Self-Regulatory Organizations; MIAX PEARL, LLC; Notice of Filing of Amendment No. 1 and Order Instituting Proceedings To Determine Whether To Approve or Disapprove a Proposed Rule Change, as Modified by Amendment No. 1, To Establish Rules Governing the Trading of Equity Securities, 29759-29766 [2020-10519]
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Federal Register / Vol. 85, No. 96 / Monday, May 18, 2020 / Notices
PNPP in a systematic manner. For
example, it may take time after the PHE
has ended for security personnel
affected by COVID–19 to fully recover
and return to duty status. Based on the
above, the NRC staff concludes that the
proposed exemption would not
endanger life or property or the common
defense and security.
jbell on DSKJLSW7X2PROD with NOTICES
C. Otherwise in the Public Interest
On April 17, 2020, the Cybersecurity
& Infrastructure Security Agency (CISA)
within the U.S. Department of
Homeland Security (DHS) published
Version 3.0 of its ‘‘Guidance on the
Essential Critical Infrastructure
Workforce: Ensuring Community and
National Resilience in COVID–19
Response.’’ Although that guidance is
advisory in nature, it is designed to
ensure ‘‘continuity of functions critical
to public health and safety, as well as
economic and national security.’’ In
addition, the Centers for Disease Control
and Prevention (CDC) has issued
recommendations (e.g., social
distancing, limiting assemblies) to limit
the spread of COVID–19.
EHNC states, in part, that:
The Energy Harbor Nuclear Corp.
pandemic response plan is based on [the
Nuclear Energy Institute (NEI) guidance
document] NEI 06–03, Pandemic Threat
Planning, Preparation, and Response
Reference Guide (Reference 4), which
recommends isolation strategies such as
sequestering, use of super crews or minimum
staffing as well as social distancing, group
size limitations and self-quarantining, in the
event of a pandemic, to prevent the spread
of the virus to the plant. NEI 06–03 provides
other mitigation strategies that serve the
public interest during a pandemic by
ensuring adequate staff is isolated from the
pandemic and remains healthy to perform
their job function.
Keeping PNPP in operation during the
pandemic will help to support the public
need for reliable electricity supply to cope
with the pandemic. As the US Departments
of Homeland Security and Energy have stated
in their guidance, the electric grid and
nuclear plant operation make up the nation’s
critical infrastructure similar to the medical,
food, communications, and other critical
industries. If the plant operation is impacted
because it cannot comply with the security
training requalification requirements while
isolation activities are in effect for essential
crew members, the area electrical grid would
lose this reliable source of baseload power.
In addition, PNPP personnel could face the
added transient challenge of shutting down
their respective plant and possibly not
restarting it until the pandemic passes. This
does not serve the public interest in
maintaining a safe and reliable supply of
electricity.
EHNC stated that the requalification
activities for security personnel at PNPP
must be rescheduled to allow
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implementation of the EHNC pandemic
response plan mitigation strategies. In
addition, EHNC indicated that this
exemption would support the licensee’s
implementation of isolation activities
(e.g., social distancing, group size
limitations, and self-quarantining) at
PNPP. EHNC stated these actions serve
the public interest by ensuring adequate
staff isolation and maintaining staff
health to perform their job function
during the COVID–19 PHE.
Based on the above and the NRC
staff’s aforementioned findings, the NRC
staff concludes that granting the
temporary exemption is in the public
interest because it allows EHNC to
maintain the required security posture
at PNPP while the facility continues to
provide electrical power. The
exemption also enables EHNC to reduce
the risk of exposing essential security
personnel at PNPP to COVID–19.
D. Environmental Considerations
NRC approval of this exemption
request is categorically excluded under
10 CFR 51.22(c)(25), and there are no
special circumstances present that
would preclude reliance on this
exclusion. The NRC staff determined,
per 10 CFR 51.22(c)(25)(vi)(E), that the
requirements from which the exemption
is sought involve education, training,
experience, qualification,
requalification, or other employment
suitability requirements. The NRC staff
also determined that approval of this
exemption request involves no
significant hazards consideration
because it does not authorize any
physical changes to the facility or any
of its safety systems, nor does it change
any of the assumptions or limits used in
the facility licensee’s safety analyses or
introduce any new failure modes; no
significant change in the types or
significant increase in the amounts of
any effluents that may be released
offsite because this exemption does not
affect any effluent release limits as
provided in the facility licensee’s
technical specifications or by the
regulations in 10 CFR part 20,
‘‘Standards for Protection Against
Radiation’’; no significant increase in
individual or cumulative public or
occupational radiation exposure
because this exemption does not affect
limits on the release of any radioactive
material or the limits provided in 10
CFR part 20 for radiation exposure to
workers or members of the public; no
significant construction impact because
this exemption does not involve any
changes to a construction permit; and
no significant increase in the potential
for or consequences from radiological
accidents because this exemption does
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29759
not alter any of the assumptions or
limits in the facility licensee’s safety
analysis. In addition, the NRC staff
determined that there would be no
significant impacts to biota, water
resources, historic properties, cultural
resources, or socioeconomic conditions
in the region. As such, there are no
special circumstances present that
would preclude reliance on this
categorical exclusion. Therefore,
pursuant to 10 CFR 51.22(b), no
environmental impact statement or
environmental assessment need be
prepared in connection with the
approval of this exemption request.
IV. Conclusions
Accordingly, the NRC has determined
that pursuant to 10 CFR part 73.5, the
exemption is authorized by law, will not
endanger life or property or the common
defense and security, and is otherwise
in the public interest. Therefore, the
Commission hereby grants EHNC’s
request to exempt PNPP from the
requirements for periodic
requalification of security personnel in
paragraphs B.5.(a), C.3.(l)(1), D.1.(b)(3),
D.2.(a), E.1.(c), E.1.(f), and F.5.(a) of 10
CFR part 73, Appendix B, Section VI.
This exemption expires 90 days after the
end of the COVID–19 PHE, or December
31, 2020, whichever occurs first.
Dated: May 11, 2020.
For the Nuclear Regulatory Commission.
Craig G. Erlanger,
Director, Division of Operating Reactor
Licensing, Office of Nuclear Reactor
Regulation.
[FR Doc. 2020–10527 Filed 5–15–20; 8:45 am]
BILLING CODE 7590–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–88859; File No. SR–
PEARL–2020–03]
Self-Regulatory Organizations; MIAX
PEARL, LLC; Notice of Filing of
Amendment No. 1 and Order Instituting
Proceedings To Determine Whether To
Approve or Disapprove a Proposed
Rule Change, as Modified by
Amendment No. 1, To Establish Rules
Governing the Trading of Equity
Securities
May 12, 2020.
I. Introduction
On January 24, 2020, MIAX PEARL,
LLC (‘‘MIAX PEARL’’ or ‘‘Exchange’’)
filed with the Securities and Exchange
Commission (‘‘Commission’’), pursuant
to Section 19(b)(1) of the Securities
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Exchange Act of 1934 (‘‘Act’’) 1 and Rule
19b–4 thereunder,2 a proposed rule
change to adopt rules to govern the
trading of cash equities and establish an
equities trading facility of the Exchange.
The proposed rule change was
published for comment in the Federal
Register on February 12, 2020.3 On
March 25, 2020, the Commission
extended the time period within which
to approve the proposed rule change,
disapprove the proposed rule change, or
institute proceedings to determine
whether to approve or disapprove the
proposed rule change, to May 12, 2020.4
On May 8, 2020, the Exchange filed
Amendment No. 1 to the proposed rule
change.5 The Commission has received
no comments on the proposed rule
change.
The Commission is publishing this
notice and order to solicit comments on
the proposed rule change, as modified
by Amendment No. 1, from interested
persons and to institute proceedings
pursuant to Section 19(b)(2)(B) of the
Act 6 to determine whether to approve
or disapprove the proposed rule change,
as modified by Amendment No. 1.
II. Description of the Proposed Rule
Change, as Modified by Amendment
No. 1
As more fully set forth in the Notice
and Amendment No. 1, and summarized
below, the Exchange proposes to
establish a platform for the trading of
cash equity securities (referred to herein
as ‘‘MIAX PEARL Equities’’) to be
regulated as an equities trading facility
of the Exchange. MIAX PEARL Equities
would operate pursuant to the proposed
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 See Securities Exchange Act Release No. 88132
(February 6, 2020), 85 FR 8053 (February 12, 2020)
(‘‘Notice’’).
4 See Securities Exchange Act Release No. 88476
(March 25, 2020), 85 FR 17929 (March 31, 2020).
5 Amendment No. 1 makes the following changes
to the proposed rule change: (i) Deletes the
definition of ‘‘Equity Securities’’ from proposed
Exchange Rule 1901 and makes corresponding
changes throughout the proposed Exchange Rules to
eliminate unnecessary confusion; (ii) substitutes
references to ‘‘PEARL Equities’’ with ‘‘MIAX
PEARL Equities’’ throughout the proposed
Exchange Rules; (iii) updates proposed Exchange
Rule 2622 (Limit Up-Limit Down Plan and Trading
Halts) regarding a Level 3 Market Decline to
conform it to recent changes made by each of the
national securities exchanges that trade equities and
the Financial Industry Regulatory Authority
(‘‘FINRA’’), and makes a corresponding change to
proposed Exchange Rule 2615 (Opening Process);
and (iv) amends proposed Exchange Rule
2617(a)(4)(C) and (D) to account for the potential for
orders to post and rest at prices that cross contraside liquidity and also to correct a typographical
error in proposed Exchange Rule 2617(a)(4)(D).
Amendment No. 1 is available on the Commission’s
website at: https://www.sec.gov/comments/sr-pearl2020-03/srpearl202003-7168815-216600a.pdf.
6 15 U.S.C. 78s(b)(2)(B).
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rules (‘‘MIAX PEARL Equities Rules’’)
and regulatory requirements described
below. This description summarizes but
does not review every detail of the
proposal, as modified by Amendment
No. 1.
A. MIAX PEARL Equity Members
As proposed, MIAX PEARL Equities
will operate an electronic trading
system for equity securities (the
‘‘System’’) that will provide for the
electronic execution of orders pursuant
to a price/time priority execution
model.7 The Exchange will have a new
category of Exchange Member
participation called ‘‘Equity Member.’’ 8
As proposed, an Equity Member must
be or become a member of the Exchange
pursuant to Chapter II (Access) and
continue to abide by the requirements of
Chapter II of Exchange Rules and the
additional requirements of Chapter XX
governing participation in MIAX PEARL
Equities.9 An Equity Member must also
be a member of another registered
exchange that is not registered solely
under Section 6(g) of the Exchange Act,
or be a member of FINRA.10 Further, an
Equity Member that transacts business
with public customers must at all times
be a member of FINRA.11
There would be two types of Equity
Members: (1) Equities Order Entry Firms
(‘‘OEFs’’) and (2) Equities Market
Makers. Each Equity Member must be
registered as a broker-dealer and have as
the principal purpose of being an Equity
Member the conduct of a securities
business, which shall be deemed to
exist if and so long as: (1) The Equity
Member has qualified and acts in
respect of its business on MIAX PEARL
Equities as an OEF, or an Equities
Market Maker, or both; and (2) all
transactions effected by the Equity
Member are in compliance with Section
11(a) of the Act 12 and the rules and
regulations adopted thereunder.13
Equity Members may trade equity
securities for their own proprietary
accounts or, if authorized to do so under
applicable law, may conduct business
7 See
Notice, supra note 3 at 8053, 8056.
proposed MIAX PEARL Equities Rules
2000–2003.
9 See proposed MIAX PEARL Equities Rule
2000(b).
10 See proposed MIAX PEARL Equities Rule
2001(f). If such other registered exchange has not
been designated by the Commission, pursuant to
Rule 17d–1 under the Exchange Act, to examine
Members for compliance with financial
responsibility rules, then such applicant must have
and maintain a membership in FINRA. See id.
11 See proposed MIAX PEARL Equities Rule
2001(f).
12 15 U.S.C. 78k(a).
13 See proposed MIAX PEARL Equities Rule
2001(e).
8 See
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on behalf of customers.14 OEFs are
Equity Members representing orders as
agent on MIAX PEARL Equities or nonEquities Market Makers conducting
proprietary trading as principal.15 An
Equity Member may also register as an
Equities Market Maker by filing a
registration request with the
Exchange.16
An Equity Member registered as an
Equities Market Maker would be
required to engage in a course of dealing
for its own account and to assist in the
maintenance of a fair and orderly
market.17 Among other things, each
Equities Market Maker must, on a daily
basis, maintain a two-sided market on a
continuous basis during regular market
hours for each equity security in which
it is registered as an Equities Market
Maker.18 Equities Market Makers may
withdraw their quotations,19 and may
voluntarily terminate their registration
with the Exchange.20 Pursuant to the
existing procedures set forth in Chapter
IX of current Exchange Rules, the
Exchange could suspend, condition,
limit, prohibit or terminate the authority
of an Equities Market Maker to enter
quotations in one or more authorized
securities for violations of applicable
requirements or prohibitions.21
While using the System, Equity
Members and persons employed by or
associated with any Equity Member
would be prohibited from conduct that
is: (1) Inconsistent with the
maintenance of a fair and orderly
market; (2) apt to impair public
confidence in the operations of the
Exchange; or (3) inconsistent with the
ordinary and efficient conduct of
business.22 Should any such conduct
occur, the Exchange may suspend an
Equity Member’s access to the System
following a warning, or terminate an
14 See
id.
proposed MIAX PEARL Equities Rule 1901.
16 See proposed MIAX PEARL Equities Rule 2605.
The Exchange represents that an unlimited number
of Equities Market Makers may be registered in each
equity security unless the number of Market Makers
registered to make a market in a particular equity
security should be limited whenever, in the
Exchange’s judgment, quotation system capacity in
an equity security is not sufficient to support
additional Market Makers in such equity security.
See Notice, supra note 3, at 8053. The Exchange
further represents that it will not restrict access in
any particular equity security until the Exchange
has submitted objective standards for restricting
access to the Commission for the Commission’s
review and approval. See id.
