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, 88186-88191 [2023-27917]
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Federal Register / Vol. 88, No. 243 / Wednesday, December 20, 2023 / Notices
response, and because market
participants may readily adjust their
order routing practices, the Exchange
believes that the degree to which rebate
and fee changes in this market may
impose any burden on competition is
extremely limited.
In this instance, the Exchange is
proposing to limit the category of DLPs
that may qualify for the Additional Tape
C ETP Incentives in the DLP Program to
Primary DLPs in an effort to exclusively
reward Primary DLPs with such
incentives. The proposal is reflective of
the greater responsibility borne by
Primary DLPs.
The Exchange uses incentives, such as
the rebates of the DLP program, to
incentivize market participants to
improve the market. The Exchange
must, from time to time, assess the
effectiveness of incentives and adjust
them when they are not as effective as
the Exchange believes they could be.
Moreover, the Exchange is ultimately
limited in the amount of rebates it may
offer. The proposal is reflective of such
an analysis.
The Exchange notes that participation
in the DLP program is entirely voluntary
and, to the extent that registered market
makers determine that the rebates are
not in line with the level of marketimproving behavior the Exchange
requires, a DLP may elect to deregister
as such with no penalty. The Exchange
does not believe that the proposed
change places an unnecessary burden
on competition and, in sum, if the
changes proposed herein are
unattractive to market makers, it is
likely that the Exchange will lose
participation in the DLP program as a
result. Thus, the Exchange does not
believe that the proposal represents a
burden on competition among Exchange
members, or that the proposal will
impair the ability of members or
competing order execution venues to
maintain their competitive standing in
the financial markets.
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C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were either
solicited or 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.7
At any time within 60 days of the
filing of the proposed rule change, the
7
15 U.S.C. 78s(b)(3)(A)(ii).
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Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is: (i) necessary or appropriate in
the public interest; (ii) for the protection
of investors; or (iii) 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–
NASDAQ–2023–053 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–NASDAQ–2023–053. 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
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submitted material that is obscene or
subject to copyright protection. All
submissions should refer to file number
SR–NASDAQ–2023–053 and should be
submitted on or before January 10, 2024.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.8
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023–27918 Filed 12–19–23; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–99175; File No. SR–
PEARL–2023–69]
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
December 14, 2023.
Pursuant to the provisions of Section
19(b)(1) of the Securities Exchange Act
of 1934 (‘‘Act’’) 1 and Rule 19b–4
thereunder,2 notice is hereby given that
on December 12, 2023, MIAX PEARL,
LLC (‘‘MIAX Pearl’’ or ‘‘Exchange’’)
filed with the Securities and Exchange
Commission (‘‘Commission’’) a
proposed rule change as described in
Items I, II, and III below, which Items
have been prepared by the Exchange.
The Commission is publishing this
notice to solicit comments on the
proposed rule change from interested
persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange is filing a proposal to
amend the fee schedule (the ‘‘Fee
Schedule’’) applicable to MIAX Pearl
Equities, an equities trading facility of
the Exchange.
The text of the proposed rule change
is available on the Exchange’s website at
https://www.miaxglobal.com/markets/
us-options/pearl-options/rule-filings, at
MIAX Pearl’s principal office, and at the
Commission’s Public Reference Room.
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
17 CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
8
1 15
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any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to amend the
Fee Schedule to: (1) amend Section 1)d)
to modify the volume requirement in
Tier 1 of the Remove Volume Tiers 3
applicable to executions of orders in
securities priced at or above $1.00 per
share that remove liquidity from the
Exchange (‘‘Removed Volume’’) and
eliminate Remove Volume Tier 2 and
the corresponding fee; and (2) amend
Section 1)f) to modify the expiration
month (referred to herein as the ‘‘sunset
period’’) for the Step-Up Added
Liquidity Rebate. The Exchange
originally filed this proposal on
November 30, 2023 (SR–PEARL–2023–
67). On December 12, 2023, the
Exchange withdrew SR–PEARL–2023–
67 and refiled this proposal with minor
changes.
Remove Volume Tiers Table Changes
Currently the Exchange charges a fee
of $0.00295 per share for executions of
Removed Volume on the Exchange in
securities priced at or above $1.00 per
share, except for executions of Removed
Volume that execute at the midpoint for
non-displayed Midpoint Peg Orders 4 in
all Tapes.5 The Exchange also offers a
tiered pricing structure in Section 1)d)
of the Fee Schedule, Remove Volume
Tiers, which provides reduced fees for
executions of Removed Volume on the
Exchange in securities priced at or
above $1.00 per share based on certain
volume thresholds achieved by Equity
Members.6 To achieve the reduced fees
of the Remove Volume Tiers, Equity
Members must, (i) for Tier 1, achieve an
average daily volume (‘‘ADV’’) 7 that is
3 See
Fee Schedule, Section 1)d).
2614(a)(3)(i)(A) for the definition of
Midpoint Peg Order.
5 See Fee Schedule, Section 1)a) and Liquidity
Indicator Codes RA, Ra, RB, Rb, RC, Rc, Rp, RR, Rr,
RT, and Rt.
6 The term ‘‘Equity Member’’ is a Member
authorized by the Exchange to transact business on
MIAX Pearl Equities. See Exchange Rule 1901.
7 ‘‘ADV’’ means average daily volume calculated
as the number of shares added or removed,
combined, per day. ADV is calculated on a monthly
basis. See the Definitions Section of the Fee
Schedule. The Exchange excludes from its
calculation of ADV shares added or removed on any
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4 See
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88187
equal to or greater than 0.10% of the
total consolidated volume (‘‘TCV’’) 8 and
execute at least 1,000 shares of added
liquidity during the month; and (ii) for
Tier 2, achieve an ADV that is equal to
or greater than 0.15% of TCV and
execute at least 1,000 shares of added
liquidity during the month. Equity
Members that qualify for the discounted
rates of the Remove Volume Tiers in a
particular month will be charged the
lower fee according to the threshold tier
achieved instead of the standard
Remove Volume fee of $0.00295 per
share for executions of orders in
securities priced at or above $1.00 per
share in that particular month.
The Exchange proposes to increase
the ADV requirement in Remove
Volume Tier 1 from 0.10% to now be
0.20% of TCV. The Exchange also
proposes to eliminate Remove Volume
Tier 2 from the Fee Schedule.
Accordingly, with the proposed
changes, to achieve the reduced fee of
Remove Volume Tier 1, Equity Members
must achieve an ADV that is equal to or
greater than 0.20% of TCV and execute
at least 1,000 shares of added liquidity
during the month.
The purpose of this change is for
business and competitive reasons. The
Exchange notes that despite the modest
increase in volume ADV requirement
and elimination of Remove Volume Tier
2, the Exchange’s reduced fee and
requirements to achieve Remove
Volume Tier 1 remain competitive with
the fees to remove liquidity in securities
priced at or above $1.00 per share
charged by other equity exchanges,
including other equity exchanges that
also have reduced fees for meeting
certain criteria for removing liquidity.9
Step-Up Added Liquidity Rebate
The Exchange currently provides a
standard rebate of ($0.0024) 10 per share
for executions of orders in securities
priced at or above $1.00 per share that
add displayed liquidity to the Exchange.
