
[Federal Register Volume 84, Number 53 (Tuesday, March 19, 2019)]
[Notices]
[Pages 10144-10151]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-05088]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-85304; File No. SR-PEARL-2019-07]


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

March 13, 2019.
    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 February 28, 2019, MIAX PEARL, LLC (``MIAX PEARL'' 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.
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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 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) decrease Maker 
(as defined below) rebates in certain Tiers for options transactions in 
Penny classes (as defined below) for Priority Customers; \3\ (ii) 
increase Taker (as defined below) fees in certain Tiers for options 
transactions in certain Penny classes (excluding SPY, QQQ, and IWM) for 
Priority Customers; (iii) decrease Taker fees in certain Tiers for 
options transactions in QQQ and IWM classes for Priority Customers; 
(iv) create a new tiered fee structure in Penny classes for Maker 
rebates for MIAX PEARL Market Makers \4\ to carve out orders that are 
contra to Priority Customer Origin and make a corresponding clarifying 
change to MIAX PEARL Market Maker existing Maker tiers to clarify that 
it will apply to MIAX PEARL Market Maker orders contra Origins ex 
Priority Customer; (v) increase Taker fees in certain Tiers for options 
transactions in Penny classes for MIAX PEARL Market Makers; (vi) create 
a new tiered fee structure in Penny classes for Taker fees for MIAX 
PEARL Market Makers to carve out orders that are contra to Priority 
Customer Origin and make a corresponding clarifying change to MIAX 
PEARL Market Maker existing Taker tiers to clarify that it will apply 
to MIAX PEARL Market Maker orders contra Origins ex Priority Customer; 
(vii) create a new tiered fee structure in Penny classes for Maker 
rebates for Non-Priority Customers, Firms, Broker-Dealers and Non-MIAX 
PEARL Market Makers (collectively herein ``Professional Members'') to 
carve out orders that are contra to Priority Customer Origin and make a 
corresponding clarifying change to Professional Member existing Maker 
tiers to clarify that it will apply to Professional Members orders 
contra Origins ex Priority Customer; (viii) increase Taker fees in 
certain Tiers for options transactions in Penny classes for 
Professional Members; (ix) create a new tiered fee structure in Penny 
classes for Taker fees for Professional Members to carve out orders 
that are contra to Priority Customer Origin and make a corresponding 
clarifying change to Professional Member existing Taker tiers to 
clarify that it will apply to Professional Members orders contra 
Origins ex Priority Customer; and (x) and make a non-substantive 
technical correction to remove VXX from the Taker fee carve out that 
applies to all Penny classes other than SPY, QQQ, IWM, and VXX, for 
Priority Customers.
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    \3\ ``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 account(s). See Exchange Rule 
100, including Interpretations and Policies .01.
    \4\ ``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.
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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 \5\ on MIAX PEARL in the relevant, respective 
origin type (not including Excluded

[[Page 10145]]

Contracts) \6\ expressed as a percentage of TCV.\7\ 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. Transaction rebates and fees in Section (1)(a) 
of the Fee Schedule are currently assessed according to the following 
tables:
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    \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.
    \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. 84865 (December 19, 
2018), 83 FR 66813 (December 27, 2018) (SR-PEARL-2018-26).

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                                                                    Per contract rebates/fees for Penny classes            Per contract rebates/fees for
                                                         ----------------------------------------------------------------        Non-Penny classes
            Origin               Tier    Volume criteria                                                   QQQ, IWM, VXX -------------------------------
                                                               Maker          Taker *        SPY taker         taker          Maker          Taker *
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Priority Customer............       1   0.00%-0.10%.....         ($0.25)           $0.48           $0.43           $0.47         ($0.85)           $0.84
                                    2   Above 0.10%-              (0.40)            0.46            0.43            0.46          (0.95)            0.84
                                         0.35%.
                                    3   Above 0.35%-              (0.45)            0.44            0.42            0.44          (1.00)            0.84
                                         0.50%.
                                    4   Above 0.50%-              (0.52)            0.44            0.41            0.43          (1.03)            0.84
                                         0.75%.
                                    5   Above 0.75%-              (0.53)            0.44            0.40            0.42          (1.04)            0.84
                                         1.25%.
                                    6   Above 1.25%.....          (0.53)            0.43            0.38            0.40          (1.04)            0.84
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* For all Penny Classes other than SPY, QQQ, IWM, and VXX.


