Self-Regulatory Organizations; MIAX PEARL, LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change by MIAX PEARL, LLC To Amend the MIAX Pearl Equities Fee Schedule, 68705-68709 [2023-21951]

Download as PDF Federal Register / Vol. 88, No. 191 / Wednesday, October 4, 2023 / Notices power in the execution of option order flow. Indeed, participants can readily choose to send their orders to other exchange, and, additionally offexchange venues, if they deem fee levels at those other venues to be more favorable. Moreover, 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.’’ 36 The fact that this market is competitive has also long been recognized by the courts. In NetCoalition v. Securities and Exchange Commission, the D.C. Circuit stated as follows: ‘‘[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 order-routing agents, have a wide range of choices of where to route orders for execution’; [and] ‘no exchange can afford to take its market share percentages for granted’ because ‘no exchange possesses a monopoly, regulatory or otherwise, in the execution of order flow from broker dealers’. . . .’’.37 Accordingly, the Exchange does not believe its proposed fee change imposes any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others The Exchange neither solicited nor received comments on the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action lotter on DSK11XQN23PROD with NOTICES1 The foregoing rule change has become effective pursuant to Section 19(b)(3)(A)(ii) of the Act,38 and Rule 19b–4(f)(2) 39 thereunder. At any time 36 See Securities Exchange Act Release No. 51808 (June 9, 2005), 70 FR 37496, 37499 (June 29, 2005). 37 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–NYSEArca–2006–21)). 38 15 U.S.C. 78s(b)(3)(A)(ii). 39 17 CFR 240.19b–4(f)(2). VerDate Sep<11>2014 20:21 Oct 03, 2023 Jkt 262001 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 68705 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–2023–056 and should be submitted on or before October 25, 2023. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.40 Sherry R. Haywood, Assistant Secretary. 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: [FR Doc. 2023–21943 Filed 10–3–23; 8:45 am] Electronic Comments [Release No. 34–98618; File No. SR– PEARL–2023–50] • 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– CBOE–2023–056 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–CBOE–2023–056. 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 PO 00000 Frm 00147 Fmt 4703 Sfmt 4703 BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION Self-Regulatory Organizations; MIAX PEARL, LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change by MIAX PEARL, LLC To Amend the MIAX Pearl Equities Fee Schedule September 28, 2023. Pursuant to the provisions of 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 27, 2023, MIAX PEARL, LLC (‘‘MIAX Pearl’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’) a proposed rule change as described in Items I, II, and III below, which Items have been prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange is filing a proposal to amend the 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-options/pearl-options/rule-filings, at MIAX Pearl’s principal office, and at the Commission’s Public Reference Room. 40 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 E:\FR\FM\04OCN1.SGM 04OCN1 68706 Federal Register / Vol. 88, No. 191 / Wednesday, October 4, 2023 / Notices The Exchange proposes to amend Section 1)f) of the Fee Schedule to modify one aspect of the criteria that is required for Equity Members 3 to receive the Step-Up Added Liquidity Rebate (described below). and AC (adds liquidity, displayed order, Tape C).6 Currently, Equity Members qualify for the Step-Up Added Liquidity Rebate by achieving a ‘‘Step-Up ADAV as a % of TCV’’ 7 of at least 0.03% over the baseline month of May 2023.8 Average daily added volume (‘‘ADAV’’) means average daily added volume calculated as the number of shares added per day and average daily volume (‘‘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.9 Total consolidated volume (‘‘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.10 For example, prior to the effectiveness of this proposal, if an Equity Member had an ADAV as a percent of TCV of 0.01% in May 2023, then that Equity Member has to achieve an ADAV as a percent of TCV equal to or greater than 0.04% in any subsequent month in order to qualify for the StepUp Added Liquidity Rebate. Background Proposal The Exchange currently provides a standard rebate of ($0.0024) 4 per share for executions of orders in securities priced at or above $1.00 per share that add displayed liquidity to the Exchange. The Exchange also currently offers various volume-based tiers and incentives through which an Equity Member may receive an enhanced rebate for executions of orders that add displayed liquidity to the Exchange by achieving the specified criteria that corresponds to a particular tier/ incentive. In particular, the Exchange adopted a volume based pricing incentive, referred to as the ‘‘Step-Up Added Liquidity Rebate,’’ in which qualifying Equity Members receive an enhanced rebate of ($0.0031) per share for executions of orders in securities priced at or above $1.00 per share that add displayed liquidity to the Exchange.5 The enhanced rebate provided by the StepUp Added Liquidity Rebate applies to Liquidity Indicator Codes AA (adds liquidity, displayed order, Tape A), AB (adds liquidity, displayed order, Tape B) The Exchange now proposes to amend Section 1)f) of the Fee Schedule to 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 lotter on DSK11XQN23PROD with NOTICES1 1. Purpose 3 The term ‘‘Equity Member’’ is a Member authorized by the Exchange to transact business on MIAX Pearl Equities. See Exchange Rule 1901. 4 Rebates are indicated by parentheses. See the General Notes Section of the Fee Schedule. 5 See Securities Exchange Act Release No. 95614 (August 26, 2022), 87 FR 53813 (September 1, 2022) (SR–PEARL–2022–33). VerDate Sep<11>2014 20:21 Oct 03, 2023 Jkt 262001 6 See Fee Schedule, Section 1)b), Liquidity Indicator Codes and Associated Fees. 7 The term ‘‘Step-Up ADAV as a % of TCV’’ means ADAV as a percent of TCV in the relevant baseline month subtracted from the current month’s ADAV as a percent of TCV. See the Definitions Section of the Fee Schedule. The Exchange notes that the Step-Up Added Liquidity Rebate does not apply to executions of orders in securities priced below $1.00 per share or executions of orders that constitute added non-displayed liquidity. 