Self-Regulatory Organizations; MIAX PEARL, LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend the MIAX Pearl Equities Fee Schedule To Adopt the NBBO Setter Plus Program and Eliminate Certain Other Rebates, 66533-66541 [2023-20960]
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Federal Register / Vol. 88, No. 186 / Wednesday, September 27, 2023 / Notices
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
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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–CBOE–2023–048 and should be
submitted on or before October 18,
2023.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.31
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023–20961 Filed 9–26–23; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–98472; File No. SR–
PEARL–2023–45]
Self-Regulatory Organizations; MIAX
PEARL, LLC; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change To Amend the MIAX Pearl
Equities Fee Schedule To Adopt the
NBBO Setter Plus Program and
Eliminate Certain Other Rebates
ddrumheller on DSK120RN23PROD with NOTICES1
September 21, 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
September 11, 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
31 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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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 fee schedule (the ‘‘Fee
Schedule’’) applicable to MIAX Pearl
Equities, an equities trading facility of
the Exchange.
The text of the proposed rule change
is available on the Exchange’s website at
https://www.miaxglobal.com/markets/
us-equities/pearl-equities/rule-filings, 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 amend the
Fee Schedule to: (i) adopt a new
incentive program called the ‘‘NBBO
Setter Plus Program’’ (referred to in this
filing as the ‘‘NBBO Program’’) that, in
general, provides enhanced rebates for
Equity Members’ 3 added displayed
liquidity (‘‘Added Displayed Volume’’)
in securities priced at or above $1.00 per
share in all Tapes based on increasing
volume thresholds and increasing
market quality levels (described below),
as well as an additive rebate applied to
orders that set the NBBO 4 upon entry;
(ii) reduce the standard rebate for
executions of orders in securities priced
at or above $1.00 per share for Added
Displayed Volume in all Tapes and
make the corresponding changes to the
Liquidity Indicator Codes and
3 The term ‘‘Equity Member’’ is a Member
authorized by the Exchange to transact business on
MIAX Pearl Equities. See Exchange Rule 1901.
4 With respect to the trading of equity securities,
the term ‘‘NBB’’ shall mean the national best bid,
the term ‘‘NBO’’ shall mean the national best offer,
and the term ‘‘NBBO’’ shall mean the national best
bid and offer. See Exchange Rule 1901.
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66533
Associated Fees table 5; (iii) eliminate
the Add Volume Tiers table 6 and
associated rebates and make
corresponding changes to rename
Section 1)c) to now be titled ‘‘NBBO
Setter Plus Program’’; (iv) eliminate the
Market Quality Tiers table 7 and
associated rebates; (v) renumber Section
1)g), Step-Up Added Liquidity Rebate,
to now be Section 1)f), Step-Up Added
Liquidity Rebate; and (vi) amend the
Definitions section to include a
definition for the term ‘‘NBBO Set
Volume’’ (described below). All of the
proposed changes relate to the adoption
of the proposed NBBO Program, which
incorporates certain concepts from the
current Add Volume Tiers and Market
Quality Tiers programs.
The Exchange originally filed this
proposal on August 31, 2023 (SR–
PEARL–2023–42). On September 11,
2023, the Exchange withdrew SR–
PEARL–2023–42 and refiled this
proposal.
Background of Current Rebate Programs
Impacted by This Proposal
Section 1)a) of the Fee Schedule sets
forth the Exchange’s standard rebates
and fees for adding, removing or routing
orders (displayed and non-displayed) in
all Tapes. The Exchange provides
different rebates and fees depending on
whether (i) the execution is for an order
where the securities are priced at or
above $1.00 per share, or (ii) the
execution is for an order where the
securities are priced below $1.00 per
share. Relevant for the purposes of this
proposal, the Exchange currently
provides a standard rebate of ($0.0027) 8
per share for executions of orders in
securities priced at or above $1.00 per
share for Added Displayed Volume
across all Tapes.9
Section 1)b) of the Fee Schedules
provides a list of the liquidity indicator
codes and associated rebates or fees that
are applied to a transaction so that each
Equity Member that enters an order is
able to understand the fee or rebate that
is applied to the execution. Each side of
a trade is assigned a liquidity indicator
code in order to identify the scenario
under which the trade occurred.
Section 1)c) of the Fee Schedule
provides a volume-based tier structure,
referred to as the Add Volume Tiers, in
5 See Fee Schedule, Section 1)b), Liquidity
Indicator Codes AA, AB and AC.
6 See Fee Schedule, Section 1)c).
7 See Fee Schedule, Section 1)f).
8 The Exchange indicates rebates in parentheses
in the Fee Schedule. See the General Notes Section
of the Fee Schedule.
9 See Fee Schedule, Section 1)a). See also Fee
Schedule, Section 1)b), Liquidity Indicator Codes
AA, AB, and AC.
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ddrumheller on DSK120RN23PROD with NOTICES1
which the Exchange provides enhanced
rebates for executions of orders in
securities priced at or above $1.00 per
share for Added Displayed Volume for
Equity Members that meet specified
volume thresholds on the Exchange. In
particular, an Equity Member that
qualifies for Add Volume Tier 1 will
receive an enhanced rebate of ($0.0032)
per share for executions of orders in
securities priced at or above $1.00 per
share for Added Displayed Volume
across all Tapes by achieving an
ADAV 10 of at least 0.07% of TCV.11 An
Equity Member that qualifies for Add
Volume Tier 2 will receive an enhanced
rebate of ($0.0035) per share for
executions of orders in securities priced
at or above $1.00 per share for Added
Displayed Volume across all Tapes by
achieving an ADAV of at least 0.10% of
TCV. An Equity Member that qualifies
for Add Volume Tier 3 will receive an
enhanced rebate of ($0.0036) per share
for executions of orders in securities
priced at or above $1.00 per share for
Added Displayed Volume across all
Tapes by achieving an ADAV of at least
0.30% of TCV. The enhanced rebates
provided by the Add Volume Tiers are
provided instead of the standard rebate
of ($0.0027) per share applicable to
executions of orders in securities priced
at or above $1.00 per share for Added
Displayed Volume across all Tapes.
Section 1)f) of the Fee Schedule sets
forth a separate tiered pricing incentive
structure, referred to as the Market
Quality Tiers, which provides enhanced
rebates for executions of orders in
securities priced at or above $1.00 per
share for Added Displayed Volume for
Equity Members that meet certain
minimum quoting requirements across a
10 The term ‘‘ADAV’’ means average daily added
volume calculated as the number of shares added
per day and ‘‘ADV’’ means average daily volume
calculated as the number of shares added or
removed, combined, per day. ADAV and ADV are
calculated on a monthly basis. The Exchange
excludes from its calculation of ADAV and ADV
shares added or removed on any day that the
Exchange’s system experiences a disruptions that
lasts for more than 60 minutes during regular
trading hours (‘‘Exchange System Disruption’’), on
any day with a scheduled early market close, and
on the ‘‘Russell Reconstitution Day’’ (typically the
last Friday in June). Routed shares are not included
in the ADAV or ADV calculation. See the
Definitions Section of the Fee Schedule.
11 The term ‘‘TCV’’ means total consolidated
volume calculated as the volume in shares reported
by all exchanges and reporting facilities to a
consolidated transaction reporting plan for the
month for which the fees apply. The Exchange
excludes from its calculation of TCV volume on any
given day that the Exchange’s system experiences
a disruption that lasts for more than 60 minutes
during Regular Trading Hours. On any day with a
scheduled early market close, and on the ‘‘Russell
Reconstitution Day’’ (typically the last Friday in
June). See the Definitions Section of the Fee
Schedule.
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specified number of securities. In
particular, the Exchange provides an
enhanced rebate of ($0.0032) per share
in Market Quality Tier 1 for executions
of orders in securities priced at or above
$1.00 per share for Added Displayed
Volume if the Equity Member’s Percent
Time at NBBO 12 is at least 25% in an
average of at least 250 securities, at least
50 of which must be Market Quality
Securities,13 per trading day during the
month. The Exchange also provides an
enhanced rebate of ($0.0035) per share
in Market Quality Tier 2 for executions
of orders in securities priced at or above
$1.00 per share for Added Displayed
Volume if the Equity Member’s Percent
Time at NBBO is at least 25% in an
average of at least 1,000 securities, at
least 100 of which must be MQ
Securities, per trading day during the
month. The list of MQ Securities is
published on the Exchange’s website.14
Proposal To Adopt the NBBO Setter
Plus Program
The Exchange proposes to adopt a
new incentive program called the
‘‘NBBO Setter Plus Program’’ (referred
to in this filing as the ‘‘NBBO
Program’’), which is designed to
incentivize market quality and quoting
on the Exchange. Certain elements of
the NBBO Program will be similar to the
incentives and volume calculations for
the current Add Volume Tiers and
Market Quality Tiers programs. In
connection with the establishment of
the NBBO Program, the Exchange
proposes to remove the Add Volume
Tiers and Market Quality Tiers sections
from the Fee Schedule (described
further below), with Section 1)c) being
re-titled ‘‘NBBO Setter Plus Program.’’
The Exchange proposes to add a new
table in Section 1)c) of the Fee Schedule
titled ‘‘NBBO Setter Plus Table.’’ The
NBBO Setter Plus Table will provide
12 The term ‘‘Percent Time at NBBO’’ means the
aggregate of the percentage of time during regular
trading hours where a Member has a displayed
order of at least one round lot at the national best
bid (‘‘NBB’’) or the national best offer (‘‘NBO’’). See
the Definitions Section of the Fee Schedule.
13 Pursuant to this proposal, and as described
further below, the Exchange proposes to slightly
amend the term ‘‘Market Quality Securities’’ or
‘‘MQ Securities’’ as currently defined in the Fee
Schedule in order to account for the changes to the
Market Quality Tiers program and newly proposed
NBBO Setter Plus Program. Currently, the term
‘‘Market Quality Securities’’ or ‘‘MQ Securities’’
means a list of securities designated as such, that
are used for the purposes of qualifying for the
Market Quality Tiers. The universe of these
securities will be determined by the Exchange and
published on the Exchange’s website. See the
Definitions Section of the Fee Schedule. The
proposed changes are described below.
14 See https://www.miaxglobal.com/markets/usequities/pearl-equities/fees (last visited August 21,
2023).
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enhanced rebates for executions of
orders in securities priced at or above
$1.00 per share for Added Displayed
Volume across all Tapes (applicable to
Liquidity Indicator Codes AA, AB and
AC). Conceptually, the NBBO Program
provides four volume tiers enhanced by
three market quality levels to provide
increasing rebates in this segment. The
four volume tiers are achievable by
greater volume from the best of three
alternative methods. The three market
quality levels are achievable by greater
NBBO participation in a minimum
number of specific securities.
Additionally, there is an additive rebate
for trades the set the NBBO, described
further below.
First, MIAX Pearl Equities will
determine the applicable tier based on
three different volume calculation
methods. The three volume-based
methods to determine the Equity
Member’s tier for purposes of the NBBO
Program will be calculated in parallel in
each month, and each Equity Member
will receive the highest tier achieved
from any of the three methods each
month. All three volume calculation
methods will be based on an Equity
Member’s respective ADAV or NBBO
Set Volume or ADV as a percent of
industry TCV as the denominator.
Under volume calculation Method 1,
the Exchange proposes to provide tiered
rebates based on an Equity Member’s
ADAV as a percentage of TCV. In
particular, an Equity Member will
qualify for the base rebates in Tier 1 for
executions of orders in securities priced
at or above $1.00 per share for Added
Displayed Volume across all Tapes by
achieving an ADAV of at least 0.00%
and less than 0.08% of TCV. An Equity
Member will qualify for the enhanced
rebates in Tier 2 for executions of orders
in securities priced at or above $1.00 per
share for Added Displayed Volume
across all Tapes by achieving an ADAV
of at least 0.08% and less than 0.25% of
TCV. An Equity Member will qualify for
the enhanced rebates in Tier 3 for
executions of orders in securities priced
at or above $1.00 per share for Added
Displayed Volume across all Tapes by
achieving an ADAV of at least 0.25%
and less than 0.40% of TCV. Finally, an
Equity Member will qualify for the
enhanced rebates in Tier 4 for
executions of orders in securities priced
at or above $1.00 per share for Added
Displayed Volume across all Tapes by
achieving an ADAV of at least 0.40% of
TCV.
Under volume calculation Method 2,
the Exchange proposes to provide tiered
rebates based on an Equity Member’s
NBBO Set Volume as a percentage of
TCV. In connection with this proposed
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volume calculation method, the
Exchange proposes to adopt a definition
for the term ‘‘NBBO Set Volume,’’
which will be included in the
Definitions section of the Fee Schedule.
The Exchange proposes that the term
NBBO Set Volume means the ADAV in
all securities of an Equity Member that
sets the NBB or NBO on MIAX Pearl
Equities. Pursuant to proposed Method
2, an Equity Member will qualify for the
base rebates in Tier 1 for executions of
orders in securities priced at or above
$1.00 per share for Added Displayed
Volume across all Tapes by achieving an
NBBO Set Volume of at least 0.00% and
less than 0.02% of TCV. An Equity
Member will qualify for the enhanced
rebates in Tier 2 for executions of orders
in securities priced at or above $1.00 per
share for Added Displayed Volume
across all Tapes by achieving an NBBO
Set Volume of at least 0.02% and less
than 0.03% of TCV. An Equity Member
will qualify for the enhanced rebates in
Tier 3 for executions of orders in
securities priced at or above $1.00 per
share for Added Displayed Volume
across all Tapes by achieving an NBBO
Set Volume of at least 0.03% and less
than 0.08% of TCV. An Equity Member
will qualify for the enhanced rebates in
Tier 4 for executions of orders in
securities priced at or above $1.00 per
share for Added Displayed Volume
across all Tapes by achieving an NBBO
Set Volume of at least 0.08% of TCV.