The Exchange also currently offers
various volume-based tiers and
incentives through which an Equity
Member may receive an enhanced
rebate for executions of orders that add
displayed liquidity to the Exchange by
achieving the specified criteria that
corresponds to a particular tier/
incentive.
In particular, the Exchange adopted a
volume based pricing incentive, referred
to as the ‘‘Step-Up Added Liquidity
Rebate,’’ in which qualifying Equity
Members receive an enhanced rebate of
($0.0031) per share for executions of
orders in securities priced at or above
$1.00 per share that add displayed
liquidity to the Exchange.11 The
enhanced rebate provided by the StepUp Added Liquidity Rebate applies to
Liquidity Indicator Codes AA (adds
liquidity, displayed order, Tape A), AB
(adds liquidity, displayed order, Tape B)
and AC (adds liquidity, displayed order,
Tape C).12
Equity Members qualify for the StepUp Added Liquidity Rebate by
achieving a ‘‘Step-Up ADAV as a % of
TCV’’ 13 of at least 0.03% over the
baseline month of May 2023. Average
daily added volume (‘‘ADAV’’) means
average daily added volume calculated
as the number of shares added per
day.14 For example, if an Equity
Member had an ADAV as a percent of
TCV of 0.01% in May 2023, then that
Equity Member has to achieve an ADAV
as a percent of TCV equal to or greater
day that the Exchange’s system experiences a
disruption that lasts for more than 60 minutes
during regular trading hours, on any day with a
scheduled early market close, and on the ‘‘Russell
Reconstitution Day’’ (typically the last Friday in
June). Routed shares are also not included in the
ADV calculation. See id.
8 ‘‘TCV’’ means total consolidated volume
calculated as the volume in shares reported by all
exchanges and reporting facilities to a consolidated
transaction reporting plan for the month for which
the fees apply. The Exchange excludes from its
calculation of TCV volume on any given day that
the Exchange’s system experiences a disruption that
lasts for more than 60 minutes during Regular
Trading Hours, on any day with a scheduled early
market close, and on the ‘‘Russell Reconstitution
Day’’ (typically the last Friday in June). See the
Definitions Section of the Fee Schedule.
9 See MEMX LLC (‘‘MEMX’’) Equities Fee
Schedule, available at https://info.
memxtrading.com/equities-trading-resources/usequities-fee-schedule/ (providing standard remove
volume fee of $0.0030 per share and reduced
Liquidity Removal Tier fee of $0.00295 per share so
long as a member achieves an ADV greater than or
equal to 0.60% of TCV and a Removed Volume
ADV greater than or equal to 0.30% of TCV); see
also Cboe EDGX Equities Fee Schedule, available at
https://www.cboe.com/us/equities/membership/fee_
schedule/edgx/ (providing a standard fee of $0.0030
per share to remove liquidity in securities priced at
or above $1.00 per share, Remove Volume Tier 1
fee of $0.0029 per share to remove liquidity in
securities priced at or above $1.00 per share so long
as the member achieves an ADAV greater than or
equal to 0.25% of TCV).
10 Rebates are indicated by parentheses. See the
General Notes Section of the Fee Schedule.
11 See Securities Exchange Act Release No. 95614
(August 26, 2022), 87 FR 53813 (September 1, 2022)
(SR–PEARL–2022–33).
12 See Fee Schedule, Section 1)f), Step-Up Added
Liquidity Rebate, and Section 1)b), Liquidity
Indicator Codes and Associated Fees.
13 The term ‘‘Step-Up ADAV as a % of TCV’’
means ADAV as a percent of TCV in the relevant
baseline month subtracted from the current month’s
ADAV as a percent of TCV. See the Definitions
Section of the Fee Schedule. The Exchange notes
that the Step-Up Added Liquidity Rebate does not
apply to executions of orders in securities priced
below $1.00 per share or executions of orders that
constitute added non-displayed liquidity.
14 See the Definitions Section of the Fee
Schedule. ADAV and ADV are calculated on a
monthly basis. See id.
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than 0.04% in any subsequent month in
order to qualify for the Step-Up Added
Liquidity Rebate. Currently, the Step-Up
Added Liquidity Rebate will expire no
later than November 30, 2023.15
The Exchange now proposes to amend
Section 1)f) of the Fee Schedule so that
the criteria to qualify for the Step-Up
Added Liquidity Rebate will expire no
later than December 31, 2023.16 The
Exchange will issue an alert to market
participants should the Exchange
determine that the Step-Up Added
Liquidity Rebate will expire earlier than
December 31, 2023, or if the Exchange
determines to amend the criteria or rate
applicable to the Step-Up Added
Liquidity Rebate prior to the end of the
sunset period. The Exchange notes that
at least one other competing equities
exchange provides a similar ‘‘sunset
period’’ for one of its enhanced rebates
subject to the same baseline month as
the Exchange proposes.17
The Exchange does not propose any
other changes to the qualifying criteria
for Equity Members to receive the StepUp Added Liquidity Rebate. The
Exchange also does not propose to
amend the amount of the enhanced
rebate of ($0.0031) per share for Equity
Members that qualify for the Step-Up
Added Liquidity Rebate. Finally, the
Exchange does not propose to change
the baseline ADAV of 0.00% of TCV
used for firms that become Equity
Members of the Exchange after May
2023 for the purpose of the Step-Up
Added Liquidity Rebate calculation.
This change simply extends the
sunset period from November 30, 2023
until December 31, 2023. The Exchange
believes that the Step-Up Added
Liquidity Rebate will continue to
provide an incentive for Equity
Members to strive for higher ADAV on
the Exchange (above their ADAV in the
baseline month of May 2023) to receive
the enhanced rebate for qualifying
executions of orders in securities priced
at or above $1.00 per share that add
displayed liquidity to the Exchange. The
Exchange believes that with the
extension of the sunset period the StepUp Added Liquidity Rebate will
continue to encourage the submission of
additional displayed added liquidity to
the Exchange, thereby promoting price
discovery and contributing to a deeper
and more liquid market, which benefits
15 See
Fee Schedule, Section 1)f).
Exchange notes that at the end of the
sunset period, the Step-Up Added Liquidity Rebate
will no longer apply unless the Exchange files
another 19b–4 Filing with the Commission to
amend the criteria terms.
17 See MEMX Equities Fee Schedule, Liquidity
Provision Tiers table and corresponding footnotes
‘‘*’’ through ‘‘***’’, supra note 9.
16 The
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all market participants and enhances the
attractiveness of the Exchange as a
trading venue.
The purpose of this change is for
business and competitive reasons.
Several competing equities exchanges
continue to use a baseline month’s
volume for their members as the
requirements for higher rebates/lower
fees that is an older month than the
Exchange’s baseline month of May 2023
and many of those exchanges do not
have a sunset provision.18 By extending
the sunset period, the Exchange will be
able to continue to compete with the
enhanced rebates offered by competing
exchanges that use older baseline
months’ volume in their requirements
for the higher rebates/lower fees.
