Self-Regulatory Organizations; MIAX PEARL, LLC; Notice of Filing of Proposed Rule Change To Amend Exchange Rule 2616, Priority of Orders, 43279-43283 [2021-16789]
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Federal Register / Vol. 86, No. 149 / Friday, August 6, 2021 / Notices
POSTAL REGULATORY COMMISSION
[Docket Nos. MC2021–119 and CP2021–121]
New Postal Products
Postal Regulatory Commission.
ACTION: Notice.
AGENCY:
The Commission is noticing a
recent Postal Service filing for the
Commission’s consideration concerning
negotiated service agreements. This
notice informs the public of the filing,
invites public comment, and takes other
administrative steps.
DATES: Comments are due: August 10,
2021.
SUMMARY:
Submit comments
electronically via the Commission’s
Filing Online system at https://
www.prc.gov. Those who cannot submit
comments electronically should contact
the person identified in the FOR FURTHER
INFORMATION CONTACT section by
telephone for advice on filing
alternatives.
ADDRESSES:
FOR FURTHER INFORMATION CONTACT:
David A. Trissell, General Counsel, at
202–789–6820.
SUPPLEMENTARY INFORMATION:
Table of Contents
I. Introduction
II. Docketed Proceeding(s)
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The Commission gives notice that the
Postal Service filed request(s) for the
Commission to consider matters related
to negotiated service agreement(s). The
request(s) may propose the addition or
removal of a negotiated service
agreement from the market dominant or
the competitive product list, or the
modification of an existing product
currently appearing on the market
dominant or the competitive product
list.
Section II identifies the docket
number(s) associated with each Postal
Service request, the title of each Postal
Service request, the request’s acceptance
date, and the authority cited by the
Postal Service for each request. For each
request, the Commission appoints an
officer of the Commission to represent
the interests of the general public in the
proceeding, pursuant to 39 U.S.C. 505
(Public Representative). Section II also
establishes comment deadline(s)
pertaining to each request.
The public portions of the Postal
Service’s request(s) can be accessed via
the Commission’s website (https://
www.prc.gov). Non-public portions of
the Postal Service’s request(s), if any,
can be accessed through compliance
19:29 Aug 05, 2021
II. Docketed Proceeding(s)
1. Docket No(s).: MC2021–119 and
CP2021–121; Filing Title: USPS Request
to Add Priority Mail Contract 716 to
Competitive Product List and Notice of
Filing Materials Under Seal; Filing
Acceptance Date: August 2, 2021; Filing
Authority: 39 U.S.C. 3642, 39 CFR
3040.130 through 3040.135, and 39 CFR
3035.105; Public Representative:
Kenneth R. Moeller; Comments Due:
August 10, 2021.
This Notice will be published in the
Federal Register.
Erica A. Barker,
Secretary.
I. Introduction
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with the requirements of 39 CFR
3011.301.1
The Commission invites comments on
whether the Postal Service’s request(s)
in the captioned docket(s) are consistent
with the policies of title 39. For
request(s) that the Postal Service states
concern market dominant product(s),
applicable statutory and regulatory
requirements include 39 U.S.C. 3622, 39
U.S.C. 3642, 39 CFR part 3030, and 39
CFR part 3040, subpart B. For request(s)
that the Postal Service states concern
competitive product(s), applicable
statutory and regulatory requirements
include 39 U.S.C. 3632, 39 U.S.C. 3633,
39 U.S.C. 3642, 39 CFR part 3035, and
39 CFR part 3040, subpart B. Comment
deadline(s) for each request appear in
section II.
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[FR Doc. 2021–16810 Filed 8–5–21; 8:45 am]
BILLING CODE 7710–FW–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–92545; File No. SR–
PEARL–2021–35]
Self-Regulatory Organizations; MIAX
PEARL, LLC; Notice of Filing of
Proposed Rule Change To Amend
Exchange Rule 2616, Priority of Orders
August 2, 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 July 20,
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 and II
below, which Items have been prepared
1 See Docket No. RM2018–3, Order Adopting
Final Rules Relating to Non-Public Information,
June 27, 2018, Attachment A at 19–22 (Order No.
4679).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
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43279
by the Exchange. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange is filing a proposal to
amend Exchange Rule 2616, Priority of
Orders, to provide that an order will
receive a new timestamp when its
position is modified via a Cancel/
Replace message during a Short Sale
Period.3
The text of the proposed rule change
is available on the Exchange’s website at
https://www.miaxoptions.com/rulefilings/pearl at MIAX Pearl’s principal
office, and at the Commission’s Public
Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The purpose of the proposed rule
change is to amend Exchange Rule 2616,
Priority of Orders, to provide that an
order will receive a new timestamp
when its position is modified via a
Cancel/Replace message during a Short
Sale Period. The proposed rule change
applies to orders in equity securities
traded on the Exchange’s equity trading
platform (referred to herein as ‘‘MIAX
Pearl Equities’’).
Exchange Rule 2614(e)(3) provides
that only the price, sell long, sell short,
or short exempt indicator, Max Floor of
an order with a Reserve Quantity,4 and
size terms of the order may be changed
by a Cancel/Replace Message. If a User
desires to change any other terms of an
existing order the existing order must be
3 Exchange Rule 2614(g)(3)(A) defines a Short
Sale Period as the time when ‘‘a short sale price test
restriction under Rule 201 of Regulation SHO’’ is
in effect. 17 CFR 242.201.
4 See Exchange Rule 2614(c)(8).
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cancelled and a new order must be
entered. An order receives a new
timestamp when that order receives a
new price, its size is increased, or is
cancelled in full and replaced by a new
order. In addition, an order also receives
a new timestamp when it is repriced
pursuant to Exchange Rule 2614(g).5 For
example, an order may be repriced
pursuant to the Exchange’s Display
Price Sliding Process if it would be
displayed at a price that would lock or
cross the Protected Best Bid or Offer
(‘‘PBBO’’) of an away Trading Center.6
In such case, that order would receive
a new 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
such modification involves a decrease
in the size of the order, a change to the
Max Floor of an order with a Reserve
Quantity, 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. Any other modification to
an order, 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 7 and the
timestamp for such order being revised
to reflect the time of the modification.