Under volume calculation Method 3,
the Exchange proposes to provide tiered
rebates based on an Equity Member’s
ADV as a percentage of TCV. In
particular, an Equity Member will
qualify for the base rebates in Tier 1 for
executions of orders in securities priced
at or above $1.00 per share for Added
Displayed Volume across all Tapes by
achieving an ADV of at least 0.00% and
less than 0.20% of TCV. An Equity
Member will qualify for the enhanced
rebates in Tier 2 for executions of orders
in securities priced at or above $1.00 per
share for Added Displayed Volume
across all Tapes by achieving an ADV of
at least 0.20% and less than 0.60% of
TCV. An Equity Member will qualify for
the enhanced rebates in Tier 3 for
executions of orders in securities priced
at or above $1.00 per share for Added
Displayed Volume across all Tapes by
achieving an ADV of at least 0.60% and
less than 1.00% of TCV. An Equity
Member will qualify for the enhanced
rebates in Tier 4 for executions of orders
in securities priced at or above $1.00 per
share for Added Displayed Volume
across all Tapes by achieving an ADV of
at least 1.00% of TCV.
After the volume calculation is
performed to determine highest tier
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achieved by the Equity Member, the
applicable rebate will be calculated
based on two different measurements
based on the Equity Member’s
participation at the NBBO on the
Exchange in certain securities
(referenced below).
The Exchange proposes to provide
one column of base rebates (referred to
in the NBBO Program table as ‘‘Level
A’’) and two columns of enhanced
rebates (referred to in the NBBO
Program table as ‘‘Level B’’ and ‘‘Level
C’’), depending on the Equity Member’s
Percent Time at NBBO on MIAX Pearl
Equities in a certain amount of specified
securities (‘‘Market Quality Securities’’
or ‘‘MQ Securities,’’ defined below). The
Fee Schedule will specify the
percentage of time that the Equity
Member must be at the NBBO on MIAX
Pearl Equities in at least 200 symbols
out of the full list of 1,000 MQ
Securities (which may vary from time to
time based on market conditions). The
list of MQ Securities will be generally
based on the top multi-listed 1,000
symbols by ADV across all U.S.
securities exchanges. The list of MQ
Securities will be updated monthly by
the Exchange and published on the
Exchange’s website. The Exchange notes
that at least one other competing
exchange provides enhanced rebates for
executions of orders in certain securities
priced at or above $1.00 per share
submitted by members that set or join
the NBBO on that exchange.15
The Exchange proposes that, for the
purpose of determining qualification for
the rebates described in Level B and
Level C of Market Quality Tier columns
in the NBBO Setter Plus Program, the
Exchange will exclude from its
calculation: (1) any trading day that the
Exchange’s system experiences a
disruption that lasts for more than 60
minutes during regular trading hours;
(2) any day with a scheduled early
market close; and (3) the ‘‘Russell
Reconstitution Day’’ (typically the last
Friday in June). The Exchange proposes
15 See Cboe BZX Equities Fee Schedule, NBBO
Setter section and Add/Remove Volume Tiers
section, available at https://www.cboe.com/us/
equities/membership/fee_schedule/bzx/ (providing
an additional rebate of ($0.0007) per share to the
top displayed liquidity tier rebate of ($0.0031) per
share for executions of added displayed volume in
securities priced at or above $1.00 per share that
establish a new Setter NBBO in NBBO Setter
Securities on Cboe BZX). For purposes of the Cboe
BZX Fee Schedule, the term ‘‘Setter NBBO’’ means
a quotation of at least 100 shares that is better than
the NBBO or a quotation of a notional size of at
least $10,000.00 that is better than the NBBO.
Further, the term ‘‘NBBO Setter Securities’’ means
a list of securities included in the Cboe BZX NBBO
Setter Program, the universe of which will be
determined by Cboe BZX and published in a notice
distributed to Cboe BZX members and on the Cboe
BZX website. See id.
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66535
to describe this exclusion in the General
Notes section of the Fee Schedule. The
Exchange believes that these types of
Exchange system disruptions could
preclude Equity Members from
participating on the Exchange to the
extent that they might have otherwise
participated on such days, and thus, the
Exchange believes it is appropriate to
exclude such days when determining
whether an Equity Member meets the
applicable Percent Time at NBBO
during a month to avoid penalizing
Equity Members that might otherwise
have met such requirements.
Additionally, the Exchange believes
that scheduled early market closures,
which typically are the day before, or
the day after, a holiday, may preclude
some Equity Members from
participating on the Exchange at the
same level that they might otherwise.
For similar reasons, the Exchange
believes it is appropriate to exclude the
Russell Reconstitution Day in the same
manner, as the Exchange believes that
the Russell Reconstitution Day typically
has extraordinarily high, and
abnormally distributed, trading volumes
and the Exchange believes this change
to normal activity may affect an Equity
Member’s ability to meet the quoting
requirement across various MQ
Securities on that day. The Exchange
notes that the exclusion of any day
during which the Exchange’s system
experiences a disruption that lasts for
more than 60 minutes during Regular
Trading Hours, any day with a
scheduled early market close, and the
Russell Reconstitution Day is consistent
with the methodologies used by other
exchanges when calculating certain
member trading and other volume
metrics for purposes of determining
whether those members qualify for
certain pricing incentives, and the
Exchange believes application of this
methodology is similarly appropriate for
the proposed Percent Time at NBBO
requirements under the proposed NBBO
Program.16
The Exchange proposes that the base
rebates (‘‘Level A’’) will be as follows:
($0.00240) per share in Tier 1;
($0.00310) per share in Tier 2;
($0.00345) per share in Tier 3; and
($0.00350) per share in Tier 4.17
16 See e.g., Cboe BZX Equities Fee Schedule,
available at https://www.cboe.com/us/equities/
membership/fee_schedule/bzx/; Cboe EDGX
Exchange, Inc. (‘‘Cboe EDGX’’) Equities Fee
Schedule, available at https://www.cboe.com/us/
equities/membership/fee_schedule/edgx/; and
MEMX, LLC (‘‘MEMX’’) Fee Schedule, available at
https://info.memxtrading.com/fee-schedule/.
17 The Exchange notes that the proposed
($0.00240) per share will be the base standard
rebate for executions of orders in securities priced
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Federal Register / Vol. 88, No. 186 / Wednesday, September 27, 2023 / Notices
Under Level B, the Exchange proposes
to provide enhanced rebates for
executions of orders in securities priced
at or above $1.00 per share for Added
Displayed Volume across all Tapes if
the Equity Member’s Percent Time at
NBBO is at least 25% and less than 50%
in at least 200 MQ Securities per trading
day during the month. The Exchange
proposes that the Level B rebates will be
as follows: ($0.00250) per share in Tier
1; ($0.00315) per share in Tier 2;
($0.00350) per share in Tier 3; and
($0.00355) per share in Tier 4.
Under Level C, the Exchange proposes
to provide enhanced rebates for
executions of orders in securities priced
at or above $1.00 per share for Added
Displayed Volume across all Tapes if
the Equity Member’s Percent Time at
NBBO is at least 50% in at least 200 MQ
Securities per trading day during the
month. The Exchange proposes that the
Level C rebates will be as follows:
($0.00260) per share in Tier 1;
($0.00320) per share in Tier 2;
($0.00355) per share in Tier 3; and
($0.00360) per share in Tier 4.
The Exchange notes that the
introduction of the NBBO Setter Plus
Program will be available to all Equity
Members and will provide Equity
Members several different opportunities
to receive enhanced rebates utilizing
three different volume calculation
methodologies and different
participation levels at the NBBO. The
proposed changes are designed to
encourage Equity Members that provide
Added Displayed Volume in securities
priced at or above $1.00 per share across
all Tapes to the Exchange to increase
such order flow, which would benefit
all Equity Members by providing greater
execution opportunities on the
Exchange and contribute to a deeper,
more liquid market, to the benefit of all
investors and market participants.
ddrumheller on DSK120RN23PROD with NOTICES1
NBBO Setter Additive Rebate
The Exchange proposes to provide an
additional rebate as part of the NBBO
Program, which will be included as a
line item at the bottom of the NBBO
Setter Plus table. In particular, the
Exchange proposes to provide an
‘‘NBBO Setter Additive Rebate’’ of
($0.0003) per share, which will be
applicable only to executions of orders
in securities priced at or above $1.00 per
at or above $1.00 per share for Added Displayed
Volume across all Tapes, which is a decrease from
the current standard rebate of ($0.0027) per share,
listed in Section 1)a) of the Fee Schedule and
attributable to Liquidity Indicator Codes AA, AB
and AC. The purpose and rationale for the proposed
decrease in the standard rebate for executions of
orders in securities priced at or above $1.00 per
share for Added Displayed Volume across all Tapes
is discussed below.
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share for Added Displayed Volume
(other than Retail Orders 18) that set the
NBB or NBO on MIAX Pearl Equities
with a minimum size of a round lot. The
purpose of the proposed NBBO Setter
Additive Rebate is to provide an
additional incentive for Equity Members
to contribute Added Displayed Volume
in securities priced at or above $1.00 per
share that sets the NBBO on MIAX Pearl
Equities, which should benefit all
Equity Members by providing greater
execution opportunities on the
Exchange and contribute to a deeper,
more liquid market, to the benefit of all
investors and market participants.
Additionally, other U.S. equity
exchanges have adopted similar pricing
incentives applicable to executions of
orders that establish the NBBO, with the
Exchange’s proposed top tier rebate,
coupled with the NBBO Setter Additive
Rebate, being higher than competing
exchanges’ top rebates for similar
executions (providing additive rebate of
($0.0003) per share to the top displayed
liquidity tier rebate of ($0.0036) per
share for executions of added displayed
volume (other than retail orders) in
securities priced at or above $1.00 per
share that establish the NBBO on the
Exchange, for a total ‘‘enhanced’’ rebate
of ($0.0039) per share).19
Corresponding Changes to the Fee
Schedule
Proposal To Reduce the Standard Rebate
for Executions of Orders in Securities
Priced at or Above $1.00 per Share for
Added Displayed Volume (All Tapes)
and Corresponding Changes to Liquidity
Indicator Codes
In connection with the proposed
NBBO Setter Plus Program, the
Exchange proposes to reduce the
standard rebate for executions of orders
18 A ‘‘Retail Order’’ is an agency or riskless
principal order that meets the criteria of FINRA
Rule 5320.03 that originates from a natural person
and is submitted to the Exchange by a Retail
Member Organization, provided that no change is
made to the terms of the order with respect to price
or side of market and the order does not originate
from a trading algorithm or any other computerized
methodology. See Exchange Rule 2626(a)(2).
19 See MEMX Fee Schedule, NBBO Setter/Joiner
Tiers Section (providing additional rebate of
($0.0004) per share to the top displayed liquidity
tier rebate of ($0.0033) per share for executions of
added displayed volume (other than retail orders)
in securities priced at or above $1.00 per share that
establish the NBBO or establish a new BBO on
MEMX that matches the NBBO first established on
an away market, for a total ‘‘enhanced’’ rebate of
($0.0037) per share); and Cboe BZX Fee Schedule,
NBBO Setter section and Add/Remove Volume
Tiers section (providing additional rebate of
($0.0007) per share to the top displayed liquidity
tier rebate of ($0.0031) per share for executions of
added displayed volume in securities priced at or
above $1.00 per share that establish a new Setter
NBBO in NBBO Setter Securities on Cboe BZX, for
a total ‘‘enhanced’’ rebate of ($0.0038) per share).
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in securities priced at or above $1.00 per
share that add displayed liquidity to the
Exchange across all Tapes (as
mentioned above). Currently, the
Exchange provides a standard rebate of
($0.0027) per share for executions of
orders in securities priced at or above
$1.00 per share for Added Displayed
Volume in all Tapes. The Exchange now
proposes to reduce the standard rebate
from ($0.0027) to ($0.0024) per share for
executions of orders in securities priced
at or above $1.00 per share for Added
Displayed Volume across all Tapes.
Accordingly, the Exchange proposes to
amend Section 1)a), Standard Rates, to
reflect this proposed change and amend
Section 1)b), Liquidity Indicator Codes
and Associated Fees, to reflect the
corresponding changes to the applicable
Liquidity Indicator Codes, AA, AB and
AC.
The purpose of reducing the standard
rebate for executions of orders in
securities priced at or above $1.00 per
share for Added Displayed Volume
across all Tapes is due to the Exchange’s
proposal to adopt the NBBO Program,
which provides multiple volume
calculation methods for Equity Members
to receive enhanced rebates compared to
the standard rate. The Exchange notes
that despite the modest reduction
proposed herein, the proposed standard
rebate of ($0.0024) per share for
executions of orders in securities priced
at or above $1.00 per share for Added
Displayed Volume across all Tapes
remains competitive with, and higher
than, the standard rebates provided by
other exchanges for similar
executions.20
Proposal To Eliminate the Add Volume
Tiers Table and Associated Rebates
In connection with the NBBO Setter
Plus Program, the Exchange proposes to
eliminate the Add Volume Tiers table
and associated rebates in Section 1)c) of
the Fee Schedule and rename Section
1)c) as the NBBO Setter Plus Program.