8 The Exchange currently uses a baseline ADAV of 0.00% of TCV for firms that become Equity Members of the Exchange after May 2023 for the purpose of the Step-Up Added Liquidity Rebate calculation. See Securities Exchange Act Release No. 97716 (June 13, 2023), 88 FR 39887 (June 20, 2023) (SR–PEARL–2023–25). 9 The Exchange excludes from its calculation of ADAV and ADV 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). Routed shares are not included in the ADAV or ADV calculation. With prior notice to the Exchange, an Equity Member may aggregate ADAV or ADV with other Equity Members that control, are controlled by, or are under common control with such Equity Member (as evidenced on such Equity Member’s Form BD). See the Definitions Section of the Fee Schedule. 10 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. PO 00000 Frm 00148 Fmt 4703 Sfmt 4703 modify one aspect of the required criteria for Equity Members to receive the Step-Up Added Liquidity Rebate. In particular, the Exchange proposes to amend the baseline month from May 2023 to now be July 2023. With the proposed change, Equity Members will qualify for the Step-Up Added Liquidity Rebate by achieving a Step-Up ADAV as a % of TCV of at least 0.03% over the baseline month of July 2023.11 Additionally, the Exchange proposes that the criteria to qualify for the StepUp Added Liquidity Rebate will expire no later than January 31, 2024 (referred to herein as the ‘‘sunset period’’).12 The Exchange will issue an alert to market participants should the Exchange determine that the Step-Up Added Liquidity Rebate will expire earlier than January 31, 2024 or if the Exchange determines to amend the criteria or rate applicable to the Step-Up Added Liquidity Rebate prior to the end of the sunset period. The Exchange notes that at least one other competing equities exchange provides a similar ‘‘sunset period’’ for one of its enhanced rebates subject to a baseline month comparison with a more recent month.13 The Exchange does not propose any other changes to the qualifying criteria for Equity Members to receive the StepUp Added Liquidity Rebate. The Exchange also does not propose to amend the amount of the enhanced rebate of ($0.0031) per share for Equity Members that qualify for the Step-Up Added Liquidity Rebate. The purpose of this proposed change is to update the baseline month to a more recent month for the calculation of the Step-Up Added Liquidity Rebate. The Exchange believes that with the updated baseline month, the Step-Up Added Liquidity Rebate will continue to provide an incentive for Equity Members to strive for higher ADAV on the Exchange (above their ADAV in the baseline month of July 2023) to receive the enhanced rebate for qualifying executions of orders in securities priced at or above $1.00 per share that add displayed liquidity to the Exchange. The 11 The Exchange will continue use a baseline ADAV of 0.00% of TCV for firms that become Equity Members of the Exchange after July 2023 for the purpose of the Step-Up Added Liquidity Rebate calculation. 12 The Exchange notes that at the end of the sunset period, the Step-Up Added Liquidity Rebate will no longer apply unless the Exchange files another 19b–4 Filing with the Commission to amend the criteria terms or update the baseline month to a more recent month. 13 See Securities Exchange Act Release No. 97462 (May 9, 2023), 88 FR 31077 (May 15, 2023) (SR– MEMX–2023–08); see also MEMX LLC (‘‘MEMX’’) Fee Schedule, Liquidity Provision Tiers, Tier 4, available at https://info.memxtrading.com/feeschedule/ (last visited September 22, 2023). E:\FR\FM\04OCN1.SGM 04OCN1 Federal Register / Vol. 88, No. 191 / Wednesday, October 4, 2023 / Notices 2. Statutory Basis The Exchange believes that its proposal to amend its Fee Schedule is consistent with Section 6(b) of the Act 15 in general, and furthers the objectives of Section 6(b)(4) of the Act 16 in particular, in that it is an equitable allocation of reasonable fees and other charges among its Equity Members and issuers and other persons using its facilities and is not 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 September 26, 2023, based on publicly available information, no single registered equities exchange currently has more than approximately 15–16% of the total market share of executed volume of equities trading for the month of September 2023.17 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 represents approximately 1.72% of the overall market share as of September 26, 2023 for the month of September 2023.18 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.’’ 19 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 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 additional orders that add liquidity to the Exchange, which the Exchange believes would deepen liquidity and promote market quality on the Exchange to the benefit of all market participants. The Exchange notes that volumebased incentives and discounts (such as tiers) have been widely adopted by exchanges (including the Exchange), and believes they are reasonable, equitable and not unfairly discriminatory because they are available to all Equity Members on an equal basis, provide additional benefits or discounts that are reasonably related to the value of an exchange’s market quality associated with higher levels of 14 See id. MEMX will likely have to make a similar filing as proposed by the Exchange in this filing in order to amend or otherwise update its baseline month and sunset period before October 31, 2023. 15 15 U.S.C. 78f(b). 16 15 U.S.C. 78f(b)(4). 17 See the ‘‘Market Share’’ Section of the Exchange’s website, available at https:// www.miaxglobal.com/ (last visited September 26, 2023). 