[Federal Register Volume 85, Number 174 (Tuesday, September 8, 2020)]
[Notices]
[Pages 55530-55534]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-19717]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-89730; File No. SR-PEARL-2020-10]


Self-Regulatory Organizations; MIAX PEARL, LLC; Notice of Filing 
and Immediate Effectiveness of a Proposed Rule Change To Implement a 
Second Equity Rights Program

September 1, 2020.
    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 August 20, 2020, MIAX PEARL, LLC (``MIAX PEARL'' or ``Exchange'') 
filed with the Securities and Exchange Commission (``Commission'') the 
proposed rule change as described in Items I, II, and III below, which 
Items have been prepared by the Exchange. The Commission is publishing 
this notice to solicit comments on the proposed rule change from 
interested persons.
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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 implement an equity rights 
program related to fees charged for the trading of both options and 
equity securities on the Exchange.
    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
    On April 6, 2018, the Exchange filed for immediate effectiveness a 
proposed rule change with the Commission to implement an equity rights 
program (``Existing Program'') pursuant to which units representing the 
right to acquire equity in the Exchange's parent holding company, Miami 
International Holdings, Inc. (``MIH'') were issued to a participating 
Member \3\ in exchange for payment of an initial purchase price or the 
prepayment of certain ERP Exchange Fees \4\ and the achievement of 
certain liquidity volume thresholds on the Exchange over a 32-month 
period.\5\ On August 14, 2020, the Commission approved a proposed rule 
change to adopt rules governing the trading of equity securities on the 
Exchange (the platform for the trading of equity securities is referred 
to herein as ``MIAX PEARL Equities'').\6\ The Exchange now proposes to 
implement a second equity rights program under which ERP Exchange fees 
would be expanded to include fees incurred on and after

[[Page 55531]]

October 1, 2020 \7\ through June 30, 2024 (``Prepaid Fee Period'') for 
trading equity securities on MIAX PEARL Equities and the achievement of 
certain liquidity volume thresholds on MIAX PEARL Equities over a 42-
month period (``Proposed Program''). ERP Exchange Fees under the 
Proposed Program would also include the fees included today as part of 
the Existing Program.\8\ The Proposed Program would be independent of 
the Existing Program.
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    \3\ The term ``Member'' means an individual or organization that 
is registered with the Exchange pursuant to Chapter II of the 
Exchange's 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 Exchange Rule 100.
    \4\ The ERP Exchange fees under the Existing Program consist of: 
(a) Transaction fees as set forth in Section 1)a of the MIAX PEARL 
Options Fee Schedule; (b) membership fees as set forth in Section 3 
of the MIAX PEARL Options Fee Schedule; (c) system connectivity fees 
as set forth in Section 5 of the MIAX PEARL Options Fee Schedule; 
and (d) market data fees as set forth in Section 6 of the MIAX PEARL 
Options Fee Schedule (collectively, the ``ERP Exchange Fees'').
    \5\ See Securities Exchange Act Release No. 83012 (April 9, 
2018), 83 FR 16163 (April 13, 2018) (Notice of Filing and Immediate 
Effectiveness of a Proposed Rule Change To Implement an Equity 
Rights Program) (``Initial ERP Filing'').
    \6\ See Securities Exchange Act Release Nos. 88132 (February 6, 
2020), 85 FR 8053 (February 12, 2020) (SR-PEARL-2020-03) (Notice of 
Filing of a Proposed Rule Change to Adopt Rules Governing the 
Trading of Equity Securities); and 89563 (August 14, 2020), 85 FR 
51510 (August 20, 2020) (Order Approving Proposed Rule Change to 
Adopt Rules Governing the Trading of Equity Securities).
    \7\ The Exchange intends to begin trading equity securities on 
September 25, 2020. See MIAX PEARL Receives Approval to Operate 
Equities Exchange; Launch Date Confirmed for September 25, 2020, 
available at https://www.miaxoptions.com/sites/default/files/press_release-files/MIAX_Press_Release_08182020.pdf (dated August 
19, 2020).