17 See proposed MIAX PEARL Equities Rule 2606.
18 See proposed MIAX PEARL Equities Rule
2606(a)(1).
19 See proposed MIAX PEARL Equities Rule 2607.
20 See proposed MIAX PEARL Equities Rule 2608.
21 See proposed MIAX PEARL Equities Rule 2609.
22 See proposed MIAX PEARL Equities Rule
2602(b).
15 See
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Equity Member’s access to the System
by notice in writing.23
B. MIAX PEARL Equities Trading
System
As proposed, the Exchange’s equities
trading System, like its system for
options, will be operated as a fully
automated electronic order book, and
the Exchange will not maintain or
operate a physical trading floor.24 The
Exchange has proposed to be a trading
center (‘‘Trading Center’’) whose
quotations can be ‘‘automated
quotations’’ under Rule 600(b)(4).25 In
addition, the Exchange is designed to be
an ‘‘automated trading center’’ under
Rule 600(b)(5) whose best-priced,
displayed quotation will be a ‘‘protected
quotation’’ under Rules 600(b)(61) and
600(b)(62), and for purposes of Rule
611.26 Only Equity Members and their
Sponsored Participants (‘‘Users’’) would
be permitted to transact business on
MIAX PEARL via the System.27
1. Order Types and Instructions
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The Exchange proposes that Users
may submit orders to the System as
Limit Orders, Market Orders, or
Midpoint Peg Orders.28 Orders may be
entered as an odd lot, round lot, or
mixed lot.29 The System will support
two time-in-force instructions:
Immediate-or-Cancel (‘‘IOC’’) or Regular
23 See proposed MIAX PEARL Equities Rule
2602(d). The timing of such notice would depend
on the severity of the Equity Member’s misconduct.
See Notice, supra note 3, at 8055.
24 The Exchange represents that the System will
leverage the Exchange’s current technology,
including its customer connectivity, messaging
protocols, quotations and execution engine, order
router, data feeds, and network infrastructure. See
Notice, supra note 3, at 8056. In addition, the
Exchange represents that it will become a member
of the Depository Trust Company (‘‘DTC’’), and that
the System will be linked to DTC for the Exchange
to transmit locked-in trades for clearance and
settlement. Id.
25 17 CFR 242.600(b)(4); see proposed MIAX
PEARL Equities Rule 2617(c).
26 17 CFR 242.600(b)(5), (b)(61) and (b)(62); 17
CFR 242.611; see MIAX PEARL Equities Rule
2617(c).
27 See proposed MIAX PEARL Equities Rules
2000 and 2602(a)(1). See also Exchange Rule 210
(Sponsored Access to the Exchange).
28 See proposed MIAX PEARL Equities Rule
2614(a)(1)–(3). Midpoint Peg Orders are nondisplayed Limit Orders that are assigned a ‘‘working
price’’ pegged to the midpoint of the Protected
NBBO. A Midpoint Peg Order receives a new
timestamp each time its working price changes in
response to changes to the midpoint of the
Protected NBBO.
29 See proposed MIAX PEARL Equities Rule
2614(a). The Exchange proposes that odd lot, round
lot, and mixed lot orders are to be treated in the
same manner on the Exchange, except as discussed
below regarding the adjustment of an odd-lot price
that locks or crosses the Protected NBBO. See infra
note 74 and accompanying text.
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Hours Only (‘‘RHO’’).30 Users may
submit orders with the display
instructions of Displayed or NonDisplayed, but all orders eligible for
display will be automatically defaulted
to Displayed unless a User elects
otherwise.31 Users also may submit
orders with instructions of: Do Not
Route,32 Post Only,33 Attributable,34
and Non-Attributable.35 In addition,
Users may mark Limit Orders as
Intermarket Sweep Orders, which will
allow orders so designated to be
automatically matched and executed
without reference to Protected
Quotations at other Trading Centers.36
30 See proposed MIAX PEARL Equities Rule
2614(b). A Market Order may only include a time
in force of IOC. See MIAX PEARL Equities Rule
2614(a)(2).
31 See proposed MIAX PEARL Equities Rule
2614(c)(3) and (4). Market Orders and Mid-Point
Peg Orders are not eligible for display. See
proposed MIAX PEARL Equities Rule 2614(a)(2)
and (3).
32 An order designated as Do Not Route is a nonroutable order that will be ranked and executed on
the MIAX PEARL Equities Book pursuant to
proposed MIAX PEARL Equities Rules 2616 and
2617(a)(4) or cancelled. Unless otherwise instructed
by the User, an order designated as Do Not Route
will be subject to the price sliding processes set
forth in proposed MIAX PEARL Equities Rule
2614(g) and proposed MIAX PEARL Equities Rule
2622(e). See proposed MIAX PEARL Equities Rule
2614(c)(1).
33 An order designated as Post Only is a nonroutable order that will be ranked and executed on
the MIAX PEARL Equities Book pursuant to
proposed MIAX PEARL Equities Rule 2616 and
proposed MIAX PEARL Equities Rule 2617(a)(4).
An order designated as Post Only will only remove
liquidity from the MIAX PEARL Equities Book
when: (A) The order is for a security priced below
$1.00; or (B) the value of such execution when
removing liquidity equals or exceeds the value of
such execution if the order instead posted to the
MIAX PEARL Equities Book and subsequently
provided liquidity including the applicable fees
charged or rebates paid. To determine at the time
of a potential execution whether the value of such
execution when removing liquidity equals or
exceeds the value of such execution if the order
were instead posted to the MIAX PEARL Equities
Book and subsequently provided liquidity, the
Exchange will use the highest possible rebate paid
and highest possible fee charged for such
executions on the Exchange. Lastly, unless
otherwise instructed by the User, an order
designated as Post Only will be subject to the price
sliding processes set forth in proposed MIAX
PEARL Equities Rule 2614(g). See proposed MIAX
PEARL Equities Rule 2614(c)(2).
34 ‘‘Attributable’’ is an instruction to include the
User’s market participant identifier (‘‘MPID’’) with
an order that is designated for display (price and
size) on an Exchange proprietary data feed. See
proposed MIAX PEARL Equities Rule 2614(c)(5).
35 ‘‘Non-Attributable’’ is an instruction on an
order that is designated for display (price and size)
on an Exchange proprietary data feed to display that
order on an anonymous basis. See proposed MIAX
PEARL Equities Rule 2614(c)(6).
36 A User marking a Limit Order as ‘‘ISO’’ must
simultaneously route one or more additional Limit
Orders marked ‘‘ISO,’’ as necessary, to away
Trading Centers to execute against the full
displayed size of any Protected Quotation for the
security. An order meeting such requirements may
be immediately executed at one or multiple price
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29761
Users may also choose to designate
orders with self-trade protection
modifiers to prevent executions against
a resting opposite side order originating
from the same market participant,
Exchange Member, or trading group
identifier.37
As proposed, the MIAX PEARL
Equities Rules will provide for Limit
Order Price Protection.38 The Exchange
has proposed that a Limit Order to buy
(sell) will be rejected if it is priced at or
above (below) the greater of a specified
dollar and percentage away from: (1)
The Protected Best Offer for Limit
Orders to buy, the Protected Best Bid for
Limit Orders to sell; or (2) if the
Protected Best Offer or Protected Best
Bid is unavailable, the consolidated last
sale price disseminated during the
Regular Trading Hours on trade date; or
(3) if the Protected Best Offer or
Protected Best Bid and a consolidated
last sale price are unavailable, the prior
day’s Official Closing Price identified as
such by the primary listing exchange,
adjusted to account for events such as
corporate actions and news events.39
The proposed functionality would differ
from that provided by other equities
exchanges by using a waterfall of
reference prices and permitting Equity
Members to customize the Limit Order
Price Protection dollar and percentage
limits on a per session basis, in lieu of
using the Exchange’s default
parameters.40
2. Opening Procedures
As proposed, the Exchange will
conduct an Opening Process at the start
levels in the System without regard to Protected
Quotations at away Trading Centers consistent with
Regulation NMS. An ISO is not eligible for routing
and may include a time-in-force of IOC or RHO. See
MIAX PEARL Equities Rule 2614(d). A User
entering an ISO with a time-in-force of IOC
represents that such User has simultaneously
routed one or more additional Limit Orders marked
‘‘ISO,’’ if necessary, to away Trading Centers to
execute against the full displayed size of any
Protected Quotation for the security with a price
that is superior to the limit price of the ISO entered
in the System. A User entering an ISO with a timein-force of RHO makes the same representation but
further represents that it simultaneously routed one
or more additional Limit Orders marked ‘‘ISO,’’ if
necessary, to away Trading Centers to execute
against the full displayed size of any Protected
Quotation for the security with a price that is equal
to the limit price of the ISO entered in the System.
37 See proposed MIAX PEARL Equities Rule
2614(f).
38 See proposed MIAX PEARL Equities Rule
2614(a)(1)(I).
39 See proposed MIAX PEARL Equities Rule 1900
(defining the term ‘‘PBO’’ or ‘‘Protected NBO’’ as
the national best offer that is a Protected Quotation,
and the term ‘‘PBB’’ or ‘‘Protected NBB’’ as the
national best bid that is a Protected Quotation).
40 See Notice, supra note 3, at 8061.
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of Regular Trading Hours.41 During the
Opening Process, the Exchange attempts
to match eligible buy and sell orders at
the midpoint of the NBBO.42 Similar to
the Opening Process conducted by other
national securities exchanges,43 the
midpoint of the NBBO will be
calculated differently depending on
whether the primary listing exchange is
NYSE or NYSE American,44 or is any
other primary listing exchange.45 If the
conditions to establish the Opening
Process do not occur by 9:45:00 a.m.
Eastern Time, the Exchange will
conduct a Contingent Open, by
matching all orders eligible to
participate in the Opening Process at the
midpoint of the then prevailing
NBBO.46 If the midpoint of the NBBO is
not available for the Contingent Open,
all orders will be handled in time
sequence, beginning with the order with
the oldest timestamp, and be placed on
the MIAX PEARL Equities Book,
cancelled, executed, or routed to away
Trading Centers in accordance with the
terms of the order.47 Those Users that do
not wish to participate in the Contingent
41 Orders designated as Post Only, ISOs, Market
Orders, and orders that include a time-in-force
other than RHO are not eligible to participate in the
Opening Process. See proposed MIAX PEARL
Equities Rule 2615. Self-trade prevention modifiers
will be honored during the Opening Process. See
proposed MIAX PEARL Equities Rule 2615(a)(2).
42 All orders eligible to trade at the midpoint will
be processed in time sequence, beginning with the
order with the oldest timestamp. The Opening
Process will conclude when no remaining orders,
if any, can be matched at the midpoint of the
NBBO. At the conclusion of the Opening Process,
the unexecuted portion of orders that were eligible
to participate in the Opening Process will be placed
on the MIAX PEARL Equities Book in time
sequence, cancelled, executed, or routed to away
Trading Centers in accordance with the terms of the
order. See proposed MIAX PEARL Equities Rule
2615(b).
43 See, e.g., Cboe BZX Rule 11.24(c); Cboe EDGX
Rule 11.7(c).
44 When the primary listing exchange is the NYSE
or NYSE American, the Opening Process will be
priced at the midpoint of the: (i) First NBBO
subsequent to the first reported trade and first twosided quotation on the primary listing exchange
after 9:30:00 a.m. Eastern Time; or (ii) then
prevailing NBBO when the first two-sided quotation
is published by the primary listing exchange after
9:30:00 a.m. Eastern Time, but before 9:45:00 a.m.
Eastern Time if no first trade is reported by the
primary listing exchange within one second of
publication of the first two-sided quotation by the
primary listing exchange. See proposed MIAX
PEARL Equities Rule 2615(c)(1).
45 For any other primary listing exchange, the
Opening Process will be priced at the midpoint of
the first NBBO subsequent to the first two-sided
quotation published by the primary listing
exchange after 9:30:00 a.m. Eastern Time. See
proposed MIAX PEARL Equities Rules 2615(c)(2).
46 See proposed MIAX PEARL Equities Rule
2615(d).
47 Users not seeking an execution at the midpoint
of the NBBO during the Contingent Open may
cancel their orders before 9:45 a.m. and re-enter
those orders after the Contingent Open occurs. See
Notice, supra note 3, at 8063.
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Open may cancel their orders at any
time and resubmit those orders after the
Contingent Open occurs and continuous
trading begins.48 While an equity
security is subject to a halt, suspension,
or pause in trading, the Exchange will
accept orders for queuing prior to the
resumption of trading in the security for
participation in the Re-Opening
Process.49 As proposed, the Re-Opening
Process will occur in the same general
manner as the Opening Process.50
3. Order Priority and Execution
As proposed, following the Opening
Process, the System will continuously
and automatically match orders
pursuant to price/time priority.51 For
equally-priced trading interest, orders
categorized as displayed will have
priority over orders categorized as nondisplayed.52 Within each priority
category, orders will be ranked based on
time, with each order being assigned a
timestamp equal to the time the order is
first placed on the MIAX PEARL
Equities Book.53 The System also will
utilize certain collars and constraints in
an effort to reduce the occurrence of
erroneous trades.54 The best-ranked
orders to buy and best-ranked orders to
sell that are displayable in the MIAX
PEARL Equities book and their
48 See
49 See
id.
proposed MIAX PEARL Equities Rule
2615(e).
50 See proposed MIAX PEARL Equities Rule
2615(e)(1).
51 See proposed MIAX PEARL Equities Rules
2616(a)(1) and 2617(a)(4)(A). Orders to buy will be
ranked from highest working price to lowest
working price. Orders to sell will be ranked from
lowest working price to highest working price. If
the working price of an order changes, the price
priority of the order will also change. See proposed
MIAX PEARL Equities Rule 2616(a)(1). See also
proposed MIAX PEARL Equities Rule 1900,
defining ‘‘working price’’ to mean the price at
which an order is eligible to trade at any given time,
which may be different from the limit price or
display price of the order.