The Exchange now proposes to
provide that an order will also receive
a new timestamp in one additional
scenario where the order may not
receive a new price. As proposed, an
order would also receive a new
timestamp when its position is changed
via a Cancel/Replace message during a
Short Sale Period. Specifically, the
Exchange proposes to amend Exchange
Rule 2616(a)(5) to provide that a change
in position via a Cancel/Replace
message 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
during a Short Sale Period will result in
a change to the order’s timestamp. Such
modification to an order during a Short
Sale Period will result in such order
losing time priority as compared to
other orders in the MIAX Pearl Equities
5 See, e.g., Exchange Rule 2614(g) (‘‘Repricing
Processes to Comply with Regulatory
Requirements’’).
6 See Exchange Rule 2614(g)(1) (‘‘Display Price
Sliding Process’’).
7 Exchange Rule 1901 defines the term ‘‘MIAX
Pearl Equities Book’’ as ‘‘the electronic book of
orders in equity securities maintained by the
System.’’
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Book and the timestamp for such order
being revised to reflect the time of the
modification. The Exchange does not
propose to change an order’s timestamp
where a position change is made via a
Cancel/Replace message when a Short
Sale Period is not in effect.
The need for proposed rule change
became apparent as a result of
technology changes related to the
Exchange’s recent implementation of
the Reserve Quantity and Minimum
Execution Quantity 8 order
instructions.9 As a result of the above
technology changes and to ensure the
ongoing resiliency of the System,10 the
reevaluation of an order for execution as
a result of a change to the order’s
position via a Cancel/Replace message
during a Short Sale Period will result in
that order receiving a new timestamp,
including where the order’s price
remains unchanged.
The Exchange notes that an order will
always receive a new timestamp where
the order is re-priced, including where
that order is re-priced pursuant to the
Exchange’s Short Sale Price Sliding
Process due to a change in position via
a Cancel/Replace message.11 However,
pursuant to the proposed rule change, a
position change via a Cancel/Replace
message during a Short Sale Period
would now always result in the order
receiving a new timestamp, regardless of
whether the re-evaluation of the order
results in the order being re-priced.
The proposed rule change reflects a
necessary technology change that would
ensure continued System resiliency and
stability. The Exchange notes that the
proposed rule change is designed to
address a discrete and potentially
limited scenario that a Short Sale Period
must be in effect when the position
change is made via a Cancel/Replace
message. If a Short Sale Period is not in
effect, an order would retain its
timestamp when its position is changed
via a Cancel/Replace message. The
proposed rule change is no different
than where an order may receive a new
timestamp when it is not re-priced, such
as when an order’s size is increased via
a Cancel/Replace message or an order is
cancelled in full and replaced with a
8 See
Exchange Rule 2614(c)(7).
MIAX Pearl Equities—Reminder:
Announces Further Expansion of its Equity Trading
Platform with the Launch of the Minimum
Execution Quantity and Reserve Quantity Order
Instructions; Both Available July 1st 2021, available
at https://www.miaxoptions.com/alerts/2021/06/15/
miax-pearl-equities-reminder-announces-furtherexpansion-its-equity-trading (June 15, 2021).
10 The term ‘‘System’’ means the automated
trading system used by the Exchange for the trading
of securities. See Exchange Rule 100.
11 See Exchange Rule 2614(g)(3) for a description
of the Exchange’s Short Sale Price Sliding Process.
9 See
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new order. In both of these cases, the
order would be provided a new
timestamp and experience a loss in
priority. The same would be true under
the proposed rule change where an
order would receive a new timestamp
where its position is changed via a
Cancel/Replace message during a Short
Sale Period.
*
*
*
*
*
Lastly, the Exchange proposes to
make two clarifying changes to
Exchange Rules 2614(e)(3) and
2616(a)(5). First, the Exchange proposes
to add the word ‘‘Cancel’’ before the
word ‘‘Replace’’ in Exchange Rule
2614(e)(3). This change is to use
consistent terminology when referring
to Cancel/Replace messages in the
Exchange’s rules. Second, the Exchange
proposes to clarify within Exchange
Rule 2616(a)(5) that an order is being
modified by the Cancel/Replace
message. In part, Exchange Rule
2616(a)(5) states that ‘‘[i]n the event an
order has been cancelled or replaced in
accordance with Exchange Rule 2614(e)
above, . . .’’. The Exchange proposes to
replace the phrase ‘‘cancelled or
replaced’’ in Exchange Rule 2616(a)(5)
with ‘‘modified via a Cancel/Replace
message.’’ Doing so would clarify within
Exchange Rule 2616(a)(5) that the order
is being modified, rather than cancelled
and replaced with a new order. Neither
of the above changes amend the
meaning or operation of either rule.
They are simply intended to clarify each
rule and to ensure the use of consistent
terminology across the Exchange’s
rulebook.
2. Statutory Basis
The proposed rule change is
consistent with Section 6(b) of the
Act,12 in general, and furthers the
objectives of Section 6(b)(5),13 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 promotes
just and equitable principles of trade
because it is similar to other cases today
where an order may lose priority when
a modification is made via a Cancel/
Replace message. For example,
12 15
13 15
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U.S.C. 78f(b).
U.S.C. 78f(b)(5).
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increasing the size of an order 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.14
The System also re-evaluates the order
for execution when an Equity Member 15
increases the size of an order via a
Cancel/Replace message. The same is
true for a position change made
pursuant to Exchange Rule 2614(e)
during a Short Sale Period. For example,
should an order’s position be changed
from long to short during a Short Sale
Period, that order would become subject
to the price restrictions of Regulation
SHO 16 and the System would evaluate
whether the order may be executed or
re-priced pursuant to the Exchange’s
Short Sale Price Sliding Process.17
Under the proposed rule change, this
evaluation would result in the order
receiving a new timestamp and loss in
priority, even when that order is not repriced. While the price of the order may
not change, the position change during
a Short Sale Period impacts whether the
order is subject to the price restrictions
of Regulation SHO and may or may not
become eligible for execution.
Therefore, like size change via a Cancel/
Replace message may change the
execution status of the order, the
Exchange believes treating a position
change made via a Cancel/Replace
message in the same manner and
updating the order’s timestamp is
reasonable and consistent with the Act
because it also reflects a change in the
execution status of the order.
