[Federal Register Volume 83, Number 12 (Thursday, January 18, 2018)]
[Notices]
[Pages 2686-2692]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-00724]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-82490; File No. SR-PEARL-2017-40]


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

January 11, 2018.
    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 29, 2017, 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.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of the 
Substance of the Proposed Rule Change

    The Exchange is filing a proposal to amend the MIAX PEARL Fee 
Schedule (the ``Fee Schedule'').
    The text of the proposed rule change is available on the Exchange's 
website at http://www.miaxoptions.com/rule-filings/pearl at MIAX 
PEARL's principal office, and at the Commission's Public Reference 
Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
sections A, B, and C below, of the most significant aspects of such 
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend the Add/Remove Tiered Rebates/Fees 
set forth in Section (1)(a) of the Fee Schedule to (i) modify the 
monthly volume thresholds that apply to MIAX PEARL Market Makers \3\ in 
certain tiers, and to establish rebates and fees for new Tier 2 and new 
Tier 6 applicable to Market Makers, (ii) modify the monthly volume 
thresholds that apply to MIAX PEARL Non-Priority Customers, Firms, 
Broker-Dealers and Non-MIAX PEARL Market Makers in Tier 4, and to 
establish rebates and fees for a new Tier 5 applicable to such market 
participants who are not Priority Customers \4\ or MIAX PEARL Market 
Makers; and (iii) offer Members \5\ the Maker Rebate and

[[Page 2687]]

the Taker Fee associated with the highest Tier in Non-Penny classes (as 
defined below) for transactions in Non-Penny classes if such Member 
executes more than 0.30% volume in Non-Penny classes, not including 
Excluded Contracts,\6\ as compared to the TCV \7\ in all MIAX PEARL 
listed option classes.
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    \3\ ``Market Maker'' means a Member registered with the Exchange 
for the purpose of making markets in options contracts traded on the 
Exchange. See the Definitions Section of the Fee Schedule and 
Exchange Rule 100.
    \4\ ``Priority Customer'' means a person or entity that (i) is 
not a broker or dealer in securities, and (ii) does not place more 
than 390 orders in listed options per day on average during a 
calendar month for its own beneficial accounts(s). See Exchange Rule 
100, including Interpretations and Policies .01.
    \5\ ``Member'' means an individual or organization that is 
registered with the Exchange pursuant to Chapter II of the 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\ ``Excluded Contracts'' means any contracts routed to an away 
market for execution. See the Definitions Section of the Fee 
Schedule.
    \7\ ``TCV'' means total consolidated volume calculated as the 
total national volume in those classes listed on MIAX PEARL for the 
month for which the fees apply, excluding consolidated volume 
executed during the period time in which the Exchange experiences an 
``Exchange System Disruption'' (solely in the option classes of the 
affected Matching Engine (as defined below)). The term Exchange 
System Disruption, which is defined in the Definitions section of 
the Fee Schedule, means an outage of a Matching Engine or collective 
Matching Engines for a period of two consecutive hours or more, 
during trading hours. The term Matching Engine, which is also 
defined in the Definitions section of the Fee Schedule, is a part of 
the MIAX PEARL electronic system that processes options orders and 
trades on a symbol-by-symbol basis. Some Matching Engines will 
process option classes with multiple root symbols, and other 
Matching Engines may be dedicated to one single option root symbol 
(for example, options on SPY may 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 believes that it is reasonable and appropriate 
to select two consecutive hours as the amount of time necessary to 
constitute an Exchange System Disruption, as two hours equates to 
approximately 1.4% of available trading time per month. The Exchange 
notes that the term ``Exchange System Disruption'' and its meaning 
have no applicability outside of the Fee Schedule, as it is used 
solely for purposes of calculating volume for the threshold tiers in 
the Fee Schedule. See the Definitions Section of the Fee Schedule.
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    The Exchange currently assesses transaction rebates and fees to all 
market participants which are based upon the total monthly volume 
executed by the Member on MIAX PEARL in the relevant, respective origin 
type (not including Excluded Contracts) expressed as a percentage of 
TCV. In addition, the per contract transaction rebates and fees are 
applied retroactively to all eligible volume for that origin type once 
the respective threshold tier (``Tier'') has been reached by the 
Member. The Exchange aggregates the volume of Members and their 
Affiliates.\8\ Members that place resting liquidity, i.e., orders 
resting on the book of the MIAX PEARL System,\9\ are paid the specified 
``maker'' rebate (each a ``Maker''), and Members that execute against 
resting liquidity are assessed the specified ``taker'' fee (each a 
``Taker''). For opening transactions and ABBO uncrossing transactions, 
per contract transaction rebates and fees are waived for all market 
participants. Finally, Members are assessed lower transaction fees and 
receive lower rebates for order executions in standard option classes 
in the Penny Pilot Program \10\ (``Penny classes'') than for order 
executions in standard option classes which are not in the Penny Pilot 
Program (``Non-Penny classes''), where Members are assessed higher 
transaction fees and receive higher rebates within the same tier.
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    \8\ ``Affiliate'' means (i) an affiliate of a Member of at least 
75% common ownership between the firms as reflected on each firm's 
Form BD, Schedule A, or (ii) the Appointed Market Maker of an 
Appointed EEM (or, conversely, the Appointed EEM of an Appointed 
Market Maker). An ``Appointed Market Maker'' is a MIAX PEARL Market 
Maker (who does not otherwise have a corporate affiliation based 
upon common ownership with an EEM) that has been appointed by an EEM 
and an ``Appointed EEM'' is an EEM (who does not otherwise have a 
corporate affiliation based upon common ownership with a MIAX PEARL 
Market Maker) that has been appointed by a MIAX PEARL Market Maker, 
pursuant to the process described in the Fee Schedule. See the 
Definitions Section of the Fee Schedule.
    \9\ The term ``System'' means the automated trading system used 
by the Exchange for the trading of securities. See Exchange Rule 
100.
    \10\ See Securities Exchange Act Release No. 82391 (December 22, 
2017), 82 FR 61622 (December 28, 2017) (SR-PEARL-2017-39).
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Transaction Rebates and Fees for MIAX PEARL Market Makers
    Transaction rebates and fees applicable to all MIAX PEARL Market 
Makers are currently assessed according to the following table:

