Self-Regulatory Organizations; MIAX PEARL, LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend the MIAX PEARL Fee Schedule, 56215-56219 [2019-22830]

Download as PDF khammond on DSKJM1Z7X2PROD with NOTICES Federal Register / Vol. 84, No. 203 / Monday, October 21, 2019 / Notices free to choose which competing product to purchase to satisfy their need for market information. Often, the choice comes down to price, as broker-dealers or vendors look to purchase the cheapest top of book data product, or quality, as market participants seek to purchase data that represents significant market liquidity. In order to better compete for this segment of the market, the Exchange is proposing to reduce the cost of top of book data provided by small retail brokers to their retail investor clients. The Exchange believes that this would facilitate greater access to such data, ultimately benefiting the retail investors that are provided access to such market data. The Exchange does not believe that this price reduction would cause any unnecessary or inappropriate burden on intermarket competition as other exchanges and data vendors are free to lower their prices to better compete with the Exchange’s offering. Indeed, as explained in the basis section of this proposed rule change, the Exchange’s decision to lower its distribution and consolidation fees for small retail brokers is itself a competitive response to different fee structures available on competing markets. The Exchange therefore believes that the proposed rule change is pro-competitive as it seeks to offer pricing incentives to customers to better position the Exchange as it competes to attract additional market data subscribers. The Exchange also believes that the proposed reduction in fees for small retail brokers would not cause any unnecessary or inappropriate burden on intramarket competition. Although the proposed fee discount would be largely limited to small retail broker subscribers, larger broker-dealers and vendors can already purchase top of book data from the Exchange at prices that represent a significant cost savings when compared to competitor products that combine higher subscriber fees with lower fees for distribution. In light of the benefits already provided to this group of subscribers, the Exchange believes that additional discounts to small retail brokers would increase rather than decrease competition among broker-dealers that participate on the Exchange. Furthermore, as discussed earlier in this proposed rule change, the Exchange believes that offering pricing benefits to brokers that represent retail investors facilitates the Commission’s mission of protecting ordinary investors, and is therefore consistent with the Act. VerDate Sep<11>2014 16:52 Oct 18, 2019 Jkt 250001 C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were either solicited or received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing rule change has become effective pursuant to Section 19(b)(3)(A) of the Act 24 and paragraph (f) of Rule 19b–4 25 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 will institute proceedings to determine whether the proposed rule change 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– CboeBYX–2019–015 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–CboeBYX–2019–015. 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–CboeBYX–2019–015 and should be submitted on or before November 12, 2019. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.26 Jill M. Peterson, Assistant Secretary. [FR Doc. 2019–22831 Filed 10–18–19; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–87308; File No. SR– PEARL–2019–31] 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 15, 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 October 1, 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. 26 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 1 15 24 15 U.S.C. 78s(b)(3)(A). 25 17 CFR 240.19b–4(f). PO 00000 Frm 00056 Fmt 4703 Sfmt 4703 56215 E:\FR\FM\21OCN1.SGM 21OCN1 56216 Federal Register / Vol. 84, No. 203 / Monday, October 21, 2019 / Notices 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 remove the application of, and definitions for, nontransaction fee waivers and waiver periods. The Exchange previously filed this proposal 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–2019–31). 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 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 khammond on DSKJM1Z7X2PROD with NOTICES The Exchange proposes to amend the Fee Schedule to remove the text and application of the three-month New Member Non-Transaction Fee Waiver 4 and Waiver Period.5 MIAX PEARL 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’’). 4 ‘‘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. 