Further, as stated above, Exchange
Rule 2614(e)(3) provides that only the
price, sell long, sell short, or short
exempt indicator, Max Floor of an order
with a Reserve Quantity, and size terms
of the order may be changed by a
Cancel/Replace Message. 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. This includes, for example,
changes to the minimum quantity
condition of an order with a Minimum
Execution Quantity instruction.18 In
such case, the existing order must be
cancelled and new order entered with
the revised minimum execution
quantity. Like a position change during
a Short Sale Period, the new order
would be provided a new timestamp
14 See
Exchange Rule 2616(a)(5).
15 The term ‘‘Equity Member’’ is a Member
authorized by the Exchange to transact business on
MIAX Pearl Equities. See Exchange Rule 1901.
16 17 CFR 242.201(1)(i) [sic].
17 Exchange Rule 2614(g)(3).
18 See Exchange Rule 2614(c)(7).
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and re-evaluated for execution based on
the revised minimum execution
quantity. Therefore, the proposed rule
change promotes just and equitable
principles of trade because it is similar
to existing exchange functionality.
The proposed rule change promotes
just and equitable principles of trade
because it is consistent with the other
exchanges’ treatment of position
changes and their impact on the order’s
priority. For example, Investors
Exchange LLC (‘‘IEX’’) Rule 11.190(d)(4)
does not allow for a position change via
a Cancel/Replace message and requires
that if a ‘‘[u]ser desires to modify an
invalid field on an order, the existing
order must be canceled and a new order
must be entered.’’ 19 Therefore, on IEX,
a market participant must enter a new
order where it seeks to change that
order’s position at all times, not just
during a Short Sale Period. This is
broader than the Exchange’s proposal
which is limited to position changes
during a Short Sale Period. On IEX, the
new order would receive a new
timestamp, resulting in a priority loss.
In addition, The Nasdaq Stock Market,
LLC (‘‘Nasdaq’’) Rule 4756(a)(3)
provides that an order will be cancelled
if the order’s position is ‘‘redesignated
as short during a Short Sale Period and
the order is not priced at a Permitted
Price or higher under Nasdaq Rule
4763(e).’’ This would require the
replacement of the original order with a
new order and a new timestamp,
resulting in a priority loss.20 Therefore,
the Exchange’s proposal is not novel
and is similar to functionality provided
for on other exchanges.
Unlike where an order retains its
timestamp when a modification
involves a decrease in the size of the
order or a change to the Max Floor of
an order with a Reserve Quantity, a
change in the order’s position during a
Short Sale Period triggers compliance
with additional regulatory requirements.
In such case, the Exchange must assess
whether the order is priced or may be
executed in accordance with Regulation
SHO. For example, an order whose
position is changed from long to short
during a Short Sale Period may not be
priced at or above the national best bid
and may either need to be repriced
pursuant to the Exchange’s Short Sale
Price Sliding Process or cancelled based
19 See IEX Rule 11.190(d)(4) (stating that
‘‘Symbol, side, execution instruction, order type,
and TIF are considered invalid fields. If a User
attempts modify an invalid field by submitting a
Replace Message, the order amendment will be
rejected by the Exchange. If a User desires to modify
an invalid field on an order, the existing order must
be canceled and a new order must be entered’’).
20 See Nasdaq Rule 4756(a)(3).
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43281
on the Equity Member’s instructions.
Conversely, an order whose position is
changed from short to long during a
Short Sale Period would no longer be
subject to the price restrictions of
Regulation SHO and may now be
eligible for execution or routing to an
away market. An order marked short is
not subject to the price restrictions of
Regulation SHO when a Short Sale
Period is not in effect. Therefore,
allowing the order to retain its
timestamp when a Short Sale Period is
not in effect continues to promote just
and equitable principles of trade
because the execution status of the order
remains unchanged.21
Notwithstanding the above, the
proposed rule change also protects
investors and the public interest
because it does not change anything
with regard to compliance with
Regulation SHO, including Regulation
SHO’s order marking requirements and
Equity Member’s compliance with its
applicable exceptions. Today, an Equity
Member has the ability to modify their
order’s position via a Cancel/Replace
message. The proposal does not change
that. Today, Equity Members are
required to mark their orders properly
both upon entry and when modifying
that order’s position later via a Cancel/
Replace message. This proposed rule
change does not alter Equity Members
obligations to continue to ensure that
their orders are marked in accordance
with the requirements of Regulation
SHO and Exchange Rule 2623 22 at all
times, including when changing the
order’s position via a Cancel/Replace
message when a Short Sale Period is or
is not in effect. As they are required to
do today, Equity Members must also
continue to ensure that their order
complies with any applicable
exemption from Regulation SHO that
they seek to avail themselves of, not
only at the time of entry, but also at the
time they change the order’s position
21 This is also consistent with other exchanges’
rules. See, e.g., Members Exchange, Inc. Rule
11.9(a)(4) and Cboe EDGX Exchange, Inc. Rule
11.9(a)(4).
22 Exchange Rule 26123 [sic] provides that ‘‘[a]ll
short sale orders shall be identified as ‘‘short’’ or
‘‘short exempt’’ when entered into the System. If
marked ‘‘short exempt,’’ the Exchange shall
execute, display and/or route a short sale order
marked ‘‘short exempt’’ without regard to any short
sale price test restriction in effect during a Short
Sale Period, as defined in Exchange Rule
2614(g)(3)(A). The Exchange relies on the marking
of an order as ‘‘short exempt’’ when handling such
order, and thus, it is the entering Member’s
responsibility, not the Exchange’s responsibility, to
comply with the requirements of Regulation SHO
relating to marking of orders as ‘‘short exempt.’’
Exchange Rule 2603 also requires that Equity
Members input accurate information into the
System.
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via a Cancel/Replace message.23 Again,
nothing in this proposal alters a
Member’s obligations under Regulation
SHO. The Exchange notes that the
proposed rule change removes
impediments to and perfects the
mechanism of a free and open market
and a national market system because it
is designed to address a discrete and
potentially limited scenario of a Short
Sale Period being in effect when the a
position change is made via a Cancel/
Replace message. If a Short Sale Period
is not in effect, an order would retain its
timestamp when its position is changed
via a Cancel/Replace message. This
proposed rule change is narrowly
focused to address only where an order
would lose priority where its position is
changed via a Cancel/Replace message
during a Short Sale Period.
