Self-Regulatory Organizations; MIAX PEARL, LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Exchange Rule 2614, Orders and Order Instructions, To Adopt and Make Available the Reserve Quantity Instruction for Orders on the MIAX PEARL Equities Platform, 17259-17263 [2021-06671]
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TABLE 1—SUMMARY OF BURDEN ESTIMATES FOR RULE 11a–3—Continued
Total Burden .............................................................
(Recordkeeping + Notice) ........................................
Internal burden
Wage rate
642 hours ..........................
............................................
Cost of internal burden
$64,518.
UPDATED BURDEN ESTIMATES
Recordkeeping Requirement ...........................................
Respondents ....................................................................
Total .................................................................................
Notice Requirement .........................................................
Respondents ....................................................................
Total .................................................................................
Total Responses ......................................................
(Recordkeeping + Notice) ........................................
419
Total Burden .............................................................
(Recordkeeping + Notice) ........................................
559 hours ..........................
The estimate of average burden hours
is made solely for the purposes of the
Paperwork Reduction Act, and is not
derived from a comprehensive or even
a representative survey or study of the
costs of Commission rules and forms.
An agency may not conduct or sponsor,
and a person is not required to respond
to, a collection of information unless it
displays a currently valid control
number.
Written comments are requested on:
(a) Whether the collection of
information is necessary for the proper
performance of the functions of the
Commission, including whether the
information has practical utility; (b) the
accuracy of the Commission’s estimate
of the burden(s) of the collection of
information; (c) ways to enhance the
quality, utility, and clarity of the
information collected; and (d) ways to
minimize the burden of the collection of
information on respondents, including
through the use of automated collection
techniques or other forms of information
technology. Consideration will be given
to comments and suggestions submitted
in writing within 60 days of this
publication.
Please direct your written comments
to David Bottom, Director/Chief
Information Officer, Securities and
Exchange Commission, C/O Cynthia
Roscoe, 100 F Street NE, Washington,
DC 20549; or send an email to: PRA_
Mailbox@sec.gov.
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1 hour ................................
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349 hours ..........................
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210 hours ..........................
Dated: March 29, 2021.
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021–06731 Filed 3–31–21; 8:45 am]
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$60,137
[Release No. 34–91425; File No. SR–
PEARL–2021–09]
Self-Regulatory Organizations; MIAX
PEARL, LLC; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change To Amend Exchange
Rule 2614, Orders and Order
Instructions, To Adopt and Make
Available the Reserve Quantity
Instruction for Orders on the MIAX
PEARL Equities Platform
March 26, 2021.
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 March 23,
2021, MIAX PEARL, LLC (‘‘MIAX
PEARL’’ or ‘‘Exchange’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I, II, and
III below, which Items have been
prepared by the Exchange. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange is filing a proposed rule
change to amend Exchange Rule 2614,
Orders and Order Instructions, to adopt
the Reserve Quantity instruction.
The text of the proposed rule change
is available on the Exchange’s website at
https://www.miaxoptions.com/rulefilings/pearl at MIAX PEARL’s principal
office, and at the Commission’s Public
Reference Room.
1
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17 CFR 240.19b–4.
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II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The purpose of the proposed rule
change is to amend Exchange Rule 2614,
Orders and Order Instructions, to adopt
the Reserve Quantity instruction that
would be available to orders in equity
securities traded on the Exchange’s
equity trading platform (referred to
herein as ‘‘MIAX Pearl Equities’’). In
sum, a Reserve Quantity instruction
would enable a User 3 to specify that a
portion of their order be displayed and
another portion of their order be nondisplayed. The proposed operation of
the Reserve Quantity instruction is well
established in the equity markets and is
based on similar functionality offered at
other exchanges.4
3 Exchange Rule 1901 defines the term ‘‘User’’ as
‘‘any Member or Sponsored Participant who is
authorized to obtain access to the System pursuant
to Exchange Rule 2602.’’
4 See, e.g., Cboe BYX Exchange, Inc. (‘‘BYX’’) and
Cboe BZX Exchange, Inc. Rules 11.9(c)(1), Cboe
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The Exchange understands that some
market participants avoid sending large
displayed orders to MIAX Pearl Equities
out of concern that revealing the full
size of their order may adversely impact
the market for the security. Market
participants submitting large volume
orders may, therefore, have the desire to
conceal the full size of their order to
avoid anticipatory action from other
market participants. As only a small
portion of the order is visible at any one
time, price movements and market
impact would be reduced. For example,
a large institutional investor may want
to avoid placing a large sell order that
could cause panic. On the other hand,
an institutional investor looking to buy
shares at the lowest possible price may
want to avoid placing a large buy order
that professional traders could see and
attempt to increase the price of the
stock.
To facilitate the liquidation or
acquisition of a large position, market
participants tend to submit multiple
orders into the market that may only
represent a fraction of the overall
institutional position to be executed.
Various strategies used by institutional
market participants to execute large
orders are intended to limit price
movement of the security at issue.
Displaying the full size of their interest
at one time may impact the market for
that security such that the execution of
their order’s full size may be more
costly to execute. As a result, these
orders may often be executed away from
the Exchange in dark pools or other
exchanges that offer the same
functionality as proposed herein,5 or via
broker-dealer internalization.
To attract larger orders, the Exchange
proposes to add new optional
functionality in the form of the Reserve
Quantity instruction. The proposed
Reserve Quantity instruction would be
set forth under new paragraph (c)(8) of
Exchange Rule 2614 and be described as
an instruction a User may attach to an
order where a portion of the order is
displayed (‘‘Displayed Quantity’’) and
with a portion of the order nondisplayed (‘‘Reserve Quantity’’). Upon
entry, both the Displayed Quantity and
the Reserve Quantity are eligible to
EDGA Exchange, Inc. (‘‘EDGA’’) and Cboe EDGX
Exchange, Inc. (‘‘EDGX’’, collectively with BYX,
BZX, and EDGA, the ‘‘Cboe Equity Exchanges’’)
Rules 11.6(m), New York Stock Exchange LLC
(‘‘NYSE’’) Rule 7.31(d)(1), NYSE Arca, Inc. (‘‘NYSE
Arca’’) Rule 7.31–E(d)(1), NYSE American LLC
(‘‘NYSE American’’, collectively with NYSE and
NYSE Arca, the ‘‘NYSE Exchanges’’) Rule
7.31E(d)(1), Investors Exchange, Inc. (‘‘IEX’’) Rule
11.190(b)(2), The NASDAQ Stock Market LLC
(‘‘NASDAQ’’) Rule 4703(h), and MEMX LLC
(‘‘MEMX’’) Rule 11.6(k).
