Self-Regulatory Organizations; MIAX PEARL, LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend the MIAX PEARL Options Fee Schedule To Remove Certain Credits, 57544-57547 [2022-20269]
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Federal Register / Vol. 87, No. 181 / Tuesday, September 20, 2022 / Notices
their orders to other exchange and offexchange venues if they deem fee levels
at those other venues to be more
favorable. In such an environment, the
Exchange must continually adjust its
fees and rebates to remain competitive
with other exchanges and with offexchange venues. Because competitors
are free to modify their own fees and
credits in response, and because market
participants may readily adjust their
order routing practices, the Exchange
does not believe its proposed fee change
can impose any burden on intermarket
competition.
The Exchange believes that the
proposed change could promote
competition between the Exchange and
other execution venues, including those
that currently offer after-hours trading
sessions and comparable transaction
pricing, by encouraging additional
orders to be sent to the Exchange.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were solicited
or received with respect to the proposed
rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The foregoing rule change is effective
upon filing pursuant to Section
19(b)(3)(A) 23 of the Act and
subparagraph (f)(2) of Rule 19b–4 24
thereunder, because it establishes a due,
fee, or other charge imposed by the
Exchange.
At any time within 60 days of the
filing of such 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
under Section 19(b)(2)(B) 25 of the Act to
determine whether the proposed rule
change should be approved or
disapproved.
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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–
NYSE–2022–41 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–NYSE–2022–41. 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
a.m. and 3 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–NYSE–
2022–41, and should be submitted on or
before October 11, 2022.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.26
J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022–20267 Filed 9–19–22; 8:45 am]
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(2).
25 15 U.S.C. 78s(b)(2)(B).
24 17
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[Release No. 34–95775; File No. SR–
PEARL–2022–35]
Self-Regulatory Organizations; MIAX
PEARL, LLC; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change To Amend the MIAX
PEARL Options Fee Schedule To
Remove Certain Credits
September 14, 2022.
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
September 1, 2022, MIAX PEARL, LLC
(‘‘MIAX Pearl’’ or ‘‘Exchange’’) filed
with the Securities and Exchange
Commission (‘‘Commission’’) a
proposed rule change as described in
Items I, II, and III, below, which Items
have been prepared by the Exchange.
The Commission is publishing this
notice to solicit comments on the
proposed rule change from interested
persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange is filing a proposal to
amend the MIAX Pearl Options Fee
Schedule (the ‘‘Fee Schedule’’) to
remove two monthly credits associated
with Trading Permit 3 and nontransaction fees.
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.
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 Exchange Rule 100.
2 17
BILLING CODE 8011–01–P
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SECURITIES AND EXCHANGE
COMMISSION
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A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange commenced operations
in February 2017 4 and adopted its
initial fee schedule that waived fees for
Trading Permits to trade on the
Exchange.5 In 2018, as the Exchange’s
market share increased,6 the Exchange
adopted a nominal fee for Trading
Permits along with a tiered-volume
based fee credit, known as the Trading
Permit Fee Credit, and a Monthly
Volume Credit.7 The Exchange
established the Trading Permit Fee
Credit to continue to attract order flow
and increase membership by lowering
the costs for Members.8
The Exchange believes that the
Trading Permit Fee Credit and Monthly
Volume Credit have served their
purpose of incentivizing market
participants to trade on the Exchange as
the Exchange’s market share continues
to grow and increase since the credits
were established.9 Therefore, the
Exchange now proposes to remove the
two monthly credits associated with
Trading Permit and non-transaction fees
from the Fee Schedule.
Monthly Volume Credit
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The Exchange proposes to amend the
Definitions section of the Fee Schedule
to delete the definition and remove the
credits applicable to the Monthly
Volume Credit for Members. The
Exchange established the Monthly
Volume Credit in 2018 10 to encourage
Members to send increased Priority
4 See MIAX PEARL Successfully Launches
Trading Operations, dated February 6, 2017,
available at https://www.miaxoptions.com/sites/
default/files/alert-files/MIAX_Press_Release_
02062017.pdf.
5 See Securities Exchange Act Release No. 80061
(February 17, 2017), 82 FR 11676 (February 24,
2017) (SR–PEARL–2017–10).
6 The Exchange experienced a monthly average
trading volume of 3.94% for the month of March
2018. See Market at a Glance, available at
www.miaxoptions.com (last visited (August 29,
2022).
7 See Securities Exchange Act Release No. 82867
(March 13, 2018), 83 FR 12044 (March 19, 2018)
(SR–PEARL–2018–07).