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                                                                                           Per contract rebates/fees for   Per contract rebates/fees for
                                                                                                   Penny classes                 Non-Penny classes
                   Origin                        Tier             Volume criteria        ---------------------------------------------------------------
                                                                                               Maker           Taker         Maker **        Taker **
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All MIAX PEARL Market Makers................          1   0.00%-0.15%...................         ($0.25)           $0.50         ($0.30)           $1.10
                                                      2   Above 0.15%-0.40% or Above              (0.40)            0.50          (0.30)            1.10
                                                           0.45% in SPY/QQQ/IWM.
                                                      3   Above 0.40%-0.65%.............          (0.40)            0.48          (0.60)            1.09
                                                      4   Above 0.65%-1.00% or Above              (0.47)            0.47          (0.65)            1.08
                                                           2.25% in SPY.
                                                      5   Above 1.00%-1.40%.............          (0.48)            0.45          (0.70)            1.07
                                                      6   Above 1.40%...................          (0.48)            0.44          (0.85)            1.06
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[[Page 10146]]



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                                                                                           Per contract rebates/fees for   Per contract rebates/fees for
                                                                                                   Penny classes                 Non-Penny classes
                   Origin                        Tier             Volume criteria        ---------------------------------------------------------------
                                                                                                                               Maker
                                                                                           Maker [caret]       Taker         **[caret]       Taker **
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Non-Priority Customer, Firm, BD, and Non-             1   0.00%-0.15%...................         ($0.25)           $0.50         ($0.30)           $1.10
 MIAX PEARL Market Makers.
                                                      2   Above 0.15%-0.40%.............          (0.40)            0.50          (0.30)            1.10
                                                      3   Above 0.40%-0.65%.............          (0.40)            0.48          (0.60)            1.10
                                                      4   Above 0.65%-1.00%.............          (0.47)            0.48          (0.65)            1.09
                                                      5   Above 1.00%-1.40%.............          (0.48)            0.48          (0.70)            1.08
                                                      6   Above 1.40%...................          (0.48)            0.48          (0.85)            1.07
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** Members may qualify for the Maker Rebate and the Taker Fee associated with the highest Tier for transactions in Non-Penny classes if the 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 purposes of qualifying for such rates, the Exchange will aggregate the volume transacted by Members and their Affiliates in the following
  Origin types in Non-Penny classes: MIAX PEARL Market Makers, and Non-Priority Customer, Firm, BD, and Non-MIAX PEARL Market Makers.
[caret] Members may qualify for Maker Rebates equal to the greater of: (A) (0.40) for Penny Classes and (0.65) for Non-Penny Classes, or (B) the amount
  set forth in the applicable Tier reached by the Member in the relevant Origin, if the Member and their Affiliates execute at least 1.50% volume in the
  relevant month, in Priority Customer Origin type, in all options classes, not including Excluded Contracts, as compared to the TCV in all MIAX PEARL
  listed option classes.
Except as otherwise set forth herein, the Volume Criteria is calculated based on the total monthly volume executed by the Member in all options classes
  on MIAX PEARL in the relevant Origin type, not including Excluded Contracts, (as the numerator) expressed as a percentage of (divided by) TCV (as the
  denominator). In Tier 2 for MIAX PEARL Market Makers, the alternative Volume Criteria (above 0.45% in SPY/QQQ/IWM) is calculated based on the total
  monthly volume executed by the Market Maker collectively in SPY, QQQ, and IWM options on MIAX PEARL in the relevant Origin type, not including
  Excluded Contracts, (as the numerator) expressed as a percentage of (divided by) SPY/QQQ/IWM TCV (as the denominator). In Tier 4 for MIAX PEARL Market
  Makers, the alternative Volume Criteria (above 2.25% in SPY) is calculated based on the total monthly volume executed by the Market Maker solely in
  SPY options on MIAX PEARL in the relevant Origin type, not including Excluded Contracts, (as the numerator) expressed as a percentage of (divided by)
  SPY TCV (as the denominator). The per contract transaction rebates and fees shall be applied retroactively to all eligible volume once the threshold
  has been reached by Member. The Exchange aggregates the volume of Members and their Affiliates in the Add/Remove Tiered Fees. The per contract
  transaction rebates and fees shall be waived for transactions executed during the opening and for transactions that uncross the ABBO.

