Self-Regulatory Organizations; MIAX PEARL, LLC; Suspension of and Order Instituting Proceedings To Determine Whether To Approve or Disapprove Proposed Rule Changes To Amend the MIAX Pearl Options Fee Schedule To Remove Certain Credits and Increase Trading Permit Fees, 49399-49403 [2021-18948]

Download as PDF Federal Register / Vol. 86, No. 168 / Thursday, September 2, 2021 / Notices Commission finds that the proposed changes to Form CMA conform to the recently amended MAP rules.37 The Commission therefore finds that the proposed rule change is consistent with the goals set forth by the Commission when it approved amendments to the MAP rules as described in File No. SR– FINRA–2020–011, which become effective on September 1, 2021.38 The Commission finds that waiving the 30day operative delay would facilitate firm compliance with the amended MAP rules on the date they become effective.39 Therefore, the Commission believes it is consistent with the protection of investors and the public interest to waive the 30-day operative delay requirement. Therefore the Commission designates the proposed rule change as operative on September 1, 2021. 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: lotter on DSK11XQN23PROD with NOTICES1 Electronic Comments • Use the Commission’s internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an email to rulecomments@sec.gov. Please include File Number SR–FINRA–2021–020 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–FINRA–2021–020. This file number should be included on the subject line if email is used. To help the 37 See supra note 5. 38 Id. 39 Similarly, the Commission finds that the nonsubstantive and technical changes to Form CMA are consistent with the protection of investors and the public interest. VerDate Sep<11>2014 17:33 Sep 01, 2021 Jkt 253001 49399 Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission’s internet website (https://www.sec.gov/ rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for website viewing and printing in the Commission’s Public Reference Room, 100 F Street NE, Washington, DC 20549, on official business days between the hours of 10 a.m. and 3 p.m. Copies of such filing also will be available for inspection and copying at the principal office of FINRA. 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–FINRA–2021–020 and should be submitted on or before August 23, 2021. to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Exchange Act’’ or ‘‘Act’’),1 and Rule 19b–4 thereunder,2 a proposed rule change (File Number SR–PEARL–2021–32) to amend the MIAX Pearl Options Fee Schedule (‘‘Fee Schedule’’) to remove certain credits and increase monthly Trading Permit fees for Exchange Members.3 The proposed rule change was immediately effective upon filing with the Commission pursuant to Section 19(b)(3)(A) of the Act.4 The proposed rule change was published for comment in the Federal Register on July 15, 2021.5 The Commission has received no comment letters on the proposed rule change. Under Section 19(b)(3)(C) of the Act,6 the Commission is hereby: (i) Temporarily suspending File Number SR–PEARL–2021–32; and (ii) instituting proceedings to determine whether to approve or disapprove File Number SR– PEARL–2021–32. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.40 Vanessa A. Countryman, Secretary. Remove ‘‘Monthly Volume Credit’’ [FR Doc. 2021–18945 Filed 9–1–21; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–92797; File No. SR– PEARL–2021–32] II. Description of the Proposed Rule Change The Exchange proposes to amend its Fee Schedule to: (1) Delete the definition of and remove the credits applicable to the Monthly Volume Credit for Members; (2) and; (3) amend Section (3)(b) of the Fee Schedule to increase the amount of monthly Trading Permit Fees. The Exchange proposes to amend the Definitions section of its Fee Schedule to delete the definition of ‘‘Monthly Volume Credit’’ and remove the credits applicable to the Monthly Volume Credit for Members.7 The Exchange states that the Monthly Volume Credit was established in 2018 to encourage Members to send increased Priority 1 15 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 The term ‘‘Trading Permit’’ means a permit issued by the Exchange that confers the ability to transact on the Exchange. See Notice, infra note 5, at 37379. The term ‘‘Member’’ means an individual or organization that is registered with the Exchange pursuant to Chapter II of Exchange Rules for purposes of trading on the Exchange as an ‘‘Electronic Exchange Member’’ or ‘‘Market Maker.’’ Members are deemed ‘‘members’’ under the Exchange Act. See id. 4 15 U.S.C. 78s(b)(3)(A). A proposed rule change may take effect upon filing with the Commission if it is designated by the exchange as ‘‘establishing or changing a due, fee, or other charge imposed by the self-regulatory organization on any person, whether or not the person is a member of the self-regulatory organization.’’ 15 U.S.C. 78s(b)(3)(A)(ii). 5 See Securities Exchange Act Release No. 92366 (July 9, 2021), 86 FR 37379 (‘‘Notice’’). 6 15 U.S.C. 78s(b)(3)(C). 7 See Notice, supra note 5, at 37379–80. 2 17 Self-Regulatory Organizations; MIAX PEARL, LLC; Suspension of and Order Instituting Proceedings To Determine Whether To Approve or Disapprove Proposed Rule Changes To Amend the MIAX Pearl Options Fee Schedule To Remove Certain Credits and Increase Trading Permit Fees August 27, 2021. I. Introduction On July 1, 2021, MIAX PEARL, LLC (‘‘MIAX Pearl’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’), pursuant 40 17 PO 00000 CFR 200.30–3(a)(12). Frm 00113 Fmt 4703 Sfmt 4703 E:\FR\FM\02SEN1.SGM 02SEN1 49400 Federal Register / Vol. 86, No. 168 / Thursday, September 2, 2021 / Notices Customer 8 order flow to the Exchange. The Monthly Volume Credit is provided to Members whose executed Priority Customer volume along with that of its Affiliates,9 not including Excluded Contracts,10 is at least 0.30% of Exchange-listed Total Consolidated Volume (‘‘TCV’’) 11 and is $250 for Members that connect via the FIX Interface and $1,000 for Members that connect via the MEO Interface (or both interfaces).12 The Monthly Volume Credit is a single once-per-month credit towards the aggregate monthly total of non-transaction fees assessable to a Member. Remove Trading Permit Fee Credit The Exchange also proposes to amend Section (3)(b) of the Fee Schedule to remove a Trading Permit fee credit of $100 that is provided to Members who connect via both the MEO and FIX Interfaces and is a monthly credit towards the Trading Permit fees applicable to the MEO Interface use.13 lotter on DSK11XQN23PROD with NOTICES1 Increase Monthly Trading Permit Fees The Exchange also proposes to amend Section (3)(b) of the Fee Schedule to increase the amount of the monthly Trading Permit fees that are charged to Exchange Members that are Electronic Exchange Members or Market Makers.14 These fees are assessed in a tier-based fee structure based on the monthly total volume executed by a Member and its Affiliates on the Exchange across all origin types, not including Excluded Contracts, as compared to all Exchangelisted options and are also assessed 8 ‘‘Priority Customer’’ means a person or entity that (i) is not a broker or dealer in securities, and (ii) does not place more than 390 orders in listed options per day on average during a calendar month for its own beneficial accounts(s). The number of orders shall be counted in accordance with Interpretation and Policy .01 of Exchange Rule 100. See Notice, supra note 5, at 37380 n.6. 9 ‘‘Affiliate’’ means (i) an affiliate of a Member of at least 75% common ownership between the firms as reflected on each firm’s Form BD, Schedule A, or (ii) the Appointed Market Maker of an Appointed EEM (or, conversely, the Appointed EEM of an Appointed Market Maker). See Notice, supra note 5, at 37380 n.9. 10 ‘‘Excluded Contracts’’ means any contracts routed to an away market for execution. See Notice, supra note 5, at 37380 n.10. 11 ‘‘TCV’’ means total consolidated volume calculated as the total national volume in those classes listed on MIAX Pearl for the month for which the fees apply, excluding consolidated volume executed during the period of time in which the Exchange experiences an Exchange System Disruption (solely in the option classes of the affected Matching Engine). See Notice, supra note 5, at 37380 n.11. 12 The ‘‘FIX Interface’’ and ‘‘MEO Interface’’ are different interfaces for certain order types as set forth in Exchange Rule 516. See Notice, supra note 5, at 37380 n.7–8. 