18 See id. 19 See Securities Exchange Act Release No. 51808 (June 9, 2005), 70 FR 37499 (June 29, 2005). Exchange believes that, with the proposed change to the baseline month, the Step-Up Added Liquidity Rebate will continue to encourage the submission of additional displayed added liquidity to the Exchange, thereby promoting price discovery and contributing to a deeper and more liquid market, which benefits all market participants and enhances the attractiveness of the Exchange as a trading venue. The Exchange notes that earlier this year, MEMX filed a proposal to use a more recent month (April 2023) as the baseline month for one of its enhanced Liquidity Provision Tiers (Tier 4) for MEMX’s members to receive an enhanced rebate, with a sunset period of October 31, 2023.14 The purpose of including the proposed sunset period in the Fee Schedule is to provide clarity to Equity Members that, unless the Exchange determines to amend or otherwise modify the Step-Up Added Liquidity Rebate, the Step-Up Added Liquidity Rebate will expire at the end of the sunset period. lotter on DSK11XQN23PROD with NOTICES1 Implementation The proposed changes will be effective beginning October 1, 2023. VerDate Sep<11>2014 20:21 Oct 03, 2023 Jkt 262001 PO 00000 Frm 00149 Fmt 4703 Sfmt 4703 68707 market activity (such as higher levels of liquidity provision and/or growth patterns), and the introduction of higher volumes of orders into the price and volume discovery process. The Exchange believes its proposal to update the baseline month criteria for the Step-Up Added Liquidity Rebate is reasonable, equitably allocated and not unfairly discriminatory because volume on the Exchange has changed since the Exchange last updated the baseline month for the Step-Up Added Liquidity Rebate and utilizing a more recent month as the baseline should be more representative of Equity Members’ trading on the Exchange. The Exchange believes that with the updated baseline month, the Step-Up Added Liquidity Rebate will continue to provide an incentive for Equity Members to strive for higher ADAV on the Exchange (above their ADAV in the baseline month of July 2023) to receive the enhanced rebate for qualifying executions of orders in securities priced at or above $1.00 per share that add displayed liquidity to the Exchange. The Exchange believes that the proposal is reasonable because even with the updated baseline month, the Step-Up Added Liquidity Rebate will continue to encourage the submission of added displayed liquidity to the Exchange, thereby promoting price discovery and contributing to a deeper and more liquid market, which benefits all market participants and enhances the attractiveness of the Exchange as a trading venue. The Exchange believes that the StepUp Added Liquidity Rebate, as modified by the proposed change to the baseline month, is reasonable, equitable and not unfairly discriminatory as the Step-Up Added Liquidity Rebate will continue to be available to all Equity Members on an equal basis, and is reasonably designed to encourage Equity Members to maintain or increase their order flow in liquidity-adding volume. The Exchange believes this will continue to promote price discovery, enhance liquidity and market quality, and contribute to a more robust and well-balanced market ecosystem on the Exchange to the benefit of all Equity Members and market participants. The Exchange also notes that MEMX filed a proposal to use a more recent month (April 2023) as the baseline month for one of its enhanced Liquidity Provision Tiers (Tier 4) for MEMX’s members to receive an enhanced rebate, and anticipates MEMX making a similar update to its baseline month for its enhanced rebate sometime E:\FR\FM\04OCN1.SGM 04OCN1 lotter on DSK11XQN23PROD with NOTICES1 68708 Federal Register / Vol. 88, No. 191 / Wednesday, October 4, 2023 / Notices within the next month (or removing the enhanced rebate altogether).20 The Exchange believes it is reasonable, equitable and not unfairly discriminatory to include the sunset period in the Fee Schedule for the StepUp Added Liquidity Rebate because it will provide clarity to Equity Members that, unless the Exchange determines to amend or otherwise modify the Step-Up Added Liquidity Rebate, the Step-Up Added Liquidity Rebate will expire at the end of the sunset period. This will allow Equity Members to take into account that the enhanced rebate provided for by the Step-Up Added Liquidity Rebate may be discontinued at the end of sunset period unless the Exchange announces otherwise and files a revised proposal with the Commission. The Exchange further notes that it will issue an alert to market participants should the Exchange determine that the Step-Up Added Liquidity Rebate will expire earlier than January 31, 2024 or if the Exchange determines to amend the criteria or rate applicable to the Step-Up Added Liquidity Rebate prior to the end of the sunset period. At least one other competing equities exchange provided a similar sunset period in its fee schedule for one of its enhanced rebates subject to a baseline month comparison with a more recent month.21 The Exchange believes it is reasonable, equitable and not unfairly discriminatory to use a baseline ADAV of 0.00% of TCV for firms that become Equity Members of the Exchange after July 2023 for the purpose of the Step-Up Added Liquidity Rebate calculation because it will provide an additional incentive for prospective firms to become Equity Members. The Exchange believes this will incentivize new Equity Members to trade on the Exchange, which will add to price discovery, enhance liquidity and market quality, and contribute to a more robust and well-balanced market ecosystem on the Exchange to the benefit of all Equity Members and market participants. The Exchange notes that the proposed StepUp Added Liquidity Rebate will not adversely impact any Equity Member’s ability to qualify for reduced fees or enhanced rebates offered under other pricing tiers/incentives on the Exchange. Should an Equity Member not meet the required criteria, the Equity Member will merely not receive the corresponding enhanced rebate. 20 See supra notes 13–14. 21 See id. VerDate Sep<11>2014 20:21 Oct 03, 2023 Jkt 262001 B. Self-Regulatory Organization’s Statement on Burden on Competition The Exchange believes that the proposed change will not impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. Intramarket Competition The Exchange does not believe that the proposal will impose any burden on intramarket competition not necessary or appropriate in furtherance of the purposes of the Act. The Exchange believes the Step-Up Added Liquidity Rebate, as modified by this proposal, will continue to incentivize Equity Members to submit additional orders that add liquidity to the Exchange, 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, which the Exchange believes, in turn, would continue to encourage market participants to direct additional order flow to the Exchange. The Exchange also believes that using a baseline ADAV of 0.00% of TCV for firms that become Equity Members of the Exchange after July 2023 for the purpose of the Step-Up Added Liquidity Rebate calculation will incentivize new Equity Members to trade on the Exchange, which will add to price discovery, enhance liquidity and market quality, and contribute to a more robust and well-balanced market ecosystem on the Exchange to the benefit of all Equity Members and market participants. 