Self-Regulatory Organizations; MIAX PEARL, LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Remove Additional Separate Maker Rebates in Non-Penny Classes From the MIAX Pearl Options Fee Schedule, 41703-41706 [2023-13455]
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Federal Register / Vol. 88, No. 122 / Tuesday, June 27, 2023 / Notices
prices at or better than the NBBO at the
start of the auction.12
Finally, the Exchange notes that it
operates in a highly competitive market,
and members have numerous alternative
venues they may participate on and
direct their order flow, including other
options exchanges that have
implemented similar electronic price
improvement mechanisms with automatch pricing. Participants can readily
choose to send their orders to other
exchanges if they deem those other
venues to be more favorable.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
The Exchange neither solicited nor
received comments on the proposed
rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule
change does not:
A. significantly affect the protection
of investors or the public interest;
B. impose any significant burden on
competition; and
C. become operative for 30 days from
the date on which it was filed, or such
shorter time as the Commission may
designate, it has become effective
pursuant to Section 19(b)(3)(A) of the
Act 13 and Rule 19b–4(f)(6) 14
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 will institute proceedings
to determine whether the proposed rule
change should be approved or
disapproved.
ddrumheller on DSK120RN23PROD with NOTICES1
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
supra note 10.
U.S.C. 78s(b)(3)(A).
14 17 CFR 240.19b–4(f)(6).
• Send an email to rule-comments@
sec.gov. Please include file number SR–
CboeEDGX–2023–041 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–CboeEDGX–2023–041. This
file number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
internet website (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for website viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE,
Washington, DC 20549, on official
business days between the hours of 10
a.m. and 3 p.m. Copies of the filing also
will be available for inspection and
copying at the principal office of the
Exchange. Do not include personal
identifiable information in submissions;
you should submit only information
that you wish to make available
publicly. We may redact in part or
withhold entirely from publication
submitted material that is obscene or
subject to copyright protection. All
submissions should refer to file number
SR–CboeEDGX–2023–041 and should be
submitted on or before July 18, 2023.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.15
J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2023–13559 Filed 6–26–23; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–97769; File No. SR–
PEARL–2023–26]
Self-Regulatory Organizations; MIAX
PEARL, LLC; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change To Remove Additional
Separate Maker Rebates in Non-Penny
Classes From the MIAX Pearl Options
Fee Schedule
June 20, 2023.
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 June 9,
2023, 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’’).
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 proposes to remove the
additional separate rebates from Section
12 See
13 15
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15 17
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2 17
E:\FR\FM\27JNN1.SGM
U.S.C. 78s(b)(1).
CFR 240.19b–4.
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Federal Register / Vol. 88, No. 122 / Tuesday, June 27, 2023 / Notices
1)a) of the Fee Schedule denoted by
footnotes ‘‘■’’ and ‘‘b.’’ The Exchange
originally filed this proposal on May 31,
2023, (SR–PEARL–2023–24). On June 9,
2023, the Exchange withdrew SR–
PEARL–2023–24 and resubmitted this
proposal.
ddrumheller on DSK120RN23PROD with NOTICES1
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 3 on MIAX
Pearl in the relevant, respective origin
type (not including Excluded
Contracts) 4 (as the numerator)
expressed as a percentage of (divided
by) TCV 5 (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.6 Members that place
3 ‘‘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.
4 ‘‘Excluded Contracts’’ means any contracts
routed to an away market for execution. See the
Definitions Section of the Fee Schedule.
5 ‘‘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.
6 ‘‘Affiliate’’ means (i) an affiliate of a Member of
at least 75% common ownership between the firms
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resting liquidity, i.e., orders resting on
the book of the MIAX Pearl System,7 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 8
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 9 (‘‘Penny
Classes’’) than for order executions in
standard option classes which are not in
the Penny Interval Program (‘‘NonPenny Classes’’), where Members are
assessed higher transaction fees and
receive higher rebates.
Proposal
Currently, the Exchange provides a
per contract Maker rebate in Non-Penny
classes for MIAX Pearl Market Maker
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.
7 The term ‘‘System’’ means the automated
trading system used by the Exchange for the trading
of securities. See Exchange Rule 100.
8 ‘‘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.