5 Id.
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trade with resting interest in the MIAX
Pearl Equities Book or route to away
markets. When resting, both the
Displayed Quantity and Reserve
Quantity are available for execution
against incoming and Aggressing
Orders.6 The Exchange also proposes to
make a related change to Exchange Rule
2614(a)(1)(A)(i) to specify that the
Reserve Quantity instruction may be
attached to a Limit Order.7
Replenishment Amounts
Exchange Rule 2614(c)(8)(A) would
describe how an order’s Displayed
Quantity may be replenished from the
Reserve Quantity. Specifically,
Exchange Rule 2614(c)(8)(A) would
provide that a User must select the
initial Displayed Quantity (‘‘Max
Floor’’) when entering an order with a
Reserve Quantity.8 The Max Floor is
also used to determine the
replenishment amount and must be
entered in round lots.9 If the Displayed
Quantity is reduced to less than the
round lot,10 the System 11 will replenish
the Displayed Quantity from the Reserve
Quantity using one of two
replenishment options in accordance
with the User’s instruction. The two
proposed replenishment options are
Random Replenishment and Fixed
Replenishment, the descriptions of each
would be set forth under proposed
Exchange Rule 2614(c)(8)(A)(i),
described below. Proposed Exchange
Rule 2614(c)(8)(A)(ii) sets forth the
default replenishment option and
provides an order with a Reserve
Quantity will be subject to Fixed
Replenishment unless the User
affirmatively elects Random
Replenishment.12
6 Exchange Rule 1901 defines the term
‘‘Aggressing Order’’ as ‘‘an order to buy (sell) that
is or becomes marketable against sell (buy) interest
on the MIAX Pearl Equities Book. A resting order
may become an Aggressing Order if its working
price changes, if the PBBO or NBBO is updated,
because of changes to other orders on the MIAX
Pearl Equities Book, or when processing inbound
messages.’’
7 Exchange Rule 2614(a)(1)(A)(i) would also
provide that a displayed Limit Order with a Reserve
Quantity must include a replenishment instruction
and a replenishment amount, as described herein.
8 This behavior is identical to that of the Cboe
Equity Exchanges and NYSE Exchanges. See, e.g.,
EDGX Rule 11.6(m)(1) and NYSE Rule
7.31(d)(1)(A).
9 100 shares constitutes a ‘‘round lot’’, unless
specified by the primary listing market to be fewer
than 100 shares. See Exchange Rule 2610.
10 This behavior is identical to that of the Cboe
Equity Exchanges and NYSE Exchanges. See, e.g.,
EDGX Rule 11.6(m)(1) and NYSE Rule 7.31(d)(1)(A).
11 The term ‘‘System’’ means the automated
trading system used by the Exchange for the trading
of securities. See Exchange Rule 100.
12 This default behavior is identical to that of the
Cboe Equity Exchanges. See, e.g., EDGX Rule
11.6(m)(1)(B).
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Random Replenishment
Random Replenishment is an
instruction where replenishment
quantities are randomly determined by
the System within a replenishment
range established by the User. The User
entering an order into the System
subject to the Random Replenishment
instruction must select a replenishment
value and a Max Floor. The initial
Displayed Quantity and replenishment
quantities will be determined by the
System by randomly selecting a number
of shares within a replenishment range
that is between: (i) The Max Floor
minus the replenishment value; and (ii)
the Max Floor plus the replenishment
value.13
The following example illustrates the
operation of Random Replenishment. A
User enters an order into the System to
buy 10,000 shares at $100 and the User
selects Random Replenishment with a
Max Floor of 1,000 shares and a
replenishment value of 400 shares
(‘‘Order 1’’). Under Random
Replenishment, the System will
generate the initial Displayed Quantity
and subsequent replenished Displayed
Quantities from within a replenishment
range that is calculated by adding and
subtracting the 400 share replenishment
value from the order’s Max Floor of
1,000 shares. For Order 1, 1,000 shares
plus or minus 400 shares equals a
replenishment range of 600 to 1,400
shares. Assume the System randomly
chooses an initial Displayed Quantity of
800 shares, resulting in a Reserve
Quantity of 9,200 shares. An inbound
Market Order 14 to sell 800 shares
(‘‘Order 2’’) is entered into the System
and Order 2 executes against Order 1’s
800 share Displayed Quantity. Under
Random Replenishment, the Displayed
Quantity of Order 1 is randomly
replenished to a new round lot quantity
within the replenishment range of 600
to 1,400 shares. Assume the System
selects a replenishment quantity of
1,200 shares for Order 1. Order 1’s
Displayed Quantity will be 1,200 shares
to buy at $100, resulting in a Reserve
Quantity of 8,000 shares. Upon
replenishment, the Displayed Quantity
will receive a new time stamp and the
13 This behavior is identical to that of the Cboe
Equity Exchanges. See, e.g., EDGX Rule
11.6(m)(1)(A). See also NASDAQ Rule 4703(h)
(providing that the Participant may stipulate that
the original and subsequent displayed size will be
an amount randomly determined based on factors
selected by the Participant (a ‘‘Random Reserve’’)).
14 A Market Order is an order to buy (sell) a stated
amount of a security that is to be executed at the
PBO (PBB) or better. See Exchange Rule 2614(a)(2).
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Reserve Quantity will retain its original
time stamp, as described below.15
is less than Order’s 1 Max Floor of 100
shares.
Fixed Replenishment
Priority
Fixed Replenishment is an instruction
where the System will replenish the
Displayed Quantity to equal the Max
Floor designated by the User.16 The
following example illustrates the
operation of Fixed Replenishment. A
User enters an order into the System to
buy 10,000 shares at $100 with a Max
Floor of 1,000 shares and a Reserve
Quantity of 9,000 shares (‘‘Order 1’’).
The order defaults to Fixed
Replenishment with an initial Displayed
Quantity of 1,000 shares, equal to its
Max Floor. An inbound Market Order to
sell 400 shares is entered into the
System (‘‘Order 2’’). Order 2 executes
against the Order 1’s Displayed Quantity
of 1,000 shares, resulting in Order 1’s
Displayed Quantity to be decremented
to 600 shares. Another order to sell 600
shares is entered (‘‘Order 3’’). Order 3
executes against Order 1’s Displayed
Quantity of 600 shares. Order 1’s
Displayed Quantity is then replenished
by the System from its Reserve Quantity
to the order’s Max Floor of 1,000 shares,
resulting in a remaining Reserve
Quantity of 8,000 shares.