----------------------------------------------------------------------------------------------------------------
                                                                Per contract rebates/     Per contract rebates/
                                                               fees for penny classes      fees for non-penny
            Origin                 Tier      Volume criteria --------------------------          classes
                                                                                       -------------------------
                                                                 Maker        Taker        Maker        Taker
----------------------------------------------------------------------------------------------------------------
All MIAX PEARL Market Makers.            1  0.00%-0.10%.....      ($0.25)        $0.50      ($0.30)        $1.05
                                         2  Above 0.10%-           (0.40)         0.48       (0.60)         1.03
                                             0.50%.
                                         3  Above 0.50%-           (0.47)         0.47       (0.65)         1.02
                                             0.75% or Above
                                             2.0% in SPY.
                                         4  Above 0.75%.....       (0.48)         0.47       (0.70)         1.02
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    The Exchange proposes to modify the monthly volume thresholds 
applicable to the Exchange's Market Makers to adjust the thresholds in 
current Tiers 1, 3 and 4 and to add a new Tier 2 threshold and 
corresponding Tier 2 rebates and fees, as well as to add a new Tier 6 
threshold and corresponding Tier 6 rebates and fees. Specifically, the 
Exchange proposes to adjust the calculation threshold of Tier 1's 
volume criteria from 0.00% up to 0.10% of the total monthly volume 
executed by the Member on MIAX PEARL, not including Excluded Contracts, 
divided by the TCV, to become above 0.00% up to 0.05% of the total 
monthly volume executed by the Member on MIAX PEARL, not including 
Excluded Contracts, divided by the TCV. The Exchange then proposes to 
add a new Tier 2 threshold applicable to all MIAX PEARL Market Makers. 
The new Tier 2 threshold volume criteria shall be calculated as above 
0.05% up to 0.25% of the total monthly volume executed by the Member on 
MIAX PEARL, not including Excluded Contracts, divided by the TCV.
    Further, the Exchange proposes to adjust the calculation threshold 
of former Tier 2 and now Tier 3's volume criteria from above 0.10% up 
to 0.50% of the total monthly volume executed by the Member on MIAX 
PEARL, not including Excluded Contracts, divided by the TCV, to become 
above 0.25% up to 0.50% of the total monthly volume executed by the 
Member on MIAX PEARL, not including Excluded Contracts, divided by the 
TCV. Former Tier 3 will now become Tier 4.
    The Exchange additionally proposes to adjust the calculation 
threshold of former Tier 4 and now Tier 5's volume criteria from above 
0.75% of the total monthly volume executed by the Member on MIAX PEARL, 
not including Excluded Contracts, divided by the TCV, to become above 
0.75% up to 1.00% of the total monthly volume executed by the Member on 
MIAX PEARL, not including Excluded Contracts, divided by the TCV.
    The Exchange then proposes to add a new Tier 6 threshold applicable 
to all MIAX PEARL Market Makers. The new Tier 6 threshold volume 
criteria shall be calculated as above 1.00% of the total monthly volume 
executed by the