5 ‘‘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 VerDate Sep<11>2014 16:52 Oct 18, 2019 Jkt 250001 commenced operations as a national securities exchange registered under Section 6 of the Act 6 on February 6, 2017.7 The Exchange adopted its transaction fees and certain of its nontransaction fees in its filing SR–PEARL– 2017–10.8 In that filing, the Exchange expressly adopted the definition and application of the Waiver Period pertaining to fees for the Application for MIAX PEARL Membership, Monthly Trading Permit fees, Application Programming Interface (‘‘API’’) Testing and Certification fees for Members 9 and non-Members, Port fees, MIAX PEARL Member Participant Identifier (‘‘MPID’’) 10 fees, and MIAX PEARL Top of Market (‘‘ToM’’) and MIAX PEARL Liquidity Feed (‘‘PLF’’) market data fees.11 The Exchange also stated that it would provide notice to market participants when the Exchange intended to terminate the Waiver Period for such fees.12 The Exchange adopted the three-month New Member NonTransaction Fee Waiver in the filing SR– PEARL–2018–07,13 which applied to the Monthly Trading Permit fee, Port fees, and ToM and PLF market data fees. On March 14, 2019, the Exchange issued a Regulatory Circular that the Exchange would be removing the text and application of the New Member Non-Transaction Fee Waiver as it applied to all relevant non-transaction fees, including the Monthly Trading Permit fee, Port fees, ToM and PLF market data fees, and establishing other non-transaction fees, beginning April 1, 2019.14 The Exchange initially filed the 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. 6 15 U.S.C. 78f. 7 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). 8 See Securities Exchange Act Release No. 80061 (February 17, 2017), 82 FR 11676 (February 24, 2017) (SR–PEARL–2017–10). 9 ‘‘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. 10 An MPID is a code used in the MIAX PEARL system to identify the participant to MIAX PEARL and to the participant’s Clearing Member respecting trades executed on MIAX PEARL. Participants may use more than one MPID. 11 See supra note 8. 12 See id. 13 See Securities Exchange Act Release No. 82867 (March 13, 2018), 83 FR 12044 (March 19, 2018) (SR–PEARL–2018–07). 14 See MIAX PEARL Regulatory Circular 2019–09 available at https://www.miaxoptions.com/sites/ PO 00000 Frm 00057 Fmt 4703 Sfmt 4703 proposal on March 27, 2019, designating the proposed fees effective April 1, 2019.15 The First Proposed Rule Change was published for comment in the Federal Register on April 12, 2019.16 The proposed fees remained in effect until the Exchange withdrew the First Proposed Rule Change on May 20, 2019.17 The Exchange refiled the proposal on June 28, 2019, designating the proposed fees effective July 1, 2019.18 The Second Proposed Rule Change was published for comment in the Federal Register on July 18, 2019.19 The proposed fee changes remained in effect until the Exchange withdrew the Second Proposed Rule Change on August 27, 2019.20 On September 20, 2019, the Exchange filed separate proposals to establish API Testing and Certification fees 21 and fees for the one-time Application for MIAX PEARL Membership.22 On October 1, 2019, the Exchange also filed to separately establish MPID fees.23 The Exchange is now refiling the proposal to remove the text and application of the New Member NonTransaction Fee Waiver and Waiver Period for all remaining non-transaction fees in the Fee Schedule. In particular, the Exchange proposes to remove the New Member Non-Transaction Fee Waiver as it currently applies to the Monthly Trading Permit fee; Port fees; and ToM and PLF market data fees. The Exchange also proposes to amend the Definitions section of the Fee Schedule to delete the definitions of ‘‘New Member Non-Transaction Fee Waiver’’ and ‘‘Waiver Period’’ as those definitions would no longer be applicable in accordance with this proposal, and the Exchange’s previous filings to establish API Testing and Certification fees,24 fees for the one-time default/files/circular-files/MIAX_PEARL_RC_2019_ 09.pdf. 15 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’’). 16 See id. 17 See Letter from Gregory P. Ziegler, AVP and Senior Associate Counsel, MIAX PEARL, LLC, to Vanessa Countryman, Acting Secretary, Commission, dated May 17, 2019. 18 See supra note 3. 19 See id. 20 See Letter from Joseph Ferraro, SVP and Deputy General Counsel, MIAX PEARL, LLC, to Vanessa Countryman, Acting Secretary, Commission, dated August 26, 2019. 21 See SR–PEARL–2019–26. 22 See SR–PEARL–2019–27. 23 See SR–PEARL–2019–30. 