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, 78077-78081 [2023-25007]

Download as PDF khammond on DSKJM1Z7X2PROD with NOTICES Federal Register / Vol. 88, No. 218 / Tuesday, November 14, 2023 / Notices designates the proposed rule change to be operative upon filing.13 At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission will institute proceedings to determine whether the proposed rule change should be approved or disapproved. 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–NYSECHX–2023–20 and should be submitted on or before December 5, 2023. 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: For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.14 Sherry R. Haywood, Assistant Secretary. 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– NYSECHX–2023–20 on the subject line. SECURITIES AND EXCHANGE COMMISSION 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–NYSECHX–2023–20. 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 13 For purposes only of waiving the 30-day operative delay, the Commission also has considered the proposed rule’s impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). VerDate Sep<11>2014 16:48 Nov 13, 2023 Jkt 262001 [FR Doc. 2023–25011 Filed 11–13–23; 8:45 am] BILLING CODE 8011–01–P [Release No. 34–98873; File No. SR– PEARL–2023–60] 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 November 7, 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 October 31, 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 14 17 CFR 200.30–3(a)(12), (59). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 PO 00000 Frm 00130 Fmt 4703 Sfmt 4703 78077 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 Section 1)e) of the Fee Schedule to amend the Midpoint Peg Order Adding Liquidity at Midpoint Volume Tiers table to offer a new enhanced rebate for executions of Midpoint Peg Orders 3 in securities priced at or above $1.00 per share that execute at the midpoint of the Protected NBBO 4 and add liquidity to the Exchange in all Tapes. In response to the competitive environment, the Exchange offers tiered pricing, which provides Equity Members 5 with opportunities to qualify for higher rebates or lower fees when certain volume criteria and thresholds are met. Tiered pricing provides an incremental incentive for Equity Members to strive for higher tier levels, which provides increasingly higher benefits or discounts for satisfying increasingly more stringent criteria. 3 A Midpoint Peg Order is a non-displayed Limit Order that is assigned a working price pegged to the midpoint of the PBBO. A Midpoint Peg Order receives a new timestamp each time its working price changes in response to changes in the midpoint of the PBBO. See Exchange Rule 2614(a)(3). 4 With respect to the trading of equity securities, the term ‘‘the term ‘‘Protected NBB’’ or ‘‘PBB’’ shall mean the national best bid that is a Protected Quotation, the term ‘‘Protected NBO’’ or ‘‘PBO’’ shall mean the national best offer that is a Protected Quotation, and the term ‘‘Protected NBBO’’ or ‘‘PBBO’’ shall mean the national best bid and offer that is a Protected Quotation. See Exchange Rule 1901. 5 The term ‘‘Equity Member’’ is a Member authorized by the Exchange to transact business on MIAX Pearl Equities. See Exchange Rule 1901. E:\FR\FM\14NON1.SGM 14NON1 78078 Federal Register / Vol. 88, No. 218 / Tuesday, November 14, 2023 / Notices khammond on DSKJM1Z7X2PROD with NOTICES Midpoint Peg Orders The Exchange currently provides a standard rebate of ($0.00205) 6 per share for executions of Midpoint Peg Orders in securities priced at or above $1.00 per share that execute at the midpoint of the Protected NBBO and add liquidity to the Exchange in all Tapes.7 The Exchange also provides enhanced rebates through a tiered pricing structure for executions of Midpoint Peg Orders in securities priced at or above $1.00 per share that execute at the midpoint of the Protected NBBO and add liquidity to the Exchange in all Tapes based on an Equity Member achieving certain ‘‘Midpoint ADAV’’ thresholds (defined below) (the ‘‘Midpoint Volume Tiers Program’’).8 Pursuant to the Midpoint Volume Tiers Program, Midpoint ADAV means the average daily added volume (‘‘ADAV’’) for the current month consisting of Midpoint Peg Orders in securities priced at or above $1.00 per share that execute at the midpoint of the Protected NBBO and add liquidity to the Exchange.9 Pursuant to Tier 1 of the Midpoint Volume Tiers Program, Equity Members may qualify for an enhanced rebate of ($0.0025) per share for executions of Midpoint Peg Orders in securities priced at or above $1.00 per share that execute at the midpoint of the Protected NBBO and add liquidity to the Exchange by achieving a Midpoint ADAV equal to or greater than 500,000 shares. Pursuant to Tier 2 of the Midpoint Volume Tiers Program, Equity Members may qualify for an enhanced rebate of ($0.0027) per share for executions of Midpoint Peg Orders in securities priced at or above $1.00 per share that execute at the midpoint of the 6 Rebates are indicated by parentheses. See the General Notes section of the Fee Schedule. 7 See Fee Schedule, Sections (1)(a) and (1)(b), Liquidity Indicator Code ‘‘Ap’’ (adds liquidity and executes at the midpoint, non-displayed Midpoint Peg Order (all Tapes)). The Exchange notes that the standard rebate is not changing under this proposal. 8 See Fee schedule, Section (1)(e). 9 ‘‘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 disruption 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. 