[[Page 2688]]

Member on MIAX PEARL, not including Excluded Contracts, divided by the 
TCV.
    The new thresholds for MIAX PEARL Market Makers will be as set 
forth in the following table:

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                                                                Per contract rebates/     Per contract rebates/
                                                               fees for penny classes      fees for non-penny
            Origin                 Tier      Volume criteria --------------------------          classes
                                                                                       -------------------------
                                                                 Maker        Taker        Maker        Taker
----------------------------------------------------------------------------------------------------------------
All MIAX PEARL Market Makers.            1  0.00%-0.05%.....      ($0.25)        $0.50      ($0.30)        $1.05
                                         2  Above 0.05%-           (0.40)         0.50       (0.30)         1.05
                                             0.25%.
                                         3  Above 0.25%-           (0.40)         0.48       (0.60)         1.03
                                             0.50%.
                                         4  Above 0.50%-           (0.47)         0.47       (0.65)         1.02
                                             0.75% or Above
                                             2.0% in SPY.
                                         5  Above 0.75%-           (0.48)         0.47       (0.70)         1.02
                                             1.00%.
                                         6  Above 1.00%.....       (0.48)         0.47       (0.85)         1.02
----------------------------------------------------------------------------------------------------------------

    The Exchange believes that the proposed new monthly volume tier and 
new rebates/fees in Tier 2 should provide incentives for the Exchange's 
Market Makers to more aggressively provide liquidity in Penny classes 
so that they can achieve the higher Maker rebate in Penny classes with 
less volume than previously required in the former tier. The Exchange 
additionally believes that the proposed new monthly volume tier and new 
rebates/fees in Tier 6 should provide incentives for the Exchange's 
Market Makers to more aggressively provide liquidity in Non-Penny 
classes so that they can achieve a higher Maker rebate in Non-Penny 
classes than previously offered. The Exchange believes that increased 
MIAX PEARL Market Maker volume should make the MIAX PEARL marketplace 
an attractive venue where the Exchange's Market Makers are incentivized 
to submit orders with narrow spreads and with greater size, deepening 
and enhancing the quality of the MIAX PEARL marketplace. This should in 
turn provide more trading opportunities and tighter spreads for other 
market participants and result in a corresponding increase in order 
flow from such other market participants.
Transaction Rebates and Fees for Other Market Participants That Are Not 
Priority Customers or MIAX PEARL Market Makers
    Transaction rebates and fees applicable to all other market 
participants that are not Priority Customers or MIAX PEARL Market 
Makers are currently assessed according to the following table:

----------------------------------------------------------------------------------------------------------------
                                                                Per contract rebates/     Per contract rebates/
                                                               fees for penny classes      fees for non-penny
            Origin                 Tier      Volume criteria --------------------------          classes
                                                                                       -------------------------
                                                                 Maker        Taker        Maker        Taker
----------------------------------------------------------------------------------------------------------------
Non-Priority Customer, Firm,             1  0.00%-0.10%.....      ($0.25)        $0.50      ($0.30)        $1.05
 BD, and Non-MIAX PEARL                  2  Above 0.10%-           (0.40)         0.49       (0.60)         1.04
 Market Makers.                          3   0.50%.                (0.45)         0.48       (0.65)         1.04
                                            Above 0.50%-
                                             0.75%.
                                         4  Above 0.75%.....       (0.48)         0.48       (0.70)         1.04
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    The Exchange proposes to modify the monthly volume thresholds 
applicable to all Non-Priority Customers, Firms, Broker-Dealers and 
Non-MIAX PEARL Market Makers to adjust the threshold in Tier 4 set 
forth above and to add a new Tier 5 threshold and corresponding Tier 5 
rebates and fees. Specifically, the Exchange proposes to adjust the 
calculation threshold of Tier 4's volume criteria from above 0.75% of 
the total monthly volume executed by the Member on MIAX PEARL, not 
including Excluded Contracts, divided by the TCV, to become above 0.75% 
up to 1.00% of the total monthly volume executed by the Member on MIAX 
PEARL, not including Excluded Contracts, divided by the TCV. The 
rebates and fees applicable in the new Tier 5 shall be ($0.48) and 
$0.48 per contract for Penny classes, and ($0.85) and $1.04 for Non-
Penny classes.
    Additionally, the Exchange proposes to add a new Tier 5 threshold 
applicable to all such market participants. The new Tier 5 threshold 
volume criteria shall be calculated as above 1.00% of the total monthly 
volume executed by the Member on MIAX PEARL, not including Excluded 
Contracts, divided by the TCV.
    The new thresholds for Non-Priority Customers, Firms, Broker-
Dealers and Non-MIAX PEARL Market Makers will be as set forth in the 
following table:

----------------------------------------------------------------------------------------------------------------
                                                                Per contract rebates/     Per contract rebates/
                                                               fees for penny classes      fees for non-penny
            Origin                 Tier      Volume criteria --------------------------          classes
                                                                                       -------------------------
                                                                 Maker        Taker        Maker        Taker
----------------------------------------------------------------------------------------------------------------
Non-Priority Customer, Firm,             1  0.00%-0.10%.....      ($0.25)        $0.50      ($0.30)        $1.05
 BD, and Non-MIAX PEARL                  2  Above 0.10%-           (0.40)         0.49       (0.60)         1.04
 Market Makers.                          3   0.50%.                (0.45)         0.48       (0.65)         1.04
                                            Above 0.50%-
                                             0.75%.
                                         4  Above 0.75%-           (0.48)         0.48       (0.70)         1.04
                                             1.00%.
                                         5  Above 1.00%.....       (0.48)         0.48       (0.85)         1.04
----------------------------------------------------------------------------------------------------------------


[[Page 2689]]

    The Exchange believes that the proposed new monthly volume tier and 
higher rebate in Tier 5 should provide incentives for such market 
participants to direct greater volume to the Exchange in Non-Penny 
classes. The Exchange believes that increased order flow by these 
market participants should make the MIAX PEARL marketplace an 
attractive venue where these market participants are incentivized to 
submit orders with narrower spreads and with greater size, deepening 
and enhancing the quality of the MIAX PEARL marketplace. This should in 
turn provide more trading opportunities and tighter spreads for all 
market participants and result in a corresponding increase in order 
flow from all market participants.
Member Transaction Maker Rebates and Taker Fees for Non-Penny Classes
    The Exchange proposes to offer Members transacting volume in MIAX 
PEARL Market Maker, Non-Priority Customer, Firm, Broker Dealer, and 
Non-MIAX PEARL Market Maker origin types (the ``Select Origins'') a new 
method to achieve higher rebates and lower fees for transactions in 
Non-Penny classes. Specifically, the Exchange proposes to offer Members 
transacting volume in the Select Origins the Maker rebate and the Taker 
fee associated with the highest Tier for that respective origin type in 
Non-Penny classes for transactions in Non-Penny classes if such Member 
executes more than 0.30% volume in Non-Penny classes, not including 
Excluded Contracts, as compared to the TCV in all MIAX PEARL listed 
option classes. For example, under the proposed tiers, if a Market 
Maker transacted monthly volume of 0.45% in both Penny and Non-Penny 
classes, not including Excluded Contracts, as divided by TCV, such 
Member would receive proposed Tier 3 rebates and fees: Maker rebate of 
($0.40) for orders that placed resting liquidity on the book and Taker 
fee of $0.48 for orders that removed liquidity from the book in Penny 
classes; Maker rebate of ($0.60) for orders that placed resting 
liquidity on the book and Taker fee of $1.03 for orders that removed 
liquidity from the book in Non-Penny classes. However, if such Member's 
volume was heavily concentrated in Non-Penny classes where its Non-
Penny executed volume was above 0.30%, not including Excluded 
Contracts, as divided by TCV in all MIAX PEARL listed options classes, 
such Member would receive a Maker rebate of ($0.85) and Taker fee of 
$1.02, the proposed rates for Tier 6 in Non-Penny classes for Market 
Makers. Its Maker rebate of ($0.40) and Taker fee of $0.48 will 
continue to apply for Penny classes for Market Makers in proposed Tier 
3. This example would be similar for Non-Priority Customers, Firms, 
Broker Dealers, and Non-MIAX PEARL Market Makers, except for the 
variations in the rates and thresholds. For example, under the proposed 
tiers, if a Member in these origins transacted monthly volume of 0.45% 
in both Penny and Non-Penny classes, not including Excluded Contracts, 
as divided by TCV, such Member would receive Tier 2 rebates and fees: 
Maker rebate of ($0.40) for orders that placed resting liquidity on the 
book and Taker fee of $0.49 for orders that removed liquidity from the 
book in Penny classes; Maker rebate of ($0.60) for orders that placed 
resting liquidity on the book and Taker fee of $1.04 for orders that 
removed liquidity from the book in Non-Penny classes. However, if such 