24 See supra note 21. E:\FR\FM\21OCN1.SGM 21OCN1 Federal Register / Vol. 84, No. 203 / Monday, October 21, 2019 / Notices khammond on DSKJM1Z7X2PROD with NOTICES Application for MIAX PEARL Membership,25 and MPID fees.26 First, the Exchange proposes to remove the New Member NonTransaction Fee Waiver from the Fee Schedule. Currently, the New Member Non-Transaction Fee Waiver waives the assessment of a fee for a Trading Permit, Port, ToM or PLF market data feed for a new Member of the Exchange for the first calendar month during which the new Member was approved as a Member and was credentialed to use the System 27 in the production environment, and for the two (2) subsequent calendar months thereafter. The Exchange initially waived certain non-transaction fees for new Members in order to attract new business and encourage Members to use the Exchange. The Exchange now believes that the New Member Non-Transaction Fee Waiver is no longer necessary since the MIAX PEARL market is established and the Exchange no longer needs to rely on such waivers to attract market participants to a new venue. The Exchange notes that any Member who began receiving the benefit of the New Member Non-Transaction Fee Waiver prior to the filing of this proposal, will continue to receive that benefit for the first calendar month during which they were approved as a Member and were credentialed to use the System in the production environment, and for the two (2) subsequent calendar months thereafter. The Exchange also proposes to delete the definition for ‘‘Waiver Period’’ from the Fee Schedule as such term is no longer applicable since the Exchange recently filed to establish API Testing and Certification fees,28 fees for the onetime Application for MIAX PEARL Membership,29 and MPID fees.30 Accordingly, the Exchange is no longer waiving non-transaction fees in light of MIAX PEARL’s market being more established and the Exchange no longer believes it necessary to waive these nontransaction fees to attract market participants to a new venue. 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 25 See supra note 22. supra note 23. 27 The term ‘‘System’’ means the automated trading system used by the exchange for the trading of securities. See Exchange Rule 100. 28 See supra note 21. 29 See supra note 22. 30 See supra note 23. 26 See VerDate Sep<11>2014 16:52 Oct 18, 2019 Jkt 250001 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.’’ 31 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% market share.32 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.33 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 and services, terminate an existing membership or determine to not become a new member, and/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).34 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. The Exchange believes that market participants have the choice to become members of a particular exchange and because it is a choice, MIAX PEARL must set reasonable prices for its services and products, otherwise prospective members would not join and existing members would 31 See Securities Exchange Act Release No. 51808 (June 9, 2005), 70 FR 37496 (June 29, 2005). 32 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. 33 See id. 34 See Securities Exchange Act Release No. 84387 (October 9, 2018), 83 FR 52039 (October 15, 2018) (SR–PEARL–2018–21). PO 00000 Frm 00058 Fmt 4703 Sfmt 4703 56217 discontinue using the Exchange. No options market participant is required by rule, regulation, or competitive forces to be a Member of the Exchange. As evidence of the fact that market participants can discontinue or reduce use of certain categories of products and services, terminate an existing membership or determine to not become a new member, and/or shift order flow, in response to a non-transaction fee change, a participant of the BOX Exchange LLC (‘‘BOX’’) disconnected from BOX following a recent proposal to increase BOX’s connectivity fees. In response to BOX’s proposed fee increase, R2G Services LLC (‘‘R2G’’) filed a comment letter which stated, ‘‘[w]hen BOX instituted a $10,000/ month price increase for connectivity; we had no choice but to terminate connectivity into them as well as terminate our market data relationship. The cost benefit analysis just didn’t make any sense for us at those new levels.’’ 35 Accordingly, this example shows that if an exchange sets too high of a non-transaction fee, market participants can choose to no longer conduct business on that particular exchange. The proposal to remove the text and application of the New Member NonTransaction Fee Waiver and Waiver Period would be applied uniformly to all market participants. The Exchange is not aware of any market participant that is currently planning to become a Member and thus would be subject to the proposed fees. 2. Statutory Basis The Exchange believes that its proposal to amend its Fee Schedule is consistent with Section 6(b) of the Act 36 in general, and furthers the objectives of Section 6(b)(4) of the Act 37 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 35 See Letter from Stefano Durdic, R2G, to Vanessa Countryman, Acting Secretary, Commission, dated March 27, 2019 (the ‘‘R2G Letter’’). 36 15 U.S.C. 78f(b). 