Maker Rebates
    The Exchange proposes to decrease the Maker rebate amounts in 
certain Tiers for options transactions in Penny classes for Priority 
Customers. Specifically, for Priority Customer options transactions in 
Penny classes, the Exchange proposes to decrease the Maker rebate in 
Tier 4 from (0.52) to (0.51), in Tier 5 from (0.53) to (0.52), and in 
Tier 6 from (0.53) to (0.52).
Taker Fees
    The Exchange proposes to: (i) Increase the Taker fees assessable to 
Priority Customers in certain Tiers for options transactions in certain 
Penny classes (excluding SPY, QQQ, and IWM), (ii) increase the Taker 
fees assessable to MIAX PEARL Market Makers in certain Tiers for 
options transactions in Penny classes, (iii) increase the Taker fees 
assessable to Professional Members in certain Tiers for options 
transactions in Penny classes, and (iv) decrease the Taker fees 
assessable to Priority Customers in certain Tiers for options 
transactions in QQQ and IWM classes.
    Specifically, the Exchange proposes to increase the Taker fees for 
Priority Customer orders in options in certain Penny classes (excluding 
SPY, QQQ, and IWM) in Tier 2 from 0.46 to 0.48, in Tier 3 from 0.44 to 
0.46, and in Tier 4 from 0.44 to 0.45. The Exchange next proposes to 
increase the Taker fees for MIAX PEARL Market Makers for options 
transactions in Penny classes in Tier 3 from 0.48 to 0.49, in Tier 4 
from 0.47 to 0.48, in Tier 5 from 0.45 to 0.46, and in Tier 6 from 0.44 
to 0.45. The Exchange further proposes to increase the Taker fees for 
Professional Members for options transactions in Penny classes in Tier 
3 from 0.48 to 0.49, and in Tier 4 from 0.48 to 0.49. Lastly, the 
Exchange proposes to decrease the Taker fees for Priority Customer 
orders in options in QQQ and IWM classes in Tier 1 from 0.47 to 0.44, 
and in Tier 2 from 0.46 to 0.44.
New Tiered Fee Structure for MIAX PEARL Market Makers
    The Exchange proposes to: (i) Create a new tiered fee structure in 
Penny classes for Maker rebates for MIAX PEARL Market Makers to carve 
out orders that are contra to Priority Customer Origin and make a 
corresponding clarifying change to MIAX PEARL Market Maker existing 
Maker tiers to clarify that it will apply to MIAX PEARL Market Maker 
orders contra Origins ex Priority Customer; and (ii) create a new 
tiered fee structure in Penny classes for Taker fees for MIAX PEARL 
Market Makers to carve out orders that are contra to Priority Customer 
Origin and make a corresponding clarifying change to MIAX PEARL Market 
Maker existing Taker tiers to clarify that it will apply to MIAX PEARL 
Market Maker orders contra Origins ex Priority Customer. Specifically, 
the Exchange proposes to amend the MIAX PEARL Market Maker table to 
establish a separate, additional tiered structure in Penny classes of 
Maker rebates for options transactions where the contra order is from a 
Priority Customer Origin. The Exchange currently does not distinguish 
Maker rebates for MIAX PEARL Market Makers based on the contra Origin 
type, but believes that making this distinction will provide greater 
granularity with respect to Maker rebates. The Exchange also proposes 
to make a corresponding change to the MIAX PEARL Market Maker table to 
clarify that the existing Maker rebates would apply to orders from all 
Origins except for those with a Priority Customer Origin, which would 
have their own carve out, by inserting the language ``Contra Origins ex 
Priority Customer'' right after the word ``Maker'' in the table.
    Further, the Exchange proposes to amend the MIAX PEARL Market Maker 
table to establish a separate, additional tiered structure in Penny 
classes of Taker fees for options transactions where the contra order 
is from a Priority Customer Origin. The Exchange currently does not 
distinguish Taker fees for MIAX PEARL Market Makers based on the contra 
Origin, but believes that making this distinction will provide greater 
granularity with respect to Taker fees. The Exchange also proposes to 
make a corresponding change to the MIAX PEARL Market Maker table to 
clarify that the existing Taker fees

[[Page 10147]]