9 See Securities Exchange Act Release No. 88992
(June 2, 2020), 85 FR 35142 (June 8, 2020) (SR–
PEARL–2020–06).
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origins in Tier 1 and Tier 2 of ($0.30);
($0.60) in Tier 3; ($0.65) in Tier 4;
($0.70) in Tier 5; and ($0.85) in Tier 6)
as shown in the Fee Schedule section
for the origin type, ‘‘All MIAX Pearl
Market Makers.’’ Under footnote ‘‘■’’ of
section 1)a) of the Fee schedule Market
Makers may qualify for additional
separate rebates for transactions in NonPenny classes in Tiers 1 through 4 if the
Market Maker increases their NonPenny Class Maker TCV by 100% or
more as compared to that Market
Maker’s TCV for the month of July 2022,
which is the Market Maker’s baseline
Non-Penny Class Maker TCV. Marker
Makers that qualify will receive the
following additional rebates (in addition
to the relevant rebates described in the
Fee Schedule): ($0.40) in Tier 1; ($0.40)
in Tier 2; ($0.10) in Tier 3; and ($0.05)
in Tier 4. Market Makers with no
volume in the Non-Penny Class Maker
segment for the month of July 2022 will
have any new volume considered as
added volume.
Additionally, the Exchange provides a
per contract Maker rebate in Non-Penny
classes for Non-Priority Customer, Firm,
BD, and Non-MIAX Pearl Market Maker
origins in Tier 1 and Tier 2 of ($0.30);
($0.60) in Tier 3; ($0.65) in Tier 4;
($0.70) in Tier 5; ($0.85) in Tier 6 as
shown in the Fee Schedule for the
following origin types, ‘‘Non-Priority
Customer, Firm, BD, and Non-MIAX
Pearl Market Makers.’’ Under footnote
‘‘b’’ of section 1)a) of the Fee schedule
EEMs may qualify for additional
separate rebates for transactions in NonPenny classes in Tiers 1 through 4 if the
EEM Professional Origins, which
include Non-Priority Customer, Firm,
BD, and Non-MIAX Pearl Market
Makers collectively, increases their
Non-Penny Class Maker TCV by 100%
or more as compared to that EEM’s TCV
for the month of July 2022, which is the
EEM’s Professional Origins baseline
Non-Penny Class Maker TCV. EEMs
Professional Origins who qualify will
receive the following additional rebates
(in addition to the relevant rebates
described in the Fee Schedule): ($0.40)
in Tier 1; ($0.40) in Tier 2; ($0.10) in
Tier 3; and ($0.05) in Tier 4. EEMs with
no Professional Origins volume in the
Non-Penny Class Maker segment for the
month of July 2022 will have any new
volume considered as added volume.
These rebates were adopted to attract
additional Non-Penny Class volume to
the Exchange.10
The Exchange has observed that the
incremental credit has not had the
10 See Securities Exchange Act Release No. 95886
(September 22, 2022), 87 FR 58843 (September 28,
2022) (SR–PEARL–2022–40).
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Federal Register / Vol. 88, No. 122 / Tuesday, June 27, 2023 / Notices
intended result in the last six months.
Since the incremental credit has not
incentivized MIAX Pearl Market Makers
and EEM Professional origins to
significantly increase their Non-Penny
Class volume on the Exchange, the
Exchange has determined to eliminate
the incremental credit and remove it
from the Exchange’s Fee Schedule.
The Exchange now proposes to
remove these additional separate rebates
from the Exchange’s Fee Schedule
denoted by the ‘‘■’’ and ‘‘b’’ footnotes.
Accordingly, the Exchange proposes to
remove the footnotes from the table in
Section 1)a) and also the explanatory
note below the table for each footnote.
Implementation
The proposed changes are
immediately effective.
ddrumheller on DSK120RN23PROD with NOTICES1
2. Statutory Basis
The Exchange believes that its
proposal to amend its Fee Schedule is
consistent with Section 6(b) of the Act 11
in general, and furthers the objectives of
Section 6(b)(4) of the Act,12 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,13 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
broader forms that are most important to
investors and listed companies.’’ 14
There are currently 16 registered
options exchanges competing for order
flow. Based on publicly-available
information, and excluding index-based
options, as of May 26, 2023, no single
11 15
U.S.C. 78f(b).