37 15 U.S.C. 78f(b)(4) and (5). E:\FR\FM\21OCN1.SGM 21OCN1 khammond on DSKJM1Z7X2PROD with NOTICES 56218 Federal Register / Vol. 84, No. 203 / Monday, October 21, 2019 / Notices permit unfair discrimination between customers, issuers, brokers and dealers. The Exchange believes its proposal to remove the text and application of the New Member Non-Transaction Fee Waiver and Waiver Period as described above is reasonable in several respects. First, the Exchange is subject to significant competitive forces in the market for options transaction and nontransaction services that constrain its pricing determinations in that 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.’’ 38 Numerous indicia demonstrate the competitive nature of this market. For example, clear substitutes to the Exchange exist in the market for options transaction services. The Exchange is one of several options venues to which market participants may direct their order flow, and it represents a small percentage of the overall market. Within this environment, market participants can freely and often do shift their order flow among the Exchange and competing venues in response to changes in their respective pricing schedules. There are currently 16 registered options exchanges competing for order flow. Based on publiclyavailable 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.39 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.40 The Exchange believes that the evershifting market share among the exchanges from month to month demonstrates that market participants can discontinue or reduce use of certain categories of products and services, 38 See Securities Exchange Act Release No. 51808 (June 9, 2005), 70 FR 37496 (June 29, 2005). 39 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. 40 See id. VerDate Sep<11>2014 16:52 Oct 18, 2019 Jkt 250001 terminate an existing membership or determine to not become a new member, and/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).41 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. Another example to show that market participants can discontinue or reduce use of certain categories of products and services, terminate an existing membership or determine to not become a new member, and/or shift order flow, in response to a nontransaction fee change, is that a participant of the BOX disconnected from BOX following a recent proposal to increase BOX’s connectivity fees. In response to BOX’s proposed fee increase, R2G filed a comment letter which stated, ‘‘[w]hen BOX instituted a $10,000/month price increase for connectivity; we had no choice but to terminate connectivity into them as well as terminate our market data relationship. The cost benefit analysis just didn’t make any sense for us at those new levels.’’ 42 Accordingly, this example shows that if an exchange sets too high of a non-transaction fee, market participants can choose to no longer conduct business on that particular exchange. Further, the Exchange no longer believes it is necessary to waive these 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 to a new venue. The Exchange believes that the proposed change is equitable and not unfairly discriminatory because the elimination of the New Member NonTransaction Fee Waiver and Waiver Period will uniformly apply to all market participants of the Exchange. 41 See Securities Exchange Act Release No. 84387 (October 9, 2018), 83 FR 52039 (October 15, 2018) (SR–PEARL–2018–21). 42 See supra note 35. PO 00000 Frm 00059 Fmt 4703 Sfmt 4703 The Exchange initially waived certain non-transaction fees for market participants in order to attract new business and encourage prospective market participants to join the Exchange. The Exchange believes that the New Member Non-Transaction Fee Waiver is no longer necessary since the MIAX PEARL market is established and MIAX PEARL no longer relies on such waivers to attract market participants to a new venue. Further, the proposed rule change will not apply to any new Member who began receiving the New Member Non-Transaction Fee Waiver prior to the filing of this proposal and will continue to receive that benefit for the first calendar month during which they were approved as a Member and were credentialed to use the System in the production environment, and for the two (2) subsequent calendar months thereafter. Further, the Exchange believes its proposal to delete the definition for the Waiver Period in the Fee Schedule is reasonable, equitable, and not unfairly discriminatory because this definition is no longer applicable to any fees in the Fee Schedule in light of the Exchange’s previous filings to establish API Testing and Certification fees,43 fees for the onetime Application for MIAX PEARL Membership,44 and MPID fees.45 The Exchange no longer believes it is necessary to waive these 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 to a new venue. Accordingly, the definition for ‘‘Waiver Period’’ is no longer necessary to include in the Fee Schedule and this proposal will provide market participants with greater clarity regarding the Exchange’s nontransaction and transaction fees. 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. 43 See supra note 21. supra note 22. 45 See supra note 23. 