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 the Monthly Volume Credit, 68214-68217 [2022-24651]
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Federal Register / Vol. 87, No. 218 / Monday, November 14, 2022 / Notices
to determine whether the proposed rule
change 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:
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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–
NASDAQ–2022–060 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–NASDAQ–2022–060. 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–2022–060 and
should be submitted on or before
December 5, 2022.
15 17
CFR 200.30–3(a)(12).
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Jkt 259001
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.15
J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022–24649 Filed 11–10–22; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–96251; File No. SR–
PEARL–2022–35]
Self-Regulatory Organizations; MIAX
PEARL, LLC; Notice of Withdrawal of
Proposed Rule Change To Amend the
MIAX PEARL Options Fee Schedule To
Remove Certain Credits
November 7, 2022.
On September 1, 2022, MIAX PEARL,
LLC (‘‘MIAX Pearl’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’), pursuant to Section
19(b)(1) of the Securities Exchange Act
of 1934 1 and Rule 19b–4 thereunder,2 a
proposed rule change to remove certain
credits. The proposed rule change was
published for comment in the Federal
Register on September 20, 2022.3
On October 25, 2022, MIAX Pearl
withdrew the proposed rule change
(SR–PEARL–2022–35).
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.4
J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022–24652 Filed 11–10–22; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–96250; File No. SR–
PEARL–2022–46]
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 the Monthly Volume Credit
November 7, 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 November
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 See Securities Exchange Act Release No. 95775
(September 14, 2022), 87 FR 57544.
4 17 CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
2 17
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2, 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 the ‘‘Monthly Volume Credit’’
from 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
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 commenced operations
in February 2017 3 and adopted its
initial fee schedule.4 In 2018, as the
Exchange’s market share increased,5 the
Exchange adopted a Monthly Volume
Credit 6 to continue to attract order flow
3 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.
4 See Securities Exchange Act Release No. 80061
(February 17, 2017), 82 FR 11676 (February 24,
2017) (SR–PEARL–2017–10).
5 The Exchange experienced a monthly average
trading volume in equity options of 3.94% for the
month of March 2018. See Market at a Glance,
available at www.miaxoptions.com (last visited
November 2, 2022).
6 See Securities Exchange Act Release No. 82867
(March 13, 2018), 83 FR 12044 (March 19, 2018)
(SR–PEARL–2018–07).
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and increase membership by lowering
the costs for Members.7 The Exchange
believes that the Monthly Volume
Credit has served its 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.8 Therefore, the Exchange
now proposes to remove the Monthly
Volume Credit from the Fee Schedule.
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 9 to encourage
Members to send increased Priority
Customer 10 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 11 or
MEO Interface.12 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,13
7 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.
8 The Exchange experienced a monthly average
trading volume in equity options of 4.35% for the
month of October 2022. See Market at a Glance,
supra note 5 (last visited November 2, 2022).
9 See supra note 6.
10 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.
11 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.
12 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.
13 ‘‘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
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not including Excluded Contracts,14 of
at least 0.30% of MIAX Pearl-listed
Total Consolidated Volume (‘‘TCV’’),15
as set forth in the following table:
Type of member connection
Monthly
volume credit
Member that connects via
the FIX Interface .............
Member that connects via
the MEO Interface ...........
$250
1,000
68215
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.16
Implementation and Procedural History
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
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.
14 ‘‘Excluded Contracts’’ means any contracts
routed to an away market for execution. See the
Definitions Section of the Fee Schedule.
15 ‘‘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.
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The proposed rule change will be
immediately effective. The Exchange
initially filed this proposal to remove
the Monthly Volume Credit (and
monthly credits associated with Trading
Permits) on July 1, 2021, with the
proposed fees being immediately
effective.17 In that proposal, the
Exchange also proposed to increase its
Trading Permit fees. Between August
2021 and September 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.18 The
Commission received three comment
letters from one commenter on the
various filings.19 On October 25, 2022,
the Exchange withdrew its latest
proposal and submitted a revised
proposal to only remove the Monthly
Volume Credit (SR–PEARL–2022–44,
which was not noticed by the
Commission). On November 2, 2022, the
Exchange withdrew SR–PEARL–2022–
44 and now resubmits a revised
proposal to only remove the Monthly
Volume Credit.
16 See,
generally, Fee Schedule, Section 1)a).
Securities Exchange Act Release No. 92366
(July 9, 2021), 86 FR 37379 (SR–PEARL–2021–32).
18 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;
95419 (August 4, 2022), 87 FR 48702 (August 10,
2022 (SR–PEARL–2022–30); 95775 (September 15,
2022), 87 FR 57544 (September 20, 2022) (SR–
PEARL–2022–35).
19 See Letters from Richard J. McDonald,
Susquehanna International Group, LLC (‘‘SIG’’), to
Vanessa Countryman, Secretary, Commission, dated
September 28, 2021 and March 15, 2022, and Letter
from Brian Sopinsky, General Counsel, SIG, to
Vanessa Countryman, Secretary, Commission, dated
May 9, 2022.
