Self-Regulatory Organizations; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change by MIAX PEARL, LLC To Amend the MIAX Pearl Options Fee Schedule, 63115-63119 [2022-22556]
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Federal Register / Vol. 87, No. 200 / Tuesday, October 18, 2022 / Notices
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–NASDAQ–2022–055. 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–NASDAQ–2022–055 and
should be submitted on or before
November 8, 2022.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.18
J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022–22555 Filed 10–17–22; 8:45 am]
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BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–96038; File No. SR–
CboeBZX–2022–045]
Self-Regulatory Organizations; Cboe
BZX Exchange, Inc.; Notice of
Designation of a Longer Period for
Commission Action on a Proposed
Rule Change To Amend the Opening
Auction Process Provided Under Rule
11.23(b)(2)(B)
October 12, 2022.
On August 15, 2022, Cboe BZX
Exchange, Inc. (‘‘BZX’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’), pursuant to Section
19(b)(1) of the Securities Exchange Act
of 1934 (‘‘Act’’) 1 and Rule 19b–4
thereunder,2 a proposed rule change to
amend the Opening Auction process
provided under Rule 11.23(b)(2)(B). The
proposed rule change was published for
comment in the Federal Register on
August 31, 2022.3 The Commission has
received no comments on the proposed
rule change.
Section 19(b)(2) of the Act 4 provides
that within 45 days of the publication of
notice of the filing of a proposed rule
change, or within such longer period up
to 90 days (i) as the Commission may
designate if it finds such longer period
to be appropriate and publishes its
reasons for so finding or (ii) as to which
the self-regulatory organization
consents, the Commission shall either
approve the proposed rule change,
disapprove the proposed rule change, or
institute proceedings to determine
whether the proposed rule change
should be disapproved. The 45th day
after publication of the notice for this
proposed rule change is October 15,
2022. The Commission is extending this
45-day time period.
The Commission finds that it is
appropriate to designate a longer period
within which to take action on the
proposed rule change so that it has
sufficient time to consider the proposed
rule change and the issues raised
therein. Accordingly, pursuant to
Section 19(b)(2) of the Act,5 the
Commission designates November 29,
2022, as the date by which the
Commission shall either approve or
disapprove, or institute proceedings to
determine whether to disapprove, the
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 See Securities Exchange Act Release No. 95601
(Aug. 25, 2022), 87 FR 53514.
4 15 U.S.C. 78s(b)(2).
5 Id.
2 17
18 17
CFR 200.30–3(a)(12).
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63115
proposed rule change (File No. SR–
CboeBZX–2022–045).
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.6
J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022–22554 Filed 10–17–22; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–96044; File No. SR–
PEARL–2022–42]
Self-Regulatory Organizations; Notice
of Filing and Immediate Effectiveness
of a Proposed Rule Change by MIAX
PEARL, LLC To Amend the MIAX Pearl
Options Fee Schedule
October 12, 2022.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on
September 29, 2022, MIAX PEARL, LLC
(‘‘MIAX Pearl’’ or ‘‘Exchange’’) filed
with the Securities and Exchange
Commission (‘‘Commission’’) the
proposed rule change as described in
Items I, II and III below, which Items
have been prepared by the Exchange.
The Commission is publishing this
notice to solicit comments on the
proposed rule change from interested
persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange is filing a proposal to
amend the MIAX Pearl Options Fee
Schedule (the ‘‘Fee Schedule’’).
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
6 17
CFR 200.30–3(a)(31).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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Federal Register / Vol. 87, No. 200 / Tuesday, October 18, 2022 / Notices
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to amend the
Add/Remove Tiered Rebates/Fees set
forth in Section (1)(a) of the Fee
Schedule to: (1) modify the volume
threshold for the alternative volume
criteria for certain Maker (defined
below) rebates for Non-Priority
Customer, Firm, Broker-Dealer (‘‘BD’’),
and Non-MIAX Pearl Market Maker
origins (collectively, ‘‘Professional
Members’’); (2) lower the alternative
Maker rebate for Professional Members
in Penny Classes (defined below); and
(3) modify the volume threshold for the
alternative volume criteria for the lower
Taker (defined below) fee for
Professional Members’ Firm origin
when trading against origins other than
Priority Customer 3 in Penny Classes.
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Background
The Exchange currently assesses
transaction rebates and fees to all
market participants which are based
upon the total monthly volume
executed by the Member 4 on MIAX
Pearl in the relevant, respective origin
type (not including Excluded
Contracts) 5 (as the numerator)
expressed as a percentage of (divided
by) TCV 6 (as the denominator). In
3 ‘‘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.
4 ‘‘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 the
Definitions Section of the Fee Schedule and
Exchange Rule 100.
5 ‘‘Excluded Contracts’’ means any contracts
routed to an away market for execution. See the
Definitions Section of the Fee Schedule.
6 ‘‘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 time in which
the Exchange experiences an ‘‘Exchange System
Disruption’’ (solely in the option classes of the
affected Matching Engine (as defined below)). The
term Exchange System Disruption, which is defined
in the Definitions section of the Fee Schedule,
means an outage of a Matching Engine or collective
Matching Engines for a period of two consecutive
hours or more, during trading hours. The term
Matching Engine, which is also defined in the
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addition, the per contract transaction
rebates and fees are applied
retroactively to all eligible volume for
that origin type once the respective
threshold tier (‘‘Tier’’) has been reached
by the Member. The Exchange
aggregates the volume of Members and
their Affiliates.7 Members that place
resting liquidity, i.e., orders resting on
the book of the MIAX Pearl System,8 are
paid the specified ‘‘maker’’ rebate (each
a ‘‘Maker’’), and Members that execute
against resting liquidity are assessed the
Definitions section of the Fee Schedule, is a part of
the MIAX Pearl electronic system that processes
options orders and trades on a symbol-by-symbol
basis. Some Matching Engines will process option
classes with multiple root symbols, and other
Matching Engines may be dedicated to one single
option root symbol (for example, options on SPY
may be processed by one single Matching Engine
that is dedicated only to SPY). A particular root
symbol may only be assigned to a single designated
Matching Engine. A particular root symbol may not
be assigned to multiple Matching Engines. The
Exchange believes that it is reasonable and
appropriate to select two consecutive hours as the
amount of time necessary to constitute an Exchange
System Disruption, as two hours equates to
approximately 1.4% of available trading time per
month. The Exchange notes that the term
‘‘Exchange System Disruption’’ and its meaning
have no applicability outside of the Fee Schedule,
as it is used solely for purposes of calculating
volume for the threshold tiers in the Fee Schedule.