U.S.C. 78f(b)(4).
13 15 U.S.C. 78f(b)(1) and (b)(5).
14 See Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37496 (June 29, 2005).
12 15
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18:54 Jun 26, 2023
Jkt 259001
exchange had more than approximately
12–13% equity options market share for
the month of May 2023.15 Therefore, no
exchange possesses significant pricing
power. More specifically, as of May 26,
2023, the Exchange had a market share
of approximately 6.87% of executed
volume of multiply-listed equity options
for the month of May 2023.16
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).17 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
eliminate additional separate Maker
rebates for options transactions in NonPenny Classes in Tiers 1 through 4 for
MIAX Pearl Market Makers and EEM
Professional origins is reasonable
because the incentive that is the subject
of this proposal did not have the
intended results. The rebates were
intended to attract additional NonPenny Class volume to the Exchange.18
The Exchange notes that the
incremental credit has been
underutilized in the last six months and
has not incentivized Members to
increase Non-Penny Class volume on
15 See MIAX’s ‘‘The market at a glance/MTD
AVERAGE,’’ available at https://
www.miaxglobal.com/ (Data as of 5\1\2023–
5\25\2023).
16 See id.
17 See Securities Exchange Act Release No. 85304
(March 13, 2019), 84 FR 10144 (March 19, 2019)
(SR–PEARL–2019–07).
18 See supra note 10.
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41705
the Exchange as anticipated. The
Exchange also does not anticipate that
any Member will qualify for the pricing
incentive that is the subject of this
proposal in the near future. The
Exchange believes that it is reasonable
to eliminate incentives when such
incentives are underutilized. The
Exchange believes that eliminating
incentive programs from the Fee
Schedule when such incentives become
ineffective is equitable and not unfairly
discriminatory because the incentive
would be eliminated in its entirety and
would no longer be available to any
Member.
The Exchange notes that all Members
would continue to be subject to the
same fee structure, and access to the
Exchange’s market would continue to be
offered on fair and non-discriminatory
terms. The Exchange also believes that
the proposed change would protect
investors and the public interest
because the removal of an underutilized
pricing incentive would simplify the
Fee Schedule and facilitate market
participants’ understanding of the fees
charged and rebates offered by the
Exchange.
For the foregoing reasons, the
Exchange believes that the proposal is
consistent with the Act.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange believes that the
proposed change will not impose any
burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act.
Intra-Market Competition
The Exchange does not believe that
the proposal will impose any burden on
intra-market competition not necessary
or appropriate in furtherance of the
purposes of the Act. The Exchange
believes the elimination of the enhanced
rebates will not impose any burden on
intra-market competition as the
incentive has been underutilized in the
last six months. The Exchange believes
that it is reasonable to eliminate
incentives when such incentives are
underutilized. The Exchange believes
that eliminating incentive programs
from the Fee Schedule when such
incentives become ineffective is
equitable and not unfairly
discriminatory because the incentive
would be eliminated in its entirety and
would no longer be available to any
Member. Therefore the Exchange does
not believe that its proposal will impose
any burden on intra-market competition
that is not necessary or appropriate in
furtherance of the purposes of the Act.
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41706
Federal Register / Vol. 88, No. 122 / Tuesday, June 27, 2023 / Notices
Inter-Market Competition
The Exchange operates in a highly
competitive market in which market
participants can readily choose to send
their orders to other exchanges if they
deem fee levels and incentives at those
other exchanges to be more favorable.
As noted above, the Exchange’s market
share is currently 6.87%.19 In such an
environment, the Exchange must
continually adjust its fees and rebates to
remain competitive with other
exchanges. Because competitors are free
to modify their own fees and credits in
response, and because market
participants may readily adjust their
own order routing practices, the
Exchange does not believe its proposed
fee change can impose any burden on
inter-market competition.