8 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 Exchange Rule 100 and the
Definitions Section of the Fee Schedule.
9 The Exchange experienced a monthly average
trading volume of 4.75% for the month of August
2022 (as of August 29, 2022). See Market at a
Glance, supra note 6.
10 See supra note 7.
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Customer 11 order flow to the Exchange,
which the Exchange applied as a metric
to the assessment of non-transaction
fees for that Member. During the period
when the Monthly Volume Credit was
in effect (as further described below),
the Exchange applied a different
Monthly Volume Credit depending on
whether the Member connected to the
Exchange via the FIX Interface 12 or
MEO Interface.13 During the period
when the Monthly Volume Credit was
in effect, the Exchange assessed the
Monthly Volume Credit to each Member
that had executed Priority Customer
volume along with that of its affiliates,14
11 The term ‘‘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 the Definitions Section of
the Fee Schedule and Exchange Rule 100, including
Interpretation and Policy .01.
12 The term ‘‘FIX Interface’’ means the Financial
Information Exchange interface for certain order
types as set forth in Exchange Rule 516. See the
Definitions Section of the Fee Schedule and
Exchange Rule 100.
13 The term ‘‘MEO Interface’’ or ‘‘MEO’’ means a
binary order interface for certain order types as set
forth in Rule 516 into the MIAX Pearl System. See
the Definitions Section of the Fee Schedule and
Exchange Rule 100.
14 ‘‘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). An
‘‘Appointed Market Maker’’ is a MIAX Pearl Market
Maker (who does not otherwise have a corporate
affiliation based upon common ownership with an
EEM) that has been appointed by an EEM and an
‘‘Appointed EEM’’ is an EEM (who does not
otherwise have a corporate affiliation based upon
common ownership with a MIAX Pearl Market
Maker) that has been appointed by a MIAX Pearl
Market Maker, pursuant to the following process. A
MIAX Pearl Market Maker appoints an EEM and an
EEM appoints a MIAX Pearl Market Maker, for the
purposes of the Fee Schedule, by each completing
and sending an executed Volume Aggregation
Request Form by email to membership@
miaxoptions.com no later than 2 business days
prior to the first business day of the month in which
the designation is to become effective. Transmittal
of a validly completed and executed form to the
Exchange along with the Exchange’s
acknowledgement of the effective designation to
each of the Market Maker and EEM will be viewed
as acceptance of the appointment. The Exchange
will only recognize one designation per Member. A
Member may make a designation not more than
once every 12 months (from the date of its most
recent designation), which designation shall remain
in effect unless or until the Exchange receives
written notice submitted 2 business days prior to
the first business day of the month from either
Member indicating that the appointment has been
terminated. Designations will become operative on
the first business day of the effective month and
may not be terminated prior to the end of the
month. Execution data and reports will be provided
to both parties. See the Definitions Section of the
Fee Schedule.
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57545
not including Excluded Contracts,15 of
at least 0.30% of MIAX Pearl-listed
Total Consolidated Volume (‘‘TCV’’),16
as set forth in the following table:
Type of member connection
Member that connects via the FIX
Interface ......................................
Member that connects via the MEO
Interface ......................................
Monthly
volume
credit
$250
1,000
If a Member connected via both the
MEO Interface and FIX Interface and
qualified for the Monthly Volume Credit
based upon its Priority Customer
volume, the greater Monthly Volume
Credit would apply to such Member.
During the periods when the Monthly
Volume Credit was in effect, the
Monthly Volume Credit was a single,
once-per-month credit towards the
aggregate monthly total of nontransaction fees assessable to a Member.
The Exchange proposes to amend the
Definitions section of the Fee Schedule
to delete the definition and remove the
Monthly Volume Credit. The Exchange
established the Monthly Volume Credit
when it first launched operations to
encourage Members to increase their
order flow by providing a credit to those
that exceeded a volume threshold. The
Exchange believes that the Exchange’s
existing Priority Customer rebates and
fees will continue to allow the Exchange
to remain highly competitive and
continue to attract order flow and
maintain market share even without the
Monthly Volume Credit.17
Trading Permit Fee Credit
The Exchange proposes to amend
Section (3)(b) of the Fee Schedule to
remove the Trading Permit fee credit
that is denoted in footnote ‘‘*’’ below
the Trading Permit fee table. During
periods when the Trading Permit fee
credit was in effect, the Trading Permit
fee credit was applicable to Members
that connected via both the MEO and
FIX Interfaces. Members who connected
via both the MEO and FIX Interfaces
were assessed the rates for both types of
Trading Permits, but these Members
received a $100 monthly credit towards
15 ‘‘Excluded Contracts’’ means any contracts
routed to an away market for execution. See the
Definitions Section of the Fee Schedule.