See the Definitions Section of the Fee Schedule.
7 ‘‘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.
8 The term ‘‘System’’ means the automated
trading system used by the Exchange for the trading
of securities. See Exchange Rule 100.
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specified ‘‘taker’’ fee (each a ‘‘Taker’’).
For opening transactions and ABBO 9
uncrossing transactions, per contract
transaction rebates and fees are waived
for all market participants. Finally,
Members are assessed lower transaction
fees and receive lower rebates for order
executions in standard option classes in
the Penny Interval Program 10 (‘‘Penny
Classes’’) than for order executions in
standard option classes that are not in
the Penny Interval Program (‘‘NonPenny Classes’’), where Members are
assessed higher transaction fees and
receive higher rebates.
Proposal To Modify the Volume
Threshold for the Alternative Volume
Criteria for Certain Maker Rebates for
Professional Members and Lower the
Alternative Rebate for Professional
Members in Penny Classes
The Exchange proposes to amend
footnote ‘‘∧’’ below the tables in the
Add/Remove Tiered Rebates/Fees
section set forth in Section (1)(a) of the
Fee Schedule to decrease the affiliated
Priority Customer threshold in order for
Members to qualify for alternative
Maker rebates for options transactions
in all classes for Professional Members,
provided that the Member meets certain
volume criteria. Currently, Professional
Members may qualify for Maker rebates
equal to the greater of: (A) ($0.40) for
Penny Classes and ($0.65) for NonPenny Classes, or (B) the amount set
forth in the applicable Tier reached by
the Member in the relevant origin, if the
Member and their Affiliates execute at
least 2.25% volume in the relevant
month, in Priority Customer origin type,
in all options classes, not including
Excluded Contracts, as compared to the
TCV in all MIAX Pearl listed option
classes.
The Exchange proposes to decrease
the affiliated Priority Customer
threshold percentage amount in footnote
‘‘∧’’ in order for Members to qualify for
the alternative Maker rebates for their
Professional Members. The threshold
will change from at least 2.25% to at
least 1.25% volume in the relevant
month, in Priority Customer origin type,
in all options classes, not including
Excluded Contracts, as compared to the
TCV in all MIAX Pearl listed option
classes. For purposes of qualifying for
such rates, the Exchange will continue
9 ‘‘ABBO’’ means the best bid(s) or offer(s)
disseminated by other Eligible Exchanges (defined
in Exchange Rule 1400(g)) and calculated by the
Exchange based on market information received by
the Exchange from OPRA. See the Definitions
Section of the Fee Schedule and Exchange Rule
100.
10 See Securities Exchange Act Release No. 88992
(June 2, 2020), 85 FR 35142 (June 8, 2020) (SR–
PEARL–2020–06).
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Federal Register / Vol. 87, No. 200 / Tuesday, October 18, 2022 / Notices
to aggregate the Priority Customer
volume transacted by Members and
their Affiliates. As the amount and type
of volume that is executed on the
Exchange has shifted since it first
established the alternative Maker
rebates for options transactions in all
classes for Professional Members,
provided that the Member meets certain
volume criteria, the Exchange has
determined to level-set this threshold
amount so that it is more reflective of
the current operating conditions and the
current type and amount of volume
executed on the Exchange.11 This
change is also for business and
competitive reasons in order to attract
additional Priority Customer volume
from Professional Members by
decreasing the alternative volume
threshold in order for Professional
Members to achieve the alternative
Maker rebates denoted by footnote ‘‘∧’’,
which should benefit all Exchange
participants by providing more trading
opportunities and tighter spreads.
The Exchange also proposes to amend
footnote ‘‘∧’’ to decrease the alternative
Maker rebate for Professional Members
in Penny Classes. As described above,
footnote ‘‘∧’’ provides that Members may
achieve an alternative Maker rebate of
($0.40) in Penny Classes if a certain
volume threshold is achieved in the
Priority Customer origin type, in all
options classes, not including Excluded
Contracts, as compared to the TCV in all
MIAX Pearl listed option classes. The
Exchange now proposes to decrease this
Maker rebate from ($0.40) to ($0.37).
Accordingly, with both of the proposed
changes to footnote ‘‘∧,’’ Members may
qualify for Maker rebates equal to the
greater of: (A) ($0.37) for Penny Classes
and ($0.65) for Non-Penny Classes, or
(B) the amount set forth in the
applicable Tier reached by the Member
in the relevant origin, if the Member and
their Affiliates execute at least 1.25%
volume in the relevant month, in
Priority Customer origin type, in all
options classes, not including Excluded
Contracts, as compared to the TCV in all
MIAX Pearl listed option classes.
The purpose of adjusting the specified
Maker rebate is for business and
competitive reasons. In order to attract
order flow, the Exchange initially set its
Maker rebates so that they were higher
than other options exchanges that
operate comparable maker/taker pricing
11 See Securities Exchange Act Release Nos.
91605 (April 16, 2021), 86 FR 21405 (April 22,
2021) (SR–PEARL–2021–16); 83419 (June 12, 2018),
83 FR 28285 (June 18, 2018) (SR–PEARL–2018–13);
85608 (April 11, 2019), 84 FR 16073 (April 17,
2019) (SR–PEARL–2019–13).