Exchange Rule 2614(c)(8)(A)(iii)
would provide that if after a partial
execution the remainder of the order is
less than the replenishment amount, the
Exchange will replenish the Displayed
Quantity to equal the remaining size of
the order.17 The following example
illustrates the proposed behavior. A
User enters an order into the System to
buy 200 shares at $100 with a Max Floor
of 100 shares and a Reserve Quantity of
100 shares (‘‘Order 1’’). Order 1 defaults
to Fixed Replenishment with an initial
Displayed Quantity of 100 shares, equal
to its Max Floor. An inbound Market
Order to sell 150 shares is entered into
the System (‘‘Order 2’’). Order 2
executes against the Order 1’s Displayed
Quantity of 100 shares and then
executes against Order 1’s Reserve
Quantity of 50 shares, resulting in Order
1’s Reserve Quantity to be decremented
to 50 shares. The total size of Order 1
is now 50 shares (0 share Displayed
Quantity + 50 shares Reserve Quantity
= 50 shares). Order 1’s Displayed
Quantity will now equal its remaining
order size of 50 shares because 50 shares
Exchange Rule 2614(c)(8)(B) would
describe the priority treatment of an
order’s Displayed Quantity and Reserve
Quantity. Exchange Rule 2614(c)(8)(B)(i)
would provide that the Displayed
Quantity of the order is provided
displayed priority pursuant to Exchange
Rule 2616(a)(2)(A)(i) and the Reserve
Quantity is provided non-displayed
priority pursuant to Exchange Rule
2616(a)(2)(A)(ii).18 The Exchange does
not propose to make any changes to
Exchange Rule 2616 regarding the
priority of displayed and non-displayed
orders.
The following example illustrates this
behavior. A User enters an order to buy
6,000 shares at $30.50, the PBB,19 with
a Displayed Quantity of 1,000 shares
and a Reserve Quantity of 5,000 shares
(‘‘Order 1’’). Order 1 is subject to Fixed
Replenishment. A User then enters a
displayed order to buy 600 shares at
$30.50 with no Reserve Quantity
(‘‘Order 2’’). Subsequently, an order to
sell 2,000 shares is entered into the
System (‘‘Order 3’’). Order 3 first
executes against the Order 1’s Displayed
Quantity of 1,000 shares, then executes
against the full 600 shares of Order 2,
and then executes 400 shares from
Order 1’s Reserve Quantity. The
Displayed Quantities of Orders 1 and 2
execute in time priority, followed by the
Reserve Quantity of Order 1. The
Displayed Quantity of Order 1 is then
replenished for 1,000 shares, leaving a
Reserve Quantity of 3,600 shares.
As discussed above, Exchange Rule
2614(c)(8)(B)(ii) would provide that
each time the Displayed Quantity is
replenished from the Reserve Quantity,
a new time stamp is created for the
Displayed Quantity, while the Reserve
Quantity retains its time stamp.20
15 This behavior is identical to that of the NYSE
Exchanges. See, e.g., NYSE Rule 7.31(d)(1)(B). See
infra note 20 and accompanying text.
16 This behavior is identical to that of the Cboe
Equity Exchanges. See, e.g., EDGX Rule
11.6(m)(1)(B).
17 This behavior is identical to that of the Cboe
Equity Exchanges. See, e.g., EDGX Rule 11.6(m)(1).
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Re-Pricing
As stated above, the Exchange
proposes to amend Exchange Rule
2614(a)(1)(A)(i) to specify that the
Reserve Quantity instruction may be
18 This proposed priority treatment is identical to
the Cboe Equity Exchange and the NYSE
Exchanges. See, e.g., EDGX Rule 11.9(a)(6) and
NYSE Rule 7.31(d)(1).
19 With respect to the trading of equity securities,
the term ‘‘Protected NBB’’ or ‘‘PBB’’ shall mean the
national best bid that is a Protected Quotation, the
term ‘‘Protected NBO’’ or ‘‘PBO’’ shall mean the
national best offer that is a Protected Quotation, and
the term ‘‘Protected NBBO’’ or ‘‘PBBO’’ shall mean
the national best bid and offer that is a Protected
Quotation. See Exchange Rule 1901.
20 This proposed priority treatment is identical to
the NYSE Exchanges. See, e.g., NYSE Rule
7.31(d)(1)(B).
PO 00000
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17261
attached to a Limit Order.21 The
Displayed Quantity of the Limit Order
will be subject to the Exchange’s
existing standard re-pricing processes
for displayed orders.22 Exchange Rule
2614(c)(8)(C) would specify that the
Reserve Quantity’s working price will
be adjusted pursuant to the NonDisplayed Price Sliding Process as
provided for Exchange Rule 2614(g)(2).
Routing
The behavior of an order with a
Reserve Quantity would be described
under Exchange Rule 2614(c)(8)(D) and
would provide that any quantity of an
order with a Reserve Quantity that is
returned unexecuted will join the
Reserve Quantity. If there is no Reserve
Quantity to join, the returned quantity
will be assigned a new time stamp as
the Reserve Quantity. In either case,
such Reserve Quantity will replenish
the Displayed Quantity pursuant to the
replenishment options set forth under
Exchange Rule 2614(C)(8)(A)(1),
described above.23
Cancel/Replace Messages
The Exchange proposes to amend
Exchange Rule 2614(e)(3) to describe
what changes may be made to an order
with a Reserve Quantity via a Replace
Message. Currently, Exchange Rule
2614(e)(3) provides that only the price,
sell long, sell short, or short exempt
indicator, and size terms of the order
may be changed by a Replace Message.
The Exchange proposes to amend
Exchange Rule 2614(e)(3) to also
provide that the Max Floor of an order
with a Reserve Quantity may also be
changed by a Replace Message.24 If a
User desires to change any other terms
of an existing order the existing order
must be cancelled and a new order must
be entered.
The Exchange proposes to make a
related change to Exchange Rule
2616(a)(5) to describe when a
modification to an order with a Reserve
Quantity made pursuant to Exchange
Rule 2614(e)(5) described above may
result in a change to that order’s
timestamp. Exchange Rule 2616(a)(5)
currently provides that in the event an
order has been cancelled or replaced in
accordance with Exchange Rule 2614(e),
such order only retains its timestamp if
21 The Exchange does not propose to allow a
Reserve Quantity to be included with any other
order type at this time.
22 See Exchange Rule 2614(a)(1)(E), (F), and (H).
This proposed behavior is identical to the NYSE
Exchanges. See, e.g., NYSE Rule 7.31(d)(1).
23 This behavior is identical to that of the NYSE
Exchanges. See, e.g., NYSE Rule 7.31(d)(1)(D)(ii).
24 This behavior is identical to that of the Cboe
Equity Exchanges. See, e.g., EDGX Rule 11.10(e)(3).
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such 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.
The Exchange proposes to amend
Exchange Rule 2616(a)(5) to also
provide that a change to the Max Floor
of an order with a Reserve Quantity in
accordance with Exchange Rule
2614(e)(5) will not result in a change to
the order’s timestamp.25 Any other
modification to an order with a Reserve
Quantity, including an increase in the
size of the order and/or price change,
will result in such order losing time
priority as compared to other orders in
the MIAX Pearl Equities Book and the
timestamp for such order being revised
to reflect the time of the modification.