17 See
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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 20
in general, and furthers the objectives of
Section 6(b)(4) of the Act 21 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’
. . . .’’ 22
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.’’ 23
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
20 15
U.S.C. 78f(b).
U.S.C. 78f(b)(4).
22 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)).
23 See Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37496, 37499 (June 29, 2005)
(‘‘Regulation NMS Adopting Release’’).
21 15
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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).24 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
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. The Exchange
believes it is reasonable and equitable 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 further believes its
proposal to remove the Monthly Volume
Credit is reasonable because the
Exchange originally adopted the
Monthly Volume Credit to attract order
flow to increase the Exchange’s market
share. The Exchange believes that the
Monthly Volume Credit has served its
purpose of incentivizing market
participants to trade on the Exchange as
the Exchange’s market share continues
to grow and increase since the credit
24 See Securities Exchange Act Release No. 85304
(March 13, 2019), 84 FR 10144 (March 19, 2019)
(SR–PEARL–2019–07).
25 See Fee Schedule, Section 1)a).
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was established.26 Therefore, the
Exchange believes it is reasonable to
remove the Monthly Volume Credit
from the Fee Schedule.
Lastly, the Exchange also believes the
proposal furthers the objectives of
Section 6(b)(5) of the Act in that it is not
designed to permit unfair
discrimination between customers,
issuers, brokers and dealers because the
Monthly Volume Credit will no longer
be available to any Member and all
Members would now be subject to the
same level of non-transaction fees
regardless of the amount of Priority
Customer volume they execute on the
Exchange.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
In accordance with Section 6(b)(8) of
the Act,27 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 will not
place certain market participants at a
relative disadvantage to other market
participants because, in order to attract
order flow, the Exchange established
this credit to lower the initial fixed cost
for Members. The Exchange now
believes that it is appropriate to remove
this credit 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.28 Lastly, the
proposed fee change will not impact
intra-market competition because it will
apply to all Members equally.
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%
26 The Exchange experienced a monthly average
trading volume in equity options of 4.35% for the
month of October 2022. See Market at a Glance,
supra note 5 (last visited November 2, 2022).
27 15 U.S.C. 78f(8).
28 See, generally, Fee Schedule, Section 1)a).
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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.29
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.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
The Exchange responded to comment
letters in a prior proposal.30
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,31 and Rule
19b–4(f)(2) 32 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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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:
supra note 5.
supra note 18.
31 15 U.S.C. 78s(b)(3)(A)(ii).
32 17 CFR 240.19b–4(f)(2).
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
PEARL–2022–46 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–2022–46. 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–2022–46 and
should be submitted on or before
December 5, 2022.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.33
J. Matthew DeLesDernier,
Deputy Secretary.
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–96249; File No. SR–
PEARL–2022–47]
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 a Monthly Credit Associated
With Trading Permit Fees
November 7, 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 November
2, 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 a monthly credit associated with
Trading Permit (defined below) 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.
BILLING CODE 8011–01–P
30 See
17:30 Nov 10, 2022
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
[FR Doc. 2022–24651 Filed 11–10–22; 8:45 am]
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]]>Agencies
[Federal Register Volume 87, Number 218 (Monday, November 14, 2022)]
[Notices]
[Pages 68214-68217]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-24651]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-96250; File No. SR-PEARL-2022-46]
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 the Monthly Volume Credit
November 7, 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 November 2, 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 the ``Monthly Volume
Credit'' from 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 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 commenced operations in February 2017 \3\ and adopted
its initial fee schedule.\4\ In 2018, as the Exchange's market share
increased,\5\ the Exchange adopted a Monthly Volume Credit \6\ to
continue to attract order flow
[[Page 68215]]
and increase membership by lowering the costs for Members.\7\ The
Exchange believes that the Monthly Volume Credit has served its 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.\8\ Therefore, the Exchange now proposes to
remove the Monthly Volume Credit from the Fee Schedule.
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\3\ 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.
\4\ See Securities Exchange Act Release No. 80061 (February 17,
2017), 82 FR 11676 (February 24, 2017) (SR-PEARL-2017-10).
\5\ The Exchange experienced a monthly average trading volume in
equity options of 3.94% for the month of March 2018. See Market at a
Glance, available at www.miaxoptions.com (last visited November 2,
2022).
\6\ See Securities Exchange Act Release No. 82867 (March 13,
2018), 83 FR 12044 (March 19, 2018) (SR-PEARL-2018-07).
\7\ 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.
\8\ The Exchange experienced a monthly average trading volume in
equity options of 4.35% for the month of October 2022. See Market at
a Glance, supra note 5 (last visited November 2, 2022).
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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 \9\ to encourage Members to send
increased Priority Customer \10\ 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 \11\ or MEO
Interface.\12\ 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,\13\ not including Excluded Contracts,\14\ of at least 0.30%
of MIAX Pearl-listed Total Consolidated Volume (``TCV''),\15\ as set
forth in the following table:
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\9\ See supra note 6.