16 ‘‘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 the Definitions
Section of the Fee Schedule.
17 See, generally, Fee Schedule, Section (1)(a).
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the Trading Permit fees applicable to the
MEO Interface. The Exchange proposes
to remove the Trading Permit fee credit
and delete footnote ‘‘*’’ from Section
(3)(b) of the Fee Schedule.
The Exchange established the Trading
Permit fee credit when it first launched
operations to attract order flow and
increase membership by lowering the
costs for Members that connect via the
MEO Interface and FIX Interface. The
Exchange believes the Trading Permit
fee credit has achieved its purpose and
the Exchange believes that it is
appropriate to remove this credit in
light of the current operating conditions
and membership population on the
Exchange.
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Implementation and Procedural History
The proposed rule change will be
immediately effective. The Exchange
initially filed this proposal to remove
the two monthly credits associated with
Trading Permit and non-transaction fees
on July 1, 2021, with the proposed fees
being immediately effective.18 In that
proposal, the Exchange also proposed to
increase its Trading Permit fees.
Between August 2021 and August 2022,
the Exchange withdrew and refiled the
proposed rule change, each time to
meaningfully attempt to provide
additional justification for the proposed
fee changes, provide enhanced details
regarding the Exchange’s cost
methodology or to supplement its
competition based arguments.19 The
Commission received three comment
letters from one commenter on the
various filings.20 The Exchange
withdrew its latest proposal and
submits this proposal to only remove
the two monthly credits associated with
Trading Permit and non-transaction
fees. The Exchange does not propose to
amend its Trading Permit fees in this
filing.
The proposed changes will be
effective beginning September 1, 2022.
18 See Securities Exchange Act Release No. 92366
(July 9, 2021), 86 FR 37379 (SR–PEARL–2021–32).
19 See Securities Exchange Act Release Nos.
92797 (August 27, 2021), 86 FR 49399 (September
2, 2021) (SR–PEARL–2021–32) (‘‘Suspension Order
1’’); 93555 (November 10, 2021), 86 FR 64254
(November 17, 2021) (SR–PEARL–2021–54); 93895
(January 4, 2022), 87 FR 1217 (January 10, 2022)
(SR–PEARL–2021–59); 94287 (February 18, 2022),
87 FR 10837 (February 25, 2022) (SR–PEARL–2022–
05) (‘‘Suspension Order 2’’); 94696 (April 12, 2022),
87 FR 22987 (April 18, 2022) (SR–PEARL–2022–
09); 94993 (May 26, 2022), 87 FR 33518 (June 2,
2022) (SR–PEARL–2022–23); SR–PEARL–2022–28;
and Securities Exchange Act Release No. 95419
(August 4, 2022), 87 FR 48702 (August 10, 2022
(SR–PEARL–2022–30).
20 See Letters from Richard J. McDonald,
Susquehanna International Group, LLC (‘‘SIG’’), to
Vanessa Countryman, Secretary, Commission, dated
September 28, 2021, March 15, 2022, and May 9,
2022.
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2. Statutory Basis
The Exchange believes that its
proposal to amend the Fee Schedule is
consistent with Section 6(b) of the Act 21
in general, and furthers the objectives of
Section 6(b)(4) of the Act 22 in
particular, in that it is an equitable
allocation of reasonable dues, fees and
other charges among its members and
issuers and other persons using its
facilities.
The proposed changes to the Fee
Schedule are reasonable in several
respects. As a threshold matter, the
Exchange is subject to significant
competitive forces in the market for
order flow, which constrains its pricing
determinations. The fact that the market
for order flow is competitive has long
been recognized by the courts. In
NetCoalition v. Securities and Exchange
Commission, the D.C. Circuit stated,
‘‘[n]o one disputes that competition for
order flow is ‘fierce.’ . . . As the SEC
explained, ‘[i]n the U.S. national market
system, buyers and sellers of securities,
and the broker-dealers that act as their
order-routing agents, have a wide range
of choices of where to route orders for
execution’; [and] ‘no exchange can
afford to take its market share
percentages for granted’ because ‘no
exchange possesses a monopoly,
regulatory or otherwise, in the execution
of order flow from broker
dealers’. . . .’’ 23
The Commission and the courts have
repeatedly expressed their preference
for competition over regulatory
intervention to determine prices,
products, and services in the securities
markets. In Regulation NMS, while
adopting a series of steps to improve the
current market model, the Commission
highlighted the importance of market
forces in determining prices and SRO
revenues, and also recognized that
current regulation of the market system
‘‘has been remarkably successful in
promoting market competition in its
broader forms that are most important to
investors and listed companies.’’ 24
The Exchange believes its proposal to
remove the Monthly Volume Credit is
reasonable, equitable and not unfairly
discriminatory because all market
participants will no longer be offered
the ability to achieve the extra credits
associated with the Monthly Volume
Credit for submitting Priority Customer
21 15
U.S.C. 78f(b).