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. As described above, the opportunity to qualify for the proposed new Step-Up Added Liquidity Rebate, and thus receive the proposed rebate for qualifying executions of orders in securities priced at or above $1.00 per share that add displayed volume will continue to be available to all Equity Members that meet the associated volume requirement, and the Exchange believes the proposed update to the baseline month is reasonably related to the enhanced market quality that the Step-Up Added Liquidity Rebate is designed to promote. As such the Exchange does not believe the proposed changes would impose any burden on intramarket competition that is not necessary or appropriate in furtherance of the purpose of the Act. PO 00000 Frm 00150 Fmt 4703 Sfmt 4703 The Exchange believes its proposal to include the sunset period in the Fee Schedule for the Step-Up Added Liquidity Rebate will not impose any burden on intramarket competition not necessary or appropriate in furtherance of the purposes of the Act because it will provide clarity to Equity Members that, unless the Exchange determines to amend or otherwise modify the Step-Up Added Liquidity Rebate, the Step-Up Added Liquidity Rebate will be discontinued at the end of the sunset period. This will allow Equity Members to take into account that the enhanced rebate provided for by the Step-Up Added Liquidity Rebate may be discontinued at the end of the sunset period unless the Exchange announces otherwise. The Exchange further notes that it will issue an alert to market participants should the Exchange determine that the Step-Up Added Liquidity Rebate will expire earlier than January 31, 2024 or if the Exchange determines to amend the criteria or rate applicable to the Step-Up Added Liquidity Rebate prior to the end of the sunset period. At least one other competing equities exchange provided a similar sunset period in its fee schedule for one of its enhanced rebates subject to a baseline month comparison with a more recent month.22 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, as of September 26, 2023, based on publicly available information, no single registered equities exchange currently has more than approximately 15–16% of the total market share of executed volume of equities trading for the month of September 2023.23 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 represents approximately 1.72% of the overall market share as of September 26, 2023 for the month of September 2023.24 Moreover, the Exchange believes that the ever-shifting market share among the exchanges from month to month demonstrates that market participants 22 See supra notes 13–14. supra note 17. 24 See id. 23 See E:\FR\FM\04OCN1.SGM 04OCN1 lotter on DSK11XQN23PROD with NOTICES1 Federal Register / Vol. 88, No. 191 / Wednesday, October 4, 2023 / Notices 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 the criteria for Equity Members to achieve the Step-Up Added Liquidity Rebate, and market participants can readily choose to send their orders to other exchanges and off-exchange venues if they deem rebate criteria at those other venues to be more favorable. As described above, the proposed changes represent a competitive proposal through which the Exchange is seeking to continue to encourage additional order flow to the Exchange through a volume-based incentive that is comparable to the criteria for volumebased incentives adopted by at least one other competing exchange which also updated its baseline month to a more recent month for a specific enhanced rebate that adds liquidity to that market.25 Accordingly, the Exchange believes that its proposal would not burden, but rather promote, intermarket competition by enabling it to better compete with other exchanges that offer similar pricing incentives to market participants that 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.’’ 26 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 possesses a monopoly, regulatory or otherwise, in the execution of order flow from broker 25 See supra note 13. 26 See Securities Exchange Act Release No. 51808 (June 9, 2005), 70 FR 37496, 37499 (June 29, 2005). VerDate Sep<11>2014 20:21 Oct 03, 2023 Jkt 262001 dealers’. . .’’.27 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. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others Written comments were neither solicited nor received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing rule change has become effective pursuant to Section 19(b)(3)(A)(ii) of the Act,28 and Rule 19b–4(f)(2) 29 thereunder. At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule should be approved or disapproved. 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–2023–50 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–2023–50. This file number should be included on the subject line if email is used. To help the Commission process and review your 27 See 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)). 28 15 U.S.C. 78s(b)(3)(A)(ii). 29 17 CFR 240.19b–4(f)(2). PO 00000 Frm 00151 Fmt 4703 Sfmt 4703 68709 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–2023–50 and should be submitted on or before October 25, 2023. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.30 Sherry R. Haywood, Assistant Secretary. [FR Doc. 2023–21951 Filed 10–3–23; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–98625; File No. SR–IEX– 2023–10] Self-Regulatory Organizations; Investors Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend IEX Rules 11.190(b)(7) and 11.190(g) September 28, 2023. Pursuant to Section 19(b)(1) 1 of the Securities Exchange Act of 1934 (the ‘‘Act’’),2 and Rule 19b–4 thereunder,3 notice is hereby given that on September 27, 2023, the Investors Exchange LLC (‘‘IEX’’ or the ‘‘Exchange’’) filed with the Securities 30 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 15 U.S.C. 78a. 3 17 CFR 240.19b–4. 1 15 E:\FR\FM\04OCN1.SGM 04OCN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 88, Number 191 (Wednesday, October 4, 2023)]
[Notices]
[Pages 68705-68709]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-21951]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-98618; File No. SR-PEARL-2023-50]