The proposed rule change would also
remove impediments to and promote
just and equitable principles of trade
because it reflects a necessary
technology change that would ensure
continued System resiliency and
stability. As a national securities
exchange, the Exchange is subject to
Regulation Systems Compliance and
Integrity (‘‘Reg. SCI’’).24 Reg. SCI Rule
1001(a) requires that the Exchange
establish, maintain, and enforce written
policies and procedures reasonably
designed to ensure (among other things)
that its Reg. SCI systems have levels of
capacity adequate to maintain the
Exchange’s operational capability and
promote the maintenance of fair and
orderly markets.25 The proposed rule
change is necessary to ensure the
ongoing resiliency of the Exchange’s
infrastructure and underling technology
to ensure the Exchange continues to
satisfy its requirements under Reg. SCI.
The Exchange takes pride in the
reliability and availability of its System.
The proposed rule change is necessary
due to technological complexity and to
continue to ensure the System operates
consistent with the Exchange’s rules
and in accordance with the Exchange’s
obligations under Reg. SCI.
Lastly, the proposed clarifying
changes to Exchange Rules 2614(e)(3)
and 2616(a)(5) removes impediments to
and perfect a free and open market
system because they simply clarify each
rule and ensure the use of consistent
terminology across the Exchange’s
rulebook. Neither of these changes
amend the meaning or operation of
either rule.
23 The Exchange will continue to surveil for
compliance with Exchange Rules 2623 and 2603 as
well as Regulation SHO.
24 17 CFR 242.1000–1007.
25 17 CFR 242.1001(a).
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B. Self-Regulatory Organization’s
Statement on Burden on Competition
may choose to price their orders more
aggressively.
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. The
proposed rule change is not being
proposed for competitive reasons. As
discussed above, the need for the
proposed rule change became apparent
when making technology changes
related to the Exchange’s upcoming
implementation of the Reserve Quantity
and Minimum Execution Quantity order
instructions.26 Further, this proposed
rule change to cause an order to lose
priority when the order’s position is
changed during a Short Sale Period via
a Cancel/Replace message is no different
than where an Equity Member seek to
change the position of their order by
cancelling that order and re-submitting
a new order. In each case, the order will
receive a new timestamp at the time the
position was changed via a cancel or
replace message.
Adjusting the order’s timestamp due
to a position change via a Cancel/
Replace message during a Short Sale
Period does not impose any burden on
inter-market competition that is not
necessary or appropriate in furtherance
of the Act. Equity Members may take
into consideration that their order may
experience a loss in priority when they
change their order’s position during a
Short Sale Period when determining
where to send their order for execution.
Equity Members are free to consider this
change as part of their overall
experience on the Exchange, including
the quality of executions and other
functionality offerings, which are part of
their order routing decisions.
Lastly, adjusting the order’s
timestamp due to a position change via
a Cancel/Replace message during a
Short Sale Period does not also impose
any burden on intra-market competition
that is not necessary or appropriate in
furtherance of the Act because it is
similar to functionality on other
exchanges.27 Also, like above for intramarket competition, Equity Members
may take into consideration that their
order may experience a loss in priority
when they change their order’s position
during a Short Sale Period when
determining where to send their order
for execution. Equity Members who
make position changes during a Short
Sale Period may consider the potential
that their order may lose priority and
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.
26 See
27 See
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supra notes 19 and 20.
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III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of
publication of this notice in the Federal
Register, or such longer period up to 90
days (i) as the Commission may
designate if it finds such longer period
to be appropriate and publishes its
reasons for so finding or (ii) as to which
the self-regulatory organization
consents, the Commission will:
(A) By order approve or disapprove
the proposed rule change, or
(B) institute proceedings to determine
whether the proposed rule change
should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
PEARL–2021–35 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–2021–35. 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
E:\FR\FM\06AUN1.SGM
06AUN1
Federal Register / Vol. 86, No. 149 / Friday, August 6, 2021 / Notices
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–2021–35, and
should be submitted on or before
August 27, 2021.
(‘‘Commission’’) pursuant to Section
19(b)(1) of the Securities Exchange Act
of 1934 (‘‘Act’’) 1 and Rule 19b–4
thereunder,2 a proposed rule change to
amend the Sixth Amended and Restated
Bylaws (‘‘Bylaws’’) of their parent
company, Cboe Global Markets, Inc.
(‘‘CGM’’), to implement proxy access.
The proposed rule changes were
published for comment in the Federal
Register on May 5, 2021.3 No comment
letters were received in response to the
proposals. On July 28, 2021, each of
BYX, BZX, EDGA, EDGX and C2, and on
July 29, 2021, Cboe filed Amendment
No. 1 to the proposed rule changes
(collectively, ‘‘Amendment Nos. 1’’).4
This order provides notice of filing of
Amendment Nos. 1 and approves the
proposed rule changes, as modified by
Amendment Nos. 1, on an accelerated
basis.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.28
J. Matthew DeLesDernier,
Assistant Secretary.
II. Description of the Proposed Rule
Changes, as Modified by Amendment
Nos. 1
[FR Doc. 2021–16789 Filed 8–5–21; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–92546; File Nos. SR–
CBOE–2021–023; SR–CboeBYX–2021–009;
SR–CboeBZX–2021–028; SR–CboeEDGA–
2021–009; SR–CboeEDGX–2021–021; SR–
C2–2021–007]
Self-Regulatory Organizations; Cboe
Exchange, Inc.; Cboe BYX Exchange,
Inc.; Cboe BZX Exchange, Inc.; Cboe
EDGA Exchange, Inc.; Cboe EDGX
Exchange, Inc.; Cboe C2 Exchange,
Inc.; Notice of Filing of Amendment
No. 1 and Order Granting Accelerated
Approval of a Proposed Rule Change,
as Modified by Amendment Nos. 1, To
Amend the Sixth Amended and
Restated Bylaws of Cboe Global
Markets, Inc. To Implement Proxy
Access
jbell on DSKJLSW7X2PROD with NOTICES
August 2, 2021.