U.S.C. 78f(b)(4) and (5).
23 See NetCoalition, 615 F.3d at 539 (D.C. Cir.
2010) (quoting Securities Exchange Act Release No.
59039 (December 2, 2008), 73 FR 74770, 74782–83
(December 9, 2008) (SR–NYSEArca–2006–21)).
24 See Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37496, 37499 (June 29, 2005)
(‘‘Regulation NMS Adopting Release’’).
22 15
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volume to the Exchange and access to
the Exchange is offered on terms that are
not unfairly discriminatory. The
Exchange believes it is equitable and not
unfairly discriminatory to remove the
Monthly Volume Credit from the Fee
Schedule for business and competitive
reasons. The Exchange established the
Monthly Volume Credit when it first
launched operations to encourage
Members to increase their order flow by
providing a credit to those that
exceeded a volume threshold. The
Exchange believes that the Exchange’s
existing Priority Customer rebates and
fees will continue to allow the Exchange
to remain highly competitive and
continue to attract order flow and
maintain market share even without the
Monthly Volume Credit.25
The Exchange believes its proposal to
remove the Trading Permit fee credit for
Members that connect via both the MEO
Interface and FIX Interface 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. The Exchange believes
it is equitable and not unfairly
discriminatory to remove the Trading
Permit fee credit for business and
competitive reasons. The Exchange
established the Trading Permit fee credit
to lower the costs for Members that
connect via the MEO Interface and/or
FIX Interface as a means to attract order
flow and memberships after the
Exchange first launched operations. The
Exchange now believes that it is
appropriate to remove this credit in
light of the current operating conditions
and membership on the Exchange.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
In accordance with Section 6(b)(8) of
the Act,26 the Exchange believes that the
proposed rule change would not impose
any burden on intermarket or
intramarket competition that is not
necessary or appropriate in furtherance
of the purposes of the Act.
Intra-Market Competition
The Exchange believes the removal of
the Monthly Volume Credit and Trading
Permit fee credit will not place certain
market participants at a relative
disadvantage to other market
participants because, in order to attract
order flow when the Exchange first
launched operations, the Exchange
established these credits to lower the
25 See
26 15
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Fee Schedule, Section (1)(a).
U.S.C. 78f(8).
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initial fixed cost for Members. The
Exchange now believes that it is
appropriate to remove these credits in
light of the current operating conditions,
including the Exchange’s overall
membership and the current type and
amount of volume executed on the
Exchange. The Exchange believes that
the Exchange’s current rebates and fees
will still allow the Exchange to remain
highly competitive such that the
Exchange should continue to attract
order flow and maintain market share.
Inter-Market Competition
The Exchange operates in a highly
competitive market in which market
participants can readily favor one of the
15 competing options venues if they
deem fee levels at a particular venue to
be excessive. Based on publiclyavailable information, and excluding
index-based options, no single exchange
has more than approximately 16%
market share. Therefore, no exchange
possesses significant pricing power
regarding memberships or in the
execution of multiply-listed equity and
exchange-traded fund (‘‘ETF’’) options
order flow. Over the course of 2021 and
2022, the Exchange’s market share has
fluctuated between approximately 3–6%
of the U.S. equity options industry.27
The Exchange is not aware of any
evidence that a market share of
approximately 3–6% provides the
Exchange with anti-competitive pricing
power when it comes to competition for
memberships. The Exchange believes
that the ever-shifting market share
among exchanges from month to month
demonstrates that market participants
can discontinue memberships in
response to fee changes. In such an
environment, the Exchange must
continually adjust its fees to remain
competitive with other exchanges and to
attract and retain memberships on the
Exchange. Lastly, the proposed fee
change will not impact intermarket
competition because it will apply to all
Members equally.
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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
The foregoing rule change has become
effective pursuant to Section
19(b)(3)(A)(ii) of the Act,28 and Rule
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–2022–35 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–2022–35. 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
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 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–2022–35 and should be
submitted on or before October 11,
2022.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.30
J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022–20269 Filed 9–19–22; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[SEC File No. 270–780, OMB Control No.