As mentioned above, the Add Volume
Tiers provided enhanced rebates for
executions of orders in securities priced
at or above $1.00 per share for Added
Displayed Volume so long as the Equity
Member met specified ADAV thresholds
on the Exchange. The Exchange adopted
20 See e.g., NYSE Arca Equities Fee Schedule,
available at https://www.nyse.com/publicdocs/
nyse/markets/nyse-arca/NYSE_Arca_Marketplace_
Fees.pdf (providing standard rebates of $0.0020 per
share (Tapes A and C) and $0.0016 per share (Tape
B) for adding displayed liquidity in securities
priced at or above $1.00 per share); see also Cboe
BZX Equities Fee Schedule, available at https://
www.cboe.com/us/equities/membership/fee_
schedule/bzx/ (providing a standard rebate of
$0.0016 per share for adding displayed liquidity in
securities priced at or above $1.00 per share).
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the Add Volume Tiers rebates for the
purpose of encouraging Equity Members
to increase their orders that add
liquidity on the Exchange, thereby
improving its market quality with
respect to such securities and
contributing to a more robust and wellbalanced market ecosystem on the
Exchange to the benefit of all Equity
Members.21 The Exchange now
proposes to eliminate the Add Volume
Tiers table and associated rebates as the
NBBO Program incorporates similar
aspects and rebate amounts, including,
under volume calculation Method 1,
tiered rebates based on an Equity
Member’s ADAV as a percentage of
TCV. The Exchange notes that the
NBBO Program does have slightly lower
rebates for the corresponding Add
Volume Tier thresholds; however, the
Exchange believes that the benefits of
the NBBO Program—three volume
calculation methods and two market
quality levels based on participation at
the NBBO in order to obtain enhanced
rebates—provides more opportunities
for Equity Members to achieve higher
rebates and will encourage the
submission of increased order flow. The
Exchange believes this will, in turn
benefit all Equity Members by providing
greater execution opportunities on the
Exchange and contribute to a deeper,
more liquid market, to the benefit of all
investors and market participants.
Proposal To Eliminate the Market
Quality Tiers Table and Associated
Rebates
In connection with the NBBO Setter
Plus Program, the Exchange proposes to
eliminate the Market Quality Tiers table
and associated rebate in Section 1)f) of
the Fee Schedule. As mentioned above,
the Market Quality Tiers provided
enhanced rebates for Equity Members
that met certain minimum quoting
requirements across a specified number
of securities. The Exchange adopted the
Market Quality Tiers for the purpose of
encouraging executions of Added
Displayed Volume for qualifying Equity
Members as a means of recognizing the
value of market participants that
consistently quote at the NBBO in a
large number of securities generally, and
in the specified MQ Securities, in
particular.22 The Exchange now
proposes to eliminate the Market
Quality Tiers table and associated
rebates as the NBBO Program
incorporates similar aspects, rebate
21 See Securities Exchange Act Release No. 93979
(January 14, 2022), 87 FR 3151 (January 20, 2022)
(SR–PEARL–2022–01).
22 See Securities Exchange Act Release No. 94929
(May 17, 2022), 87 FR 31269 (May 23, 2022) (SR–
PEARL–2022–21).
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amounts, and calculation methodologies
based on an Equity Member’s Percent
Time at NBBO in certain MQ Securities
under Level B and Level C.
Proposal To Renumber Fee Schedule
Section 1)g), Step-Up Added Liquidity
Rebate, as Section 1)f)
As described above, the Exchange
proposes to eliminate the Market
Quality Tiers table and associated
rebates currently described in Section
1)f) of the Fee Schedule. Accordingly,
the Exchange proposes to renumber
Section 1)g), Step-Up Added Liquidity
Rebate, as Section 1)f). The purpose of
this change is to provide consistency
and clarity in the Fee Schedule.
Proposed Changes to the Definitions and
General Notes Sections of the Fee
Schedule
As mentioned above, with the
adoption of the NBBO Program, the
Exchange proposes to make several
corresponding changes to the
Definitions and General Notes sections
of the Fee Schedule. First, the Exchange
proposes to amend the paragraphs
describing ‘‘ADAV’’ in the Definition
section to include the definition of
‘‘NBBO Set Volume.’’ In particular, the
term ‘‘NBBO Set Volume’’ will mean the
ADAV in all securities of an Equity
Member that sets the NBB or NBO on
MIAX Pearl Equities. Further, the
Exchange proposes that an Equity
Member’s NBBO Set Volume will be
excluded from the calculation of the
NBBO Program in certain instances. The
Exchange proposes to amend the second
paragraph related to ADAV in the
Definitions section to include NBBO Set
Volume as excluded volume. With the
proposed changes, the paragraphs
describing ADAV in the Definitions
section will read as follows:
‘‘ADAV’’ means average daily added
volume calculated as the number of shares
added per day and ‘‘ADV’’ means average
daily volume calculated as the number of
shares added or removed, combined, per day.
ADAV and ADV are calculated on a monthly
basis. NBBO Set Volume means the ADAV in
all securities of an Equity Member that sets
the NBB or NBO on MIAX Pearl Equities.
The Exchange excludes from its calculation
of ADAV, ADV, and NBBO Set Volume
shares added or removed on any day that the
Exchange’s system experiences a disruption
that lasts for more than 60 minutes during
regular trading hours, on any day with a
scheduled early market close, and on the
‘‘Russell Reconstitution Day’’ (typically the
last Friday in June).
Next, the Exchange proposes to
amend the definition for ‘‘Market
Quality Securities’’ or ‘‘MQ Securities.’’
Since the Exchange proposes to
eliminate the Market Quality Tiers and
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66537
associated rebates, which are based on
an Equity Member’s participation at the
NBBO in the currently-defined MQ
Securities, the Exchange will amend
this definition to fit within the NBBO
Program. As described above, Level B
and Level C enhanced rebates in the
NBBO Program will be partly based on
an Equity Member’s Percent Time at
NBBO on MIAX Pearl Equities in a
certain amount of MQ Securities. The
Exchange proposes to amend the
definition of MQ Securities to reflect the
elimination of the Market Quality Tiers
and adoption of the NBBO Program.
Accordingly, with the proposed
changes, the definition for Market
Quality Securities will be as follows:
‘‘Market Quality Securities’’ or ‘‘MQ
Securities’’ shall mean a list of securities
designated as such, that are used for the
purposes of qualifying for the rebates
described in Level B and Level C of the
Market Quality Tier columns in the NBBO
Setter Plus Program. The universe of these
securities will be determined by the
Exchange and published on the Exchange’s
website.
In connection with the proposed
revised definition for MQ Securities, the
Exchange also proposes to amend the
corresponding paragraph in the General
Notes section regarding when the
Exchange excludes certain Market
Quality security volume. With the
proposed changes, the exclusion
paragraph will read as follows:
For the purpose of determining
qualification for the rebates described in
Level B and Level C of Market Quality Tier
columns in the NBBO Setter Plus Program,
the Exchange will exclude from its
calculation: (1) any trading day that the
Exchange’s system experiences a disruption
that lasts for more than 60 minutes during
regular trading hours; (2) any day with a
scheduled early market close; and (3) the
‘‘Russell Reconstitution Day’’ (typically the
last Friday in June).
The purpose of all these changes is to
provide consistency and clarity in the
Fee Schedule in light of the proposed
adoption of the NBBO Program and
corresponding elimination of other
rebate programs.
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 23
in general, and furthers the objectives of
Section 6(b)(4) of the Act 24 in
23 15
24 15
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particular, in that it provides for the
equitable allocation of reasonable dues,
fees and other charges among its Equity
Members and issuers and other persons
using its facilities. Additionally, the
Exchange believes the proposed rule
change is consistent with the Section
6(b)(5) 25 requirement that the rules of
an exchange not be designed to permit
unfair discrimination between
customers, issuers, brokers or dealers.
The Exchange operates in a highly
fragmented and competitive market in
which market participants can readily
direct their order flow to competing
venues if they deem fee levels at a
particular venue to be excessive or
incentives to be insufficient. More
specifically, the Exchange is only one of
sixteen registered equities exchanges,
and there are a number of alternative
trading systems and other off-exchange
venues, to which market participants
may direct their order flow. As of
August 23, 2023, based on publicly
available information, no single
registered equities exchange currently
has more than approximately 13–14% of
the total market share of executed
volume of equities trading for the month
of August 2023.26 Thus, in such a lowconcentrated and highly competitive
market, no single equities exchange
possesses significant pricing power in
the execution of order flow, and the
Exchange currently represents
approximately 1.86% of the overall
market share. The Commission and the
courts have repeatedly expressed their
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.’’ 27
The Exchange believes that the evershifting market share among the
exchanges from month to month
demonstrates that market participants
can shift order flow or discontinue to
reduce use of certain categories of
products, in response to new or
different pricing structures being
introduced into the market.
Accordingly, competitive forces
25 15
U.S.C. 78f(b)(5).
the ‘‘Market Share’’ section of the
Exchange’s website, available at https://
www.miaxglobal.com/ (last visited August 23,
2023).
27 See Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37499 (June 29, 2005).
constrain the Exchange’s transaction
fees and rebates, and market
participants can readily trade on
competing venues if they deem pricing
levels at those other venues to be more
favorable. The Exchange believes the
proposal reflects a reasonable and
competitive pricing structure designed
to incentivize market participants to
direct their order flow to the Exchange,
which the Exchange believes would
enhance liquidity and market quality in
both a broad manner and in a targeted
manner with respect to the MQ
Securities and the NBBO Program.
NBBO Setter Plus Program
The Exchange believes that the
proposed NBBO Setter Plus Program, in
general, is a reasonable means to
encourage Equity Members to not only
increase their order flow to the
Exchange but also to contribute to price
discovery and market quality on the
Exchange by submitting aggressively
priced displayed liquidity in securities
priced at or above $1.00 per share. As
noted above, aspects of the proposed
NBBO Program are comparable to other
volume-based incentives currently in
place at the Exchange and competing
exchanges, which have been widely
adopted.28 The Exchange believes the
proposed NBBO Program is equitable
and not unfairly discriminatory because
it is open to all Equity Members on an
equal basis and provides enhanced
rebates that are reasonably related to the
value to the Exchange’s market quality
associated with greater order flow by
Equity Members that set the NBBO, and
the introduction of higher volumes of
orders into the price and volume
discovery process. The Exchange
believes the proposed NBBO Program is
equitable and not unfairly
discriminatory because it is designed to
incentivize the entry of aggressively
priced displayed liquidity that will
create tighter spreads, thereby
promoting price discovery and market
quality on the Exchange to the benefit
of all Equity Members and public
investors.
The Exchange believes the proposal to
have three different volume calculation
methods to determine the Equity
Member’s tier for purposes of the NBBO
Program is reasonable, equitably
allocated, and not unfairly
discriminatory because the three
methods will be calculated in parallel in
each month, and each Equity Member
will receive the tier associated with the
highest tier achieved each month. This
allows market participants with various
trading strategies to participate in the
NBBO Program, including, among
others, Equity Members with liquidity
providing strategies, aggressive order
adding strategies that attempt to set the
NBBO, as well as Equity Members
acting as an agency for customers.
The Exchange believes the proposed
Market Quality Tiers applicable to the
enhanced rebates in the NBBO Program,
which are dependent upon the Equity
Member’s Percent Time at NBBO in MQ
Securities, are reasonable, equitably
allocated and not unfairly
discriminatory. This is because the
Market Quality Tiers of the NBBO
Program are intended to encourage
Equity Members to promote price
discovery and market quality by quoting
at the NBBO for a significant portion of
each day in a large number of securities
generally, and in MQ Securities in
particular, thereby benefiting the
Exchange and other investors by
providing improved trading conditions
for all market participants through
narrower bid-ask spreads and increasing
the depth of liquidity available at the
NBBO in a broad base of highly liquid
securities. As noted above, Cboe BZX
provides an enhanced rebate based on
increased member participation in a
defined list of securities (called the
NBBO Setter Securities on Cboe BZX)
that set the NBBO on that exchange.29
The Exchange believes the proposed
enhanced rebates in Level B 30 and Level
C 31 of the Market Quality Tiers of the
NBBO Program are reasonable in that
they do not reflect disproportionate
increases above the standard rebates of
($0.00250) per share for Level B and
($0.00260) per share for Level C, but
reflect the value added value to the
Exchange’s market quality from Equity
Members that meet the required Percent
Time at NBBO in the minimum number
of MQ Securities, which should
incentivize the entry of aggressively
priced displayed liquidity that will
create tighter spreads, promote price
discovery and market quality on the
Exchange to the benefit of all Equity
Members and public investors.
The Exchange further believes that the
proposed criteria to achieve the
enhanced rebates provided in Level B
and Level C of the Market Quality Tiers
of the NBBO Program is reasonable and
not unfairly discriminatory because the
proposed criteria for Level C rebates is
26 See
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28 See, generally, Fee Schedule, Section 1)c) and
Section 1)f); see also Cboe BZX Equities Fee
Schedule, NBBO Setter Section and Add/Remove
Volume Tiers Section and MEMX Fee Schedule,
NBBO Setter/Joiner Tiers Section.
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29 See
supra note 15.
tiered rebates ranging from
($0.00250) in Tier 1 to ($0.00355) in Tier 4.
31 Proposed tiered rebates ranging from
($0.00260) in Tier 1 to ($0.00360) in Tier 4.
30 Proposed
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incrementally more difficult to achieve
than that of Level B, and thus Level C
appropriately offers higher rebates
commensurate with the corresponding
higher Percent Time at NBBO by Equity
Members in the minimum number of
MQ Securities. Therefore, the Exchange
believes that the Market Quality Tiers of
the NBBO Program, as proposed, are
consistent with an equitable allocation
of fees and rebates, as the more stringent
criteria correlates with the
corresponding higher tiers’ enhanced
rebates.