52 See proposed MIAX PEARL Equities Rule
2616(a)(2).
53 See proposed MIAX PEARL Equities Rule
2616(a)(3). When Users elect that their orders not
execute against an order with the same self-trade
prevention modifier, the System will not permit
such orders to execute against one another,
regardless of priority ranking. See MIAX PEARL
Equities Rule 2616(a)(4). When a User cancels or
replaces an order resting on the MIAX PEARL
Equities Book, the order will retain its timestamp
and retain its priority only where the modification
involves a decrease in the size of the order or a
change in position from: (A) Sell to sell short; (B)
sell to sell short exempt; (C) sell short to sell; (D)
sell short to sell short exempt; (E) sell short exempt
to sell; and (F) sell short exempt to sell short. See
proposed MIAX PEARL Equities Rule 2616(a)(5). In
addition, the remainder of an order that is partially
executed against an incoming order or Aggressing
Order (as defined in proposed MIAX PEARL
Equities Rule 1901) will retain its timestamp. See
proposed MIAX PEARL Equities Rule 2616(a)(6).
54 See MIAX PEARL Equities Rules 2618 and
2621.
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aggregate displayed size will be
available to quotation vendors for
dissemination pursuant to the
requirements of Rule 602 of Regulation
NMS.55
Proposed MIAX PEARL Equities Rule
2617(a) addresses order execution.56
The proposed rule provides that an
order will be cancelled back to the User
if, based on market conditions, User
instructions, applicable Exchange Rules
and/or the Exchange Act and the rules
and regulations thereunder, such order
is not executable, cannot be routed to
another Trading Center and cannot be
posted to the MIAX PEARL Equities
Book.57
Proposed MIAX PEARL Equities Rule
2617(a)(1)–(3) provides that the System
will comply with all applicable
securities laws and regulations,
including Regulation NMS Rule 611,
Regulation SHO, and the Plan to
Address Extraordinary Market Volatility
(the ‘‘LULD Plan’’).58 Proposed Rule
2617(a)(4) addresses how (subject to the
requirements of Rule 611 and other
applicable Commission and Exchange
requirements), an incoming order or
Aggressing Order would be matched
against orders on the MIAX PEARL
Equities Book. Specifically, proposed
MIAX PEARL Equities Rule
2617(a)(4)(A)–(B) provides that an
Aggressing Order or an incoming order
to buy (sell) will be automatically
executed to the extent that it is priced
at an amount that equals or exceeds (is
less than) any order to sell (buy) in the
MIAX PEARL Equities Book and is
executable.59
In Amendment No. 1, the Exchange
modifies proposed MIAX PEARL
55 See proposed MIAX PEARL Rule 2216(b),
providing that, pursuant to Rule 602 of Regulation
NMS, the Exchange will transmit for display to the
appropriate network processor for each System
security the highest (lowest) price to buy (sell)
wherein the aggregate size of all displayed buy (sell)
interest in the System greater (less) than or equal
to that price is one round lot or greater, and that
the aggregate size of all displayed buy (sell) interest
in the System greater (less) than or equal to that
price will be transmitted rounded down to the
nearest round lot.
56 The Exchange states that the order execution
process for equity securities is based on
functionality currently approved for use on the
Cboe Equities Exchanges, NYSE, NYSE Arca, and
Nasdaq. See Notice supra note 3 at 8065.
57 See proposed MIAX Pearl Equities Rule
2617(a). The Exchange states that this is the same
as on other equity exchanges. See Notice supra note
3 at 8065.
58 See id. Proposed Rule 2617(a)(2) specifies that
for any execution to occur during Regular Trading
Hours, the price must be equal to, or better than,
the Protected NBBO unless an exception to Rule
611 applies. See proposed MIAX PEARL Equities
Rules 1901 (defining ‘‘Protected NBBO’’) and
2617(a)(2).
59 See proposed MIAX PEARL Equities Rule
2617(a)(4)(A)–(B).
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Equities Rule 2617(a)(4)(C) and (D),
which further addresses executions on
the MIAX PEARL Equities Book, by
describing how the Exchange would
handle internally locked or crossed
interest on the MIAX PEARL Equities
Book. Proposed MIAX PEARL Equities
Rule 2617(a)(4)(C), as amended,
acknowledges that certain orders, based
on their operation and User
instructions, are permitted to post and
rest on the MIAX PEARL Equities Book
at prices that lock or cross contra-side
liquidity; provided, however, that the
System would never display a locked or
crossed market.60 The rule states further
that, if an Aggressing Order or an
incoming order to buy (sell) would
execute upon entry against an order to
sell (buy) at the same price as or a worse
price than a resting displayed order to
buy (sell), the Aggressing Order or
incoming order to buy (sell) will be
cancelled or posted to the MIAX PEARL
Equities Book and ranked in accordance
with proposed MIAX PEARL Equities
Rule 2616.61
Proposed MIAX PEARL Equities Rule
2617(a)(4)(D), as modified by
Amendment No. 1, governs the price at
which an order is executable when it is
posted non-displayed on the PEARL
Equities Book and there is a contra-side
displayed order at a price which results
in an internally locked or crossed
book.62 For securities priced equal to or
greater than $1.00 per share, in the case
where a non-displayed order to sell
(buy) is posted on the MIAX PEARL
Equities Book at a price that locks or
crosses a displayed order to buy (sell)
pursuant to proposed MIAX PEARL
Equities Rule 2617(a)(4)(C) described
above, an Aggressing Order or an
incoming order to buy (sell) that is a
market order or a limit order priced
more aggressively than the order to buy
(sell) displayed on the MIAX PEARL
Equities Book will execute against the
non-displayed order to sell (buy) resting
on the PEARL Equities Book at one-half
minimum price variation greater (less)
than the price of the resting displayed
order to buy (sell).63
As initially proposed, MIAX PEARL
Equities Rule 2617(a)(4)(C) and (D) set
forth how the Exchange would process
orders when the MIAX PEARL Equities
Book is internally locked.64 In
Amendment No. 1, the Exchange added
language to these proposed rule
provisions to account for the fact that
certain orders also may post at prices
60 See
Amendment No. 1; Rule 2617(a)(4)(C).
Amendment No. 1; Rule 2617(a)(4)(C).
62 See Amendment No. 1; Rule 2617(a)(4)(D).
63 See Amendment No. 1; Rule 2617(a)(4)(D).
64 See Amendment No. 1.
61 See
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that cross contra-side liquidity resting
on the MIAX PEARL Equities Book.65
The Exchange states that such an
internally crossed book may occur when
an incoming order of odd lot size
designated as Post Only does not
execute against a resting Midpoint Peg
order pursuant to the Exchange’s
proposed economic best interest
functionality under proposed MIAX
PEARL Equities Rule 2614(c)(2).66 The
Exchange provides an example where
this occurs when an incoming
displayable odd lot Post Only order
would cross a contra-side Midpoint Peg
order resting at the midpoint of the
PBBO by one half of one cent ($.005)
and post and display at its limit price,
crossing the Midpoint Peg order.67 The
example further reflects where these
internally crossed orders would be
subsequently executable—specifically,
the Midpoint Peg order would no longer
be executable at the midpoint of the
PBBO and instead would be executable
at one-half minimum price variation
more aggressive than the displayed
price of the odd lot Post Only order, and
the odd lot Post Only order would be
executable at its displayed price.68
The MIAX PEARL Equities Rules also
are designed to address intermarket
locks and crosses, as required by Rule
610(d) of Regulation NMS,69 in that they
are designed not to disseminate interest
that would lock or cross a protected
quote, require Users to reasonably avoid
displaying interest that locks or crosses
any protected quotation, and are
reasonably designed to assure the
reconciliation of locked or crossed
interest.70 The MIAX PEARL Equities
65 Id.
66 Id.
67 Id. The example assumes that the PBBO is
$10.00 by $10.05 and there are no orders resting on
the MIAX PEARL Equities book. The Exchange
states that it has yet to determine the level of fees
and rebates it intends to offer, so the example
assumes a maker/taker fee structure with a $0.0030
fee for removing liquidity and a $0.0030 rebate for
providing liquidity, requiring at least $0.0060 of
price improvement for a displayed order designated
as Post Only to remove liquidity. The Exchange also
states that, assuming it offers lower fees and rebates
for non-displayed orders, if the incoming post only
order in the example was non-displayed, it would
execute against the resting contra-side Midpoint Peg
order pursuant to the Exchange’s proposed
economic best interest functionality under
proposed Exchange Rule 2614(c)(2). Further, the
Exchange states that if the incoming post only order
in the example instead was a displayed round lot,
it would have updated the PBBO resulting in the
contra-side Midpoint Peg Order being re-priced to
the new midpoint of the PBBO and not resulting in
a non-displayed internally crossed book. Id.
68 Id.
69 17 CFR 242.610(d).
70 See proposed MIAX PEARL Equities Rule 2624:
see also proposed MIAX PEARL Equities Rule
2614(a)(1) and (g)(1) (relating to price sliding
functionality for non-routable limit orders to avoid
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29763
Rules also provide for the re-pricing of
limit orders in order to comply with
Rule 201 of Regulation SHO 71 and the
LULD Plan,72 and the repricing of nondisplayed limit orders to ensure
compliance with Rule 611 of Regulation
NMS.73 Further, with respect to odd
lots, the Exchange has proposed that the
working and display price of a
displayable odd lot order will be
adjusted both on arrival and when
resting on the MIAX PEARL Equities
Book depending on the odd lot order’s
limit price in relation the Protected
NBBO and whether the Protected NBBO
itself is locked or crossed, to reduce the
potential for odd lot orders to be
displayed on the Exchange’s proprietary
data feed at potentially unexecutable
prices.74
C. Routing
As proposed, MIAX PEARL Equities
will support orders that are designated
to be routed to the Protected NBBO as
well as orders that will execute only
within MIAX PEARL Equities.75 The
System will provide a routing service
(‘‘Routing Services’’) for orders when
trading interest is not available on
MIAX PEARL Equities.76 As the
Exchange currently does for options,77 it
will route orders in equity securities via
one or more routing brokers that are not
affiliated with the Exchange.78
For all Routing Services, the Exchange
will determine the logic that provides
violations of Rule 610(d) of Regulation NMS, 17
CFR 242.610(d)).
71 17 CFR 242.201; see proposed MIAX PEARL
Equities Rule 2614(a)(1) and (g)(3).
72 See proposed MIAX PEARL Equities Rules
2614(a)(1) and 2622; see also proposed MIAX
PEARL Equities Rule 2617(a)(3) (providing that any
executions that occur during Regular Trading Hours
must comply with the LULD plan).
73 17 CFR 242.611; see proposed MIAX PEARL
Equities Rule 2614(a)(1) and (g)(2).
74 See proposed MIAX PEARL Equities Rule
2611(b)(1). See also proposed MIAX PEARL
Equities Rule 2611(b)(2) (regarding circumstances
in which resting odd lot quantity could be joined
with the returned quantity of a routed order and
receive a new timestamp). See also Notice, supra
note 3 at 8057.
75 However, an order marked ‘‘short’’ when a
short sale price test restriction pursuant to Rule 201
of Regulation SHO is in effect is not eligible for
routing by the Exchange. See MIAX Pearl Equities
Rule 2617(b)(2). An order that is ineligible for
routing due to a short sale price test restriction and
that includes a time-in-force of IOC will be
cancelled upon entry. Id. The Exchange will handle
routable orders in connection with the LULD Plan
as described in proposed MIAX PEARL Equities
Rule 2622(b)(2) and (3).
76 See Notice, supra note 3, at 8053.
77 See Exchange Rule 529.
78 See Notice, supra note 3, at 8066. The
Exchange notes that this routing process is
described under proposed MIAX PEARL Equities
Rule 2617(b)(1), which is identical to current
Exchange Rule 529 that is applicable to options. See
id.
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when, how, and where orders are routed
away to other Trading Centers.79 The
Exchange represents that the Exchange’s
routing logic will not provide any
advantage to Users when routing orders
to away Trading Centers as compared to
other routing methods.80 The routing
broker will receive routing instructions
from the Exchange to route orders to
other Trading Centers and report such
executions back to the Exchange.81 The
routing broker cannot change the terms
of an order or the routing instructions,
nor does the routing broker have any
discretion about where to route an
order.82
The Exchange represents that for each
routing broker used by the Exchange, an
agreement will be in place between the
Exchange and the routing broker that
will, among other things, restrict the use
of any confidential and proprietary
information that the routing broker
receives to legitimate business purposes
necessary for routing orders at the
direction of the Exchange.83 Further, the
Exchange will establish and maintain
procedures and internal controls
reasonably designed to adequately
restrict the flow of confidential and
proprietary information between the
Exchange and the routing broker, and
any other entity, including any affiliate
of the routing broker; and, if the routing
broker or any of its affiliates engages in
any other business activities other than
providing routing services to the
Exchange, between the segment of the
routing broker or affiliate that provides
the other business activities and the
segment of the routing broker that
provides the Routing Services.84
The Exchange may not use a routing
broker for which the Exchange or any
affiliate of the Exchange is the
designated examining authority.85 In
addition, the Exchange will provide its
Routing Services in compliance with the
provisions of the Act and the rules
thereunder, including, but not limited
to, the requirements in Section 6(b)(4)
and (5) of the Act that the rules of a
national securities exchange provide for
the equitable allocation of reasonable
dues, fees, and other charges among an
exchange’s members and other persons
using its facilities, and not be designed
79 See proposed MIAX PEARL Equities Rule
2617(b)(1)(A)(iv).
80 See Notice, supra note 3, at 8066.
81 See proposed MIAX PEARL Equities Rule
2617(b)(1)(A)(v).
82 See proposed MIAX PEARL Equities Rule
2617(b)(1)(A)(v).
83 See Notice, supra note 3, at 8066. See also
proposed MIAX PEARL Equities Rule 2617(b)(1)(A).
84 See proposed MIAX PEARL Equities Rule
2617(b)(1)(A)(i).
