
with certainty whether any market participant is planning to utilize
any of the services of the Exchange such that API testing and
certification would be required, in which the Member or non-Member
would be subject to the proposed API Testing and Certification fees
established herein.
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\30\ See supra note 27.
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2. Statutory Basis
The Exchange believes that its proposal to amend its Fee Schedule
is consistent with Section 6(b) of the Act \31\ in general, and
furthers the objectives of Section 6(b)(4) of the Act \32\ in
particular, in that it is an equitable allocation of reasonable dues,
fees and other charges among its members and issuers and other persons
using its facilities. The Exchange also believes the proposal furthers
the objectives of Section 6(b)(5) of the Act in that it is designed to
promote just and equitable principles of trade, 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 is not designed to permit unfair discrimination between
customers, issuers, brokers and dealers.
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\31\ 15 U.S.C. 78f(b).
\32\ 15 U.S.C. 78f(b)(4) and (5).
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The Exchange believes its proposal to adopt API Testing and
Certification fees provides for the equitable allocation of reasonable
dues and fees and is not unfairly discriminatory for the following
reasons. First, the Exchange operates in a highly competitive market.
The Commission has repeatedly expressed its 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.'' \33\ There are currently 16 registered options
exchanges competing for order flow. Based on publicly-available
information, and excluding index-based options, no single exchange has
more than approximately 16% of the market share of executed volume of
multiply-listed equity and ETF options.\34\ Therefore, no exchange
possesses significant pricing power. More specifically, as of September
9, 2019, the Exchange had approximately a 5.30% market share of
executed volume of multiply-listed equity and ETF options.\35\
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\33\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496 (June 29, 2005).
\34\ The Options Clearing Corporation (``OCC'') publishes
options and futures volume in a variety of formats, including daily
and monthly volume by exchange, available here: https://www.theocc.com/market-data/volume/default.jsp.
\35\ See id.
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The Exchange also believes that the ever-shifting market share
among the exchanges from month to month demonstrates that market
participants can discontinue or reduce use of certain categories of
products, or shift order flow, in response to non-transaction and
transaction fee changes. For example, on September 28, 2018, the
Exchange filed with the Commission a proposal to decrease a transaction
fee for certain types of orders (which fee was to be effective October
1, 2018).\36\ The Exchange experienced an increase in total market
share in the month of October 2018, after the proposal went into
effect. Accordingly, the Exchange believes that the October 1, 2018 fee
change, decreasing a transaction fee, may have contributed to the
increase in the Exchange's market share and, as such, the Exchange
believes competitive forces constrain MIAX PEARL's, and other options
exchanges, ability to set non-transaction and transaction fees and
market participants can shift order flow based on fee changes
instituted by the exchanges.
---------------------------------------------------------------------------
\36\ See Securities Exchange Act Release No. 84387 (October 9,
2018), 83 FR 52039 (October 15, 2018) (SR-PEARL-2018-21).
---------------------------------------------------------------------------
Second, the Exchange believes its proposal to adopt API Testing and
Certification fees for Member and non-Members is an equitable
allocation of reasonable dues and fees pursuant to Section 6(b)(4) of
the Act \37\ because of the time and resources spent to ensure that
Member and non-Member APIs function correctly to prevent any System
malfunction. Further, the Exchange believes the price differential in
API Testing and Certification fees for Members and non-Members is not
unfairly discriminatory because, in the Exchange's experience, Member
testing utilizes less Exchange resources and employee time than non-
Member testing as Members have more experience testing these systems
with exchanges, resulting generally in fewer questions and issues
arising during the testing and certification process. Also, with
respect to API testing and certification, because Third Party Vendors
and Service Bureaus are redistributing data and reselling services to
other Members and market participants the number and types of scenarios
that need to be tested are more numerous and complex than those tested
and certified for Members.