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,20 and Rule
19b–4(f)(2) 21 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.
ddrumheller on DSK120RN23PROD with NOTICES1
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:
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–2023–26. This file
number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
internet website (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for website viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE,
Washington, DC 20549, on official
business days between the hours of 10
a.m. and 3 p.m. Copies of the filing also
will be available for inspection and
copying at the principal office of the
Exchange. Do not include personal
identifiable information in submissions;
you should submit only information
that you wish to make available
publicly. We may redact in part or
withhold entirely from publication
submitted material that is obscene or
subject to copyright protection. All
submissions should refer to file number
SR–PEARL–2023–26 and should be
submitted on or before July 18, 2023.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.22
J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2023–13455 Filed 6–26–23; 8:45 am]
BILLING CODE 8011–01–P
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–2023–26 on the subject line.
supra note 15.
U.S.C. 78s(b)(3)(A)(ii).
21 17 CFR 240.19b–4(f)(2).
22 17
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Self-Regulatory Organizations; Cboe
BZX Exchange, Inc.; Notice of
Withdrawal of a Proposed Rule Change
To Amend Its Fee Schedule
June 21, 2023.
On April 17, 2023, Cboe BZX
Exchange, Inc. (‘‘Exchange’’) 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 its fee schedule. The
proposed rule change was published for
comment in the Federal Register on
May 3, 2023.3 The Commission did not
receive any comment letters. On June 1,
2023, the Exchange withdrew the
proposed rule change (CboeBZX–2023–
026).
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.4
J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2023–13563 Filed 6–26–23; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–97771; File No. SR–MIAX–
2023–24]
Self-Regulatory Organizations; Miami
International Securities Exchange,
LLC; Notice of Filing and Immediate
Effectiveness of a Proposed Rule
Change To Amend Its Fee Schedule for
the Priority Customer Rebate Program
and the Professional Rebate Program
June 20, 2023.
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 June 9,
2023, Miami International Securities
Exchange, LLC (‘‘MIAX’’ 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
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 See Securities Exchange Act Release No. 97392
(April 27, 2023), 88 FR 27937.
4 17 CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
2 17
20 15
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[Release No. 34–97781; File No. SR–
CboeBZX–2023–026]
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19 See
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SECURITIES AND EXCHANGE
COMMISSION
PO 00000
CFR 200.30–3(a)(12).
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]]>Agencies
[Federal Register Volume 88, Number 122 (Tuesday, June 27, 2023)]
[Notices]
[Pages 41703-41706]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-13455]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-97769; File No. SR-PEARL-2023-26]
Self-Regulatory Organizations; MIAX PEARL, LLC; Notice of Filing
and Immediate Effectiveness of a Proposed Rule Change To Remove
Additional Separate Maker Rebates in Non-Penny Classes From the MIAX
Pearl Options Fee Schedule
June 20, 2023.
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 June 9, 2023, 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'').
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 proposes to remove the additional separate rebates
from Section
[[Page 41704]]
1)a) of the Fee Schedule denoted by footnotes ``[ssbox]'' and
``[ballot].'' The Exchange originally filed this proposal on May 31,
2023, (SR-PEARL-2023-24). On June 9, 2023, the Exchange withdrew SR-
PEARL-2023-24 and resubmitted this proposal.
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 \3\ on MIAX Pearl in the relevant, respective
origin type (not including Excluded Contracts) \4\ (as the numerator)
expressed as a percentage of (divided by) TCV \5\ (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.\6\
Members that place resting liquidity, i.e., orders resting on the book
of the MIAX Pearl System,\7\ 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 \8\ 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 \9\ (``Penny Classes'') than for order executions in
standard option classes which are not in the Penny Interval Program
(``Non-Penny Classes''), where Members are assessed higher transaction
fees and receive higher rebates.
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\3\ ``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.
\4\ ``Excluded Contracts'' means any contracts routed to an away
market for execution. See the Definitions Section of the Fee
Schedule.
\5\ ``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.
\6\ ``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.
\7\ The term ``System'' means the automated trading system used
by the Exchange for the trading of securities. See Exchange Rule
100.
\8\ ``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.
\9\ See Securities Exchange Act Release No. 88992 (June 2,
2020), 85 FR 35142 (June 8, 2020) (SR-PEARL-2020-06).
