Self-Regulatory Organizations; MIAX PEARL, LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend the MIAX Pearl Options Fee Schedule for Purge Ports, 86193-86197 [2023-27161]

Download as PDF Federal Register / Vol. 88, No. 237 / Tuesday, December 12, 2023 / Notices For the Commission, pursuant to delegated authority.40 Sherry R. Haywood, Assistant Secretary. [FR Doc. 2023–27159 Filed 12–11–23; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–99090; File No. SR– PEARL–2023–65] Self-Regulatory Organizations; MIAX PEARL, LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend the MIAX Pearl Options Fee Schedule for Purge Ports December 6, 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 November 22, 2023, MIAX PEARL, LLC (‘‘MIAX Pearl’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend the MIAX Pearl Options Exchange Fee Schedule (the ‘‘Fee Schedule’’) to amend fees for MIAX Express Network (‘‘MEO’’) 3 Purge Ports (‘‘Purge Ports’’).4 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 40 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 ‘‘MEO Interface’’ or ‘‘MEO’’ means a binary order interface for certain order types as set forth in Rule 516 into the MIAX Pearl System. See the Definitions Section of the Fee Schedule and Exchange Rule 100. 4 The proposed fee change is based on a recent proposal by Nasdaq Phlx LLC (‘‘Phlx’’) to adopt fees for purge ports. See Securities Exchange Act Release No. 97825 (June 30, 2023), 88 FR 43405 (July 7, 2023) (SR–Phlx–2023–28). ddrumheller on DSK120RN23PROD with NOTICES1 1 15 VerDate Sep<11>2014 18:03 Dec 11, 2023 Jkt 262001 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 is proposing to amend the fees for Purge Ports, which is a function enabling the Exchange’s two types of Members,5 Market Makers 6 and Electronic Exchange Members 7 (‘‘EEMs’’), to cancel all open orders or a subset of open orders through a single cancel message. The Exchange currently provides Members the option to purchase Purge Ports to assist in their quoting activity. Purge Ports provide Members with the ability to send purge messages to the Exchange System.8 Purge Ports are not capable of sending or receiving any other type of messages or information. The use of Purge Ports is completely optional and no rule or regulation requires that a Market Maker utilize them. The Exchange initially filed the proposal on September 29, 2023 (SR– PEARL–2023–52) (the ‘‘Initial Proposal’’).9 On November 22, 2023, the Exchange withdrew the Initial Proposal and replaced it with this filing. Unlike other options exchanges that charge fees for Purge Ports on a per port 5 The term ‘‘Member’’ means an individual or organization that is registered with the Exchange pursuant to Chapter II of Exchange Rules for purposes of trading on the Exchange as an ‘‘Electronic Exchange Member’’ or ‘‘Market Maker.’’ Members are deemed ‘‘members’’ under the Exchange Act. See the Definitions Section of the Fee Schedule and Exchange Rule 100. 6 The term ‘‘Market Maker’’ or ‘‘MM’’ means a Member registered with the Exchange for the purpose of making markets in options contracts traded on the Exchange and that is vested with the rights and responsibilities specified in Chapter VI of the Exchange Rules. See the Definitions Section of the Fee Schedule and Exchange Rule 100. 7 The term ‘‘Electronic Exchange Member’’ or ‘‘EEM’’ means the holder of a Trading Permit who is a Member representing as agent Public Customer Orders or Non-Customer Orders on the Exchange and those non-Market Maker Members conducting proprietary trading. Electronic Exchange Members are deemed ‘‘members’’ under the Exchange Act. See the Definitions Section of the Fee Schedule and Exchange Rule 100. 8 The term ‘‘System’’ means the automated trading system used by the Exchange for the trading of securities. See Exchange Rule 100. 9 See Securities Exchange Act Release No. 98733 (October 12, 2023), 88 FR 71907 (October 18, 2023) (SR–PEARL–2023–52). PO 00000 Frm 00090 Fmt 4703 Sfmt 4703 86193 basis,10 the Exchange assesses a flat fee of $750 per month, regardless of the number of Purge Ports utilized by a Market Maker. Currently, a Market Maker may request and be allocated two (2) Purge Ports per Matching Engine 11 to which it connects and not all Members connect to all of the Exchange’s Matching Engines. The Exchange now proposes to amend the fee for Purge Ports to align more closely with other exchanges who charge on a per port basis by providing two (2) Purge Ports per Matching Engine for a monthly flat fee of $600 per month per Matching Engine. The only difference with a per port structure is that Members receive two (2) Purge Ports per Matching Engine for the same proposed monthly fee, rather than being charged a separate fee for each Purge Port. The Exchange proposes to charge the proposed fee for Purge Ports per Matching Engine, instead on a per Purge Port basis, due to its System architecture which provides two (2) Purge Ports per Matching Engine for redundancy purposes. In addition, the proposed fee is lower than the comparable fee charged by competing exchanges that also charge on a per port basis, notwithstanding that the Exchange is providing up to two (2) Purge Ports for that same lower fee.12 Similar to a per port charge, Members are able to select the Matching Engines that they want to connect to,13 based on the business needs of each Market Maker, and pay the applicable fee based on the number of Matching Engines and ports utilized. The Exchange believes 10 See Cboe BXZ Exchange, Inc. (‘‘BZX’’) Options Fee Schedule, Options Logical Port Fees, Purge Ports ($750 per purge port per month); Cboe EDGX Exchange, Inc. (‘‘EDGX’’) Options Fee Schedule, Options Logical Port Fees, Purge Ports ($750 per purge port per month); Cboe Exchange, Inc. (‘‘Cboe’’) Fee Schedule ($850 per purge port per month). See also Nasdaq GEMX, Options 7, Pricing Schedule, Section 6.C.(3). Nasdaq GEMX, LLC (‘‘Nasdaq GEMX’’) assesses its members $1,250 per SQF Purge Port per month, subject to a monthly cap of $17,500 for SQF Purge Ports and SQF Ports, applicable to market makers. See also Securities Exchange Act Release No. 97825 (June 30, 2023), 88 FR 43405 (July 7, 2023) (SR–Phlx–2023–28). 11 A Matching Engine is a part of the Exchange’s electronic system that processes options quotes and trades on a symbol-by-symbol basis. Some matching engines will process option classes with multiple root symbols, and other matching engines will be dedicated to one single option root symbol (for example, options on SPY will be processed by one single matching engine that is dedicated only to SPY). A particular root symbol may only be assigned to a single designated matching engine. A particular root symbol may not be assigned to multiple matching engines. 12 See supra note 10. 13 The Exchange notes that each Matching Engine corresponds to a specified group of symbols. Certain Market Makers choose to only quote in certain symbols while other Market Makers choose to quote the entire market. E:\FR\FM\12DEN1.SGM 12DEN1 ddrumheller on DSK120RN23PROD with NOTICES1 86194 Federal Register / Vol. 88, No. 237 / Tuesday, December 12, 2023 / Notices that the proposed fee provides Members with flexibility to control their Purge Port costs based on the number of Matching Engines each Marker Maker elects to connect to based on each Market Maker’s business needs. * * * * * A logical port represents a port established by the Exchange within the Exchange’s System for trading and billing purposes. Each logical port grants a Member the ability to accomplish a specific function, such as order entry, order cancellation, access to execution reports, and other administrative information. Purge Ports are designed to assist Members 14 in the management of, and risk control over, their orders, particularly if the firm is dealing with a large number of securities. For example, if a Market Maker detects market indications that may influence the execution potential of their orders, the Market Maker may use Purge Ports to reduce uncertainty and to manage risk by purging all orders in a number of securities. This allows Members to seamlessly avoid unintended executions, while continuing to evaluate the market, their positions, and their risk levels. Purge Ports are used by Members that conduct business activity that exposes them to a large amount of risk across a number of securities. Purge Ports enable Members to cancel all open orders, or a subset of open orders through a single cancel message. The Exchange notes that Purge Ports increase efficiency of already existing functionality enabling the cancellation of orders. The Exchange operates highly performant systems with significant throughput and determinism which allows participants to enter, update and cancel orders at high rates. Members may currently cancel individual orders through the existing functionality, such as through the use of a mass cancel message by which a Market Maker may request that the Exchange remove all or a subset of its quotations and block all or a subset of its new inbound quotations.15 Other than Purge Ports being a dedicated line for cancelling quotations, Purge Ports operate in the same manner as a mass cancel message being sent over a different type of port. For example, like Purge Ports, mass cancellations sent over a logical port may be done at either the firm or MPID level. As a result, Members can currently cancel orders in rapid 14 Members seeking to become registered as a Market Maker must comply with the applicable requirements of Chapter VI of the Exchange’s Rules. 