\10\ 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.
\11\ 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.
\12\ 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.
\13\ ``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.
\14\ ``Excluded Contracts'' means any contracts routed to an
away market for execution. See the Definitions Section of the Fee
Schedule.
\15\ ``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 volume
Type of member connection credit
------------------------------------------------------------------------
Member that connects via the FIX Interface............. $250
Member that connects via the MEO Interface............. 1,000
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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.\16\
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\16\ See, generally, Fee Schedule, Section 1)a).
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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 Monthly Volume
Credit (and monthly credits associated with Trading Permits) on July 1,
2021, with the proposed fees being immediately effective.\17\ In that
proposal, the Exchange also proposed to increase its Trading Permit
fees. Between August 2021 and September 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.\18\ The Commission received
three comment letters from one commenter on the various filings.\19\ On
October 25, 2022, the Exchange withdrew its latest proposal and
submitted a revised proposal to only remove the Monthly Volume Credit
(SR-PEARL-2022-44, which was not noticed by the Commission). On
November 2, 2022, the Exchange withdrew SR-PEARL-2022-44 and now
resubmits a revised proposal to only remove the Monthly Volume Credit.
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\17\ See Securities Exchange Act Release No. 92366 (July 9,
2021), 86 FR 37379 (SR-PEARL-2021-32).
\18\ 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; 95419 (August
4, 2022), 87 FR 48702 (August 10, 2022 (SR-PEARL-2022-30); 95775
(September 15, 2022), 87 FR 57544 (September 20, 2022) (SR-PEARL-
2022-35).
\19\ See Letters from Richard J. McDonald, Susquehanna
International Group, LLC (``SIG''), to Vanessa Countryman,
Secretary, Commission, dated September 28, 2021 and March 15, 2022,
and Letter from Brian Sopinsky, General Counsel, SIG, to Vanessa
Countryman, Secretary, Commission, dated May 9, 2022.
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[[Page 68216]]
2. Statutory Basis
The Exchange believes that its proposal to amend the Fee Schedule
is consistent with Section 6(b) of the Act \20\ in general, and
furthers the objectives of Section 6(b)(4) of the Act \21\ 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' . . . .'' \22\
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\20\ 15 U.S.C. 78f(b).
\21\ 15 U.S.C. 78f(b)(4).
\22\ 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)).
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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.'' \23\
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\23\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting
Release'').
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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).\24\ 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.
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\24\ 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 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. The Exchange
believes it is reasonable and equitable 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\
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\25\ See Fee Schedule, Section 1)a).
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The Exchange further believes its proposal to remove the Monthly
Volume Credit is reasonable because the Exchange originally adopted the
Monthly Volume Credit to attract order flow to increase the Exchange's
market share. The Exchange believes that the Monthly Volume Credit has
served its purpose of incentivizing market participants to trade on the
Exchange as the Exchange's market share continues to grow and increase
since the credit was established.\26\ Therefore, the Exchange believes
it is reasonable to remove the Monthly Volume Credit from the Fee
Schedule.
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\26\ The Exchange experienced a monthly average trading volume
in equity options of 4.35% for the month of October 2022. See Market
at a Glance, supra note 5 (last visited November 2, 2022).
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Lastly, the Exchange also believes the proposal furthers the
objectives of Section 6(b)(5) of the Act in that it is not designed to
permit unfair discrimination between customers, issuers, brokers and
dealers because the Monthly Volume Credit will no longer be available
to any Member and all Members would now be subject to the same level of
non-transaction fees regardless of the amount of Priority Customer
volume they execute on the Exchange.
B. Self-Regulatory Organization's Statement on Burden on Competition
In accordance with Section 6(b)(8) of the Act,\27\ 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.
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\27\ 15 U.S.C. 78f(8).
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Intra-Market Competition
The Exchange believes the removal of the Monthly Volume Credit will
not place certain market participants at a relative disadvantage to
other market participants because, in order to attract order flow, the
Exchange established this credit to lower the initial fixed cost for
Members. The Exchange now believes that it is appropriate to remove
this credit 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.\28\ Lastly, the proposed fee change
will not impact intra-market competition because it will apply to all
Members equally.
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\28\ See, generally, Fee Schedule, Section 1)a).
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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%
[[Page 68217]]
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.\29\ 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.
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\29\ See supra note 5.
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C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
The Exchange responded to comment letters in a prior proposal.\30\
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\30\ See supra note 18.
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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,\31\ and Rule 19b-4(f)(2) \32\ 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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\31\ 15 U.S.C. 78s(b)(3)(A)(ii).
\32\ 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-2022-46 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-2022-46. 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-2022-46 and should be submitted on
or before December 5, 2022.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\33\
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\33\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022-24651 Filed 11-10-22; 8:45 am]
BILLING CODE 8011-01-P