13 See Notice, supra note 5, at 37380. 14 See Notice, supra note 5, at 37380–81. VerDate Sep<11>2014 17:33 Sep 01, 2021 Jkt 253001 based upon the type of interface used by the Member to connect to the Exchange, specifically the FIX Interface and/or the MEO Interface.15 The Exchange proposes to increase fees for Trading Permits as follows: For Members that connect via the FIX Interface, if the Member’s relevant monthly volume falls within the parameters of: • Tier 1 (up to 0.30% TCV): The monthly fee would increase from $250 to $500; • Tier 2 (above 0.30%, up to 0.60% TCV): The monthly fee would increase from $350 to $1,000; and • Tier 3 (above 0.60% TCV): The monthly fee would increase from $450 to $1,500. For Members that connect via the MEO interface, if the Member’s relevant monthly volume falls within the parameters of: • Tier 1 (up to 0.30% TCV): The monthly fee would increase from $300 to $2,500; • Tier 2 (above 0.30%, up to 0.60% TCV): The monthly fee would increase from $400 to $4,000; and • Tier 3 (above 0.60% TCV): The monthly fee would increase from $500 to $6,000. III. Suspension of the Proposed Rule Change Pursuant to Section 19(b)(3)(C) of the Act,16 at any time within 60 days of the date of filing of an immediately effective proposed rule change pursuant to Section 19(b)(1) of the Act,17 the Commission summarily may temporarily suspend the change in the rules of a self-regulatory organization (‘‘SRO’’) 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. As discussed below, the Commission believes a temporary suspension of the proposed rule change is necessary and appropriate to allow for additional analysis of the proposed rule change’s consistency with the Act and the rules thereunder. In support of the proposed fee changes, the Exchange principally argues that these fees are constrained by competitive forces, and that this is supported by their revenue and cost analysis. In particular, the Exchange states that it operates in a ‘‘highly competitive market’’ in which market participants can readily favor competing venues if they deem fee levels at a 15 See Notice, supra note 5, at 37380. U.S.C. 78s(b)(3)(C). 17 15 U.S.C. 78s(b)(1). 16 15 PO 00000 Frm 00114 Fmt 4703 Sfmt 4703 particular venue to be excessive.18 In further support of its argument that competitive forces constrain its proposed fee changes, Exchange further states that if it were to attempt to establish unreasonable pricing, then no market participant would join or connect, and existing market participants would disconnect.19 In addition, the Exchange states that it is not aware of any reason why market participants could not simply drop their access to an exchange (or not initially access an exchange) if an exchange were to establish prices for its nontransaction fees that, in the determination of such market participant, did not make business or economic sense for such market participant to access such exchange, and claims that no options market participant is required by rule, regulation, or competitive forces to be a Member of the Exchange, which the Exchange believes is illustrated by the fact that it is unaware of any one options exchange whose membership includes every registered brokerdealer.20 The Exchange also states that these fees are designed to recover a portion of the costs associated with directly accessing the Exchange. The Exchange believes that Trading Permits are a means to directly access the Exchange and thus offers meaningful value (and without a Trading Permit a Member cannot directly trade on the Exchange). The Exchange provides an analysis of its revenues, costs, and profitability associated with these fees, which it references as ‘‘Proposed Access Fees.’’ 21 The Exchange states that this analysis reflects an extensive cost review in which the Exchange analyzed every expense item in the Exchange’s general expense ledger to determine whether each such expense relates to the Proposed Access Fees, and, if such expense did so relate, what portion (or percentage) of such expense actually supports the access services.22 The Exchange states that this analysis shows that the Proposed Access Fees will not result in excessive pricing or supracompetitive profit when compared to the Exchange’s annual expense associated with providing the services 18 See Notice, supra note 5, at 37387; see also id. at 37382. 19 See Notice, supra note 5, at 37382. 20 See Notice, supra note 5, at 37387. 21 See Notice, supra note 5, at 37381–86. 22 See Notice, supra note 5, at 37382. In addition, the Exchange notes that the expenses discussed within their filing only cover the MIAX Pearl options market; expenses associated with the MIAX Pearl equities market are accounted for separately and are not included within the scope of this filing. See id. at 37384. E:\FR\FM\02SEN1.SGM 02SEN1 lotter on DSK11XQN23PROD with NOTICES1 Federal Register / Vol. 86, No. 168 / Thursday, September 2, 2021 / Notices associated with the Proposed Access Fees versus the annual revenue the Exchange will collect for providing those services.23 The Exchange states that for 2021, the total annual expense for providing the access services associated with the Proposed Access Fees for the Exchange is projected to be approximately $844,741.24 The $844,741 in projected total annual expense is comprised of the following, all of which the Exchange states are directly related to the access services associated with the Proposed Access Fees: (1) Third-party expense, relating to fees paid by the Exchange to third-parties for certain products and services; and (2) internal expense, relating to the internal costs of the Exchange to provide the services associated with the Proposed Access Fees. The Exchange states that the $844,741 in projected total annual expense is directly related to the access services associated with the Proposed Access Fees, and not any other product or service offered by the Exchange. The Exchange states that the total third-party expense, relating to fees paid by the Exchange to third-parties for certain products and services for the Exchange to be able to provide the access services associated with the Proposed Access Fees is projected to be $188,815 for 2021.25 The Exchange represents that it determined whether third-party expenses related to the access services associated with the Proposed Access Fees, and, if such expense did so relate, determined what portion (or percentage) of such expense represents the cost to the Exchange to provide access services associated with the Proposed Access Fees. This includes allocating a portion of fees paid to: (1) Equinix, for data center services (approximately 8% of the Exchange’s total applicable Equinix expense); (2) Zayo Group Holdings, Inc. for network services (approximately 4%); (3) Secure Financial Transaction Infrastructure and various other services providers (approximately 3%); and (4) various other hardware and software providers (approximately 5%). In addition, the Exchange states that the total internal expense, relating to the internal costs of the Exchange to provide the access services associated with the Proposed Access Fees, is projected to be $655,925 for 2021.26 The Exchange represents that: (1) The Exchange’s employee compensation and benefits expense relating to providing 23 See Notice, supra note 5, at 37382, 37386. Notice, supra note 5, at 37383–84. 25 See Notice, supra note 5, at 37384–85. 26 See Notice, supra note 5, at 37385–86. 24 See VerDate Sep<11>2014 17:33 Sep 01, 2021 Jkt 253001 the access services associated with the Proposed Access Fees is projected to be $549,824, which is a portion of the Exchange’s total projected expense of $9,163,894 for employee compensation and benefits (approximately 6%); (2) the Exchange’s depreciation and amortization expense relating to providing the access services associated with the Proposed Access Fees is projected to be $66,316, which is a portion of the Exchange’s total projected expense of $1,326,325 for depreciation and amortization (approximately 5%); and (3) the Exchange’s occupancy expense relating to providing the access services associated with the Proposed Access Fees is projected to be $39,775, which is a portion of the Exchange’s total projected expense of $497,180 for occupancy (approximately 8%). The Exchange states that this cost and revenue analysis shows that the proposed rule change will not result in excessive pricing or supra-competitive profit.27 The Exchange projects that, on a fully-annualized basis, the Proposed Access Fees will have an expense of $844,741 per year and a projected revenue of $1,170,000 per year, resulting in a projected profit margin of 28% ($1,170,000 in projected revenue minus $844,741 in projected expense = $325,259 profit per year). The Exchange states that this estimated profit margin is well below the operating profit margins of other competing exchanges based on financial statements provided by them in Form 1 filings.28 The Exchange also claims that the Trading Permit fees are reasonable and equitable because ‘‘they are in line with, or cheaper than, the trading permit fees or similar membership fees charged by other options exchanges.’’ 