I. Introduction
On April 16, 2021, each of Cboe
Exchange, Inc. (‘‘Cboe’’), Cboe BYX
Exchange, Inc. (‘‘BYX’’), Cboe BZX
Exchange, Inc. (‘‘BZX’’), Cboe EDGA
Exchange, Inc. (‘‘EDGA’’), and Cboe
EDGX Exchange, Inc. (‘‘EDGX’’), and on
April 26, 2021, Cboe C2 Exchange, Inc.
(‘‘C2’’ and together with Cboe, BYX,
BZX, EDGA, and EDGX, the
‘‘Exchanges’’) filed with the Securities
and Exchange Commission
28 17
CFR 200.30–3(a)(12).
VerDate Sep<11>2014
19:29 Aug 05, 2021
Jkt 253001
The Exchanges state that CGM
received a stockholder proposal
submitted pursuant to Rule 14a–8 under
the Act which requested that the Board
of Directors of CGM (‘‘Board’’) take steps
to implement a ‘‘proxy access’’ bylaw
provision to allow a stockholder, or
group of stockholders, who comply with
certain requirements, to nominate
candidates for service on the Board and
have those candidates included in
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 See Securities Exchange Act Release Nos. 91728
(April 29, 2021), 86 FR 24052 (SR–CBOE–2021–
023); 91729 (April 29, 2021), 86 FR 24059 (SR–
CboeBYX–2021–009); 91727 (April 29, 2021), 86 FR
24083 (SR–CboeBZX–2021–028); 91725 (April 29,
2021), 86 FR 24076 (SR–CboeEDGA–2021–009);
91724 (April 29, 2021), 86 FR 24044 (SR–
CboeEDGX–2021–021); 91732 (April 29, 2021), 86
FR 24125 (SR–C2–2021–007) (collectively,
‘‘Notices’’).
4 In Amendment Nos. 1, the Exchanges clarified
the circumstances under which proxy access
nominees may be excluded from the proxy
materials. Pursuant to proposed Section 2.16(j)(i) of
the Bylaws, CGM would not be required to include
a Stockholder Nominee in its proxy materials who
would not be an independent director under
Section 3.3 of the Bylaws, under the rules of the
principal national securities exchange on which the
outstanding capital stock of CGM is traded, any
applicable rules of the Commission and any
publicly disclosed standards used by the Board in
determining and disclosing independence of CGM’s
directors, in each case as determined by the Board
in its sole discretion. In Amendment Nos. 1, the
Exchanges represented that any independence
standards adopted by CGM’s Board will apply
uniformly to all director nominees, including
Stockholder Nominees, and that any future
independence standards adopted by the Board will
comply with all applicable laws, rules, and
regulations. Amendment Nos. 1 are available on the
Commission’s website at https://www.sec.gov/rules/
sro.shtml.
2 17
PO 00000
Frm 00125
Fmt 4703
Sfmt 4703
43283
CGM’s proxy materials.5 The Exchanges
state that CGM has determined to take
the stockholder’s requested steps to
implement proxy access and,
accordingly, the Exchanges have
submitted this proposal to adopt new
Section 2.16 of the Bylaws.6 Subject to
procedures and conditions set forth
therein, and as further described below,
proposed Section 2.16 of the Bylaws
would generally permit a stockholder,
or group of up to 20 stockholders, to
nominate director nominees for the
Board and have such director nominees
included in CGM’s annual meeting
proxy materials, so long as the
stockholder(s) have owned at least three
percent of CGM’s outstanding shares of
capital stock continuously for at least
three years.7 The proposal would limit
the number of proposed director
nominees to the greater of (i) two or (ii)
20% of the number of CGM directors in
office (rounded down to the nearest
whole number, but no less than two).8
The Exchanges note that the parent
companies of other national securities
exchanges have adopted substantively
similar proxy access provisions, and the
Exchanges state that they do not believe
such provisions are materially different
from the proxy access provision
proposed by the Exchanges.9
Proposed Section 2.16 of the Bylaws
Specifically, proposed Section 2.16(a)
of the Bylaws would require that,
subject to the provisions of proposed
Section 2.16, whenever the Board
solicits proxies with respect to the
election of directors at an annual
meeting of stockholders, CGM must
include in its proxy statement for such
annual meeting, in addition to any
persons nominated for election by or at
5 See Notices, supra note 3, at 24052, 24059,
24083, 24076, 24045, and 24125, respectively. See
also 17 CFR 240.14a–8 (establishing procedures
pursuant to which stockholders of a public
company may have their proposals placed
alongside management’s proposals in the
company’s proxy materials for presentation to a
vote at a meeting of stockholders).
6 See Notices, supra note 3, at 24052, 24059–60,
24083–84, 24076, 24045, and 24125, respectively.
The Exchanges also propose to make conforming
changes to current Sections 2.10 and 2.11 of the
Bylaws. See id. at 24052, 24059, 24083, 24076,
24045, and 24125, respectively. See also infra notes
45–46.
7 See proposed Bylaws Section 2.16.
8 See proposed Bylaws Section 2.16(c).
9 See Notices, supra note 3, at 24052, 24059–60,
24083–84, 24076, 24045, and 24125, respectively
(citing to Securities Exchange Release Nos. 79357
(November 18, 2016), 81 FR 85283 (November 25,
2016) (SR–NASDAQ–2016–127; SR–BX–2016–051;
SR–ISE–2016–22; SR–ISEGemini–2016–10; SR–
ISEMercury–2016–16; SR–PHLX–2016–93; SR–
BSECC–2016–001; SR–SCCP–2016–01); and 77782
(May 6, 2016), 81 FR 29600 (May 12, 2016) (SR–
NYSE–2016–14; SR–NYSEArca–2016–25; SR–
NYSEMKT–2016–20)).