Member's volume was heavily concentrated in Non-Penny classes where its 
Non-Penny executed volume was above 0.30%, not including Excluded 
Contracts, as divided by TCV in all MIAX PEARL listed options classes, 
such Member would receive a Maker rebate of ($0.85) and Taker fee of 
$1.04, the proposed rates for Tier 5 in Non-Penny classes for these 
origins. Its Maker rebate of ($0.40) and Taker fee of $0.49 will 
continue to apply for Penny classes in that origin type in proposed 
Tier 2.
    Lastly, the Exchange proposes to offer Members an alternative 
method to achieve such higher rebates and lower fees for transactions 
in Non-Penny classes by permitting the Member to aggregate its volume 
in Non-Penny classes with that of its Affiliates \11\ in the Select 
Origins. For avoidance of doubt, volume from Priority Customer in Non-
Penny classes will not be aggregated toward the 0.30% volume threshold. 
Specifically, any Member and its Affiliates will be credited the Maker 
rebate associated with the highest tier for transactions in Non-Penny 
classes and will be assessed the lowest Taker fee associated with the 
highest tier for transactions in Non-Penny classes if such Member 
together with its Affiliates in the Select Origins executes more than 
0.30% volume in Non-Penny classes, not including Excluded Contracts, as 
compared to TCV in all MIAX PEARL option classes. The Exchange believes 
that these incentives will encourage Members to transact a greater 
number of contracts in Non-Penny classes on the Exchange.
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    \11\ ``Affiliate'' means (i) an affiliate of a Member of at 
least 75% common ownership between the firms as reflected on each 
firm's Form BD, Schedule A, or (ii) the Appointed Market Maker of an 
Appointed EEM (or, conversely, the Appointed EEM of an Appointed 
Market Maker). An ``Appointed Market Maker'' is a MIAX PEARL Market 
Maker (who does not otherwise have a corporate affiliation based 
upon common ownership with an EEM) that has been appointed by an EEM 
and an ``Appointed EEM'' is an EEM (who does not otherwise have a 
corporate affiliation based upon common ownership with a MIAX PEARL 
Market Maker) that has been appointed by a MIAX PEARL Market Maker, 
pursuant to the following process. A MIAX PEARL Market Maker 
appoints an EEM and an EEM appoints a MIAX PEARL Market Maker, for 
the purposes of the Fee Schedule, by each completing and sending an 
executed Volume Aggregation Request Form by email to 
[email protected] no later than 2 business days prior to 
the first business day of the month in which the designation is to 
become effective. Transmittal of a validly completed and executed 
form to the Exchange along with the Exchange's acknowledgement of 
the effective designation to each of the Market Maker and EEM will 
be viewed as acceptance of the appointment. The Exchange will only 
recognize one designation per Member. A Member may make a 
designation not more than once every 12 months (from the date of its 
most recent designation), which designation shall remain in effect 
unless or until the Exchange receives written notice submitted 2 
business days prior to the first business day of the month from 
either Member indicating that the appointment has been terminated. 
Designations will become operative on the first business day of the 
effective month and may not be terminated prior to the end of the 
month. Execution data and reports will be provided to both parties.
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    The proposed rule change is scheduled to become operative January 
2, 2018.
2. Statutory Basis
    The Exchange believes that its proposal to amend its Fee Schedule 
is consistent with Section 6(b) of the Act \12\ in general, and 
furthers the objectives of Section 6(b)(4) of the Act,\13\ in that it 
is an equitable allocation of reasonable dues, fees and other charges 
among Exchange members and issuers and other persons using its 
facilities, and 6(b)(5) of the Act,\14\ in that it is designed to 
prevent fraudulent and manipulative acts and practices, to promote just 
and equitable principles of trade, to foster cooperation and 
coordination with persons engaged in facilitating transactions in 
securities, to remove impediments to and perfect the mechanisms of a 
free and open market and a national market system and, in general, to 
protect investors and the public interest.
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    \12\ 15 U.S.C. 78f(b).
    \13\ 15 U.S.C. 78f(b)(4).
    \14\ 15 U.S.C. 78f(b)(1) and (b)(5).
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    The Exchange believes that the proposed new tier structure 
applicable to the Exchange's Market Makers is consistent with Section 
6(b)(4) of the Act in that it is fair, equitable and not unreasonably 
discriminatory and should improve market quality for the Exchange's 
Market Makers and