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models.12 The Exchange believes that it
is appropriate to adjust this specified
Maker rebate so that it is more in line
with other exchanges, but will remain
highly competitive such that it should
enable the Exchange to continue to
attract order flow and maintain market
share.13
Proposal To Modify the Volume
Threshold for the Alternative Volume
Criteria for the Lower Taker Fee for
Professional Members’ Firm Origin
When Trading Against Origins Other
Than Priority Customer in Penny
Classes
The Exchange proposes to amend
footnote ‘‘◊’’ below the tables in the
Add/Remove Tiered Rebates/Fees
section set forth in Section (1)(a) of the
Fee Schedule to decrease the affiliated
Priority Customer threshold in which
Members may qualify for alternative
lower Taker fee for options transactions
in Penny Classes for Professional
Members’ Firm origin, provided that the
Member meets certain volume criteria.
Currently, Professional Members may
qualify for the alternative lower Taker
fee for their Firm origin of $0.48 in
Penny Classes when trading against
origins other than Priority Customer if
the Member and their Affiliates execute
at least 2.25% of TCV in the relevant
month in the Priority Customer origin
type, in all options classes, not
including Excluded Contracts, as
compared to TCV in all MIAX Pearl
listed option classes.
The Exchange proposes to decrease
the affiliated Priority Customer
threshold percentage amount in footnote
‘‘◊’’ in order for Members’ Firm origin
to qualify for the alternative lower Taker
fee. The threshold will change from at
least 2.25% to at least 1.25% of TCV in
the relevant month, in Priority Customer
origin type, in all options classes, not
including Excluded Contracts, as
compared to the TCV in all MIAX Pearl
listed option classes. As the amount and
type of volume that is executed on the
Exchange has shifted since it first
12 See Securities Exchange Act Release Nos.
80061 (February 17, 2017), 82 FR 11676 (February
24, 2017) (SR–PEARL–2017–10) (establishing the
Exchange’s fee schedule with Market Maker and
Professional Member Maker Penny Class rebates
ranging from ($0.25) in Tier 1 to ($0.48) in Tier 4,
the highest Tier at that time).
13 See, generally, The Nasdaq Stock Market,
Options 7 Pricing Schedule, Section 2 (Professional
Member rebates ranging from $0.20 in Tier 1 to
$0.48 in Tier 6); Cboe BZX Options Fee Schedule,
Standard Rates (Professional rebates for Penny Class
securities ranging from $0.25 to $0.48 for adding
liquidity; and Firm, Broker-Dealer, Joint Back Office
rebates for Penny Class securities ranging from
$0.25 to $0.46 for adding liquidity).
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63117
established the alternative Taker fee,14
the Exchange has determined to levelset this threshold amount so that it is
more reflective of the current operating
conditions and the current type and
amount of volume executed on the
Exchange. The purpose of this change is
also for business and competitive
reasons in order to attract additional
Priority Customer volume by decreasing
the alternative volume threshold in
order for Professional Members to
achieve the lower Taker fee for their
Firm origin orders, which should
benefit all Exchange participants by
providing more trading opportunities
and tighter spreads.
Implementation
The proposed changes are effective
beginning October 1, 2022.
2. Statutory Basis
The Exchange believes that its
proposal to amend its Fee Schedule is
consistent with Section 6(b) of the Act 15
in general, and furthers the objectives of
Section 6(b)(4) of the Act,16 in that it is
an equitable allocation of reasonable
dues, fees and other charges among
Exchange members and issuers and
other persons using its facilities, and
6(b)(5) of the Act,17 in that it is designed
to prevent fraudulent and manipulative
acts and practices, to promote just and
equitable principles of trade, to foster
cooperation and coordination with
persons engaged in facilitating
transactions in securities, to remove
impediments to and perfect the
mechanisms of a free and open market
and a national market system and, in
general, to protect investors and the
public interest.
The Commission has repeatedly
expressed its preference for competition
over regulatory intervention in
determining prices, products, and
services in the securities markets. In
Regulation NMS, 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
14 See Securities Exchange Act Release Nos.
85608 (April 11, 2019), 84 FR 16073 (April 17,
2019) (SR–PEARL–2019–13) (establishing lower
alternative Taker fee for Firm origin with volume
threshold of 2.00% of TCV); 85807 (May 8, 2019),
84 FR 21368 (May 14, 2019) (SR–PEARL–2019–15)
(removing one of the conditions that must be met
in order for Members to qualify for the alternative
lower Taker fee for Penny Classes for their Firm
origin).
15 15 U.S.C. 78f(b).
16 15 U.S.C. 78f(b)(4).
17 15 U.S.C. 78f(b)(1) and (b)(5).
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broader forms that are most important to
investors and listed companies.’’ 18
There are currently 16 registered
options exchanges competing for order
flow. Based on publicly-available
information, and excluding index-based
options, as of September 26, 2022, no
single exchange has more than
approximately 10–11% equity options
market share for the month of
September 2022.19 Therefore, no
exchange possesses significant pricing
power. More specifically, as of
September 26, 2022, the Exchange has a
market share of approximately 4.04% of
executed volume of multiply-listed
equity options for the month of
September 2022.20
The Exchange believes that the evershifting market share among the
exchanges from month to month
demonstrates that market participants
can discontinue or reduce use of certain
categories of products and services,
terminate an existing membership or
determine to not become a new member,
and/or shift order flow, in response to
transaction fee changes. For example, on
February 28, 2019, the Exchange filed
with the Commission a proposal to
increase Taker fees in certain Tiers for
options transactions in certain Penny
classes for Priority Customers and
decrease Maker rebates in certain Tiers
for options transactions in Penny classes
for Priority Customers (which fee was to
be effective March 1, 2019).21 The
Exchange experienced a decrease in
total market share for the month of
March 2019, after the proposal went
into effect. Accordingly, the Exchange
believes that its March 1, 2019, fee
change, to increase certain transaction
fees and decrease certain transaction
rebates, may have contributed to the
decrease in MIAX Pearl’s market share
and, as such, the Exchange believes
competitive forces constrain the
Exchange’s, and other options
exchanges, ability to set transaction fees
and market participants can shift order
flow based on fee changes instituted by
the exchanges.