E:\FR\FM\06AUN1.SGM
06AUN1
]]>Agencies
[Federal Register Volume 86, Number 149 (Friday, August 6, 2021)]
[Notices]
[Pages 43279-43283]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-16789]
=======================================================================
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-92545; File No. SR-PEARL-2021-35]
Self-Regulatory Organizations; MIAX PEARL, LLC; Notice of Filing
of Proposed Rule Change To Amend Exchange Rule 2616, Priority of Orders
August 2, 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 July 20, 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 and II below, which Items
have been prepared by the Exchange. The Commission is publishing this
notice to solicit comments on the proposed rule change from interested
persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange is filing a proposal to amend Exchange Rule 2616,
Priority of Orders, to provide that an order will receive a new
timestamp when its position is modified via a Cancel/Replace message
during a Short Sale Period.\3\
---------------------------------------------------------------------------
\3\ Exchange Rule 2614(g)(3)(A) defines a Short Sale Period as
the time when ``a short sale price test restriction under Rule 201
of Regulation SHO'' is in effect. 17 CFR 242.201.
---------------------------------------------------------------------------
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
2616, Priority of Orders, to provide that an order will receive a new
timestamp when its position is modified via a Cancel/Replace message
during a Short Sale Period. The proposed rule change applies to orders
in equity securities traded on the Exchange's equity trading platform
(referred to herein as ``MIAX Pearl Equities'').
Exchange Rule 2614(e)(3) provides that only the price, sell long,
sell short, or short exempt indicator, Max Floor of an order with a
Reserve Quantity,\4\ and size terms of the order may be changed by a
Cancel/Replace Message. If a User desires to change any other terms of
an existing order the existing order must be
[[Page 43280]]
cancelled and a new order must be entered. An order receives a new
timestamp when that order receives a new price, its size is increased,
or is cancelled in full and replaced by a new order. In addition, an
order also receives a new timestamp when it is repriced pursuant to
Exchange Rule 2614(g).\5\ For example, an order may be repriced
pursuant to the Exchange's Display Price Sliding Process if it would be
displayed at a price that would lock or cross the Protected Best Bid or
Offer (``PBBO'') of an away Trading Center.\6\ In such case, that order
would receive a new timestamp.
---------------------------------------------------------------------------
\4\ See Exchange Rule 2614(c)(8).
\5\ See, e.g., Exchange Rule 2614(g) (``Repricing Processes to
Comply with Regulatory Requirements'').
\6\ See Exchange Rule 2614(g)(1) (``Display Price Sliding
Process'').
---------------------------------------------------------------------------
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 such modification
involves a decrease in the size of the order, a change to the Max Floor
of an order with a Reserve Quantity, 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. Any other modification
to an order, 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 \7\ and the
timestamp for such order being revised to reflect the time of the
modification.
---------------------------------------------------------------------------
\7\ Exchange Rule 1901 defines the term ``MIAX Pearl Equities
Book'' as ``the electronic book of orders in equity securities
maintained by the System.''
---------------------------------------------------------------------------
The Exchange now proposes to provide that an order will also
receive a new timestamp in one additional scenario where the order may
not receive a new price. As proposed, an order would also receive a new
timestamp when its position is changed via a Cancel/Replace message
during a Short Sale Period. Specifically, the Exchange proposes to
amend Exchange Rule 2616(a)(5) to provide that a change in position via
a Cancel/Replace message 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 during a Short Sale Period will result in a change to the
order's timestamp. Such modification to an order during a Short Sale
Period 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. The
Exchange does not propose to change an order's timestamp where a
position change is made via a Cancel/Replace message when a Short Sale
Period is not in effect.
The need for proposed rule change became apparent as a result of
technology changes related to the Exchange's recent implementation of
the Reserve Quantity and Minimum Execution Quantity \8\ order
instructions.\9\ As a result of the above technology changes and to
ensure the ongoing resiliency of the System,\10\ the reevaluation of an
order for execution as a result of a change to the order's position via
a Cancel/Replace message during a Short Sale Period will result in that
order receiving a new timestamp, including where the order's price
remains unchanged.
---------------------------------------------------------------------------
\8\ See Exchange Rule 2614(c)(7).
\9\ See MIAX Pearl Equities--Reminder: Announces Further
Expansion of its Equity Trading Platform with the Launch of the
Minimum Execution Quantity and Reserve Quantity Order Instructions;
Both Available July 1st 2021, available at https://www.miaxoptions.com/alerts/2021/06/15/miax-pearl-equities-reminder-announces-further-expansion-its-equity-trading (June 15, 2021).
\10\ The term ``System'' means the automated trading system used
by the Exchange for the trading of securities. See Exchange Rule
100.
---------------------------------------------------------------------------
The Exchange notes that an order will always receive a new
timestamp where the order is re-priced, including where that order is
re-priced pursuant to the Exchange's Short Sale Price Sliding Process
due to a change in position via a Cancel/Replace message.\11\ However,
pursuant to the proposed rule change, a position change via a Cancel/
Replace message during a Short Sale Period would now always result in
the order receiving a new timestamp, regardless of whether the re-
evaluation of the order results in the order being re-priced.
---------------------------------------------------------------------------
\11\ See Exchange Rule 2614(g)(3) for a description of the
Exchange's Short Sale Price Sliding Process.
---------------------------------------------------------------------------
The proposed rule change reflects a necessary technology change
that would ensure continued System resiliency and stability. The
Exchange notes that the proposed rule change is designed to address a
discrete and potentially limited scenario that a Short Sale Period must
be in effect when the position change is made via a Cancel/Replace
message. If a Short Sale Period is not in effect, an order would retain
its timestamp when its position is changed via a Cancel/Replace
message. The proposed rule change is no different than where an order
may receive a new timestamp when it is not re-priced, such as when an
order's size is increased via a Cancel/Replace message or an order is
cancelled in full and replaced with a new order. In both of these
cases, the order would be provided a new timestamp and experience a
loss in priority. The same would be true under the proposed rule change
where an order would receive a new timestamp where its position is
changed via a Cancel/Replace message during a Short Sale Period.
* * * * *
Lastly, the Exchange proposes to make two clarifying changes to
Exchange Rules 2614(e)(3) and 2616(a)(5). First, the Exchange proposes
to add the word ``Cancel'' before the word ``Replace'' in Exchange Rule
2614(e)(3). This change is to use consistent terminology when referring
to Cancel/Replace messages in the Exchange's rules. Second, the
Exchange proposes to clarify within Exchange Rule 2616(a)(5) that an
order is being modified by the Cancel/Replace message. In part,
Exchange Rule 2616(a)(5) states that ``[i]n the event an order has been
cancelled or replaced in accordance with Exchange Rule 2614(e) above, .