    \8\ See supra note 5.
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    Similar to the Existing Program for options, the purpose of the 
Proposed Program is to promote the long-term interests of MIAX PEARL by 
providing incentives designed to encourage future MIH owners and MIAX 
PEARL options and equity market participants to contribute to the 
growth and success of MIAX PEARL, by being active liquidity providers 
and takers on MIAX PEARL Equities in particular, and to provide 
enhanced levels of trading volume in equity securities through an 
opportunity to increase their proprietary interests in MIAX PEARL's 
enterprise value.
    Members that participated in the Existing Program had two options 
to choose from: (i) An offering of I-Units; and/or (ii) an offering of 
J-Units.\9\ Members that choose to participate in the Proposed Program 
will be able to participate in an offering of L-Units.\10\ Under the 
Proposed Program, market participants would be able to pre-pay the 
following ERP Exchange Fees for trading equities: (a) Transaction fees; 
(b) system connectivity fees; and (c) market data fees.\11\ Like under 
the Existing Program, market participants would also be able to pre-pay 
the following ERP Exchange Fees for trading options: (a) Transaction 
fees as set forth in Section 1)a of the MIAX PEARL Options Fee 
Schedule; (b) membership fees as set forth in Section 3 of the MIAX 
PEARL Options Fee Schedule; (c) system connectivity fees as set forth 
in Section 5 of the MIAX PEARL Options Fee Schedule; and (d) market 
data fees as set forth in Section 6 of the MIAX PEARL Options Fee 
Schedule.
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    \9\ See supra note 5 for a complete description of I-Units and 
J-Units.
    \10\ Like the Existing Program, the Proposed Program also 
provides equity-like consideration in exchange for market making or 
the provision of liquidity, order flow or volume and is open to 
market participants generally. Also like the Existing Program, all 
MIAX PEARL Members may participate in the Proposed Program subject 
to their satisfaction of eligibility requirements. To be designated 
as a participant Member, an applicant must: (i) Be a Member in good 
standing of MIAX PEARL; (ii) qualify as an ``accredited investor'' 
as such term is defined in Regulation D of the Securities Act of 
1933; and (iii) have executed all required documentation for Program 
participation. If L-Unit option is oversubscribed, the units will be 
allocated on a pro-rata basis that may result in a fractional 
allocation.
    \11\ The Exchange notes that proprietary real-time market data 
will be provided free of charge for a period of time. The Exchange 
also notes that it will file a proposed rule change to adopt MIAX 
PEARL Equities Fee Schedule with the Commission pursuant to Section 
19(b)(3)(A)(iii) of the Exchange Act and Rule 19b-4(f)(2) thereunder 
prior to the commencement of trading equity securities currently 
anticipated for September 25, 2020. The Exchange has provided (and 
will continue to provide) a draft of the MIAX PEARL Equities Fee 
Schedule to any current or potential participant that expresses 
interest joining the Proposed Program (with the condition that a 
final MIAX PEARL Equities Fee Schedule is subject to filing with the 
Commission), so that such participant can evaluate the proposed fees 
and make a fully-informed decision in whether it wishes to join the 
Proposed Program.