Implementation
The proposed changes are
immediately effective.
2. Statutory Basis
The Exchange believes that its
proposal to amend its Fee Schedule is
consistent with Section 6(b) of the Act 19
in general, and furthers the objectives of
Section 6(b)(4) of the Act 20 in
particular, in that it is an equitable
allocation of reasonable fees and other
charges among its Equity Members and
issuers and other persons using its
facilities and is not designed to permit
unfair discrimination between
customers, issuers, brokers, or dealers.
The Exchange operates in a highly
fragmented and competitive market in
which market participants can readily
direct their order flow to competing
venues if they deem fee levels at a
particular venue to be excessive or
incentives to be insufficient. More
specifically, the Exchange is only one of
sixteen registered equities exchanges,
and there are a number of alternative
trading systems and other off-exchange
venues, to which market participants
may direct their order flow. Based on
publicly available information, no single
registered equities exchange had more
18 See NYSE Arca Equities Fee Schedule, Section
VII, Step Up Tiers table, footnote ‘‘(b),’’ available at
https://www.nyse.com/publicdocs/nyse/markets/
nyse-arca/NYSE_Arca_Marketplace_Fees.pdf
(providing enhanced rebate of $0.0036 per share on
all LMM add volume if the ETP Holder, together
with its affiliates, executes Tape B adding ADV that
is at least 40% over the ETP Holder’s adding ADV
in Q3 2019, as a percentage of Tape B CADV with
no sunset provision); Cboe BYX Equities Fee
Schedule, Step-Up Tier table, available at https://
www.cboe.com/us/equities/membership/fee_
schedule/byx/ (providing reduced fee if the member
has a combined Step-Up Auction ADV and Step-Up
ADAV from April 2022 greater than or equal to
3,000,000 and the member has a combined Auction
ADV and ADAV greater than or equal to 0.25% of
TCV with no sunset provision).
19 15 U.S.C. 78f(b).
20 15 U.S.C. 78f(b)(4).
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than approximately 15.58% of the total
market share of executed volume of
equities trading for the month of
November 2023.21 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 represented approximately
2.08% of the overall equities market
share for the month of November
2023.22 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.’’ 23
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 continue to incentivize market
participants to direct additional orders
that add liquidity to the Exchange in
securities priced at or above $1.00 per
share, which the Exchange believes
would deepen liquidity and promote
market quality on the Exchange to the
benefit of all market participants.
The Exchange notes that volumebased incentives and discounts (such as
tiers) have been widely adopted by
exchanges (including the Exchange),
and believes they are reasonable,
equitable and not unfairly
discriminatory because they are
available to all Equity Members on an
equal basis, provide additional benefits
or discounts that are reasonably related
21 See the ‘‘Market Share’’ section of the
Exchange’s website, available at https://
www.miaxglobal.com/ (last visited December 12,
2023).
22 See id.
23 See Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37499 (June 29, 2005).
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to the value of an exchange’s market
quality associated with higher levels of
market activity (such as higher levels of
liquidity provision and/or growth
patterns), and the introduction of higher
volumes of orders into the price and
volume discovery process.
The Exchange believes its proposal to
increase the ADV requirement in
Remove Volume Tier 1 and eliminate
Remove Volume Tier 2 from the Fee
Schedule is reasonable, equitably
allocated and not unfairly
discriminatory because the reduced fee
for Remove Volume Tier 1 will continue
to be available to all Equity Members on
an equal basis, and is reasonably
designed to encourage Equity Members
to maintain or increase their order flow.
The Exchange believes that even with
this proposal, the reduced fee of
Remove Volume Tier 1 will continue to
promote price discovery, enhance
liquidity and market quality, and
contribute to a more robust and wellbalanced market ecosystem on the
Exchange to the benefit of all Equity
Members and market participants.
Further, the Exchange believes its
proposal to increase the ADV
requirement in Remove Volume Tier 1
from 0.10% to now be 0.20% of TCV
and eliminate Remove Volume Tier 2 is
reasonable, equitably allocated and not
unfairly discriminatory because, despite
the modest increase in ADV
requirement and elimination of Remove
Volume Tier 2, the Exchange’s reduced
fee and requirements to achieve Remove
Volume Tier 1 remain competitive with
the fees to remove liquidity in securities
priced at or above $1.00 per share
charged by other equity exchanges,
including other equity exchanges that
also have reduced fees for meeting
certain criteria for removing liquidity.24
The Exchange believes that the StepUp Added Liquidity Rebate, as modified
by the proposed change to the sunset
period, is reasonable, equitable and not
unfairly discriminatory as the Step-Up
Added Liquidity Rebate will continue to
be available to all Equity Members on an
equal basis, and is reasonably designed
to encourage Equity Members to
maintain or increase their order flow in
liquidity-adding volume. The Exchange
believes this will continue to promote
price discovery, enhance liquidity and
market quality, and contribute to a more
robust and well-balanced market
ecosystem on the Exchange to the
benefit of all Equity Members and
market participants.
In addition, the Exchange believes its
proposal is reasonable because several
competing equities exchanges continue
24 See
supra note 9.
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18:02 Dec 19, 2023
to use a baseline month’s volume for
their members as the requirement for
higher rebates/lower fees that is an older
month than the Exchange’s baseline
month of May 2023 and many of those
exchanges do not have a sunset
provision.25 By extending the sunset
period, the Exchange will be able to
continue to compete with the enhanced
rebates offered by competing exchanges
that use older baseline months’ volume
in their requirements for the higher
rebates/lower fees.
The Exchange believes it is
reasonable, equitable and not unfairly
discriminatory to amend the sunset
period in the Fee Schedule for the StepUp Added Liquidity Rebate because it
will provide clarity to Equity Members
that, unless the Exchange determines to
amend or otherwise modify the Step-Up
Added Liquidity Rebate, the Step-Up
Added Liquidity Rebate will expire at
the end of the sunset period. This will
allow Equity Members to take into
account that the enhanced rebate
provided for by the Step-Up Added
Liquidity Rebate may be discontinued at
the end of sunset period unless the
Exchange announces otherwise and files
a revised proposal with the
Commission. The Exchange further
notes that it will issue an alert to market
participants should the Exchange
determine that the Step-Up Added
Liquidity Rebate will expire earlier than
December 31, 2023, or if the Exchange
determines to amend the criteria or rate
applicable to the Step-Up Added
Liquidity Rebate prior to the end of the
sunset period.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange believes that the
proposed change will not impose any
burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act.
Intramarket Competition
The Exchange believes that its
proposal will not impose any burden on
intramarket competition that is not
necessary or appropriate in furtherance
of the purposes of the Act. The
Exchange believes the Step-Up Added
Liquidity Rebate, as modified by this
proposal, will continue to incentivize
Equity Members to submit additional
orders that add liquidity to the
Exchange, thereby contributing to a
deeper and more liquid market and
promoting price discovery and market
quality on the Exchange to the benefit
of all market participants and enhancing
the attractiveness of the Exchange as a
25 See
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trading venue, which the Exchange
believes, in turn, would continue to
encourage market participants to direct
additional order flow to the Exchange.