29 The Exchange further states that its proposed fees are reasonable, equitably allocated and not unfairly discriminatory because the Exchange, and its affiliates, Miami International Securities Exchange, LLC and MIAX Emerald, LLC, are still recouping the initial expenditures from building out their systems while the ‘‘legacy’’ exchanges have already paid for and built their systems.30 The Exchange also believes that removal of the Monthly 27 See Notice, supra note 5, at 37386. Notice, supra note 5, at 37386. The Exchange states that Nasdaq ISE, LLC’s operating profit margin for 2019 was 83% and Nasdaq PHLX LLC’s operating profit margin for 2019 was 67%. 29 See Notice, supra note 5, at 37387. The Exchange cites fees from NYSE Arca, NYSE American, and CBOE BZX Options Exchange in support of this statement. See id. at 37381 n.18. For a more detailed description of the Exchange’s justifications for the proposed rule change, see Notice, supra note 5, at 37381–88. 30 See Notice, supra note 5, at 37386. 28 See PO 00000 Frm 00115 Fmt 4703 Sfmt 4703 49401 Volume Credit and Trading Permit fee credit is reasonable, equitable and not unfairly discriminatory because all market participants will no longer be offered the ability to receive the credit and access to the Exchange is offered on terms that are not unfairly discriminatory.31 In addition, the Exchange states that these credits were offered in order to attract order flow and membership after the Exchange first launched operations, and it is now appropriate to remove these credits in light of the current operating conditions of the Exchange.32 The Exchange states that the proposed fees are equitably allocated, not unfairly discriminatory, and do not impose an unnecessary or inappropriate burden on competition because the Proposed Access Fees do not favor certain categories of market participants,33 the difference in Trading Permit fees for FIX versus MEO Interface users reflects the fact FIX Interface utilizes less capacity and resources of the Exchange while the MEO Interface offers lower latency and higher throughput, which utilizes greater capacity and resources of the Exchange; 34 and options market participants are not forced to connect to (and purchase Trading Permits) all options exchanges.35 When exchanges file their proposed rule changes with the Commission, including fee filings like the Exchange’s present proposal, they are required to provide a statement supporting the proposal’s basis under the Act and the rules and regulations thereunder applicable to the exchange.36 The instructions to Form 19b–4, on which exchanges file their proposed rule changes, specify that such statement ‘‘should be sufficiently detailed and specific to support a finding that the proposed rule change is consistent with [those] requirements.’’ 37 Section 6 of the Act, including Sections 6(b)(4), (5), and (8), require the rules of an exchange to (1) provide for the equitable allocation of reasonable fees among members, issuers, and other persons using the exchange’s facilities; 38 (2) perfect the mechanism of a free and open market and a national 31 See Notice, supra note 5, at 37382–83. Notice, supra note 5, at 37382–83. 33 See id. at 37387. 34 See Notice, supra note 5, at 37381. 35 For a more detailed description of the Exchange’s justifications for the proposed rule change, see Notice, supra note 5, at 37381–88. 36 See 17 CFR 240.19b–4 (Item 3 entitled ‘‘SelfRegulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change’’). 37 Id. 38 15 U.S.C. 78f(b)(4). 32 See E:\FR\FM\02SEN1.SGM 02SEN1 49402 Federal Register / Vol. 86, No. 168 / Thursday, September 2, 2021 / Notices market system, protect investors and the public interest, and not be designed to permit unfair discrimination between customers, issuers, brokers, or dealers; 39 and (3) not impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act.40 In temporarily suspending the Exchange’s fee change, the Commission intends to further consider whether the proposed rule change is consistent with the statutory requirements applicable to a national securities exchange under the Act. In particular, the Commission will consider whether the proposed rule change satisfies the standards under the Act and the rules thereunder requiring, among other things, that an exchange’s rules provide for the equitable allocation of reasonable fees among members, issuers, and other persons using its facilities; not permit unfair discrimination between customers, issuers, brokers or dealers; and do not impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act.41 Therefore, the Commission finds that it is appropriate in the public interest, for the protection of investors, and otherwise in furtherance of the purposes of the Act, to temporarily suspend the proposed rule change.42 IV. Proceedings To Determine Whether To Approve or Disapprove the Proposed Rule Change In addition to temporarily suspending the proposal, the Commission also hereby institutes proceedings pursuant to Sections 19(b)(3)(C) 43 and 19(b)(2)(B) of the Act 44 to determine whether the proposed rule change should be approved or disapproved. Institution of proceedings does not indicate that the Commission has reached any conclusions with respect to any of the issues involved. Rather, the Commission seeks and encourages interested persons to provide additional comment on the proposed rule change to inform the Commission’s analysis of whether to U.S.C. 78f(b)(5). U.S.C. 78f(b)(8). 41 See 15 U.S.C. 78f(b)(4), (5), and (8), respectively. 42 For purposes of temporarily suspending the proposed rule change, the Commission has considered the proposed rule’s impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). 43 15 U.S.C. 78s(b)(3)(C). Once the Commission temporarily suspends a proposed rule change, Section 19(b)(3)(C) of the Act requires that the Commission institute proceedings under Section 19(b)(2)(B) to determine whether a proposed rule change should be approved or disapproved. 44 15 U.S.C. 78s(b)(2)(B). approve or disapprove the proposed rule change. Pursuant to Section 19(b)(2)(B) of the Act,45 the Commission is providing notice of the grounds for possible disapproval under consideration: • Whether the Exchange has demonstrated how the proposal is consistent with Section 6(b)(4) of the Act, which requires that the rules of a national securities exchange ‘‘provide for the equitable allocation of reasonable dues, fees, and other charges among its members and issuers and other persons using its facilities;’’ 46 • Whether the Exchange has demonstrated how the proposal is consistent with Section 6(b)(5) of the Act, which requires, among other things, that the rules of a national securities exchange be ‘‘designed to perfect the operation of a free and open market and a national market system’’ and ‘‘protect investors and the public interest,’’ and not be ‘‘designed to permit unfair discrimination between customers, issuers, brokers, or dealers;’’ 47 and • Whether the Exchange has demonstrated how the proposal is consistent with Section 6(b)(8) of the Act, which requires that the rules of a national securities exchange ‘‘not impose any burden on competition not necessary or appropriate in furtherance of the purposes of [the Act].’’ 48 As discussed in Section III above, the Exchange makes various arguments in support of the proposal. The Commission believes that there are questions as to whether the Exchange has provided sufficient information to demonstrate that the proposal to remove certain credits and increase monthly Trading Permit fees is consistent with the Act and the rules thereunder. Under the Commission’s Rules of Practice, the ‘‘burden to demonstrate that a proposed rule change is consistent with the [Act] and the rules and regulations issued thereunder . . . is on the [SRO] that proposed the rule change.’’ 