44 See E:\FR\FM\21OCN1.SGM 21OCN1 Federal Register / Vol. 84, No. 203 / Monday, October 21, 2019 / 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. khammond on DSKJM1Z7X2PROD with NOTICES Inter-Market Competition The Exchange believes the proposed non-transaction 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. Based on publicly-available information, and excluding index-based options, no single exchange has more than 16% market share.46 Therefore, no exchange possesses significant pricing power in the execution of multiply-listed and ETF options order flow. As of September 9, 2019, the Exchange had an approximately 5.30% market share 47 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,48 and Rule 19b–4(f)(2) 49 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. 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–2019–31 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–2019–31. 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–2019–31 and should be submitted on or before November 12, 2019. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.50 Jill M. Peterson, Assistant Secretary. [FR Doc. 2019–22830 Filed 10–18–19; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–87301; File No. SR– NYSEArca–2019–39] Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing of Amendment No. 1 to Proposed Rule Change To Amend NYSE Arca Rule 8.201–E (Commodity-Based Trust Shares) and To List and Trade Shares of the United States Bitcoin and Treasury Investment Trust Under NYSE Arca Rule 8.201–E October 15, 2019. On June 12, 2019, NYSE Arca, Inc. (‘‘NYSE Arca’’ or the ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 a proposed rule change to amend NYSE Arca Rule 8.201–E and to list and trade shares of the United States Bitcoin and Treasury Investment Trust under NYSE Arca Rule 8.201–E. The proposed rule change was 50 17 46 See supra note 39. 48 15 U.S.C. 78s(b)(3)(A)(ii). 49 17 CFR 240.19b–4(f)(2). 47 Id. VerDate Sep<11>2014 16:52 Oct 18, 2019 Jkt 250001 PO 00000 Frm 00060 Fmt 4703 Sfmt 4703 56219 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 E:\FR\FM\21OCN1.SGM 21OCN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 84, Number 203 (Monday, October 21, 2019)]
[Notices]
[Pages 56215-56219]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-22830]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-87308; File No. SR-PEARL-2019-31]


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

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[[Page 56216]]

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 remove the application of, and 
definitions for, non-transaction fee waivers and waiver periods.
    The Exchange previously filed this proposal 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-2019-31).
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    \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'').
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    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 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 remove the text 
and application of the three-month New Member Non-Transaction Fee 
Waiver \4\ and Waiver Period.\5\ MIAX PEARL commenced operations as a 
national securities exchange registered under Section 6 of the Act \6\ 
on February 6, 2017.\7\ The Exchange adopted its transaction fees and 
certain of its non-transaction fees in its filing SR-PEARL-2017-10.\8\ 
In that filing, the Exchange expressly adopted the definition and 
application of the Waiver Period pertaining to fees for the Application 
for MIAX PEARL Membership, Monthly Trading Permit fees, Application 
Programming Interface (``API'') Testing and Certification fees for 
Members \9\ and non-Members, Port fees, MIAX PEARL Member Participant 
Identifier (``MPID'') \10\ fees, and MIAX PEARL Top of Market (``ToM'') 
and MIAX PEARL Liquidity Feed (``PLF'') market data fees.\11\ The 
Exchange also stated that it would provide notice to market 
participants when the Exchange intended to terminate the Waiver Period 
for such fees.\12\ The Exchange adopted the three-month New Member Non-
Transaction Fee Waiver in the filing SR-PEARL-2018-07,\13\ which 
applied to the Monthly Trading Permit fee, Port fees, and ToM and PLF 
market data fees.
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    \4\ ``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.
    \5\ ``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.
    \6\ 15 U.S.C. 78f.
    \7\ 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).
    \8\ See Securities Exchange Act Release No. 80061 (February 17, 
2017), 82 FR 11676 (February 24, 2017) (SR-PEARL-2017-10).
    \9\ ``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.
    \10\ An MPID is a code used in the MIAX PEARL system to identify 
the participant to MIAX PEARL and to the participant's Clearing 
Member respecting trades executed on MIAX PEARL. Participants may 
use more than one MPID.