The Exchange believes its proposal to
decrease the Priority Customer
threshold for alternative Maker rebates
for options transactions in all classes for
Professional Members, provided that the
Member meets certain volume criteria is
reasonable, equitable and not unfairly
18 See Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37496 (June 29, 2005).
19 See ‘‘The market at a glance,’’ (last visited
September 26, 2022), available at https://
www.miaxoptions.com/.
20 See id.
21 See Securities Exchange Act Release No. 85304
(March 13, 2019), 84 FR 10144 (March 19, 2019)
(SR–PEARL–2019–07).
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discriminatory because all similarly
situated market participants are subject
to the same tiered rebates and fees. The
Exchange believes that providing
alternative Maker rebates for options
transactions in all classes for
Professional Members (if the Member
meets certain volume criteria relating to
Priority Customer volume), and
adjusting the threshold requirement so
that it is reflective of current operating
conditions and the current type and
amount of volume executed on the
Exchange, will encourage Members to
execute additional Priority Customer
and Professional Member volume on the
Exchange. The Exchange believes that
additional Priority Customer and
Professional Member volume executed
on the Exchange will attract further
liquidity to the Exchange, which in turn
will benefit all market participants.
The Exchange believes its proposal to
decrease the alternative Maker rebate for
Professional Members in Penny Classes
is reasonable, equitable and not unfairly
discriminatory because all similarly
situated market participants are subject
to the same tiered rebates and fees. In
order to attract order flow, the Exchange
initially set its Maker rebates so that
they were higher than other options
exchanges that operate comparable
maker/taker pricing models.22 The
Exchange believes that it is reasonable
and equitable to adjust this specified
Maker rebate so that it is more in line
with other exchanges, but will remain
highly competitive such that it should
enable the Exchange to continue to
attract order flow and maintain market
share.23
The Exchange believes its proposal to
decrease the Priority Customer
threshold for the alternative lower Taker
fee for Professional Members’ Firm
origin, provided that the Member meets
certain volume criteria is reasonable,
equitable and not unfairly
discriminatory because all similarly
situated market participants are subject
to the same tiered rebates and fees. The
Exchange believes that providing the
lower alternative Taker fee for
Professional Members Firm origin (if the
22 See Securities Exchange Act Release Nos.
80061 (February 17, 2017), 82 FR 11676 (February
24, 2017) (SR–PEARL–2017–10) (establishing the
Exchange’s fee schedule with Market Maker and
Professional Member Maker Penny Class rebates
ranging from ($0.25) in Tier 1 to ($0.48) in Tier 4,
the highest Tier at that time).
23 See, generally, The Nasdaq Stock Market,
Options 7 Pricing Schedule, Section 2 (Professional
Member rebates ranging from $0.20 in Tier 1 to
$0.48 in Tier 6); Cboe BZX Options Fee Schedule,
Standard Rates (Professional rebates for Penny Class
securities ranging from $0.25 to $0.48 for adding
liquidity; and Firm, Broker-Dealer, Joint Back Office
rebates for Penny Class securities ranging from
$0.25 to $0.46 for adding liquidity).
PO 00000
Frm 00096
Fmt 4703
Sfmt 4703
Member meets certain volume criteria
relating to Priority Customer volume),
and adjusting the threshold requirement
so that it is reflective of current
operating conditions and the current
type and amount of volume executed on
the Exchange, will encourage Members
to execute additional Priority Customer
and Professional Member volume on the
Exchange. The Exchange believes that
additional Priority Customer and
Professional Member volume executed
on the Exchange will attract further
liquidity to the Exchange, which in turn
will benefit all market participants.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule changes will impose
any burden on competition not
necessary or appropriate in furtherance
of the purposes of the Act. The
Exchange believes that the proposed
change to lower the volume threshold
for the alternative volume criteria for
certain Maker rebates for Professional
Members should continue to encourage
the provision of liquidity that enhances
the quality of the Exchange’s market and
increase the number of trading
opportunities on the Exchange for all
participants who will be able to
compete for such opportunities.
Similarly, the Exchange believes that
the proposed change to lower the
volume threshold for the alternative
volume criteria for the lower Taker fee
for Professional Members’ Firm origin
should continue to encourage the
provision of liquidity that enhances the
quality of the Exchange’s market and
increase the number of trading
opportunities on the Exchange for all
participants who will be able to
compete for such opportunities. These
proposed changes should enable the
Exchange to continue to attract and
compete for Professional Member and
Priority Customer order flow with other
exchanges. However, this competition
does not create an undue burden on
competition but rather offers all market
participants the opportunity to receive
the benefit of competitive pricing.
The Exchange believes the proposed
Maker rebate adjustment is intended to
keep the Exchange’s rebates highly
competitive with those of other
exchanges, and to encourage liquidity
and should enable the Exchange to
continue to attract and compete for
order flow with other exchanges. The
Exchange notes 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. In such an environment, the
E:\FR\FM\18OCN1.SGM
18OCN1
Federal Register / Vol. 87, No. 200 / Tuesday, October 18, 2022 / Notices
Exchange must continually adjust its
rebates and fees to remain competitive
with other exchanges and to attract
order flow. The Exchange believes that
the proposed rule changes reflect this
competitive environment because the
proposal modifies the Exchange’s fees in
a manner that encourages market
participants to continue to provide
liquidity and to send order flow to the
Exchange.
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,24 and Rule
19b–4(f)(2) 25 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.