Self-Regulatory Organizations; MIAX PEARL, LLC; Notice of Filing 
and Immediate Effectiveness of a Proposed Rule Change by MIAX PEARL, 
LLC To Amend the MIAX Pearl Equities Fee Schedule

September 28, 2023.
    Pursuant to the provisions of 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 27, 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-options/pearl-options/rule-filings, at MIAX Pearl's principal office, and at the Commission's 
Public Reference Room.

[[Page 68706]]

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 Section 1)f) of the Fee Schedule to 
modify one aspect of the criteria that is required for Equity Members 
\3\ to receive the Step-Up Added Liquidity Rebate (described below).
---------------------------------------------------------------------------

    \3\ The term ``Equity Member'' is a Member authorized by the 
Exchange to transact business on MIAX Pearl Equities. See Exchange 
Rule 1901.
---------------------------------------------------------------------------

Background
    The Exchange currently provides a standard rebate of ($0.0024) \4\ 
per share for executions of orders in securities priced at or above 
$1.00 per share that add displayed liquidity to the Exchange. The 
Exchange also currently offers various volume-based tiers and 
incentives through which an Equity Member may receive an enhanced 
rebate for executions of orders that add displayed liquidity to the 
Exchange by achieving the specified criteria that corresponds to a 
particular tier/incentive.
---------------------------------------------------------------------------

    \4\ Rebates are indicated by parentheses. See the General Notes 
Section of the Fee Schedule.
---------------------------------------------------------------------------

    In particular, the Exchange adopted a volume based pricing 
incentive, referred to as the ``Step-Up Added Liquidity Rebate,'' in 
which qualifying Equity Members receive an enhanced rebate of ($0.0031) 
per share for executions of orders in securities priced at or above 
$1.00 per share that add displayed liquidity to the Exchange.\5\ The 
enhanced rebate provided by the Step-Up Added Liquidity Rebate applies 
to Liquidity Indicator Codes AA (adds liquidity, displayed order, Tape 
A), AB (adds liquidity, displayed order, Tape B) and AC (adds 
liquidity, displayed order, Tape C).\6\
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    \5\ See Securities Exchange Act Release No. 95614 (August 26, 
2022), 87 FR 53813 (September 1, 2022) (SR-PEARL-2022-33).
    \6\ See Fee Schedule, Section 1)b), Liquidity Indicator Codes 
and Associated Fees.
---------------------------------------------------------------------------

    Currently, Equity Members qualify for the Step-Up Added Liquidity 
Rebate by achieving a ``Step-Up ADAV as a % of TCV'' \7\ of at least 
0.03% over the baseline month of May 2023.\8\ Average daily added 
volume (``ADAV'') means average daily added volume calculated as the 
number of shares added per day and average daily volume (``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.\9\ Total consolidated volume (``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.\10\ For example, prior to the 
effectiveness of this proposal, if an Equity Member had an ADAV as a 
percent of TCV of 0.01% in May 2023, then that Equity Member has to 
achieve an ADAV as a percent of TCV equal to or greater than 0.04% in 
any subsequent month in order to qualify for the Step-Up Added 
Liquidity Rebate.
---------------------------------------------------------------------------