. .''. The Exchange proposes to replace the phrase ``cancelled or
replaced'' in Exchange Rule 2616(a)(5) with ``modified via a Cancel/
Replace message.'' Doing so would clarify within Exchange Rule
2616(a)(5) that the order is being modified, rather than cancelled and
replaced with a new order. Neither of the above changes amend the
meaning or operation of either rule. They are simply intended to
clarify each rule and to ensure the use of consistent terminology
across the Exchange's rulebook.
2. Statutory Basis
The proposed rule change is consistent with Section 6(b) of the
Act,\12\ in general, and furthers the objectives of Section
6(b)(5),\13\ 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.
---------------------------------------------------------------------------
\12\ 15 U.S.C. 78f(b).
\13\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
The proposed rule change promotes just and equitable principles of
trade because it is similar to other cases today where an order may
lose priority when a modification is made via a Cancel/Replace message.
For example,
[[Page 43281]]
increasing the size of an order 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.\14\ The System also re-evaluates the order for
execution when an Equity Member \15\ increases the size of an order via
a Cancel/Replace message. The same is true for a position change made
pursuant to Exchange Rule 2614(e) during a Short Sale Period. For
example, should an order's position be changed from long to short
during a Short Sale Period, that order would become subject to the
price restrictions of Regulation SHO \16\ and the System would evaluate
whether the order may be executed or re-priced pursuant to the
Exchange's Short Sale Price Sliding Process.\17\ Under the proposed
rule change, this evaluation would result in the order receiving a new
timestamp and loss in priority, even when that order is not re-priced.
While the price of the order may not change, the position change during
a Short Sale Period impacts whether the order is subject to the price
restrictions of Regulation SHO and may or may not become eligible for
execution. Therefore, like size change via a Cancel/Replace message may
change the execution status of the order, the Exchange believes
treating a position change made via a Cancel/Replace message in the
same manner and updating the order's timestamp is reasonable and
consistent with the Act because it also reflects a change in the
execution status of the order.
---------------------------------------------------------------------------
\14\ See Exchange Rule 2616(a)(5).
\15\ The term ``Equity Member'' is a Member authorized by the
Exchange to transact business on MIAX Pearl Equities. See Exchange
Rule 1901.
\16\ 17 CFR 242.201(1)(i) [sic].
\17\ Exchange Rule 2614(g)(3).
---------------------------------------------------------------------------
Further, as stated above, Exchange Rule 2614(e)(3) provides that
only the price, sell long, sell short, or short exempt indicator, Max
Floor of an order with a Reserve Quantity, and size terms of the order
may be changed by a Cancel/Replace Message. 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. This includes, for example,
changes to the minimum quantity condition of an order with a Minimum
Execution Quantity instruction.\18\ In such case, the existing order
must be cancelled and new order entered with the revised minimum
execution quantity. Like a position change during a Short Sale Period,
the new order would be provided a new timestamp and re-evaluated for
execution based on the revised minimum execution quantity. Therefore,
the proposed rule change promotes just and equitable principles of
trade because it is similar to existing exchange functionality.
---------------------------------------------------------------------------
\18\ See Exchange Rule 2614(c)(7).
---------------------------------------------------------------------------
The proposed rule change promotes just and equitable principles of
trade because it is consistent with the other exchanges' treatment of
position changes and their impact on the order's priority. For example,
Investors Exchange LLC (``IEX'') Rule 11.190(d)(4) does not allow for a
position change via a Cancel/Replace message and requires that if a
``[u]ser desires to modify an invalid field on an order, the existing
order must be canceled and a new order must be entered.'' \19\
Therefore, on IEX, a market participant must enter a new order where it
seeks to change that order's position at all times, not just during a
Short Sale Period. This is broader than the Exchange's proposal which
is limited to position changes during a Short Sale Period. On IEX, the
new order would receive a new timestamp, resulting in a priority loss.
In addition, The Nasdaq Stock Market, LLC (``Nasdaq'') Rule 4756(a)(3)
provides that an order will be cancelled if the order's position is
``redesignated as short during a Short Sale Period and the order is not
priced at a Permitted Price or higher under Nasdaq Rule 4763(e).'' This
would require the replacement of the original order with a new order
and a new timestamp, resulting in a priority loss.\20\ Therefore, the
Exchange's proposal is not novel and is similar to functionality
provided for on other exchanges.
---------------------------------------------------------------------------
\19\ See IEX Rule 11.190(d)(4) (stating that ``Symbol, side,
execution instruction, order type, and TIF are considered invalid
fields. If a User attempts modify an invalid field by submitting a
Replace Message, the order amendment will be rejected by the
Exchange. If a User desires to modify an invalid field on an order,
the existing order must be canceled and a new order must be
entered'').
\20\ See Nasdaq Rule 4756(a)(3).
---------------------------------------------------------------------------
Unlike where an order retains its timestamp when a modification
involves a decrease in the size of the order or a change to the Max
Floor of an order with a Reserve Quantity, a change in the order's
position during a Short Sale Period triggers compliance with additional
regulatory requirements. In such case, the Exchange must assess whether
the order is priced or may be executed in accordance with Regulation
SHO. For example, an order whose position is changed from long to short
during a Short Sale Period may not be priced at or above the national
best bid and may either need to be repriced pursuant to the Exchange's
Short Sale Price Sliding Process or cancelled based on the Equity
Member's instructions. Conversely, an order whose position is changed
from short to long during a Short Sale Period would no longer be
subject to the price restrictions of Regulation SHO and may now be
eligible for execution or routing to an away market. An order marked
short is not subject to the price restrictions of Regulation SHO when a
Short Sale Period is not in effect. Therefore, allowing the order to
retain its timestamp when a Short Sale Period is not in effect
continues to promote just and equitable principles of trade because the
execution status of the order remains unchanged.\21\
---------------------------------------------------------------------------
\21\ This is also consistent with other exchanges' rules. See,
e.g., Members Exchange, Inc. Rule 11.9(a)(4) and Cboe EDGX Exchange,
Inc. Rule 11.9(a)(4).