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    Members that participate in the Proposed Program will be issued for 
each unit warrants to purchase 432,163 shares of common stock of MIH in 
exchange for such participant Member's cash contribution of $1,000,000, 
and with such warrants being exercisable upon the achievement by the 
participating Member of certain volume thresholds on the Exchange 
during a 42-month measurement period, commencing January 1, 2021. A 
total of 22 L-Units will be offered. The total equity ownership of MIH 
common stock held by any one participant Member will be subject to a 
cap of 19.9%.\12\
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    \12\ See Ninth Article (b)(i)(B), Amended and Restated 
Certificate of Incorporation of Miami International Holdings, Inc., 
effective October 16, 2015 (providing that no Exchange Member, 
either alone or together with its Related Persons, may own, directly 
or indirectly, of record or beneficially, shares constituting more 
than twenty percent (20%) of any class of capital stock of the 
Corporation). See also Ninth Article (b)(i)(C), Amended and Restated 
Certificate of Incorporation of Miami International Holdings, Inc., 
effective October 16, 2015 (providing that no Person, either alone 
or together with its Related Persons, at any time may, directly, 
indirectly or pursuant to any voting trust, agreement, plan or other 
arrangement, vote or cause the voting of shares of the capital stock 
of the Corporation or give any consent or proxy with respect to 
shares representing more than twenty percent (20%) of the voting 
power of the then issued and outstanding capital stock of the 
Corporation, nor may any Person, either alone or together with its 
Related Persons, enter into any agreement, plan or other arrangement 
with any other Person, either alone or together with its Related 
Persons, under circumstances that would result in the shares of 
capital stock of the Corporation that are subject to such agreement, 
plan or other arrangement not being voted on any matter or matters 
or any proxy relating thereto being withheld, where the effect of 
such agreement, plan or other arrangement would be to enable any 
Person, either alone or together with its Related Persons, to vote, 
possess the right to vote or cause the voting of shares of the 
capital stock of the Corporation which would represent more than 
twenty percent (20%) of said voting power.). Any purported transfer 
of shares or ownership of shares in violation of the ownership cap 
by a stockholder would be subject to the limitations of the 
Certificate of Incorporation, including the non-recognition of 
voting rights of shares in excess of the cap and a redemption right 
by MIH for excess shares. See also Ninth Article (d) and (e), 
Amended and Restated Certificate of Incorporation of Miami 
International Holdings, Inc., effective October 16, 2015.
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    The warrants will vest in seven (7) tranches during a measurement 
period of months 1-42 of the Proposed Program. In addition, the 
participant Members may earn or lose the right to exercise warrants on 
a pro-rata basis based upon meeting volume commitments during the 
measurement periods, as detailed below.
    A participant Member will be eligible to earn warrants during 
measurement periods provided that the participant has achieved a 
specified percentage of the average daily volume for National Market 
System equity securities on MIAX PEARL Equities as reported by the 
applicable consolidated transaction reporting plan (``ADV'').\13\ While 
market participants will be able to pre-pay fees related to both their 
equity and options trading on MIAX PEARL, the Proposed Program's 
performance criteria will only include a market participant's equity 
market share and will not include a market participant's options market 
share.
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    \13\ If an equity security is not traded on MIAX PEARL Equities, 
then the trading volume in that equity security will be omitted from 
the calculation of ADV.
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    The seven (7) tranches will vest during the following measurement 
periods: (i) 7.14% of the warrants resulting from months 1-6, with a 
volume commitment of 0.014% of MIAX PEARL Equities ADV per L-Unit; \14\ 
(ii) 5.41% of the warrants resulting from months 7-12, with a volume 
commitment of 0.053% of MIAX PEARL Equities ADV per L-Unit; (iii) 9.49% 
of the warrants resulting from months 13-18, with a volume commitment 
of 0.093% of MIAX PEARL Equities ADV per L-Unit; (iv) 13.47% of the 
warrants resulting from months 19-24, with a volume commitment of 
0.132% of MIAX PEARL Equities ADV per L-Unit; (v) 17.45% of the 
warrants resulting from months 25-30, with a volume commitment of 
0.171% of MIAX PEARL Equities ADV per L-Unit; (vi) 21.53% of the 
warrants resulting from months 31-36, with a volume commitment of 
0.211% of MIAX PEARL Equities ADV per L-Unit; and (vii) 25.51% of the 
warrants resulting from months 37-42, with a volume commitment of 
0.250% of MIAX PEARL Equities ADV per L-Unit. If a participant

[[Page 55532]]