[[Page 2690]]

consequently all market participants. The proposed changes to the MIAX 
PEARL Market Maker tier structure and rebates and fees are fair and 
equitable and not unreasonably discriminatory because they apply 
equally to all MIAX PEARL Market Maker orders. All similarly situated 
MIAX PEARL Market Maker orders are subject to the same rebate and fee 
schedule, and access to the Exchange is offered on terms that are not 
unfairly discriminatory.
    The Exchange believes that the proposed rule changes applicable to 
MIAX PEARL Market Makers are consistent with Section 6(b)(5) of the Act 
in that they promote equitable access to the Exchange for all market 
participants. To the extent that MIAX PEARL Market Maker volume is 
increased by the proposal, market participants will increasingly 
compete for the opportunity to trade on the Exchange including sending 
more orders that are narrower and larger-sized. The resulting increased 
volume and liquidity will benefit all Exchange participants by 
providing more trading opportunities and tighter spreads.
    The specific volume thresholds of the Tiers and the rebates and 
fees set forth in new Tiers 2 and 6 applicable to the Exchange's Market 
Makers were set based upon business determinations and an analysis of 
current volume levels. The Exchange believes that the proposed new 
monthly volume tier and new rebates/fees in Tier 2 should provide 
incentives for the Exchange's Market Makers to more aggressively 
provide liquidity so that they can achieve the higher Maker rebate in 
Penny classes with less volume than previously required in the former 
tier. The Maker Rebates and Taker Fees set forth in new Tier 6 are 
within the range of rebates and fees at other exchanges that have a 
Maker-Taker fee structure.\15\ The volume thresholds are intended to 
incentivize MIAX PEARL Market Makers to increase the number of orders 
they send to the Exchange so that they can achieve the next threshold, 
and to encourage all market participants to send more orders as well. 
Increasing the number of orders sent to the Exchange will in turn 
provide tighter and more liquid markets, and therefore attract more 
business overall. Similarly, the different rebate rates at the 
different tier levels are based on an analysis of current revenue and 
volume levels and are intended to provide increasing incentives to MIAX 
PEARL Market Makers for increasing the volume of orders sent to, and 
contracts executed on, the Exchange. The specific amounts of the tiers 
and rates are set in order to encourage MIAX PEARL Markets Makers to 
reach for higher tiers.
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    \15\ See NYSE Arca Options Fees and Charges under ``NYSE Arca 
Options: Trade-Related Charges For Standard Options''; see also Cboe 
BZX Options Exchange Fee Schedule under ``Transaction Fees''.
---------------------------------------------------------------------------