85 See proposed MIAX PEARL Equities Rule
2617(b)(1)(A)(ii).
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to permit unfair discrimination between
customers, issuers, brokers, or dealers.86
The Exchange also represents that it will
file a proposed rule change with the
Commission pursuant to Section 19(b)
of the Act prior to offering additional
routing options.87
The Exchange notes that use of its
routing services to route orders to other
market centers is optional.88 Parties that
do not desire to use these services must
designate their orders as not available
for routing.89 In addition, any bid or
offer entered on the Exchange routed to
another Trading Center through a
routing broker that results in an
execution shall be binding on the
Member that entered such bid or offer.90
D. Securities Traded: Unlisted Trading
Privileges
The Exchange is not proposing to be
a listing market for equity securities, but
instead proposes to trade equity
securities pursuant to unlisted trading
privileges (‘‘UTP’’). MIAX PEARL
Equities Rule 2900 establishes the
Exchange’s authority to trade securities
on a UTP basis. MIAX PEARL Equities
Rule 2900(a) provides that the Exchange
may extend UTP any NMS Stock that is
listed on another national securities
exchange or with respect to which UTP
may otherwise be extended in
accordance with Section 12(f) of the
Act.91 MIAX PEARL Equities Rule
2900(a) further provides that any such
security would be subject to all
Exchange rules applicable to trading on
the Exchange, unless otherwise noted.
For any UTP security that is a UTP
Exchange Traded Product, the Exchange
will distribute an information circular
prior to the commencement of trading in
each such UTP Exchange Traded
Product that generally includes the
same information as is contained in the
information circular provided by the
listing exchange.92 Equity Members
86 See
proposed MIAX PEARL Equities Rule
2617(b)(1)(A)(iii).
87 See Notice, supra note 3, at 8066 n.78.
88 See id. at 8066.
89 See id.
90 See proposed MIAX PEARL Equities Rule
2617(b)(1)(A)(vi).
91 Any such security will be subject to all
Exchange rules applicable to trading on the
Exchange, unless otherwise noted. See proposed
MIAX PEARL Equities Rule 2900. The Exchange
states that this rule is identical to the rules of other
equities exchanges. See Notice, supra note 3, at
8070. See also Amendment No. 1, supra note 5,
deleting from the proposed MIAX PEARL Equities
Rules the originally proposed definition of Equity
Securities as unnecessary.
92 This includes: (a) The special risks of trading
the new Exchange Traded Product; (b) the Exchange
Rules that will apply to the new Exchange Traded
Product; and (c) information about the
dissemination of value of the underlying assets or
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must provide each purchaser of UTP
Exchange Traded Products a written
description of the terms and
characteristics of those securities, in a
form approved by the Exchange or
prepared by the open-ended
management company issuing such
securities, not later than the time a
confirmation of the first transaction in
such securities is delivered to such
purchaser.93 Upon request of a
customer, an Equity Member must also
provide a prospectus for the particular
UTP Exchange Traded Product.94
The Exchange also proposes certain
restrictions on Equity Members acting as
Equities Market Makers on the Exchange
in a UTP Exchange Traded Product that
derives its value from one or more
currencies, commodities, or derivatives
based on one or more currencies or
commodities, or is based on a basket or
index composed of currencies or
commodities.95 Further, the Exchange
will enter into comprehensive
surveillance sharing agreements with
markets that trade components of the
index or portfolio on which the UTP
Exchange Traded Product is based to the
same extent as the listing exchange’s
rules require the listing exchange to
enter into comprehensive surveillance
sharing agreements with such
markets.96
E. Regulation
The Exchange represents that it will
regulate MIAX PEARL Equities using
the Exchange’s existing regulatory
structure.97 Pursuant to the Exchange’s
By-Laws, the Chief Regulatory Office of
the Exchange will have general
supervision of the regulatory operations
of the Exchange, which will include
responsibility for overseeing the
Exchange’s surveillance, examination,
and enforcement functions and for
administering any regulatory services
agreements applicable to MIAX PEARL
indices. See proposed MIAX PEARL Equities Rules
2900(b)(1).
93 In addition, Equity Members will include a
written description with any sales material relating
to UTP Exchange Traded Products that is provided
to customers or the public, as well as a disclaimer
(Any other written materials provided by an Equity
Member to customers or the public making specific
reference to the UTP Exchange Traded Products as
an investment vehicle) with any other written
materials provided by an Equity Member to
customers or the public making specific reference
to the UTP Exchange Traded Products as an
investment vehicle substantially in in a form
prescribed by the Exchange. See proposed MIAX
PEARL Equities Rules 2900(b)(2)(B).
94 See proposed MIAX PEARL Equities Rule
2900(b)(2)(C).
95 See proposed MIAX PEARL Equities Rule
2900(b)(4).
96 See proposed MIAX PEARL Equities Rule
2900(b)(5).
97 See id. at 8071–72.
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Equities.98 Similarly, the Exchange’s
existing Regulatory Oversight
Committee will be responsible for
overseeing the adequacy and
effectiveness of Exchange’s regulatory
and self-regulatory organization
responsibilities, including those
applicable to MIAX PEARL Equities.99
As more fully discussed in the Notice,
the Exchange has proposed specific
business conduct and operational rules
for Equity Members consistent with the
approved rules of other equities
exchanges, which include rules
covering similar subject matter as
existing Exchange Rules, applicable to
options Members.100 In addition, the
Exchange proposes that existing rules
applicable to the MIAX PEARL options
market (current Chapters I though XVIII
of the Exchange Rules) will apply to
Equity Members and their associated
persons, unless a specific MIAX PEARL
Equities Rule (in proposed Chapters XIX
through XXX of the Exchange Rules)
governs or the context otherwise
requires.101 The Exchange also proposes
to incorporate certain rules of other selfregulatory organizations (‘‘SROs’’) and
represents that it will request an
exemption from the rule filing
requirements of Section 19(b) of the
Exchange Act for those rules of another
SRO that it proposes to incorporate by
reference to the extent such rules are
effected solely by virtue of a change to
any of those rules.102
Further, the Exchange’s By-Laws
provide that it has disciplinary
jurisdiction over its members, including
Equity Members so that it can enforce
its members’ compliance with its rules
and the federal securities laws.103 The
Exchange’s rules also permit it to
sanction members for violations of its
rules and of the federal securities laws
by, among other things, expelling or
suspending members, limiting members’
activities, functions, or operations,
fining or censuring members, or
suspending or barring a person from
being associated with a member.104
In addition, the Exchange represents
that: (1) The Exchange will join the
existing equities industry agreements
and establish new agreements, as
necessary, pursuant to Section 17(d) of
the Exchange Act, as it has with respect
to its equities market; (2) the Exchange’s
Regulatory Services Agreement (‘‘RSA’’)
with FINRA will govern many aspects of
the regulation and discipline of
Members that participate in equities
trading, as it does for options market
regulation; and (3) the Exchange will
authorize Equity Members to trade on
MIAX PEARL Equities and conduct
surveillance of equities trading as it
does for options.105
The Exchange represents that it will
establish Rule 17d–2 Plans for
Allocation of Regulatory
Responsibilities, including, subject to
Commission approval: (i) A plan with
FINRA pursuant to which the Exchange
and FINRA will agree to allocate to
FINRA, with respect to common
members, regulatory responsibility for
overseeing and enforcing certain
applicable laws, rules, and regulations
of MIAX PEARL Equities; (ii) joining the
multi-party plan with FINRA and other
national securities exchanges for the
surveillance, investigation, and
enforcement of common insider trading
rules; and (iii) joining the multi-party
plan with FINRA and other national
securities exchanges for the allocation of
regulatory responsibilities with respect
to certain Regulation NMS Rules.106
In addition, the Exchange represents
that it will: (i) Expand its existing RSA
with FINRA, pursuant to which FINRA
performs various regulatory services on
behalf of the Exchange, subject to the
Exchange’s ultimate responsibility,
including the review of membership
applications and the conduct of
investigations, disciplinary and hearing
services; (ii) join the Intermarket
Surveillance Group (‘‘ISG’’); and (iii)
submit an amended Minor Rule
98 See proposed MIAX PEARL By-Laws, Section
6.10.
99 See proposed MIAX PEARL By-Laws, Section
4.5(c).
100 See Notice, supra note 3, at 8069–70
(discussing MIAX PEARL Equities Rules regarding
Fair Practice (Chapter XXI), Books, Records, and
Reports (Chapter XXII), Supervision (Chapter
XXIII), Margin (Chapter XXIV), Chapter XXVII
(Trading Practice Rules), and other miscellaneous
provisions (Chapter XXVIII).
101 See proposed MIAX PEARL Rule 1900
(Applicability).
102 See Notice supra note 3 at 8069.
103 See MIAX PEARL By-Laws Section 9.2; see
also MIAX PEARL By-Laws Section 2.1(d).
104 See Chapter X of Exchange Rules. The
Exchange’s rules also provide for the imposition of
fines for minor rule violations in lieu of
commencing disciplinary proceedings. The
Commission approved the Exchange’s Minor Rule
Violation Plan (‘‘MRVP’’) in 2017. See Securities
Exchange Act Release No. 82385 (December 21,
2017), 82 FR 61613 (December 28, 2017) (File No.
4–715).
105 See id. at 8071–72.
106 See Notice, supra note 3, at 8072. Rule 17d–
2 provides that any two or more SROs may file with
the Commission a plan for allocating among such
SROs the responsibility to receive regulatory reports
from persons who are members or participants of
more than one of such SROs to examine such
persons for compliance, or to enforce compliance
by such persons, with specified provisions of the
Act, the rules and regulations thereunder, and the
rules of such SROs, or to carry out other specified
regulatory functions with respect to such persons.
See 17 CFR 240.17d–2.
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29765
Violation Plan to the Commission under
Rule 19d–1(c)(2) of the Exchange Act.107
According to the Exchange, FINRA
currently surveils options trading on
behalf of the Exchange pursuant to an
existing RSA designed to detect
violations of Exchange rules and
applicable federal securities laws.108
The Exchange represents that this RSA
will be expanded to provide for FINRA
to also surveil equities trading on MIAX
PEARL Equities on behalf of the
Exchange.109 The Exchange will remain
responsible for FINRA’s performance
under the RSA.110
In addition, with respect to exchange
traded products traded on MIAX PEARL
Equities pursuant to unlisted trading
privileges, the Exchange represents that
it will enter into a comprehensive
surveillance sharing agreement with
markets that trade components of the
index or portfolio on which shares of an
exchange-traded product is based to the
same extent as the listing exchange’s
rules require the listing exchange to
enter into a comprehensive surveillance
sharing agreement with such markets.111
The Exchange has also proposed Rule
2622(e) to comply with the LULD Plan,
and has represented that it is identical
in all material respects to the rules of
other equities exchanges.112 Proposed
MIAX PEARL Equities Rule 2622(e)
states that the Exchange is a Participant
107 See id. The Commission approved the
Exchange’s current MRVP in 2017. See Securities
Exchange Act Release No. 82385 (December 21,
2017), 82 FR 61613 (December 28, 2017) (File No.
4–715).
108 See Notice, supra note 3, at 8072.
109 See id.
110 See id.
111 See id. The Exchange states that FINRA, on
behalf of the Exchange, may obtain information,
and will communicate information as needed,
regarding trading in the shares of exchange-traded
products, as well as in the underlying exchangetraded securities and instruments with other
markets and other entities that are members of ISG.
The Exchange may also obtain information
regarding trading in such shares and underlying
securities and instruments from markets and other
entities that are members of ISG or with which the
Exchange has in place a comprehensive
surveillance sharing agreement. Moreover, the
Exchange states that FINRA, on behalf of the
Exchange, is able to access, as needed, trade
information for certain fixed income securities held
by a fund reported to FINRA’s Trade Reporting and
Compliance Engine. See id.
112 See id. at 8068. In Amendment No. 1, the
Exchange updated proposed MIAX PEARL Equities
Rules 2615 and 2622 regarding trading halts to
reflect recent proposed rule changes filed by all
other equity exchanges and FINRA with respect to
a Level 3 Market Decline. See supra note 5. When
triggered, a Level 3 halt would halt trading marketwide until the next trading day. The changes in
Amendment No. 1 would allow for next-day trading
to resume in all NMS stocks no differently from any
other trading day, and would not need to wait for
the primary listing market to reopen trading in a
security.
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Federal Register / Vol. 85, No. 96 / Monday, May 18, 2020 / Notices
in the LULD Plan 113 and requires that
Equity Members comply with the LULD
Plan’s provisions. Proposed MIAX
PEARL Equities Rule 2622(e) also
describes the Exchange’s order handling
procedures to comply with the LULD
Plan.114
jbell on DSKJLSW7X2PROD with NOTICES
III. Proceedings To Determine Whether
To Approve or Disapprove the
Proposed Rule Change, as Modified by
Amendment No. 1
The Commission is instituting
proceedings pursuant to Section
19(b)(2)(B) of the Act 115 to determine
whether the proposed rule change, as
modified by Amendment No. 1, should
be approved or disapproved. Institution
of such proceedings is appropriate at
this time in view of the legal and policy
issues raised by the amended proposal.
Institution of proceedings does not
indicate that the Commission has
reached any conclusions with respect to
any of the issues involved. Rather, the
Commission seeks and encourages
interested persons to provide additional
comment on the proposed rule change,
as modified by Amendment No. 1, to
inform the Commission’s analysis of
whether to approve or disapprove the
proposal.
Pursuant to Section 19(b)(2)(B) of the
Act,116 the Commission is providing
notice of the grounds for possible
disapproval under consideration. The
Commission is instituting proceedings
to allow for additional analysis of the
amended proposal’s consistency with:
• Section 6(b)(1) of the Act, which
requires, among other things, that a
national securities exchange be so
organized and have the capacity to carry
out the purposes of the Act, and to
comply and enforce compliance by its
members and persons associated with
its members, with the provisions of the
Act, the rules and regulation
thereunder, and the rules of the
exchange; 117 and
• Section 6(b)(5) of the Act, which
requires, among other things, that the
113 The Exchange represents that it intends to
become a Participant in the LULD Plan prior to
launching MIAX PEARL Equities. See Notice, supra
note 3, at 8068, n.87.