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Implementation
Due to the technological changes
associated with this proposed change,
the Exchange will issue a trading alert
publicly announcing the
implementation date of this proposed
rule change. The Exchange anticipates
that the implementation date will be in
either the second or third quarter of
2021.
2. Statutory Basis
The proposed rule change is
consistent with Section 6(b) of the
Act,26 in general, and furthers the
objectives of Section 6(b)(5),27 in
particular, because it is designed to
prevent fraudulent and manipulative
acts and practices, to promote just and
equitable principles of trade, to foster
cooperation and coordination with
persons engaged in regulating, clearing,
settling, processing information with
respect to, and facilitating transactions
in securities, to remove impediments to
and perfect the mechanism of a free and
open market and a national market
system, and, in general, to protect
investors and the public interest. The
proposed rule change would remove
impediments to and promote just and
equitable principles of trade because it
would provide market participants,
including institutional firms who
ultimately represent individual retail
investors in many cases, with optional
functionality that would provide them
with better control over their orders.
As discussed above, the proposed
optional Reserve Quantity would allow
a User to elect that only a small portion
25 This behavior is identical to that of the Cboe
Equity Exchanges. See, e.g., EDGX Rule 11.9(a)(4).
26 15 U.S.C. 78f(b).
27 15 U.S.C. 78f(b)(5).
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of the order is visible at any one time,
potentially reducing price movements
and market impact. For example, a large
institutional investor may want to avoid
placing a large sell order that could
cause panic. On the other hand, an
institutional investor looking to buy
shares at the lowest possible price may
want to avoid placing a large buy order
that professional traders could see and
attempt to increase the price of the
stock. Therefore, the proposal would
also provide them with greater potential
to improve the quality of their order
executions.
Because the Exchange does not have
this functionality, the Exchange believes
that market participants, such as large
institutions that transact a large number
of orders on behalf of retail investors, do
not frequently send large orders to the
Exchange to avoid potentially more
expensive transactions. In this regard,
the Exchange notes that the proposed
new optional Reserve Quantity
instruction may improve the Exchange’s
market by attracting more order flow.
Such new order flow will further
enhance the depth and liquidity on the
Exchange, which supports just and
equitable principles of trade and
benefits all market participants.
Furthermore, the proposed Reserve
Quantity instruction is consistent with
providing market participants with
greater flexibility over their orders so
that they may achieve their trading goals
and improve the quality of their
executions.
Lastly, the Exchange believes its
proposal promotes just and equitable
principles of trade because the proposed
operation of the Reserve Quantity
instruction is well established in the
equity markets and is based on similar
functionality at other exchanges.28 The
Exchange does not propose to include
any unique functionality as part of its
proposed Reserve Quantity instruction.
For example, the Exchange does not
propose any unique priority treatment
for orders with a Reserve Quantity as
the Displayed Quantity will be provided
displayed priority and the Reserve
Quantity will be provided nondisplayed priority under existing
Exchange Rule 2616(a). The Exchange
also does not propose to route an order
with a Reserve Quantity any differently
than other orders that are eligible to be
routed to an away market center under
Exchange Rule 2617(b). As described
throughout the proposal, all portions of
the proposed rule text are based on the
rules of the Cboe Equity Exchanges or
the NYSE Equity Exchanges. Therefore,
28
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See supra note 4.
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the Exchange believes the proposed rule
change is consistent with the Act.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act. In fact, the
Exchange believes that the proposal may
have a positive effect on competition
because it will enable the Exchange to
offer functionality substantially similar
to that offered by the Cboe Equity
Exchanges, the NYSE Exchanges,
NASDAQ, MEMX, and IEX.29 As noted
above, the Exchange believes its lack of
this functionality has put it at a
competitive disadvantage as market
participants, such as large institutions
that transact a large number of orders on
behalf of retail investors, have avoided
sending large orders to the Exchange to
avoid potentially more expensive
transactions. This proposal is designed
to allow the Exchange to directly
compete with other exchanges that offer
similar Reserve Quantity functionality.
The Exchange believes that its proposal
promotes competition because it is
designed to attract liquidity to the
Exchange by allowing market
participants to designate how much of
their order is to be displayed at one
time, thus providing them with
functionality available to them on other
exchanges.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
Written comments were neither
solicited nor received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule
change does not: (i) Significantly affect
the protection of investors or the public
interest; (ii) impose any significant
burden on competition; and (iii) become
operative for 30 days after the date of
the filing, or such shorter time as the
Commission may designate, it has
become effective pursuant to 19(b)(3)(A)
of the Act 30 and Rule 19b–4(f)(6) 31
thereunder.
Id.
15 U.S.C. 78s(b)(3)(A).
31 17 CFR 240.19b–4(f)(6). In addition, Rule 19b–
4(f)(6) requires a self-regulatory organization to give
the Commission written notice of its intent to file
the proposed rule change at least five business days
prior to the date of filing of the proposed rule
change, or such shorter time as designated by the
Commission. The Exchange has satisfied this
requirement.
29
30
E:\FR\FM\01APN1.SGM
01APN1
Federal Register / Vol. 86, No. 61 / Thursday, April 1, 2021 / Notices
jbell on DSKJLSW7X2PROD with NOTICES
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
should be approved or disapproved.
personal identifying information from
comment submissions. You should
submit only information that you wish
to make available publicly. All
submissions should refer to File
Number SR–PEARL–2021–09, and
should be submitted on or before April
22, 2021.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.32
J. Matthew DeLesDernier,
Assistant Secretary.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
[FR Doc. 2021–06671 Filed 3–31–21; 8:45 am]
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
PEARL–2021–09 on the subject line.
Self-Regulatory Organizations; The
Nasdaq Stock Market LLC; Notice of
Designation of a Longer Period for
Commission Action on a Proposed
Rule Change To Adopt Additional
Initial Listing Criteria for Companies
Primarily Operating in Jurisdictions
That Do Not Provide the PCAOB With
the Ability To Inspect Public
Accounting Firms
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–PEARL–2021–09. This file
number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
internet website (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for website viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE,
Washington, DC 20549, on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change.
Persons submitting comments are
cautioned that we do not redact or edit
VerDate Sep<11>2014
19:02 Mar 31, 2021
Jkt 253001
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–91413; File No. SRNASDAQ–2021–007]
17263
the Commission shall either approve the
proposed rule change, disapprove the
proposed rule change, or institute
proceedings to determine whether the
proposed rule change should be
disapproved. The 45th day after
publication of the notice for this
proposed rule change is April 2, 2021.
The Commission is extending this 45day time period.