Greater liquidity benefits all Equity
Members by providing more trading
opportunities and encourages Equity
Members to send additional orders to
the Exchange, thereby contributing to
robust levels of liquidity, which benefits
all market participants. As described
above, the Exchange believes its
proposal to increase the ADV
requirement in Remove Volume Tier 1
from 0.10% to now be 0.20% of TCV
and eliminate Remove Volume Tier 2
allows the Exchange’s reduced Removed
Volume fee to remain competitive with
the fees to remove liquidity in securities
priced at or above $1.00 per share
charged by other equity exchanges,
including other equity exchanges that
also have reduced fees for meeting
certain criteria for removing liquidity.26
Similarly, the opportunity to qualify for
the proposed new Step-Up Added
Liquidity Rebate, and thus receive the
proposed rebate for qualifying
executions of orders in securities priced
at or above $1.00 per share that add
displayed volume will continue to be
available to all Equity Members that
meet the associated volume
requirement, and the Exchange believes
the proposed extension of the sunset
period is reasonably related to the
enhanced market quality that the StepUp Added Liquidity Rebate is designed
to promote. Accordingly, the Exchange
does not believe the proposed changes
would impose any burden on
intramarket competition that is not
necessary or appropriate in furtherance
of the purpose of the Act.
The Exchange believes its proposal to
extend the sunset period in the Fee
Schedule for the Step-Up Added
Liquidity Rebate will not impose any
burden on intramarket competition not
necessary or appropriate in furtherance
of the purposes of the Act because it
will provide clarity to Equity Members
that, unless the Exchange determines to
amend or otherwise modify the Step-Up
Added Liquidity Rebate, the Step-Up
Added Liquidity Rebate will be
discontinued at the end of the sunset
period. This will allow Equity Members
to take into account that the enhanced
rebate provided for by the Step-Up
Added Liquidity Rebate may be
discontinued at the end of the sunset
period unless the Exchange announces
otherwise. The Exchange further notes
that it will issue an alert to market
participants should the Exchange
determine that the Step-Up Added
26 See
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Federal Register / Vol. 88, No. 243 / Wednesday, December 20, 2023 / Notices
ddrumheller on DSK120RN23PROD with NOTICES1
Liquidity Rebate will expire earlier than
December 31, 2023, or if the Exchange
determines to amend the criteria or rate
applicable to the Step-Up Added
Liquidity Rebate prior to the end of the
sunset period.
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, based on publicly available
information, no single registered
equities exchange had more than
approximately 15.58% of the total
market share of executed volume of
equities trading for the month of
November 2023.27 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 represented approximately
2.08% of the overall market for the
month of November 2023.28 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
introduced to the market. Accordingly,
competitive forces constrain the
Exchange’s transaction fees and rebates
generally, including with respect to the
criteria for Equity Members to achieve
Remove Volume Tier 1 and the Step-Up
Added Liquidity Rebate, and market
participants can readily choose to send
their orders to other exchanges and offexchange venues if they deem rebate
criteria at those other venues to be more
favorable.
As described above, the proposed
changes represent a competitive
proposal through which the Exchange is
seeking to continue to encourage
additional order flow to the Exchange
through a volume-based incentive that
is comparable to the criteria for volumebased incentives adopted by at least one
other competing exchange that has a
similar sunset period for a specific
enhanced rebate that adds liquidity to
that market.29 Accordingly, the
Exchange believes that its proposal
would not burden, but rather promote,
intermarket competition by enabling it
27 See
supra note 21.
id.
29 See supra note 17.
28 See
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to better compete with other exchanges
that offer similar pricing incentives to
market participants that achieve certain
volume criteria and thresholds.
Additionally, the Commission has
repeatedly expressed its preference for
competition over regulatory
intervention in determining prices,
products, and services in the securities
markets. Specifically, in Regulation
NMS, the Commission highlighted the
importance of market forces in
determining prices and SRO revenues
and, also, recognized that current
regulation of the market system ‘‘has
been remarkably successful in
promoting market competition in its
broader forms that are most important to
investors and listed companies.’’ 30 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 possesses a monopoly,
regulatory or otherwise, in the execution
of order flow from broker dealers’
. . .’’.31 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,32 and Rule
19b–4(f)(2) 33 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
30 See Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37496, 37499 (June 29, 2005).
31 See NetCoalition v. SEC, 615 F.3d 525, 539
(D.C. Cir. 2010) (quoting Securities Exchange Act
Release No. 59039 (December 2, 2008), 73 FR
74770, 74782–83 (December 9, 2008) (SR–NYSE–
2006–21)).
32 15 U.S.C. 78s(b)(3)(A)(ii).
33 17 CFR 240.19b–4(f)(2).
PO 00000
Frm 00150
Fmt 4703
Sfmt 4703
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–2023–69 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–2023–69. 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
E:\FR\FM\20DEN1.SGM
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Federal Register / Vol. 88, No. 243 / Wednesday, December 20, 2023 / Notices
submissions should refer to file number
SR–PEARL–2023–69 and should be
submitted on or before January 10, 2024.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.34
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023–27917 Filed 12–19–23; 8:45 am]
BILLING CODE 8011–01–P
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
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–99186; File No. SR–Phlx–
2023–56]
Self-Regulatory Organizations; Nasdaq
PHLX LLC; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Amend Options 7,
Section 9
December 14, 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 December
5, 2023, Nasdaq PHLX LLC (‘‘Phlx’’ or
‘‘Exchange’’) filed with the Securities
and Exchange Commission (‘‘SEC’’ or
‘‘Commission’’) the proposed rule
change as described in Items I, II, and
III below, which Items have been
prepared by the Exchange. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
ddrumheller on DSK120RN23PROD with NOTICES1
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend its
Rules at Options 7, Section 9, Other
Member Fees.3
The text of the proposed rule change
is available on the Exchange’s website at
https://listingcenter.nasdaq.com/
rulebook/phlx/rules, at the principal
office of the Exchange, 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
34 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 The Exchange initially filed the proposed
pricing changes on November 28, 2023 (SR–Phlx–
2023–52). On December 5, 2023, the Exchange
withdrew that filing and submitted this filing.
1 15
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18:02 Dec 19, 2023
Jkt 262001
The Exchange proposes to amend
Options 7, Section 9, B, Port Fees, to
increase the SQF Port 4 Fee cap.