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. VerDate Sep<11>2014 16:48 Nov 13, 2023 Jkt 262001 Protected NBBO and add liquidity to the Exchange by achieving a Midpoint ADAV equal to or greater than 1,000,000 shares. Proposal The Exchange now proposes to amend the Midpoint Volume Tiers Program to add a new Tier 3 and associated increased rebate. In particular, the Exchange proposes that pursuant to Tier 3 of the Midpoint Volume Tiers Program, Equity Members may now qualify for an enhanced rebate of ($0.0029) per share for executions of Midpoint Peg Orders in securities priced at or above $1.00 per share that execute at the midpoint of the Protected NBBO and add liquidity to the Exchange by achieving a Midpoint ADAV equal to or greater than 1,500,000 shares. The purpose of the proposed enhanced Tier 3 rebate for executions of Midpoint Peg Orders in securities priced at or above $1.00 per share that execute at the midpoint of the Protected NBBO and add liquidity to the Exchange is to encourage Equity Members that provide liquidity through non-displayed orders to strive for a higher Midpoint ADAV on the Exchange in order to qualify for the higher rebate, which should encourage increased order flow (particularly in the form of liquidity adding non-displayed Midpoint Peg Orders that execute at the midpoint of the Protected NBBO) to the Exchange, thereby contributing to a deeper and more liquid market to the benefit of all market participants. The Exchange believes that providing a higher enhanced rebate for executions of Midpoint Peg Orders in securities priced at or above $1.00 per share that execute at the midpoint of the Protected NBBO and add liquidity to the Exchange is a reasonable means to incentivize additional liquidity at the midpoint of the Protected NBBO, which in turn should increase the attractiveness of the Exchange as a destination venue as Equity Members seeking price improvement would be more motivated to direct their orders to the Exchange because they would have a heightened expectation of the availability of liquidity at the midpoint of the Protected NBBO. The Exchange notes that competing exchanges provide similar pricing structures and the proposed enhanced rebate is comparable to and higher than the rebate provided by at least two competing exchanges for executions of non-displayed orders in securities priced at or above $1.00 per share that PO 00000 Frm 00131 Fmt 4703 Sfmt 4703 are pegged to the midpoint of national best bid and offer.10 Implementation The Exchange proposes to implement the changes to the Fee Schedule pursuant to this proposal on November 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 11 in general, and furthers the objectives of Section 6(b)(4) of the Act 12 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. The Exchange also believes that the proposed rule change is consistent with the objectives of Section 6(b)(5) 13 requirements that the rules of an exchange be designed to prevent fraudulent and manipulative acts and practices, and to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in regulating, clearing, settling, processing information with respect to, and facilitating transactions in securities, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general, to protect investors and the public interest, and, particularly, 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 16 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. Based on publicly 10 See MEMX Equities Fee Schedule, available at https://info.memxtrading.com/equities-tradingresources/us-equities-fee-schedule/ (providing enhanced rebates ranging from ($0.0018) up to ($0.0028) per share for members that achieve nondisplayed ADAV ranging from 1,000,000 shares to 8,000,000 shares, which includes midpoint peg order executions); see also Nasdaq PSX Pricing Schedule, available at https:// www.nasdaqtrader.com/Trader.aspx?id=PSX_ Pricing (providing a standard rebate of $0.0018 per share for all firms that add non-displayed liquidity via an order with midpoint pegging and a rebate of $0.0025 per share for firms that add non-displayed liquidity via an order with midpoint pegging of at least 1 million shares ADV). 11 15 U.S.C. 78f(b). 12 15 U.S.C. 78f(b)(4). 13 15 U.S.C. 78f(b)(5). E:\FR\FM\14NON1.SGM 14NON1 khammond on DSKJM1Z7X2PROD with NOTICES Federal Register / Vol. 88, No. 218 / Tuesday, November 14, 2023 / Notices available information, as of October 26, 2023, 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 October 2023.14 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 2.36% of the overall market share.15 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.’’ 16 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 their order flow to the Exchange, which the Exchange believes would enhance liquidity and market quality to the benefit of all Members and market participants. The Exchange believes that the proposed change to add a new enhanced rebate to the Midpoint Volume Tiers Program is reasonable because it will provide Equity Members with an additional incentive to achieve higher volume thresholds on the Exchange. The Exchange notes that volume-based incentives for midpoint peg order executions have been adopted by 14 See the ‘‘Market Share’’ section of the Exchange’s website, available at https:// www.miaxglobal.com/ (last visited October 26, 2023). 15 Id. 16 See Securities Exchange Act Release No. 51808 (June 9, 2005), 70 FR 37499 (June 29, 2005). VerDate Sep<11>2014 16:48 Nov 13, 2023 Jkt 262001 competing exchanges,17 and the Exchange believes its proposal is reasonable, equitable, and not unfairly discriminatory because it is open to all Equity Members on an equal basis and provides an additional benefit that is reasonably related to the value to of the Exchange’s market quality associated with higher levels of market activity, such as higher levels of liquidity provision and the introduction of higher volumes of orders into the price and volume discovery processes. The Exchange believes that the proposal is reasonable because it is designed to incentivize market participants to direct additional order flow to the Exchange, which should enhance the Exchange’s market quality and provide price improvement through the use of orders that are designed to execute at the midpoint of the Protected NBBO through the provision of enhanced rebates for executions of Midpoint Peg Orders in securities priced at or above $1.00 per share that execute at the midpoint of the Protected NBBO and add liquidity to the Exchange in all Tapes.18 The Exchange believes its proposal will promote price improvement and increased liquidity on the Exchange which will benefit all market participants. The Exchange believes the proposed enhanced Tier 3 rebate is equitable and not unfairly discriminatory because all Equity Members will continue to be eligible to qualify for the enhanced rebates provided in the Midpoint Volume Tiers Program, including the new enhanced Tier 3 rebate, and have the opportunity to receive the corresponding enhanced rebate if such criteria is achieved (as described above, based on Midpoint ADAV). The Exchange further believes that the proposed criteria for the Tier 3 rebate in the Midpoint Volume Tiers Program (Midpoint ADAV equal to or greater than 1,500,000 shares) is reasonable because the proposed criteria is incrementally more difficult to achieve than that of the Tier 2 rebate; thus, proposed Tier 3 offers an appropriately higher rebate commensurate with the corresponding higher Midpoint ADAV requirement. Therefore, the Exchange believes the proposed changes to the Midpoint Volume Tiers Program is consistent with an equitable allocation 17 See supra note 10. Exchange notes that Equity Members that do not qualify for one of the Midpoint Volume Tiers will continue to receive the standard rebate of ($0.00205) per share for executions of Midpoint Peg Orders in securities priced at or above $1.00 per share that execute at the midpoint of the Protected NBBO and add liquidity to the Exchange in all Tapes. 