The Commission finds it appropriate
to designate a longer period within
which to take action on the proposed
rule change so that it has sufficient time
to consider the proposed rule change
and the comment received. Accordingly,
the Commission, pursuant to Section
19(b)(2) of the Act,5 designates May 17,
2021 as the date by which the
Commission shall either approve or
disapprove, or institute proceedings to
determine whether to disapprove, the
proposed rule change (File No. SR–
NASDAQ–2021–007).
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.6
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021–06668 Filed 3–31–21; 8:45 am]
BILLING CODE 8011–01–P
March 26, 2021.
On February 1, 2021, The Nasdaq
Stock Market LLC (‘‘Nasdaq’’ or
‘‘Exchange’’) filed with the Securities
and Exchange Commission
(‘‘Commission’’), pursuant to Section
19(b)(1) of the Securities Exchange Act
of 1934 (‘‘Act’’) 1 and Rule 19b–4
thereunder,2 a proposed rule change to
adopt additional initial listing criteria
for companies primarily operating in
jurisdictions that do not provide the
Public Company Accounting Oversight
Board with the ability to inspect public
accounting firms. The proposed rule
change was published for comment in
the Federal Register on February 16,
2021.3
Section 19(b)(2) of the Act 4 provides
that within 45 days of the publication of
notice of the filing of a proposed rule
change, or within such longer period up
to 90 days as the Commission may
designate if it finds such longer period
to be appropriate and publishes its
reasons for so finding, or as to which the
self-regulatory organization consents,
32 17
CFR 200.30–3(a)(12).
U.S.C.78s(b)(1).
2 17 CFR 240.19b–4.
3 See Securities Exchange Act Release No. 91089
(February 9, 2021), 86 FR 9549. Comment on the
proposed rule change can be found at: https://
www.sec.gov/comments/sr-nasdaq-2021-007/
srnasdaq2021007.htm.
4 15 U.S.C. 78s(b)(2).
1 15
PO 00000
Frm 00152
Fmt 4703
Sfmt 9990
SMALL BUSINESS ADMINISTRATION
Interest Rates
The Small Business Administration
publishes an interest rate called the
optional ‘‘peg’’ rate (13 CFR 120.214) on
a quarterly basis. This rate is a weighted
average cost of money to the
government for maturities similar to the
average SBA direct loan. This rate may
be used as a base rate for guaranteed
fluctuating interest rate SBA loans. This
rate will be 1.38 percent for the April–
June quarter of FY 2021.
Pursuant to 13 CFR 120.921(b), the
maximum legal interest rate for any
third party lender’s commercial loan
which funds any portion of the cost of
a 504 project (see 13 CFR 120.801) shall
be 6% over the New York Prime rate or,
if that exceeds the maximum interest
rate permitted by the constitution or
laws of a given State, the maximum
interest rate will be the rate permitted
by the constitution or laws of the given
State.
John Wade,
Chief, Secondary Market Division.
[FR Doc. 2021–06695 Filed 3–31–21; 8:45 am]
BILLING CODE P
5 Id.
6 17
E:\FR\FM\01APN1.SGM
CFR 200.30–3(a)(31).
01APN1
]]>Agencies
[Federal Register Volume 86, Number 61 (Thursday, April 1, 2021)]
[Notices]
[Pages 17259-17263]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-06671]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-91425; File No. SR-PEARL-2021-09]
Self-Regulatory Organizations; MIAX PEARL, LLC; Notice of Filing
and Immediate Effectiveness of a Proposed Rule Change To Amend Exchange
Rule 2614, Orders and Order Instructions, To Adopt and Make Available
the Reserve Quantity Instruction for Orders on the MIAX PEARL Equities
Platform
March 26, 2021.
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 March 23, 2021, MIAX PEARL, LLC (``MIAX PEARL'' or ``Exchange'')
filed with the Securities and Exchange Commission (``Commission'') the
proposed rule change as described in Items I, II, and III below, which
Items have been prepared by the Exchange. The Commission is publishing
this notice to solicit comments on the proposed rule change from
interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange is filing a proposed rule change to amend Exchange
Rule 2614, Orders and Order Instructions, to adopt the Reserve Quantity
instruction.
The text of the proposed rule change is available on the Exchange's
website at https://www.miaxoptions.com/rule-filings/pearl at MIAX
PEARL's principal office, and at the Commission's Public Reference
Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The purpose of the proposed rule change is to amend Exchange Rule
2614, Orders and Order Instructions, to adopt the Reserve Quantity
instruction that would be available to orders in equity securities
traded on the Exchange's equity trading platform (referred to herein as
``MIAX Pearl Equities''). In sum, a Reserve Quantity instruction would
enable a User \3\ to specify that a portion of their order be displayed
and another portion of their order be non-displayed. The proposed
operation of the Reserve Quantity instruction is well established in
the equity markets and is based on similar functionality offered at
other exchanges.\4\
---------------------------------------------------------------------------
\3\ Exchange Rule 1901 defines the term ``User'' as ``any Member
or Sponsored Participant who is authorized to obtain access to the
System pursuant to Exchange Rule 2602.''
\4\ See, e.g., Cboe BYX Exchange, Inc. (``BYX'') and Cboe BZX
Exchange, Inc. Rules 11.9(c)(1), Cboe EDGA Exchange, Inc. (``EDGA'')
and Cboe EDGX Exchange, Inc. (``EDGX'', collectively with BYX, BZX,
and EDGA, the ``Cboe Equity Exchanges'') Rules 11.6(m), New York
Stock Exchange LLC (``NYSE'') Rule 7.31(d)(1), NYSE Arca, Inc.
(``NYSE Arca'') Rule 7.31-E(d)(1), NYSE American LLC (``NYSE
American'', collectively with NYSE and NYSE Arca, the ``NYSE
Exchanges'') Rule 7.31E(d)(1), Investors Exchange, Inc. (``IEX'')
Rule 11.190(b)(2), The NASDAQ Stock Market LLC (``NASDAQ'') Rule
4703(h), and MEMX LLC (``MEMX'') Rule 11.6(k).
---------------------------------------------------------------------------
[[Page 17260]]
The Exchange understands that some market participants avoid
sending large displayed orders to MIAX Pearl Equities out of concern
that revealing the full size of their order may adversely impact the
market for the security. Market participants submitting large volume
orders may, therefore, have the desire to conceal the full size of
their order to avoid anticipatory action from other market
participants. As only a small portion of the order is visible at any
one time, price movements and market impact would be reduced. For
example, a large institutional investor may want to avoid placing a
large sell order that could cause panic. On the other hand, an
institutional investor looking to buy shares at the lowest possible
price may want to avoid placing a large buy order that professional
traders could see and attempt to increase the price of the stock.
To facilitate the liquidation or acquisition of a large position,
market participants tend to submit multiple orders into the market that
may only represent a fraction of the overall institutional position to
be executed. Various strategies used by institutional market
participants to execute large orders are intended to limit price
movement of the security at issue. Displaying the full size of their
interest at one time may impact the market for that security such that
the execution of their order's full size may be more costly to execute.