Today, Phlx assesses $1,250 per port,
per month up to a maximum of $42,000
per month for an SQF Port that receives
inbound quotes at any time within that
month.5 Today, member organizations
are not assessed an active SQF Port Fee
for additional ports acquired for ten
business days for the purpose of
transitioning technology.6 The Exchange
proposes to add the words ‘‘active port’’
in parenthesis at the end of the
description of SQF Port Fee to tie the
definition of an active port to the
description for the port.7
At this time, the Exchange proposes to
increase the maximum SQF Port Fee of
$42,000 per month to $50,000 per
month. The Exchange is not amending
the $1,250 per port, per month fee. As
is the case today, the Exchange would
not assess a member organization an
4 ‘‘Specialized Quote Feed’’ or ‘‘SQF’’ is an
interface that allows Lead Market Makers,
Streaming Quote Traders (‘‘SQTs’’) and Remote
Streaming Quote Traders (‘‘RSQTs’’) to connect,
send, and receive messages related to quotes,
Immediate-or-Cancel Orders, and auction responses
into and from the Exchange. Features include the
following: (1) options symbol directory messages
(e.g., underlying and complex instruments); (2)
system event messages (e.g., start of trading hours
messages and start of opening); (3) trading action
messages (e.g., halts and resumes); (4) execution
messages; (5) quote messages; (6) Immediate-orCancel Order messages; (7) risk protection triggers
and purge notifications; (8) opening imbalance
messages; (9) auction notifications; and (10) auction
responses. The SQF Purge Interface only receives
and notifies of purge requests from the Lead Market
Maker, SQT or RSQT. Lead Market Makers, SQTs
and RSQTs may only enter interest into SQF in
their assigned options series. Immediate-or-Cancel
Orders entered into SQF are not subject to the Order
Price Protection, the Market Order Spread
Protection, or Size Limitation in Options 3, Section
15(a)(1), (a)(2) and (b)(2), respectively. See Options
3, Section 7(a)(i)(B).
5 An active port shall mean that the port was
utilized to submit a quote to the System during a
given month. See Options 7, Section 9, B.
6 The member organization is required to provide
the Exchange with written notification of the
transition and all additional ports, provided at no
cost, will be removed at the end of the ten business
days. See Options 7, Section 9, B.
7 The Exchange also proposes a technical
amendment to add a comma between ‘‘per port’’
and ‘‘per month’’ for the SQF Port Fee in Options
7, Section 9, B.
PO 00000
Frm 00151
Fmt 4703
Sfmt 4703
88191
SQF Port Fee beyond the monthly cap
once the member organization has
exceeded the monthly cap for the
respective month. Despite increasing the
maximum SQF Port Fee from $42,000
per month to $50,000 per month, the
Exchange will continue to offer member
organizations the opportunity to cap
their SQF Port Fees so that they would
not be assessed these fees beyond the
cap. A Phlx Market Maker requires only
one SQF Port to submit quotes in its
assigned options series into Phlx. A
Phlx Market Maker may submit all
quotes through one SQF Port. While a
Phlx Market Maker may elect to obtain
multiple SQF Ports to organize its
business,8 only one SQF Port is
necessary for a Phlx Market Maker to
fulfill its regulatory quoting
obligations.9
2. Statutory Basis
The Exchange believes that its
proposal is consistent with Section 6(b)
of the Act,10 in general, and furthers the
objectives of Sections 6(b)(4) and 6(b)(5)
of the Act,11 in particular, in that it
provides for the equitable allocation of
reasonable dues, fees, and other charges
among members and issuers and other
persons using any facility, and is not
designed to permit unfair
discrimination between customers,
issuers, brokers, or dealers.
The proposed pricing change to
increase the maximum SQF Port Fee is
reasonable in several respects. As a
threshold matter, the Exchange is
subject to significant competitive forces
in the market for options securities
transaction services that constrain its
pricing determinations in that market.
The fact that this market is competitive
has long been recognized by the courts.
In NetCoalition v. Securities and
Exchange Commission, the D.C. Circuit
stated as follows: ‘‘[n]o one disputes
that competition for order flow is
‘fierce.’ . . . As the SEC explained, ‘[i]n
the U.S. national market system, buyers
and sellers of securities, and the brokerdealers that act as their order-routing
agents, have a wide range of choices of
where to route orders for execution’;
8 For example, a Phlx Market Maker may desire
to utilize multiple SQF Ports for accounting
purposes, to measure performance, for regulatory
reasons or other determinations that are specific to
that member organization.
9 Phlx Market Makers have various regulatory
requirements as provided for in Options 2, Section
4. Additionally, Phlx Market Makers have certain
quoting requirements with respect to their assigned
options series as provided in Options 2, Section 5.
SQF Ports are the only quoting protocol available
on Phlx and only Market Makers may utilize SQF
Ports.
10 15 U.S.C. 78f(b).
11 15 U.S.C. 78f(b)(4) and (5).
E:\FR\FM\20DEN1.SGM
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]]>Agencies
[Federal Register Volume 88, Number 243 (Wednesday, December 20, 2023)]
[Notices]
[Pages 88186-88191]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-27917]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-99175; File No. SR-PEARL-2023-69]
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
December 14, 2023.
Pursuant to the provisions of Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice
is hereby given that on December 12, 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
[[Page 88187]]
any comments it received on the proposed rule change. The text of these
statements may be examined at the places specified in Item IV below.
The Exchange has prepared summaries, set forth in sections A, B, and C
below, of the most significant aspects of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend the Fee Schedule to: (1) amend
Section 1)d) to modify the volume requirement in Tier 1 of the Remove
Volume Tiers \3\ applicable to executions of orders in securities
priced at or above $1.00 per share that remove liquidity from the
Exchange (``Removed Volume'') and eliminate Remove Volume Tier 2 and
the corresponding fee; and (2) amend Section 1)f) to modify the
expiration month (referred to herein as the ``sunset period'') for the
Step-Up Added Liquidity Rebate. The Exchange originally filed this
proposal on November 30, 2023 (SR-PEARL-2023-67). On December 12, 2023,
the Exchange withdrew SR-PEARL-2023-67 and refiled this proposal with
minor changes.
---------------------------------------------------------------------------
\3\ See Fee Schedule, Section 1)d).
---------------------------------------------------------------------------
Remove Volume Tiers Table Changes
Currently the Exchange charges a fee of $0.00295 per share for
executions of Removed Volume on the Exchange in securities priced at or
above $1.00 per share, except for executions of Removed Volume that
execute at the midpoint for non-displayed Midpoint Peg Orders \4\ in
all Tapes.\5\ The Exchange also offers a tiered pricing structure in
Section 1)d) of the Fee Schedule, Remove Volume Tiers, which provides
reduced fees for executions of Removed Volume on the Exchange in
securities priced at or above $1.00 per share based on certain volume
thresholds achieved by Equity Members.\6\ To achieve the reduced fees
of the Remove Volume Tiers, Equity Members must, (i) for Tier 1,
achieve an average daily volume (``ADV'') \7\ that is equal to or
greater than 0.10% of the total consolidated volume (``TCV'') \8\ and
execute at least 1,000 shares of added liquidity during the month; and
(ii) for Tier 2, achieve an ADV that is equal to or greater than 0.15%
of TCV and execute at least 1,000 shares of added liquidity during the
month. Equity Members that qualify for the discounted rates of the
Remove Volume Tiers in a particular month will be charged the lower fee
according to the threshold tier achieved instead of the standard Remove
Volume fee of $0.00295 per share for executions of orders in securities
priced at or above $1.00 per share in that particular month.
---------------------------------------------------------------------------
\4\ See 2614(a)(3)(i)(A) for the definition of Midpoint Peg
Order.
\5\ See Fee Schedule, Section 1)a) and Liquidity Indicator Codes
RA, Ra, RB, Rb, RC, Rc, Rp, RR, Rr, RT, and Rt.