15 See Exchange Rule 519C(a) and (b). VerDate Sep<11>2014 18:03 Dec 11, 2023 Jkt 262001 succession across their existing logical ports 16 or through a single cancel message, all open orders or a subset of open orders. Similarly, Members may also use cancel-on-disconnect control when they experience a disruption in connection to the Exchange to automatically cancel all orders, as configured or instructed by the Member or Market Maker.17 In addition, the Exchange already provides similar ability to mass cancel orders through the Exchange’s risk controls, which are offered at no charge and enables Members to establish predetermined levels of risk exposure, and can be used to cancel all open orders.18 Accordingly, the Exchange believes that the Purge Ports provide an efficient option as an alternative to already available services and enhance the Member’s ability to manage their risk. The Exchange believes that market participants benefit from a dedicated purge mechanism for specific Members and to the market as a whole. Members will have the benefit of efficient risk management and purge tools. The market will benefit from potential increased quoting and liquidity as Members may use Purge Ports to manage their risk more robustly. Only Members that request Purge Ports would be subject to the proposed fees, and other Members can continue to operate in exactly the same manner as they do today without dedicated Purge Ports, but with the additional purging capabilities described above. Implementation Date The proposed fees are immediately effective. 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with section 6(b) of the Act,19 in general, and furthers the objectives of section 6(b)(5) of the Act,20 in particular, in that it is not designed to permit unfair discrimination among customers, brokers, or dealers. The Exchange also believes that its proposed fee is consistent with section 6(b)(4) of the Act 21 because it represents an equitable allocation of reasonable dues, fees and 16 Current Exchange port functionality supports cancelation rates that exceed one thousand messages per second and the Exchange’s research indicates that certain market participants rely on such functionality and at times utilize such cancelation rates. 17 See Exchange Rule 519C(c). 18 See Exchange Rule 532. 19 15 U.S.C. 78f(b). 20 15 U.S.C. 78f(b)(5). 21 15 U.S.C. 78f(b)(4). PO 00000 Frm 00091 Fmt 4703 Sfmt 4703 other charges among market participants. The Exchange supports the proposed fee change with the below justification because a similar justification was used in a recent 2023 proposal filed with the Commission by another national securities exchange, Phlx, to adopt fees for purge ports, which the Commission deemed acceptable by not suspending that filing during the applicable 60-day review period.22 In fact, the same justification Phlx utilized was also used in similar recent proposals to adopt fees for purge ports by two of Phlx’s affiliated exchanges.23 Therefore, the Exchange utilized the below justification based on this recent Commission precedent from approximately one month ago. The Exchange believes that the proposed rule change would promote just and equitable principles of trade and remove impediments to and perfect the mechanism of a free and open market because offering Members optional service and flexible fee structures which promotes choice, flexibility, efficiency, and competition. The Exchange believes Purge Ports enhance Members’ ability to manage orders, which would, in turn, improve their risk controls to the benefit of all market participants. The Exchange believes that Purge Ports foster cooperation and coordination with persons engaged in facilitating transactions in securities because designating Purge Ports for purge messages may encourage better use of such ports. This may, concurrent with the ports that carry orders and other information necessary for market making activities, enable more efficient, as well as fair and reasonable, use of Members’ resources. Similar connectivity and functionality is offered by options exchanges, including the Exchange’s own affiliated options exchanges, and other equities exchanges.24 The Exchange believes that 22 See supra note 3. Securities Exchange Act Release Nos. 98770 (October 18, 2023), 88 FR 73065 (October 24, 2023) (SR–BX–2023–026); and 98768 (October 18, 2023), 88 FR 73056 (October 24, 2023) (SR– NASDAQ–2023–041). While the Exchange included a cost-based justification in a related filing to amend fees for connectivity, it does not believe a cost-based justification is require here because Purge Ports are optional functionality and no costbased justification was provided by Phlx or any of its affiliates in their same filings to adopt fees for purge ports. Nor does the Commission Staff’s own fee guidance include such a requirement. See Staff Guidance on SRO Rule Filings Relating to Fees (May 21, 2019), available at https://www.sec.gov/ tm/staff-guidance-sro-rule-filings-fees. 24 See supra notes 4 and 10. See also Securities Exchange Act Release No. 77613 (April 13, 2016), 81 FR 23023 (April 19, 2016). See also Securities 23 See E:\FR\FM\12DEN1.SGM 12DEN1 Federal Register / Vol. 88, No. 237 / Tuesday, December 12, 2023 / Notices ddrumheller on DSK120RN23PROD with NOTICES1 proper risk management, including the ability to efficiently cancel multiple orders quickly when necessary, is similarly valuable to firms that trade in the equities market, including Members that have heightened quoting obligations that are not applicable to other market participants. Purge Ports do not relieve Members of their quoting obligations or firm quote obligations under Regulation NMS Rule 602.25 Specifically, any interest that is executable against a Member’s or Market Maker’s orders that is received by the Exchange prior to the time of the removal of orders request will automatically execute. Members that purge their orders will not be relieved of the obligation to provide continuous two-sided orders on a daily basis, nor will it prohibit the Exchange from taking disciplinary action against a Market Maker for failing to meet their continuous quoting obligation each trading day.26 The Exchange is not the only exchange to offer this functionality and to charge associated fees.27 The Exchange believes the proposed fee for Purge Ports is reasonable because it is lower than the fees currently charged by other exchanges for similar port functionality. For example, BZX and EDGX charge a fee of $750 per purge port per month, Cboe charges $850 per purge port per month, Nasdaq GEMX assesses its members $1,250 per SQF Purge Port per month, subject to a monthly cap of $17,500 for SQF Purge Ports and SQF Ports.28 The Exchange believes it is reasonable to charge $600 per month for Purge Ports as proposed because such ports were specially developed to allow Members to send a single message to cancel multiple orders, thereby assisting firms in effectively managing risk. The Exchange also believes that a Member that chooses to utilize Purge Ports may, in the future, reduce their need for additional ports by consolidating cancel messages to their dedicated Purge Port and thus freeing up some capacity of the existing logical ports and, therefore, allowing for increased message traffic without paying for additional logical ports. Purge Ports provide the ability to cancel multiple orders with a single Exchange Act Release Nos. 79956 (February 3, 2017), 82 FR 10102 (February 9, 2017) (SR– BatsBZX–2017–05); 79957 (February 3, 2017), 82 FR 10070 (February 9, 2017) (SR–BatsEDGX–2017–07); 83201 (May 9, 2018), 83 FR 22546 (May 15, 2018) (SR–C2–2018–006). 