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:
khammond on DSKJM1Z7X2PROD with NOTICES
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–2022–42.
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–2022–42. 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–2022–42, and
should be submitted on or before
November 8, 2022.
‘‘Commission’’) the proposed rule
change as described in Items I, II, and
III, below, which Items have been
prepared by the Exchange. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.26
J. Matthew DeLesDernier,
Deputy Secretary.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
[FR Doc. 2022–22556 Filed 10–17–22; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–96046; File No. SR–MRX–
2022–20]
Self-Regulatory Organizations; Nasdaq
MRX, LLC; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Amend MRX’s Pricing
Schedule at Options 7, Section 6
October 12, 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 October
11, 2022, Nasdaq MRX, LLC (‘‘MRX’’ or
‘‘Exchange’’) filed with the Securities
and Exchange Commission (‘‘SEC’’ or
26 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
24 15
U.S.C. 78s(b)(3)(A)(ii).
25 17 CFR 240.19b–4(f)(2).
VerDate Sep<11>2014
19:52 Oct 17, 2022
1 15
Jkt 259001
63119
PO 00000
Frm 00097
Fmt 4703
Sfmt 4703
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend
MRX’s Pricing Schedule at Options 7,
section 6.
The text of the proposed rule change
is available on the Exchange’s website at
https://listingcenter.nasdaq.com/
rulebook/mrx/rules, at the principal
office of the Exchange, 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. Purpose
MRX proposes to amend its Pricing
Schedule at Options 7, section 6, Ports
and Other Services, to assess port fees,
which were not assessed until this year.
Prior to this year, MRX did not assess
its Members any port fees. MRX
launched its options market in 2016 3
And Members did not pay any port fees
until 2022.
The proposed changes are designed to
update fees for MRX’s services to reflect
their current value—rather than their
value when it was established six years
ago—based on MRX’s ability to deliver
3 The Exchange initially filed the proposed
pricing changes on May 2, 2022 (SR–MRX–2022–
04) instituting fees for membership, ports and
market data. On June 29, 2022, the Exchange
withdrew that filing, and submitted separate filings
for membership, ports and market data. SR–MRX–
2022–06 replaced the port fees set forth in SR–
MRX–2022–04. SR–MRX–2022–06 was withdrawn
on July 1, 2022 and replaced with SR–MRX–2022–
09. On August 25, 2022. SR–MRX–2022–09 which
was withdrawn and replaced with SR–MRX–2022–
12. The instant filing replaces SR–MRX–2022–12
which was withdrawn on October 11, 2022.
E:\FR\FM\18OCN1.SGM
18OCN1
]]>Agencies
[Federal Register Volume 87, Number 200 (Tuesday, October 18, 2022)]
[Notices]
[Pages 63115-63119]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-22556]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-96044; File No. SR-PEARL-2022-42]
Self-Regulatory Organizations; Notice of Filing and Immediate
Effectiveness of a Proposed Rule Change by MIAX PEARL, LLC To Amend the
MIAX Pearl Options Fee Schedule
October 12, 2022.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that on September 29, 2022, MIAX PEARL, LLC (``MIAX Pearl'' or
``Exchange'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I, II
and III below, which Items have been prepared by the Exchange. The
Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange is filing a proposal to amend the MIAX Pearl Options
Fee Schedule (the ``Fee Schedule'').
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
[[Page 63116]]
forth in sections A, B, and C below, of the most significant aspects of
such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend the Add/Remove Tiered Rebates/Fees
set forth in Section (1)(a) of the Fee Schedule to: (1) modify the
volume threshold for the alternative volume criteria for certain Maker
(defined below) rebates for Non-Priority Customer, Firm, Broker-Dealer
(``BD''), and Non-MIAX Pearl Market Maker origins (collectively,
``Professional Members''); (2) lower the alternative Maker rebate for
Professional Members in Penny Classes (defined below); and (3) modify
the volume threshold for the alternative volume criteria for the lower
Taker (defined below) fee for Professional Members' Firm origin when
trading against origins other than Priority Customer \3\ in Penny
Classes.
---------------------------------------------------------------------------
\3\ ``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.
---------------------------------------------------------------------------
Background
The Exchange currently assesses transaction rebates and fees to all
market participants which are based upon the total monthly volume
executed by the Member \4\ on MIAX Pearl in the relevant, respective
origin type (not including Excluded Contracts) \5\ (as the numerator)
expressed as a percentage of (divided by) TCV \6\ (as the denominator).
In addition, the per contract transaction rebates and fees are applied
retroactively to all eligible volume for that origin type once the
respective threshold tier (``Tier'') has been reached by the Member.
The Exchange aggregates the volume of Members and their Affiliates.\7\
Members that place resting liquidity, i.e., orders resting on the book
of the MIAX Pearl System,\8\ are paid the specified ``maker'' rebate
(each a ``Maker''), and Members that execute against resting liquidity
are assessed the specified ``taker'' fee (each a ``Taker''). For
opening transactions and ABBO \9\ uncrossing transactions, per contract
transaction rebates and fees are waived for all market participants.
Finally, Members are assessed lower transaction fees and receive lower
rebates for order executions in standard option classes in the Penny
Interval Program \10\ (``Penny Classes'') than for order executions in
standard option classes that are not in the Penny Interval Program
(``Non-Penny Classes''), where Members are assessed higher transaction
fees and receive higher rebates.
---------------------------------------------------------------------------
\4\ ``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 the Definitions Section of
the Fee Schedule and Exchange Rule 100.
\5\ ``Excluded Contracts'' means any contracts routed to an away
market for execution. See the Definitions Section of the Fee
Schedule.