    \11\ See supra note 8.
    \12\ See id.
    \13\ See Securities Exchange Act Release No. 82867 (March 13, 
2018), 83 FR 12044 (March 19, 2018) (SR-PEARL-2018-07).
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    On March 14, 2019, the Exchange issued a Regulatory Circular that 
the Exchange would be removing the text and application of the New 
Member Non-Transaction Fee Waiver as it applied to all relevant non-
transaction fees, including the Monthly Trading Permit fee, Port fees, 
ToM and PLF market data fees, and establishing other non-transaction 
fees, beginning April 1, 2019.\14\ The Exchange initially filed the 
proposal on March 27, 2019, designating the proposed fees effective 
April 1, 2019.\15\ The First Proposed Rule Change was published for 
comment in the Federal Register on April 12, 2019.\16\ The proposed 
fees remained in effect until the Exchange withdrew the First Proposed 
Rule Change on May 20, 2019.\17\
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    \14\ See MIAX PEARL Regulatory Circular 2019-09 available at 
https://www.miaxoptions.com/sites/default/files/circular-files/MIAX_PEARL_RC_2019_09.pdf.
    \15\ 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'').
    \16\ See id.
    \17\ See Letter from Gregory P. Ziegler, AVP and Senior 
Associate Counsel, MIAX PEARL, LLC, to Vanessa Countryman, Acting 
Secretary, Commission, dated May 17, 2019.
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    The Exchange refiled the proposal on June 28, 2019, designating the 
proposed fees effective July 1, 2019.\18\ The Second Proposed Rule 
Change was published for comment in the Federal Register on July 18, 
2019.\19\ The proposed fee changes remained in effect until the 
Exchange withdrew the Second Proposed Rule Change on August 27, 
2019.\20\
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    \18\ See supra note 3.
    \19\ See id.
    \20\ 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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    On September 20, 2019, the Exchange filed separate proposals to 
establish API Testing and Certification fees \21\ and fees for the one-
time Application for MIAX PEARL Membership.\22\ On October 1, 2019, the 
Exchange also filed to separately establish MPID fees.\23\
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    \21\ See SR-PEARL-2019-26.
    \22\ See SR-PEARL-2019-27.
    \23\ See SR-PEARL-2019-30.
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    The Exchange is now refiling the proposal to remove the text and 
application of the New Member Non-Transaction Fee Waiver and Waiver 
Period for all remaining non-transaction fees in the Fee Schedule. In 
particular, the Exchange proposes to remove the New Member Non-
Transaction Fee Waiver as it currently applies to the Monthly Trading 
Permit fee; Port fees; and ToM and PLF market data fees. The Exchange 
also proposes to amend the Definitions section of the Fee Schedule to 
delete the definitions of ``New Member Non-Transaction Fee Waiver'' and 
``Waiver Period'' as those definitions would no longer be applicable in 
accordance with this proposal, and the Exchange's previous filings to 
establish API Testing and Certification fees,\24\ fees for the one-time

[[Page 56217]]

Application for MIAX PEARL Membership,\25\ and MPID fees.\26\
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    \24\ See supra note 21.
    \25\ See supra note 22.
    \26\ See supra note 23.
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    First, the Exchange proposes to remove the New Member Non-
Transaction Fee Waiver from the Fee Schedule. Currently, the New Member 
Non-Transaction Fee Waiver waives the assessment of a fee for a Trading 
Permit, Port, ToM or PLF market data feed for a new Member of the 
Exchange for the first calendar month during which the new Member was 
approved as a Member and was credentialed to use the System \27\ in the 
production environment, and for the two (2) subsequent calendar months 
thereafter.
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    \27\ The term ``System'' means the automated trading system used 
by the exchange for the trading of securities. See Exchange Rule 
100.
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    The Exchange initially waived certain non-transaction fees for new 
Members in order to attract new business and encourage Members to use 
the Exchange. The Exchange now believes that the New Member Non-
Transaction Fee Waiver is no longer necessary since the MIAX PEARL 
market is established and the Exchange no longer needs to rely on such 
waivers to attract market participants to a new venue.