Member reaches 100% of the volume commitment during a tranche's 
measurement period, the Member will earn 100% of the warrants 
applicable to such measurement period. If a participant Member reaches 
less than 100% but at least 70% of the volume commitment during a 
tranche's measurement period, the Member will earn a reduced amount of 
warrants on a pro-rata basis applicable to such measurement period. If 
a participant Member fails to reach a minimum of 70% of the volume 
commitment during a tranche's measurement period, the Member will lose 
all right to that tranche of warrants. Notwithstanding, in the event a 
participant Member has not satisfied the volume commitment for any one 
measurement period (other than measurement period 7), the participant 
Member will have an opportunity to vest those warrants if such 
participant Member applies a portion of the Member's over-performance 
from the measurement period immediately following the prior measurement 
period to ensure a minimum of 70% of the volume commitment in the prior 
period and in addition has satisfied the volume commitment for the 
measurement period immediately following. If a participant Member 
exceeds 100% of the volume commitment during a tranche's measurement 
period, the Member is able to earn, on a pro-rata basis, warrants not 
earned by other participant Members. Any trades that would otherwise 
constitute Qualifying Trades shall be excluded upon the Company's 
receipt of written instructions from the Participant identifying which 
trades should not be counted in the number of trades executed on the 
Exchange by the Participant. Special strategies that are subject to a 
fee cap will be omitted from the calculation of MIAX PEARL Equities 
Volume.
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    \14\ The first measurement period will begin on January 1, 2021 
and end June 30, 2021.
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    Similar to the Existing Program, a Member of the Exchange and its 
Affiliate as defined in the options and equities Fee Schedules of MIAX 
PEARL \15\ may together participate in the Proposed Program.
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    \15\ For purposes of the MIAX PEARL Options Fee Schedule and the 
anticipated MIAX PEARL Equities Fee Schedule, the term ``Affiliate'' 
means an affiliate of a Member of at least 75% common ownership 
between the firms as reflected on each firm's Form BD, Schedule A, 
(``Affiliate''). The MIAX PEARL Options Fee Schedule further defines 
the term ``Affiliate'' as 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 Options 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 Options Market 
Maker, pursuant to the following process. A MIAX PEARL Options 
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 
membership@miaxoptions.com 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. 
See the Definitions section of the MIAX PEARL Options Fee Schedule. 
The Exchange anticipates to also provide in the MIAX PEARL Equities 
Fee Schedule for an Equity Member to aggregate ADAV and ADV with 
other Equity Members that control, are controlled by, or are under 
common control with such Equity Member (as evidenced on such Equity 
Member's Form BD).
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    Each participant Member will have a standard piggyback registration 
right to include the common shares issuable upon exercise of the 
warrants should MIH file a Registration Statement under the Securities 
Act of 1933. Each participant Member will also have the right to 
participate pro rata in all future offerings of MIH securities for so 
long as the participant Member holds at least 51% of the common shares 
issued or issuable upon the exercise of warrants included in at least 
one L-Unit. MIH will have the right of first refusal to purchase any 
shares issued or issuable upon the exercise of the warrants that a 
participant Member decides to transfer or sell. Other participant 
Members will have the secondary right of first refusal to purchase any 
common shares or warrant shares that a participant Member decides to 
transfer or sell.
    When a participating Member acquires a certain number of units, the 
Member can appoint one director to the MIAX PEARL Board.\16\ The 
Exchange notes that the number of non-industry directors on the MIAX 
PEARL Board, including at least one independent director, must equal or 
exceed the number of industry directors and Member representatives, and 
that additional new non-industry directors and Member representative 
directors will need to be added in order to maintain this status. The 
Exchange also notes that any directors that may be selected by a 
participating Member would not be counted towards the 20% Member 
representative requirement on the MIAX PEARL Board. In addition, the 
Exchange notes that a Member is only entitled to a new seat if they are 
not currently represented on the MIAX PEARL Board.
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    \16\ The Commission notes that MIAX PEARL will need to submit a 
separate proposed rule change to make changes to its corporate 
governance documents to accommodate aspects of the proposal that 
involve or affect the board of MIAX PEARL.