18 The PO 00000 Frm 00132 Fmt 4703 Sfmt 4703 78079 of fees and rebates, as the more stringent criteria correlates with the corresponding tier’s higher rebate. Additionally, the Exchange believes that the proposed rebate is reasonable as such rebate is comparable to, and higher than, the rebates for executions of liquidity-adding non-displayed orders provided by at least two other exchanges under similar volume-based tiers.19 For the reasons discussed above, the Exchange submits that the proposal satisfies the requirements of Sections 6(b)(4) and 6(b)(5) of the Act in that it provides for the equitable allocation of reasonable dues, fees and other charges among its Equity Members and other persons using its facilities and is not designed to unfairly discriminate between customers, issuers, brokers, or dealers. As described more fully below in the Exchange’s statement regarding the burden on competition, the Exchange believes that its transaction pricing is subject to significant competitive forces, and that the proposed fees and rebates described herein are appropriate to address such forces. B. Self-Regulatory Organization’s Statement on Burden on Competition The Exchange does not believe that the proposed changes will impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act. The Exchange believes the proposed change will encourage Equity Members to maintain or increase their order flow to the Exchange, thereby contributing to a deeper and more liquid market to the benefit of all market participants and enhancing the attractiveness of the Exchange as a trading venue. 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.’’ 20 Intramarket Competition The Exchange believes that the proposal would incentivize Equity Members to maintain or increase their order flow, thereby contributing to a 19 See supra note 10. Securities Exchange Act Release No. 51808 (June 9, 2005), 70 FR 47396 (June 29, 2005). 20 See E:\FR\FM\14NON1.SGM 14NON1 78080 Federal Register / Vol. 88, No. 218 / Tuesday, November 14, 2023 / Notices khammond on DSKJM1Z7X2PROD with NOTICES deeper and more liquid market to the benefit of all market participants and enhance the attractiveness of the Exchange as a trading venue, and to provide price improvement through the use of orders that are designed to execute at the midpoint of the Protected NBBO, which the Exchange believes, in turn, would continue to encourage participants to direct order flow to the Exchange. Greater liquidity benefits all Equity Members by providing more trading opportunities and encourages Equity Members to send orders to the Exchange, thereby contributing to robust levels of liquidity, which benefits all market participants. The opportunity to qualify for enhanced, incremental rebates under the Midpoint Volume Tiers Program is available to all Equity Members that meet the associated Midpoint ADAV requirements in any month. The Exchange believes the requirements in the Midpoint Volume Tiers Program are reasonably related to the enhanced market quality that the Midpoint Volume Tiers Program is designed to promote. Similarly, the proposed enhanced Tier 3 rebate for executions of Midpoint Peg Orders in securities priced at or above $1.00 per share that execute at the midpoint of the Protected NBBO and add liquidity to the Exchange would apply equally to all Equity Members. As such, the Exchange believes the proposed changes would not impose any burden on intramarket competition that is not necessary or appropriate in furtherance of the purposes of the Act. 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, for the month of October 2023, no single registered equities exchange currently has more than 15–16% of the total market share of executed volume of equities trading.21 Thus, in such a lowconcentrated and highly competitive market, no single equities exchange possesses significant pricing power in the execution of order flow. Moreover, the Exchange believes that the evershifting 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 21 See supra note 14. VerDate Sep<11>2014 16:48 Nov 13, 2023 introduced to the market. Accordingly, competitive forces constrain the Exchange’s transaction fees and rebates generally, and market participants can readily choose to send their orders to other exchanges and off-exchange venues if they deem fee levels 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 more Equity Members to maintain or increase their order flow, thereby contributing to a deeper and more liquid market to the benefit of all market participants and enhancing the attractiveness of the Exchange as a trading venue, and to encourage Equity Members to provide price improvement through the use of orders that are designed to execute at the midpoint of the Protected NBBO. In turn, the Exchange believes that the proposed enhanced Tier 3 rebate for executions of Midpoint Peg Orders in securities priced at or above $1.00 per share that execute at the midpoint of the Protected NBBO and add liquidity to the Exchange would encourage the submission of additional order flow to the Exchange, particularly in the form of Midpoint Peg Orders executed at the midpoint of Protected NBBO, thereby promoting market depth, enhanced execution opportunities, price improvement, and price discovery to the benefit of all Equity Members and market participants. As described above the Exchange’s proposal is a competitive proposal designed to encourage additional order flow to the Exchange through a combination of volume based incentives, which have been widely adopted by exchanges, and standard pricing that is comparable to, and/or competitive with, pricing for similar executions in place at other exchanges.22 Accordingly, the Exchange believes its proposal would not burden, but rather promote, intermarket competition by enabling it to better compete with other exchanges that offer similar standard pricing for Added Midpoint Volume to market participants that achieves 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 22 See Jkt 262001 PO 00000 supra note 10. Frm 00133 Fmt 4703 Sfmt 4703 regulation of the market system ‘‘has been remarkably successful in promoting market competition in its broader forms that are most important to investors and listed companies.’’ 