49 The description of a proposed rule change, its purpose and operation, its effect, and a legal analysis 39 15 lotter on DSK11XQN23PROD with NOTICES1 40 15 VerDate Sep<11>2014 17:33 Sep 01, 2021 Jkt 253001 45 15 U.S.C. 78s(b)(2)(B). Section 19(b)(2)(B) of the Act also provides that proceedings to determine whether to disapprove a proposed rule change must be concluded within 180 days of the date of publication of notice of the filing of the proposed rule change. See id. The time for conclusion of the proceedings may be extended for up to 60 days if the Commission finds good cause for such extension and publishes its reasons for so finding, or if the exchange consents to the longer period. See id. 46 15 U.S.C. 78f(b)(4). 47 15 U.S.C. 78f(b)(5). 48 15 U.S.C. 78f(b)(8). 49 17 CFR 201.700(b)(3). PO 00000 Frm 00116 Fmt 4703 Sfmt 4703 of its consistency with applicable requirements must all be sufficiently detailed and specific to support an affirmative Commission finding,50 and any failure of an SRO to provide this information may result in the Commission not having a sufficient basis to make an affirmative finding that a proposed rule change is consistent with the Act and the applicable rules and regulations.51 The Commission is instituting proceedings to allow for additional consideration and comment on the issues raised herein, including as to whether the proposal is consistent with the Act, specifically, with its requirements that the rules of a national securities exchange provide for the equitable allocation of reasonable dues, fees, and other charges among its members, issuers, and other persons using its facilities; are designed to perfect the operation of a free and open market and a national market system, and to protect investors and the public interest; are not designed to permit unfair discrimination between customers, issuers, brokers, or dealers; and do not impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act; 52 as well as any other provision of the Act, or the rules and regulations thereunder. V. Commission’s Solicitation of Comments The Commission requests written views, data, and arguments with respect to the concerns identified above as well as any other relevant concerns. Such comments should be submitted by September 23, 2021. Rebuttal comments should be submitted by October 7, 2021. Although there do not appear to be any issues relevant to approval or disapproval that would be facilitated by an oral presentation of views, data, and arguments, the Commission will consider, pursuant to Rule 19b–4, any request for an opportunity to make an oral presentation.53 The Commission asks that commenters address the sufficiency and merit of the Exchange’s statements in support of the proposal, in addition to 50 See id. id. 52 See 15 U.S.C. 78f(b)(4), (5), and (8). 53 15 U.S.C. 78s(b)(2). Section 19(b)(2) of the Act grants the Commission flexibility to determine what type of proceeding—either oral or notice and opportunity for written comments—is appropriate for consideration of a particular proposal by an SRO. See Securities Acts Amendments of 1975, Report of the Senate Committee on Banking, Housing and Urban Affairs to Accompany S. 249, S. Rep. No. 75, 94th Cong., 1st Sess. 30 (1975). 51 See E:\FR\FM\02SEN1.SGM 02SEN1 Federal Register / Vol. 86, No. 168 / Thursday, September 2, 2021 / Notices any other comments they may wish to submit about the proposed rule change. Interested persons are invited to submit written data, views, and arguments concerning the proposed rule change, including whether the proposal is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission’s internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File No. SR– PEARL–2021–32 on the subject line. lotter on DSK11XQN23PROD with NOTICES1 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–2021–32. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission’s internet website (https://www.sec.gov/ rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for website viewing and printing in the Commission’s Public Reference Room, 100 F Street NE, Washington, DC 20549, on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of the filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change. Persons submitting comments are cautioned that we do not redact or edit personal identifying information from comment submissions. You should submit only information that you wish to make available publicly. All VerDate Sep<11>2014 17:33 Sep 01, 2021 Jkt 253001 submissions should refer to File Number SR–PEARL–2021–32 and should be submitted on or before September 23, 2021. Rebuttal comments should be submitted by October 7, 2021. VI. Conclusion It is therefore ordered, pursuant to Section 19(b)(3)(C) of the Act,54 that File Number SR–PEARL–2021–32 be and hereby is, temporarily suspended. In addition, the Commission is instituting proceedings to determine whether the proposed rule change should be approved or disapproved. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.55 Vanessa A. Countryman, Secretary. [FR Doc. 2021–18948 Filed 9–1–21; 8:45 am] BILLING CODE 8011–01–P SOCIAL SECURITY ADMINISTRATION [Docket No: SSA–2021–0034] Agency Information Collection Activities: Proposed Request and Comment Request The Social Security Administration (SSA) publishes a list of information collection packages requiring clearance by the Office of Management and Budget (OMB) in compliance with Public Law 104–13, the Paperwork Reduction Act of 1995, effective October 1, 1995. This notice includes an extension and revisions of OMBapproved information collections. SSA is soliciting comments on the accuracy of the agency’s burden estimate; the need for the information; its practical utility; ways to enhance its quality, utility, and clarity; and ways to minimize burden on respondents, including the use of automated collection techniques or other forms of information technology. Mail, email, or fax your comments and recommendations on the information collection(s) to the OMB Desk Officer and SSA Reports Clearance Officer at the following addresses or fax numbers. 54 15 55 17 PO 00000 U.S.C. 78s(b)(3)(C). CFR 200.30–3(a)(57) and (58). Frm 00117 Fmt 4703 Sfmt 4703 49403 (OMB) Office of Management and Budget, Attn: Desk Officer for SSA Comments: https://www.reginfo.gov/ public/do/PRAMain. Submit your comments online referencing Docket ID Number [SSA–2021–0034]. (SSA) Social Security Administration, OLCA, Attn: Reports Clearance Director, 3100 West High Rise, 6401 Security Blvd., Baltimore, MD 21235, Fax: 410–966–2830, Email address: OR.Reports.Clearance@ssa.gov Or you may submit your comments online through https://www.reginfo.gov/ public/do/PRAMain, referencing Docket ID Number [SSA–2021–0034]. I. The information collection below is pending at SSA. SSA will submit it to OMB within 60 days from the date of this notice. To be sure we consider your comments, we must receive them no later than November 1, 2021. Individuals can obtain copies of the collection instrument by writing to the above email address. Registration for Appointed Representative Services and Direct Payment—0960–0732. SSA uses Form SSA–1699 to register appointed representatives of claimants before SSA who: • Want to register for direct payment of fees; • Registered for direct payment of fees prior to 10/31/09, but need to update their information; • Registered as appointed representatives on or after 10/31/09, but need to update their information; or • Received a notice from SSA instructing them to complete this form. By registering these individuals, SSA: (1) Authenticates and authorizes them to do business with us; (2) allows them to access our records for the claimants they represent; (3) facilitates direct payment of authorized fees to appointed representatives; and, (4) collects the information we need to meet Internal Revenue Service (IRS) requirements to issue specific IRS forms if we pay an appointed representative in excess of a specific amount ($600). The respondents are appointed representatives who want to use Form SSA–1699 for any of the purposes cited in this Notice. Type of Request: Revision of an OMBapproved information collection. E:\FR\FM\02SEN1.SGM 02SEN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 86, Number 168 (Thursday, September 2, 2021)]
[Notices]
[Pages 49399-49403]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-18948]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-92797; File No. SR-PEARL-2021-32]