114 For a description of the order handling
procedures under proposed Exchange Rule 2622(e),
see id. at 8068.
115 15 U.S.C. 78s(b)(2)(B).
116 Id. Section 19(b)(2)(B) of the Act also provides
that proceedings to determine whether to
disapprove a proposed rule change must be
concluded within 180 days of the date of
publication of notice of the filing of the proposed
rule change. See id. The time for conclusion of the
proceedings may be extended for up to 60 days if
the Commission finds good cause for such
extension and publishes its reasons for so finding,
or if the exchange consents to the longer period. See
id.
117 15 U.S.C. 78f(b)(1).
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rules of a national securities exchange
be ‘‘designed to prevent fraudulent and
manipulative acts and practices, to
promote just and equitable principles of
trade,’’ and ‘‘to protect investors and the
public interest.’’ 118
IV. Commission’s Solicitation of
Comments
The Commission requests written
views, data, and arguments with respect
to the concerns identified above as well
as any other relevant concerns. Such
comments should be submitted by June
8, 2020. Rebuttal comments should be
submitted by June 22, 2020. Although
there do not appear to be any issues
relevant to approval or disapproval that
would be facilitated by an oral
presentation of views, data, and
arguments, the Commission will
consider, pursuant to Rule 19b–4, any
request for an opportunity to make an
oral presentation.119
The Commission asks that
commenters address the sufficiency and
merit of the Exchange’s statements in
support of the proposed rule change, as
modified by Amendment No. 1, in
addition to any other comments they
may wish to submit about the proposal.
Interested persons are invited to
submit written data, views, and
arguments concerning the proposed rule
change, as modified by Amendment No.
1, including whether the proposal 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 No. SR–
PEARL–2020–03 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 No.
SR–PEARL–2020–03. The 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
118 15
U.S.C. 78f(b)(5).
U.S.C. 78s(b)(2). Section 19(b)(2) of the Act
grants the Commission flexibility to determine what
type of proceeding—either oral or notice and
opportunity for written comments—is appropriate
for consideration of a particular proposal by an
SRO. See Securities Acts Amendments of 1975,
Report of the Senate Committee on Banking,
Housing and Urban Affairs to Accompany S. 249,
S. Rep. No. 75, 94th Cong., 1st Sess. 30 (1975).
119 15
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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 such
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 publicly available. All
submissions should refer to File No.
SR–PEARL–2020–03 and should be
submitted on or before June 8, 2020.
Rebuttal comments should be submitted
by June 22, 2020.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.120
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020–10519 Filed 5–15–20; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–88857; File No. SR–BX–
2020–008]
Self-Regulatory Organizations; Nasdaq
BX, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Amend the
Exchange’s Transaction Credits and
Fees, at Equity 7, Section 118(a)
May 12, 2020.
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 May 1,
2020, Nasdaq BX, Inc. (‘‘BX’’ or
‘‘Exchange’’) filed with the Securities
and Exchange Commission (‘‘SEC’’ or
‘‘Commission’’) the proposed rule
120 17
CFR 200.30–3(a)(57).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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]]>Agencies
[Federal Register Volume 85, Number 96 (Monday, May 18, 2020)]
[Notices]
[Pages 29759-29766]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-10519]
=======================================================================
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-88859; File No. SR-PEARL-2020-03]
Self-Regulatory Organizations; MIAX PEARL, LLC; Notice of Filing
of Amendment No. 1 and Order Instituting Proceedings To Determine
Whether To Approve or Disapprove a Proposed Rule Change, as Modified by
Amendment No. 1, To Establish Rules Governing the Trading of Equity
Securities
May 12, 2020.
I. Introduction
On January 24, 2020, MIAX PEARL, LLC (``MIAX PEARL'' or
``Exchange'') filed with the Securities and Exchange Commission
(``Commission''), pursuant to Section 19(b)(1) of the Securities
[[Page 29760]]
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a
proposed rule change to adopt rules to govern the trading of cash
equities and establish an equities trading facility of the Exchange.
The proposed rule change was published for comment in the Federal
Register on February 12, 2020.\3\ On March 25, 2020, the Commission
extended the time period within which to approve the proposed rule
change, disapprove the proposed rule change, or institute proceedings
to determine whether to approve or disapprove the proposed rule change,
to May 12, 2020.\4\ On May 8, 2020, the Exchange filed Amendment No. 1
to the proposed rule change.\5\ The Commission has received no comments
on the proposed rule change.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 88132 (February 6,
2020), 85 FR 8053 (February 12, 2020) (``Notice'').
\4\ See Securities Exchange Act Release No. 88476 (March 25,
2020), 85 FR 17929 (March 31, 2020).
\5\ Amendment No. 1 makes the following changes to the proposed
rule change: (i) Deletes the definition of ``Equity Securities''
from proposed Exchange Rule 1901 and makes corresponding changes
throughout the proposed Exchange Rules to eliminate unnecessary
confusion; (ii) substitutes references to ``PEARL Equities'' with
``MIAX PEARL Equities'' throughout the proposed Exchange Rules;
(iii) updates proposed Exchange Rule 2622 (Limit Up-Limit Down Plan
and Trading Halts) regarding a Level 3 Market Decline to conform it
to recent changes made by each of the national securities exchanges
that trade equities and the Financial Industry Regulatory Authority
(``FINRA''), and makes a corresponding change to proposed Exchange
Rule 2615 (Opening Process); and (iv) amends proposed Exchange Rule
2617(a)(4)(C) and (D) to account for the potential for orders to
post and rest at prices that cross contra-side liquidity and also to
correct a typographical error in proposed Exchange Rule
2617(a)(4)(D). Amendment No. 1 is available on the Commission's
website at: https://www.sec.gov/comments/sr-pearl-2020-03/srpearl202003-7168815-216600a.pdf.
---------------------------------------------------------------------------
The Commission is publishing this notice and order to solicit
comments on the proposed rule change, as modified by Amendment No. 1,
from interested persons and to institute proceedings pursuant to
Section 19(b)(2)(B) of the Act \6\ to determine whether to approve or
disapprove the proposed rule change, as modified by Amendment No. 1.
---------------------------------------------------------------------------
\6\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------
II. Description of the Proposed Rule Change, as Modified by Amendment
No. 1
As more fully set forth in the Notice and Amendment No. 1, and
summarized below, the Exchange proposes to establish a platform for the
trading of cash equity securities (referred to herein as ``MIAX PEARL
Equities'') to be regulated as an equities trading facility of the
Exchange. MIAX PEARL Equities would operate pursuant to the proposed
rules (``MIAX PEARL Equities Rules'') and regulatory requirements
described below. This description summarizes but does not review every
detail of the proposal, as modified by Amendment No. 1.
A. MIAX PEARL Equity Members
As proposed, MIAX PEARL Equities will operate an electronic trading
system for equity securities (the ``System'') that will provide for the
electronic execution of orders pursuant to a price/time priority
execution model.\7\ The Exchange will have a new category of Exchange
Member participation called ``Equity Member.'' \8\
---------------------------------------------------------------------------
\7\ See Notice, supra note 3 at 8053, 8056.
\8\ See proposed MIAX PEARL Equities Rules 2000-2003.
---------------------------------------------------------------------------
As proposed, an Equity Member must be or become a member of the
Exchange pursuant to Chapter II (Access) and continue to abide by the
requirements of Chapter II of Exchange Rules and the additional
requirements of Chapter XX governing participation in MIAX PEARL
Equities.\9\ An Equity Member must also be a member of another
registered exchange that is not registered solely under Section 6(g) of
the Exchange Act, or be a member of FINRA.\10\ Further, an Equity
Member that transacts business with public customers must at all times
be a member of FINRA.\11\
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\9\ See proposed MIAX PEARL Equities Rule 2000(b).
\10\ See proposed MIAX PEARL Equities Rule 2001(f). If such
other registered exchange has not been designated by the Commission,
pursuant to Rule 17d-1 under the Exchange Act, to examine Members
for compliance with financial responsibility rules, then such
applicant must have and maintain a membership in FINRA. See id.
\11\ See proposed MIAX PEARL Equities Rule 2001(f).
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There would be two types of Equity Members: (1) Equities Order
Entry Firms (``OEFs'') and (2) Equities Market Makers. Each Equity
Member must be registered as a broker-dealer and have as the principal
purpose of being an Equity Member the conduct of a securities business,
which shall be deemed to exist if and so long as: (1) The Equity Member
has qualified and acts in respect of its business on MIAX PEARL
Equities as an OEF, or an Equities Market Maker, or both; and (2) all
transactions effected by the Equity Member are in compliance with
Section 11(a) of the Act \12\ and the rules and regulations adopted
thereunder.\13\ Equity Members may trade equity securities for their
own proprietary accounts or, if authorized to do so under applicable
law, may conduct business on behalf of customers.\14\ OEFs are Equity
Members representing orders as agent on MIAX PEARL Equities or non-
Equities Market Makers conducting proprietary trading as principal.\15\
An Equity Member may also register as an Equities Market Maker by
filing a registration request with the Exchange.\16\
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\12\ 15 U.S.C. 78k(a).
\13\ See proposed MIAX PEARL Equities Rule 2001(e).
\14\ See id.
\15\ See proposed MIAX PEARL Equities Rule 1901.
\16\ See proposed MIAX PEARL Equities Rule 2605. The Exchange
represents that an unlimited number of Equities Market Makers may be
registered in each equity security unless the number of Market
Makers registered to make a market in a particular equity security
should be limited whenever, in the Exchange's judgment, quotation
system capacity in an equity security is not sufficient to support
additional Market Makers in such equity security. See Notice, supra
note 3, at 8053. The Exchange further represents that it will not
restrict access in any particular equity security until the Exchange
has submitted objective standards for restricting access to the
Commission for the Commission's review and approval. See id.
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An Equity Member registered as an Equities Market Maker would be
required to engage in a course of dealing for its own account and to
assist in the maintenance of a fair and orderly market.\17\ Among other
things, each Equities Market Maker must, on a daily basis, maintain a
two-sided market on a continuous basis during regular market hours for
each equity security in which it is registered as an Equities Market
Maker.\18\ Equities Market Makers may withdraw their quotations,\19\
and may voluntarily terminate their registration with the Exchange.\20\
Pursuant to the existing procedures set forth in Chapter IX of current
Exchange Rules, the Exchange could suspend, condition, limit, prohibit
or terminate the authority of an Equities Market Maker to enter
quotations in one or more authorized securities for violations of
applicable requirements or prohibitions.\21\
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\17\ See proposed MIAX PEARL Equities Rule 2606.
\18\ See proposed MIAX PEARL Equities Rule 2606(a)(1).
\19\ See proposed MIAX PEARL Equities Rule 2607.
\20\ See proposed MIAX PEARL Equities Rule 2608.
\21\ See proposed MIAX PEARL Equities Rule 2609.
---------------------------------------------------------------------------
While using the System, Equity Members and persons employed by or
associated with any Equity Member would be prohibited from conduct that
is: (1) Inconsistent with the maintenance of a fair and orderly market;
(2) apt to impair public confidence in the operations of the Exchange;
or (3) inconsistent with the ordinary and efficient conduct of
business.\22\ Should any such conduct occur, the Exchange may suspend
an Equity Member's access to the System following a warning, or
terminate an
[[Page 29761]]
Equity Member's access to the System by notice in writing.\23\
---------------------------------------------------------------------------
\22\ See proposed MIAX PEARL Equities Rule 2602(b).
\23\ See proposed MIAX PEARL Equities Rule 2602(d). The timing
of such notice would depend on the severity of the Equity Member's
misconduct. See Notice, supra note 3, at 8055.
---------------------------------------------------------------------------
B. MIAX PEARL Equities Trading System
As proposed, the Exchange's equities trading System, like its
system for options, will be operated as a fully automated electronic
order book, and the Exchange will not maintain or operate a physical
trading floor.\24\ The Exchange has proposed to be a trading center
(``Trading Center'') whose quotations can be ``automated quotations''
under Rule 600(b)(4).\25\ In addition, the Exchange is designed to be
an ``automated trading center'' under Rule 600(b)(5) whose best-priced,
displayed quotation will be a ``protected quotation'' under Rules
600(b)(61) and 600(b)(62), and for purposes of Rule 611.\26\ Only
Equity Members and their Sponsored Participants (``Users'') would be
permitted to transact business on MIAX PEARL via the System.\27\
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\24\ The Exchange represents that the System will leverage the
Exchange's current technology, including its customer connectivity,
messaging protocols, quotations and execution engine, order router,
data feeds, and network infrastructure. See Notice, supra note 3, at
8056. In addition, the Exchange represents that it will become a
member of the Depository Trust Company (``DTC''), and that the
System will be linked to DTC for the Exchange to transmit locked-in
trades for clearance and settlement. Id.
\25\ 17 CFR 242.600(b)(4); see proposed MIAX PEARL Equities Rule
2617(c).
\26\ 17 CFR 242.600(b)(5), (b)(61) and (b)(62); 17 CFR 242.611;
see MIAX PEARL Equities Rule 2617(c).
\27\ See proposed MIAX PEARL Equities Rules 2000 and 2602(a)(1).
See also Exchange Rule 210 (Sponsored Access to the Exchange).