23 The 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: ‘‘[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’ . . .’’.24 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,25 and Rule 19b–4(f)(2) 26 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 23 See Securities Exchange Act Release No. 51808 (June 9, 2005), 70 FR 37496, 37499 (June 29, 2005). 24 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)). 25 15 U.S.C. 78s(b)(3)(A)(ii). 26 17 CFR 240.19b–4(f)(2). E:\FR\FM\14NON1.SGM 14NON1 Federal Register / Vol. 88, No. 218 / Tuesday, November 14, 2023 / Notices 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–2023–60 on the subject line. Paper Comments khammond on DSKJM1Z7X2PROD with NOTICES • 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–2023–60. 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–2023–60 and should be submitted on or before December 5, 2023. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.27 Christina Z. Milnor, Assistant Secretary. [FR Doc. 2023–25007 Filed 11–13–23; 8:45 am] BILLING CODE 8011–01–P 27 17 CFR 200.30–3(a)(12). VerDate Sep<11>2014 16:48 Nov 13, 2023 Jkt 262001 SECURITIES AND EXCHANGE COMMISSION [Release No. 34–98878; File No. SR– NASDAQ–2023–036] Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Filing of Amendment No. 1 and Order Granting Accelerated Approval of Proposed Rule Change, as Modified by Amendment No. 1, Relating to Nasdaq Rules 4120 and 4753 November 7, 2023. I. Introduction On September 12, 2023, The Nasdaq Stock Market LLC (‘‘Nasdaq’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’) pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 a proposed rule change to amend Rule 4120 (Limit Up-Limit Down and Trading Halts) and Rule 4753 (Nasdaq Halt Cross) to set forth specific requirements for halting and resuming trading in a security that is subject to a reverse stock split. The proposed rule change was published for comment in the Federal Register on September 28, 2023.3 On October 27, 2023, the Exchange filed Amendment No. 1 to the proposed rule change, which replaced and superseded the proposed rule change as originally filed.4 The Commission has received no comments on the proposal. The Commission is publishing this notice to solicit comments on Amendment No. 1 from interested persons, and is approving the proposed rule change, as modified by Amendment No. 1, on an accelerated basis. II. Self-Regulatory Organization’s Description of the Proposal, as Modified by Amendment No. 1 In its filing with the Commission, the self-regulatory organization 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 those statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, 1 15 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 See Securities Exchange Act Release No. 98489 (Sept. 22, 2023), 88 FR 66913 (Sept. 28, 2023) (SR– NASDAQ–2023–036) (‘‘Notice’’). 4 In Amendment No. 1, the Exchange makes nonsubstantive clarifying changes and provides additional justification for the proposal. Amendment No. 1 to the proposed rule change is available at https://www.sec.gov/comments/srnasdaq-2023-036/srnasdaq2023036-283339691882.pdf. 2 17 PO 00000 Frm 00134 Fmt 4703 Sfmt 4703 78081 set forth in sections A, B, and C below, of the most significant parts of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and the Statutory Basis for, the Proposed Rule Change 1. Purpose In conjunction with the increase in overall reverse stock splits in recent years, Nasdaq proposes to amend Rule 4120 and Rule 4753 to set forth specific requirements for halting trading in a security that is subject to a reverse stock split and resuming trading using the Nasdaq Halt Cross.5 Current Rule 4120 does not specifically list rule reverse stock splits in the enumerated circumstances in which Nasdaq may halt trading in a security. The proposed amendments will be specific to the automatic initiation, pre-market trading and opening of a Nasdaq-listed security undergoing a reverse stock split. Background Nasdaq has observed that the current market environment has led to an increase in reverse stock split activity. In 2022, Nasdaq processed 196 reverse stock splits, compared to 35 in 2021 and 98 in 2020. Just in the first quarter of 2023, Nasdaq processed 78 reverse stock splits, and projects significantly more throughout 2023. Reverse stock splits are often effected by smaller companies that do not have broad media or research coverage. In most cases, the companies are listed on the Capital Market tier and are conducting reverse stock splits to achieve compliance with Nasdaq’s $1 minimum bid price requirement.6 Nasdaq believes that the increase in companies effecting reverse stock splits warrants amendments to the trading halt rules to allow for Nasdaq to help reduce the potential for errors resulting in a material effect on the market resulting from market participants’ processing of the reverse stock split, including incorrect adjustment or entry of orders. Nasdaq currently processes reverse 5 The ‘‘Nasdaq Halt Cross’’ is the process for determining the price at which Eligible Interest shall be executed at the open of trading for a halted security and for executing that Eligible Interest. See Rule 4753(a)(4). ‘‘Eligible Interest’’ shall mean any quotation or any order that has been entered into the system and designated with a time-in-force that would allow the order to be in force at the time of the Halt Cross. See Nasdaq Rule 4753(a)(5). 6 Rule 5550(a)(2) specifies that a Company that has its Primary Equity Security listed on the Capital Market must have a minimum bid price of at least $1 per share. See also Rule 5450(a)(1) (Global and Global Select Markets). Companies are afforded a grace period pursuant to Rule 5810(c)(3)(A) to regain compliance. E:\FR\FM\14NON1.SGM 14NON1