    \7\ The term ``Step-Up ADAV as a % of TCV'' means ADAV as a 
percent of TCV in the relevant baseline month subtracted from the 
current month's ADAV as a percent of TCV. See the Definitions 
Section of the Fee Schedule. The Exchange notes that the Step-Up 
Added Liquidity Rebate does not apply to executions of orders in 
securities priced below $1.00 per share or executions of orders that 
constitute added non-displayed liquidity.
    \8\ The Exchange currently uses a baseline ADAV of 0.00% of TCV 
for firms that become Equity Members of the Exchange after May 2023 
for the purpose of the Step-Up Added Liquidity Rebate calculation. 
See Securities Exchange Act Release No. 97716 (June 13, 2023), 88 FR 
39887 (June 20, 2023) (SR-PEARL-2023-25).
    \9\ The Exchange excludes from its calculation of ADAV and ADV 
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). Routed shares are not included in the ADAV or ADV 
calculation. With prior notice to the Exchange, an Equity Member may 
aggregate ADAV or ADV with other Equity Members that control, are 
controlled by, or are under common control with such Equity Member 
(as evidenced on such Equity Member's Form BD). See the Definitions 
Section of the Fee Schedule.
    \10\ 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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Proposal
    The Exchange now proposes to amend Section 1)f) of the Fee Schedule 
to modify one aspect of the required criteria for Equity Members to 
receive the Step-Up Added Liquidity Rebate. In particular, the Exchange 
proposes to amend the baseline month from May 2023 to now be July 2023. 
With the proposed change, Equity Members will qualify for the Step-Up 
Added Liquidity Rebate by achieving a Step-Up ADAV as a % of TCV of at 
least 0.03% over the baseline month of July 2023.\11\ Additionally, the 
Exchange proposes that the criteria to qualify for the Step-Up Added 
Liquidity Rebate will expire no later than January 31, 2024 (referred 
to herein as the ``sunset period'').\12\ The Exchange will issue an 
alert to market participants should the Exchange determine that the 
Step-Up Added Liquidity Rebate will expire earlier than January 31, 
2024 or if the Exchange determines to amend the criteria or rate 
applicable to the Step-Up Added Liquidity Rebate prior to the end of 
the sunset period. The Exchange notes that at least one other competing 
equities exchange provides a similar ``sunset period'' for one of its 
enhanced rebates subject to a baseline month comparison with a more 
recent month.\13\
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    \11\ The Exchange will continue use a baseline ADAV of 0.00% of 
TCV for firms that become Equity Members of the Exchange after July 
2023 for the purpose of the Step-Up Added Liquidity Rebate 
calculation.
    \12\ The Exchange notes that at the end of the sunset period, 
the Step-Up Added Liquidity Rebate will no longer apply unless the 
Exchange files another 19b-4 Filing with the Commission to amend the 
criteria terms or update the baseline month to a more recent month.
    \13\ See Securities Exchange Act Release No. 97462 (May 9, 
2023), 88 FR 31077 (May 15, 2023) (SR-MEMX-2023-08); see also MEMX 
LLC (``MEMX'') Fee Schedule, Liquidity Provision Tiers, Tier 4, 
available at https://info.memxtrading.com/fee-schedule/ (last 
visited September 22, 2023).
---------------------------------------------------------------------------

    The Exchange does not propose any other changes to the qualifying 
criteria for Equity Members to receive the Step-Up Added Liquidity 
Rebate. The Exchange also does not propose to amend the amount of the 
enhanced rebate of ($0.0031) per share for Equity Members that qualify 
for the Step-Up Added Liquidity Rebate.
    The purpose of this proposed change is to update the baseline month 
to a more recent month for the calculation of the Step-Up Added 
Liquidity Rebate. The Exchange believes that with the updated baseline 
month, the Step-Up Added Liquidity Rebate will continue to provide an 
incentive for Equity Members to strive for higher ADAV on the Exchange 
(above their ADAV in the baseline month of July 2023) to receive the 
enhanced rebate for qualifying executions of orders in securities 
priced at or above $1.00 per share that add displayed liquidity to the 
Exchange. The

[[Page 68707]]

Exchange believes that, with the proposed change to the baseline month, 
the Step-Up Added Liquidity Rebate will continue to encourage the 
submission of additional displayed added liquidity to the Exchange, 
thereby promoting price discovery and contributing to a deeper and more 
liquid market, which benefits all market participants and enhances the 
attractiveness of the Exchange as a trading venue. The Exchange notes 
that earlier this year, MEMX filed a proposal to use a more recent 
month (April 2023) as the baseline month for one of its enhanced 
Liquidity Provision Tiers (Tier 4) for MEMX's members to receive an 
enhanced rebate, with a sunset period of October 31, 2023.\14\ The 
purpose of including the proposed sunset period in the Fee Schedule is 
to provide clarity to Equity Members that, unless the Exchange 
determines to amend or otherwise modify the Step-Up Added Liquidity 
Rebate, the Step-Up Added Liquidity Rebate will expire at the end of 
the sunset period.
---------------------------------------------------------------------------

    \14\ See id. MEMX will likely have to make a similar filing as 
proposed by the Exchange in this filing in order to amend or 
otherwise update its baseline month and sunset period before October 
31, 2023.
---------------------------------------------------------------------------

Implementation
    The proposed changes will be effective beginning October 1, 2023.
2. Statutory Basis
    The Exchange believes that its proposal to amend its Fee Schedule 
is consistent with Section 6(b) of the Act \15\ in general, and 
furthers the objectives of Section 6(b)(4) of the Act \16\ in 
particular, in that it is an equitable allocation of reasonable fees 
and other charges among its Equity Members and issuers and other 
persons using its facilities and is not designed to permit unfair 
discrimination between customers, issuers, brokers, or dealers.
---------------------------------------------------------------------------

    \15\ 15 U.S.C. 78f(b).
    \16\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

    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 September 26, 2023, based on publicly available 
information, no single registered equities exchange currently has more 
than approximately 15-16% of the total market share of executed volume 
of equities trading for the month of September 2023.\17\ 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 represents approximately 1.72% of the overall 
market share as of September 26, 2023 for the month of September 
2023.\18\ 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.'' \19\
---------------------------------------------------------------------------