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    All applicants will be subject to the same eligibility and 
designation criteria, and all participant Members will participate in 
the Proposed Program on the same terms, conditions and restrictions. To 
be designated as a participant Member, an applicant must: (i) Be a 
Member in good standing of MIAX PEARL; (ii) qualify as an ``accredited 
investor'' as such term is defined in Regulation D of the Securities 
Act of 1933; \17\ and (iii) have executed all required documentation 
for Proposed Program participation. Participant Members must have 
executed the definitive documentation, satisfied the eligibility 
criteria required of Proposed Program participants enumerated above, 
and tendered the minimum cash investment or prepayment of fees by 
September 10, 2020, with a closing to occur on September 11, 2020.
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    \17\ The purpose of this criterion relates to the ability of MIH 
to sell shares of common stock pursuant to an exemption from 
registration under the Securities Act of 1933. The definition of 
``accredited investor'' under Rule 501(a)(1) of the Securities Act 
of 1933 includes any broker or dealer registered pursuant to Section 
15 of the Act. MIAX PEARL Rule 200(b) requires a Member to be 
registered as a broker or dealer pursuant to Section 15 of the Act, 
therefore all MIAX PEARL Members will satisfy this criterion.
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    As discussed above, the purpose of the Proposed Program is to 
encourage Members to direct greater trade volume to MIAX PEARL to 
enhance trading volume in MIAX PEARL's market. Increased volume will 
provide for greater liquidity and enhanced price discovery, which 
benefits all market participants. Other exchanges have engaged in the 
practice of incentivizing increased order flow in order to attract 
liquidity providers through equity sharing arrangements.\18\ As 
mentioned above, the Exchange previously adopted an equity rights 
program and now simply seeks to expand that Existing Program to include 
MIAX PEARL Equities.\19\ In addition, Miami

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International Securities Exchange, LLC (``MIAX''), an affiliate of the 
Exchange, previously adopted substantially similar programs to 
incentivize increased order flow in order to attract liquidity 
providers through an equity sharing arrangement.\20\ The Proposed 
Program similarly intends to attract order flow to MIAX PEARL Equities, 
which will increase liquidity, thereby providing greater trading 
opportunities and tighter spreads for other market participants and 
causing a corresponding increase in order flow from these other market 
participants. The Proposed Program will similarly reward the liquidity 
providers that provide this additional volume with a potential 
proprietary interest in MIH.
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    \18\ See, e.g., Securities Exchange Act Release Nos. 62358 (June 
22, 2010), 75 FR 37861 (June 30, 2010) (SR-NSX-2010-06); 64742 (June 
24, 2011), 76 FR 38436 (June 30, 2011) (SR-NYSEAmex-2011-018); 69200 
(March 21, 2013), 78 FR 18657 (March 27, 2013) (SR-CBOE-2013-31); 
74114 (January 22, 2015), 80 FR 4611 (January 28, 2015) (SR-BOX-
2015-03); and 74576 (March 25, 2015), 80 FR 17122 (March 31, 2015) 
(SR-BOX-2015-16).
    \19\ See supra note 5.
    \20\ See Securities Exchange Act Release Nos. 70498 (September 
25, 2013), 78 FR 60348 (October 1, 2013) (SR-MIAX-2013-43); 74095 
(January 20, 2015), 80 FR 4011 (January 26, 2015) (SR-MIAX-2015-02); 
74225 (February 6, 2015), 80 FR 7897 (February 12, 2015) (SR-MIAX-
2015-05); and 80909 (June 12, 2017), 82 FR 27743 (June 16, 2017) 
(SR-MIAX-2017-28).
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    The specific volume thresholds of the Proposed Program's 
measurement periods were set based upon business determinations and 
intended to incentivize firms to send orders to MIAX PEARL Equities. An 
increased number of orders sent to MIAX PEARL Equities will in turn 
provide tighter and more liquid markets, and therefore attract more 
business as well.