Agencies

[Federal Register Volume 88, Number 218 (Tuesday, November 14, 2023)]
[Notices]
[Pages 78077-78081]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-25007]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-98873; File No. SR-PEARL-2023-60]


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

November 7, 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 October 31, 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.

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)e) of the Fee Schedule to 
amend the Midpoint Peg Order Adding Liquidity at Midpoint Volume Tiers 
table to offer a new enhanced rebate for executions of Midpoint Peg 
Orders \3\ in securities priced at or above $1.00 per share that 
execute at the midpoint of the Protected NBBO \4\ and add liquidity to 
the Exchange in all Tapes. In response to the competitive environment, 
the Exchange offers tiered pricing, which provides Equity Members \5\ 
with opportunities to qualify for higher rebates or lower fees when 
certain volume criteria and thresholds are met. Tiered pricing provides 
an incremental incentive for Equity Members to strive for higher tier 
levels, which provides increasingly higher benefits or discounts for 
satisfying increasingly more stringent criteria.
---------------------------------------------------------------------------

    \3\ A Midpoint Peg Order is a non-displayed Limit Order that is 
assigned a working price pegged to the midpoint of the PBBO. A 
Midpoint Peg Order receives a new timestamp each time its working 
price changes in response to changes in the midpoint of the PBBO. 
See Exchange Rule 2614(a)(3).
    \4\ With respect to the trading of equity securities, the term 
``the term ``Protected NBB'' or ``PBB'' shall mean the national best 
bid that is a Protected Quotation, the term ``Protected NBO'' or 
``PBO'' shall mean the national best offer that is a Protected 
Quotation, and the term ``Protected NBBO'' or ``PBBO'' shall mean 
the national best bid and offer that is a Protected Quotation. See 
Exchange Rule 1901.
    \5\ The term ``Equity Member'' is a Member authorized by the 
Exchange to transact business on MIAX Pearl Equities. See Exchange 
Rule 1901.