Self-Regulatory Organizations; MIAX PEARL, LLC; Suspension of and 
Order Instituting Proceedings To Determine Whether To Approve or 
Disapprove Proposed Rule Changes To Amend the MIAX Pearl Options Fee 
Schedule To Remove Certain Credits and Increase Trading Permit Fees

August 27, 2021.

I. Introduction

    On July 1, 2021, MIAX PEARL, LLC (``MIAX Pearl'' or ``Exchange'') 
filed with the Securities and Exchange Commission (``Commission''), 
pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Exchange Act'' or ``Act''),\1\ and Rule 19b-4 thereunder,\2\ a 
proposed rule change (File Number SR-PEARL-2021-32) to amend the MIAX 
Pearl Options Fee Schedule (``Fee Schedule'') to remove certain credits 
and increase monthly Trading Permit fees for Exchange Members.\3\ The 
proposed rule change was immediately effective upon filing with the 
Commission pursuant to Section 19(b)(3)(A) of the Act.\4\ The proposed 
rule change was published for comment in the Federal Register on July 
15, 2021.\5\ The Commission has received no comment letters on the 
proposed rule change. Under Section 19(b)(3)(C) of the Act,\6\ the 
Commission is hereby: (i) Temporarily suspending File Number SR-PEARL-
2021-32; and (ii) instituting proceedings to determine whether to 
approve or disapprove File Number SR-PEARL-2021-32.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ The term ``Trading Permit'' means a permit issued by the 
Exchange that confers the ability to transact on the Exchange. See 
Notice, infra note 5, at 37379. The term ``Member'' means an 
individual or organization that is registered with the Exchange 
pursuant to Chapter II of Exchange Rules for purposes of trading on 
the Exchange as an ``Electronic Exchange Member'' or ``Market 
Maker.'' Members are deemed ``members'' under the Exchange Act. See 
id.
    \4\ 15 U.S.C. 78s(b)(3)(A). A proposed rule change may take 
effect upon filing with the Commission if it is designated by the 
exchange as ``establishing or changing a due, fee, or other charge 
imposed by the self-regulatory organization on any person, whether 
or not the person is a member of the self-regulatory organization.'' 
15 U.S.C. 78s(b)(3)(A)(ii).
    \5\ See Securities Exchange Act Release No. 92366 (July 9, 
2021), 86 FR 37379 (``Notice'').
    \6\ 15 U.S.C. 78s(b)(3)(C).
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II. Description of the Proposed Rule Change

    The Exchange proposes to amend its Fee Schedule to: (1) Delete the 
definition of and remove the credits applicable to the Monthly Volume 
Credit for Members; (2) and; (3) amend Section (3)(b) of the Fee 
Schedule to increase the amount of monthly Trading Permit Fees.

Remove ``Monthly Volume Credit''

    The Exchange proposes to amend the Definitions section of its Fee 
Schedule to delete the definition of ``Monthly Volume Credit'' and 
remove the credits applicable to the Monthly Volume Credit for 
Members.\7\ The Exchange states that the Monthly Volume Credit was 
established in 2018 to encourage Members to send increased Priority

[[Page 49400]]

Customer \8\ order flow to the Exchange. The Monthly Volume Credit is 
provided to Members whose executed Priority Customer volume along with 
that of its Affiliates,\9\ not including Excluded Contracts,\10\ is at 
least 0.30% of Exchange-listed Total Consolidated Volume (``TCV'') \11\ 
and is $250 for Members that connect via the FIX Interface and $1,000 
for Members that connect via the MEO Interface (or both 
interfaces).\12\ The Monthly Volume Credit is a single once-per-month 
credit towards the aggregate monthly total of non-transaction fees 
assessable to a Member.
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    \7\ See Notice, supra note 5, at 37379-80.
    \8\ ``Priority Customer'' means a person or entity that (i) is 
not a broker or dealer in securities, and (ii) does not place more 
than 390 orders in listed options per day on average during a 
calendar month for its own beneficial accounts(s). The number of 
orders shall be counted in accordance with Interpretation and Policy 
.01 of Exchange Rule 100. See Notice, supra note 5, at 37380 n.6.
    \9\ ``Affiliate'' means (i) an affiliate of a Member of at least 
75% common ownership between the firms as reflected on each firm's 
Form BD, Schedule A, or (ii) the Appointed Market Maker of an 
Appointed EEM (or, conversely, the Appointed EEM of an Appointed 
Market Maker). See Notice, supra note 5, at 37380 n.9.
    \10\ ``Excluded Contracts'' means any contracts routed to an 
away market for execution. See Notice, supra note 5, at 37380 n.10.
    \11\ ``TCV'' means total consolidated volume calculated as the 
total national volume in those classes listed on MIAX Pearl for the 
month for which the fees apply, excluding consolidated volume 
executed during the period of time in which the Exchange experiences 
an Exchange System Disruption (solely in the option classes of the 
affected Matching Engine). See Notice, supra note 5, at 37380 n.11.
    \12\ The ``FIX Interface'' and ``MEO Interface'' are different 
interfaces for certain order types as set forth in Exchange Rule 
516. See Notice, supra note 5, at 37380 n.7-8.
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Remove Trading Permit Fee Credit

    The Exchange also proposes to amend Section (3)(b) of the Fee 
Schedule to remove a Trading Permit fee credit of $100 that is provided 
to Members who connect via both the MEO and FIX Interfaces and is a 
monthly credit towards the Trading Permit fees applicable to the MEO 
Interface use.\13\
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    \13\ See Notice, supra note 5, at 37380.
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Increase Monthly Trading Permit Fees