    The Exchange believes that the proposed new tier structure 
applicable to the Exchange's other market participants who are not 
Priority Customers or MIAX PEARL Market Makers, i.e. Non-Priority 
Customers, Firms, Broker-Dealers and Non-MIAX PEARL Market Makers, is 
consistent with Section 6(b)(4) of the Act in that it is fair, 
equitable and not unreasonably discriminatory and should improve market 
quality for such market participants as well as MIAX PEARL Market 
Makers and Priority Customers. The proposed changes to the tier 
structure and rebates and fees applicable to such market participants 
are fair and equitable and not unreasonably discriminatory because they 
apply equally to all orders of such market participants. All similarly 
situated orders of such market participants are subject to the same 
rebate and fee schedule, and access to the Exchange is offered on terms 
that are not unfairly discriminatory.
    The Exchange believes that the proposed rule changes applicable to 
Non-Priority Customers, Firms, Broker-Dealers and Non-MIAX PEARL Market 
Makers are consistent with Section 6(b)(5) of the Act in that they 
promote equitable access to the Exchange for all market participants. 
To the extent order flow by these market participants is increased by 
the proposal, other market participants will increasingly compete for 
the opportunity to trade on the Exchange including sending more orders 
that are narrower and larger sized. The resulting increased volume and 
liquidity will benefit all Exchange participants by providing more 
trading opportunities and tighter spreads.
    The specific volume thresholds of Tiers 4 and 5 and the rebates and 
fees set forth in new Tier 5 applicable to Non-Priority Customers, 
Firms, Broker-Dealers and Non-MIAX PEARL Market Makers were set based 
upon business determinations and an analysis of current volume levels. 
The Maker Rebates and Taker Fees set forth in new Tier 5 are within the 
range of rebates and fees at other exchanges that have a Maker-Taker 
fee structure.\16\ The volume thresholds are intended to incentivize 
such market participants to increase the number of orders they send to 
the Exchange so that they can achieve the next threshold, and to 
encourage all market participants to send more orders as well. 
Increasing the number of orders sent to the Exchange will in turn 
provide tighter and more liquid markets, and therefore attract more 
business overall. Similarly, the different rebate rates at the 
different tier levels are based on an analysis of current revenue and 
volume levels and are intended to provide increasing incentives to Non-
Priority Customers, Firms, Broker-Dealers and Non-MIAX PEARL Market 
Makers for increasing the volume of orders sent to, and contracts 
executed on, the Exchange. The specific amounts of the tiers and rates 
are set in order to encourage such market participants to reach for 
higher tiers.
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    \16\ Id.
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    The Exchange believes that the proposed rule change applicable to 
Members' volume in Non-Penny classes is consistent with Section 6(b)(4) 
of the Act in that it is fair, equitable and not unreasonably 
discriminatory and should improve market quality for the Exchange's 
order flow in Non-Penny classes which will benefit all market 
participants. The proposed changes are fair and equitable and not 
unreasonably discriminatory because they apply equally to all Member 
orders in Non-Penny classes. All similarly situated Member orders in 
Non-Penny classes are subject to the same rebates and fees if they 
achieve the specified volume in Non-Penny classes, and access to the 
Exchange is offered on terms that are not unfairly discriminatory. The 
Exchange's proposal to offer Members and its Affiliates the opportunity 
to achieve such higher rebates and lower fees for transactions in Non-
Penny classes by permitting the Member to aggregate its volume in Non-
Penny classes with that of its Affiliates in the Select Origins, is 
equitable and not unfairly discriminatory because the Exchange will 
offer such market participants a means to reduce transaction fees by 
qualifying for higher volume in Non-Penny classes. The Exchange 
believes that offering all such market participants the opportunity to 
lower transaction fees by incentivizing them to transact order flow in 
Non-Penny classes in turn benefits all market participants. To the 
extent that this purpose is achieved, all the Exchange's market 
participants should benefit from the improved market liquidity. 
Enhanced market quality and increased transaction volume that results 
from the anticipated increase in order flow in Non-Penny classes 
directed to the Exchange will benefit all market participants and 
improve competition on the Exchange.
    The Exchange believes that the proposal to allow the aggregation of

[[Page 2691]]