In addition, the Exchange believes
that it is reasonable and consistent with
an equitable allocation of fees to pay
higher rebates for executions of orders
in securities priced at or above $1.00 per
share for Added Displayed Volume to
Equity Members that qualify for one of
the Market Quality Tiers of the NBBO
Program because of the additional
commitment to market quality reflected
in the associated Percent Time at NBBO
requirements. Such Equity Members
benefit all investors by promoting price
discovery and increasing the depth of
liquidity available at the NBBO and
benefit the Exchange itself by enhancing
its competitiveness as a market center
that attracts actionable orders. Further,
the Exchange notes that the proposed
Market Quality Tiers of the NBBO
Program offer incentives on the
Exchange that would apply uniformly to
all Equity Members, and any Equity
Member may choose to qualify for one
of those tiers by meeting the associated
requirements in any month. The
Exchange believes that the requirements
are attainable for many market
participants who do actively quote on
the Exchange and are reasonably related
to the enhanced market quality that the
NBBO Program is designed to promote.
The Exchange also believes that
including in the proposed Market
Quality Tiers of the NBBO Program a
quoting requirement for certain
specified securities (i.e., the MQ
Securities), is equitable and not unfairly
discriminatory because the Exchange
has identified the MQ Securities as
securities in which it would like to
inject additional quoting competition,
which the Exchange believes will
generally act to narrow spreads, increase
size at the NBBO, and increase liquidity
depth in such securities, thereby
increasing the attractiveness of the
Exchange as a destination venue with
respect to such securities. Accordingly,
the Exchange believes that this aspect of
the proposal is reasonable, equitably
allocated, and not unfairly
discriminatory because it is consistent
with the overall goals of enhancing
market quality.
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As noted above, the proposed Market
Quality Tiers of the NBBO Program are
similar in structure and purpose to
pricing programs in place on at least one
other exchange that is designed to
enhance market quality.32 Specifically,
this program provides a higher rebate
for executions of liquidity-adding
displayed orders for members that
achieve minimum quoting standards,
including minimum quoting at the
NBBO in a large number of securities
generally, or certain designated
securities in particular.33 The Exchange
also notes that the proposed Market
Quality Tiers of the NBBO Program are
not dissimilar from volume-based
rebates and fees which have been
widely adopted by exchanges 34 and are
equitable and not unfairly
discriminatory because they are
generally open to all Equity Members on
an equal basis and provide higher
rebates that are reasonably related to the
value of an exchange’s market quality.
Much like volume-based tiers are
designed to incentivize higher levels of
liquidity provision, the proposed
Market Quality Tiers portion of the
NBBO Program is designed to
incentivize enhanced market quality on
the Exchange through tighter spreads,
greater size at the NBBO, and greater
quoting depth in a large number of
securities generally, and in MQ
Securities specifically, through the
provision of an enhanced rebate, where
such rebate will in turn incentivize
higher levels of displayed liquidity
provision in a general manner.
Accordingly, the Exchange believes that
the proposed NBBO Program, in general,
promotes the principles discussed in
Sections 6(b)(4) and 6(b)(5) of the Act.35
NBBO Setter Additive Rebate
The Exchange believes the proposed
NBBO Setter Additive Rebate is
reasonable, equitably allocated and not
unfairly discriminatory because is
available to all Equity Members and is
designed to incentivize the entry of
aggressively priced displayed liquidity
that will create tighter spreads, thereby
promoting price discovery and market
quality on the Exchange to the benefit
of all Equity Members and public
investors. As such, the Exchange
believes the NBBO Setter Additive
Rebate for executions of orders in
securities priced at or above $1.00 per
share for Added Displayed Volume
(other than Retail Orders) that sets the
NBB or NBO on the Exchange is
32 See
supra note 15.
33 Id.
34 Id.
35 15
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66539
reasonably related to the market quality
benefits that such additional enhanced
rebate is designed to promote.
Additionally, other U.S. equity
exchanges have adopted similar pricing
incentives applicable to executions of
orders that establish the NBBO, with the
Exchange’s proposed top tier rebate,
coupled with the NBBO Setter Additive
Rebate, being higher than competing
exchanges’ top rebates for similar
executions.36
Reduce Standard Rebate for Executions
of Orders in Securities Priced at or
Above $1.00 per Share for Added
Displayed Volume (All Tapes) and
Corresponding Changes to Liquidity
Indicator Codes
The Exchange believes that the
proposal to reduce the standard rebate
from ($0.0027) to ($0.0024) per share for
executions of orders in securities priced
at or above $1.00 per share for Added
Displayed Volume is reasonable,
equitably allocated and not unfairly
discriminatory because it represents a
modest decrease from the current
standard rebate and competitive with,
and higher than, the standard rebates
provided by other exchanges for similar
executions.37 The Exchange further
believes that the proposed reduced
standard rebate for executions of orders
in securities priced at or above $1.00 per
share for Added Displayed Volume is
equitably allocated and not unfairly
discriminatory because the standard
rebate will apply equally to all Equity
Members. The Exchange also believes
its proposal to amend Section 1)b),
Liquidity Indicator Codes and
Associated Fees, to reflect the proposed
decreased rebate for Added Displayed
Volume in the corresponding Liquidity
Indicator Codes AA, AB and AC is
reasonable because it provides
uniformity and clarity in the Fee
Schedule.
36 See MEMX Fee Schedule, NBBO Setter/Joiner
Tiers Section (providing additional rebate of
($0.0004) per share to the top displayed liquidity
tier rebate of ($0.0033) per share for executions of
added displayed volume (other than retail orders)
in securities priced at or above $1.00 per share that
establish the NBBO or establish a new BBO on
MEMX that matches the NBBO first established on
an away market, for a total ‘‘enhanced’’ rebate of
($0.0037) per share); and Cboe BZX Equities Fee
Schedule, NBBO Setter section and Add/Remove
Volume Tiers section (providing additional rebate
of ($0.0007) per share to the top displayed liquidity
tier rebate of ($0.0031) per share for executions of
added displayed volume in securities priced at or
above $1.00 per share that establish a new Setter
NBBO in NBBO Setter Securities on Cboe BZX, for
a total ‘‘enhanced’’ rebate of ($0.0038) per share).
37 See supra note 20.
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Proposal To Eliminate the Add Volume
Tiers Table and Associated Rebates and
the Market Quality Tiers Table and
Associated Rebates
The Exchange believes its proposal to
eliminate the Add Volume Tiers table
and associated rebates in Section 1)c) of
the Fee Schedule and rename Section
1)c) as the NBBO Setter Plus Program in
connection with the NBBO Program, is
reasonable, equitably allocated and not
unfairly discriminatory. The Exchange
adopted the Add Volume Tiers rebates
for the purpose of encouraging Equity
Members to increase their orders that
add liquidity on the Exchange, thereby
improving its market quality with
respect to such securities and
contributing to a more robust and wellbalanced market ecosystem on the
Exchange to the benefit of all Equity
Members. The Exchange’s proposal to
eliminate the Add Volume Tiers table
and associated rebates is reasonable
because the NBBO Program incorporates
similar aspects and rebate amounts,
including, under volume calculation
Method 1, tiered rebates based on an
Equity Member’s ADAV as a percentage
of TCV. The Exchange notes that the
NBBO Program does have slightly lower
rebates for the corresponding Add
Volume Tier thresholds; however, the
Exchange believes that the benefits of
the NBBO Program, i.e., several volume
calculation methods to obtain enhanced
rebates, provides more opportunities for
Equity Members to achieve higher
rebates and will encourage the
submission of increased order flow,
which would benefit all Equity
Members by providing greater execution
opportunities on the Exchange and
contribute to a deeper, more liquid
market, to the benefit of all investors
and market participants.
Similarly, the Exchange believes its
proposal to eliminate the Market
Quality Tiers table and associated rebate
in Section 1)f) of the Fee Schedule is
reasonable, equitably allocated and not
unfairly discriminatory. The Exchange
adopted the Market Quality Tiers for the
purpose of encouraging executions of
Added Displayed Volume for qualifying
Equity Members as a means of
recognizing the value of market
participants that consistently quote at
the NBBO in a large number of
securities generally, and in the specified
MQ Securities, in particular. The
Exchange’s proposal to eliminate the
Market Quality Tiers table and
associated rebates is reasonable as the
NBBO Program incorporates similar
aspects, rebate amounts calculation
methodologies based on an Equity
Member’s Percent Time at NBBO in
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18:44 Sep 26, 2023
Jkt 259001
certain MQ Securities under Level B
and Level C, which should provide
more opportunities for Equity Members
to achieve higher rebates and will
encourage the submission of increased
order flow to the benefit of all Equity
Members. This should provide greater
execution opportunities on the
Exchange and contribute to a more
liquid market, to the benefit of all
investors and market participants.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act.
Intra-Market Competition
The Exchange believes the proposed
rule change does not impose any burden
on intramarket competition that is not
necessary or appropriate in furtherance
of the purposes of the Act. Particularly,
the proposed NBBO Program will be
eligible to all Equity Members equally in
that all Equity Members have the
opportunity to participate and therefore
qualify for the proposed enhanced
rebates. Furthermore, the Exchange
believes that the proposed NBBO
Program will incentivize Equity
Members to submit additional
aggressively priced displayed liquidity
to the Exchange, and to increase their
order flow on the Exchange generally,
thereby contributing to a deeper and
more liquid market and promoting price
discovery and market quality on the
Exchange to the benefit of all market
participants and enhancing the
attractiveness of the Exchange as a
trading venue. The Exchange believes
that this, in turn, would continue to
encourage market participants to direct
additional order flow to the Exchange.
Greater liquidity benefits all Equity
Members by providing more trading
opportunities and encourages Equity
Members to send additional orders to
the Exchange, thereby contributing to
robust levels of liquidity, which benefits
all market participants.
The proposed decrease to the
standard rebate for executions of orders
in securities priced at or above $1.00 per
share for Added Displayed Volume does
not impose a burden on intramarket
competition that is not in furtherance of
the Act in that the proposed change
applies to all Equity Members equally
and the proposed reduced rate is still
competitive with, or higher than, rebates
offered by competing exchanges for
similar executions.38
38 See
PO 00000
supra note 20.
Frm 00180
Fmt 4703
Sfmt 4703
The proposed non-substantive
changes to the Definitions section of the
Fee Schedule are similarly nonburdensome as they are intended to
provide clear descriptions of the terms
applicable to the proposed NBBO
Program.
In general, the Exchange believes all
of the proposed changes are intended to
enhance market quality on the Exchange
in a large number of securities generally,
and in the MQ Securities specifically,
and to encourage Equity Members to
maintain or increase their order flow on
the Exchange, thereby promoting price
discovery and contributing to a deeper
and more liquid market to the benefit of
all market participants. As a result, the
Exchange believes the proposal would
enhance its competitiveness as a market
that attracts actionable orders, thereby
making it a more desirable destination
venue for its customers. For these
reasons, the Exchange believes that the
proposal furthers the Commission’s goal
in adopting Regulation NMS of fostering
competition among orders, which
promotes ‘‘more efficient pricing of
individual stocks for all types of orders,
large and small.’’ 39
Intermarket Competition
The Exchange believes its proposal
will benefit competition, and the
Exchange notes that it operates in a
highly competitive market. Equity
Members have numerous alternative
venues they may participate on and
direct their order flow to, including
fifteen other equities exchanges and
numerous alternative trading systems
and other off-exchange venues. As noted
above, no single registered equities
exchange currently has more than 13–
14% of the total market share of
executed volume of equities trading.40
Thus, in such a low-concentrated and
highly competitive market, no single
equities exchange possesses significant
pricing power in the execution of order
flow. Moreover, the Exchange believes
that the ever-shifting market share
among the exchanges from month to
month demonstrates that market
participants can shift order flow in
response to new or different pricing
structures being introduced to the
market. Accordingly, competitive forces
constrain the Exchange’s transaction
fees and rebates generally, including
with respect to executions of Added
Displayed Volume, and market
participants can readily choose to send
their orders to other exchanges and offexchange venues if they deem fee levels
39 See Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 47396 (June 29, 2005).
40 See supra note 26.
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Federal Register / Vol. 88, No. 186 / Wednesday, September 27, 2023 / Notices
at those other venues to be more
favorable.
As described above, the proposal is
designed to enhance market quality on
the Exchange and to encourage
additional order flow and quoting
activity on the Exchange and to promote
market quality through pricing
incentives that are comparable to, and
competitive with, pricing programs in
place at other exchanges with respect to
executions of Added Displayed
Volume.41 Accordingly, the Exchange
believes the proposal would not be a
burden on, but rather promote,
intermarket competition by enabling the
Exchange to better compete with other
exchanges that offer similar incentives
to market participants that enhance
market quality and/or achieve certain
volume criteria and thresholds.
Additionally, the Commission has
repeatedly expressed its preference for
competition over regulatory
intervention in determining prices,
products, and services in the securities
markets. Specifically, 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.’’ 42 The
fact that this market is competitive has
also long been recognized by the courts.
In NetCoalition v. Securities and
Exchange Commission, the DC 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 brokerdealers that act as their 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 possess a monopoly,
regulatory or otherwise, in the execution
of order flow from broker dealers’
. . .’’.43 Accordingly, the Exchange does
not believe its proposed pricing changes
impose any burden on competition that
is not necessary or appropriate in
furtherance of the purposes of the Act.
41 See
supra note 19.
Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37496, 37499 (June 29, 2005).
43 NetCoalition v. SEC, 615 F.3d 525, 539 (D.C.
Cir. 2010) (quoting Securities Exchange Act Release
No. 59039 (December 2, 2008), 73 FR 74770, 74782–
83 (December 9, 2008) (SR–NYSE–2006–21)).