    \17\ See the ``Market Share'' Section of the Exchange's website, 
available at https://www.miaxglobal.com/ (last visited September 26, 
2023).
    \18\ See id.
    \19\ 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 additional orders 
that add liquidity to the Exchange, which the Exchange believes would 
deepen liquidity and promote market quality on the Exchange to the 
benefit of all market participants.
    The Exchange notes that volume-based incentives and discounts (such 
as tiers) have been widely adopted by exchanges (including the 
Exchange), and believes they are reasonable, equitable and not unfairly 
discriminatory because they are available to all Equity Members on an 
equal basis, provide additional benefits or discounts that are 
reasonably related to the value of an exchange's market quality 
associated with higher levels of market activity (such as higher levels 
of liquidity provision and/or growth patterns), and the introduction of 
higher volumes of orders into the price and volume discovery process.
    The Exchange believes its proposal to update the baseline month 
criteria for the Step-Up Added Liquidity Rebate is reasonable, 
equitably allocated and not unfairly discriminatory because volume on 
the Exchange has changed since the Exchange last updated the baseline 
month for the Step-Up Added Liquidity Rebate and utilizing a more 
recent month as the baseline should be more representative of Equity 
Members' trading on the Exchange. The Exchange believes that with the 
updated baseline month, the Step-Up Added Liquidity Rebate will 
continue to provide an incentive for Equity Members to strive for 
higher ADAV on the Exchange (above their ADAV in the baseline month of 
July 2023) to receive the enhanced rebate for qualifying executions of 
orders in securities priced at or above $1.00 per share that add 
displayed liquidity to the Exchange. The Exchange believes that the 
proposal is reasonable because even with the updated baseline month, 
the Step-Up Added Liquidity Rebate will continue to encourage the 
submission of added displayed liquidity to the Exchange, thereby 
promoting price discovery and contributing to a deeper and more liquid 
market, which benefits all market participants and enhances the 
attractiveness of the Exchange as a trading venue.
    The Exchange believes that the Step-Up Added Liquidity Rebate, as 
modified by the proposed change to the baseline month, is reasonable, 
equitable and not unfairly discriminatory as the Step-Up Added 
Liquidity Rebate will continue to be available to all Equity Members on 
an equal basis, and is reasonably designed to encourage Equity Members 
to maintain or increase their order flow in liquidity-adding volume. 
The Exchange believes this will continue to promote price discovery, 
enhance liquidity and market quality, and contribute to a more robust 
and well-balanced market ecosystem on the Exchange to the benefit of 
all Equity Members and market participants. The Exchange also notes 
that MEMX filed a proposal to use a more recent month (April 2023) as 
the baseline month for one of its enhanced Liquidity Provision Tiers 
(Tier 4) for MEMX's members to receive an enhanced rebate, and 
anticipates MEMX making a similar update to its baseline month for its 
enhanced rebate sometime

[[Page 68708]]

within the next month (or removing the enhanced rebate altogether).\20\
---------------------------------------------------------------------------

    \20\ See supra notes 13-14.
---------------------------------------------------------------------------

    The Exchange believes it is reasonable, equitable and not unfairly 
discriminatory to include the sunset period in the Fee Schedule for the 
Step-Up Added Liquidity Rebate because it will provide clarity to 
Equity Members that, unless the Exchange determines to amend or 
otherwise modify the Step-Up Added Liquidity Rebate, the Step-Up Added 
Liquidity Rebate will expire at the end of the sunset period. This will 
allow Equity Members to take into account that the enhanced rebate 
provided for by the Step-Up Added Liquidity Rebate may be discontinued 
at the end of sunset period unless the Exchange announces otherwise and 
files a revised proposal with the Commission. The Exchange further 
notes that it will issue an alert to market participants should the 
Exchange determine that the Step-Up Added Liquidity Rebate will expire 
earlier than January 31, 2024 or if the Exchange determines to amend 
the criteria or rate applicable to the Step-Up Added Liquidity Rebate 
prior to the end of the sunset period. At least one other competing 
equities exchange provided a similar sunset period in its fee schedule 
for one of its enhanced rebates subject to a baseline month comparison 
with a more recent month.\21\
---------------------------------------------------------------------------

    \21\ See id.
---------------------------------------------------------------------------