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Proposal
Currently, the Exchange provides a per contract Maker rebate in
Non-Penny classes for MIAX Pearl Market Maker origins in Tier 1 and
Tier 2 of ($0.30); ($0.60) in Tier 3; ($0.65) in Tier 4; ($0.70) in
Tier 5; and ($0.85) in Tier 6) as shown in the Fee Schedule section for
the origin type, ``All MIAX Pearl Market Makers.'' Under footnote
``[squf]'' of section 1)a) of the Fee schedule Market Makers may
qualify for additional separate rebates for transactions in Non-Penny
classes in Tiers 1 through 4 if the Market Maker increases their Non-
Penny Class Maker TCV by 100% or more as compared to that Market
Maker's TCV for the month of July 2022, which is the Market Maker's
baseline Non-Penny Class Maker TCV. Marker Makers that qualify will
receive the following additional rebates (in addition to the relevant
rebates described in the Fee Schedule): ($0.40) in Tier 1; ($0.40) in
Tier 2; ($0.10) in Tier 3; and ($0.05) in Tier 4. Market Makers with no
volume in the Non-Penny Class Maker segment for the month of July 2022
will have any new volume considered as added volume.
Additionally, the Exchange provides a per contract Maker rebate in
Non-Penny classes for Non-Priority Customer, Firm, BD, and Non-MIAX
Pearl Market Maker origins in Tier 1 and Tier 2 of ($0.30); ($0.60) in
Tier 3; ($0.65) in Tier 4; ($0.70) in Tier 5; ($0.85) in Tier 6 as
shown in the Fee Schedule for the following origin types, ``Non-
Priority Customer, Firm, BD, and Non-MIAX Pearl Market Makers.'' Under
footnote ``[ballot]'' of section 1)a) of the Fee schedule EEMs may
qualify for additional separate rebates for transactions in Non-Penny
classes in Tiers 1 through 4 if the EEM Professional Origins, which
include Non-Priority Customer, Firm, BD, and Non-MIAX Pearl Market
Makers collectively, increases their Non-Penny Class Maker TCV by 100%
or more as compared to that EEM's TCV for the month of July 2022, which
is the EEM's Professional Origins baseline Non-Penny Class Maker TCV.
EEMs Professional Origins who qualify will receive the following
additional rebates (in addition to the relevant rebates described in
the Fee Schedule): ($0.40) in Tier 1; ($0.40) in Tier 2; ($0.10) in
Tier 3; and ($0.05) in Tier 4. EEMs with no Professional Origins volume
in the Non-Penny Class Maker segment for the month of July 2022 will
have any new volume considered as added volume. These rebates were
adopted to attract additional Non-Penny Class volume to the
Exchange.\10\
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\10\ See Securities Exchange Act Release No. 95886 (September
22, 2022), 87 FR 58843 (September 28, 2022) (SR-PEARL-2022-40).
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The Exchange has observed that the incremental credit has not had
the
[[Page 41705]]
intended result in the last six months. Since the incremental credit
has not incentivized MIAX Pearl Market Makers and EEM Professional
origins to significantly increase their Non-Penny Class volume on the
Exchange, the Exchange has determined to eliminate the incremental
credit and remove it from the Exchange's Fee Schedule.
The Exchange now proposes to remove these additional separate
rebates from the Exchange's Fee Schedule denoted by the ``[squf]'' and
``[square]'' footnotes. Accordingly, the Exchange proposes to remove
the footnotes from the table in Section 1)a) and also the explanatory
note below the table for each footnote.
Implementation
The proposed changes are immediately effective.
2. Statutory Basis
The Exchange believes that its proposal to amend its Fee Schedule
is consistent with Section 6(b) of the Act \11\ in general, and
furthers the objectives of Section 6(b)(4) of the Act,\12\ 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,\13\ 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.
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\11\ 15 U.S.C. 78f(b).
\12\ 15 U.S.C. 78f(b)(4).
\13\ 15 U.S.C. 78f(b)(1) and (b)(5).
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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 broader forms that are most
important to investors and listed companies.'' \14\
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\14\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496 (June 29, 2005).