As a result, these orders may often be executed away from the Exchange
in dark pools or other exchanges that offer the same functionality as
proposed herein,\5\ or via broker-dealer internalization.
---------------------------------------------------------------------------
\5\ Id.
---------------------------------------------------------------------------
To attract larger orders, the Exchange proposes to add new optional
functionality in the form of the Reserve Quantity instruction. The
proposed Reserve Quantity instruction would be set forth under new
paragraph (c)(8) of Exchange Rule 2614 and be described as an
instruction a User may attach to an order where a portion of the order
is displayed (``Displayed Quantity'') and with a portion of the order
non-displayed (``Reserve Quantity''). Upon entry, both the Displayed
Quantity and the Reserve Quantity are eligible to trade with resting
interest in the MIAX Pearl Equities Book or route to away markets. When
resting, both the Displayed Quantity and Reserve Quantity are available
for execution against incoming and Aggressing Orders.\6\ The Exchange
also proposes to make a related change to Exchange Rule
2614(a)(1)(A)(i) to specify that the Reserve Quantity instruction may
be attached to a Limit Order.\7\
---------------------------------------------------------------------------
\6\ Exchange Rule 1901 defines the term ``Aggressing Order'' as
``an order to buy (sell) that is or becomes marketable against sell
(buy) interest on the MIAX Pearl Equities Book. A resting order may
become an Aggressing Order if its working price changes, if the PBBO
or NBBO is updated, because of changes to other orders on the MIAX
Pearl Equities Book, or when processing inbound messages.''
\7\ Exchange Rule 2614(a)(1)(A)(i) would also provide that a
displayed Limit Order with a Reserve Quantity must include a
replenishment instruction and a replenishment amount, as described
herein.
---------------------------------------------------------------------------
Replenishment Amounts
Exchange Rule 2614(c)(8)(A) would describe how an order's Displayed
Quantity may be replenished from the Reserve Quantity. Specifically,
Exchange Rule 2614(c)(8)(A) would provide that a User must select the
initial Displayed Quantity (``Max Floor'') when entering an order with
a Reserve Quantity.\8\ The Max Floor is also used to determine the
replenishment amount and must be entered in round lots.\9\ If the
Displayed Quantity is reduced to less than the round lot,\10\ the
System \11\ will replenish the Displayed Quantity from the Reserve
Quantity using one of two replenishment options in accordance with the
User's instruction. The two proposed replenishment options are Random
Replenishment and Fixed Replenishment, the descriptions of each would
be set forth under proposed Exchange Rule 2614(c)(8)(A)(i), described
below. Proposed Exchange Rule 2614(c)(8)(A)(ii) sets forth the default
replenishment option and provides an order with a Reserve Quantity will
be subject to Fixed Replenishment unless the User affirmatively elects
Random Replenishment.\12\
---------------------------------------------------------------------------
\8\ This behavior is identical to that of the Cboe Equity
Exchanges and NYSE Exchanges. See, e.g., EDGX Rule 11.6(m)(1) and
NYSE Rule 7.31(d)(1)(A).
\9\ 100 shares constitutes a ``round lot'', unless specified by
the primary listing market to be fewer than 100 shares. See Exchange
Rule 2610.
\10\ This behavior is identical to that of the Cboe Equity
Exchanges and NYSE Exchanges. See, e.g., EDGX Rule 11.6(m)(1) and
NYSE Rule 7.31(d)(1)(A).
\11\ The term ``System'' means the automated trading system used
by the Exchange for the trading of securities. See Exchange Rule
100.
\12\ This default behavior is identical to that of the Cboe
Equity Exchanges. See, e.g., EDGX Rule 11.6(m)(1)(B).
---------------------------------------------------------------------------
Random Replenishment
Random Replenishment is an instruction where replenishment
quantities are randomly determined by the System within a replenishment
range established by the User. The User entering an order into the
System subject to the Random Replenishment instruction must select a
replenishment value and a Max Floor. The initial Displayed Quantity and
replenishment quantities will be determined by the System by randomly
selecting a number of shares within a replenishment range that is
between: (i) The Max Floor minus the replenishment value; and (ii) the
Max Floor plus the replenishment value.\13\
---------------------------------------------------------------------------
\13\ This behavior is identical to that of the Cboe Equity
Exchanges. See, e.g., EDGX Rule 11.6(m)(1)(A). See also NASDAQ Rule
4703(h) (providing that the Participant may stipulate that the
original and subsequent displayed size will be an amount randomly
determined based on factors selected by the Participant (a ``Random
Reserve'')).
---------------------------------------------------------------------------
The following example illustrates the operation of Random
Replenishment. A User enters an order into the System to buy 10,000
shares at $100 and the User selects Random Replenishment with a Max
Floor of 1,000 shares and a replenishment value of 400 shares (``Order
1''). Under Random Replenishment, the System will generate the initial
Displayed Quantity and subsequent replenished Displayed Quantities from
within a replenishment range that is calculated by adding and
subtracting the 400 share replenishment value from the order's Max
Floor of 1,000 shares. For Order 1, 1,000 shares plus or minus 400
shares equals a replenishment range of 600 to 1,400 shares. Assume the
System randomly chooses an initial Displayed Quantity of 800 shares,
resulting in a Reserve Quantity of 9,200 shares. An inbound Market
Order \14\ to sell 800 shares (``Order 2'') is entered into the System
and Order 2 executes against Order 1's 800 share Displayed Quantity.
Under Random Replenishment, the Displayed Quantity of Order 1 is
randomly replenished to a new round lot quantity within the
replenishment range of 600 to 1,400 shares. Assume the System selects a
replenishment quantity of 1,200 shares for Order 1. Order 1's Displayed
Quantity will be 1,200 shares to buy at $100, resulting in a Reserve
Quantity of 8,000 shares. Upon replenishment, the Displayed Quantity
will receive a new time stamp and the
[[Page 17261]]
Reserve Quantity will retain its original time stamp, as described
below.\15\
---------------------------------------------------------------------------
\14\ A Market Order is an order to buy (sell) a stated amount of
a security that is to be executed at the PBO (PBB) or better. See
Exchange Rule 2614(a)(2).
\15\ This behavior is identical to that of the NYSE Exchanges.
See, e.g., NYSE Rule 7.31(d)(1)(B). See infra note 20 and
accompanying text.