3235–0733]
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Notice is hereby given that pursuant
to the Paperwork Reduction Act of 1995
(‘‘PRA’’) (44 U.S.C. 3501 et seq.), the
Securities and Exchange Commission
(‘‘Commission’’) has submitted to the
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Rule of Practice 194 provides a
process for security-based swap dealers
and major security-based swap
participants (collectively, ‘‘SBS Entity’’)
to make an application to the
Commission for an order permitting an
associated person who is subject to a
statutory disqualification to effect or be
involved in effecting security-based
swaps on behalf of the SBS Entity. Rule
of Practice 194 specifies the process for
obtaining relief from the statutory
prohibition in Exchange Act Section
15F(b)(6), including by setting forth the
required showing, the form of
application and the items to be
addressed with respect to associated
persons that are natural persons. An
SBS Entity is not required to file an
27 See
28 15
supra note 6.
U.S.C. 78s(b)(3)(A)(ii).
19b–4(f)(2) 29 thereunder. 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.
VerDate Sep<11>2014
17:48 Sep 19, 2022
29 17
Jkt 256001
PO 00000
CFR 240.19b–4(f)(2).
Frm 00096
Fmt 4703
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E:\FR\FM\20SEN1.SGM
CFR 200.30–3(a)(12).
20SEN1
]]>Agencies
[Federal Register Volume 87, Number 181 (Tuesday, September 20, 2022)]
[Notices]
[Pages 57544-57547]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-20269]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-95775; File No. SR-PEARL-2022-35]
Self-Regulatory Organizations; MIAX PEARL, LLC; Notice of Filing
and Immediate Effectiveness of a Proposed Rule Change To Amend the MIAX
PEARL Options Fee Schedule To Remove Certain Credits
September 14, 2022.
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 September 1, 2022, MIAX PEARL, LLC (``MIAX Pearl'' or ``Exchange'')
filed with the Securities and Exchange Commission (``Commission'') a
proposed rule change as described in Items I, II, and III, below, which
Items have been prepared by the Exchange. The Commission is publishing
this notice to solicit comments on the proposed rule change from
interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange is filing a proposal to amend the MIAX Pearl Options
Fee Schedule (the ``Fee Schedule'') to remove two monthly credits
associated with Trading Permit \3\ and non-transaction fees.
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\3\ The term ``Trading Permit'' means a permit issued by the
Exchange that confers the ability to transact on the Exchange. See
Exchange Rule 100.
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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.
[[Page 57545]]
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange commenced operations in February 2017 \4\ and adopted
its initial fee schedule that waived fees for Trading Permits to trade
on the Exchange.\5\ In 2018, as the Exchange's market share
increased,\6\ the Exchange adopted a nominal fee for Trading Permits
along with a tiered-volume based fee credit, known as the Trading
Permit Fee Credit, and a Monthly Volume Credit.\7\ The Exchange
established the Trading Permit Fee Credit to continue to attract order
flow and increase membership by lowering the costs for Members.\8\
---------------------------------------------------------------------------
\4\ See MIAX PEARL Successfully Launches Trading Operations,
dated February 6, 2017, available at https://www.miaxoptions.com/sites/default/files/alert-files/MIAX_Press_Release_02062017.pdf.
\5\ See Securities Exchange Act Release No. 80061 (February 17,
2017), 82 FR 11676 (February 24, 2017) (SR-PEARL-2017-10).
\6\ The Exchange experienced a monthly average trading volume of
3.94% for the month of March 2018. See Market at a Glance, available
at www.miaxoptions.com (last visited (August 29, 2022).
\7\ See Securities Exchange Act Release No. 82867 (March 13,
2018), 83 FR 12044 (March 19, 2018) (SR-PEARL-2018-07).
\8\ 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 Exchange Rule 100 and the
Definitions Section of the Fee Schedule.
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The Exchange believes that the Trading Permit Fee Credit and
Monthly Volume Credit have served their purpose of incentivizing market
participants to trade on the Exchange as the Exchange's market share
continues to grow and increase since the credits were established.\9\
Therefore, the Exchange now proposes to remove the two monthly credits
associated with Trading Permit and non-transaction fees from the Fee
Schedule.
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\9\ The Exchange experienced a monthly average trading volume of
4.75% for the month of August 2022 (as of August 29, 2022). See
Market at a Glance, supra note 6.