\6\ The term ``Equity Member'' is a Member authorized by the
Exchange to transact business on MIAX Pearl Equities. See Exchange
Rule 1901.
\7\ ``ADV'' means average daily volume calculated as the number
of shares added or removed, combined, per day. ADV is calculated on
a monthly basis. See the Definitions Section of the Fee Schedule.
The Exchange excludes from its calculation of ADV shares added or
removed on any day that the Exchange's system experiences a
disruption that lasts for more than 60 minutes during regular
trading hours, on any day with a scheduled early market close, and
on the ``Russell Reconstitution Day'' (typically the last Friday in
June). Routed shares are also not included in the ADV calculation.
See id.
\8\ ``TCV'' means total consolidated volume calculated as the
volume in shares reported by all exchanges and reporting facilities
to a consolidated transaction reporting plan for the month for which
the fees apply. The Exchange excludes from its calculation of TCV
volume on any given day that the Exchange's system experiences a
disruption that lasts for more than 60 minutes during Regular
Trading Hours, on any day with a scheduled early market close, and
on the ``Russell Reconstitution Day'' (typically the last Friday in
June). See the Definitions Section of the Fee Schedule.
---------------------------------------------------------------------------
The Exchange proposes to increase the ADV requirement in Remove
Volume Tier 1 from 0.10% to now be 0.20% of TCV. The Exchange also
proposes to eliminate Remove Volume Tier 2 from the Fee Schedule.
Accordingly, with the proposed changes, to achieve the reduced fee of
Remove Volume Tier 1, Equity Members must achieve an ADV that is equal
to or greater than 0.20% of TCV and execute at least 1,000 shares of
added liquidity during the month.
The purpose of this change is for business and competitive reasons.
The Exchange notes that despite the modest increase in volume ADV
requirement and elimination of Remove Volume Tier 2, the Exchange's
reduced fee and requirements to achieve Remove Volume Tier 1 remain
competitive with the fees to remove liquidity in securities priced at
or above $1.00 per share charged by other equity exchanges, including
other equity exchanges that also have reduced fees for meeting certain
criteria for removing liquidity.\9\
---------------------------------------------------------------------------
\9\ See MEMX LLC (``MEMX'') Equities Fee Schedule, available at
https://info.memxtrading.com/equities-trading-resources/us-equities-fee-schedule/ (providing standard remove volume fee of $0.0030 per
share and reduced Liquidity Removal Tier fee of $0.00295 per share
so long as a member achieves an ADV greater than or equal to 0.60%
of TCV and a Removed Volume ADV greater than or equal to 0.30% of
TCV); see also Cboe EDGX Equities Fee Schedule, available at https://www.cboe.com/us/equities/membership/fee_schedule/edgx/ (providing a
standard fee of $0.0030 per share to remove liquidity in securities
priced at or above $1.00 per share, Remove Volume Tier 1 fee of
$0.0029 per share to remove liquidity in securities priced at or
above $1.00 per share so long as the member achieves an ADAV greater
than or equal to 0.25% of TCV).
---------------------------------------------------------------------------
Step-Up Added Liquidity Rebate
The Exchange currently provides a standard rebate of ($0.0024) \10\
per share for executions of orders in securities priced at or above
$1.00 per share that add displayed liquidity to the Exchange. The
Exchange also currently offers various volume-based tiers and
incentives through which an Equity Member may receive an enhanced
rebate for executions of orders that add displayed liquidity to the
Exchange by achieving the specified criteria that corresponds to a
particular tier/incentive.
---------------------------------------------------------------------------
\10\ Rebates are indicated by parentheses. See the General Notes
Section of the Fee Schedule.
---------------------------------------------------------------------------
In particular, the Exchange adopted a volume based pricing
incentive, referred to as the ``Step-Up Added Liquidity Rebate,'' in
which qualifying Equity Members receive an enhanced rebate of ($0.0031)
per share for executions of orders in securities priced at or above
$1.00 per share that add displayed liquidity to the Exchange.\11\ The
enhanced rebate provided by the Step-Up Added Liquidity Rebate applies
to Liquidity Indicator Codes AA (adds liquidity, displayed order, Tape
A), AB (adds liquidity, displayed order, Tape B) and AC (adds
liquidity, displayed order, Tape C).\12\
---------------------------------------------------------------------------
\11\ See Securities Exchange Act Release No. 95614 (August 26,
2022), 87 FR 53813 (September 1, 2022) (SR-PEARL-2022-33).
\12\ See Fee Schedule, Section 1)f), Step-Up Added Liquidity
Rebate, and Section 1)b), Liquidity Indicator Codes and Associated
Fees.
---------------------------------------------------------------------------
Equity Members qualify for the Step-Up Added Liquidity Rebate by
achieving a ``Step-Up ADAV as a % of TCV'' \13\ of at least 0.03% over
the baseline month of May 2023. Average daily added volume (``ADAV'')
means average daily added volume calculated as the number of shares
added per day.\14\ For example, if an Equity Member had an ADAV as a
percent of TCV of 0.01% in May 2023, then that Equity Member has to
achieve an ADAV as a percent of TCV equal to or greater
[[Page 88188]]
than 0.04% in any subsequent month in order to qualify for the Step-Up
Added Liquidity Rebate. Currently, the Step-Up Added Liquidity Rebate
will expire no later than November 30, 2023.\15\
---------------------------------------------------------------------------
\13\ The term ``Step-Up ADAV as a % of TCV'' means ADAV as a
percent of TCV in the relevant baseline month subtracted from the
current month's ADAV as a percent of TCV. See the Definitions
Section of the Fee Schedule. The Exchange notes that the Step-Up
Added Liquidity Rebate does not apply to executions of orders in
securities priced below $1.00 per share or executions of orders that
constitute added non-displayed liquidity.
\14\ See the Definitions Section of the Fee Schedule. ADAV and
ADV are calculated on a monthly basis. See id.
\15\ See Fee Schedule, Section 1)f).
---------------------------------------------------------------------------
The Exchange now proposes to amend Section 1)f) of the Fee Schedule
so that the criteria to qualify for the Step-Up Added Liquidity Rebate
will expire no later than December 31, 2023.\16\ The Exchange will
issue an alert to market participants should the Exchange determine
that the Step-Up Added Liquidity Rebate will expire earlier than
December 31, 2023, or if the Exchange determines to amend the criteria
or rate applicable to the Step-Up Added Liquidity Rebate prior to the
end of the sunset period. The Exchange notes that at least one other
competing equities exchange provides a similar ``sunset period'' for
one of its enhanced rebates subject to the same baseline month as the
Exchange proposes.\17\
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\16\ The Exchange notes that at the end of the sunset period,
the Step-Up Added Liquidity Rebate will no longer apply unless the
Exchange files another 19b-4 Filing with the Commission to amend the
criteria terms.
\17\ See MEMX Equities Fee Schedule, Liquidity Provision Tiers
table and corresponding footnotes ``*'' through ``***'', supra note
9.