---------------------------------------------------------------------------
Fixed Replenishment
Fixed Replenishment is an instruction where the System will
replenish the Displayed Quantity to equal the Max Floor designated by
the User.\16\ The following example illustrates the operation of Fixed
Replenishment. A User enters an order into the System to buy 10,000
shares at $100 with a Max Floor of 1,000 shares and a Reserve Quantity
of 9,000 shares (``Order 1''). The order defaults to Fixed
Replenishment with an initial Displayed Quantity of 1,000 shares, equal
to its Max Floor. An inbound Market Order to sell 400 shares is entered
into the System (``Order 2''). Order 2 executes against the Order 1's
Displayed Quantity of 1,000 shares, resulting in Order 1's Displayed
Quantity to be decremented to 600 shares. Another order to sell 600
shares is entered (``Order 3''). Order 3 executes against Order 1's
Displayed Quantity of 600 shares. Order 1's Displayed Quantity is then
replenished by the System from its Reserve Quantity to the order's Max
Floor of 1,000 shares, resulting in a remaining Reserve Quantity of
8,000 shares.
---------------------------------------------------------------------------
\16\ This behavior is identical to that of the Cboe Equity
Exchanges. See, e.g., EDGX Rule 11.6(m)(1)(B).
---------------------------------------------------------------------------
Exchange Rule 2614(c)(8)(A)(iii) would provide that if after a
partial execution the remainder of the order is less than the
replenishment amount, the Exchange will replenish the Displayed
Quantity to equal the remaining size of the order.\17\ The following
example illustrates the proposed behavior. A User enters an order into
the System to buy 200 shares at $100 with a Max Floor of 100 shares and
a Reserve Quantity of 100 shares (``Order 1''). Order 1 defaults to
Fixed Replenishment with an initial Displayed Quantity of 100 shares,
equal to its Max Floor. An inbound Market Order to sell 150 shares is
entered into the System (``Order 2''). Order 2 executes against the
Order 1's Displayed Quantity of 100 shares and then executes against
Order 1's Reserve Quantity of 50 shares, resulting in Order 1's Reserve
Quantity to be decremented to 50 shares. The total size of Order 1 is
now 50 shares (0 share Displayed Quantity + 50 shares Reserve Quantity
= 50 shares). Order 1's Displayed Quantity will now equal its remaining
order size of 50 shares because 50 shares is less than Order's 1 Max
Floor of 100 shares.
---------------------------------------------------------------------------
\17\ This behavior is identical to that of the Cboe Equity
Exchanges. See, e.g., EDGX Rule 11.6(m)(1).
---------------------------------------------------------------------------
Priority
Exchange Rule 2614(c)(8)(B) would describe the priority treatment
of an order's Displayed Quantity and Reserve Quantity. Exchange Rule
2614(c)(8)(B)(i) would provide that the Displayed Quantity of the order
is provided displayed priority pursuant to Exchange Rule
2616(a)(2)(A)(i) and the Reserve Quantity is provided non-displayed
priority pursuant to Exchange Rule 2616(a)(2)(A)(ii).\18\ The Exchange
does not propose to make any changes to Exchange Rule 2616 regarding
the priority of displayed and non-displayed orders.
---------------------------------------------------------------------------
\18\ This proposed priority treatment is identical to the Cboe
Equity Exchange and the NYSE Exchanges. See, e.g., EDGX Rule
11.9(a)(6) and NYSE Rule 7.31(d)(1).
---------------------------------------------------------------------------
The following example illustrates this behavior. A User enters an
order to buy 6,000 shares at $30.50, the PBB,\19\ with a Displayed
Quantity of 1,000 shares and a Reserve Quantity of 5,000 shares
(``Order 1''). Order 1 is subject to Fixed Replenishment. A User then
enters a displayed order to buy 600 shares at $30.50 with no Reserve
Quantity (``Order 2''). Subsequently, an order to sell 2,000 shares is
entered into the System (``Order 3''). Order 3 first executes against
the Order 1's Displayed Quantity of 1,000 shares, then executes against
the full 600 shares of Order 2, and then executes 400 shares from Order
1's Reserve Quantity. The Displayed Quantities of Orders 1 and 2
execute in time priority, followed by the Reserve Quantity of Order 1.
The Displayed Quantity of Order 1 is then replenished for 1,000 shares,
leaving a Reserve Quantity of 3,600 shares.
---------------------------------------------------------------------------
\19\ With respect to the trading of equity securities, the term
``Protected NBB'' or ``PBB'' shall mean the national best bid that
is a Protected Quotation, the term ``Protected NBO'' or ``PBO''
shall mean the national best offer that is a Protected Quotation,
and the term ``Protected NBBO'' or ``PBBO'' shall mean the national
best bid and offer that is a Protected Quotation. See Exchange Rule
1901.
---------------------------------------------------------------------------
As discussed above, Exchange Rule 2614(c)(8)(B)(ii) would provide
that each time the Displayed Quantity is replenished from the Reserve
Quantity, a new time stamp is created for the Displayed Quantity, while
the Reserve Quantity retains its time stamp.\20\
---------------------------------------------------------------------------
\20\ This proposed priority treatment is identical to the NYSE
Exchanges. See, e.g., NYSE Rule 7.31(d)(1)(B).
---------------------------------------------------------------------------
Re-Pricing
As stated above, the Exchange proposes to amend Exchange Rule
2614(a)(1)(A)(i) to specify that the Reserve Quantity instruction may
be attached to a Limit Order.\21\ The Displayed Quantity of the Limit
Order will be subject to the Exchange's existing standard re-pricing
processes for displayed orders.\22\ Exchange Rule 2614(c)(8)(C) would
specify that the Reserve Quantity's working price will be adjusted
pursuant to the Non-Displayed Price Sliding Process as provided for
Exchange Rule 2614(g)(2).
---------------------------------------------------------------------------
\21\ The Exchange does not propose to allow a Reserve Quantity
to be included with any other order type at this time.
\22\ See Exchange Rule 2614(a)(1)(E), (F), and (H). This
proposed behavior is identical to the NYSE Exchanges. See, e.g.,
NYSE Rule 7.31(d)(1).
---------------------------------------------------------------------------
Routing
The behavior of an order with a Reserve Quantity would be described
under Exchange Rule 2614(c)(8)(D) and would provide that any quantity
of an order with a Reserve Quantity that is returned unexecuted will
join the Reserve Quantity. If there is no Reserve Quantity to join, the
returned quantity will be assigned a new time stamp as the Reserve
Quantity. In either case, such Reserve Quantity will replenish the
Displayed Quantity pursuant to the replenishment options set forth
under Exchange Rule 2614(C)(8)(A)(1), described above.\23\
---------------------------------------------------------------------------
\23\ This behavior is identical to that of the NYSE Exchanges.
See, e.g., NYSE Rule 7.31(d)(1)(D)(ii).