    The Exchange notes that any Member who began receiving the benefit 
of the New Member Non-Transaction Fee Waiver prior to the filing of 
this proposal, will continue to receive that benefit for the first 
calendar month during which they were approved as a Member and were 
credentialed to use the System in the production environment, and for 
the two (2) subsequent calendar months thereafter.
    The Exchange also proposes to delete the definition for ``Waiver 
Period'' from the Fee Schedule as such term is no longer applicable 
since the Exchange recently filed to establish API Testing and 
Certification fees,\28\ fees for the one-time Application for MIAX 
PEARL Membership,\29\ and MPID fees.\30\ Accordingly, the Exchange is 
no longer waiving non-transaction fees in light of MIAX PEARL's market 
being more established and the Exchange no longer believes it necessary 
to waive these non-transaction fees to attract market participants to a 
new venue.
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    \28\ See supra note 21.
    \29\ See supra note 22.
    \30\ See supra note 23.
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    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.'' \31\
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    \31\ 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 than approximately 16% 
market share.\32\ 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.\33\ 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 and services, terminate an 
existing membership or determine to not become a new member, and/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).\34\ 
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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    \32\ 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.
    \33\ See id.
    \34\ See Securities Exchange Act Release No. 84387 (October 9, 
2018), 83 FR 52039 (October 15, 2018) (SR-PEARL-2018-21).
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    The Exchange believes that market participants have the choice to 
become members of a particular exchange and because it is a choice, 
MIAX PEARL must set reasonable prices for its services and products, 
otherwise prospective members would not join and existing members would 
discontinue using the Exchange. No options market participant is 
required by rule, regulation, or competitive forces to be a Member of 
the Exchange. As evidence of the fact that market participants can 
discontinue or reduce use of certain categories of products and 
services, terminate an existing membership or determine to not become a 
new member, and/or shift order flow, in response to a non-transaction 
fee change, a participant of the BOX Exchange LLC (``BOX'') 
disconnected from BOX following a recent proposal to increase BOX's 
connectivity fees. In response to BOX's proposed fee increase, R2G 
Services LLC (``R2G'') filed a comment letter which stated, ``[w]hen 
BOX instituted a $10,000/month price increase for connectivity; we had 
no choice but to terminate connectivity into them as well as terminate 
our market data relationship. The cost benefit analysis just didn't 
make any sense for us at those new levels.'' \35\ Accordingly, this 
example shows that if an exchange sets too high of a non-transaction 
fee, market participants can choose to no longer conduct business on 
that particular exchange.
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    \35\ See Letter from Stefano Durdic, R2G, to Vanessa Countryman, 
Acting Secretary, Commission, dated March 27, 2019 (the ``R2G 
Letter'').
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    The proposal to remove the text and application of the New Member 
Non-Transaction Fee Waiver and Waiver Period would be applied uniformly 
to all market participants. The Exchange is not aware of any market 
participant that is currently planning to become a Member and thus 
would be subject to the proposed fees.
2. Statutory Basis
    The Exchange believes that its proposal to amend its Fee Schedule 
is consistent with Section 6(b) of the Act \36\ in general, and 
furthers the objectives of Section 6(b)(4) of the Act \37\ 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

[[Page 56218]]

permit unfair discrimination between customers, issuers, brokers and 
dealers.
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    \36\ 15 U.S.C. 78f(b).
    \37\ 15 U.S.C. 78f(b)(4) and (5).
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    The Exchange believes its proposal to remove the text and 
application of the New Member Non-Transaction Fee Waiver and Waiver 
Period as described above is reasonable in several respects. First, the 
Exchange is subject to significant competitive forces in the market for 
options transaction and non-transaction services that constrain its 
pricing determinations in that 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.'' \38\
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    \38\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496 (June 29, 2005).
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    Numerous indicia demonstrate the competitive nature of this market. 
For example, clear substitutes to the Exchange exist in the market for 
options transaction services. The Exchange is one of several options 
venues to which market participants may direct their order flow, and it 
represents a small percentage of the overall market. Within this 
environment, market participants can freely and often do shift their 
order flow among the Exchange and competing venues in response to 
changes in their respective pricing schedules. 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.\39\ 
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.\40\
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    \39\ 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.