42 See
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18:44 Sep 26, 2023
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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,44 and Rule
19b-4(f)(2) 45 thereunder. At any time
within 60 days of the filing of the
proposed rule change, the Commission
summarily may temporarily suspend
such rule change if it appears to the
Commission that such action is
necessary or appropriate in the public
interest, for the protection of investors,
or otherwise in furtherance of the
purposes of the Act. If the Commission
takes such action, the Commission shall
institute proceedings to determine
whether the proposed rule should be
approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
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–2023–45 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–2023–45. 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–2023–45 and should be
submitted on or before October 18,
2023.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.46
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023–20960 Filed 9–26–23; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–98475; File No. SR–
NASDAQ–2023–037]
Self-Regulatory Organizations; The
Nasdaq Stock Market LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change To Amend
NOM Options 7, Section 2
September 21, 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
September 13, 2023, The Nasdaq Stock
Market LLC (‘‘Nasdaq’’ or ‘‘Exchange’’)
filed with the Securities and Exchange
Commission (‘‘SEC’’ or ‘‘Commission’’)
the proposed rule change as described
in Items I, II, and III, below, which Items
have been prepared by the Exchange.
The Commission is publishing this
notice to solicit comments on the
proposed rule change from interested
persons.
46 17
44 15
U.S.C. 78s(b)(3)(A)(ii).
45 17 CFR 240.19b–4(f)(2).
PO 00000
Frm 00181
Fmt 4703
Sfmt 4703
66541
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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]]>Agencies
[Federal Register Volume 88, Number 186 (Wednesday, September 27, 2023)]
[Notices]
[Pages 66533-66541]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-20960]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-98472; File No. SR-PEARL-2023-45]
Self-Regulatory Organizations; MIAX PEARL, LLC; Notice of Filing
and Immediate Effectiveness of a Proposed Rule Change To Amend the MIAX
Pearl Equities Fee Schedule To Adopt the NBBO Setter Plus Program and
Eliminate Certain Other Rebates
September 21, 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 September 11, 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.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange is filing a proposal to amend the fee schedule (the
``Fee Schedule'') applicable to MIAX Pearl Equities, an equities
trading facility of the Exchange.
The text of the proposed rule change is available on the Exchange's
website at https://www.miaxglobal.com/markets/us-equities/pearl-equities/rule-filings, 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 amend the Fee Schedule to: (i) adopt a new
incentive program called the ``NBBO Setter Plus Program'' (referred to
in this filing as the ``NBBO Program'') that, in general, provides
enhanced rebates for Equity Members' \3\ added displayed liquidity
(``Added Displayed Volume'') in securities priced at or above $1.00 per
share in all Tapes based on increasing volume thresholds and increasing
market quality levels (described below), as well as an additive rebate
applied to orders that set the NBBO \4\ upon entry; (ii) reduce the
standard rebate for executions of orders in securities priced at or
above $1.00 per share for Added Displayed Volume in all Tapes and make
the corresponding changes to the Liquidity Indicator Codes and
Associated Fees table \5\; (iii) eliminate the Add Volume Tiers table
\6\ and associated rebates and make corresponding changes to rename
Section 1)c) to now be titled ``NBBO Setter Plus Program''; (iv)
eliminate the Market Quality Tiers table \7\ and associated rebates;
(v) renumber Section 1)g), Step-Up Added Liquidity Rebate, to now be
Section 1)f), Step-Up Added Liquidity Rebate; and (vi) amend the
Definitions section to include a definition for the term ``NBBO Set
Volume'' (described below). All of the proposed changes relate to the
adoption of the proposed NBBO Program, which incorporates certain
concepts from the current Add Volume Tiers and Market Quality Tiers
programs.
---------------------------------------------------------------------------
\3\ The term ``Equity Member'' is a Member authorized by the
Exchange to transact business on MIAX Pearl Equities. See Exchange
Rule 1901.
\4\ With respect to the trading of equity securities, the term
``NBB'' shall mean the national best bid, the term ``NBO'' shall
mean the national best offer, and the term ``NBBO'' shall mean the
national best bid and offer. See Exchange Rule 1901.
\5\ See Fee Schedule, Section 1)b), Liquidity Indicator Codes
AA, AB and AC.
\6\ See Fee Schedule, Section 1)c).
\7\ See Fee Schedule, Section 1)f).
---------------------------------------------------------------------------
The Exchange originally filed this proposal on August 31, 2023 (SR-
PEARL-2023-42). On September 11, 2023, the Exchange withdrew SR-PEARL-
2023-42 and refiled this proposal.
Background of Current Rebate Programs Impacted by This Proposal
Section 1)a) of the Fee Schedule sets forth the Exchange's standard
rebates and fees for adding, removing or routing orders (displayed and
non-displayed) in all Tapes. The Exchange provides different rebates
and fees depending on whether (i) the execution is for an order where
the securities are priced at or above $1.00 per share, or (ii) the
execution is for an order where the securities are priced below $1.00
per share. Relevant for the purposes of this proposal, the Exchange
currently provides a standard rebate of ($0.0027) \8\ per share for
executions of orders in securities priced at or above $1.00 per share
for Added Displayed Volume across all Tapes.\9\
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\8\ The Exchange indicates rebates in parentheses in the Fee
Schedule. See the General Notes Section of the Fee Schedule.
\9\ See Fee Schedule, Section 1)a). See also Fee Schedule,
Section 1)b), Liquidity Indicator Codes AA, AB, and AC.
---------------------------------------------------------------------------
Section 1)b) of the Fee Schedules provides a list of the liquidity
indicator codes and associated rebates or fees that are applied to a
transaction so that each Equity Member that enters an order is able to
understand the fee or rebate that is applied to the execution. Each
side of a trade is assigned a liquidity indicator code in order to
identify the scenario under which the trade occurred.
Section 1)c) of the Fee Schedule provides a volume-based tier
structure, referred to as the Add Volume Tiers, in
[[Page 66534]]
which the Exchange provides enhanced rebates for executions of orders
in securities priced at or above $1.00 per share for Added Displayed
Volume for Equity Members that meet specified volume thresholds on the
Exchange. In particular, an Equity Member that qualifies for Add Volume
Tier 1 will receive an enhanced rebate of ($0.0032) per share for
executions of orders in securities priced at or above $1.00 per share
for Added Displayed Volume across all Tapes by achieving an ADAV \10\
of at least 0.07% of TCV.\11\ An Equity Member that qualifies for Add
Volume Tier 2 will receive an enhanced rebate of ($0.0035) per share
for executions of orders in securities priced at or above $1.00 per
share for Added Displayed Volume across all Tapes by achieving an ADAV
of at least 0.10% of TCV. An Equity Member that qualifies for Add
Volume Tier 3 will receive an enhanced rebate of ($0.0036) per share
for executions of orders in securities priced at or above $1.00 per
share for Added Displayed Volume across all Tapes by achieving an ADAV
of at least 0.30% of TCV. The enhanced rebates provided by the Add
Volume Tiers are provided instead of the standard rebate of ($0.0027)
per share applicable to executions of orders in securities priced at or
above $1.00 per share for Added Displayed Volume across all Tapes.
---------------------------------------------------------------------------
\10\ The term ``ADAV'' means average daily added volume
calculated as the number of shares added per day and ``ADV'' means
average daily volume calculated as the number of shares added or
removed, combined, per day. ADAV and ADV are calculated on a monthly
basis. The Exchange excludes from its calculation of ADAV and ADV
shares added or removed on any day that the Exchange's system
experiences a disruptions that lasts for more than 60 minutes during
regular trading hours (``Exchange System Disruption''), on any day
with a scheduled early market close, and on the ``Russell
Reconstitution Day'' (typically the last Friday in June). Routed
shares are not included in the ADAV or ADV calculation. See the
Definitions Section of the Fee Schedule.
\11\ The term ``TCV'' means total consolidated volume calculated
as the volume in shares reported by all exchanges and reporting
facilities to a consolidated transaction reporting plan for the
month for which the fees apply. The Exchange excludes from its
calculation of TCV volume on any given day that the Exchange's
system experiences a disruption that lasts for more than 60 minutes
during Regular Trading Hours. On any day with a scheduled early
market close, and on the ``Russell Reconstitution Day'' (typically
the last Friday in June). See the Definitions Section of the Fee
Schedule.
---------------------------------------------------------------------------
Section 1)f) of the Fee Schedule sets forth a separate tiered
pricing incentive structure, referred to as the Market Quality Tiers,
which provides enhanced rebates for executions of orders in securities
priced at or above $1.00 per share for Added Displayed Volume for
Equity Members that meet certain minimum quoting requirements across a
specified number of securities. In particular, the Exchange provides an
enhanced rebate of ($0.0032) per share in Market Quality Tier 1 for
executions of orders in securities priced at or above $1.00 per share
for Added Displayed Volume if the Equity Member's Percent Time at NBBO
\12\ is at least 25% in an average of at least 250 securities, at least
50 of which must be Market Quality Securities,\13\ per trading day
during the month. The Exchange also provides an enhanced rebate of
($0.0035) per share in Market Quality Tier 2 for executions of orders
in securities priced at or above $1.00 per share for Added Displayed
Volume if the Equity Member's Percent Time at NBBO is at least 25% in
an average of at least 1,000 securities, at least 100 of which must be
MQ Securities, per trading day during the month. The list of MQ
Securities is published on the Exchange's website.\14\
---------------------------------------------------------------------------
\12\ The term ``Percent Time at NBBO'' means the aggregate of
the percentage of time during regular trading hours where a Member
has a displayed order of at least one round lot at the national best
bid (``NBB'') or the national best offer (``NBO''). See the
Definitions Section of the Fee Schedule.
\13\ Pursuant to this proposal, and as described further below,
the Exchange proposes to slightly amend the term ``Market Quality
Securities'' or ``MQ Securities'' as currently defined in the Fee
Schedule in order to account for the changes to the Market Quality
Tiers program and newly proposed NBBO Setter Plus Program.
Currently, the term ``Market Quality Securities'' or ``MQ
Securities'' means a list of securities designated as such, that are
used for the purposes of qualifying for the Market Quality Tiers.
The universe of these securities will be determined by the Exchange
and published on the Exchange's website. See the Definitions Section
of the Fee Schedule. The proposed changes are described below.
\14\ See https://www.miaxglobal.com/markets/us-equities/pearl-equities/fees (last visited August 21, 2023).
---------------------------------------------------------------------------
Proposal To Adopt the NBBO Setter Plus Program
The Exchange proposes to adopt a new incentive program called the
``NBBO Setter Plus Program'' (referred to in this filing as the ``NBBO
Program''), which is designed to incentivize market quality and quoting
on the Exchange. Certain elements of the NBBO Program will be similar
to the incentives and volume calculations for the current Add Volume
Tiers and Market Quality Tiers programs. In connection with the
establishment of the NBBO Program, the Exchange proposes to remove the
Add Volume Tiers and Market Quality Tiers sections from the Fee
Schedule (described further below), with Section 1)c) being re-titled
``NBBO Setter Plus Program.''
The Exchange proposes to add a new table in Section 1)c) of the Fee
Schedule titled ``NBBO Setter Plus Table.'' The NBBO Setter Plus Table
will provide enhanced rebates for executions of orders in securities
priced at or above $1.00 per share for Added Displayed Volume across
all Tapes (applicable to Liquidity Indicator Codes AA, AB and AC).
Conceptually, the NBBO Program provides four volume tiers enhanced by
three market quality levels to provide increasing rebates in this
segment. The four volume tiers are achievable by greater volume from
the best of three alternative methods. The three market quality levels
are achievable by greater NBBO participation in a minimum number of
specific securities. Additionally, there is an additive rebate for
trades the set the NBBO, described further below.
First, MIAX Pearl Equities will determine the applicable tier based
on three different volume calculation methods. The three volume-based
methods to determine the Equity Member's tier for purposes of the NBBO
Program will be calculated in parallel in each month, and each Equity
Member will receive the highest tier achieved from any of the three
methods each month. All three volume calculation methods will be based
on an Equity Member's respective ADAV or NBBO Set Volume or ADV as a
percent of industry TCV as the denominator.
Under volume calculation Method 1, the Exchange proposes to provide
tiered rebates based on an Equity Member's ADAV as a percentage of TCV.
In particular, an Equity Member will qualify for the base rebates in
Tier 1 for executions of orders in securities priced at or above $1.00
per share for Added Displayed Volume across all Tapes by achieving an
ADAV of at least 0.00% and less than 0.08% of TCV. An Equity Member
will qualify for the enhanced rebates in Tier 2 for executions of
orders in securities priced at or above $1.00 per share for Added
Displayed Volume across all Tapes by achieving an ADAV of at least
0.08% and less than 0.25% of TCV. An Equity Member will qualify for the
enhanced rebates in Tier 3 for executions of orders in securities
priced at or above $1.00 per share for Added Displayed Volume across
all Tapes by achieving an ADAV of at least 0.25% and less than 0.40% of
TCV. Finally, an Equity Member will qualify for the enhanced rebates in
Tier 4 for executions of orders in securities priced at or above $1.00
per share for Added Displayed Volume across all Tapes by achieving an
ADAV of at least 0.40% of TCV.