would apply to orders from all Origins except for those with a Priority 
Customer Origin, which would have their own carve out, by inserting the 
language ``Contra Origins ex Priority Customer'' right after the word 
``Taker'' in the table.
    The Exchange believes that the proposed new tiered fee structure 
for Maker rebates and Taker fees for MIAX PEARL Market Makers, carving 
out orders that are contra to Priority Customer Origin and the 
corresponding changes to the existing tiers will provide more 
granularity to the Fee Schedule, which will continue to provide 
appropriate incentives for Exchange Members to provide aggressive 
liquidity to attract Priority Customer transactions so that they can 
achieve higher rebates and lower fees. The Exchange believes these 
rebates and fees should continue to make MIAX PEARL an attractive venue 
where the Exchange's Members are incentivized to provide liquidity to 
attract Priority Customer orders, 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.
New Tiered Fee Structure for Professional Members
    The Exchange proposes to: (i) Create a new tiered fee structure in 
Penny classes for Maker rebates for Professional Members to carve out 
orders that are contra to Priority Customer Origin and make a 
corresponding clarifying change to Professional Member existing Maker 
tiers to clarify that it will apply to Professional Members orders 
contra Origins ex Priority Customer; and (ii) create a new tiered fee 
structure in Penny classes for Taker fees for Professional Members to 
carve out orders that are contra to Priority Customer Origin and make a 
corresponding clarifying change to Professional Member existing Taker 
tiers to clarify that it will apply to Professional Member orders 
contra Origins ex Priority Customer. Specifically, the Exchange 
proposes to amend the Professional Member table to establish a 
separate, additional tiered structure in Penny classes of Maker rebates 
for options transactions where the contra order is from a Priority 
Customer Origin. The Exchange currently does not distinguish Maker 
rebates for Professional Members based on the contra Origin type, but 
believes that making this distinction will provide greater granularity 
with respect to Maker rebates. The Exchange also proposes to make a 
corresponding change to the Professional Member table to clarify that 
the existing Maker rebates would apply to orders from all Origins 
except for those with a Priority Customer Origin, which would have 
their own carve out, by inserting the language ``Contra Origins ex 
Priority Customer'' right after the word ``Maker'' in the table.
    Further, the Exchange proposes to amend the Professional Member 
table to establish a separate, additional tiered structure in Penny 
classes of Taker fees for options transactions where the contra order 
is from a Priority Customer Origin. The Exchange currently does not 
distinguish Taker fees for Professional Members based on the contra 
Origin, but believes that making this distinction will provide greater 
granularity with respect to Taker fees. The Exchange also proposes to 
make a corresponding change to the Professional Member table to clarify 
that the existing Taker fees would apply to orders from all Origins 
except for those with a Priority Customer Origin, which would have 
their own carve out, by inserting the language ``Contra Origins ex 
Priority Customer'' right after the word ``Taker'' in the table.
    The Exchange believes that the proposed new tiered fee structure in 
Penny classes for Maker rebates and Taker fees for Professional 
Members, carving out orders that are contra to Priority Customer Origin 
and the corresponding changes to the existing tiers will provide more 
granularity to the Fee Schedule, which will continue to provide 
appropriate incentives for Exchange Members to provide aggressive 
liquidity to attract Priority Customer transactions so that they can 
achieve higher rebates and lower fees. The Exchange believes these 
rebates and fees should continue to make MIAX PEARL an attractive venue 
where the Exchange's Members are incentivized to provide liquidity to 
attract Priority Customer orders, 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.
Technical Correction
    The Exchange proposes to make a non-substantive technical 
correction to remove VXX from the Taker fee carve out that applies to 
all Penny classes other than SPY, QQQ, IWM, and VXX, for Priority 
Customers. By way of background, VXX options were authorized to be 
listed for trading on the Exchange pursuant to Rule 402, but are no 
longer listed for trading since the VXX ETN matured on January 30, 2019 
\11\ and VXX ETN shares are no longer listed for trading on equity 
trading venues. Accordingly, the Exchange proposes to amend its Fee 
Schedule to delete the symbol VXX from the Taker fee carve out that 
applies to all Penny classes other than SPY, QQQ, IWM, and VXX, for 
Priority Customers. Specifically, the Exchange proposes to delete the 
symbol VXX from the ``QQQ, IWM, VXX Taker'' column of the Exchange 
Rebates/Fees--Add/Remove Tiered Rebates/Fees, for Priority Customer 
transactions, and to delete VXX from the explanatory sentence beneath 
the Priority Customer table (referenced by way of an asterisk to the 
Taker fee) to make it clear that VXX will no longer be carved out from 
the Taker fee that applies to all Penny classes other than SPY, QQQ, 
and IWM. The amendment to remove VXX as a carve out from the Taker fee 
that applies to all Penny classes other than SPY, QQQ, IWM, and VXX, 
for Priority Customers, is intended to eliminate any potential 
confusion and to make it clear to market participants that VXX will no 
longer be part of the carve out that will continue to apply to Priority 
Customer transactions in SPY, QQQ, and IWM.
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    \11\ See Prospectus and Pricing Supplement for iPath S&P 500 VIX 
Short-Term Futures ETN available at http://www.ipathetn.com/US/16/en/documentation.app?instrumentId=259118&documentId=6204338.
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    The purpose of adjusting the specified Taker fees and the specified 
Maker rebates is for business and competitive reasons. In order to 
attract order flow, the Exchange initially set its Maker rebates and 
Taker fees so that they were meaningfully higher/lower than other 
options exchanges that operate comparable maker/taker pricing 
models.\12\ The Exchange now believes that it is appropriate to further 
adjust these specified Maker rebates and Taker fees so that they are 
more in line with other exchanges, but will still remain highly 
competitive such that they should enable the Exchange to continue to 
attract order flow and maintain market share.\13\
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    \12\ See Securities Exchange Act Release Nos. 80915 (June 13, 
2017), 82 FR 27912 (June 19, 2017) (SR-PEARL-2017-29); 80914 (June 
13, 2017), 82 FR 27910 (June 19, 2017) (SR-PEARL-2017-30).
    \13\ See Cboe BZX Options Exchange Fee Schedule, under 
``Transaction Fees.''
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    Cboe BZX Exchange, Inc. (``Cboe BZX'') generally provides for 
similar fees and rebates. For example, under threshold criteria similar 
to MIAX PEARL's proposed Maker rebates in Priority Customer Tiers 4, 5 
and 6 for

[[Page 10148]]