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Monthly Volume Credit
The Exchange proposes to amend the Definitions section of the Fee
Schedule to delete the definition and remove the credits applicable to
the Monthly Volume Credit for Members. The Exchange established the
Monthly Volume Credit in 2018 \10\ to encourage Members to send
increased Priority Customer \11\ order flow to the Exchange, which the
Exchange applied as a metric to the assessment of non-transaction fees
for that Member. During the period when the Monthly Volume Credit was
in effect (as further described below), the Exchange applied a
different Monthly Volume Credit depending on whether the Member
connected to the Exchange via the FIX Interface \12\ or MEO
Interface.\13\ During the period when the Monthly Volume Credit was in
effect, the Exchange assessed the Monthly Volume Credit to each Member
that had executed Priority Customer volume along with that of its
affiliates,\14\ not including Excluded Contracts,\15\ of at least 0.30%
of MIAX Pearl-listed Total Consolidated Volume (``TCV''),\16\ as set
forth in the following table:
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\10\ See supra note 7.
\11\ The term ``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 the Definitions Section of
the Fee Schedule and Exchange Rule 100, including Interpretation and
Policy .01.
\12\ The term ``FIX Interface'' means the Financial Information
Exchange interface for certain order types as set forth in Exchange
Rule 516. See the Definitions Section of the Fee Schedule and
Exchange Rule 100.
\13\ The term ``MEO Interface'' or ``MEO'' means a binary order
interface for certain order types as set forth in Rule 516 into the
MIAX Pearl System. See the Definitions Section of the Fee Schedule
and Exchange Rule 100.
\14\ ``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). An ``Appointed Market Maker'' is a MIAX Pearl Market
Maker (who does not otherwise have a corporate affiliation based
upon common ownership with an EEM) that has been appointed by an EEM
and an ``Appointed EEM'' is an EEM (who does not otherwise have a
corporate affiliation based upon common ownership with a MIAX Pearl
Market Maker) that has been appointed by a MIAX Pearl Market Maker,
pursuant to the following process. A MIAX Pearl Market Maker
appoints an EEM and an EEM appoints a MIAX Pearl Market Maker, for
the purposes of the Fee Schedule, by each completing and sending an
executed Volume Aggregation Request Form by email to
[email protected] no later than 2 business days prior to
the first business day of the month in which the designation is to
become effective. Transmittal of a validly completed and executed
form to the Exchange along with the Exchange's acknowledgement of
the effective designation to each of the Market Maker and EEM will
be viewed as acceptance of the appointment. The Exchange will only
recognize one designation per Member. A Member may make a
designation not more than once every 12 months (from the date of its
most recent designation), which designation shall remain in effect
unless or until the Exchange receives written notice submitted 2
business days prior to the first business day of the month from
either Member indicating that the appointment has been terminated.
Designations will become operative on the first business day of the
effective month and may not be terminated prior to the end of the
month. Execution data and reports will be provided to both parties.
See the Definitions Section of the Fee Schedule.
\15\ ``Excluded Contracts'' means any contracts routed to an
away market for execution. See the Definitions Section of the Fee
Schedule.
\16\ ``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 the Definitions Section of the Fee
Schedule.
------------------------------------------------------------------------
Monthly
Type of member connection volume
credit
------------------------------------------------------------------------
Member that connects via the FIX Interface.................... $250
Member that connects via the MEO Interface.................... 1,000
------------------------------------------------------------------------
If a Member connected via both the MEO Interface and FIX Interface
and qualified for the Monthly Volume Credit based upon its Priority
Customer volume, the greater Monthly Volume Credit would apply to such
Member. During the periods when the Monthly Volume Credit was in
effect, the Monthly Volume Credit was a single, once-per-month credit
towards the aggregate monthly total of non-transaction fees assessable
to a Member.
The Exchange proposes to amend the Definitions section of the Fee
Schedule to delete the definition and remove the Monthly Volume Credit.
The Exchange established the Monthly Volume Credit when it first
launched operations to encourage Members to increase their order flow
by providing a credit to those that exceeded a volume threshold. The
Exchange believes that the Exchange's existing Priority Customer
rebates and fees will continue to allow the Exchange to remain highly
competitive and continue to attract order flow and maintain market
share even without the Monthly Volume Credit.\17\
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\17\ See, generally, Fee Schedule, Section (1)(a).
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Trading Permit Fee Credit
The Exchange proposes to amend Section (3)(b) of the Fee Schedule
to remove the Trading Permit fee credit that is denoted in footnote
``*'' below the Trading Permit fee table. During periods when the
Trading Permit fee credit was in effect, the Trading Permit fee credit
was applicable to Members that connected via both the MEO and FIX
Interfaces. Members who connected via both the MEO and FIX Interfaces
were assessed the rates for both types of Trading Permits, but these
Members received a $100 monthly credit towards
[[Page 57546]]
the Trading Permit fees applicable to the MEO Interface. The Exchange
proposes to remove the Trading Permit fee credit and delete footnote
``*'' from Section (3)(b) of the Fee Schedule.