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The Exchange does not propose any other changes to the qualifying
criteria for Equity Members to receive the Step-Up Added Liquidity
Rebate. The Exchange also does not propose to amend the amount of the
enhanced rebate of ($0.0031) per share for Equity Members that qualify
for the Step-Up Added Liquidity Rebate. Finally, the Exchange does not
propose to change the baseline ADAV of 0.00% of TCV used for firms that
become Equity Members of the Exchange after May 2023 for the purpose of
the Step-Up Added Liquidity Rebate calculation.
This change simply extends the sunset period from November 30, 2023
until December 31, 2023. The Exchange believes that the Step-Up Added
Liquidity Rebate will continue to provide an incentive for Equity
Members to strive for higher ADAV on the Exchange (above their ADAV in
the baseline month of May 2023) to receive the enhanced rebate for
qualifying executions of orders in securities priced at or above $1.00
per share that add displayed liquidity to the Exchange. The Exchange
believes that with the extension of the sunset period the Step-Up Added
Liquidity Rebate will continue to encourage the submission of
additional displayed added liquidity to the Exchange, thereby promoting
price discovery and contributing to a deeper and more liquid market,
which benefits all market participants and enhances the attractiveness
of the Exchange as a trading venue.
The purpose of this change is for business and competitive reasons.
Several competing equities exchanges continue to use a baseline month's
volume for their members as the requirements for higher rebates/lower
fees that is an older month than the Exchange's baseline month of May
2023 and many of those exchanges do not have a sunset provision.\18\ By
extending the sunset period, the Exchange will be able to continue to
compete with the enhanced rebates offered by competing exchanges that
use older baseline months' volume in their requirements for the higher
rebates/lower fees.
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\18\ See NYSE Arca Equities Fee Schedule, Section VII, Step Up
Tiers table, footnote ``(b),'' available at https://www.nyse.com/publicdocs/nyse/markets/nyse-arca/NYSE_Arca_Marketplace_Fees.pdf
(providing enhanced rebate of $0.0036 per share on all LMM add
volume if the ETP Holder, together with its affiliates, executes
Tape B adding ADV that is at least 40% over the ETP Holder's adding
ADV in Q3 2019, as a percentage of Tape B CADV with no sunset
provision); Cboe BYX Equities Fee Schedule, Step-Up Tier table,
available at https://www.cboe.com/us/equities/membership/fee_schedule/byx/ (providing reduced fee if the member has a
combined Step-Up Auction ADV and Step-Up ADAV from April 2022
greater than or equal to 3,000,000 and the member has a combined
Auction ADV and ADAV greater than or equal to 0.25% of TCV with no
sunset provision).
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Implementation
The proposed changes are immediately effective.
2. Statutory Basis
The Exchange believes that its proposal to amend its Fee Schedule
is consistent with Section 6(b) of the Act \19\ in general, and
furthers the objectives of Section 6(b)(4) of the Act \20\ in
particular, in that it is an equitable allocation of reasonable fees
and other charges among its Equity Members and issuers and other
persons using its facilities and is not designed to permit unfair
discrimination between customers, issuers, brokers, or dealers.
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\19\ 15 U.S.C. 78f(b).
\20\ 15 U.S.C. 78f(b)(4).
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The Exchange operates in a highly fragmented and competitive market
in which market participants can readily direct their order flow to
competing venues if they deem fee levels at a particular venue to be
excessive or incentives to be insufficient. More specifically, the
Exchange is only one of sixteen registered equities exchanges, and
there are a number of alternative trading systems and other off-
exchange venues, to which market participants may direct their order
flow. Based on publicly available information, no single registered
equities exchange had more than approximately 15.58% of the total
market share of executed volume of equities trading for the month of
November 2023.\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, and the Exchange
represented approximately 2.08% of the overall equities market share
for the month of November 2023.\22\ 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.'' \23\
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\21\ See the ``Market Share'' section of the Exchange's website,
available at https://www.miaxglobal.com/ (last visited December 12,
2023).
\22\ See id.
\23\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37499 (June 29, 2005).
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The Exchange believes that the ever-shifting market share among the
exchanges from month to month demonstrates that market participants can
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 continue to incentivize market participants to direct
additional orders that add liquidity to the Exchange in securities
priced at or above $1.00 per share, which the Exchange believes would
deepen liquidity and promote market quality on the Exchange to the
benefit of all market participants.
The Exchange notes that volume-based incentives and discounts (such
as tiers) have been widely adopted by exchanges (including the
Exchange), and believes they are reasonable, equitable and not unfairly
discriminatory because they are available to all Equity Members on an
equal basis, provide additional benefits or discounts that are
reasonably related
[[Page 88189]]
to the value of an exchange's market quality associated with higher
levels of market activity (such as higher levels of liquidity provision
and/or growth patterns), and the introduction of higher volumes of
orders into the price and volume discovery process.
The Exchange believes its proposal to increase the ADV requirement
in Remove Volume Tier 1 and eliminate Remove Volume Tier 2 from the Fee
Schedule is reasonable, equitably allocated and not unfairly
discriminatory because the reduced fee for Remove Volume Tier 1 will
continue to be available to all Equity Members on an equal basis, and
is reasonably designed to encourage Equity Members to maintain or
increase their order flow. The Exchange believes that even with this
proposal, the reduced fee of Remove Volume Tier 1 will continue to
promote price discovery, enhance liquidity and market quality, and
contribute to a more robust and well-balanced market ecosystem on the
Exchange to the benefit of all Equity Members and market participants.
Further, the Exchange believes its proposal to increase the ADV
requirement in Remove Volume Tier 1 from 0.10% to now be 0.20% of TCV
and eliminate Remove Volume Tier 2 is reasonable, equitably allocated
and not unfairly discriminatory because, despite the modest increase in
ADV requirement and elimination of Remove Volume Tier 2, the Exchange's
reduced fee and requirements to achieve Remove Volume Tier 1 remain
competitive with the fees to remove liquidity in securities priced at
or above $1.00 per share charged by other equity exchanges, including
other equity exchanges that also have reduced fees for meeting certain
criteria for removing liquidity.\24\
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\24\ See supra note 9.
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The Exchange believes that the Step-Up Added Liquidity Rebate, as
modified by the proposed change to the sunset period, is reasonable,
equitable and not unfairly discriminatory as the Step-Up Added
Liquidity Rebate will continue to be available to all Equity Members on
an equal basis, and is reasonably designed to encourage Equity Members
to maintain or increase their order flow in liquidity-adding volume.
The Exchange believes this will continue to promote price discovery,
enhance liquidity and market quality, and contribute to a more robust
and well-balanced market ecosystem on the Exchange to the benefit of
all Equity Members and market participants.
In addition, the Exchange believes its proposal is reasonable
because several competing equities exchanges continue to use a baseline
month's volume for their members as the requirement for higher rebates/
lower fees that is an older month than the Exchange's baseline month of
May 2023 and many of those exchanges do not have a sunset
provision.\25\ By extending the sunset period, the Exchange will be
able to continue to compete with the enhanced rebates offered by
competing exchanges that use older baseline months' volume in their
requirements for the higher rebates/lower fees.
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\25\ See supra note 18.