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[[Page 78078]]

Midpoint Peg Orders
    The Exchange currently provides a standard rebate of ($0.00205) \6\ 
per share for executions of Midpoint Peg Orders in securities priced at 
or above $1.00 per share that execute at the midpoint of the Protected 
NBBO and add liquidity to the Exchange in all Tapes.\7\
---------------------------------------------------------------------------

    \6\ Rebates are indicated by parentheses. See the General Notes 
section of the Fee Schedule.
    \7\ See Fee Schedule, Sections (1)(a) and (1)(b), Liquidity 
Indicator Code ``Ap'' (adds liquidity and executes at the midpoint, 
non-displayed Midpoint Peg Order (all Tapes)). The Exchange notes 
that the standard rebate is not changing under this proposal.
---------------------------------------------------------------------------

    The Exchange also provides enhanced rebates through a tiered 
pricing structure for executions of Midpoint Peg Orders in securities 
priced at or above $1.00 per share that execute at the midpoint of the 
Protected NBBO and add liquidity to the Exchange in all Tapes based on 
an Equity Member achieving certain ``Midpoint ADAV'' thresholds 
(defined below) (the ``Midpoint Volume Tiers Program'').\8\ Pursuant to 
the Midpoint Volume Tiers Program, Midpoint ADAV means the average 
daily added volume (``ADAV'') for the current month consisting of 
Midpoint Peg Orders in securities priced at or above $1.00 per share 
that execute at the midpoint of the Protected NBBO and add liquidity to 
the Exchange.\9\ Pursuant to Tier 1 of the Midpoint Volume Tiers 
Program, Equity Members may qualify for an enhanced rebate of ($0.0025) 
per share for executions of Midpoint Peg Orders in securities priced at 
or above $1.00 per share that execute at the midpoint of the Protected 
NBBO and add liquidity to the Exchange by achieving a Midpoint ADAV 
equal to or greater than 500,000 shares. Pursuant to Tier 2 of the 
Midpoint Volume Tiers Program, Equity Members may qualify for an 
enhanced rebate of ($0.0027) per share for executions of Midpoint Peg 
Orders in securities priced at or above $1.00 per share that execute at 
the midpoint of the Protected NBBO and add liquidity to the Exchange by 
achieving a Midpoint ADAV equal to or greater than 1,000,000 shares.
---------------------------------------------------------------------------

    \8\ See Fee schedule, Section (1)(e).
    \9\ ``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 
disruption 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. 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.
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Proposal
    The Exchange now proposes to amend the Midpoint Volume Tiers 
Program to add a new Tier 3 and associated increased rebate. In 
particular, the Exchange proposes that pursuant to Tier 3 of the 
Midpoint Volume Tiers Program, Equity Members may now qualify for an 
enhanced rebate of ($0.0029) per share for executions of Midpoint Peg 
Orders in securities priced at or above $1.00 per share that execute at 
the midpoint of the Protected NBBO and add liquidity to the Exchange by 
achieving a Midpoint ADAV equal to or greater than 1,500,000 shares.
    The purpose of the proposed enhanced Tier 3 rebate for executions 
of Midpoint Peg Orders in securities priced at or above $1.00 per share 
that execute at the midpoint of the Protected NBBO and add liquidity to 
the Exchange is to encourage Equity Members that provide liquidity 
through non-displayed orders to strive for a higher Midpoint ADAV on 
the Exchange in order to qualify for the higher rebate, which should 
encourage increased order flow (particularly in the form of liquidity 
adding non-displayed Midpoint Peg Orders that execute at the midpoint 
of the Protected NBBO) to the Exchange, thereby contributing to a 
deeper and more liquid market to the benefit of all market 
participants.
    The Exchange believes that providing a higher enhanced rebate for 
executions of Midpoint Peg Orders in securities priced at or above 
$1.00 per share that execute at the midpoint of the Protected NBBO and 
add liquidity to the Exchange is a reasonable means to incentivize 
additional liquidity at the midpoint of the Protected NBBO, which in 
turn should increase the attractiveness of the Exchange as a 
destination venue as Equity Members seeking price improvement would be 
more motivated to direct their orders to the Exchange because they 
would have a heightened expectation of the availability of liquidity at 
the midpoint of the Protected NBBO.
    The Exchange notes that competing exchanges provide similar pricing 
structures and the proposed enhanced rebate is comparable to and higher 
than the rebate provided by at least two competing exchanges for 
executions of non-displayed orders in securities priced at or above 
$1.00 per share that are pegged to the midpoint of national best bid 
and offer.\10\
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    \10\ See MEMX Equities Fee Schedule, available at https://info.memxtrading.com/equities-trading-resources/us-equities-fee-schedule/ (providing enhanced rebates ranging from ($0.0018) up to 
($0.0028) per share for members that achieve non-displayed ADAV 
ranging from 1,000,000 shares to 8,000,000 shares, which includes 
midpoint peg order executions); see also Nasdaq PSX Pricing 
Schedule, available at https://www.nasdaqtrader.com/Trader.aspx?id=PSX_Pricing (providing a standard rebate of $0.0018 
per share for all firms that add non-displayed liquidity via an 
order with midpoint pegging and a rebate of $0.0025 per share for 
firms that add non-displayed liquidity via an order with midpoint 
pegging of at least 1 million shares ADV).
---------------------------------------------------------------------------