The Exchange established the Trading Permit fee credit when it
first launched operations to attract order flow and increase membership
by lowering the costs for Members that connect via the MEO Interface
and FIX Interface. The Exchange believes the Trading Permit fee credit
has achieved its purpose and the Exchange believes that it is
appropriate to remove this credit in light of the current operating
conditions and membership population on the Exchange.
Implementation and Procedural History
The proposed rule change will be immediately effective. The
Exchange initially filed this proposal to remove the two monthly
credits associated with Trading Permit and non-transaction fees on July
1, 2021, with the proposed fees being immediately effective.\18\ In
that proposal, the Exchange also proposed to increase its Trading
Permit fees. Between August 2021 and August 2022, the Exchange withdrew
and refiled the proposed rule change, each time to meaningfully attempt
to provide additional justification for the proposed fee changes,
provide enhanced details regarding the Exchange's cost methodology or
to supplement its competition based arguments.\19\ The Commission
received three comment letters from one commenter on the various
filings.\20\ The Exchange withdrew its latest proposal and submits this
proposal to only remove the two monthly credits associated with Trading
Permit and non-transaction fees. The Exchange does not propose to amend
its Trading Permit fees in this filing.
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\18\ See Securities Exchange Act Release No. 92366 (July 9,
2021), 86 FR 37379 (SR-PEARL-2021-32).
\19\ See Securities Exchange Act Release Nos. 92797 (August 27,
2021), 86 FR 49399 (September 2, 2021) (SR-PEARL-2021-32)
(``Suspension Order 1''); 93555 (November 10, 2021), 86 FR 64254
(November 17, 2021) (SR-PEARL-2021-54); 93895 (January 4, 2022), 87
FR 1217 (January 10, 2022) (SR-PEARL-2021-59); 94287 (February 18,
2022), 87 FR 10837 (February 25, 2022) (SR-PEARL-2022-05)
(``Suspension Order 2''); 94696 (April 12, 2022), 87 FR 22987 (April
18, 2022) (SR-PEARL-2022-09); 94993 (May 26, 2022), 87 FR 33518
(June 2, 2022) (SR-PEARL-2022-23); SR-PEARL-2022-28; and Securities
Exchange Act Release No. 95419 (August 4, 2022), 87 FR 48702 (August
10, 2022 (SR-PEARL-2022-30).
\20\ See Letters from Richard J. McDonald, Susquehanna
International Group, LLC (``SIG''), to Vanessa Countryman,
Secretary, Commission, dated September 28, 2021, March 15, 2022, and
May 9, 2022.
---------------------------------------------------------------------------
The proposed changes will be effective beginning September 1, 2022.
2. Statutory Basis
The Exchange believes that its proposal to amend the Fee Schedule
is consistent with Section 6(b) of the Act \21\ in general, and
furthers the objectives of Section 6(b)(4) of the Act \22\ in
particular, in that it is an equitable allocation of reasonable dues,
fees and other charges among its members and issuers and other persons
using its facilities.
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\21\ 15 U.S.C. 78f(b).
\22\ 15 U.S.C. 78f(b)(4) and (5).
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The proposed changes to the Fee Schedule are reasonable in several
respects. As a threshold matter, the Exchange is subject to significant
competitive forces in the market for order flow, which constrains its
pricing determinations. The fact that the market for order flow is
competitive has long been recognized by the courts. In NetCoalition v.
Securities and Exchange Commission, the D.C. Circuit stated, ``[n]o one
disputes that competition for order flow is `fierce.' . . . As the SEC
explained, `[i]n the U.S. national market system, buyers and sellers of
securities, and the broker-dealers that act as their order-routing
agents, have a wide range of choices of where to route orders for
execution'; [and] `no exchange can afford to take its market share
percentages for granted' because `no exchange possesses a monopoly,
regulatory or otherwise, in the execution of order flow from broker
dealers'. . . .'' \23\
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\23\ See NetCoalition, 615 F.3d at 539 (D.C. Cir. 2010) (quoting
Securities Exchange Act Release No. 59039 (December 2, 2008), 73 FR
74770, 74782-83 (December 9, 2008) (SR-NYSEArca-2006-21)).