    The Exchange also proposes to amend Section (3)(b) of the Fee 
Schedule to increase the amount of the monthly Trading Permit fees that 
are charged to Exchange Members that are Electronic Exchange Members or 
Market Makers.\14\ These fees are assessed in a tier-based fee 
structure based on the monthly total volume executed by a Member and 
its Affiliates on the Exchange across all origin types, not including 
Excluded Contracts, as compared to all Exchange-listed options and are 
also assessed based upon the type of interface used by the Member to 
connect to the Exchange, specifically the FIX Interface and/or the MEO 
Interface.\15\
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    \14\ See Notice, supra note 5, at 37380-81.
    \15\ See Notice, supra note 5, at 37380.
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    The Exchange proposes to increase fees for Trading Permits as 
follows:
    For Members that connect via the FIX Interface, if the Member's 
relevant monthly volume falls within the parameters of:
     Tier 1 (up to 0.30% TCV): The monthly fee would increase 
from $250 to $500;
     Tier 2 (above 0.30%, up to 0.60% TCV): The monthly fee 
would increase from $350 to $1,000; and
     Tier 3 (above 0.60% TCV): The monthly fee would increase 
from $450 to $1,500.
    For Members that connect via the MEO interface, if the Member's 
relevant monthly volume falls within the parameters of:
     Tier 1 (up to 0.30% TCV): The monthly fee would increase 
from $300 to $2,500;
     Tier 2 (above 0.30%, up to 0.60% TCV): The monthly fee 
would increase from $400 to $4,000; and
     Tier 3 (above 0.60% TCV): The monthly fee would increase 
from $500 to $6,000.

III. Suspension of the Proposed Rule Change

    Pursuant to Section 19(b)(3)(C) of the Act,\16\ at any time within 
60 days of the date of filing of an immediately effective proposed rule 
change pursuant to Section 19(b)(1) of the Act,\17\ the Commission 
summarily may temporarily suspend the change in the rules of a self-
regulatory organization (``SRO'') 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. As discussed below, the Commission believes a temporary 
suspension of the proposed rule change is necessary and appropriate to 
allow for additional analysis of the proposed rule change's consistency 
with the Act and the rules thereunder.
---------------------------------------------------------------------------

    \16\ 15 U.S.C. 78s(b)(3)(C).
    \17\ 15 U.S.C. 78s(b)(1).
---------------------------------------------------------------------------

    In support of the proposed fee changes, the Exchange principally 
argues that these fees are constrained by competitive forces, and that 
this is supported by their revenue and cost analysis. In particular, 
the Exchange states that it operates in a ``highly competitive market'' 
in which market participants can readily favor competing venues if they 
deem fee levels at a particular venue to be excessive.\18\ In further 
support of its argument that competitive forces constrain its proposed 
fee changes, Exchange further states that if it were to attempt to 
establish unreasonable pricing, then no market participant would join 
or connect, and existing market participants would disconnect.\19\ In 
addition, the Exchange states that it is not aware of any reason why 
market participants could not simply drop their access to an exchange 
(or not initially access an exchange) if an exchange were to establish 
prices for its non-transaction fees that, in the determination of such 
market participant, did not make business or economic sense for such 
market participant to access such exchange, and claims that no options 
market participant is required by rule, regulation, or competitive 
forces to be a Member of the Exchange, which the Exchange believes is 
illustrated by the fact that it is unaware of any one options exchange 
whose membership includes every registered broker-dealer.\20\
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    \18\ See Notice, supra note 5, at 37387; see also id. at 37382.
    \19\ See Notice, supra note 5, at 37382.
    \20\ See Notice, supra note 5, at 37387.
---------------------------------------------------------------------------

    The Exchange also states that these fees are designed to recover a 
portion of the costs associated with directly accessing the Exchange. 
The Exchange believes that Trading Permits are a means to directly 
access the Exchange and thus offers meaningful value (and without a 
Trading Permit a Member cannot directly trade on the Exchange). The 
Exchange provides an analysis of its revenues, costs, and profitability 
associated with these fees, which it references as ``Proposed Access 
Fees.'' \21\ The Exchange states that this analysis reflects an 
extensive cost review in which the Exchange analyzed every expense item 
in the Exchange's general expense ledger to determine whether each such 
expense relates to the Proposed Access Fees, and, if such expense did 
so relate, what portion (or percentage) of such expense actually 
supports the access services.\22\ The Exchange states that this 
analysis shows that the Proposed Access Fees will not result in 
excessive pricing or supra-competitive profit when compared to the 
Exchange's annual expense associated with providing the services

[[Page 49401]]

associated with the Proposed Access Fees versus the annual revenue the 
Exchange will collect for providing those services.\23\
---------------------------------------------------------------------------

    \21\ See Notice, supra note 5, at 37381-86.
    \22\ See Notice, supra note 5, at 37382. In addition, the 
Exchange notes that the expenses discussed within their filing only 
cover the MIAX Pearl options market; expenses associated with the 
MIAX Pearl equities market are accounted for separately and are not 
included within the scope of this filing. See id. at 37384.
    \23\ See Notice, supra note 5, at 37382, 37386.
---------------------------------------------------------------------------

    The Exchange states that for 2021, the total annual expense for 
providing the access services associated with the Proposed Access Fees 
for the Exchange is projected to be approximately $844,741.\24\ The 
$844,741 in projected total annual expense is comprised of the 
following, all of which the Exchange states are directly related to the 
access services associated with the Proposed Access Fees: (1) Third-
party expense, relating to fees paid by the Exchange to third-parties 
for certain products and services; and (2) internal expense, relating 
to the internal costs of the Exchange to provide the services 
associated with the Proposed Access Fees. The Exchange states that the 
$844,741 in projected total annual expense is directly related to the 
access services associated with the Proposed Access Fees, and not any 
other product or service offered by the Exchange.
---------------------------------------------------------------------------

    \24\ See Notice, supra note 5, at 37383-84.
---------------------------------------------------------------------------

    The Exchange states that the total third-party expense, relating to 
fees paid by the Exchange to third-parties for certain products and 
services for the Exchange to be able to provide the access services 
associated with the Proposed Access Fees is projected to be $188,815 
for 2021.\25\ The Exchange represents that it determined whether third-
party expenses related to the access services associated with the 
Proposed Access Fees, and, if such expense did so relate, determined 
what portion (or percentage) of such expense represents the cost to the 
Exchange to provide access services associated with the Proposed Access 
Fees. This includes allocating a portion of fees paid to: (1) Equinix, 
for data center services (approximately 8% of the Exchange's total 
applicable Equinix expense); (2) Zayo Group Holdings, Inc. for network 
services (approximately 4%); (3) Secure Financial Transaction 
Infrastructure and various other services providers (approximately 3%); 
and (4) various other hardware and software providers (approximately 
5%).
---------------------------------------------------------------------------

    \25\ See Notice, supra note 5, at 37384-85.
---------------------------------------------------------------------------