25 See Exchange Rule 604. See also generally Chapter VI of the Exchange’s Rules. 26 Id. 27 See supra notes 4 and 10. 28 See supra note 10. VerDate Sep<11>2014 18:03 Dec 11, 2023 Jkt 262001 message over a dedicated port, and, therefore, may create efficiencies for firms and provide a more efficient solution for them based on their risk management needs. In addition, Purge Port requests may cancel orders submitted over numerous ports and contain added functionality to purge only a subset of these orders. Effective risk management is important both for individual market participants that choose to utilize risk features provided by the Exchange, as well as for the market in general. As a result, the Exchange believes that it is appropriate to charge fees for such functionality as doing so aids in the maintenance of a fair and orderly market. The Exchange also believes that its ability to set fees for Purge Ports is subject to significant substitution-based forces because Members are able to rely on currently available services both free and those they receive when using existing trading protocols. If the value of the efficiency introduced through the Purge Port functionality is not worth the proposed fees, Members will simply continue to rely on the existing functionality and not pay for Purge Ports. In that regard, Members may currently cancel individual orders through the existing functionality, such as through the use of a mass cancel message by which a Market Maker may request that the Exchange remove all or a subset of its quotations and block all or a subset of its new inbound quotations. Already Members can also cancel orders individually and by utilizing Exchange protocols that allow them to develop proprietary systems that can send cancel messages at a high rate.29 In addition, the Exchange already provides similar ability to mass cancel orders through the Exchange’s risk controls, which are offered at no charge that enables Members to establish predetermined levels of risk exposure, and can be used to cancel all open orders.30 Further, like Purge Ports, Members may also cancel all or a subset of its orders in the System, by firm name or by MPID, over their existing ports, or by requesting the Exchange staff to effect such cancellations.31 Similarly, Members may use cancelon-disconnect control when they experience a disruption in their connection to the Exchange and immediately cancel all pending quotes 29 Current Exchange port functionality supports cancellation rates that exceed one thousand messages per second and the Exchange’s research indicates that certain Participants rely on such functionality and at times utilize such cancellation rates. 30 See Exchange Rule 532. 31 See Exchange Rule 519C(a). PO 00000 Frm 00092 Fmt 4703 Sfmt 4703 86195 in the Exchange’s System.32 Finally, this existing purging functionality will allow Members to achieve essentially the same outcome in canceling orders as they would by utilizing the Purge Ports. Accordingly, the Exchange believes that the proposed Purge Ports fee is reasonable because it is related to the efficiency of Purge Ports and to other means and services already available which are either free or already a part of a fee assessed to the Members for existing connectivity. Accordingly, because Purge Ports provide additional optional functionality, excessive fees would simply serve to reduce or eliminate demand for this optional product. The Exchange also believes that offering Purge Ports at the Matching Engine level promotes risk management across the industry, and thereby facilitates investor protection. Some market participants, in particular the larger firms, could and do build similar risk functionality (as described above) in their trading systems that permit the flexible cancellation of orders entered on the Exchange at a high rate. Offering Matching Engine level protections ensures that such functionality is widely available to all firms, including smaller firms that may otherwise not be willing to incur the costs and development work necessary to support their own customized mass cancel functionality. As noted above, the Exchange is not the only exchange to offer dedicated Purge Ports, and the proposed rate is lower than that charged by other exchanges for similar functionality. The Exchange also believes that moving to a per Matching Engine fee is reasonable due to the Exchange’s architecture that provides it the ability to provide two (2) Purge Ports per Matching Engine for a fee that would still be lower than competing exchanges that charge on a per port basis. Generally speaking, restricting the Exchange’s ability to charge fees for these services discourages innovation and competition. Specifically in this case, the Exchange’s inability to offer similar services to those offered by other exchanges, and charge reasonable and equitable fees for such services, would put the Exchange at a significant competitive disadvantage and, therefore, serve to restrict competition in the market—especially when other exchanges assess comparable fees higher than those proposed by the Exchange. The Exchange believes that the proposed Purge Port fees are equitable because the proposed Purge Ports are 32 See E:\FR\FM\12DEN1.SGM Exchange Rule 519C(c). 12DEN1 86196 Federal Register / Vol. 88, No. 237 / Tuesday, December 12, 2023 / Notices ddrumheller on DSK120RN23PROD with NOTICES1 completely voluntary as they relate solely to optional risk management functionality. The Exchange also believes that the proposed amendments to its Fee Schedule are not unfairly discriminatory because they will apply uniformly to all Members that choose to use the optional Purge Ports. Purge Ports are completely voluntary and, as they relate solely to optional risk management functionality, no Market Maker is required or under any regulatory obligation to utilize them. All Members that voluntarily select this service option will be charged the same amount for the same services. All Members have the option to select any connectivity option, and there is no differentiation among Members with regard to the fees charged for the services offered by the Exchange. B. Self-Regulatory Organization’s Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act. Purge Ports are completely voluntary and are available to all Members on an equal basis at the same cost. While the Exchange believes that Purge Ports provide a valuable service, Members can choose to purchase, or not purchase, these ports based on their own determination of the value and their business needs. No Member is required or under any regulatory obligation to utilize Purge Ports. Accordingly, the Exchange believes that Purge Ports offer appropriate risk management functionality to firms that trade on the Exchange without imposing an unnecessary or inappropriate burden on competition. Furthermore, the Exchange operates in a highly competitive environment, and its ability to price the Purge Ports is constrained by competition among exchanges that offer similar functionality. As discussed, there are currently a number of similar offers available to market participants for higher fees at other exchanges. Proposing fees that are excessively higher than established fees for similar functionality would simply serve to reduce demand for the Purge Ports, which as discussed, market participants are under no obligation to utilize. It could also cause firms to shift trading to other exchanges that offer similar functionality at a lower cost, adversely impacting the overall trading on the Exchange and reducing market share. In this competitive environment, potential purchasers are free to choose which, if VerDate Sep<11>2014 18:03 Dec 11, 2023 Jkt 262001 any, similar product to purchase to satisfy their need for risk management. As a result, the Exchange believes this proposed rule change permits fair competition among national securities exchanges. The Exchange also does not believe the proposal would cause any unnecessary or inappropriate burden on intermarket competition as other exchanges are free to introduce their own purge port functionality and lower their prices to better compete with the Exchange’s offering. The Exchange does not believe the proposed rule change would cause any unnecessary or inappropriate burden on intramarket competition. Particularly, the proposal would apply uniformly to any market participant, in that it does not differentiate between Members. The proposal would allow any interested Members to purchase Purge Port functionality based on their business needs. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others The Exchange received one comment letter on the proposal.33 This comment letter was submitted not only on this proposal, but also the proposals by the Exchange and its affiliates to amend fees for 10Gb ULL connectivity and certain ports. Overall, the Exchange believes that the issues raised by the commenter are not germane to this proposal because they apply primarily to the other fee filings. Also, the commenter’s raised concerns with the current environment surrounding exchange non-transaction fee proposals that should be addressed by the Commission through rule making, or Congress, more holistically and not through an individual exchange fee filings. However, the commenter does raise one issue that concerns this proposal whereby it asserts that the Exchange’s comparison to fees charged by other exchanges for similar ports is irrelevant and unpersuasive. The core of the issue raised is regarding the cost to connect to one exchange compared to the cost to connect to others. A thorough response to this comment would require the Exchange to obtain competitively sensitive information about other exchange architecture and how their members connect. The Exchange is not privy to this information. Further, the commenter compares the Exchange’s proposed rate to other exchanges that 33 See letter from Thomas M. Merritt, Deputy General Counsel, Virtu Financial, Inc. (‘‘Virtu’’), to Vanessa Countryman, Secretary, Commission, dated November 8, 2023. PO 00000 Frm 00093 Fmt 4703 Sfmt 4703 offer purge port functionality across all matching engines for a single fee, but fails to provide the same comparison to other exchanges that charge for purge functionality like proposed here. The Exchange does not have insight into the technical architecture of other exchanges so it is difficult to ascertain the number of purge ports a firm would need to connect to another exchange’s entire market. Therefore, the Exchange is limited to comparing its proposed fee to other exchanges’ purge port fees as listed in their fee schedules. 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,34 and Rule 19b–4(f)(2) 35 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–2023–65 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–2023–65. 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 34 15 35 17 E:\FR\FM\12DEN1.SGM U.S.C. 78s(b)(3)(A)(ii). CFR 240.19b–4(f)(2). 12DEN1 Federal Register / Vol. 88, No. 237 / Tuesday, December 12, 2023 / Notices 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–2023–65 and should be submitted on or before January 2, 2024. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.36 Sherry R. Haywood, Assistant Secretary. [FR Doc. 2023–27161 Filed 12–11–23; 8:45 am] BILLING CODE 8011–01–P SMALL BUSINESS ADMINISTRATION National Women’s Business Council; Notice of Public Meeting Small Business Administration, National Women’s Business Council. ACTION: Notice of open public meeting. AGENCY: The public meeting will be held on Tuesday, January 23, 2024, from 12:00 p.m. to 2:00 p.m. EDT. ADDRESSES: This meeting is hybrid and will be held via Zoom, a web conferencing platform as well as inperson. The access link will be provided to attendees upon registration. For those attending in-person, the event will take place at the U.S. Small Business Administration Headquarters (409 3rd St. SW, Washington, DC 20416) in Eisenhower Conference Room on the Concourse Level. FOR FURTHER INFORMATION CONTACT: For more information, please visit the ddrumheller on DSK120RN23PROD with NOTICES1 DATES: 36 17 CFR 200.30–3(a)(12). VerDate Sep<11>2014 18:03 Dec 11, 2023 Jkt 262001 86197 NWBC website at www.nwbc.gov, email info@nwbc.gov or call Jordan Chapman, Public Affairs Manager, at 202–941– 6001. The meeting is open to the public; however, advance notice of attendance is requested. To RSVP, please visit the NWBC website at www.nwbc.gov. The ‘‘Public Meetings’’ section will feature a link to register on Eventbrite. This event will be held over Zoom and in-person, with a link being provided closer to the date of the event for Zoom attendees. During the live event, attendees will be in listen-only mode. For technical assistance, please visit the Zoom Support Page. The meeting record, including a recording and a recap, will be made available on www.nwbc.gov under the ‘‘Public Meetings’’ section after the meeting has concluded. SUPPLEMENTARY INFORMATION: Pursuant to section 10(a)(2) of the Federal Advisory Committee Act, the National Women’s Business Council (NWBC) announces its first public meeting of Fiscal Year 2024. The 1988 Women’s Business Ownership Act established NWBC to serve as an independent source of advice and policy recommendations to the President, Congress, and the Administrator of the U.S. Small Business Administration (SBA) on issues of importance to women entrepreneurs. This meeting will allow Council Members to review what was accomplished in 2023 and preview what may be accomplished over the next year. The event will include guest speakers and will allow Council Members to respond to a selection of questions and comments from the public. Missouri, and at possible additional exhibitions or venues yet to be determined, are of cultural significance, and, further, that their temporary exhibition or display within the United States as aforementioned is in the national interest. I have ordered that Public Notice of these determinations be published in the Federal Register. FOR FURTHER INFORMATION CONTACT: Reed Liriano, Program Coordinator, Office of the Legal Adviser, U.S. Department of State (telephone: 202– 632–6471; email: section2459@ state.gov). The mailing address is U.S. Department of State, L/PD, 2200 C Street NW (SA–5), Suite 5H03, Washington, DC 20522–0505. SUPPLEMENTARY INFORMATION: The foregoing determinations were made pursuant to the authority vested in me by the Act of October 19, 1965 (79 Stat. 985; 22 U.S.C. 2459), Executive Order 12047 of March 27, 1978, the Foreign Affairs Reform and Restructuring Act of 1998 (112 Stat. 2681, et seq.; 22 U.S.C. 6501 note, et seq.), Delegation of Authority No. 234 of October 1, 1999, Delegation of Authority No. 236–3 of August 28, 2000, and Delegation of Authority No. 523 of December 22, 2021. Dated: December 7, 2023. Andrienne Johnson, Committee Management Officer. [Docket No. MARAD–2023–0221] [FR Doc. 2023–27235 Filed 12–11–23; 8:45 am] BILLING CODE P Nicole L. Elkon, Deputy Assistant Secretary for Professional and Cultural Exchanges, Bureau of Educational and Cultural Affairs, Department of State. [FR Doc. 2023–27199 Filed 12–11–23; 8:45 am] BILLING CODE 4710–05–P DEPARTMENT OF TRANSPORTATION Maritime Administration Coastwise Endorsement Eligibility Determination for a Foreign-Built Vessel: ENVA 1 (Motor); Invitation for Public Comments Maritime Administration, DOT. Notice. AGENCY: DEPARTMENT OF STATE ACTION: [Public Notice: 12286] SUMMARY: Notice of Determinations; Culturally Significant Objects Being Imported for Exhibition—Determinations: ‘‘Matisse and the Sea’’ Exhibition Notice is hereby given of the following determinations: I hereby determine that certain objects being imported from abroad pursuant to agreements with their foreign owners or custodians for temporary display in the exhibition ‘‘Matisse and the Sea’’ at the Saint Louis Art Museum, St. Louis, SUMMARY: PO 00000 Frm 00094 Fmt 4703 Sfmt 4703 The Secretary of Transportation, as represented by the Maritime Administration (MARAD), is authorized to issue coastwise endorsement eligibility determinations for foreign-built vessels which will carry no more than twelve passengers for hire. A request for such a determination has been received by MARAD. By this notice, MARAD seeks comments from interested parties as to any effect this action may have on U.S. vessel builders or businesses in the U.S. that use U.S.flag vessels. Information about the E:\FR\FM\12DEN1.SGM 12DEN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 88, Number 237 (Tuesday, December 12, 2023)]
[Notices]
[Pages 86193-86197]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-27161]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-99090; File No. SR-PEARL-2023-65]