    The Exchange's proposal to include certain non-transaction fees 
within the definition of ERP Exchange Fees and thus render them 
eligible for prepayment under the Proposed Program is similar to the 
Existing Program and similarly designed to offer broader Member 
participation in the Proposed Program. Since the Exchange operates with 
a maker-taker pricing structure, Members that are only ``makers'' on 
the Exchange could receive significant transaction rebates on a monthly 
basis, which could obviate the need to pre-pay transaction fees under 
the Proposed Program. However, by including certain regular, monthly 
recurring non-transaction fees as eligible for prepayment under the 
Proposed Program, the Exchange believes that it is creating an 
incentive for Members that conduct this type of business on the 
Exchange, and MIAX PEARL Equities in particular, to participate in the 
Proposed Program, thereby broadening the number of Members that could 
potentially participate in the Proposed Program.
    MIAX PEARL will initiate the measurement period on January 1, 2021. 
The Exchange will notify Members of the implementation of the Proposed 
Program and the dates of the enrollment period by Regulatory Circular, 
and will post a copy of this rule filing on its website. Any MIAX PEARL 
Member that is interested in participating in the Proposed Program may 
contact MIAX PEARL for more information and legal documentation and 
will be required to enter into a nondisclosure agreement regarding this 
additional Proposed Program information.
2. Statutory Basis
    The Exchange believes that its proposed rule change is consistent 
with Section 6(b) of the Act \21\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act \22\ in particular, 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. Additionally, 
the Exchange believes the proposed rule change is consistent with the 
Section 6(b)(5) of the Act \23\ requirement that the rules of an 
exchange not be designed to permit unfair discrimination between 
customers, issuers, brokers, or dealers. The Exchange also believes the 
proposed rule change is consistent with Section 6(b)(4) of the Act,\24\ 
which requires that Exchange rules provide for the equitable allocation 
of reasonable dues, fees, and other charges among its members and other 
persons using its facilities. As mentioned above, the Exchange 
previously adopted an equity rights program which was published by the 
Commission. The Exchange now simply seeks to expand upon that Existing 
Program to include MIAX PEARL Equities.\25\
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    \21\ 15 U.S.C. 78f(b).
    \22\ 15 U.S.C. 78f(b)(5).
    \23\ 15 U.S.C. 78f(b)(5).
    \24\ 15 U.S.C. 78f(b)(4).
    \25\ See supra note 5.
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    In particular, the proposed rule change is equitable and not 
unfairly discriminatory, because all Members may elect to participate 
(or elect to not participate) in the Proposed Program and earn units on 
the same terms and conditions, assuming they satisfy the same 
eligibility criteria as described above. The eligibility criteria are 
objective; thus, all Members have the ability to satisfy them. The 
Board of MIAX PEARL also has authorized MIAX PEARL to offer warrants in 
MIH to any Member that requests designation to participate in the 
Proposed Program and otherwise satisfies the eligibility criteria to 
ensure that all Members will have the opportunity to own warrants and 
thus participate in the Proposed Program if they so choose. The 
participant Members will earn warrants on a pro-rata basis upon meeting 
fixed volume threshold amounts during the measurement periods that will 
apply to all participant Members.
    The Exchange believes that the methodology used to calculate the 
volume thresholds is fair, reasonable and not unfairly discriminatory 
because it is based on objective criteria that are designed to omit 
from the calculation functionality that is not available on the 
Exchange and types of transactions that are subject to little or no 
transaction fees. The Proposed Program is designed to reward 
participating Members for bringing their orders and quotes to MIAX 
PEARL Equities.
    The Exchange believes that its proposal to allow Affiliates to 
participate in the Proposed Program is fair, reasonable and not 
unfairly discriminatory because, like the Existing Program, it is being 
offered to all Members of the Exchange on the same terms and 
conditions. The Exchange believes that allowing traditional Corporate 
Affiliates \26\ to participate in the Proposed Program is reasonable 
and appropriate because it will provide those participants with a 
potentially greater opportunity to achieve the volume thresholds in the 
Proposed Program.