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\37\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------
Accordingly, the Exchange no longer believes it is necessary to
waive API Testing and Certification fees to attract market participants
to the MIAX PEARL market since this market is now established and MIAX
PEARL no longer needs to rely on such waivers to attract market
participants. The Exchange believes its proposed API Testing and
Certification fees are reasonable and well within the range of non-
transaction fees assessed among other exchanges, including the
Exchange's affiliate, Miami International Securities Exchange, LLC
(``MIAX).\38\
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\38\ See the MIAX Options Fee Schedule, Section (4)a and (4)b.
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[[Page 54209]]
Finally, the Exchange notes that it operates in a highly
competitive market in which market participants can readily favor
competing venues if they deem fee levels at a particular venue to be
excessive. In such an environment, the Exchange must continually adjust
its fees for services and products, in addition to order flow, to
remain competitive with other exchanges. The Exchange believes that the
proposed changes reflect this competitive environment.
B. Self-Regulatory Organization's Statement on Burden on Competition
MIAX PEARL does not believe that the proposed rule change will
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act.
Intra-Market Competition
The Exchange does not believe that the proposed rule change would
place certain market participants at the Exchange at a relative
disadvantage compared to other market participants or affect the
ability of such market participants to compete. Unilateral action by
MIAX PEARL in the assessment of certain non-transaction fees for
services provided to its Members and others using its facilities will
not have an impact on competition. As a more recent entrant in the
already highly competitive environment for equity options trading, MIAX
PEARL does not have the market power necessary to set prices for
services that are unreasonable or unfairly discriminatory in violation
of the Act. MIAX PEARL's proposed API Testing and Certification fee
levels, as described herein, are comparable to fee levels charged by
other options exchanges for the same or similar services, including
those fees assessed by the Exchange's affiliate, MIAX.\39\
---------------------------------------------------------------------------
\39\ See the MIAX Options Fee Schedule.
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The Exchange believes that the proposed API Testing and
Certification fees do not place certain market participants at a
relative disadvantage to other market participants because the fees do
not apply unequally to different size market participants, but instead
would allow the Exchange charge for the time and resource necessary for
API testing and certification for Members and non-Members to ensure
proper functioning of all available order types, new order entry, order
management, order throughput and mass order cancellation (as well as,
for Market Makers, all available quote types, quote throughput, quote
management and cancellation, Aggregate Risk Manager settings and
triggers, and confirmation of quotes within the trading engines).
Accordingly, the proposed API Testing and Certification fees do not
favor certain categories of market participants in a manner that would
impose a burden on competition.
Inter-Market Competition
The Exchange believes the proposed API Testing and Certification
fees do not place an undue burden on competition on other SROs that is
not necessary or appropriate. The Exchange operates in a highly
competitive market in which market participants can readily favor one
of the 16 competing options venues if they deem fee levels at a
particular venue to be excessive.\40\ Based on publicly-available
information, and excluding index-based options, no single exchange has
more than 16% market share. Therefore, no exchange possesses
significant pricing power in the execution of multiply-listed equity
and ETF options order flow. As of September 9, 2019, the Exchange had
an approximately 5.30% market share \41\ and the Exchange believes that
the ever-shifting market share among exchanges from month to month
demonstrates that market participants can discontinue or reduce use of
certain categories of products, or shift order flow, in response to fee
changes. In such an environment, the Exchange must continually adjust
its fees and fee waivers to remain competitive with other exchanges and
to attract order flow to the Exchange.
---------------------------------------------------------------------------
\40\ See supra note 34.
\41\ Id.
---------------------------------------------------------------------------
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,\42\ and Rule 19b-4(f)(2) \43\ 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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\42\ 15 U.S.C. 78s(b)(3)(A)(ii).
\43\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------
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-2019-26 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-2019-26. 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 10:00 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-2019-26 and should be submitted on
or before October 30, 2019.
[[Page 54210]]
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\44\
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\44\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-22010 Filed 10-8-19; 8:45 am]
BILLING CODE 8011-01-P