Implementation
    The Exchange proposes to implement the changes to the Fee Schedule 
pursuant to this proposal on November 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 \11\ in general, and 
furthers the objectives of Section 6(b)(4) of the Act \12\ 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. The Exchange also believes that the 
proposed rule change is consistent with the objectives of Section 
6(b)(5) \13\ requirements that the rules of an exchange be designed to 
prevent fraudulent and manipulative acts and practices, and to promote 
just and equitable principles of trade, to foster cooperation and 
coordination with persons engaged in regulating, clearing, settling, 
processing information with respect to, and facilitating transactions 
in securities, to remove impediments to and perfect the mechanism of a 
free and open market and a national market system, and, in general, to 
protect investors and the public interest, and, particularly, is not 
designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers.
---------------------------------------------------------------------------

    \11\ 15 U.S.C. 78f(b).
    \12\ 15 U.S.C. 78f(b)(4).
    \13\ 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 16 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. Based on 
publicly

[[Page 78079]]

available information, as of October 26, 2023, 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 October 2023.\14\ 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 2.36% of the overall market 
share.\15\ 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.'' \16\
---------------------------------------------------------------------------

    \14\ See the ``Market Share'' section of the Exchange's website, 
available at https://www.miaxglobal.com/ (last visited October 26, 
2023).
    \15\ Id.
    \16\ 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 to the benefit of all Members and market 
participants.
    The Exchange believes that the proposed change to add a new 
enhanced rebate to the Midpoint Volume Tiers Program is reasonable 
because it will provide Equity Members with an additional incentive to 
achieve higher volume thresholds on the Exchange. The Exchange notes 
that volume-based incentives for midpoint peg order executions have 
been adopted by competing exchanges,\17\ and the Exchange believes its 
proposal is reasonable, equitable, and not unfairly discriminatory 
because it is open to all Equity Members on an equal basis and provides 
an additional benefit that is reasonably related to the value to of the 
Exchange's market quality associated with higher levels of market 
activity, such as higher levels of liquidity provision and the 
introduction of higher volumes of orders into the price and volume 
discovery processes. The Exchange believes that the proposal is 
reasonable because it is designed to incentivize market participants to 
direct additional order flow to the Exchange, which should enhance the 
Exchange's market quality and provide price improvement through the use 
of orders that are designed to execute at the midpoint of the Protected 
NBBO through the provision of enhanced rebates for executions of 
Midpoint Peg Orders in securities priced at or above $1.00 per share 
that execute at the midpoint of the Protected NBBO and add liquidity to 
the Exchange in all Tapes.\18\ The Exchange believes its proposal will 
promote price improvement and increased liquidity on the Exchange which 
will benefit all market participants.
---------------------------------------------------------------------------

    \17\ See supra note 10.
    \18\ The Exchange notes that Equity Members that do not qualify 
for one of the Midpoint Volume Tiers will continue to receive the 
standard rebate of ($0.00205) per share for executions of Midpoint 
Peg Orders in securities priced at or above $1.00 per share that 
execute at the midpoint of the Protected NBBO and add liquidity to 
the Exchange in all Tapes.
---------------------------------------------------------------------------

    The Exchange believes the proposed enhanced Tier 3 rebate is 
equitable and not unfairly discriminatory because all Equity Members 
will continue to be eligible to qualify for the enhanced rebates 
provided in the Midpoint Volume Tiers Program, including the new 
enhanced Tier 3 rebate, and have the opportunity to receive the 
corresponding enhanced rebate if such criteria is achieved (as 
described above, based on Midpoint ADAV).
    The Exchange further believes that the proposed criteria for the 
Tier 3 rebate in the Midpoint Volume Tiers Program (Midpoint ADAV equal 
to or greater than 1,500,000 shares) is reasonable because the proposed 
criteria is incrementally more difficult to achieve than that of the 
Tier 2 rebate; thus, proposed Tier 3 offers an appropriately higher 
rebate commensurate with the corresponding higher Midpoint ADAV 
requirement. Therefore, the Exchange believes the proposed changes to 
the Midpoint Volume Tiers Program is consistent with an equitable 
allocation of fees and rebates, as the more stringent criteria 
correlates with the corresponding tier's higher rebate. Additionally, 
the Exchange believes that the proposed rebate is reasonable as such 
rebate is comparable to, and higher than, the rebates for executions of 
liquidity-adding non-displayed orders provided by at least two other 
exchanges under similar volume-based tiers.\19\
---------------------------------------------------------------------------

    \19\ See supra note 10.
---------------------------------------------------------------------------

    For the reasons discussed above, the Exchange submits that the 
proposal satisfies the requirements of Sections 6(b)(4) and 6(b)(5) of 
the Act in that it provides for the equitable allocation of reasonable 
dues, fees and other charges among its Equity Members and other persons 
using its facilities and is not designed to unfairly discriminate 
between customers, issuers, brokers, or dealers. As described more 
fully below in the Exchange's statement regarding the burden on 
competition, the Exchange believes that its transaction pricing is 
subject to significant competitive forces, and that the proposed fees 
and rebates described herein are appropriate to address such forces.