---------------------------------------------------------------------------
1. Order Types and Instructions
The Exchange proposes that Users may submit orders to the System as
Limit Orders, Market Orders, or Midpoint Peg Orders.\28\ Orders may be
entered as an odd lot, round lot, or mixed lot.\29\ The System will
support two time-in-force instructions: Immediate-or-Cancel (``IOC'')
or Regular Hours Only (``RHO'').\30\ Users may submit orders with the
display instructions of Displayed or Non-Displayed, but all orders
eligible for display will be automatically defaulted to Displayed
unless a User elects otherwise.\31\ Users also may submit orders with
instructions of: Do Not Route,\32\ Post Only,\33\ Attributable,\34\ and
Non-Attributable.\35\ In addition, Users may mark Limit Orders as
Intermarket Sweep Orders, which will allow orders so designated to be
automatically matched and executed without reference to Protected
Quotations at other Trading Centers.\36\ Users may also choose to
designate orders with self-trade protection modifiers to prevent
executions against a resting opposite side order originating from the
same market participant, Exchange Member, or trading group
identifier.\37\
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\28\ See proposed MIAX PEARL Equities Rule 2614(a)(1)-(3).
Midpoint Peg Orders are non-displayed Limit Orders that are assigned
a ``working price'' pegged to the midpoint of the Protected NBBO. A
Midpoint Peg Order receives a new timestamp each time its working
price changes in response to changes to the midpoint of the
Protected NBBO.
\29\ See proposed MIAX PEARL Equities Rule 2614(a). The Exchange
proposes that odd lot, round lot, and mixed lot orders are to be
treated in the same manner on the Exchange, except as discussed
below regarding the adjustment of an odd-lot price that locks or
crosses the Protected NBBO. See infra note 74 and accompanying text.
\30\ See proposed MIAX PEARL Equities Rule 2614(b). A Market
Order may only include a time in force of IOC. See MIAX PEARL
Equities Rule 2614(a)(2).
\31\ See proposed MIAX PEARL Equities Rule 2614(c)(3) and (4).
Market Orders and Mid-Point Peg Orders are not eligible for display.
See proposed MIAX PEARL Equities Rule 2614(a)(2) and (3).
\32\ An order designated as Do Not Route is a non-routable order
that will be ranked and executed on the MIAX PEARL Equities Book
pursuant to proposed MIAX PEARL Equities Rules 2616 and 2617(a)(4)
or cancelled. Unless otherwise instructed by the User, an order
designated as Do Not Route will be subject to the price sliding
processes set forth in proposed MIAX PEARL Equities Rule 2614(g) and
proposed MIAX PEARL Equities Rule 2622(e). See proposed MIAX PEARL
Equities Rule 2614(c)(1).
\33\ An order designated as Post Only is a non-routable order
that will be ranked and executed on the MIAX PEARL Equities Book
pursuant to proposed MIAX PEARL Equities Rule 2616 and proposed MIAX
PEARL Equities Rule 2617(a)(4). An order designated as Post Only
will only remove liquidity from the MIAX PEARL Equities Book when:
(A) The order is for a security priced below $1.00; or (B) the value
of such execution when removing liquidity equals or exceeds the
value of such execution if the order instead posted to the MIAX
PEARL Equities Book and subsequently provided liquidity including
the applicable fees charged or rebates paid. To determine at the
time of a potential execution whether the value of such execution
when removing liquidity equals or exceeds the value of such
execution if the order were instead posted to the MIAX PEARL
Equities Book and subsequently provided liquidity, the Exchange will
use the highest possible rebate paid and highest possible fee
charged for such executions on the Exchange. Lastly, unless
otherwise instructed by the User, an order designated as Post Only
will be subject to the price sliding processes set forth in proposed
MIAX PEARL Equities Rule 2614(g). See proposed MIAX PEARL Equities
Rule 2614(c)(2).
\34\ ``Attributable'' is an instruction to include the User's
market participant identifier (``MPID'') with an order that is
designated for display (price and size) on an Exchange proprietary
data feed. See proposed MIAX PEARL Equities Rule 2614(c)(5).
\35\ ``Non-Attributable'' is an instruction on an order that is
designated for display (price and size) on an Exchange proprietary
data feed to display that order on an anonymous basis. See proposed
MIAX PEARL Equities Rule 2614(c)(6).
\36\ A User marking a Limit Order as ``ISO'' must simultaneously
route one or more additional Limit Orders marked ``ISO,'' as
necessary, to away Trading Centers to execute against the full
displayed size of any Protected Quotation for the security. An order
meeting such requirements may be immediately executed at one or
multiple price levels in the System without regard to Protected
Quotations at away Trading Centers consistent with Regulation NMS.
An ISO is not eligible for routing and may include a time-in-force
of IOC or RHO. See MIAX PEARL Equities Rule 2614(d). A User entering
an ISO with a time-in-force of IOC represents that such User has
simultaneously routed one or more additional Limit Orders marked
``ISO,'' if necessary, to away Trading Centers to execute against
the full displayed size of any Protected Quotation for the security
with a price that is superior to the limit price of the ISO entered
in the System. A User entering an ISO with a time-in-force of RHO
makes the same representation but further represents that it
simultaneously routed one or more additional Limit Orders marked
``ISO,'' if necessary, to away Trading Centers to execute against
the full displayed size of any Protected Quotation for the security
with a price that is equal to the limit price of the ISO entered in
the System.
\37\ See proposed MIAX PEARL Equities Rule 2614(f).
---------------------------------------------------------------------------
As proposed, the MIAX PEARL Equities Rules will provide for Limit
Order Price Protection.\38\ The Exchange has proposed that a Limit
Order to buy (sell) will be rejected if it is priced at or above
(below) the greater of a specified dollar and percentage away from: (1)
The Protected Best Offer for Limit Orders to buy, the Protected Best
Bid for Limit Orders to sell; or (2) if the Protected Best Offer or
Protected Best Bid is unavailable, the consolidated last sale price
disseminated during the Regular Trading Hours on trade date; or (3) if
the Protected Best Offer or Protected Best Bid and a consolidated last
sale price are unavailable, the prior day's Official Closing Price
identified as such by the primary listing exchange, adjusted to account
for events such as corporate actions and news events.\39\ The proposed
functionality would differ from that provided by other equities
exchanges by using a waterfall of reference prices and permitting
Equity Members to customize the Limit Order Price Protection dollar and
percentage limits on a per session basis, in lieu of using the
Exchange's default parameters.\40\
---------------------------------------------------------------------------
\38\ See proposed MIAX PEARL Equities Rule 2614(a)(1)(I).
\39\ See proposed MIAX PEARL Equities Rule 1900 (defining the
term ``PBO'' or ``Protected NBO'' as the national best offer that is
a Protected Quotation, and the term ``PBB'' or ``Protected NBB'' as
the national best bid that is a Protected Quotation).
\40\ See Notice, supra note 3, at 8061.
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2. Opening Procedures
As proposed, the Exchange will conduct an Opening Process at the
start
[[Page 29762]]
of Regular Trading Hours.\41\ During the Opening Process, the Exchange
attempts to match eligible buy and sell orders at the midpoint of the
NBBO.\42\ Similar to the Opening Process conducted by other national
securities exchanges,\43\ the midpoint of the NBBO will be calculated
differently depending on whether the primary listing exchange is NYSE
or NYSE American,\44\ or is any other primary listing exchange.\45\ If
the conditions to establish the Opening Process do not occur by 9:45:00
a.m. Eastern Time, the Exchange will conduct a Contingent Open, by
matching all orders eligible to participate in the Opening Process at
the midpoint of the then prevailing NBBO.\46\ If the midpoint of the
NBBO is not available for the Contingent Open, all orders will be
handled in time sequence, beginning with the order with the oldest
timestamp, and be placed on the MIAX PEARL Equities Book, cancelled,
executed, or routed to away Trading Centers in accordance with the
terms of the order.\47\ Those Users that do not wish to participate in
the Contingent Open may cancel their orders at any time and resubmit
those orders after the Contingent Open occurs and continuous trading
begins.\48\ While an equity security is subject to a halt, suspension,
or pause in trading, the Exchange will accept orders for queuing prior
to the resumption of trading in the security for participation in the
Re-Opening Process.\49\ As proposed, the Re-Opening Process will occur
in the same general manner as the Opening Process.\50\
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\41\ Orders designated as Post Only, ISOs, Market Orders, and
orders that include a time-in-force other than RHO are not eligible
to participate in the Opening Process. See proposed MIAX PEARL
Equities Rule 2615. Self-trade prevention modifiers will be honored
during the Opening Process. See proposed MIAX PEARL Equities Rule
2615(a)(2).
\42\ All orders eligible to trade at the midpoint will be
processed in time sequence, beginning with the order with the oldest
timestamp. The Opening Process will conclude when no remaining
orders, if any, can be matched at the midpoint of the NBBO. At the
conclusion of the Opening Process, the unexecuted portion of orders
that were eligible to participate in the Opening Process will be
placed on the MIAX PEARL Equities Book in time sequence, cancelled,
executed, or routed to away Trading Centers in accordance with the
terms of the order. See proposed MIAX PEARL Equities Rule 2615(b).
\43\ See, e.g., Cboe BZX Rule 11.24(c); Cboe EDGX Rule 11.7(c).
\44\ When the primary listing exchange is the NYSE or NYSE
American, the Opening Process will be priced at the midpoint of the:
(i) First NBBO subsequent to the first reported trade and first two-
sided quotation on the primary listing exchange after 9:30:00 a.m.
Eastern Time; or (ii) then prevailing NBBO when the first two-sided
quotation is published by the primary listing exchange after 9:30:00
a.m. Eastern Time, but before 9:45:00 a.m. Eastern Time if no first
trade is reported by the primary listing exchange within one second
of publication of the first two-sided quotation by the primary
listing exchange. See proposed MIAX PEARL Equities Rule 2615(c)(1).
\45\ For any other primary listing exchange, the Opening Process
will be priced at the midpoint of the first NBBO subsequent to the
first two-sided quotation published by the primary listing exchange
after 9:30:00 a.m. Eastern Time. See proposed MIAX PEARL Equities
Rules 2615(c)(2).
\46\ See proposed MIAX PEARL Equities Rule 2615(d).
\47\ Users not seeking an execution at the midpoint of the NBBO
during the Contingent Open may cancel their orders before 9:45 a.m.
and re-enter those orders after the Contingent Open occurs. See
Notice, supra note 3, at 8063.
\48\ See id.
\49\ See proposed MIAX PEARL Equities Rule 2615(e).
\50\ See proposed MIAX PEARL Equities Rule 2615(e)(1).
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3. Order Priority and Execution
As proposed, following the Opening Process, the System will
continuously and automatically match orders pursuant to price/time
priority.\51\ For equally-priced trading interest, orders categorized
as displayed will have priority over orders categorized as non-
displayed.\52\ Within each priority category, orders will be ranked
based on time, with each order being assigned a timestamp equal to the
time the order is first placed on the MIAX PEARL Equities Book.\53\ The
System also will utilize certain collars and constraints in an effort
to reduce the occurrence of erroneous trades.\54\ The best-ranked
orders to buy and best-ranked orders to sell that are displayable in
the MIAX PEARL Equities book and their aggregate displayed size will be
available to quotation vendors for dissemination pursuant to the
requirements of Rule 602 of Regulation NMS.\55\
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\51\ See proposed MIAX PEARL Equities Rules 2616(a)(1) and
2617(a)(4)(A). Orders to buy will be ranked from highest working
price to lowest working price. Orders to sell will be ranked from
lowest working price to highest working price. If the working price
of an order changes, the price priority of the order will also
change. See proposed MIAX PEARL Equities Rule 2616(a)(1). See also
proposed MIAX PEARL Equities Rule 1900, defining ``working price''
to mean the price at which an order is eligible to trade at any
given time, which may be different from the limit price or display
price of the order.
\52\ See proposed MIAX PEARL Equities Rule 2616(a)(2).
\53\ See proposed MIAX PEARL Equities Rule 2616(a)(3). When
Users elect that their orders not execute against an order with the
same self-trade prevention modifier, the System will not permit such
orders to execute against one another, regardless of priority
ranking. See MIAX PEARL Equities Rule 2616(a)(4). When a User
cancels or replaces an order resting on the MIAX PEARL Equities
Book, the order will retain its timestamp and retain its priority
only where the modification involves a decrease in the size of the
order or a change in position from: (A) Sell to sell short; (B) sell
to sell short exempt; (C) sell short to sell; (D) sell short to sell
short exempt; (E) sell short exempt to sell; and (F) sell short
exempt to sell short. See proposed MIAX PEARL Equities Rule
2616(a)(5). In addition, the remainder of an order that is partially
executed against an incoming order or Aggressing Order (as defined
in proposed MIAX PEARL Equities Rule 1901) will retain its
timestamp. See proposed MIAX PEARL Equities Rule 2616(a)(6).
\54\ See MIAX PEARL Equities Rules 2618 and 2621.
\55\ See proposed MIAX PEARL Rule 2216(b), providing that,
pursuant to Rule 602 of Regulation NMS, the Exchange will transmit
for display to the appropriate network processor for each System
security the highest (lowest) price to buy (sell) wherein the
aggregate size of all displayed buy (sell) interest in the System
greater (less) than or equal to that price is one round lot or
greater, and that the aggregate size of all displayed buy (sell)
interest in the System greater (less) than or equal to that price
will be transmitted rounded down to the nearest round lot.
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Proposed MIAX PEARL Equities Rule 2617(a) addresses order
execution.\56\ The proposed rule provides that an order will be
cancelled back to the User if, based on market conditions, User
instructions, applicable Exchange Rules and/or the Exchange Act and the
rules and regulations thereunder, such order is not executable, cannot
be routed to another Trading Center and cannot be posted to the MIAX
PEARL Equities Book.\57\
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\56\ The Exchange states that the order execution process for
equity securities is based on functionality currently approved for
use on the Cboe Equities Exchanges, NYSE, NYSE Arca, and Nasdaq. See
Notice supra note 3 at 8065.
\57\ See proposed MIAX Pearl Equities Rule 2617(a). The Exchange
states that this is the same as on other equity exchanges. See
Notice supra note 3 at 8065.