Under volume calculation Method 2, the Exchange proposes to provide
tiered rebates based on an Equity Member's NBBO Set Volume as a
percentage of TCV. In connection with this proposed
[[Page 66535]]
volume calculation method, the Exchange proposes to adopt a definition
for the term ``NBBO Set Volume,'' which will be included in the
Definitions section of the Fee Schedule. The Exchange proposes that the
term NBBO Set Volume means the ADAV in all securities of an Equity
Member that sets the NBB or NBO on MIAX Pearl Equities. Pursuant to
proposed Method 2, an Equity Member will qualify for the base rebates
in Tier 1 for executions of orders in securities priced at or above
$1.00 per share for Added Displayed Volume across all Tapes by
achieving an NBBO Set Volume of at least 0.00% and less than 0.02% of
TCV. An Equity Member will qualify for the enhanced rebates in Tier 2
for executions of orders in securities priced at or above $1.00 per
share for Added Displayed Volume across all Tapes by achieving an NBBO
Set Volume of at least 0.02% and less than 0.03% of TCV. An Equity
Member will qualify for the enhanced rebates in Tier 3 for executions
of orders in securities priced at or above $1.00 per share for Added
Displayed Volume across all Tapes by achieving an NBBO Set Volume of at
least 0.03% and less than 0.08% of TCV. An Equity Member will qualify
for the enhanced rebates in Tier 4 for executions of orders in
securities priced at or above $1.00 per share for Added Displayed
Volume across all Tapes by achieving an NBBO Set Volume of at least
0.08% of TCV.
Under volume calculation Method 3, the Exchange proposes to provide
tiered rebates based on an Equity Member's ADV as a percentage of TCV.
In particular, an Equity Member will qualify for the base rebates in
Tier 1 for executions of orders in securities priced at or above $1.00
per share for Added Displayed Volume across all Tapes by achieving an
ADV of at least 0.00% and less than 0.20% of TCV. An Equity Member will
qualify for the enhanced rebates in Tier 2 for executions of orders in
securities priced at or above $1.00 per share for Added Displayed
Volume across all Tapes by achieving an ADV of at least 0.20% and less
than 0.60% of TCV. An Equity Member will qualify for the enhanced
rebates in Tier 3 for executions of orders in securities priced at or
above $1.00 per share for Added Displayed Volume across all Tapes by
achieving an ADV of at least 0.60% and less than 1.00% of TCV. An
Equity Member will qualify for the enhanced rebates in Tier 4 for
executions of orders in securities priced at or above $1.00 per share
for Added Displayed Volume across all Tapes by achieving an ADV of at
least 1.00% of TCV.
After the volume calculation is performed to determine highest tier
achieved by the Equity Member, the applicable rebate will be calculated
based on two different measurements based on the Equity Member's
participation at the NBBO on the Exchange in certain securities
(referenced below).
The Exchange proposes to provide one column of base rebates
(referred to in the NBBO Program table as ``Level A'') and two columns
of enhanced rebates (referred to in the NBBO Program table as ``Level
B'' and ``Level C''), depending on the Equity Member's Percent Time at
NBBO on MIAX Pearl Equities in a certain amount of specified securities
(``Market Quality Securities'' or ``MQ Securities,'' defined below).
The Fee Schedule will specify the percentage of time that the Equity
Member must be at the NBBO on MIAX Pearl Equities in at least 200
symbols out of the full list of 1,000 MQ Securities (which may vary
from time to time based on market conditions). The list of MQ
Securities will be generally based on the top multi-listed 1,000
symbols by ADV across all U.S. securities exchanges. The list of MQ
Securities will be updated monthly by the Exchange and published on the
Exchange's website. The Exchange notes that at least one other
competing exchange provides enhanced rebates for executions of orders
in certain securities priced at or above $1.00 per share submitted by
members that set or join the NBBO on that exchange.\15\
---------------------------------------------------------------------------
\15\ See Cboe BZX Equities Fee Schedule, NBBO Setter section and
Add/Remove Volume Tiers section, available at https://www.cboe.com/us/equities/membership/fee_schedule/bzx/ (providing an additional
rebate of ($0.0007) per share to the top displayed liquidity tier
rebate of ($0.0031) per share for executions of added displayed
volume in securities priced at or above $1.00 per share that
establish a new Setter NBBO in NBBO Setter Securities on Cboe BZX).
For purposes of the Cboe BZX Fee Schedule, the term ``Setter NBBO''
means a quotation of at least 100 shares that is better than the
NBBO or a quotation of a notional size of at least $10,000.00 that
is better than the NBBO. Further, the term ``NBBO Setter
Securities'' means a list of securities included in the Cboe BZX
NBBO Setter Program, the universe of which will be determined by
Cboe BZX and published in a notice distributed to Cboe BZX members
and on the Cboe BZX website. See id.
---------------------------------------------------------------------------
The Exchange proposes that, for the purpose of determining
qualification for the rebates described in Level B and Level C of
Market Quality Tier columns in the NBBO Setter Plus Program, the
Exchange will exclude from its calculation: (1) any trading day that
the Exchange's system experiences a disruption that lasts for more than
60 minutes during regular trading hours; (2) any day with a scheduled
early market close; and (3) the ``Russell Reconstitution Day''
(typically the last Friday in June). The Exchange proposes to describe
this exclusion in the General Notes section of the Fee Schedule. The
Exchange believes that these types of Exchange system disruptions could
preclude Equity Members from participating on the Exchange to the
extent that they might have otherwise participated on such days, and
thus, the Exchange believes it is appropriate to exclude such days when
determining whether an Equity Member meets the applicable Percent Time
at NBBO during a month to avoid penalizing Equity Members that might
otherwise have met such requirements.
Additionally, the Exchange believes that scheduled early market
closures, which typically are the day before, or the day after, a
holiday, may preclude some Equity Members from participating on the
Exchange at the same level that they might otherwise. For similar
reasons, the Exchange believes it is appropriate to exclude the Russell
Reconstitution Day in the same manner, as the Exchange believes that
the Russell Reconstitution Day typically has extraordinarily high, and
abnormally distributed, trading volumes and the Exchange believes this
change to normal activity may affect an Equity Member's ability to meet
the quoting requirement across various MQ Securities on that day. The
Exchange notes that the exclusion of any day during which the
Exchange's system experiences a disruption that lasts for more than 60
minutes during Regular Trading Hours, any day with a scheduled early
market close, and the Russell Reconstitution Day is consistent with the
methodologies used by other exchanges when calculating certain member
trading and other volume metrics for purposes of determining whether
those members qualify for certain pricing incentives, and the Exchange
believes application of this methodology is similarly appropriate for
the proposed Percent Time at NBBO requirements under the proposed NBBO
Program.\16\
---------------------------------------------------------------------------
\16\ See e.g., Cboe BZX Equities Fee Schedule, available at
https://www.cboe.com/us/equities/membership/fee_schedule/bzx/; Cboe
EDGX Exchange, Inc. (``Cboe EDGX'') Equities Fee Schedule, available
at https://www.cboe.com/us/equities/membership/fee_schedule/edgx/;
and MEMX, LLC (``MEMX'') Fee Schedule, available at https://info.memxtrading.com/fee-schedule/.
---------------------------------------------------------------------------
The Exchange proposes that the base rebates (``Level A'') will be
as follows: ($0.00240) per share in Tier 1; ($0.00310) per share in
Tier 2; ($0.00345) per share in Tier 3; and ($0.00350) per share in
Tier 4.\17\
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\17\ The Exchange notes that the proposed ($0.00240) per share
will be the base standard rebate for executions of orders in
securities priced at or above $1.00 per share for Added Displayed
Volume across all Tapes, which is a decrease from the current
standard rebate of ($0.0027) per share, listed in Section 1)a) of
the Fee Schedule and attributable to Liquidity Indicator Codes AA,
AB and AC. The purpose and rationale for the proposed decrease in
the standard rebate for executions of orders in securities priced at
or above $1.00 per share for Added Displayed Volume across all Tapes
is discussed below.
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[[Page 66536]]
Under Level B, the Exchange proposes to provide enhanced rebates
for executions of orders in securities priced at or above $1.00 per
share for Added Displayed Volume across all Tapes if the Equity
Member's Percent Time at NBBO is at least 25% and less than 50% in at
least 200 MQ Securities per trading day during the month. The Exchange
proposes that the Level B rebates will be as follows: ($0.00250) per
share in Tier 1; ($0.00315) per share in Tier 2; ($0.00350) per share
in Tier 3; and ($0.00355) per share in Tier 4.
Under Level C, the Exchange proposes to provide enhanced rebates
for executions of orders in securities priced at or above $1.00 per
share for Added Displayed Volume across all Tapes if the Equity
Member's Percent Time at NBBO is at least 50% in at least 200 MQ
Securities per trading day during the month. The Exchange proposes that
the Level C rebates will be as follows: ($0.00260) per share in Tier 1;
($0.00320) per share in Tier 2; ($0.00355) per share in Tier 3; and
($0.00360) per share in Tier 4.
The Exchange notes that the introduction of the NBBO Setter Plus
Program will be available to all Equity Members and will provide Equity
Members several different opportunities to receive enhanced rebates
utilizing three different volume calculation methodologies and
different participation levels at the NBBO. The proposed changes are
designed to encourage Equity Members that provide Added Displayed
Volume in securities priced at or above $1.00 per share across all
Tapes to the Exchange to increase such order flow, which would benefit
all Equity Members by providing greater execution opportunities on the
Exchange and contribute to a deeper, more liquid market, to the benefit
of all investors and market participants.
NBBO Setter Additive Rebate
The Exchange proposes to provide an additional rebate as part of
the NBBO Program, which will be included as a line item at the bottom
of the NBBO Setter Plus table. In particular, the Exchange proposes to
provide an ``NBBO Setter Additive Rebate'' of ($0.0003) per share,
which will be applicable only to executions of orders in securities
priced at or above $1.00 per share for Added Displayed Volume (other
than Retail Orders \18\) that set the NBB or NBO on MIAX Pearl Equities
with a minimum size of a round lot. The purpose of the proposed NBBO
Setter Additive Rebate is to provide an additional incentive for Equity
Members to contribute Added Displayed Volume in securities priced at or
above $1.00 per share that sets the NBBO on MIAX Pearl Equities, which
should benefit all Equity Members by providing greater execution
opportunities on the Exchange and contribute to a deeper, more liquid
market, to the benefit of all investors and market participants.
Additionally, other U.S. equity exchanges have adopted similar pricing
incentives applicable to executions of orders that establish the NBBO,
with the Exchange's proposed top tier rebate, coupled with the NBBO
Setter Additive Rebate, being higher than competing exchanges' top
rebates for similar executions (providing additive rebate of ($0.0003)
per share to the top displayed liquidity tier rebate of ($0.0036) per
share for executions of added displayed volume (other than retail
orders) in securities priced at or above $1.00 per share that establish
the NBBO on the Exchange, for a total ``enhanced'' rebate of ($0.0039)
per share).\19\
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\18\ A ``Retail Order'' is an agency or riskless principal order
that meets the criteria of FINRA Rule 5320.03 that originates from a
natural person and is submitted to the Exchange by a Retail Member
Organization, provided that no change is made to the terms of the
order with respect to price or side of market and the order does not
originate from a trading algorithm or any other computerized
methodology. See Exchange Rule 2626(a)(2).
\19\ See MEMX Fee Schedule, NBBO Setter/Joiner Tiers Section
(providing additional rebate of ($0.0004) per share to the top
displayed liquidity tier rebate of ($0.0033) per share for
executions of added displayed volume (other than retail orders) in
securities priced at or above $1.00 per share that establish the
NBBO or establish a new BBO on MEMX that matches the NBBO first
established on an away market, for a total ``enhanced'' rebate of
($0.0037) per share); and Cboe BZX Fee Schedule, NBBO Setter section
and Add/Remove Volume Tiers section (providing additional rebate of
($0.0007) per share to the top displayed liquidity tier rebate of
($0.0031) per share for executions of added displayed volume in
securities priced at or above $1.00 per share that establish a new
Setter NBBO in NBBO Setter Securities on Cboe BZX, for a total
``enhanced'' rebate of ($0.0038) per share).
---------------------------------------------------------------------------
Corresponding Changes to the Fee Schedule
Proposal To Reduce the Standard Rebate for Executions of Orders in
Securities Priced at or Above $1.00 per Share for Added Displayed
Volume (All Tapes) and Corresponding Changes to Liquidity Indicator
Codes
In connection with the proposed NBBO Setter Plus Program, the
Exchange proposes to reduce the standard rebate for executions of
orders in securities priced at or above $1.00 per share that add
displayed liquidity to the Exchange across all Tapes (as mentioned
above). Currently, the Exchange provides a standard rebate of ($0.0027)
per share for executions of orders in securities priced at or above
$1.00 per share for Added Displayed Volume in all Tapes. The Exchange
now proposes to reduce the standard rebate from ($0.0027) to ($0.0024)
per share for executions of orders in securities priced at or above
$1.00 per share for Added Displayed Volume across all Tapes.
Accordingly, the Exchange proposes to amend Section 1)a), Standard
Rates, to reflect this proposed change and amend Section 1)b),
Liquidity Indicator Codes and Associated Fees, to reflect the
corresponding changes to the applicable Liquidity Indicator Codes, AA,
AB and AC.
The purpose of reducing the standard rebate for executions of
orders in securities priced at or above $1.00 per share for Added
Displayed Volume across all Tapes is due to the Exchange's proposal to
adopt the NBBO Program, which provides multiple volume calculation
methods for Equity Members to receive enhanced rebates compared to the
standard rate. The Exchange notes that despite the modest reduction
proposed herein, the proposed standard rebate of ($0.0024) per share
for executions of orders in securities priced at or above $1.00 per
share for Added Displayed Volume across all Tapes remains competitive
with, and higher than, the standard rebates provided by other exchanges
for similar executions.\20\
---------------------------------------------------------------------------
\20\ See e.g., NYSE Arca Equities Fee Schedule, available at
https://www.nyse.com/publicdocs/nyse/markets/nyse-arca/NYSE_Arca_Marketplace_Fees.pdf (providing standard rebates of
$0.0020 per share (Tapes A and C) and $0.0016 per share (Tape B) for
adding displayed liquidity in securities priced at or above $1.00
per share); see also Cboe BZX Equities Fee Schedule, available at
https://www.cboe.com/us/equities/membership/fee_schedule/bzx/
(providing a standard rebate of $0.0016 per share for adding
displayed liquidity in securities priced at or above $1.00 per
share).