---------------------------------------------------------------------------
Notwithstanding the above, the proposed rule change also protects
investors and the public interest because it does not change anything
with regard to compliance with Regulation SHO, including Regulation
SHO's order marking requirements and Equity Member's compliance with
its applicable exceptions. Today, an Equity Member has the ability to
modify their order's position via a Cancel/Replace message. The
proposal does not change that. Today, Equity Members are required to
mark their orders properly both upon entry and when modifying that
order's position later via a Cancel/Replace message. This proposed rule
change does not alter Equity Members obligations to continue to ensure
that their orders are marked in accordance with the requirements of
Regulation SHO and Exchange Rule 2623 \22\ at all times, including when
changing the order's position via a Cancel/Replace message when a Short
Sale Period is or is not in effect. As they are required to do today,
Equity Members must also continue to ensure that their order complies
with any applicable exemption from Regulation SHO that they seek to
avail themselves of, not only at the time of entry, but also at the
time they change the order's position
[[Page 43282]]
via a Cancel/Replace message.\23\ Again, nothing in this proposal
alters a Member's obligations under Regulation SHO. The Exchange notes
that the proposed rule change removes impediments to and perfects the
mechanism of a free and open market and a national market system
because it is designed to address a discrete and potentially limited
scenario of a Short Sale Period being in effect when the a position
change is made via a Cancel/Replace message. If a Short Sale Period is
not in effect, an order would retain its timestamp when its position is
changed via a Cancel/Replace message. This proposed rule change is
narrowly focused to address only where an order would lose priority
where its position is changed via a Cancel/Replace message during a
Short Sale Period.
---------------------------------------------------------------------------
\22\ Exchange Rule 26123 [sic] provides that ``[a]ll short sale
orders shall be identified as ``short'' or ``short exempt'' when
entered into the System. If marked ``short exempt,'' the Exchange
shall execute, display and/or route a short sale order marked
``short exempt'' without regard to any short sale price test
restriction in effect during a Short Sale Period, as defined in
Exchange Rule 2614(g)(3)(A). The Exchange relies on the marking of
an order as ``short exempt'' when handling such order, and thus, it
is the entering Member's responsibility, not the Exchange's
responsibility, to comply with the requirements of Regulation SHO
relating to marking of orders as ``short exempt.'' Exchange Rule
2603 also requires that Equity Members input accurate information
into the System.
\23\ The Exchange will continue to surveil for compliance with
Exchange Rules 2623 and 2603 as well as Regulation SHO.
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The proposed rule change would also remove impediments to and
promote just and equitable principles of trade because it reflects a
necessary technology change that would ensure continued System
resiliency and stability. As a national securities exchange, the
Exchange is subject to Regulation Systems Compliance and Integrity
(``Reg. SCI'').\24\ Reg. SCI Rule 1001(a) requires that the Exchange
establish, maintain, and enforce written policies and procedures
reasonably designed to ensure (among other things) that its Reg. SCI
systems have levels of capacity adequate to maintain the Exchange's
operational capability and promote the maintenance of fair and orderly
markets.\25\ The proposed rule change is necessary to ensure the
ongoing resiliency of the Exchange's infrastructure and underling
technology to ensure the Exchange continues to satisfy its requirements
under Reg. SCI. The Exchange takes pride in the reliability and
availability of its System. The proposed rule change is necessary due
to technological complexity and to continue to ensure the System
operates consistent with the Exchange's rules and in accordance with
the Exchange's obligations under Reg. SCI.
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\24\ 17 CFR 242.1000-1007.
\25\ 17 CFR 242.1001(a).
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Lastly, the proposed clarifying changes to Exchange Rules
2614(e)(3) and 2616(a)(5) removes impediments to and perfect a free and
open market system because they simply clarify each rule and ensure the
use of consistent terminology across the Exchange's rulebook. Neither
of these changes amend the meaning or operation of either rule.
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. The proposed rule change is
not being proposed for competitive reasons. As discussed above, the
need for the proposed rule change became apparent when making
technology changes related to the Exchange's upcoming implementation of
the Reserve Quantity and Minimum Execution Quantity order
instructions.\26\ Further, this proposed rule change to cause an order
to lose priority when the order's position is changed during a Short
Sale Period via a Cancel/Replace message is no different than where an
Equity Member seek to change the position of their order by cancelling
that order and re-submitting a new order. In each case, the order will
receive a new timestamp at the time the position was changed via a
cancel or replace message.
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\26\ See supra note 9.
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Adjusting the order's timestamp due to a position change via a
Cancel/Replace message during a Short Sale Period does not impose any
burden on inter-market competition that is not necessary or appropriate
in furtherance of the Act. Equity Members may take into consideration
that their order may experience a loss in priority when they change
their order's position during a Short Sale Period when determining
where to send their order for execution. Equity Members are free to
consider this change as part of their overall experience on the
Exchange, including the quality of executions and other functionality
offerings, which are part of their order routing decisions.
Lastly, adjusting the order's timestamp due to a position change
via a Cancel/Replace message during a Short Sale Period does not also
impose any burden on intra-market competition that is not necessary or
appropriate in furtherance of the Act because it is similar to
functionality on other exchanges.\27\ Also, like above for intra-market
competition, Equity Members may take into consideration that their
order may experience a loss in priority when they change their order's
position during a Short Sale Period when determining where to send
their order for execution. Equity Members who make position changes
during a Short Sale Period may consider the potential that their order
may lose priority and may choose to price their orders more
aggressively.
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\27\ See supra notes 19 and 20.
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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
Within 45 days of the date of publication of this notice in the
Federal Register, or such longer period up to 90 days (i) as the
Commission may designate if it finds such longer period to be
appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
(A) By order approve or disapprove the proposed rule change, or
(B) institute proceedings to determine whether the proposed rule
change should be 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-2021-35 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-2021-35. 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
[[Page 43283]]
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-2021-35, and should be submitted on or before August 27, 2021.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\28\
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\28\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-16789 Filed 8-5-21; 8:45 am]
BILLING CODE 8011-01-P