Penny classes, Cboe BZX's Customer Penny Pilot Add Tiers 3, 4 and 5 
provides for rebates of $0.51, $0.52, and $0.53, respectively.\14\ 
Additionally, under threshold criteria similar to MIAX PEARL's proposed 
Taker fees in Priority Customer Tiers 2, 3 and 4; and in Priority 
Customer transactions in QQQ and IWM, Tiers 1 and 2 for Penny classes, 
Cboe BZX charges a fee of $0.50 for Customer Penny Pilot transactions 
that remove liquidity.\15\ Additionally, under threshold criteria 
similar to MIAX PEARL's proposed Taker fees in Market Maker Tiers 3, 4, 
5 and 6 for Penny classes, Cboe BZX charges Market Makers a fee of 
$0.44, $0.47 and $0.44 for non-Customer Penny Pilot Take Volume Tiers 
1, 2 and 3, respectively.\16\ Finally, under threshold criteria similar 
to MIAX PEARL's proposed Taker fees in Professional Member Tiers 3 and 
4 for Penny classes, Cboe BZX charges Professionals a fee of $0.47 and 
$0.44 for non-Customer Penny Pilot Take Volume Tiers 2 and 3, 
respectively.\17\
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    \14\ See Cboe BZX Options Exchange Fee Schedule, under 
``Transaction Fees,'' ``Customer Penny Pilot Add Tiers.''
    \15\ See Cboe BZX Options Exchange Fee Schedule, under 
``Transaction Fees,'' ``Customer Remove Rates.''
    \16\ See Cboe BZX Options Exchange Fee Schedule, under 
``Transaction Fees,'' ``Non-Customer Penny Pilot Take Volume 
Tiers.''
    \17\ See id.
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    Further, BOX Exchange LLC (``BOX'') generally provides for a 
similar tiered structure of rebates and fees. Specifically, similar to 
MIAX PEARL's proposed tiered fee structure for Maker rebates and Taker 
fees for MIAX PEARL Market Makers and Professional Members, carving out 
orders that are contra to Priority Customer Origin, BOX has different 
rebates and fees depending on the contra party.\18\ For example, for 
orders submitted by Professional Customers or Broker Dealers, BOX 
offers different rebates and charges different fees depending on 
whether the contra is a Public Customer, Professional Customer/Broker 
Dealer, or Market Maker,\19\ which is similar to MIAX PEARL's proposed 
tiered rebate and fee structure for Professional Members. Similarly, 
like MIAX PEARL's proposed tiered rebate and fee structure for Market 
Makers, BOX offers different rebates and charges different fees 
depending on whether the contra party to a Market Maker order is a 
Public Customer, Professional Customer/Broker Dealer or a Market 
Maker.\20\
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    \18\ See BOX Options Section I., Electronic Transaction Fees.
    \19\ See id.
    \20\ See id.
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    With all proposed changes, Section (1)(a) of the Fee Schedule shall 
be the following:

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                                                                    Per contract rebates/fees for Penny classes            Per contract rebates/fees for
                                                         ----------------------------------------------------------------        Non-Penny classes
            Origin               Tier    Volume criteria                                                                 -------------------------------
                                                               Maker          Taker *        SPY taker    QQQ, IWM taker      Maker           Taker
--------------------------------------------------------------------------------------------------------------------------------------------------------
Priority Customer............       1   0.00%-0.10%.....         ($0.25)           $0.48           $0.43           $0.44         ($0.85)           $0.84
                                    2   Above 0.10%-              (0.40)            0.48            0.43            0.44          (0.95)            0.84
                                         0.35%.
                                    3   Above 0.35%-              (0.45)            0.46            0.42            0.44          (1.00)            0.84
                                         0.50%.
                                    4   Above 0.50%-              (0.51)            0.45            0.41            0.43          (1.03)            0.84
                                         0.75%.
                                    5   Above 0.75%-              (0.52)            0.44            0.40            0.42          (1.04)            0.84
                                         1.25%.
                                    6   Above 1.25%.....          (0.52)            0.43            0.38            0.40          (1.04)            0.84
--------------------------------------------------------------------------------------------------------------------------------------------------------
* For all Penny Classes other than SPY, QQQ, and IWM.


--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                    Per contract rebates/fees for Penny classes            Per contract rebates/fees for
                                                         ----------------------------------------------------------------        Non-Penny classes
                                                           Maker (contra   Maker (contra   Taker (contra   Taker (contra -------------------------------
            Origin               Tier    Volume criteria    origins ex       priority       origins ex       priority
                                                             priority        customer        priority        customer        Maker **        Taker **
                                                             customer)        origin)        customer)        origin)
--------------------------------------------------------------------------------------------------------------------------------------------------------
All MIAX PEARL Market Makers.       1   0.00%-0.15%.....          (0.25)          (0.23)            0.50            0.50          (0.30)            1.10
                                    2   Above 0.15%-              (0.40)          (0.38)            0.50            0.50          (0.30)            1.10
                                         0.40% or Above
                                         0.45% in SPY/
                                         QQQ/IWM.
                                    3   Above 0.40%-              (0.40)          (0.38)            0.49            0.50          (0.60)            1.09
                                         0.65%.
                                    4   Above 0.65%-              (0.47)          (0.45)            0.48            0.49          (0.65)            1.08
                                         1.00% or Above
                                         2.25% in SPY.
                                    5   Above 1.00%-              (0.48)          (0.46)            0.46            0.47          (0.70)            1.07
                                         1.40%.

