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]

Download as PDF 17259 Federal Register / Vol. 86, No. 61 / Thursday, April 1, 2021 / Notices 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. jbell on DSKJLSW7X2PROD with NOTICES 1 hour ................................ 349 funds ........................... 349 hours .......................... 1 hour ................................ 2 hours .............................. 70 funds ............................. 210 hours .......................... Dated: March 29, 2021. J. Matthew DeLesDernier, Assistant Secretary. [FR Doc. 2021–06731 Filed 3–31–21; 8:45 am] BILLING CODE 8011–01–P 19:02 Mar 31, 2021 ............................................ $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 http://www.miaxoptions.com/rulefilings/pearl at MIAX PEARL’s principal office, and at the Commission’s Public Reference Room. 1 Jkt 253001 $63. 349 funds. $21,987. $419. $126. 70 funds. $38,150. SECURITIES AND EXCHANGE COMMISSION 2 VerDate Sep<11>2014 $63/hr. (clerk) .................... ............................................ ............................................ $419/hr. (attorney) ............. $63/hr. (clerk) .................... ............................................ ............................................ PO 00000 15 U.S.C. 78s(b)(1). 17 CFR 240.19b–4. Frm 00148 Fmt 4703 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 Continued Sfmt 4703 E:\FR\FM\01APN1.SGM 01APN1 17260 Federal Register / Vol. 86, No. 61 / Thursday, April 1, 2021 / Notices jbell on DSKJLSW7X2PROD with NOTICES 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. VerDate Sep<11>2014 19:02 Mar 31, 2021 Jkt 253001 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). PO 00000 Frm 00149 Fmt 4703 Sfmt 4703 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). E:\FR\FM\01APN1.SGM 01APN1 jbell on DSKJLSW7X2PROD with NOTICES Federal Register / Vol. 86, No. 61 / Thursday, April 1, 2021 / Notices 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). VerDate Sep<11>2014 19:02 Mar 31, 2021 Jkt 253001 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 Frm 00150 Fmt 4703 Sfmt 4703 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). E:\FR\FM\01APN1.SGM 01APN1 17262 Federal Register / Vol. 86, No. 61 / Thursday, April 1, 2021 / Notices 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. jbell on DSKJLSW7X2PROD with NOTICES 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). VerDate Sep<11>2014 19:02 Mar 31, 2021 Jkt 253001 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 PO 00000 See supra note 4. Frm 00151 Fmt 4703 Sfmt 4703 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 (http://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 (http://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]


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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 http://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\
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    \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).

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[[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.
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    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\
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    \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.
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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\
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    \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\
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    \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\
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    \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\
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    \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).
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    \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\
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    \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.
---------------------------------------------------------------------------

    \25\ This behavior is identical to that of the Cboe Equity 
Exchanges. See, e.g., EDGX Rule 11.9(a)(4).
---------------------------------------------------------------------------

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.
---------------------------------------------------------------------------

    \26\ 15 U.S.C. 78f(b).
    \27\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \28\ See supra note 4.
---------------------------------------------------------------------------

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.
---------------------------------------------------------------------------

    \29\ Id.
---------------------------------------------------------------------------

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    Written comments were neither solicited nor received.

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

    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.
---------------------------------------------------------------------------

    \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 (http://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 (http://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