\6\ ``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 time in which the Exchange experiences an
``Exchange System Disruption'' (solely in the option classes of the
affected Matching Engine (as defined below)). The term Exchange
System Disruption, which is defined in the Definitions section of
the Fee Schedule, means an outage of a Matching Engine or collective
Matching Engines for a period of two consecutive hours or more,
during trading hours. The term Matching Engine, which is also
defined in the Definitions section of the Fee Schedule, is a part of
the MIAX Pearl electronic system that processes options orders and
trades on a symbol-by-symbol basis. Some Matching Engines will
process option classes with multiple root symbols, and other
Matching Engines may be dedicated to one single option root symbol
(for example, options on SPY may be processed by one single Matching
Engine that is dedicated only to SPY). A particular root symbol may
only be assigned to a single designated Matching Engine. A
particular root symbol may not be assigned to multiple Matching
Engines. The Exchange believes that it is reasonable and appropriate
to select two consecutive hours as the amount of time necessary to
constitute an Exchange System Disruption, as two hours equates to
approximately 1.4% of available trading time per month. The Exchange
notes that the term ``Exchange System Disruption'' and its meaning
have no applicability outside of the Fee Schedule, as it is used
solely for purposes of calculating volume for the threshold tiers in
the Fee Schedule. See the Definitions Section of the Fee Schedule.
\7\ ``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.
\8\ The term ``System'' means the automated trading system used
by the Exchange for the trading of securities. See Exchange Rule
100.
\9\ ``ABBO'' means the best bid(s) or offer(s) disseminated by
other Eligible Exchanges (defined in Exchange Rule 1400(g)) and
calculated by the Exchange based on market information received by
the Exchange from OPRA. See the Definitions Section of the Fee
Schedule and Exchange Rule 100.
\10\ See Securities Exchange Act Release No. 88992 (June 2,
2020), 85 FR 35142 (June 8, 2020) (SR-PEARL-2020-06).
---------------------------------------------------------------------------
Proposal To Modify the Volume Threshold for the Alternative Volume
Criteria for Certain Maker Rebates for Professional Members and Lower
the Alternative Rebate for Professional Members in Penny Classes
The Exchange proposes to amend footnote ``[supcaret]'' below the
tables in the Add/Remove Tiered Rebates/Fees section set forth in
Section (1)(a) of the Fee Schedule to decrease the affiliated Priority
Customer threshold in order for Members to qualify for alternative
Maker rebates for options transactions in all classes for Professional
Members, provided that the Member meets certain volume criteria.
Currently, Professional Members may qualify for Maker rebates equal to
the greater of: (A) ($0.40) for Penny Classes and ($0.65) for Non-Penny
Classes, or (B) the amount set forth in the applicable Tier reached by
the Member in the relevant origin, if the Member and their Affiliates
execute at least 2.25% volume in the relevant month, in Priority
Customer origin type, in all options classes, not including Excluded
Contracts, as compared to the TCV in all MIAX Pearl listed option
classes.
The Exchange proposes to decrease the affiliated Priority Customer
threshold percentage amount in footnote ``[supcaret]'' in order for
Members to qualify for the alternative Maker rebates for their
Professional Members. The threshold will change from at least 2.25% to
at least 1.25% volume in the relevant month, in Priority Customer
origin type, in all options classes, not including Excluded Contracts,
as compared to the TCV in all MIAX Pearl listed option classes. For
purposes of qualifying for such rates, the Exchange will continue
[[Page 63117]]
to aggregate the Priority Customer volume transacted by Members and
their Affiliates. As the amount and type of volume that is executed on
the Exchange has shifted since it first established the alternative
Maker rebates for options transactions in all classes for Professional
Members, provided that the Member meets certain volume criteria, the
Exchange has determined to level-set this threshold amount so that it
is more reflective of the current operating conditions and the current
type and amount of volume executed on the Exchange.\11\ This change is
also for business and competitive reasons in order to attract
additional Priority Customer volume from Professional Members by
decreasing the alternative volume threshold in order for Professional
Members to achieve the alternative Maker rebates denoted by footnote
``[supcaret]'', which should benefit all Exchange participants by
providing more trading opportunities and tighter spreads.
---------------------------------------------------------------------------
\11\ See Securities Exchange Act Release Nos. 91605 (April 16,
2021), 86 FR 21405 (April 22, 2021) (SR-PEARL-2021-16); 83419 (June
12, 2018), 83 FR 28285 (June 18, 2018) (SR-PEARL-2018-13); 85608
(April 11, 2019), 84 FR 16073 (April 17, 2019) (SR-PEARL-2019-13).
---------------------------------------------------------------------------
The Exchange also proposes to amend footnote ``[supcaret]'' to
decrease the alternative Maker rebate for Professional Members in Penny
Classes. As described above, footnote ``[supcaret]'' provides that
Members may achieve an alternative Maker rebate of ($0.40) in Penny
Classes if a certain volume threshold is achieved in the Priority
Customer origin type, in all options classes, not including Excluded
Contracts, as compared to the TCV in all MIAX Pearl listed option
classes. The Exchange now proposes to decrease this Maker rebate from
($0.40) to ($0.37). Accordingly, with both of the proposed changes to
footnote ``[supcaret],'' Members may qualify for Maker rebates equal to
the greater of: (A) ($0.37) for Penny Classes and ($0.65) for Non-Penny
Classes, or (B) the amount set forth in the applicable Tier reached by
the Member in the relevant origin, if the Member and their Affiliates
execute at least 1.25% volume in the relevant month, in Priority
Customer origin type, in all options classes, not including Excluded
Contracts, as compared to the TCV in all MIAX Pearl listed option
classes.