    The Exchange believes it is reasonable, equitable and not unfairly 
discriminatory to use a baseline ADAV of 0.00% of TCV for firms that 
become Equity Members of the Exchange after July 2023 for the purpose 
of the Step-Up Added Liquidity Rebate calculation because it will 
provide an additional incentive for prospective firms to become Equity 
Members. The Exchange believes this will incentivize new Equity Members 
to trade on the Exchange, which will add to price discovery, enhance 
liquidity and market quality, and contribute to a more robust and well-
balanced market ecosystem on the Exchange to the benefit of all Equity 
Members and market participants. The Exchange notes that the proposed 
Step-Up Added Liquidity Rebate will not adversely impact any Equity 
Member's ability to qualify for reduced fees or enhanced rebates 
offered under other pricing tiers/incentives on the Exchange. Should an 
Equity Member not meet the required criteria, the Equity Member will 
merely not receive the corresponding enhanced rebate.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange believes that the proposed change will not impose any 
burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act.
Intramarket Competition
    The Exchange does not believe that the proposal will impose any 
burden on intramarket competition not necessary or appropriate in 
furtherance of the purposes of the Act. The Exchange believes the Step-
Up Added Liquidity Rebate, as modified by this proposal, will continue 
to incentivize Equity Members to submit additional orders that add 
liquidity to the Exchange, 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, which the Exchange 
believes, in turn, would continue to encourage market participants to 
direct additional order flow to the Exchange.
    The Exchange also believes that using a baseline ADAV of 0.00% of 
TCV for firms that become Equity Members of the Exchange after July 
2023 for the purpose of the Step-Up Added Liquidity Rebate calculation 
will incentivize new Equity Members to trade on the Exchange, which 
will add to price discovery, enhance liquidity and market quality, and 
contribute to a more robust and well-balanced market ecosystem on the 
Exchange to the benefit of all Equity Members and market participants. 
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. As described above, the 
opportunity to qualify for the proposed new Step-Up Added Liquidity 
Rebate, and thus receive the proposed rebate for qualifying executions 
of orders in securities priced at or above $1.00 per share that add 
displayed volume will continue to be available to all Equity Members 
that meet the associated volume requirement, and the Exchange believes 
the proposed update to the baseline month is reasonably related to the 
enhanced market quality that the Step-Up Added Liquidity Rebate is 
designed to promote. As such the Exchange does not believe the proposed 
changes would impose any burden on intramarket competition that is not 
necessary or appropriate in furtherance of the purpose of the Act.
    The Exchange believes its proposal to include the sunset period in 
the Fee Schedule for the Step-Up Added Liquidity Rebate will not impose 
any burden on intramarket competition not necessary or appropriate in 
furtherance of the purposes of the Act because it will provide clarity 
to Equity Members that, unless the Exchange determines to amend or 
otherwise modify the Step-Up Added Liquidity Rebate, the Step-Up Added 
Liquidity Rebate will be discontinued at the end of the sunset period. 
This will allow Equity Members to take into account that the enhanced 
rebate provided for by the Step-Up Added Liquidity Rebate may be 
discontinued at the end of the sunset period unless the Exchange 
announces otherwise. The Exchange further notes that it will issue an 
alert to market participants should the Exchange determine that the 
Step-Up Added Liquidity Rebate will expire earlier than January 31, 
2024 or if the Exchange determines to amend the criteria or rate 
applicable to the Step-Up Added Liquidity Rebate prior to the end of 
the sunset period. At least one other competing equities exchange 
provided a similar sunset period in its fee schedule for one of its 
enhanced rebates subject to a baseline month comparison with a more 
recent month.\22\
---------------------------------------------------------------------------

    \22\ See supra notes 13-14.
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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, as of September 26, 2023, based on 
publicly available information, no single registered equities exchange 
currently has more than approximately 15-16% of the total market share 
of executed volume of equities trading for the month of September 
2023.\23\ 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 represents 
approximately 1.72% of the overall market share as of September 26, 
2023 for the month of September 2023.\24\ Moreover, the Exchange 
believes that the ever-shifting market share among the exchanges from 
month to month demonstrates that market participants

[[Page 68709]]

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 the criteria for Equity Members to achieve 
the Step-Up Added Liquidity Rebate, and market participants can readily 
choose to send their orders to other exchanges and off-exchange venues 
if they deem rebate criteria at those other venues to be more 
favorable.
---------------------------------------------------------------------------

    \23\ See supra note 17.
    \24\ See id.
---------------------------------------------------------------------------

    As described above, the proposed changes represent a competitive 
proposal through which the Exchange is seeking to continue to encourage 
additional order flow to the Exchange through a volume-based incentive 
that is comparable to the criteria for volume-based incentives adopted 
by at least one other competing exchange which also updated its 
baseline month to a more recent month for a specific enhanced rebate 
that adds liquidity to that market.\25\ Accordingly, the Exchange 
believes that its proposal would not burden, but rather promote, 
intermarket competition by enabling it to better compete with other 
exchanges that offer similar pricing incentives to market participants 
that achieve certain volume criteria and thresholds.
---------------------------------------------------------------------------

    \25\ See supra note 13.
---------------------------------------------------------------------------

    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.'' \26\ 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 possesses a 
monopoly, regulatory or otherwise, in the execution of order flow from 
broker dealers'. . .''.\27\ 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.
---------------------------------------------------------------------------

    \26\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005).
    \27\ See 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)).
---------------------------------------------------------------------------

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    Written comments were neither solicited nor received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A)(ii) of the Act,\28\ and Rule 19b-4(f)(2) \29\ thereunder. 
At any time within 60 days of the filing of the proposed rule change, 
the Commission summarily may temporarily suspend such rule change if it 
appears to the Commission that such action is necessary or appropriate 
in the public interest, for the protection of investors, or otherwise 
in furtherance of the purposes of the Act. If the Commission takes such 
action, the Commission shall institute proceedings to determine whether 
the proposed rule should be approved or disapproved.
---------------------------------------------------------------------------

    \28\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \29\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
file number SR-PEARL-2023-50 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-2023-50. 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-2023-50 and should be 
submitted on or before October 25, 2023.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\30\
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    \30\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-21951 Filed 10-3-23; 8:45 am]
BILLING CODE 8011-01-P

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