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

    The Exchange does not believe that the proposed changes will impose 
any burden on competition not necessary or appropriate in furtherance 
of the purposes of the Act. The Exchange believes the proposed change 
will encourage Equity Members to maintain or increase their order flow 
to the Exchange, thereby contributing to a deeper and more liquid 
market to the benefit of all market participants and enhancing the 
attractiveness of the Exchange as a trading venue. 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.'' \20\
---------------------------------------------------------------------------

    \20\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 47396 (June 29, 2005).
---------------------------------------------------------------------------

Intramarket Competition
    The Exchange believes that the proposal would incentivize Equity 
Members to maintain or increase their order flow, thereby contributing 
to a

[[Page 78080]]

deeper and more liquid market to the benefit of all market participants 
and enhance the attractiveness of the Exchange as a trading venue, and 
to provide price improvement through the use of orders that are 
designed to execute at the midpoint of the Protected NBBO, which the 
Exchange believes, in turn, would continue to encourage participants to 
direct order flow to the Exchange. Greater liquidity benefits all 
Equity Members by providing more trading opportunities and encourages 
Equity Members to send orders to the Exchange, thereby contributing to 
robust levels of liquidity, which benefits all market participants. The 
opportunity to qualify for enhanced, incremental rebates under the 
Midpoint Volume Tiers Program is available to all Equity Members that 
meet the associated Midpoint ADAV requirements in any month. The 
Exchange believes the requirements in the Midpoint Volume Tiers Program 
are reasonably related to the enhanced market quality that the Midpoint 
Volume Tiers Program is designed to promote. Similarly, the proposed 
enhanced Tier 3 rebate for executions of Midpoint Peg Orders in 
securities priced at or above $1.00 per share that execute at the 
midpoint of the Protected NBBO and add liquidity to the Exchange would 
apply equally to all Equity Members. As such, the Exchange believes the 
proposed changes would not impose any burden on intramarket competition 
that is not necessary or appropriate in furtherance of the purposes of 
the Act.
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, for the month of October 2023, no 
single registered equities exchange currently has more than 15-16% of 
the total market share of executed volume of equities trading.\21\ 
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, and market participants can readily choose 
to send their orders to other exchanges and off-exchange venues if they 
deem fee levels at those other venues to be more favorable.
---------------------------------------------------------------------------

    \21\ See supra note 14.
---------------------------------------------------------------------------

    As described above, the proposal is designed to enhance market 
quality on the Exchange and to encourage more Equity Members to 
maintain or increase their order flow, thereby contributing to a deeper 
and more liquid market to the benefit of all market participants and 
enhancing the attractiveness of the Exchange as a trading venue, and to 
encourage Equity Members to provide price improvement through the use 
of orders that are designed to execute at the midpoint of the Protected 
NBBO. In turn, the Exchange believes that the proposed enhanced Tier 3 
rebate for executions of Midpoint Peg Orders in securities priced at or 
above $1.00 per share that execute at the midpoint of the Protected 
NBBO and add liquidity to the Exchange would encourage the submission 
of additional order flow to the Exchange, particularly in the form of 
Midpoint Peg Orders executed at the midpoint of Protected NBBO, thereby 
promoting market depth, enhanced execution opportunities, price 
improvement, and price discovery to the benefit of all Equity Members 
and market participants.
    As described above the Exchange's proposal is a competitive 
proposal designed to encourage additional order flow to the Exchange 
through a combination of volume based incentives, which have been 
widely adopted by exchanges, and standard pricing that is comparable 
to, and/or competitive with, pricing for similar executions in place at 
other exchanges.\22\
---------------------------------------------------------------------------

    \22\ See supra note 10.
---------------------------------------------------------------------------

    Accordingly, the Exchange believes its proposal would not burden, 
but rather promote, intermarket competition by enabling it to better 
compete with other exchanges that offer similar standard pricing for 
Added Midpoint Volume to market participants that achieves 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.'' \23\ 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: ``[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' . . .''.\24\ 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.
---------------------------------------------------------------------------

    \23\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005).
    \24\ 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,\25\ and Rule 19b-4(f)(2) \26\ 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.
---------------------------------------------------------------------------

    \25\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \26\ 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

[[Page 78081]]

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-2023-60 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-2023-60. 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-2023-60 and should be 
submitted on or before December 5, 2023.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\27\
---------------------------------------------------------------------------

    \27\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Christina Z. Milnor,
Assistant Secretary.
[FR Doc. 2023-25007 Filed 11-13-23; 8:45 am]
BILLING CODE 8011-01-P
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