trading activity of Members and their Affiliates for purposes of the 
fee reduction is fair, equitable and not unreasonably discriminatory. 
The Exchange believes the proposed rule change is reasonable because it 
would allow aggregation of the trading activity of Members and their 
Affiliates in the Select Origins for purposes of the fee reduction only 
in very narrow circumstances, namely, where the firm is an Affiliate as 
defined in the Exchange's Fee Schedule. Furthermore, other exchanges, 
including MIAX PEARL's affiliate, Miami International Securities 
Exchange, LLC (``MIAX Options,''), as well as the Exchange, have rules 
that permit the aggregation of the trading activity of affiliated 
entities for the purposes of calculating and assessing certain 
fees.\17\ The Exchange believes that offering all such market 
participants the opportunity to lower transaction fees by incentivizing 
them to transact order flow in Non-Penny classes in turn benefits all 
market participants.
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    \17\ See MIAX Options Fee Schedule, Section (1)(a)(i).
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    The Exchange believes that the proposal, which would only include 
volume transacted in Non-Penny classes of Members and their Affiliates 
from the Select Origins for purposes of the threshold aggregation, is 
fair, equitable and not unreasonably discriminatory. The Exchange 
believes that not including Priority Customer volume transacted in Non-
Penny classes is reasonable because Priority Customers already receive 
a higher level of rebates offered by the Exchange for transactions in 
Non-Penny classes, higher than the rebate amounts proposed for the 
Select Origins. In Non-Penny classes, Priority Customers can receive 
Maker rebates of between ($0.85) to ($1.05) compared to the proposed 
highest tier rebate of ($0.85) for Select Origins. Other exchanges use 
similar qualifications for use in tier thresholds. For example, on Cboe 
BZX, for Firm, Broker Dealer, and Joint Back Office, a member would be 
required to have an ADAV (average daily added volume) in Non-Customer 
Non-Penny Orders >=0.20% of average OCV (OCC Customer Volume), as one 
of the criteria (criteria 3) to reach tier 3 or tier 4.\18\ 
Accordingly, the Exchange believes that it is fair, equitable, and not 
unreasonably discriminatory to not include the Priority Customer volume 
of Members and their Affiliates from the Select Origins for purposes of 
the threshold aggregation.
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    \18\ See Cboe BZX Options Exchange Fee Schedule (Firm, Broker 
Dealer, and Joint Back Office Non-Penny Pilot Add Volume Tiers).
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    The Exchange believes that the proposed rule changes applicable to 
Members' volume in Non-Penny classes are consistent with Section 
6(b)(5) of the Act in that they to promote just and equitable 
principles of trade of options in Non-Penny classes. To the extent 
Member volume in Non-Penny classes is increased by the proposal, market 
participants will increasingly compete for the opportunity to trade on 
the Exchange in Non-Penny classes which could result in more orders 
that are narrower and larger-sized. The resulting increased volume and 
liquidity will benefit all Exchange participants by providing more 
trading opportunities and tighter spreads.

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

    MIAX PEARL does not believe that the proposed rule changes will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act. The Exchange believes that the 
proposed changes would increase both intermarket and intramarket 
competition by encouraging MIAX PEARL Market Makers as well as Non-
Priority Customers, Firms, Broker-Dealers and Non-MIAX PEARL Market 
Makers to direct their orders to the Exchange, which should provide 
liquidity to the marketplace and increase the volume of contracts 
traded on MIAX PEARL. The Exchange believes that the proposed changes 
in the tier structure for these market participants should provide 
additional liquidity that enhances the quality of the Exchange's 
markets and increases the number of trading opportunities on MIAX PEARL 
for all participants who will be able to compete for such 
opportunities. The Exchange additionally believes that the proposed 
changes in volume associated with Non-Penny classes and the opportunity 
to receive higher rebates and lower fees as a result of achieving the 
specified volume in Non-Penny classes should provide additional 
liquidity in Non-Penny classes and encourage order flow for such 
classes. To the extent that there are market participants that are not 
able to aggregate order flow with Affiliates, the Exchange believes 
that this should incent such market participants to direct additional 
order flow to the Exchange and thus provide additional liquidity that 
enhances the quality of its markets and increases the volume of 
contracts traded here especially in Non-Penny classes. This should 
benefit all market participants and improve competition on the 
Exchange.
    The Exchange notes that it operates in a highly competitive market 
in which market participants can readily favor competing venues if they 
deem fee levels at a particular venue to be excessive. In such an 
environment, the Exchange must continually adjust its rebates and fees 
to remain competitive with other exchanges and to attract order flow. 
The Exchange believes that the proposed rule changes reflect this 
competitive environment because they modify the Exchange's fees in a 
manner that encourages all market participants to provide liquidity and 
to send order flow to the Exchange.

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,\19\ and Rule 19b-4(f)(2) \20\ 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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    \19\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \20\ 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 (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-PEARL-2017-40 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.


[[Page 2692]]


All submissions should refer to File Number SR-PEARL-2017-40. 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 (http://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 10:00 a.m. and 
3:00 p.m. Copies of the filing also will be available for inspection 
and copying at the principal office of the Exchange. All comments 
received will be posted without change. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-PEARL-2017-40 and should be submitted on 
or before February 8, 2018.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\21\
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    \21\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-00724 Filed 1-17-18; 8:45 am]
 BILLING CODE 8011-01-P