---------------------------------------------------------------------------
The Commission and the courts have repeatedly expressed their
preference for competition over regulatory intervention to determine
prices, products, and services in the securities markets. In Regulation
NMS, while adopting a series of steps to improve the current market
model, the Commission highlighted the importance of market forces in
determining prices and SRO revenues, and also recognized that current
regulation of the market system ``has been remarkably successful in
promoting market competition in its broader forms that are most
important to investors and listed companies.'' \24\
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\24\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting
Release'').
---------------------------------------------------------------------------
The Exchange believes its proposal to remove the Monthly Volume
Credit is reasonable, equitable and not unfairly discriminatory because
all market participants will no longer be offered the ability to
achieve the extra credits associated with the Monthly Volume Credit for
submitting Priority Customer volume to the Exchange and access to the
Exchange is offered on terms that are not unfairly discriminatory. The
Exchange believes it is equitable and not unfairly discriminatory to
remove the Monthly Volume Credit from the Fee Schedule for business and
competitive reasons. The Exchange established the Monthly Volume Credit
when it first launched operations to encourage Members to increase
their order flow by providing a credit to those that exceeded a volume
threshold. The Exchange believes that the Exchange's existing Priority
Customer rebates and fees will continue to allow the Exchange to remain
highly competitive and continue to attract order flow and maintain
market share even without the Monthly Volume Credit.\25\
---------------------------------------------------------------------------
\25\ See Fee Schedule, Section (1)(a).
---------------------------------------------------------------------------
The Exchange believes its proposal to remove the Trading Permit fee
credit for Members that connect via both the MEO Interface and FIX
Interface 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. The Exchange believes it is
equitable and not unfairly discriminatory to remove the Trading Permit
fee credit for business and competitive reasons. The Exchange
established the Trading Permit fee credit to lower the costs for
Members that connect via the MEO Interface and/or FIX Interface as a
means to attract order flow and memberships after the Exchange first
launched operations. The Exchange now believes that it is appropriate
to remove this credit in light of the current operating conditions and
membership on the Exchange.
B. Self-Regulatory Organization's Statement on Burden on Competition
In accordance with Section 6(b)(8) of the Act,\26\ the Exchange
believes that the proposed rule change would not impose any burden on
intermarket or intramarket competition that is not necessary or
appropriate in furtherance of the purposes of the Act.
---------------------------------------------------------------------------
\26\ 15 U.S.C. 78f(8).
---------------------------------------------------------------------------
Intra-Market Competition
The Exchange believes the removal of the Monthly Volume Credit and
Trading Permit fee credit will not place certain market participants at
a relative disadvantage to other market participants because, in order
to attract order flow when the Exchange first launched operations, the
Exchange established these credits to lower the
[[Page 57547]]
initial fixed cost for Members. The Exchange now believes that it is
appropriate to remove these credits in light of the current operating
conditions, including the Exchange's overall membership and the current
type and amount of volume executed on the Exchange. The Exchange
believes that the Exchange's current rebates and fees will still allow
the Exchange to remain highly competitive such that the Exchange should
continue to attract order flow and maintain market share.
Inter-Market Competition
The Exchange operates in a highly competitive market in which
market participants can readily favor one of the 15 competing options
venues if they deem fee levels at a particular venue to be excessive.
Based on publicly-available information, and excluding index-based
options, no single exchange has more than approximately 16% market
share. Therefore, no exchange possesses significant pricing power
regarding memberships or in the execution of multiply-listed equity and
exchange-traded fund (``ETF'') options order flow. Over the course of
2021 and 2022, the Exchange's market share has fluctuated between
approximately 3-6% of the U.S. equity options industry.\27\ The
Exchange is not aware of any evidence that a market share of
approximately 3-6% provides the Exchange with anti-competitive pricing
power when it comes to competition for memberships. The Exchange
believes that the ever-shifting market share among exchanges from month
to month demonstrates that market participants can discontinue
memberships in response to fee changes. In such an environment, the
Exchange must continually adjust its fees to remain competitive with
other exchanges and to attract and retain memberships on the Exchange.
Lastly, the proposed fee change will not impact intermarket competition
because it will apply to all Members equally.
---------------------------------------------------------------------------
\27\ See supra note 6.
---------------------------------------------------------------------------
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
The foregoing rule change has become effective pursuant to Section
19(b)(3)(A)(ii) of the Act,\28\ and Rule 19b-4(f)(2) \29\ thereunder.
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.
---------------------------------------------------------------------------
\28\ 15 U.S.C. 78s(b)(3)(A)(ii).
\29\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------
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-2022-35 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-2022-35. 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 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 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-2022-35 and should be submitted on
or before October 11, 2022.
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\30\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\30\
J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022-20269 Filed 9-19-22; 8:45 am]
BILLING CODE 8011-01-P