[[Page 10149]]

 
                                    6   Above 1.40%.....          (0.48)          (0.47)            0.45            0.46          (0.85)            1.06
--------------------------------------------------------------------------------------------------------------------------------------------------------


 
                                                                    Per contract rebates/fees for Penny classes            Per contract rebates/fees for
                                                         ----------------------------------------------------------------        Non-Penny classes
                                                               Maker           Maker                                     -------------------------------
                                                            [supcaret]      [supcaret]     Taker (contra   Taker (contra
            Origin               Tier    Volume criteria      (contra         (contra       origins ex       priority
                                                            origins ex       priority        priority        customer        Maker **        Taker **
                                                             priority        customer        customer)        origin)       [supcaret]
                                                             customer)        origin)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Non-Priority Customer, Firm,        1   0.00%-0.15%.....         ($0.25)         ($0.23)           $0.50           $0.50         ($0.30)           $1.10
 BD, and Non-MIAX PEARL
 Market Makers.
                                    2   Above 0.15%-              (0.40)          (0.38)            0.50            0.50          (0.30)            1.10
                                         0.40%.
                                    3   Above 0.40%-              (0.40)          (0.38)            0.49            0.50          (0.60)            1.10
                                         0.65%.
                                    4   Above 0.65%-              (0.47)          (0.45)            0.49            0.50          (0.65)            1.09
                                         1.00%.
                                    5   Above 1.00%-              (0.48)          (0.46)            0.48            0.50          (0.70)            1.08
                                         1.40%.
                                    6   Above 1.40%.....          (0.48)          (0.46)            0.48            0.50          (0.85)            1.07
--------------------------------------------------------------------------------------------------------------------------------------------------------
** Members may qualify for the Maker Rebate and the Taker Fee associated with the highest Tier for transactions in Non-Penny classes if the 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 purposes of qualifying for such rates, the Exchange will aggregate the volume transacted by Members and their Affiliates in the following
  Origin types in Non-Penny classes: MIAX PEARL Market Makers, and Non-Priority Customer, Firm, BD, and Non-MIAX PEARL Market Makers.
[supcaret] Members may qualify for Maker Rebates equal to the greater of: (A) ($0.40) for Penny Classes and ($0.65) for Non-Penny Classes, or (B) the
  amount set forth in the applicable Tier reached by the Member in the relevant Origin, if the Member and their Affiliates execute at least 1.50% volume
  in the relevant month, in Priority Customer Origin type, in all options classes, not including Excluded Contracts, as compared to the TCV in all MIAX
  PEARL listed option classes.
Except as otherwise set forth herein, the Volume Criteria is calculated based on the total monthly volume executed by the Member in all options classes
  on MIAX PEARL in the relevant Origin type, not including Excluded Contracts, (as the numerator) expressed as a percentage of (divided by) TCV (as the
  denominator). In Tier 2 for MIAX PEARL Market Makers, the alternative Volume Criteria (above 0.45% in SPY/QQQ/IWM) is calculated based on the total
  monthly volume executed by the Market Maker collectively in SPY, QQQ, and IWM options on MIAX PEARL in the relevant Origin type, not including
  Excluded Contracts, (as the numerator) expressed as a percentage of (divided by) SPY/QQQ/IWM TCV (as the denominator). In Tier 4 for MIAX PEARL Market
  Makers, the alternative Volume Criteria (above 2.25% in SPY) is calculated based on the total monthly volume executed by the Market Maker solely in
  SPY options on MIAX PEARL in the relevant Origin type, not including Excluded Contracts, (as the numerator) expressed as a percentage of (divided by)
  SPY TCV (as the denominator). The per contract transaction rebates and fees shall be applied retroactively to all eligible volume once the threshold
  has been reached by Member. The Exchange aggregates the volume of Members and their Affiliates in the Add/Remove Tiered Fees. The per contract
  transaction rebates and fees shall be waived for transactions executed during the opening and for transactions that uncross the ABBO.