The purpose of adjusting the specified Maker rebate is for business
and competitive reasons. In order to attract order flow, the Exchange
initially set its Maker rebates so that they were higher than other
options exchanges that operate comparable maker/taker pricing
models.\12\ The Exchange believes that it is appropriate to adjust this
specified Maker rebate so that it is more in line with other exchanges,
but will remain highly competitive such that it should enable the
Exchange to continue to attract order flow and maintain market
share.\13\
---------------------------------------------------------------------------
\12\ See Securities Exchange Act Release Nos. 80061 (February
17, 2017), 82 FR 11676 (February 24, 2017) (SR-PEARL-2017-10)
(establishing the Exchange's fee schedule with Market Maker and
Professional Member Maker Penny Class rebates ranging from ($0.25)
in Tier 1 to ($0.48) in Tier 4, the highest Tier at that time).
\13\ See, generally, The Nasdaq Stock Market, Options 7 Pricing
Schedule, Section 2 (Professional Member rebates ranging from $0.20
in Tier 1 to $0.48 in Tier 6); Cboe BZX Options Fee Schedule,
Standard Rates (Professional rebates for Penny Class securities
ranging from $0.25 to $0.48 for adding liquidity; and Firm, Broker-
Dealer, Joint Back Office rebates for Penny Class securities ranging
from $0.25 to $0.46 for adding liquidity).
---------------------------------------------------------------------------
Proposal To Modify the Volume Threshold for the Alternative Volume
Criteria for the Lower Taker Fee for Professional Members' Firm Origin
When Trading Against Origins Other Than Priority Customer in Penny
Classes
The Exchange proposes to amend footnote ``[diamso]'' below the
tables in the Add/Remove Tiered Rebates/Fees section set forth in
Section (1)(a) of the Fee Schedule to decrease the affiliated Priority
Customer threshold in which Members may qualify for alternative lower
Taker fee for options transactions in Penny Classes for Professional
Members' Firm origin, provided that the Member meets certain volume
criteria. Currently, Professional Members may qualify for the
alternative lower Taker fee for their Firm origin of $0.48 in Penny
Classes when trading against origins other than Priority Customer if
the Member and their Affiliates execute at least 2.25% of TCV in the
relevant month in the Priority Customer origin type, in all options
classes, not including Excluded Contracts, as compared to TCV in all
MIAX Pearl listed option classes.
The Exchange proposes to decrease the affiliated Priority Customer
threshold percentage amount in footnote ``[diamso]'' in order for
Members' Firm origin to qualify for the alternative lower Taker fee.
The threshold will change from at least 2.25% to at least 1.25% of TCV
in the relevant month, in Priority Customer origin type, in all options
classes, not including Excluded Contracts, as compared to the TCV in
all MIAX Pearl listed option classes. As the amount and type of volume
that is executed on the Exchange has shifted since it first established
the alternative Taker fee,\14\ the Exchange has determined to level-set
this threshold amount so that it is more reflective of the current
operating conditions and the current type and amount of volume executed
on the Exchange. The purpose of this change is also for business and
competitive reasons in order to attract additional Priority Customer
volume by decreasing the alternative volume threshold in order for
Professional Members to achieve the lower Taker fee for their Firm
origin orders, which should benefit all Exchange participants by
providing more trading opportunities and tighter spreads.
---------------------------------------------------------------------------
\14\ See Securities Exchange Act Release Nos. 85608 (April 11,
2019), 84 FR 16073 (April 17, 2019) (SR-PEARL-2019-13) (establishing
lower alternative Taker fee for Firm origin with volume threshold of
2.00% of TCV); 85807 (May 8, 2019), 84 FR 21368 (May 14, 2019) (SR-
PEARL-2019-15) (removing one of the conditions that must be met in
order for Members to qualify for the alternative lower Taker fee for
Penny Classes for their Firm origin).
---------------------------------------------------------------------------
Implementation
The proposed changes are effective beginning October 1, 2022.
2. Statutory Basis
The Exchange believes that its proposal to amend its Fee Schedule
is consistent with Section 6(b) of the Act \15\ in general, and
furthers the objectives of Section 6(b)(4) of the Act,\16\ in that it
is an equitable allocation of reasonable dues, fees and other charges
among Exchange members and issuers and other persons using its
facilities, and 6(b)(5) of the Act,\17\ in that it is designed to
prevent fraudulent and manipulative acts and practices, to promote just
and equitable principles of trade, to foster cooperation and
coordination with persons engaged in facilitating transactions in
securities, to remove impediments to and perfect the mechanisms of a
free and open market and a national market system and, in general, to
protect investors and the public interest.
---------------------------------------------------------------------------
\15\ 15 U.S.C. 78f(b).
\16\ 15 U.S.C. 78f(b)(4).
\17\ 15 U.S.C. 78f(b)(1) and (b)(5).
---------------------------------------------------------------------------
The Commission has repeatedly expressed its preference for
competition over regulatory intervention in determining prices,
products, and services in the securities markets. In Regulation NMS,
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
[[Page 63118]]
broader forms that are most important to investors and listed
companies.'' \18\
---------------------------------------------------------------------------
\18\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496 (June 29, 2005).
---------------------------------------------------------------------------
There are currently 16 registered options exchanges competing for
order flow. Based on publicly-available information, and excluding
index-based options, as of September 26, 2022, no single exchange has
more than approximately 10-11% equity options market share for the
month of September 2022.\19\ Therefore, no exchange possesses
significant pricing power. More specifically, as of September 26, 2022,
the Exchange has a market share of approximately 4.04% of executed
volume of multiply-listed equity options for the month of September
2022.\20\
---------------------------------------------------------------------------
\19\ See ``The market at a glance,'' (last visited September 26,
2022), available at https://www.miaxoptions.com/.
\20\ See id.
---------------------------------------------------------------------------
The Exchange believes that the ever-shifting market share among the
exchanges from month to month demonstrates that market participants can
discontinue or reduce use of certain categories of products and
services, terminate an existing membership or determine to not become a
new member, and/or shift order flow, in response to transaction fee
changes. For example, on February 28, 2019, the Exchange filed with the
Commission a proposal to increase Taker fees in certain Tiers for
options transactions in certain Penny classes for Priority Customers
and decrease Maker rebates in certain Tiers for options transactions in
Penny classes for Priority Customers (which fee was to be effective
March 1, 2019).\21\ The Exchange experienced a decrease in total market
share for the month of March 2019, after the proposal went into effect.