---------------------------------------------------------------------------
Proposal To Eliminate the Add Volume Tiers Table and Associated Rebates
In connection with the NBBO Setter Plus Program, the Exchange
proposes to eliminate the Add Volume Tiers table and associated rebates
in Section 1)c) of the Fee Schedule and rename Section 1)c) as the NBBO
Setter Plus Program. As mentioned above, the Add Volume Tiers provided
enhanced rebates for executions of orders in securities priced at or
above $1.00 per share for Added Displayed Volume so long as the Equity
Member met specified ADAV thresholds on the Exchange. The Exchange
adopted
[[Page 66537]]
the Add Volume Tiers rebates for the purpose of encouraging Equity
Members to increase their orders that add liquidity on the Exchange,
thereby improving its market quality with respect to such securities
and contributing to a more robust and well-balanced market ecosystem on
the Exchange to the benefit of all Equity Members.\21\ The Exchange now
proposes to eliminate the Add Volume Tiers table and associated rebates
as the NBBO Program incorporates similar aspects and rebate amounts,
including, under volume calculation Method 1, tiered rebates based on
an Equity Member's ADAV as a percentage of TCV. The Exchange notes that
the NBBO Program does have slightly lower rebates for the corresponding
Add Volume Tier thresholds; however, the Exchange believes that the
benefits of the NBBO Program--three volume calculation methods and two
market quality levels based on participation at the NBBO in order to
obtain enhanced rebates--provides more opportunities for Equity Members
to achieve higher rebates and will encourage the submission of
increased order flow. The Exchange believes this will, in turn benefit
all Equity Members by providing greater execution opportunities on the
Exchange and contribute to a deeper, more liquid market, to the benefit
of all investors and market participants.
---------------------------------------------------------------------------
\21\ See Securities Exchange Act Release No. 93979 (January 14,
2022), 87 FR 3151 (January 20, 2022) (SR-PEARL-2022-01).
---------------------------------------------------------------------------
Proposal To Eliminate the Market Quality Tiers Table and Associated
Rebates
In connection with the NBBO Setter Plus Program, the Exchange
proposes to eliminate the Market Quality Tiers table and associated
rebate in Section 1)f) of the Fee Schedule. As mentioned above, the
Market Quality Tiers provided enhanced rebates for Equity Members that
met certain minimum quoting requirements across a specified number of
securities. The Exchange adopted the Market Quality Tiers for the
purpose of encouraging executions of Added Displayed Volume for
qualifying Equity Members as a means of recognizing the value of market
participants that consistently quote at the NBBO in a large number of
securities generally, and in the specified MQ Securities, in
particular.\22\ The Exchange now proposes to eliminate the Market
Quality Tiers table and associated rebates as the NBBO Program
incorporates similar aspects, rebate amounts, and calculation
methodologies based on an Equity Member's Percent Time at NBBO in
certain MQ Securities under Level B and Level C.
---------------------------------------------------------------------------
\22\ See Securities Exchange Act Release No. 94929 (May 17,
2022), 87 FR 31269 (May 23, 2022) (SR-PEARL-2022-21).
---------------------------------------------------------------------------
Proposal To Renumber Fee Schedule Section 1)g), Step-Up Added Liquidity
Rebate, as Section 1)f)
As described above, the Exchange proposes to eliminate the Market
Quality Tiers table and associated rebates currently described in
Section 1)f) of the Fee Schedule. Accordingly, the Exchange proposes to
renumber Section 1)g), Step-Up Added Liquidity Rebate, as Section 1)f).
The purpose of this change is to provide consistency and clarity in the
Fee Schedule.
Proposed Changes to the Definitions and General Notes Sections of the
Fee Schedule
As mentioned above, with the adoption of the NBBO Program, the
Exchange proposes to make several corresponding changes to the
Definitions and General Notes sections of the Fee Schedule. First, the
Exchange proposes to amend the paragraphs describing ``ADAV'' in the
Definition section to include the definition of ``NBBO Set Volume.'' In
particular, the term ``NBBO Set Volume'' will mean the ADAV in all
securities of an Equity Member that sets the NBB or NBO on MIAX Pearl
Equities. Further, the Exchange proposes that an Equity Member's NBBO
Set Volume will be excluded from the calculation of the NBBO Program in
certain instances. The Exchange proposes to amend the second paragraph
related to ADAV in the Definitions section to include NBBO Set Volume
as excluded volume. With the proposed changes, the paragraphs
describing ADAV in the Definitions section will read as follows:
``ADAV'' means average daily added volume calculated as the
number of shares added per day and ``ADV'' means average daily
volume calculated as the number of shares added or removed,
combined, per day. ADAV and ADV are calculated on a monthly basis.
NBBO Set Volume means the ADAV in all securities of an Equity Member
that sets the NBB or NBO on MIAX Pearl Equities.
The Exchange excludes from its calculation of ADAV, ADV, and
NBBO Set Volume shares added or removed on any day that the
Exchange's system experiences a disruption that lasts for more than
60 minutes during regular trading hours, on any day with a scheduled
early market close, and on the ``Russell Reconstitution Day''
(typically the last Friday in June).
Next, the Exchange proposes to amend the definition for ``Market
Quality Securities'' or ``MQ Securities.'' Since the Exchange proposes
to eliminate the Market Quality Tiers and associated rebates, which are
based on an Equity Member's participation at the NBBO in the currently-
defined MQ Securities, the Exchange will amend this definition to fit
within the NBBO Program. As described above, Level B and Level C
enhanced rebates in the NBBO Program will be partly based on an Equity
Member's Percent Time at NBBO on MIAX Pearl Equities in a certain
amount of MQ Securities. The Exchange proposes to amend the definition
of MQ Securities to reflect the elimination of the Market Quality Tiers
and adoption of the NBBO Program. Accordingly, with the proposed
changes, the definition for Market Quality Securities will be as
follows:
``Market Quality Securities'' or ``MQ Securities'' shall mean a
list of securities designated as such, that are used for the
purposes of qualifying for the rebates described in Level B and
Level C of the Market Quality Tier columns in the NBBO Setter Plus
Program. The universe of these securities will be determined by the
Exchange and published on the Exchange's website.
In connection with the proposed revised definition for MQ
Securities, the Exchange also proposes to amend the corresponding
paragraph in the General Notes section regarding when the Exchange
excludes certain Market Quality security volume. With the proposed
changes, the exclusion paragraph will read as follows:
For the purpose of determining qualification for the rebates
described in Level B and Level C of Market Quality Tier columns in
the NBBO Setter Plus Program, the Exchange will exclude from its
calculation: (1) any trading day that the Exchange's system
experiences a disruption that lasts for more than 60 minutes during
regular trading hours; (2) any day with a scheduled early market
close; and (3) the ``Russell Reconstitution Day'' (typically the
last Friday in June).
The purpose of all these changes is to provide consistency and
clarity in the Fee Schedule in light of the proposed adoption of the
NBBO Program and corresponding elimination of other rebate programs.
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 \23\ in general, and
furthers the objectives of Section 6(b)(4) of the Act \24\ in
[[Page 66538]]
particular, in that it provides for the equitable allocation of
reasonable dues, fees and other charges among its Equity Members and
issuers and other persons using its facilities. Additionally, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \25\ requirement that the rules of an exchange not be
designed to permit unfair discrimination between customers, issuers,
brokers or dealers.
---------------------------------------------------------------------------
\23\ 15 U.S.C. 78f(b).
\24\ 15 U.S.C. 78f(b)(4).
\25\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
The Exchange operates in a highly fragmented and competitive market
in which market participants can readily direct their order flow to
competing venues if they deem fee levels at a particular venue to be
excessive or incentives to be insufficient. More specifically, the
Exchange is only one of sixteen registered equities exchanges, and
there are a number of alternative trading systems and other off-
exchange venues, to which market participants may direct their order
flow. As of August 23, 2023, based on publicly available information,
no single registered equities exchange currently has more than
approximately 13-14% of the total market share of executed volume of
equities trading for the month of August 2023.\26\ Thus, in such a low-
concentrated and highly competitive market, no single equities exchange
possesses significant pricing power in the execution of order flow, and
the Exchange currently represents approximately 1.86% of the overall
market share. The Commission and the courts have repeatedly expressed
their 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.'' \27\
---------------------------------------------------------------------------
\26\ See the ``Market Share'' section of the Exchange's website,
available at https://www.miaxglobal.com/ (last visited August 23,
2023).
\27\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37499 (June 29, 2005).
---------------------------------------------------------------------------
The Exchange believes that the ever-shifting market share among the
exchanges from month to month demonstrates that market participants can
shift order flow or discontinue to reduce use of certain categories of
products, in response to new or different pricing structures being
introduced into the market. Accordingly, competitive forces constrain
the Exchange's transaction fees and rebates, and market participants
can readily trade on competing venues if they deem pricing levels at
those other venues to be more favorable. The Exchange believes the
proposal reflects a reasonable and competitive pricing structure
designed to incentivize market participants to direct their order flow
to the Exchange, which the Exchange believes would enhance liquidity
and market quality in both a broad manner and in a targeted manner with
respect to the MQ Securities and the NBBO Program.
NBBO Setter Plus Program
The Exchange believes that the proposed NBBO Setter Plus Program,
in general, is a reasonable means to encourage Equity Members to not
only increase their order flow to the Exchange but also to contribute
to price discovery and market quality on the Exchange by submitting
aggressively priced displayed liquidity in securities priced at or
above $1.00 per share. As noted above, aspects of the proposed NBBO
Program are comparable to other volume-based incentives currently in
place at the Exchange and competing exchanges, which have been widely
adopted.\28\ The Exchange believes the proposed NBBO Program is
equitable and not unfairly discriminatory because it is open to all
Equity Members on an equal basis and provides enhanced rebates that are
reasonably related to the value to the Exchange's market quality
associated with greater order flow by Equity Members that set the NBBO,
and the introduction of higher volumes of orders into the price and
volume discovery process. The Exchange believes the proposed NBBO
Program is equitable and not unfairly discriminatory because it is
designed to incentivize the entry of aggressively priced displayed
liquidity that will create tighter spreads, thereby promoting price
discovery and market quality on the Exchange to the benefit of all
Equity Members and public investors.
---------------------------------------------------------------------------
\28\ See, generally, Fee Schedule, Section 1)c) and Section
1)f); see also Cboe BZX Equities Fee Schedule, NBBO Setter Section
and Add/Remove Volume Tiers Section and MEMX Fee Schedule, NBBO
Setter/Joiner Tiers Section.
---------------------------------------------------------------------------
The Exchange believes the proposal to have three different volume
calculation methods to determine the Equity Member's tier for purposes
of the NBBO Program is reasonable, equitably allocated, and not
unfairly discriminatory because the three methods will be calculated in
parallel in each month, and each Equity Member will receive the tier
associated with the highest tier achieved each month. This allows
market participants with various trading strategies to participate in
the NBBO Program, including, among others, Equity Members with
liquidity providing strategies, aggressive order adding strategies that
attempt to set the NBBO, as well as Equity Members acting as an agency
for customers.
The Exchange believes the proposed Market Quality Tiers applicable
to the enhanced rebates in the NBBO Program, which are dependent upon
the Equity Member's Percent Time at NBBO in MQ Securities, are
reasonable, equitably allocated and not unfairly discriminatory. This
is because the Market Quality Tiers of the NBBO Program are intended to
encourage Equity Members to promote price discovery and market quality
by quoting at the NBBO for a significant portion of each day in a large
number of securities generally, and in MQ Securities in particular,
thereby benefiting the Exchange and other investors by providing
improved trading conditions for all market participants through
narrower bid-ask spreads and increasing the depth of liquidity
available at the NBBO in a broad base of highly liquid securities. As
noted above, Cboe BZX provides an enhanced rebate based on increased
member participation in a defined list of securities (called the NBBO
Setter Securities on Cboe BZX) that set the NBBO on that exchange.\29\
---------------------------------------------------------------------------
\29\ See supra note 15.
---------------------------------------------------------------------------
The Exchange believes the proposed enhanced rebates in Level B \30\
and Level C \31\ of the Market Quality Tiers of the NBBO Program are
reasonable in that they do not reflect disproportionate increases above
the standard rebates of ($0.00250) per share for Level B and ($0.00260)
per share for Level C, but reflect the value added value to the
Exchange's market quality from Equity Members that meet the required
Percent Time at NBBO in the minimum number of MQ Securities, which
should incentivize the entry of aggressively priced displayed liquidity
that will create tighter spreads, promote price discovery and market
quality on the Exchange to the benefit of all Equity Members and public
investors.
---------------------------------------------------------------------------
\30\ Proposed tiered rebates ranging from ($0.00250) in Tier 1
to ($0.00355) in Tier 4.
\31\ Proposed tiered rebates ranging from ($0.00260) in Tier 1
to ($0.00360) in Tier 4.
---------------------------------------------------------------------------
The Exchange further believes that the proposed criteria to achieve
the enhanced rebates provided in Level B and Level C of the Market
Quality Tiers of the NBBO Program is reasonable and not unfairly
discriminatory because the proposed criteria for Level C rebates is
[[Page 66539]]
incrementally more difficult to achieve than that of Level B, and thus
Level C appropriately offers higher rebates commensurate with the
corresponding higher Percent Time at NBBO by Equity Members in the
minimum number of MQ Securities. Therefore, the Exchange believes that
the Market Quality Tiers of the NBBO Program, as proposed, are
consistent with an equitable allocation of fees and rebates, as the
more stringent criteria correlates with the corresponding higher tiers'
enhanced rebates.