    The proposed changes are scheduled to become operative March 1, 
2019.
2. Statutory Basis
    The Exchange believes that its proposal to amend its Fee Schedule 
is consistent with Section 6(b) of the Act \21\ in general, and 
furthers the objectives of Section 6(b)(4) of the Act,\22\ 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,\23\ 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.
---------------------------------------------------------------------------

    \21\ 15 U.S.C. 78f(b).
    \22\ 15 U.S.C. 78f(b)(4).
    \23\ 15 U.S.C. 78f(b)(1) and (b)(5).
---------------------------------------------------------------------------

    The proposed Maker rebate decreases in certain specified Tiers 
applicable to orders submitted by Priority Customers in Penny classes 
are reasonable, equitable and not unfairly discriminatory because all 
similarly situated market participants in the same Origin type are 
subject to the same tiered Maker rebates and access to the Exchange is 
offered on terms that are not unfairly discriminatory. The Exchange 
believes it is equitable and not unfairly discriminatory to reduce the 
Maker rebate to Priority Customer orders in Penny classes because for 
competitive and business reasons, the Exchange initially set its Maker 
rebates for such orders higher than certain other options exchanges 
that operate comparable maker/taker pricing models.\24\ The Exchange 
now believes that it is appropriate to further decrease those specified 
Maker rebates so that they are more in line with other exchanges, and 
will still remain highly competitive such that they should

[[Page 10150]]

enable the Exchange to continue to attract order flow and maintain 
market share.\25\
---------------------------------------------------------------------------

    \24\ See supra note 13.
    \25\ See supra note 14.
---------------------------------------------------------------------------

    Furthermore, the proposed decreases to the Maker rebates for 
Priority Customers promotes just and equitable principles of trade, 
fosters cooperation and coordination with persons engaged in 
facilitating transactions in securities, and protects investors and the 
public interest, because even with the decreases, the Exchange's 
proposed Maker rebates for such orders still remain highly competitive 
with certain other options exchanges offering comparable pricing 
models, and should enable the Exchange to continue to attract order 
flow and maintain market share.\26\ The Exchange believes that the 
amount of such fees, as proposed to be decreased, will continue to 
encourage those market participants to send orders to the Exchange.
---------------------------------------------------------------------------

    \26\ See id.
---------------------------------------------------------------------------

    The proposed Taker fee adjustments in certain specified Tiers 
applicable to certain orders submitted by Priority Customers in Penny 
classes (excluding SPY, QQQ, and IWM), Priority Customers in QQQ and 
IWM, MIAX PEARL Market Makers in Penny classes, and Professional 
Members in Penny classes are reasonable, equitable and not unfairly 
discriminatory because all similarly situated market participants in 
the same Origin type are subject to the same tiered Taker fees and 
access to the Exchange is offered on terms that are not unfairly 
discriminatory. For competitive and business reasons, the Exchange 
initially set its Taker fees for such orders generally lower than 
certain other options exchanges that operate comparable maker/taker 
pricing models.\27\ The Exchange now believes that it is appropriate to 
further increase those specified Taker fees so that they are more in 
line with other exchanges, and will still remain highly competitive 
such that they should enable the Exchange to continue to attract order 
flow and maintain market share. The Exchange further believes that it 
is appropriate to decrease the Taker fees for Priority Customers in QQQ 
and IWM because these select products are generally more liquid than 
other options classes. The Exchange notes that, even as amended, its 
Taker fees are generally lower than certain other options exchanges 
operating competing models.\28\ The Exchange believes for these reasons 
that increasing certain Taker fees for transactions in the specified 
Tiers is equitable, reasonable and not unfairly discriminatory, and 
thus consistent with the Act.
---------------------------------------------------------------------------

    \27\ See supra notes 15 and 16.
    \28\ See id.
---------------------------------------------------------------------------

    Furthermore, the proposed adjustments to the Taker fees for 
Priority Customers in certain Penny classes (excluding SPY, QQQ, and 
IWM), Priority Customers in QQQ and IWM, MIAX PEARL Market Makers in 
Penny classes, and Professional Members in Penny classes promotes just 
and equitable principles of trade, fosters cooperation and coordination 
with persons engaged in facilitating transactions in securities, and 
protects investors and the public interest, because even with the 
increases to Taker fees for Priority Customers in certain Penny classes 
(excluding SPY, QQQ, and IWM), MIAX PEARL Market Makers in Penny 
classes, and Professional Members in Penny classes, and the decreases 
to Taker fees for Priority Customers in QQQ and IWM, the Exchange's 
proposed Taker fees for such orders still remain highly competitive 
with certain other options exchanges offering comparable pricing 
models, and should enable the Exchange to continue to attract order 
flow and maintain market share.\29\ The Exchange believes that the 
amount of such fees, as proposed to be adjusted, will continue to 
encourage those market participants to send orders to the Exchange. To 
the extent that order flow is increased by the proposal, market 
participants will increasingly compete for the opportunity to trade on 
the Exchange, including sending more orders which will have the 
potential to be assessed lower fees and higher rebates than certain 
other competing options exchanges. The resulting increased volume and 
liquidity will benefit all Exchange participants by providing more 
trading opportunities and tighter spreads.
---------------------------------------------------------------------------

    \29\ See id.
---------------------------------------------------------------------------