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

December 6, 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 November 22, 2023, MIAX PEARL, LLC (``MIAX Pearl'' or ``Exchange'') 
filed with the Securities and Exchange Commission (``Commission'') the 
proposed rule change as described in Items I, II, and III below, which 
Items have been prepared by the Exchange. The Commission is publishing 
this notice to solicit comments on the proposed rule change from 
interested persons.
---------------------------------------------------------------------------

    \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 proposes to amend the MIAX Pearl Options Exchange Fee 
Schedule (the ``Fee Schedule'') to amend fees for MIAX Express Network 
(``MEO'') \3\ Purge Ports (``Purge Ports'').\4\
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    \3\ ``MEO Interface'' or ``MEO'' means a binary order interface 
for certain order types as set forth in Rule 516 into the MIAX Pearl 
System. See the Definitions Section of the Fee Schedule and Exchange 
Rule 100.
    \4\ The proposed fee change is based on a recent proposal by 
Nasdaq Phlx LLC (``Phlx'') to adopt fees for purge ports. See 
Securities Exchange Act Release No. 97825 (June 30, 2023), 88 FR 
43405 (July 7, 2023) (SR-Phlx-2023-28).
---------------------------------------------------------------------------

    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 is proposing to amend the fees for Purge Ports, which 
is a function enabling the Exchange's two types of Members,\5\ Market 
Makers \6\ and Electronic Exchange Members \7\ (``EEMs''), to cancel 
all open orders or a subset of open orders through a single cancel 
message. The Exchange currently provides Members the option to purchase 
Purge Ports to assist in their quoting activity. Purge Ports provide 
Members with the ability to send purge messages to the Exchange 
System.\8\ Purge Ports are not capable of sending or receiving any 
other type of messages or information. The use of Purge Ports is 
completely optional and no rule or regulation requires that a Market 
Maker utilize them.
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    \5\ The term ``Member'' means an individual or organization that 
is registered with the Exchange pursuant to Chapter II of Exchange 
Rules for purposes of trading on the Exchange as an ``Electronic 
Exchange Member'' or ``Market Maker.'' Members are deemed 
``members'' under the Exchange Act. See the Definitions Section of 
the Fee Schedule and Exchange Rule 100.
    \6\ The term ``Market Maker'' or ``MM'' means a Member 
registered with the Exchange for the purpose of making markets in 
options contracts traded on the Exchange and that is vested with the 
rights and responsibilities specified in Chapter VI of the Exchange 
Rules. See the Definitions Section of the Fee Schedule and Exchange 
Rule 100.
    \7\ The term ``Electronic Exchange Member'' or ``EEM'' means the 
holder of a Trading Permit who is a Member representing as agent 
Public Customer Orders or Non-Customer Orders on the Exchange and 
those non-Market Maker Members conducting proprietary trading. 
Electronic Exchange Members are deemed ``members'' under the 
Exchange Act. See the Definitions Section of the Fee Schedule and 
Exchange Rule 100.
    \8\ The term ``System'' means the automated trading system used 
by the Exchange for the trading of securities. See Exchange Rule 
100.
---------------------------------------------------------------------------

    The Exchange initially filed the proposal on September 29, 2023 
(SR-PEARL-2023-52) (the ``Initial Proposal'').\9\ On November 22, 2023, 
the Exchange withdrew the Initial Proposal and replaced it with this 
filing.
---------------------------------------------------------------------------

    \9\ See Securities Exchange Act Release No. 98733 (October 12, 
2023), 88 FR 71907 (October 18, 2023) (SR-PEARL-2023-52).
---------------------------------------------------------------------------

    Unlike other options exchanges that charge fees for Purge Ports on 
a per port basis,\10\ the Exchange assesses a flat fee of $750 per 
month, regardless of the number of Purge Ports utilized by a Market 
Maker. Currently, a Market Maker may request and be allocated two (2) 
Purge Ports per Matching Engine \11\ to which it connects and not all 
Members connect to all of the Exchange's Matching Engines.
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    \10\ See Cboe BXZ Exchange, Inc. (``BZX'') Options Fee Schedule, 
Options Logical Port Fees, Purge Ports ($750 per purge port per 
month); Cboe EDGX Exchange, Inc. (``EDGX'') Options Fee Schedule, 
Options Logical Port Fees, Purge Ports ($750 per purge port per 
month); Cboe Exchange, Inc. (``Cboe'') Fee Schedule ($850 per purge 
port per month). See also Nasdaq GEMX, Options 7, Pricing Schedule, 
Section 6.C.(3). Nasdaq GEMX, LLC (``Nasdaq GEMX'') assesses its 
members $1,250 per SQF Purge Port per month, subject to a monthly 
cap of $17,500 for SQF Purge Ports and SQF Ports, applicable to 
market makers. See also Securities Exchange Act Release No. 97825 
(June 30, 2023), 88 FR 43405 (July 7, 2023) (SR-Phlx-2023-28).
    \11\ A Matching Engine is a part of the Exchange's electronic 
system that processes options quotes and trades on a symbol-by-
symbol basis. Some matching engines will process option classes with 
multiple root symbols, and other matching engines will be dedicated 
to one single option root symbol (for example, options on SPY will 
be processed by one single matching engine that is dedicated only to 
SPY). A particular root symbol may only be assigned to a single 
designated matching engine. A particular root symbol may not be 
assigned to multiple matching engines.
---------------------------------------------------------------------------