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    \26\ The Commission notes that the term ``Corporate Affiliate'' 
refers to and has the same meaning as the defined term 
``Affiliate.'' See supra note 15 (stating, the term ``Affiliate'' 
means an affiliate of a Member of at least 75% common ownership 
between the firms as reflected on each firm's Form BD, Schedule A).
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    The Exchange believes the Proposed Program is equitable and 
reasonable because an increase in volume and liquidity would benefit 
all market participants by providing more trading opportunities and 
tighter spreads, even to those market participants that do not 
participate in the Proposed Program. Additionally, the Exchange 
believes the proposed rule change is consistent with the Act because, 
as described above, the Proposed Program is designed to bring greater 
volume and liquidity to the Exchange, including MIAX PEARL Equities, 
which will benefit all market participants by providing tighter quoting 
and better prices, all of which perfects the mechanism for a free and 
open market and national market system.

[[Page 55534]]

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

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act. The Exchange believes that the 
proposed rule change will improve competition by providing market 
participants with another option when determining where to execute 
orders and post liquidity.
    The Exchange believes that the proposed change would increase both 
intermarket and intramarket competition by incenting participant 
Members to direct their orders to MIAX PEARL Equities, which will 
enhance the quality of quoting and increase the volume traded here. To 
the extent that there is an additional competitive burden on non-
participant Members, the Exchange believes that this is appropriate 
because the Proposed Program should incent Members to direct additional 
order flow to MIAX PEARL Equities, and thus provide additional 
liquidity that enhances the quality of its markets and increases the 
volume traded on MIAX PEARL Equities. To the extent that this purpose 
is achieved, all of 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 directed to the Exchange will benefit all market 
participants and improve competition on the Exchange and MIAX PEARL 
Equities in particular.
    Given the robust competition for volume among equities markets, 
many of which offer the same products, implementing a program to 
attract order flow like the one being proposed in this filing is 
consistent with the above-mentioned goals of the Act. This is 
especially true for the smaller equities markets, such as MIAX PEARL 
Equities in particular, which is competing for volume with much larger 
exchanges that dominate the equities trading industry. MIAX PEARL has 
no history in the trading of equities, so it is unlikely that the 
Proposed Program could cause any competitive harm to the equities 
markets or to market participants. Rather, the Proposed Program is an 
attempt by a new equities market to attract order volume away from 
larger competitors by adopting an innovative pricing strategy, as 
evidenced by the volume thresholds of the Proposed Program that 
represent fractions of equities Total Consolidated Volume. The Exchange 
notes that if the Proposed Program resulted in a modest average daily 
trading volume in equities executed on MIAX PEARL, it would represent a 
minimal reduction in volume of its larger competitors in the industry. 
The Exchange believes that the Proposed Program will help further 
competition, because market participants will have yet another option 
in determining where to execute orders and post liquidity if they 
factor the benefits of MIAX PEARL equity participation into the 
determination. The Exchange notes that other exchanges have engaged in 
the practice of incentivizing increased order flow in order to attract 
liquidity providers through equity sharing arrangements.\27\ In 
addition, as mentioned above, the Exchange previously adopted an equity 
rights program and now simply seeks to adopt the Proposed Program to 
include MIAX PEARL Equities.\28\
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    \27\ See supra note 18.
    \28\ See supra note 5.
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C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    Written comments were neither solicited nor received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A)(ii) of the Act,\29\ and Rule 19b-4(f)(2) \30\ 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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    \29\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \30\ 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 rule-comments@sec.gov. Please include 
File Number SR-PEARL-2020-10 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-2020-10. 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 such 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-2020-10, and should be submitted 
on or before September 29, 2020.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\31\
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    \31\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-19717 Filed 9-4-20; 8:45 am]
BILLING CODE 8011-01-P