    The Exchange believes that the proposed new tiered fee structure 
for Maker rebates and Taker fees for MIAX PEARL Market Makers and 
Professional Members, carving out orders that are contra to Priority 
Customer Origin and the corresponding changes to the existing tiers are 
is reasonable, equitable and not unfairly discriminatory because the 
new tiered fee structures is consistent with other options markets that 
also assess different transaction fees depending on the contra 
Origin.\30\ Additionally, the Exchange believes proposal is reasonable, 
equitable and not unfairly discriminatory because all similarly 
situated market participants in the same Origin type are subject to the 
same tiered Maker rebates and Taker fees and access to the Exchange is 
offered on terms that are not unfairly discriminatory. The Exchange 
believes the proposed new tiered fee structure promotes just and 
equitable principles of trade, fosters cooperation and coordination 
with persons engaged in facilitating transactions in securities, and 
protects investors and the public interest, because the proposal 
provides more granularity to the Fee Schedule, which will continue to 
provide appropriate incentives for Exchange Members to provide 
aggressive liquidity to attract Priority Customer transactions so that 
they can achieve higher rebates and lower fees. The Exchange believes 
these rebates and fees should continue to make MIAX PEARL an attractive 
venue where the Exchange's Members are incentivized to submit Priority 
Customer orders, deepening and enhancing the quality of the MIAX PEARL 
marketplace. This will benefit all market participants through 
increased liquidity, tighter markets and greater order interaction.
---------------------------------------------------------------------------

    \30\ See supra note 18.
---------------------------------------------------------------------------

    Further, the Exchange believes that removing VXX from the Taker fee 
carve out that currently applies to Penny classes other than SPY, QQQ, 
IWM, and VXX, for Priority Customers, is reasonable, equitable and not 
unfairly discriminatory because this proposal is intended only as a 
technical correction as VXX options are no longer listed for trading on 
the Exchange, and therefore, will no longer be included in the Taker 
fee carve out. The Exchange believes that removing VXX from the Taker 
fee carve out promotes just and equitable principles of trade, fosters 
cooperation and coordination with persons engaged in facilitating 
transactions in securities, and protects investors and the public 
interest, because it would eliminate any potential confusion and make 
it clear to market participants that VXX will no longer be included in 
the Taker fee carve out as VXX options are no longer listed for trading 
on the Exchange as a result of the VXX ETN maturity on January 30, 
2019.\31\
---------------------------------------------------------------------------

    \31\ See supra note 11.
---------------------------------------------------------------------------

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

    MIAX PEARL does not believe that the proposed rule change will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act. The Exchange believes that the 
proposed changes in the specified Maker rebates and Taker fees for the 
applicable market participants should continue to encourage the 
provision of liquidity that enhances the quality of the Exchange's

[[Page 10151]]

market and increases the number of trading opportunities on MIAX PEARL 
for all participants who will be able to compete for such 
opportunities. The proposed rule change should enable the Exchange to 
continue to attract and compete for order flow with other exchanges. 
However, this competition does not create an undue burden on 
competition but rather offers all market participants the opportunity 
to receive the benefit of competitive pricing.
    The proposed Maker rebate decreases and Taker fee adjustments are 
intended to keep the Exchange's fees highly competitive with those of 
other exchanges, and to encourage liquidity and should enable the 
Exchange to continue to attract and compete for order flow with other 
exchanges. 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 market participants to continue to provide 
liquidity and to send order flow to the Exchange.
    The Exchange believes that the proposed new tiered fee structure 
for Maker rebates and Taker fees for MIAX PEARL Market Makers and 
Professional Members, carving out orders that are contra to Priority 
Customer Origin and the corresponding changes to the existing tiers are 
intended to keep the Exchange's fees highly competitive with those of 
other exchanges, and to encourage liquidity and should enable the 
Exchange to continue to attract and compete for order flow with other 
exchanges which offer comparable tiered fee structures for Maker 
rebates and Taker fees which distinguish by contra Origin type.
    Further, the Exchange does not believe that removing VXX from the 
Taker fee carve out that currently applies to Penny classes other than 
SPY, QQQ, IWM, and VXX, for Priority Customers, will impose any burden 
on competition not necessary or appropriate in furtherance of the 
purposes of the Act because the proposal to remove VXX from the Taker 
fee carve out is intended only as a technical correction, as VXX 
options are no longer listed for trading on the Exchange, and 
therefore, will no longer be included in the Taker fee carve out. 
Additionally, this proposed rule change would eliminate any potential 
confusion and make it clear to market participants that VXX will no 
longer be included in the Taker fee carve out as VXX options are no 
longer listed for trading on the Exchange as a result of the VXX ETN 
maturity on January 30, 2019.\32\
---------------------------------------------------------------------------

    \32\ See id.
---------------------------------------------------------------------------

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,\33\ and Rule 19b-4(f)(2) \34\ 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.
---------------------------------------------------------------------------

    \33\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \34\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------

IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-PEARL-2019-07 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-2019-07. 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 offices 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-2019-07, and should be submitted 
on or before April 9, 2019.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\35\
---------------------------------------------------------------------------

    \35\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-05088 Filed 3-18-19; 8:45 am]
BILLING CODE 8011-01-P