    In addition, the Exchange states that the total internal expense, 
relating to the internal costs of the Exchange to provide the access 
services associated with the Proposed Access Fees, is projected to be 
$655,925 for 2021.\26\ The Exchange represents that: (1) The Exchange's 
employee compensation and benefits expense relating to providing the 
access services associated with the Proposed Access Fees is projected 
to be $549,824, which is a portion of the Exchange's total projected 
expense of $9,163,894 for employee compensation and benefits 
(approximately 6%); (2) the Exchange's depreciation and amortization 
expense relating to providing the access services associated with the 
Proposed Access Fees is projected to be $66,316, which is a portion of 
the Exchange's total projected expense of $1,326,325 for depreciation 
and amortization (approximately 5%); and (3) the Exchange's occupancy 
expense relating to providing the access services associated with the 
Proposed Access Fees is projected to be $39,775, which is a portion of 
the Exchange's total projected expense of $497,180 for occupancy 
(approximately 8%).
---------------------------------------------------------------------------

    \26\ See Notice, supra note 5, at 37385-86.
---------------------------------------------------------------------------

    The Exchange states that this cost and revenue analysis shows that 
the proposed rule change will not result in excessive pricing or supra-
competitive profit.\27\ The Exchange projects that, on a fully-
annualized basis, the Proposed Access Fees will have an expense of 
$844,741 per year and a projected revenue of $1,170,000 per year, 
resulting in a projected profit margin of 28% ($1,170,000 in projected 
revenue minus $844,741 in projected expense = $325,259 profit per 
year). The Exchange states that this estimated profit margin is well 
below the operating profit margins of other competing exchanges based 
on financial statements provided by them in Form 1 filings.\28\ The 
Exchange also claims that the Trading Permit fees are reasonable and 
equitable because ``they are in line with, or cheaper than, the trading 
permit fees or similar membership fees charged by other options 
exchanges.'' \29\
---------------------------------------------------------------------------

    \27\ See Notice, supra note 5, at 37386.
    \28\ See Notice, supra note 5, at 37386. The Exchange states 
that Nasdaq ISE, LLC's operating profit margin for 2019 was 83% and 
Nasdaq PHLX LLC's operating profit margin for 2019 was 67%.
    \29\ See Notice, supra note 5, at 37387. The Exchange cites fees 
from NYSE Arca, NYSE American, and CBOE BZX Options Exchange in 
support of this statement. See id. at 37381 n.18. For a more 
detailed description of the Exchange's justifications for the 
proposed rule change, see Notice, supra note 5, at 37381-88.
---------------------------------------------------------------------------

    The Exchange further states that its proposed fees are reasonable, 
equitably allocated and not unfairly discriminatory because the 
Exchange, and its affiliates, Miami International Securities Exchange, 
LLC and MIAX Emerald, LLC, are still recouping the initial expenditures 
from building out their systems while the ``legacy'' exchanges have 
already paid for and built their systems.\30\ The Exchange also 
believes that removal of the Monthly Volume Credit and Trading Permit 
fee credit is reasonable, equitable and not unfairly discriminatory 
because all market participants will no longer be offered the ability 
to receive the credit and access to the Exchange is offered on terms 
that are not unfairly discriminatory.\31\ In addition, the Exchange 
states that these credits were offered in order to attract order flow 
and membership after the Exchange first launched operations, and it is 
now appropriate to remove these credits in light of the current 
operating conditions of the Exchange.\32\
---------------------------------------------------------------------------

    \30\ See Notice, supra note 5, at 37386.
    \31\ See Notice, supra note 5, at 37382-83.
    \32\ See Notice, supra note 5, at 37382-83.
---------------------------------------------------------------------------

    The Exchange states that the proposed fees are equitably allocated, 
not unfairly discriminatory, and do not impose an unnecessary or 
inappropriate burden on competition because the Proposed Access Fees do 
not favor certain categories of market participants,\33\ the difference 
in Trading Permit fees for FIX versus MEO Interface users reflects the 
fact FIX Interface utilizes less capacity and resources of the Exchange 
while the MEO Interface offers lower latency and higher throughput, 
which utilizes greater capacity and resources of the Exchange; \34\ and 
options market participants are not forced to connect to (and purchase 
Trading Permits) all options exchanges.\35\
---------------------------------------------------------------------------

    \33\ See id. at 37387.
    \34\ See Notice, supra note 5, at 37381.
    \35\ For a more detailed description of the Exchange's 
justifications for the proposed rule change, see Notice, supra note 
5, at 37381-88.
---------------------------------------------------------------------------

    When exchanges file their proposed rule changes with the 
Commission, including fee filings like the Exchange's present proposal, 
they are required to provide a statement supporting the proposal's 
basis under the Act and the rules and regulations thereunder applicable 
to the exchange.\36\ The instructions to Form 19b-4, on which exchanges 
file their proposed rule changes, specify that such statement ``should 
be sufficiently detailed and specific to support a finding that the 
proposed rule change is consistent with [those] requirements.'' \37\
---------------------------------------------------------------------------

    \36\ See 17 CFR 240.19b-4 (Item 3 entitled ``Self-Regulatory 
Organization's Statement of the Purpose of, and Statutory Basis for, 
the Proposed Rule Change'').
    \37\ Id.
---------------------------------------------------------------------------

    Section 6 of the Act, including Sections 6(b)(4), (5), and (8), 
require the rules of an exchange to (1) provide for the equitable 
allocation of reasonable fees among members, issuers, and other persons 
using the exchange's facilities; \38\ (2) perfect the mechanism of a 
free and open market and a national

[[Page 49402]]

market system, protect investors and the public interest, and not be 
designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers; \39\ and (3) not impose any burden on competition 
not necessary or appropriate in furtherance of the purposes of the 
Act.\40\
---------------------------------------------------------------------------

    \38\ 15 U.S.C. 78f(b)(4).
    \39\ 15 U.S.C. 78f(b)(5).
    \40\ 15 U.S.C. 78f(b)(8).
---------------------------------------------------------------------------

    In temporarily suspending the Exchange's fee change, the Commission 
intends to further consider whether the proposed rule change is 
consistent with the statutory requirements applicable to a national 
securities exchange under the Act. In particular, the Commission will 
consider whether the proposed rule change satisfies the standards under 
the Act and the rules thereunder requiring, among other things, that an 
exchange's rules provide for the equitable allocation of reasonable 
fees among members, issuers, and other persons using its facilities; 
not permit unfair discrimination between customers, issuers, brokers or 
dealers; and do not impose any burden on competition not necessary or 
appropriate in furtherance of the purposes of the Act.\41\
---------------------------------------------------------------------------

    \41\ See 15 U.S.C. 78f(b)(4), (5), and (8), respectively.
---------------------------------------------------------------------------

    Therefore, the Commission finds that it is appropriate in the 
public interest, for the protection of investors, and otherwise in 
furtherance of the purposes of the Act, to temporarily suspend the 
proposed rule change.\42\
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    \42\ For purposes of temporarily suspending the proposed rule 
change, the Commission has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
---------------------------------------------------------------------------