    The Exchange now proposes to amend the fee for Purge Ports to align 
more closely with other exchanges who charge on a per port basis by 
providing two (2) Purge Ports per Matching Engine for a monthly flat 
fee of $600 per month per Matching Engine. The only difference with a 
per port structure is that Members receive two (2) Purge Ports per 
Matching Engine for the same proposed monthly fee, rather than being 
charged a separate fee for each Purge Port. The Exchange proposes to 
charge the proposed fee for Purge Ports per Matching Engine, instead on 
a per Purge Port basis, due to its System architecture which provides 
two (2) Purge Ports per Matching Engine for redundancy purposes. In 
addition, the proposed fee is lower than the comparable fee charged by 
competing exchanges that also charge on a per port basis, 
notwithstanding that the Exchange is providing up to two (2) Purge 
Ports for that same lower fee.\12\
---------------------------------------------------------------------------

    \12\ See supra note 10.
---------------------------------------------------------------------------

    Similar to a per port charge, Members are able to select the 
Matching Engines that they want to connect to,\13\ based on the 
business needs of each Market Maker, and pay the applicable fee based 
on the number of Matching Engines and ports utilized. The Exchange 
believes

[[Page 86194]]

that the proposed fee provides Members with flexibility to control 
their Purge Port costs based on the number of Matching Engines each 
Marker Maker elects to connect to based on each Market Maker's business 
needs.
---------------------------------------------------------------------------

    \13\ The Exchange notes that each Matching Engine corresponds to 
a specified group of symbols. Certain Market Makers choose to only 
quote in certain symbols while other Market Makers choose to quote 
the entire market.
---------------------------------------------------------------------------

* * * * *
    A logical port represents a port established by the Exchange within 
the Exchange's System for trading and billing purposes. Each logical 
port grants a Member the ability to accomplish a specific function, 
such as order entry, order cancellation, access to execution reports, 
and other administrative information.
    Purge Ports are designed to assist Members \14\ in the management 
of, and risk control over, their orders, particularly if the firm is 
dealing with a large number of securities. For example, if a Market 
Maker detects market indications that may influence the execution 
potential of their orders, the Market Maker may use Purge Ports to 
reduce uncertainty and to manage risk by purging all orders in a number 
of securities. This allows Members to seamlessly avoid unintended 
executions, while continuing to evaluate the market, their positions, 
and their risk levels. Purge Ports are used by Members that conduct 
business activity that exposes them to a large amount of risk across a 
number of securities. Purge Ports enable Members to cancel all open 
orders, or a subset of open orders through a single cancel message. The 
Exchange notes that Purge Ports increase efficiency of already existing 
functionality enabling the cancellation of orders.
---------------------------------------------------------------------------

    \14\ Members seeking to become registered as a Market Maker must 
comply with the applicable requirements of Chapter VI of the 
Exchange's Rules.
---------------------------------------------------------------------------

    The Exchange operates highly performant systems with significant 
throughput and determinism which allows participants to enter, update 
and cancel orders at high rates. Members may currently cancel 
individual orders through the existing functionality, such as through 
the use of a mass cancel message by which a Market Maker may request 
that the Exchange remove all or a subset of its quotations and block 
all or a subset of its new inbound quotations.\15\ Other than Purge 
Ports being a dedicated line for cancelling quotations, Purge Ports 
operate in the same manner as a mass cancel message being sent over a 
different type of port. For example, like Purge Ports, mass 
cancellations sent over a logical port may be done at either the firm 
or MPID level. As a result, Members can currently cancel orders in 
rapid succession across their existing logical ports \16\ or through a 
single cancel message, all open orders or a subset of open orders.
---------------------------------------------------------------------------

    \15\ See Exchange Rule 519C(a) and (b).
    \16\ Current Exchange port functionality supports cancelation 
rates that exceed one thousand messages per second and the 
Exchange's research indicates that certain market participants rely 
on such functionality and at times utilize such cancelation rates.
---------------------------------------------------------------------------

    Similarly, Members may also use cancel-on-disconnect control when 
they experience a disruption in connection to the Exchange to 
automatically cancel all orders, as configured or instructed by the 
Member or Market Maker.\17\ In addition, the Exchange already provides 
similar ability to mass cancel orders through the Exchange's risk 
controls, which are offered at no charge and enables Members to 
establish pre-determined levels of risk exposure, and can be used to 
cancel all open orders.\18\ Accordingly, the Exchange believes that the 
Purge Ports provide an efficient option as an alternative to already 
available services and enhance the Member's ability to manage their 
risk.
---------------------------------------------------------------------------

    \17\ See Exchange Rule 519C(c).
    \18\ See Exchange Rule 532.
---------------------------------------------------------------------------

    The Exchange believes that market participants benefit from a 
dedicated purge mechanism for specific Members and to the market as a 
whole. Members will have the benefit of efficient risk management and 
purge tools. The market will benefit from potential increased quoting 
and liquidity as Members may use Purge Ports to manage their risk more 
robustly. Only Members that request Purge Ports would be subject to the 
proposed fees, and other Members can continue to operate in exactly the 
same manner as they do today without dedicated Purge Ports, but with 
the additional purging capabilities described above.
Implementation Date
    The proposed fees are immediately effective.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with section 6(b) of the Act,\19\ in general, and furthers the 
objectives of section 6(b)(5) of the Act,\20\ in particular, in that it 
is not designed to permit unfair discrimination among customers, 
brokers, or dealers. The Exchange also believes that its proposed fee 
is consistent with section 6(b)(4) of the Act \21\ because it 
represents an equitable allocation of reasonable dues, fees and other 
charges among market participants.
---------------------------------------------------------------------------

    \19\ 15 U.S.C. 78f(b).
    \20\ 15 U.S.C. 78f(b)(5).
    \21\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

    The Exchange supports the proposed fee change with the below 
justification because a similar justification was used in a recent 2023 
proposal filed with the Commission by another national securities 
exchange, Phlx, to adopt fees for purge ports, which the Commission 
deemed acceptable by not suspending that filing during the applicable 
60-day review period.\22\ In fact, the same justification Phlx utilized 
was also used in similar recent proposals to adopt fees for purge ports 
by two of Phlx's affiliated exchanges.\23\ Therefore, the Exchange 
utilized the below justification based on this recent Commission 
precedent from approximately one month ago.
---------------------------------------------------------------------------