In addition, the Exchange believes that it is reasonable and
consistent with an equitable allocation of fees to pay higher rebates
for executions of orders in securities priced at or above $1.00 per
share for Added Displayed Volume to Equity Members that qualify for one
of the Market Quality Tiers of the NBBO Program because of the
additional commitment to market quality reflected in the associated
Percent Time at NBBO requirements. Such Equity Members benefit all
investors by promoting price discovery and increasing the depth of
liquidity available at the NBBO and benefit the Exchange itself by
enhancing its competitiveness as a market center that attracts
actionable orders. Further, the Exchange notes that the proposed Market
Quality Tiers of the NBBO Program offer incentives on the Exchange that
would apply uniformly to all Equity Members, and any Equity Member may
choose to qualify for one of those tiers by meeting the associated
requirements in any month. The Exchange believes that the requirements
are attainable for many market participants who do actively quote on
the Exchange and are reasonably related to the enhanced market quality
that the NBBO Program is designed to promote.
The Exchange also believes that including in the proposed Market
Quality Tiers of the NBBO Program a quoting requirement for certain
specified securities (i.e., the MQ Securities), is equitable and not
unfairly discriminatory because the Exchange has identified the MQ
Securities as securities in which it would like to inject additional
quoting competition, which the Exchange believes will generally act to
narrow spreads, increase size at the NBBO, and increase liquidity depth
in such securities, thereby increasing the attractiveness of the
Exchange as a destination venue with respect to such securities.
Accordingly, the Exchange believes that this aspect of the proposal is
reasonable, equitably allocated, and not unfairly discriminatory
because it is consistent with the overall goals of enhancing market
quality.
As noted above, the proposed Market Quality Tiers of the NBBO
Program are similar in structure and purpose to pricing programs in
place on at least one other exchange that is designed to enhance market
quality.\32\ Specifically, this program provides a higher rebate for
executions of liquidity-adding displayed orders for members that
achieve minimum quoting standards, including minimum quoting at the
NBBO in a large number of securities generally, or certain designated
securities in particular.\33\ The Exchange also notes that the proposed
Market Quality Tiers of the NBBO Program are not dissimilar from
volume-based rebates and fees which have been widely adopted by
exchanges \34\ and are equitable and not unfairly discriminatory
because they are generally open to all Equity Members on an equal basis
and provide higher rebates that are reasonably related to the value of
an exchange's market quality. Much like volume-based tiers are designed
to incentivize higher levels of liquidity provision, the proposed
Market Quality Tiers portion of the NBBO Program is designed to
incentivize enhanced market quality on the Exchange through tighter
spreads, greater size at the NBBO, and greater quoting depth in a large
number of securities generally, and in MQ Securities specifically,
through the provision of an enhanced rebate, where such rebate will in
turn incentivize higher levels of displayed liquidity provision in a
general manner. Accordingly, the Exchange believes that the proposed
NBBO Program, in general, promotes the principles discussed in Sections
6(b)(4) and 6(b)(5) of the Act.\35\
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\32\ See supra note 15.
\33\ Id.
\34\ Id.
\35\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------
NBBO Setter Additive Rebate
The Exchange believes the proposed NBBO Setter Additive Rebate is
reasonable, equitably allocated and not unfairly discriminatory because
is available to all Equity Members and is designed to incentivize the
entry of aggressively priced displayed liquidity that will create
tighter spreads, thereby promoting price discovery and market quality
on the Exchange to the benefit of all Equity Members and public
investors. As such, the Exchange believes the NBBO Setter Additive
Rebate for executions of orders in securities priced at or above $1.00
per share for Added Displayed Volume (other than Retail Orders) that
sets the NBB or NBO on the Exchange is reasonably related to the market
quality benefits that such additional enhanced rebate is designed to
promote. Additionally, other U.S. equity exchanges have adopted similar
pricing incentives applicable to executions of orders that establish
the NBBO, with the Exchange's proposed top tier rebate, coupled with
the NBBO Setter Additive Rebate, being higher than competing exchanges'
top rebates for similar executions.\36\
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\36\ See MEMX Fee Schedule, NBBO Setter/Joiner Tiers Section
(providing additional rebate of ($0.0004) per share to the top
displayed liquidity tier rebate of ($0.0033) per share for
executions of added displayed volume (other than retail orders) in
securities priced at or above $1.00 per share that establish the
NBBO or establish a new BBO on MEMX that matches the NBBO first
established on an away market, for a total ``enhanced'' rebate of
($0.0037) per share); and Cboe BZX Equities Fee Schedule, NBBO
Setter section and Add/Remove Volume Tiers section (providing
additional rebate of ($0.0007) per share to the top displayed
liquidity tier rebate of ($0.0031) per share for executions of added
displayed volume in securities priced at or above $1.00 per share
that establish a new Setter NBBO in NBBO Setter Securities on Cboe
BZX, for a total ``enhanced'' rebate of ($0.0038) per share).
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Reduce Standard Rebate for Executions of Orders in Securities Priced at
or Above $1.00 per Share for Added Displayed Volume (All Tapes) and
Corresponding Changes to Liquidity Indicator Codes
The Exchange believes that the proposal to reduce the standard
rebate from ($0.0027) to ($0.0024) per share for executions of orders
in securities priced at or above $1.00 per share for Added Displayed
Volume is reasonable, equitably allocated and not unfairly
discriminatory because it represents a modest decrease from the current
standard rebate and competitive with, and higher than, the standard
rebates provided by other exchanges for similar executions.\37\ The
Exchange further believes that the proposed reduced standard rebate for
executions of orders in securities priced at or above $1.00 per share
for Added Displayed Volume is equitably allocated and not unfairly
discriminatory because the standard rebate will apply equally to all
Equity Members. The Exchange also believes its proposal to amend
Section 1)b), Liquidity Indicator Codes and Associated Fees, to reflect
the proposed decreased rebate for Added Displayed Volume in the
corresponding Liquidity Indicator Codes AA, AB and AC is reasonable
because it provides uniformity and clarity in the Fee Schedule.
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\37\ See supra note 20.
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[[Page 66540]]
Proposal To Eliminate the Add Volume Tiers Table and Associated Rebates
and the Market Quality Tiers Table and Associated Rebates
The Exchange believes its proposal to eliminate the Add Volume
Tiers table and associated rebates in Section 1)c) of the Fee Schedule
and rename Section 1)c) as the NBBO Setter Plus Program in connection
with the NBBO Program, is reasonable, equitably allocated and not
unfairly discriminatory. The Exchange adopted the Add Volume Tiers
rebates for the purpose of encouraging Equity Members to increase their
orders that add liquidity on the Exchange, thereby improving its market
quality with respect to such securities and contributing to a more
robust and well-balanced market ecosystem on the Exchange to the
benefit of all Equity Members. The Exchange's proposal to eliminate the
Add Volume Tiers table and associated rebates is reasonable because the
NBBO Program incorporates similar aspects and rebate amounts,
including, under volume calculation Method 1, tiered rebates based on
an Equity Member's ADAV as a percentage of TCV. The Exchange notes that
the NBBO Program does have slightly lower rebates for the corresponding
Add Volume Tier thresholds; however, the Exchange believes that the
benefits of the NBBO Program, i.e., several volume calculation methods
to obtain enhanced rebates, provides more opportunities for Equity
Members to achieve higher rebates and will encourage the submission of
increased order flow, which would benefit all Equity Members by
providing greater execution opportunities on the Exchange and
contribute to a deeper, more liquid market, to the benefit of all
investors and market participants.
Similarly, the Exchange believes its proposal to eliminate the
Market Quality Tiers table and associated rebate in Section 1)f) of the
Fee Schedule is reasonable, equitably allocated and not unfairly
discriminatory. The Exchange adopted the Market Quality Tiers for the
purpose of encouraging executions of Added Displayed Volume for
qualifying Equity Members as a means of recognizing the value of market
participants that consistently quote at the NBBO in a large number of
securities generally, and in the specified MQ Securities, in
particular. The Exchange's proposal to eliminate the Market Quality
Tiers table and associated rebates is reasonable as the NBBO Program
incorporates similar aspects, rebate amounts calculation methodologies
based on an Equity Member's Percent Time at NBBO in certain MQ
Securities under Level B and Level C, which should provide more
opportunities for Equity Members to achieve higher rebates and will
encourage the submission of increased order flow to the benefit of all
Equity Members. This should provide greater execution opportunities on
the Exchange and contribute to a more liquid market, to the benefit of
all investors and market participants.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act.
Intra-Market Competition
The Exchange believes the proposed rule change does not impose any
burden on intramarket competition that is not necessary or appropriate
in furtherance of the purposes of the Act. Particularly, the proposed
NBBO Program will be eligible to all Equity Members equally in that all
Equity Members have the opportunity to participate and therefore
qualify for the proposed enhanced rebates. Furthermore, the Exchange
believes that the proposed NBBO Program will incentivize Equity Members
to submit additional aggressively priced displayed liquidity to the
Exchange, and to increase their order flow on the Exchange generally,
thereby contributing to a deeper and more liquid market and promoting
price discovery and market quality on the Exchange to the benefit of
all market participants and enhancing the attractiveness of the
Exchange as a trading venue. The Exchange believes that this, in turn,
would continue to encourage market participants to direct additional
order flow to the Exchange. Greater liquidity benefits all Equity
Members by providing more trading opportunities and encourages Equity
Members to send additional orders to the Exchange, thereby contributing
to robust levels of liquidity, which benefits all market participants.
The proposed decrease to the standard rebate for executions of
orders in securities priced at or above $1.00 per share for Added
Displayed Volume does not impose a burden on intramarket competition
that is not in furtherance of the Act in that the proposed change
applies to all Equity Members equally and the proposed reduced rate is
still competitive with, or higher than, rebates offered by competing
exchanges for similar executions.\38\
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\38\ See supra note 20.
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The proposed non-substantive changes to the Definitions section of
the Fee Schedule are similarly non-burdensome as they are intended to
provide clear descriptions of the terms applicable to the proposed NBBO
Program.
In general, the Exchange believes all of the proposed changes are
intended to enhance market quality on the Exchange in a large number of
securities generally, and in the MQ Securities specifically, and to
encourage Equity Members to maintain or increase their order flow on
the Exchange, thereby promoting price discovery and contributing to a
deeper and more liquid market to the benefit of all market
participants. As a result, the Exchange believes the proposal would
enhance its competitiveness as a market that attracts actionable
orders, thereby making it a more desirable destination venue for its
customers. For these reasons, the Exchange believes that the proposal
furthers the Commission's goal in adopting Regulation NMS of fostering
competition among orders, which promotes ``more efficient pricing of
individual stocks for all types of orders, large and small.'' \39\
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\39\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 47396 (June 29, 2005).
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Intermarket Competition
The Exchange believes its proposal will benefit competition, and
the Exchange notes that it operates in a highly competitive market.
Equity Members have numerous alternative venues they may participate on
and direct their order flow to, including fifteen other equities
exchanges and numerous alternative trading systems and other off-
exchange venues. As noted above, no single registered equities exchange
currently has more than 13-14% of the total market share of executed
volume of equities trading.\40\ Thus, in such a low-concentrated and
highly competitive market, no single equities exchange possesses
significant pricing power in the execution of order flow. Moreover, the
Exchange believes that the ever-shifting market share among the
exchanges from month to month demonstrates that market participants can
shift order flow in response to new or different pricing structures
being introduced to the market. Accordingly, competitive forces
constrain the Exchange's transaction fees and rebates generally,
including with respect to executions of Added Displayed Volume, and
market participants can readily choose to send their orders to other
exchanges and off-exchange venues if they deem fee levels
[[Page 66541]]
at those other venues to be more favorable.
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\40\ See supra note 26.
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As described above, the proposal is designed to enhance market
quality on the Exchange and to encourage additional order flow and
quoting activity on the Exchange and to promote market quality through
pricing incentives that are comparable to, and competitive with,
pricing programs in place at other exchanges with respect to executions
of Added Displayed Volume.\41\ Accordingly, the Exchange believes the
proposal would not be a burden on, but rather promote, intermarket
competition by enabling the Exchange to better compete with other
exchanges that offer similar incentives to market participants that
enhance market quality and/or achieve certain volume criteria and
thresholds.
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\41\ See supra note 19.
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Additionally, the Commission has repeatedly expressed its
preference for competition over regulatory intervention in determining
prices, products, and services in the securities markets. Specifically,
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.'' \42\ The fact
that this market is competitive has also long been recognized by the
courts. In NetCoalition v. Securities and Exchange Commission, the DC
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 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 possess a
monopoly, regulatory or otherwise, in the execution of order flow from
broker dealers' . . .''.\43\ Accordingly, the Exchange does not believe
its proposed pricing changes impose any burden on competition that is
not necessary or appropriate in furtherance of the purposes of the Act.
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\42\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496, 37499 (June 29, 2005).
\43\ NetCoalition v. SEC, 615 F.3d 525, 539 (D.C. Cir. 2010)
(quoting Securities Exchange Act Release No. 59039 (December 2,
2008), 73 FR 74770, 74782-83 (December 9, 2008) (SR-NYSE-2006-21)).
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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,\44\ and Rule 19b-4(f)(2) \45\ 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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\44\ 15 U.S.C. 78s(b)(3)(A)(ii).
\45\ 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-2023-45 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-2023-45. 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-2023-45 and should be
submitted on or before October 18, 2023.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\46\
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\46\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-20960 Filed 9-26-23; 8:45 am]
BILLING CODE 8011-01-P