IV. Proceedings To Determine Whether To Approve or Disapprove the 
Proposed Rule Change

    In addition to temporarily suspending the proposal, the Commission 
also hereby institutes proceedings pursuant to Sections 19(b)(3)(C) 
\43\ and 19(b)(2)(B) of the Act \44\ to determine whether the proposed 
rule change should be approved or disapproved. Institution of 
proceedings does not indicate that the Commission has reached any 
conclusions with respect to any of the issues involved. Rather, the 
Commission seeks and encourages interested persons to provide 
additional comment on the proposed rule change to inform the 
Commission's analysis of whether to approve or disapprove the proposed 
rule change.
---------------------------------------------------------------------------

    \43\ 15 U.S.C. 78s(b)(3)(C). Once the Commission temporarily 
suspends a proposed rule change, Section 19(b)(3)(C) of the Act 
requires that the Commission institute proceedings under Section 
19(b)(2)(B) to determine whether a proposed rule change should be 
approved or disapproved.
    \44\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------

    Pursuant to Section 19(b)(2)(B) of the Act,\45\ the Commission is 
providing notice of the grounds for possible disapproval under 
consideration:
---------------------------------------------------------------------------

    \45\ 15 U.S.C. 78s(b)(2)(B). Section 19(b)(2)(B) of the Act also 
provides that proceedings to determine whether to disapprove a 
proposed rule change must be concluded within 180 days of the date 
of publication of notice of the filing of the proposed rule change. 
See id. The time for conclusion of the proceedings may be extended 
for up to 60 days if the Commission finds good cause for such 
extension and publishes its reasons for so finding, or if the 
exchange consents to the longer period. See id.
---------------------------------------------------------------------------

     Whether the Exchange has demonstrated how the proposal is 
consistent with Section 6(b)(4) of the Act, which requires that the 
rules of a national securities exchange ``provide for the equitable 
allocation of reasonable dues, fees, and other charges among its 
members and issuers and other persons using its facilities;'' \46\
---------------------------------------------------------------------------

    \46\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

     Whether the Exchange has demonstrated how the proposal is 
consistent with Section 6(b)(5) of the Act, which requires, among other 
things, that the rules of a national securities exchange be ``designed 
to perfect the operation of a free and open market and a national 
market system'' and ``protect investors and the public interest,'' and 
not be ``designed to permit unfair discrimination between customers, 
issuers, brokers, or dealers;'' \47\ and
---------------------------------------------------------------------------

    \47\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

     Whether the Exchange has demonstrated how the proposal is 
consistent with Section 6(b)(8) of the Act, which requires that the 
rules of a national securities exchange ``not impose any burden on 
competition not necessary or appropriate in furtherance of the purposes 
of [the Act].'' \48\
---------------------------------------------------------------------------

    \48\ 15 U.S.C. 78f(b)(8).
---------------------------------------------------------------------------

    As discussed in Section III above, the Exchange makes various 
arguments in support of the proposal. The Commission believes that 
there are questions as to whether the Exchange has provided sufficient 
information to demonstrate that the proposal to remove certain credits 
and increase monthly Trading Permit fees is consistent with the Act and 
the rules thereunder.
    Under the Commission's Rules of Practice, the ``burden to 
demonstrate that a proposed rule change is consistent with the [Act] 
and the rules and regulations issued thereunder . . . is on the [SRO] 
that proposed the rule change.'' \49\ The description of a proposed 
rule change, its purpose and operation, its effect, and a legal 
analysis of its consistency with applicable requirements must all be 
sufficiently detailed and specific to support an affirmative Commission 
finding,\50\ and any failure of an SRO to provide this information may 
result in the Commission not having a sufficient basis to make an 
affirmative finding that a proposed rule change is consistent with the 
Act and the applicable rules and regulations.\51\
---------------------------------------------------------------------------

    \49\ 17 CFR 201.700(b)(3).
    \50\ See id.
    \51\ See id.
---------------------------------------------------------------------------

    The Commission is instituting proceedings to allow for additional 
consideration and comment on the issues raised herein, including as to 
whether the proposal is consistent with the Act, specifically, with its 
requirements that the rules of a national securities exchange provide 
for the equitable allocation of reasonable dues, fees, and other 
charges among its members, issuers, and other persons using its 
facilities; are designed to perfect the operation of a free and open 
market and a national market system, and to protect investors and the 
public interest; are not designed to permit unfair discrimination 
between customers, issuers, brokers, or dealers; and do not impose any 
burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act; \52\ as well as any other 
provision of the Act, or the rules and regulations thereunder.
---------------------------------------------------------------------------

    \52\ See 15 U.S.C. 78f(b)(4), (5), and (8).
---------------------------------------------------------------------------

V. Commission's Solicitation of Comments

    The Commission requests written views, data, and arguments with 
respect to the concerns identified above as well as any other relevant 
concerns. Such comments should be submitted by September 23, 2021. 
Rebuttal comments should be submitted by October 7, 2021. Although 
there do not appear to be any issues relevant to approval or 
disapproval that would be facilitated by an oral presentation of views, 
data, and arguments, the Commission will consider, pursuant to Rule 
19b-4, any request for an opportunity to make an oral presentation.\53\
---------------------------------------------------------------------------

    \53\ 15 U.S.C. 78s(b)(2). Section 19(b)(2) of the Act grants the 
Commission flexibility to determine what type of proceeding--either 
oral or notice and opportunity for written comments--is appropriate 
for consideration of a particular proposal by an SRO. See Securities 
Acts Amendments of 1975, Report of the Senate Committee on Banking, 
Housing and Urban Affairs to Accompany S. 249, S. Rep. No. 75, 94th 
Cong., 1st Sess. 30 (1975).
---------------------------------------------------------------------------

    The Commission asks that commenters address the sufficiency and 
merit of the Exchange's statements in support of the proposal, in 
addition to

[[Page 49403]]

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

Electronic Comments

     Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File No. SR-PEARL-2021-32 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-2021-32. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (https://www.sec.gov/rules/sro.shtml). 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for website viewing and printing in 
the Commission's Public Reference Room, 100 F Street NE, Washington, DC 
20549, on official business days between the hours of 10:00 a.m. and 
3:00 p.m. Copies of the filing also will be available for inspection 
and copying at the principal office of the Exchange. All comments 
received will be posted without change. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-PEARL-2021-32 and should be submitted on 
or before September 23, 2021. Rebuttal comments should be submitted by 
October 7, 2021.

VI. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(3)(C) of the 
Act,\54\ that File Number SR-PEARL-2021-32 be and hereby is, 
temporarily suspended. In addition, the Commission is instituting 
proceedings to determine whether the proposed rule change should be 
approved or disapproved.
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    \54\ 15 U.S.C. 78s(b)(3)(C).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\55\
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    \55\ 17 CFR 200.30-3(a)(57) and (58).
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Vanessa A. Countryman,
Secretary.
[FR Doc. 2021-18948 Filed 9-1-21; 8:45 am]
BILLING CODE 8011-01-P

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