    \22\ See supra note 3.
    \23\ See Securities Exchange Act Release Nos. 98770 (October 18, 
2023), 88 FR 73065 (October 24, 2023) (SR-BX-2023-026); and 98768 
(October 18, 2023), 88 FR 73056 (October 24, 2023) (SR-NASDAQ-2023-
041). While the Exchange included a cost-based justification in a 
related filing to amend fees for connectivity, it does not believe a 
cost-based justification is require here because Purge Ports are 
optional functionality and no cost-based justification was provided 
by Phlx or any of its affiliates in their same filings to adopt fees 
for purge ports. Nor does the Commission Staff's own fee guidance 
include such a requirement. See Staff Guidance on SRO Rule Filings 
Relating to Fees (May 21, 2019), available at https://www.sec.gov/tm/staff-guidance-sro-rule-filings-fees.
---------------------------------------------------------------------------

    The Exchange believes that the proposed rule change would promote 
just and equitable principles of trade and remove impediments to and 
perfect the mechanism of a free and open market because offering 
Members optional service and flexible fee structures which promotes 
choice, flexibility, efficiency, and competition. The Exchange believes 
Purge Ports enhance Members' ability to manage orders, which would, in 
turn, improve their risk controls to the benefit of all market 
participants. The Exchange believes that Purge Ports foster cooperation 
and coordination with persons engaged in facilitating transactions in 
securities because designating Purge Ports for purge messages may 
encourage better use of such ports. This may, concurrent with the ports 
that carry orders and other information necessary for market making 
activities, enable more efficient, as well as fair and reasonable, use 
of Members' resources. Similar connectivity and functionality is 
offered by options exchanges, including the Exchange's own affiliated 
options exchanges, and other equities exchanges.\24\ The Exchange 
believes that

[[Page 86195]]

proper risk management, including the ability to efficiently cancel 
multiple orders quickly when necessary, is similarly valuable to firms 
that trade in the equities market, including Members that have 
heightened quoting obligations that are not applicable to other market 
participants.
---------------------------------------------------------------------------

    \24\ See supra notes 4 and 10. See also Securities Exchange Act 
Release No. 77613 (April 13, 2016), 81 FR 23023 (April 19, 2016). 
See also Securities Exchange Act Release Nos. 79956 (February 3, 
2017), 82 FR 10102 (February 9, 2017) (SR-BatsBZX-2017-05); 79957 
(February 3, 2017), 82 FR 10070 (February 9, 2017) (SR-BatsEDGX-
2017-07); 83201 (May 9, 2018), 83 FR 22546 (May 15, 2018) (SR-C2-
2018-006).
---------------------------------------------------------------------------

    Purge Ports do not relieve Members of their quoting obligations or 
firm quote obligations under Regulation NMS Rule 602.\25\ Specifically, 
any interest that is executable against a Member's or Market Maker's 
orders that is received by the Exchange prior to the time of the 
removal of orders request will automatically execute. Members that 
purge their orders will not be relieved of the obligation to provide 
continuous two-sided orders on a daily basis, nor will it prohibit the 
Exchange from taking disciplinary action against a Market Maker for 
failing to meet their continuous quoting obligation each trading 
day.\26\
---------------------------------------------------------------------------

    \25\ See Exchange Rule 604. See also generally Chapter VI of the 
Exchange's Rules.
    \26\ Id.
---------------------------------------------------------------------------

    The Exchange is not the only exchange to offer this functionality 
and to charge associated fees.\27\ The Exchange believes the proposed 
fee for Purge Ports is reasonable because it is lower than the fees 
currently charged by other exchanges for similar port functionality. 
For example, BZX and EDGX charge a fee of $750 per purge port per 
month, Cboe charges $850 per purge port per month, Nasdaq GEMX assesses 
its members $1,250 per SQF Purge Port per month, subject to a monthly 
cap of $17,500 for SQF Purge Ports and SQF Ports.\28\
---------------------------------------------------------------------------

    \27\ See supra notes 4 and 10.
    \28\ See supra note 10.
---------------------------------------------------------------------------

    The Exchange believes it is reasonable to charge $600 per month for 
Purge Ports as proposed because such ports were specially developed to 
allow Members to send a single message to cancel multiple orders, 
thereby assisting firms in effectively managing risk. The Exchange also 
believes that a Member that chooses to utilize Purge Ports may, in the 
future, reduce their need for additional ports by consolidating cancel 
messages to their dedicated Purge Port and thus freeing up some 
capacity of the existing logical ports and, therefore, allowing for 
increased message traffic without paying for additional logical ports. 
Purge Ports provide the ability to cancel multiple orders with a single 
message over a dedicated port, and, therefore, may create efficiencies 
for firms and provide a more efficient solution for them based on their 
risk management needs. In addition, Purge Port requests may cancel 
orders submitted over numerous ports and contain added functionality to 
purge only a subset of these orders. Effective risk management is 
important both for individual market participants that choose to 
utilize risk features provided by the Exchange, as well as for the 
market in general. As a result, the Exchange believes that it is 
appropriate to charge fees for such functionality as doing so aids in 
the maintenance of a fair and orderly market.
    The Exchange also believes that its ability to set fees for Purge 
Ports is subject to significant substitution-based forces because 
Members are able to rely on currently available services both free and 
those they receive when using existing trading protocols. If the value 
of the efficiency introduced through the Purge Port functionality is 
not worth the proposed fees, Members will simply continue to rely on 
the existing functionality and not pay for Purge Ports. In that regard, 
Members may currently cancel individual orders through the existing 
functionality, such as through the use of a mass cancel message by 
which a Market Maker may request that the Exchange remove all or a 
subset of its quotations and block all or a subset of its new inbound 
quotations. Already Members can also cancel orders individually and by 
utilizing Exchange protocols that allow them to develop proprietary 
systems that can send cancel messages at a high rate.\29\ In addition, 
the Exchange already provides similar ability to mass cancel orders 
through the Exchange's risk controls, which are offered at no charge 
that enables Members to establish pre-determined levels of risk 
exposure, and can be used to cancel all open orders.\30\
---------------------------------------------------------------------------

    \29\ Current Exchange port functionality supports cancellation 
rates that exceed one thousand messages per second and the 
Exchange's research indicates that certain Participants rely on such 
functionality and at times utilize such cancellation rates.
    \30\ See Exchange Rule 532.
---------------------------------------------------------------------------

    Further, like Purge Ports, Members may also cancel all or a subset 
of its orders in the System, by firm name or by MPID, over their 
existing ports, or by requesting the Exchange staff to effect such 
cancellations.\31\
---------------------------------------------------------------------------

    \31\ See Exchange Rule 519C(a).
---------------------------------------------------------------------------