    \40\ See id.
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    The Exchange believes that the ever-shifting market share among the 
exchanges from month to month demonstrates that market participants can 
discontinue or reduce use of certain categories of products and 
services, terminate an existing membership or determine to not become a 
new member, and/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).\41\ 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. Another example to show that market 
participants can discontinue or reduce use of certain categories of 
products and services, terminate an existing membership or determine to 
not become a new member, and/or shift order flow, in response to a non-
transaction fee change, is that a participant of the BOX disconnected 
from BOX following a recent proposal to increase BOX's connectivity 
fees. In response to BOX's proposed fee increase, R2G filed a comment 
letter which stated, ``[w]hen BOX instituted a $10,000/month price 
increase for connectivity; we had no choice but to terminate 
connectivity into them as well as terminate our market data 
relationship. The cost benefit analysis just didn't make any sense for 
us at those new levels.'' \42\ Accordingly, this example shows that if 
an exchange sets too high of a non-transaction fee, market participants 
can choose to no longer conduct business on that particular exchange. 
Further, the Exchange no longer believes it is necessary to waive these 
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 to a new venue.
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    \41\ See Securities Exchange Act Release No. 84387 (October 9, 
2018), 83 FR 52039 (October 15, 2018) (SR-PEARL-2018-21).
    \42\ See supra note 35.
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    The Exchange believes that the proposed change is equitable and not 
unfairly discriminatory because the elimination of the New Member Non-
Transaction Fee Waiver and Waiver Period will uniformly apply to all 
market participants of the Exchange. The Exchange initially waived 
certain non-transaction fees for market participants in order to 
attract new business and encourage prospective market participants to 
join the Exchange. The Exchange believes that the New Member Non-
Transaction Fee Waiver is no longer necessary since the MIAX PEARL 
market is established and MIAX PEARL no longer relies on such waivers 
to attract market participants to a new venue. Further, the proposed 
rule change will not apply to any new Member who began receiving the 
New Member Non-Transaction Fee Waiver prior to the filing of this 
proposal and will continue to receive that benefit for the first 
calendar month during which they were approved as a Member and were 
credentialed to use the System in the production environment, and for 
the two (2) subsequent calendar months thereafter.
    Further, the Exchange believes its proposal to delete the 
definition for the Waiver Period in the Fee Schedule is reasonable, 
equitable, and not unfairly discriminatory because this definition is 
no longer applicable to any fees in the Fee Schedule in light of the 
Exchange's previous filings to establish API Testing and Certification 
fees,\43\ fees for the one-time Application for MIAX PEARL 
Membership,\44\ and MPID fees.\45\ The Exchange no longer believes it 
is necessary to waive these 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 
to a new venue. Accordingly, the definition for ``Waiver Period'' is no 
longer necessary to include in the Fee Schedule and this proposal will 
provide market participants with greater clarity regarding the 
Exchange's non-transaction and transaction fees.
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    \43\ See supra note 21.
    \44\ See supra note 22.
    \45\ See supra note 23.
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    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.

[[Page 56219]]

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.
Inter-Market Competition
    The Exchange believes the proposed non-transaction 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. Based on publicly-available information, and excluding 
index-based options, no single exchange has more than 16% market 
share.\46\ Therefore, no exchange possesses significant pricing power 
in the execution of multiply-listed and ETF options order flow. As of 
September 9, 2019, the Exchange had an approximately 5.30% market share 
\47\ 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.
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    \46\ See supra note 39.
    \47\ Id.
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C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    Written comments were neither solicited nor received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A)(ii) of the Act,\48\ and Rule 19b-4(f)(2) \49\ 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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    \48\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \49\ 17 CFR 240.19b-4(f)(2).
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IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-PEARL-2019-31 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-2019-31. 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-2019-31 and should be submitted on 
or before November 12, 2019.
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    \50\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\50\
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-22830 Filed 10-18-19; 8:45 am]
 BILLING CODE 8011-01-P

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