Accordingly, the Exchange believes that its March 1, 2019, fee change,
to increase certain transaction fees and decrease certain transaction
rebates, may have contributed to the decrease in MIAX Pearl's market
share and, as such, the Exchange believes competitive forces constrain
the Exchange's, and other options exchanges, ability to set transaction
fees and market participants can shift order flow based on fee changes
instituted by the exchanges.
---------------------------------------------------------------------------
\21\ See Securities Exchange Act Release No. 85304 (March 13,
2019), 84 FR 10144 (March 19, 2019) (SR-PEARL-2019-07).
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The Exchange believes its proposal to decrease the Priority
Customer threshold for alternative Maker rebates for options
transactions in all classes for Professional Members, provided that the
Member meets certain volume criteria is reasonable, equitable and not
unfairly discriminatory because all similarly situated market
participants are subject to the same tiered rebates and fees. The
Exchange believes that providing alternative Maker rebates for options
transactions in all classes for Professional Members (if the Member
meets certain volume criteria relating to Priority Customer volume),
and adjusting the threshold requirement so that it is reflective of
current operating conditions and the current type and amount of volume
executed on the Exchange, will encourage Members to execute additional
Priority Customer and Professional Member volume on the Exchange. The
Exchange believes that additional Priority Customer and Professional
Member volume executed on the Exchange will attract further liquidity
to the Exchange, which in turn will benefit all market participants.
The Exchange believes its proposal to decrease the alternative
Maker rebate for Professional Members in Penny Classes is reasonable,
equitable and not unfairly discriminatory because all similarly
situated market participants are subject to the same tiered rebates and
fees. In order to attract order flow, the Exchange initially set its
Maker rebates so that they were higher than other options exchanges
that operate comparable maker/taker pricing models.\22\ The Exchange
believes that it is reasonable and equitable to adjust this specified
Maker rebate so that it is more in line with other exchanges, but will
remain highly competitive such that it should enable the Exchange to
continue to attract order flow and maintain market share.\23\
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\22\ See Securities Exchange Act Release Nos. 80061 (February
17, 2017), 82 FR 11676 (February 24, 2017) (SR-PEARL-2017-10)
(establishing the Exchange's fee schedule with Market Maker and
Professional Member Maker Penny Class rebates ranging from ($0.25)
in Tier 1 to ($0.48) in Tier 4, the highest Tier at that time).
\23\ See, generally, The Nasdaq Stock Market, Options 7 Pricing
Schedule, Section 2 (Professional Member rebates ranging from $0.20
in Tier 1 to $0.48 in Tier 6); Cboe BZX Options Fee Schedule,
Standard Rates (Professional rebates for Penny Class securities
ranging from $0.25 to $0.48 for adding liquidity; and Firm, Broker-
Dealer, Joint Back Office rebates for Penny Class securities ranging
from $0.25 to $0.46 for adding liquidity).
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The Exchange believes its proposal to decrease the Priority
Customer threshold for the alternative lower Taker fee for Professional
Members' Firm origin, provided that the Member meets certain volume
criteria is reasonable, equitable and not unfairly discriminatory
because all similarly situated market participants are subject to the
same tiered rebates and fees. The Exchange believes that providing the
lower alternative Taker fee for Professional Members Firm origin (if
the Member meets certain volume criteria relating to Priority Customer
volume), and adjusting the threshold requirement so that it is
reflective of current operating conditions and the current type and
amount of volume executed on the Exchange, will encourage Members to
execute additional Priority Customer and Professional Member volume on
the Exchange. The Exchange believes that additional Priority Customer
and Professional Member volume executed on the Exchange will attract
further liquidity to the Exchange, which in turn will benefit all
market participants.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule changes will
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act. The Exchange believes that the
proposed change to lower the volume threshold for the alternative
volume criteria for certain Maker rebates for Professional Members
should continue to encourage the provision of liquidity that enhances
the quality of the Exchange's market and increase the number of trading
opportunities on the Exchange for all participants who will be able to
compete for such opportunities. Similarly, the Exchange believes that
the proposed change to lower the volume threshold for the alternative
volume criteria for the lower Taker fee for Professional Members' Firm
origin should continue to encourage the provision of liquidity that
enhances the quality of the Exchange's market and increase the number
of trading opportunities on the Exchange for all participants who will
be able to compete for such opportunities. These proposed changes
should enable the Exchange to continue to attract and compete for
Professional Member and Priority Customer order flow with other
exchanges. However, this competition does not create an undue burden on
competition but rather offers all market participants the opportunity
to receive the benefit of competitive pricing.
The Exchange believes the proposed Maker rebate adjustment is
intended to keep the Exchange's rebates highly competitive with those
of other exchanges, and to encourage liquidity and should enable the
Exchange to continue to attract and compete for order flow with other
exchanges. The Exchange notes 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. In such
an environment, the
[[Page 63119]]
Exchange must continually adjust its rebates and fees to remain
competitive with other exchanges and to attract order flow. The
Exchange believes that the proposed rule changes reflect this
competitive environment because the proposal modifies the Exchange's
fees in a manner that encourages market participants to continue to
provide liquidity and to send order flow to the Exchange.
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,\24\ and Rule 19b-4(f)(2) \25\ 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.
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\24\ 15 U.S.C. 78s(b)(3)(A)(ii).
\25\ 17 CFR 240.19b-4(f)(2).
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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 [email protected]. Please include
File Number SR-PEARL-2022-42.
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-2022-42. 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-2022-42, and should be submitted
on or before November 8, 2022.
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\26\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\26\
J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022-22556 Filed 10-17-22; 8:45 am]
BILLING CODE 8011-01-P