---------------------------------------------------------------------------
Cancel/Replace Messages
The Exchange proposes to amend Exchange Rule 2614(e)(3) to describe
what changes may be made to an order with a Reserve Quantity via a
Replace Message. Currently, Exchange Rule 2614(e)(3) provides that only
the price, sell long, sell short, or short exempt indicator, and size
terms of the order may be changed by a Replace Message. The Exchange
proposes to amend Exchange Rule 2614(e)(3) to also provide that the Max
Floor of an order with a Reserve Quantity may also be changed by a
Replace Message.\24\ If a User desires to change any other terms of an
existing order the existing order must be cancelled and a new order
must be entered.
---------------------------------------------------------------------------
\24\ This behavior is identical to that of the Cboe Equity
Exchanges. See, e.g., EDGX Rule 11.10(e)(3).
---------------------------------------------------------------------------
The Exchange proposes to make a related change to Exchange Rule
2616(a)(5) to describe when a modification to an order with a Reserve
Quantity made pursuant to Exchange Rule 2614(e)(5) described above may
result in a change to that order's timestamp. Exchange Rule 2616(a)(5)
currently provides that in the event an order has been cancelled or
replaced in accordance with Exchange Rule 2614(e), such order only
retains its timestamp if
[[Page 17262]]
such 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.
The Exchange proposes to amend Exchange Rule 2616(a)(5) to also provide
that a change to the Max Floor of an order with a Reserve Quantity in
accordance with Exchange Rule 2614(e)(5) will not result in a change to
the order's timestamp.\25\ Any other modification to an order with a
Reserve Quantity, including an increase in the size of the order and/or
price change, will result in such order losing time priority as
compared to other orders in the MIAX Pearl Equities Book and the
timestamp for such order being revised to reflect the time of the
modification.
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\25\ This behavior is identical to that of the Cboe Equity
Exchanges. See, e.g., EDGX Rule 11.9(a)(4).
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Implementation
Due to the technological changes associated with this proposed
change, the Exchange will issue a trading alert publicly announcing the
implementation date of this proposed rule change. The Exchange
anticipates that the implementation date will be in either the second
or third quarter of 2021.
2. Statutory Basis
The proposed rule change is consistent with Section 6(b) of the
Act,\26\ in general, and furthers the objectives of Section
6(b)(5),\27\ in particular, because it is designed to prevent
fraudulent and manipulative acts and practices, to promote just and
equitable principles of trade, to foster cooperation and coordination
with persons engaged in regulating, clearing, settling, processing
information with respect to, and facilitating transactions in
securities, to remove impediments to and perfect the mechanism of a
free and open market and a national market system, and, in general, to
protect investors and the public interest. The proposed rule change
would remove impediments to and promote just and equitable principles
of trade because it would provide market participants, including
institutional firms who ultimately represent individual retail
investors in many cases, with optional functionality that would provide
them with better control over their orders.
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\26\ 15 U.S.C. 78f(b).
\27\ 15 U.S.C. 78f(b)(5).
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As discussed above, the proposed optional Reserve Quantity would
allow a User to elect that only a small portion of the order is visible
at any one time, potentially reducing price movements and market
impact. For example, a large institutional investor may want to avoid
placing a large sell order that could cause panic. On the other hand,
an institutional investor looking to buy shares at the lowest possible
price may want to avoid placing a large buy order that professional
traders could see and attempt to increase the price of the stock.
Therefore, the proposal would also provide them with greater potential
to improve the quality of their order executions.
Because the Exchange does not have this functionality, the Exchange
believes that market participants, such as large institutions that
transact a large number of orders on behalf of retail investors, do not
frequently send large orders to the Exchange to avoid potentially more
expensive transactions. In this regard, the Exchange notes that the
proposed new optional Reserve Quantity instruction may improve the
Exchange's market by attracting more order flow. Such new order flow
will further enhance the depth and liquidity on the Exchange, which
supports just and equitable principles of trade and benefits all market
participants. Furthermore, the proposed Reserve Quantity instruction is
consistent with providing market participants with greater flexibility
over their orders so that they may achieve their trading goals and
improve the quality of their executions.
Lastly, the Exchange believes its proposal promotes just and
equitable principles of trade because the proposed operation of the
Reserve Quantity instruction is well established in the equity markets
and is based on similar functionality at other exchanges.\28\ The
Exchange does not propose to include any unique functionality as part
of its proposed Reserve Quantity instruction. For example, the Exchange
does not propose any unique priority treatment for orders with a
Reserve Quantity as the Displayed Quantity will be provided displayed
priority and the Reserve Quantity will be provided non-displayed
priority under existing Exchange Rule 2616(a). The Exchange also does
not propose to route an order with a Reserve Quantity any differently
than other orders that are eligible to be routed to an away market
center under Exchange Rule 2617(b). As described throughout the
proposal, all portions of the proposed rule text are based on the rules
of the Cboe Equity Exchanges or the NYSE Equity Exchanges. Therefore,
the Exchange believes the proposed rule change is consistent with the
Act.
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\28\ See supra note 4.
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act. In fact, the Exchange
believes that the proposal may have a positive effect on competition
because it will enable the Exchange to offer functionality
substantially similar to that offered by the Cboe Equity Exchanges, the
NYSE Exchanges, NASDAQ, MEMX, and IEX.\29\ As noted above, the Exchange
believes its lack of this functionality has put it at a competitive
disadvantage as market participants, such as large institutions that
transact a large number of orders on behalf of retail investors, have
avoided sending large orders to the Exchange to avoid potentially more
expensive transactions. This proposal is designed to allow the Exchange
to directly compete with other exchanges that offer similar Reserve
Quantity functionality. The Exchange believes that its proposal
promotes competition because it is designed to attract liquidity to the
Exchange by allowing market participants to designate how much of their
order is to be displayed at one time, thus providing them with
functionality available to them on other exchanges.
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\29\ Id.
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C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
Written comments were neither solicited nor received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule change does not: (i)
Significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
become operative for 30 days after the date of the filing, or such
shorter time as the Commission may designate, it has become effective
pursuant to 19(b)(3)(A) of the Act \30\ and Rule 19b-4(f)(6) \31\
thereunder.
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\30\ 15 U.S.C. 78s(b)(3)(A).
\31\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)
requires a self-regulatory organization to give the Commission
written notice of its intent to file the proposed rule change at
least five business days prior to the date of filing of the proposed
rule change, or such shorter time as designated by the Commission.
The Exchange has satisfied this requirement.
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[[Page 17263]]
At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings to
determine whether the proposed rule should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-PEARL-2021-09 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to File Number SR-PEARL-2021-09. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (https://www.sec.gov/rules/sro.shtml).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for website viewing and printing in
the Commission's Public Reference Room, 100 F Street NE, Washington, DC
20549, on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of the filing also will be available for inspection
and copying at the principal office of the Exchange. All comments
received will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-PEARL-2021-09, and should be submitted
on or before April 22, 2021.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\32\
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\32\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-06671 Filed 3-31-21; 8:45 am]
BILLING CODE 8011-01-P