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Proposed MIAX PEARL Equities Rule 2617(a)(1)-(3) provides that the
System will comply with all applicable securities laws and regulations,
including Regulation NMS Rule 611, Regulation SHO, and the Plan to
Address Extraordinary Market Volatility (the ``LULD Plan'').\58\
Proposed Rule 2617(a)(4) addresses how (subject to the requirements of
Rule 611 and other applicable Commission and Exchange requirements), an
incoming order or Aggressing Order would be matched against orders on
the MIAX PEARL Equities Book. Specifically, proposed MIAX PEARL
Equities Rule 2617(a)(4)(A)-(B) provides that an Aggressing Order or an
incoming order to buy (sell) will be automatically executed to the
extent that it is priced at an amount that equals or exceeds (is less
than) any order to sell (buy) in the MIAX PEARL Equities Book and is
executable.\59\
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\58\ See id. Proposed Rule 2617(a)(2) specifies that for any
execution to occur during Regular Trading Hours, the price must be
equal to, or better than, the Protected NBBO unless an exception to
Rule 611 applies. See proposed MIAX PEARL Equities Rules 1901
(defining ``Protected NBBO'') and 2617(a)(2).
\59\ See proposed MIAX PEARL Equities Rule 2617(a)(4)(A)-(B).
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In Amendment No. 1, the Exchange modifies proposed MIAX PEARL
[[Page 29763]]
Equities Rule 2617(a)(4)(C) and (D), which further addresses executions
on the MIAX PEARL Equities Book, by describing how the Exchange would
handle internally locked or crossed interest on the MIAX PEARL Equities
Book. Proposed MIAX PEARL Equities Rule 2617(a)(4)(C), as amended,
acknowledges that certain orders, based on their operation and User
instructions, are permitted to post and rest on the MIAX PEARL Equities
Book at prices that lock or cross contra-side liquidity; provided,
however, that the System would never display a locked or crossed
market.\60\ The rule states further that, if an Aggressing Order or an
incoming order to buy (sell) would execute upon entry against an order
to sell (buy) at the same price as or a worse price than a resting
displayed order to buy (sell), the Aggressing Order or incoming order
to buy (sell) will be cancelled or posted to the MIAX PEARL Equities
Book and ranked in accordance with proposed MIAX PEARL Equities Rule
2616.\61\
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\60\ See Amendment No. 1; Rule 2617(a)(4)(C).
\61\ See Amendment No. 1; Rule 2617(a)(4)(C).
---------------------------------------------------------------------------
Proposed MIAX PEARL Equities Rule 2617(a)(4)(D), as modified by
Amendment No. 1, governs the price at which an order is executable when
it is posted non-displayed on the PEARL Equities Book and there is a
contra-side displayed order at a price which results in an internally
locked or crossed book.\62\ For securities priced equal to or greater
than $1.00 per share, in the case where a non-displayed order to sell
(buy) is posted on the MIAX PEARL Equities Book at a price that locks
or crosses a displayed order to buy (sell) pursuant to proposed MIAX
PEARL Equities Rule 2617(a)(4)(C) described above, an Aggressing Order
or an incoming order to buy (sell) that is a market order or a limit
order priced more aggressively than the order to buy (sell) displayed
on the MIAX PEARL Equities Book will execute against the non-displayed
order to sell (buy) resting on the PEARL Equities Book at one-half
minimum price variation greater (less) than the price of the resting
displayed order to buy (sell).\63\
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\62\ See Amendment No. 1; Rule 2617(a)(4)(D).
\63\ See Amendment No. 1; Rule 2617(a)(4)(D).
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As initially proposed, MIAX PEARL Equities Rule 2617(a)(4)(C) and
(D) set forth how the Exchange would process orders when the MIAX PEARL
Equities Book is internally locked.\64\ In Amendment No. 1, the
Exchange added language to these proposed rule provisions to account
for the fact that certain orders also may post at prices that cross
contra-side liquidity resting on the MIAX PEARL Equities Book.\65\ The
Exchange states that such an internally crossed book may occur when an
incoming order of odd lot size designated as Post Only does not execute
against a resting Midpoint Peg order pursuant to the Exchange's
proposed economic best interest functionality under proposed MIAX PEARL
Equities Rule 2614(c)(2).\66\ The Exchange provides an example where
this occurs when an incoming displayable odd lot Post Only order would
cross a contra-side Midpoint Peg order resting at the midpoint of the
PBBO by one half of one cent ($.005) and post and display at its limit
price, crossing the Midpoint Peg order.\67\ The example further
reflects where these internally crossed orders would be subsequently
executable--specifically, the Midpoint Peg order would no longer be
executable at the midpoint of the PBBO and instead would be executable
at one-half minimum price variation more aggressive than the displayed
price of the odd lot Post Only order, and the odd lot Post Only order
would be executable at its displayed price.\68\
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\64\ See Amendment No. 1.
\65\ Id.
\66\ Id.
\67\ Id. The example assumes that the PBBO is $10.00 by $10.05
and there are no orders resting on the MIAX PEARL Equities book. The
Exchange states that it has yet to determine the level of fees and
rebates it intends to offer, so the example assumes a maker/taker
fee structure with a $0.0030 fee for removing liquidity and a
$0.0030 rebate for providing liquidity, requiring at least $0.0060
of price improvement for a displayed order designated as Post Only
to remove liquidity. The Exchange also states that, assuming it
offers lower fees and rebates for non-displayed orders, if the
incoming post only order in the example was non-displayed, it would
execute against the resting contra-side Midpoint Peg order pursuant
to the Exchange's proposed economic best interest functionality
under proposed Exchange Rule 2614(c)(2). Further, the Exchange
states that if the incoming post only order in the example instead
was a displayed round lot, it would have updated the PBBO resulting
in the contra-side Midpoint Peg Order being re-priced to the new
midpoint of the PBBO and not resulting in a non-displayed internally
crossed book. Id.
\68\ Id.
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The MIAX PEARL Equities Rules also are designed to address
intermarket locks and crosses, as required by Rule 610(d) of Regulation
NMS,\69\ in that they are designed not to disseminate interest that
would lock or cross a protected quote, require Users to reasonably
avoid displaying interest that locks or crosses any protected
quotation, and are reasonably designed to assure the reconciliation of
locked or crossed interest.\70\ The MIAX PEARL Equities Rules also
provide for the re-pricing of limit orders in order to comply with Rule
201 of Regulation SHO \71\ and the LULD Plan,\72\ and the repricing of
non-displayed limit orders to ensure compliance with Rule 611 of
Regulation NMS.\73\ Further, with respect to odd lots, the Exchange has
proposed that the working and display price of a displayable odd lot
order will be adjusted both on arrival and when resting on the MIAX
PEARL Equities Book depending on the odd lot order's limit price in
relation the Protected NBBO and whether the Protected NBBO itself is
locked or crossed, to reduce the potential for odd lot orders to be
displayed on the Exchange's proprietary data feed at potentially
unexecutable prices.\74\
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\69\ 17 CFR 242.610(d).
\70\ See proposed MIAX PEARL Equities Rule 2624: see also
proposed MIAX PEARL Equities Rule 2614(a)(1) and (g)(1) (relating to
price sliding functionality for non-routable limit orders to avoid
violations of Rule 610(d) of Regulation NMS, 17 CFR 242.610(d)).
\71\ 17 CFR 242.201; see proposed MIAX PEARL Equities Rule
2614(a)(1) and (g)(3).
\72\ See proposed MIAX PEARL Equities Rules 2614(a)(1) and 2622;
see also proposed MIAX PEARL Equities Rule 2617(a)(3) (providing
that any executions that occur during Regular Trading Hours must
comply with the LULD plan).
\73\ 17 CFR 242.611; see proposed MIAX PEARL Equities Rule
2614(a)(1) and (g)(2).
\74\ See proposed MIAX PEARL Equities Rule 2611(b)(1). See also
proposed MIAX PEARL Equities Rule 2611(b)(2) (regarding
circumstances in which resting odd lot quantity could be joined with
the returned quantity of a routed order and receive a new
timestamp). See also Notice, supra note 3 at 8057.
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C. Routing
As proposed, MIAX PEARL Equities will support orders that are
designated to be routed to the Protected NBBO as well as orders that
will execute only within MIAX PEARL Equities.\75\ The System will
provide a routing service (``Routing Services'') for orders when
trading interest is not available on MIAX PEARL Equities.\76\ As the
Exchange currently does for options,\77\ it will route orders in equity
securities via one or more routing brokers that are not affiliated with
the Exchange.\78\
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\75\ However, an order marked ``short'' when a short sale price
test restriction pursuant to Rule 201 of Regulation SHO is in effect
is not eligible for routing by the Exchange. See MIAX Pearl Equities
Rule 2617(b)(2). An order that is ineligible for routing due to a
short sale price test restriction and that includes a time-in-force
of IOC will be cancelled upon entry. Id. The Exchange will handle
routable orders in connection with the LULD Plan as described in
proposed MIAX PEARL Equities Rule 2622(b)(2) and (3).
\76\ See Notice, supra note 3, at 8053.
\77\ See Exchange Rule 529.
\78\ See Notice, supra note 3, at 8066. The Exchange notes that
this routing process is described under proposed MIAX PEARL Equities
Rule 2617(b)(1), which is identical to current Exchange Rule 529
that is applicable to options. See id.
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For all Routing Services, the Exchange will determine the logic
that provides
[[Page 29764]]
when, how, and where orders are routed away to other Trading
Centers.\79\ The Exchange represents that the Exchange's routing logic
will not provide any advantage to Users when routing orders to away
Trading Centers as compared to other routing methods.\80\ The routing
broker will receive routing instructions from the Exchange to route
orders to other Trading Centers and report such executions back to the
Exchange.\81\ The routing broker cannot change the terms of an order or
the routing instructions, nor does the routing broker have any
discretion about where to route an order.\82\
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\79\ See proposed MIAX PEARL Equities Rule 2617(b)(1)(A)(iv).
\80\ See Notice, supra note 3, at 8066.
\81\ See proposed MIAX PEARL Equities Rule 2617(b)(1)(A)(v).
\82\ See proposed MIAX PEARL Equities Rule 2617(b)(1)(A)(v).
---------------------------------------------------------------------------
The Exchange represents that for each routing broker used by the
Exchange, an agreement will be in place between the Exchange and the
routing broker that will, among other things, restrict the use of any
confidential and proprietary information that the routing broker
receives to legitimate business purposes necessary for routing orders
at the direction of the Exchange.\83\ Further, the Exchange will
establish and maintain procedures and internal controls reasonably
designed to adequately restrict the flow of confidential and
proprietary information between the Exchange and the routing broker,
and any other entity, including any affiliate of the routing broker;
and, if the routing broker or any of its affiliates engages in any
other business activities other than providing routing services to the
Exchange, between the segment of the routing broker or affiliate that
provides the other business activities and the segment of the routing
broker that provides the Routing Services.\84\
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\83\ See Notice, supra note 3, at 8066. See also proposed MIAX
PEARL Equities Rule 2617(b)(1)(A).
\84\ See proposed MIAX PEARL Equities Rule 2617(b)(1)(A)(i).
---------------------------------------------------------------------------
The Exchange may not use a routing broker for which the Exchange or
any affiliate of the Exchange is the designated examining
authority.\85\ In addition, the Exchange will provide its Routing
Services in compliance with the provisions of the Act and the rules
thereunder, including, but not limited to, the requirements in Section
6(b)(4) and (5) of the Act that the rules of a national securities
exchange provide for the equitable allocation of reasonable dues, fees,
and other charges among an exchange's members and other persons using
its facilities, and not be designed to permit unfair discrimination
between customers, issuers, brokers, or dealers.\86\ The Exchange also
represents that it will file a proposed rule change with the Commission
pursuant to Section 19(b) of the Act prior to offering additional
routing options.\87\
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\85\ See proposed MIAX PEARL Equities Rule 2617(b)(1)(A)(ii).
\86\ See proposed MIAX PEARL Equities Rule 2617(b)(1)(A)(iii).
\87\ See Notice, supra note 3, at 8066 n.78.
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The Exchange notes that use of its routing services to route orders
to other market centers is optional.\88\ Parties that do not desire to
use these services must designate their orders as not available for
routing.\89\ In addition, any bid or offer entered on the Exchange
routed to another Trading Center through a routing broker that results
in an execution shall be binding on the Member that entered such bid or
offer.\90\
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\88\ See id. at 8066.
\89\ See id.
\90\ See proposed MIAX PEARL Equities Rule 2617(b)(1)(A)(vi).
---------------------------------------------------------------------------
D. Securities Traded: Unlisted Trading Privileges
The Exchange is not proposing to be a listing market for equity
securities, but instead proposes to trade equity securities pursuant to
unlisted trading privileges (``UTP''). MIAX PEARL Equities Rule 2900
establishes the Exchange's authority to trade securities on a UTP
basis. MIAX PEARL Equities Rule 2900(a) provides that the Exchange may
extend UTP any NMS Stock that is listed on another national securities
exchange or with respect to which UTP may otherwise be extended in
accordance with Section 12(f) of the Act.\91\ MIAX PEARL Equities Rule
2900(a) further provides that any such security would be subject to all
Exchange rules applicable to trading on the Exchange, unless otherwise
noted. For any UTP security that is a UTP Exchange Traded Product, the
Exchange will distribute an information circular prior to the
commencement of trading in each such UTP Exchange Traded Product that
generally includes the same information as is contained in the
information circular provided by the listing exchange.\92\ Equity
Members must provide each purchaser of UTP Exchange Traded Products a
written description of the terms and characteristics of those
securities, in a form approved by the Exchange or prepared by the open-
ended management company issuing such securities, not later than the
time a confirmation of the first transaction in such securities is
delivered to such purchaser.\93\ Upon request of a customer, an Equity
Member must also provide a prospectus for the particular UTP Exchange
Traded Product.\94\
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\91\ Any such security will be subject to all Exchange rules
applicable to trading on the Exchange, unless otherwise noted. See
proposed MIAX PEARL Equities Rule 2900. The Exchange states that
this rule is identical to the rules of other equities exchanges. See
Notice, supra note 3, at 8070. See also Amendment No. 1, supra note
5, deleting from the proposed MIAX PEARL Equities Rules the
originally proposed definition of Equity Securities as unnecessary.