    Similarly, Members may use cancel-on-disconnect control when they 
experience a disruption in their connection to the Exchange and 
immediately cancel all pending quotes in the Exchange's System.\32\ 
Finally, this existing purging functionality will allow Members to 
achieve essentially the same outcome in canceling orders as they would 
by utilizing the Purge Ports. Accordingly, the Exchange believes that 
the proposed Purge Ports fee is reasonable because it is related to the 
efficiency of Purge Ports and to other means and services already 
available which are either free or already a part of a fee assessed to 
the Members for existing connectivity. Accordingly, because Purge Ports 
provide additional optional functionality, excessive fees would simply 
serve to reduce or eliminate demand for this optional product.
---------------------------------------------------------------------------

    \32\ See Exchange Rule 519C(c).
---------------------------------------------------------------------------

    The Exchange also believes that offering Purge Ports at the 
Matching Engine level promotes risk management across the industry, and 
thereby facilitates investor protection. Some market participants, in 
particular the larger firms, could and do build similar risk 
functionality (as described above) in their trading systems that permit 
the flexible cancellation of orders entered on the Exchange at a high 
rate. Offering Matching Engine level protections ensures that such 
functionality is widely available to all firms, including smaller firms 
that may otherwise not be willing to incur the costs and development 
work necessary to support their own customized mass cancel 
functionality.
    As noted above, the Exchange is not the only exchange to offer 
dedicated Purge Ports, and the proposed rate is lower than that charged 
by other exchanges for similar functionality. The Exchange also 
believes that moving to a per Matching Engine fee is reasonable due to 
the Exchange's architecture that provides it the ability to provide two 
(2) Purge Ports per Matching Engine for a fee that would still be lower 
than competing exchanges that charge on a per port basis. Generally 
speaking, restricting the Exchange's ability to charge fees for these 
services discourages innovation and competition. Specifically in this 
case, the Exchange's inability to offer similar services to those 
offered by other exchanges, and charge reasonable and equitable fees 
for such services, would put the Exchange at a significant competitive 
disadvantage and, therefore, serve to restrict competition in the 
market--especially when other exchanges assess comparable fees higher 
than those proposed by the Exchange.
    The Exchange believes that the proposed Purge Port fees are 
equitable because the proposed Purge Ports are

[[Page 86196]]

completely voluntary as they relate solely to optional risk management 
functionality.
    The Exchange also believes that the proposed amendments to its Fee 
Schedule are not unfairly discriminatory because they will apply 
uniformly to all Members that choose to use the optional Purge Ports. 
Purge Ports are completely voluntary and, as they relate solely to 
optional risk management functionality, no Market Maker is required or 
under any regulatory obligation to utilize them. All Members that 
voluntarily select this service option will be charged the same amount 
for the same services. All Members have the option to select any 
connectivity option, and there is no differentiation among Members with 
regard to the fees charged for the services offered by the Exchange.

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

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act. Purge Ports are completely 
voluntary and are available to all Members on an equal basis at the 
same cost. While the Exchange believes that Purge Ports provide a 
valuable service, Members can choose to purchase, or not purchase, 
these ports based on their own determination of the value and their 
business needs. No Member is required or under any regulatory 
obligation to utilize Purge Ports. Accordingly, the Exchange believes 
that Purge Ports offer appropriate risk management functionality to 
firms that trade on the Exchange without imposing an unnecessary or 
inappropriate burden on competition.
    Furthermore, the Exchange operates in a highly competitive 
environment, and its ability to price the Purge Ports is constrained by 
competition among exchanges that offer similar functionality. As 
discussed, there are currently a number of similar offers available to 
market participants for higher fees at other exchanges. Proposing fees 
that are excessively higher than established fees for similar 
functionality would simply serve to reduce demand for the Purge Ports, 
which as discussed, market participants are under no obligation to 
utilize. It could also cause firms to shift trading to other exchanges 
that offer similar functionality at a lower cost, adversely impacting 
the overall trading on the Exchange and reducing market share. In this 
competitive environment, potential purchasers are free to choose which, 
if any, similar product to purchase to satisfy their need for risk 
management. As a result, the Exchange believes this proposed rule 
change permits fair competition among national securities exchanges.
    The Exchange also does not believe the proposal would cause any 
unnecessary or inappropriate burden on intermarket competition as other 
exchanges are free to introduce their own purge port functionality and 
lower their prices to better compete with the Exchange's offering. The 
Exchange does not believe the proposed rule change would cause any 
unnecessary or inappropriate burden on intramarket competition. 
Particularly, the proposal would apply uniformly to any market 
participant, in that it does not differentiate between Members. The 
proposal would allow any interested Members to purchase Purge Port 
functionality based on their business needs.

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

    The Exchange received one comment letter on the proposal.\33\ This 
comment letter was submitted not only on this proposal, but also the 
proposals by the Exchange and its affiliates to amend fees for 10Gb ULL 
connectivity and certain ports. Overall, the Exchange believes that the 
issues raised by the commenter are not germane to this proposal because 
they apply primarily to the other fee filings. Also, the commenter's 
raised concerns with the current environment surrounding exchange non-
transaction fee proposals that should be addressed by the Commission 
through rule making, or Congress, more holistically and not through an 
individual exchange fee filings. However, the commenter does raise one 
issue that concerns this proposal whereby it asserts that the 
Exchange's comparison to fees charged by other exchanges for similar 
ports is irrelevant and unpersuasive. The core of the issue raised is 
regarding the cost to connect to one exchange compared to the cost to 
connect to others. A thorough response to this comment would require 
the Exchange to obtain competitively sensitive information about other 
exchange architecture and how their members connect. The Exchange is 
not privy to this information. Further, the commenter compares the 
Exchange's proposed rate to other exchanges that offer purge port 
functionality across all matching engines for a single fee, but fails 
to provide the same comparison to other exchanges that charge for purge 
functionality like proposed here. The Exchange does not have insight 
into the technical architecture of other exchanges so it is difficult 
to ascertain the number of purge ports a firm would need to connect to 
another exchange's entire market. Therefore, the Exchange is limited to 
comparing its proposed fee to other exchanges' purge port fees as 
listed in their fee schedules.
---------------------------------------------------------------------------

    \33\ See letter from Thomas M. Merritt, Deputy General Counsel, 
Virtu Financial, Inc. (``Virtu''), to Vanessa Countryman, Secretary, 
Commission, dated November 8, 2023.
---------------------------------------------------------------------------

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,\34\ and Rule 19b-4(f)(2) \35\ 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.
---------------------------------------------------------------------------

    \34\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \35\ 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-2023-65 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-2023-65. 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

[[Page 86197]]

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-2023-65 and should be submitted on 
or before January 2, 2024.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\36\
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    \36\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-27161 Filed 12-11-23; 8:45 am]
BILLING CODE 8011-01-P

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