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The Exchange believes it is reasonable, equitable and not unfairly
discriminatory to amend the sunset period in the Fee Schedule for the
Step-Up Added Liquidity Rebate because it will provide clarity to
Equity Members that, unless the Exchange determines to amend or
otherwise modify the Step-Up Added Liquidity Rebate, the Step-Up Added
Liquidity Rebate will expire at the end of the sunset period. This will
allow Equity Members to take into account that the enhanced rebate
provided for by the Step-Up Added Liquidity Rebate may be discontinued
at the end of sunset period unless the Exchange announces otherwise and
files a revised proposal with the Commission. The Exchange further
notes that it will issue an alert to market participants should the
Exchange determine that the Step-Up Added Liquidity Rebate will expire
earlier than December 31, 2023, or if the Exchange determines to amend
the criteria or rate applicable to the Step-Up Added Liquidity Rebate
prior to the end of the sunset period.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange believes that the proposed change will not impose any
burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act.
Intramarket Competition
The Exchange believes that its proposal will not impose any burden
on intramarket competition that is not necessary or appropriate in
furtherance of the purposes of the Act. The Exchange believes the Step-
Up Added Liquidity Rebate, as modified by this proposal, will continue
to incentivize Equity Members to submit additional orders that add
liquidity to the Exchange, thereby contributing to a deeper and more
liquid market and promoting price discovery and market quality on the
Exchange to the benefit of all market participants and enhancing the
attractiveness of the Exchange as a trading venue, which the Exchange
believes, in turn, would continue to encourage market participants to
direct additional order flow to the Exchange. Greater liquidity
benefits all Equity Members by providing more trading opportunities and
encourages Equity Members to send additional orders to the Exchange,
thereby contributing to robust levels of liquidity, which benefits all
market participants. As described above, the Exchange believes its
proposal to increase the ADV requirement in Remove Volume Tier 1 from
0.10% to now be 0.20% of TCV and eliminate Remove Volume Tier 2 allows
the Exchange's reduced Removed Volume fee to remain competitive with
the fees to remove liquidity in securities priced at or above $1.00 per
share charged by other equity exchanges, including other equity
exchanges that also have reduced fees for meeting certain criteria for
removing liquidity.\26\ Similarly, the opportunity to qualify for the
proposed new Step-Up Added Liquidity Rebate, and thus receive the
proposed rebate for qualifying executions of orders in securities
priced at or above $1.00 per share that add displayed volume will
continue to be available to all Equity Members that meet the associated
volume requirement, and the Exchange believes the proposed extension of
the sunset period is reasonably related to the enhanced market quality
that the Step-Up Added Liquidity Rebate is designed to promote.
Accordingly, the Exchange does not believe the proposed changes would
impose any burden on intramarket competition that is not necessary or
appropriate in furtherance of the purpose of the Act.
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\26\ See supra note 9.
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The Exchange believes its proposal to extend the sunset period in
the Fee Schedule for the Step-Up Added Liquidity Rebate will not impose
any burden on intramarket competition not necessary or appropriate in
furtherance of the purposes of the Act because it will provide clarity
to Equity Members that, unless the Exchange determines to amend or
otherwise modify the Step-Up Added Liquidity Rebate, the Step-Up Added
Liquidity Rebate will be discontinued at the end of the sunset period.
This will allow Equity Members to take into account that the enhanced
rebate provided for by the Step-Up Added Liquidity Rebate may be
discontinued at the end of the sunset period unless the Exchange
announces otherwise. The Exchange further notes that it will issue an
alert to market participants should the Exchange determine that the
Step-Up Added
[[Page 88190]]
Liquidity Rebate will expire earlier than December 31, 2023, or if the
Exchange determines to amend the criteria or rate applicable to the
Step-Up Added Liquidity Rebate prior to the end of the sunset period.
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, based on publicly available
information, no single registered equities exchange had more than
approximately 15.58% of the total market share of executed volume of
equities trading for the month of November 2023.\27\ 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 represented approximately 2.08% of the overall
market for the month of November 2023.\28\ Moreover, the Exchange
believes that the ever-shifting market share among the exchanges from
month to month demonstrates that market participants can shift order
flow in response to new or different pricing structures being
introduced to the market. Accordingly, competitive forces constrain the
Exchange's transaction fees and rebates generally, including with
respect to the criteria for Equity Members to achieve Remove Volume
Tier 1 and the Step-Up Added Liquidity Rebate, and market participants
can readily choose to send their orders to other exchanges and off-
exchange venues if they deem rebate criteria at those other venues to
be more favorable.
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\27\ See supra note 21.
\28\ See id.
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As described above, the proposed changes represent a competitive
proposal through which the Exchange is seeking to continue to encourage
additional order flow to the Exchange through a volume-based incentive
that is comparable to the criteria for volume-based incentives adopted
by at least one other competing exchange that has a similar sunset
period for a specific enhanced rebate that adds liquidity to that
market.\29\ Accordingly, the Exchange believes that its proposal would
not burden, but rather promote, intermarket competition by enabling it
to better compete with other exchanges that offer similar pricing
incentives to market participants that achieve certain volume criteria
and thresholds.
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\29\ See supra note 17.
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Additionally, the Commission has repeatedly expressed its
preference for competition over regulatory intervention in determining
prices, products, and services in the securities markets. Specifically,
in Regulation NMS, the Commission highlighted the importance of market
forces in determining prices and SRO revenues and, also, recognized
that current regulation of the market system ``has been remarkably
successful in promoting market competition in its broader forms that
are most important to investors and listed companies.'' \30\ 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 possesses a
monopoly, regulatory or otherwise, in the execution of order flow from
broker dealers' . . .''.\31\ Accordingly, the Exchange does not believe
its proposed pricing changes impose any burden on competition that is
not necessary or appropriate in furtherance of the purposes of the Act.
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\30\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496, 37499 (June 29, 2005).
\31\ See NetCoalition v. SEC, 615 F.3d 525, 539 (D.C. Cir. 2010)
(quoting Securities Exchange Act Release No. 59039 (December 2,
2008), 73 FR 74770, 74782-83 (December 9, 2008) (SR-NYSE-2006-21)).
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C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
Written comments were neither solicited nor received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become effective pursuant to Section
19(b)(3)(A)(ii) of the Act,\32\ and Rule 19b-4(f)(2) \33\ thereunder.
At any time within 60 days of the filing of the proposed rule change,
the Commission summarily may temporarily suspend such rule change if it
appears to the Commission that such action is necessary or appropriate
in the public interest, for the protection of investors, or otherwise
in furtherance of the purposes of the Act. If the Commission takes such
action, the Commission shall institute proceedings to determine whether
the proposed rule should be approved or disapproved.
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\32\ 15 U.S.C. 78s(b)(3)(A)(ii).
\33\ 17 CFR 240.19b-4(f)(2).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
file number SR-PEARL-2023-69 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-2023-69. 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
[[Page 88191]]
submissions should refer to file number SR-PEARL-2023-69 and should be
submitted on or before January 10, 2024.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\34\
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\34\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-27917 Filed 12-19-23; 8:45 am]
BILLING CODE 8011-01-P