\92\ This includes: (a) The special risks of trading the new
Exchange Traded Product; (b) the Exchange Rules that will apply to
the new Exchange Traded Product; and (c) information about the
dissemination of value of the underlying assets or indices. See
proposed MIAX PEARL Equities Rules 2900(b)(1).
\93\ In addition, Equity Members will include a written
description with any sales material relating to UTP Exchange Traded
Products that is provided to customers or the public, as well as a
disclaimer (Any other written materials provided by an Equity Member
to customers or the public making specific reference to the UTP
Exchange Traded Products as an investment vehicle) with any other
written materials provided by an Equity Member to customers or the
public making specific reference to the UTP Exchange Traded Products
as an investment vehicle substantially in in a form prescribed by
the Exchange. See proposed MIAX PEARL Equities Rules 2900(b)(2)(B).
\94\ See proposed MIAX PEARL Equities Rule 2900(b)(2)(C).
---------------------------------------------------------------------------
The Exchange also proposes certain restrictions on Equity Members
acting as Equities Market Makers on the Exchange in a UTP Exchange
Traded Product that derives its value from one or more currencies,
commodities, or derivatives based on one or more currencies or
commodities, or is based on a basket or index composed of currencies or
commodities.\95\ Further, the Exchange will enter into comprehensive
surveillance sharing agreements with markets that trade components of
the index or portfolio on which the UTP Exchange Traded Product is
based to the same extent as the listing exchange's rules require the
listing exchange to enter into comprehensive surveillance sharing
agreements with such markets.\96\
---------------------------------------------------------------------------
\95\ See proposed MIAX PEARL Equities Rule 2900(b)(4).
\96\ See proposed MIAX PEARL Equities Rule 2900(b)(5).
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E. Regulation
The Exchange represents that it will regulate MIAX PEARL Equities
using the Exchange's existing regulatory structure.\97\ Pursuant to the
Exchange's By-Laws, the Chief Regulatory Office of the Exchange will
have general supervision of the regulatory operations of the Exchange,
which will include responsibility for overseeing the Exchange's
surveillance, examination, and enforcement functions and for
administering any regulatory services agreements applicable to MIAX
PEARL
[[Page 29765]]
Equities.\98\ Similarly, the Exchange's existing Regulatory Oversight
Committee will be responsible for overseeing the adequacy and
effectiveness of Exchange's regulatory and self-regulatory organization
responsibilities, including those applicable to MIAX PEARL
Equities.\99\
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\97\ See id. at 8071-72.
\98\ See proposed MIAX PEARL By-Laws, Section 6.10.
\99\ See proposed MIAX PEARL By-Laws, Section 4.5(c).
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As more fully discussed in the Notice, the Exchange has proposed
specific business conduct and operational rules for Equity Members
consistent with the approved rules of other equities exchanges, which
include rules covering similar subject matter as existing Exchange
Rules, applicable to options Members.\100\ In addition, the Exchange
proposes that existing rules applicable to the MIAX PEARL options
market (current Chapters I though XVIII of the Exchange Rules) will
apply to Equity Members and their associated persons, unless a specific
MIAX PEARL Equities Rule (in proposed Chapters XIX through XXX of the
Exchange Rules) governs or the context otherwise requires.\101\ The
Exchange also proposes to incorporate certain rules of other self-
regulatory organizations (``SROs'') and represents that it will request
an exemption from the rule filing requirements of Section 19(b) of the
Exchange Act for those rules of another SRO that it proposes to
incorporate by reference to the extent such rules are effected solely
by virtue of a change to any of those rules.\102\
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\100\ See Notice, supra note 3, at 8069-70 (discussing MIAX
PEARL Equities Rules regarding Fair Practice (Chapter XXI), Books,
Records, and Reports (Chapter XXII), Supervision (Chapter XXIII),
Margin (Chapter XXIV), Chapter XXVII (Trading Practice Rules), and
other miscellaneous provisions (Chapter XXVIII).
\101\ See proposed MIAX PEARL Rule 1900 (Applicability).
\102\ See Notice supra note 3 at 8069.
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Further, the Exchange's By-Laws provide that it has disciplinary
jurisdiction over its members, including Equity Members so that it can
enforce its members' compliance with its rules and the federal
securities laws.\103\ The Exchange's rules also permit it to sanction
members for violations of its rules and of the federal securities laws
by, among other things, expelling or suspending members, limiting
members' activities, functions, or operations, fining or censuring
members, or suspending or barring a person from being associated with a
member.\104\
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\103\ See MIAX PEARL By-Laws Section 9.2; see also MIAX PEARL
By-Laws Section 2.1(d).
\104\ See Chapter X of Exchange Rules. The Exchange's rules also
provide for the imposition of fines for minor rule violations in
lieu of commencing disciplinary proceedings. The Commission approved
the Exchange's Minor Rule Violation Plan (``MRVP'') in 2017. See
Securities Exchange Act Release No. 82385 (December 21, 2017), 82 FR
61613 (December 28, 2017) (File No. 4-715).
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In addition, the Exchange represents that: (1) The Exchange will
join the existing equities industry agreements and establish new
agreements, as necessary, pursuant to Section 17(d) of the Exchange
Act, as it has with respect to its equities market; (2) the Exchange's
Regulatory Services Agreement (``RSA'') with FINRA will govern many
aspects of the regulation and discipline of Members that participate in
equities trading, as it does for options market regulation; and (3) the
Exchange will authorize Equity Members to trade on MIAX PEARL Equities
and conduct surveillance of equities trading as it does for
options.\105\
---------------------------------------------------------------------------
\105\ See id. at 8071-72.
---------------------------------------------------------------------------
The Exchange represents that it will establish Rule 17d-2 Plans for
Allocation of Regulatory Responsibilities, including, subject to
Commission approval: (i) A plan with FINRA pursuant to which the
Exchange and FINRA will agree to allocate to FINRA, with respect to
common members, regulatory responsibility for overseeing and enforcing
certain applicable laws, rules, and regulations of MIAX PEARL Equities;
(ii) joining the multi-party plan with FINRA and other national
securities exchanges for the surveillance, investigation, and
enforcement of common insider trading rules; and (iii) joining the
multi-party plan with FINRA and other national securities exchanges for
the allocation of regulatory responsibilities with respect to certain
Regulation NMS Rules.\106\
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\106\ See Notice, supra note 3, at 8072. Rule 17d-2 provides
that any two or more SROs may file with the Commission a plan for
allocating among such SROs the responsibility to receive regulatory
reports from persons who are members or participants of more than
one of such SROs to examine such persons for compliance, or to
enforce compliance by such persons, with specified provisions of the
Act, the rules and regulations thereunder, and the rules of such
SROs, or to carry out other specified regulatory functions with
respect to such persons. See 17 CFR 240.17d-2.
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In addition, the Exchange represents that it will: (i) Expand its
existing RSA with FINRA, pursuant to which FINRA performs various
regulatory services on behalf of the Exchange, subject to the
Exchange's ultimate responsibility, including the review of membership
applications and the conduct of investigations, disciplinary and
hearing services; (ii) join the Intermarket Surveillance Group
(``ISG''); and (iii) submit an amended Minor Rule Violation Plan to the
Commission under Rule 19d-1(c)(2) of the Exchange Act.\107\
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\107\ See id. The Commission approved the Exchange's current
MRVP in 2017. See Securities Exchange Act Release No. 82385
(December 21, 2017), 82 FR 61613 (December 28, 2017) (File No. 4-
715).
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According to the Exchange, FINRA currently surveils options trading
on behalf of the Exchange pursuant to an existing RSA designed to
detect violations of Exchange rules and applicable federal securities
laws.\108\ The Exchange represents that this RSA will be expanded to
provide for FINRA to also surveil equities trading on MIAX PEARL
Equities on behalf of the Exchange.\109\ The Exchange will remain
responsible for FINRA's performance under the RSA.\110\
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\108\ See Notice, supra note 3, at 8072.
\109\ See id.
\110\ See id.
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In addition, with respect to exchange traded products traded on
MIAX PEARL Equities pursuant to unlisted trading privileges, the
Exchange represents that it will enter into a comprehensive
surveillance sharing agreement with markets that trade components of
the index or portfolio on which shares of an exchange-traded product is
based to the same extent as the listing exchange's rules require the
listing exchange to enter into a comprehensive surveillance sharing
agreement with such markets.\111\
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\111\ See id. The Exchange states that FINRA, on behalf of the
Exchange, may obtain information, and will communicate information
as needed, regarding trading in the shares of exchange-traded
products, as well as in the underlying exchange-traded securities
and instruments with other markets and other entities that are
members of ISG. The Exchange may also obtain information regarding
trading in such shares and underlying securities and instruments
from markets and other entities that are members of ISG or with
which the Exchange has in place a comprehensive surveillance sharing
agreement. Moreover, the Exchange states that FINRA, on behalf of
the Exchange, is able to access, as needed, trade information for
certain fixed income securities held by a fund reported to FINRA's
Trade Reporting and Compliance Engine. See id.
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The Exchange has also proposed Rule 2622(e) to comply with the LULD
Plan, and has represented that it is identical in all material respects
to the rules of other equities exchanges.\112\ Proposed MIAX PEARL
Equities Rule 2622(e) states that the Exchange is a Participant
[[Page 29766]]
in the LULD Plan \113\ and requires that Equity Members comply with the
LULD Plan's provisions. Proposed MIAX PEARL Equities Rule 2622(e) also
describes the Exchange's order handling procedures to comply with the
LULD Plan.\114\
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\112\ See id. at 8068. In Amendment No. 1, the Exchange updated
proposed MIAX PEARL Equities Rules 2615 and 2622 regarding trading
halts to reflect recent proposed rule changes filed by all other
equity exchanges and FINRA with respect to a Level 3 Market Decline.
See supra note 5. When triggered, a Level 3 halt would halt trading
market-wide until the next trading day. The changes in Amendment No.
1 would allow for next-day trading to resume in all NMS stocks no
differently from any other trading day, and would not need to wait
for the primary listing market to reopen trading in a security.
\113\ The Exchange represents that it intends to become a
Participant in the LULD Plan prior to launching MIAX PEARL Equities.
See Notice, supra note 3, at 8068, n.87.
\114\ For a description of the order handling procedures under
proposed Exchange Rule 2622(e), see id. at 8068.
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III. Proceedings To Determine Whether To Approve or Disapprove the
Proposed Rule Change, as Modified by Amendment No. 1
The Commission is instituting proceedings pursuant to Section
19(b)(2)(B) of the Act \115\ to determine whether the proposed rule
change, as modified by Amendment No. 1, should be approved or
disapproved. Institution of such proceedings is appropriate at this
time in view of the legal and policy issues raised by the amended
proposal. Institution of proceedings does not indicate that the
Commission has reached any conclusions with respect to any of the
issues involved. Rather, the Commission seeks and encourages interested
persons to provide additional comment on the proposed rule change, as
modified by Amendment No. 1, to inform the Commission's analysis of
whether to approve or disapprove the proposal.
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\115\ 15 U.S.C. 78s(b)(2)(B).
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Pursuant to Section 19(b)(2)(B) of the Act,\116\ the Commission is
providing notice of the grounds for possible disapproval under
consideration. The Commission is instituting proceedings to allow for
additional analysis of the amended proposal's consistency with:
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\116\ Id. Section 19(b)(2)(B) of the Act also provides that
proceedings to determine whether to disapprove a proposed rule
change must be concluded within 180 days of the date of publication
of notice of the filing of the proposed rule change. See id. The
time for conclusion of the proceedings may be extended for up to 60
days if the Commission finds good cause for such extension and
publishes its reasons for so finding, or if the exchange consents to
the longer period. See id.
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Section 6(b)(1) of the Act, which requires, among other
things, that a national securities exchange be so organized and have
the capacity to carry out the purposes of the Act, and to comply and
enforce compliance by its members and persons associated with its
members, with the provisions of the Act, the rules and regulation
thereunder, and the rules of the exchange; \117\ and
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\117\ 15 U.S.C. 78f(b)(1).
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Section 6(b)(5) of the Act, which requires, among other
things, that the rules of a national securities exchange be ``designed
to prevent fraudulent and manipulative acts and practices, to promote
just and equitable principles of trade,'' and ``to protect investors
and the public interest.'' \118\
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\118\ 15 U.S.C. 78f(b)(5).
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IV. Commission's Solicitation of Comments
The Commission requests written views, data, and arguments with
respect to the concerns identified above as well as any other relevant
concerns. Such comments should be submitted by June 8, 2020. Rebuttal
comments should be submitted by June 22, 2020. Although there do not
appear to be any issues relevant to approval or disapproval that would
be facilitated by an oral presentation of views, data, and arguments,
the Commission will consider, pursuant to Rule 19b-4, any request for
an opportunity to make an oral presentation.\119\
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\119\ 15 U.S.C. 78s(b)(2). Section 19(b)(2) of the Act grants
the Commission flexibility to determine what type of proceeding--
either oral or notice and opportunity for written comments--is
appropriate for consideration of a particular proposal by an SRO.
See Securities Acts Amendments of 1975, Report of the Senate
Committee on Banking, Housing and Urban Affairs to Accompany S. 249,
S. Rep. No. 75, 94th Cong., 1st Sess. 30 (1975).
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The Commission asks that commenters address the sufficiency and
merit of the Exchange's statements in support of the proposed rule
change, as modified by Amendment No. 1, in addition to any other
comments they may wish to submit about the proposal.
Interested persons are invited to submit written data, views, and
arguments concerning the proposed rule change, as modified by Amendment
No. 1, including whether the proposal 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 No. SR-PEARL-2020-03 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 No. SR-PEARL-2020-03. The 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 such 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 publicly available. All submissions
should refer to File No. SR-PEARL-2020-03 and should be submitted on or
before June 8, 2020. Rebuttal comments should be submitted by June 22,
2020.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\120\
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\120\ 17 CFR 200.30-3(a)(57).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-10519 Filed 5-15-20; 8:45 am]
BILLING CODE 8011-01-P