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There are currently 16 registered options exchanges competing for
order flow. Based on publicly-available information, and excluding
index-based options, as of May 26, 2023, no single exchange had more
than approximately 12-13% equity options market share for the month of
May 2023.\15\ Therefore, no exchange possesses significant pricing
power. More specifically, as of May 26, 2023, the Exchange had a market
share of approximately 6.87% of executed volume of multiply-listed
equity options for the month of May 2023.\16\
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\15\ See MIAX's ``The market at a glance/MTD AVERAGE,''
available at https://www.miaxglobal.com/ (Data as of 5\1\2023-
5\25\2023).
\16\ See id.
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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).\17\ 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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\17\ 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 eliminate additional separate
Maker rebates for options transactions in Non-Penny Classes in Tiers 1
through 4 for MIAX Pearl Market Makers and EEM Professional origins is
reasonable because the incentive that is the subject of this proposal
did not have the intended results. The rebates were intended to attract
additional Non-Penny Class volume to the Exchange.\18\ The Exchange
notes that the incremental credit has been underutilized in the last
six months and has not incentivized Members to increase Non-Penny Class
volume on the Exchange as anticipated. The Exchange also does not
anticipate that any Member will qualify for the pricing incentive that
is the subject of this proposal in the near future. The Exchange
believes that it is reasonable to eliminate incentives when such
incentives are underutilized. The Exchange believes that eliminating
incentive programs from the Fee Schedule when such incentives become
ineffective is equitable and not unfairly discriminatory because the
incentive would be eliminated in its entirety and would no longer be
available to any Member.
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\18\ See supra note 10.
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The Exchange notes that all Members would continue to be subject to
the same fee structure, and access to the Exchange's market would
continue to be offered on fair and non-discriminatory terms. The
Exchange also believes that the proposed change would protect investors
and the public interest because the removal of an underutilized pricing
incentive would simplify the Fee Schedule and facilitate market
participants' understanding of the fees charged and rebates offered by
the Exchange.
For the foregoing reasons, the Exchange believes that the proposal
is consistent with the Act.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange believes that the proposed change will not impose any
burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act.
Intra-Market Competition
The Exchange does not believe that the proposal will impose any
burden on intra-market competition not necessary or appropriate in
furtherance of the purposes of the Act. The Exchange believes the
elimination of the enhanced rebates will not impose any burden on
intra-market competition as the incentive has been underutilized in the
last six months. The Exchange believes that it is reasonable to
eliminate incentives when such incentives are underutilized. The
Exchange believes that eliminating incentive programs from the Fee
Schedule when such incentives become ineffective is equitable and not
unfairly discriminatory because the incentive would be eliminated in
its entirety and would no longer be available to any Member. Therefore
the Exchange does not believe that its proposal will impose any burden
on intra-market competition that is not necessary or appropriate in
furtherance of the purposes of the Act.
[[Page 41706]]
Inter-Market Competition
The Exchange operates in a highly competitive market in which
market participants can readily choose to send their orders to other
exchanges if they deem fee levels and incentives at those other
exchanges to be more favorable. As noted above, the Exchange's market
share is currently 6.87%.\19\ In such an environment, the Exchange must
continually adjust its fees and rebates to remain competitive with
other exchanges. Because competitors are free to modify their own fees
and credits in response, and because market participants may readily
adjust their own order routing practices, the Exchange does not believe
its proposed fee change can impose any burden on inter-market
competition.
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\19\ See supra note 15.
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C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
Written comments were neither solicited nor received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become effective pursuant to Section
19(b)(3)(A)(ii) of the Act,\20\ and Rule 19b-4(f)(2) \21\ 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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\20\ 15 U.S.C. 78s(b)(3)(A)(ii).
\21\ 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-2023-26 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-2023-26. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for website viewing and
printing in the Commission's Public Reference Room, 100 F Street NE,
Washington, DC 20549, on official business days between the hours of 10
a.m. and 3 p.m. Copies of the filing also will be available for
inspection and copying at the principal office of the Exchange. Do not
include personal identifiable information in submissions; you should
submit only information that you wish to make available publicly. We
may redact in part or withhold entirely from publication submitted
material that is obscene or subject to copyright protection. All
submissions should refer to file number SR-PEARL-2023-26 and should be
submitted on or before July 18, 2023.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\22\
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\22\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2023-13455 Filed 6-26-23; 8:45 am]
BILLING CODE 8011-01-P
