[Federal Register Volume 85, Number 223 (Wednesday, November 18, 2020)]
[Notices]
[Pages 73550-73553]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-25382]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-90400; File No. SR-PEARL-2020-24]


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

November 12, 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 October 30, 2020, MIAX PEARL, LLC (``MIAX PEARL'' or ``Exchange'') 
filed with the Securities and Exchange Commission (``Commission'') a 
proposed rule change as described in Items I, II, and III below, which 
Items have been prepared by the Exchange. The Commission is publishing 
this notice to solicit comments on the proposed rule change from 
interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange is filing a proposal to amend the fee schedule 
applicable for MIAX PEARL Equities, an equities trading facility of the 
Exchange (the ``Fee Schedule'').\3\ The proposed fees are scheduled to 
become operative November 2, 2020.
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    \3\ See Exchange Rule 1901.
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    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.

[[Page 73551]]

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

1. Purpose
    The purpose of the proposed rule change is to amend the Fee 
Schedule applicable to MIAX PEARL Equities to increase the rebate for 
displayed orders \4\ on the MIAX PEARL Equities Book \5\ that add 
liquidity in securities priced at or above $1.00. The Exchange 
currently provides a rebate of $0.0028 per share to displayed orders 
that add liquidity in securities priced at or above $1.00. The Exchange 
now proposes to increase the rebate for displayed orders that add 
liquidity in securities priced at or above $1.00 to $0.0032 per share.
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    \4\ See Exchange Rule 2614(c)(3).
    \5\ The term ``MIAX PEARL Equities Book'' means the electronic 
book of orders in equity securities maintained by the System. See 
Exchange Rule 1901.
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    The purpose of this proposed change is for business and competitive 
reasons. As a new entrant into the equities market, the Exchange 
initially adopted the rebate of $0.0028 per share for displayed orders 
that add liquidity in securities priced at or above $1.00 in order to 
encourage market participants to submit displayed orders to the 
Exchange. The Exchange now believes that it is appropriate to increase 
the rebate to $0.0032 per share for displayed orders that add liquidity 
in securities price at or above $1.00, thereby continuing to encourage 
market participants to submit more displayed orders to the Exchange and 
increase displayed order flow. The Exchange believes that this proposal 
will result in encouraging market participants to submit more displayed 
orders to the Exchange, thereby increasing displayed order liquidity, 
which benefits all Exchange participants by providing more trading 
opportunities and tighter spreads.
    The proposed rebate increase will become effective on November 2, 
2020. The Exchange does not propose any other changes to the MIAX PEARL 
Equities Fee Schedule.
2. Statutory Basis
    The Exchange believes that its proposal to amend its Fee Schedule 
is consistent with Section 6(b) of the Act \6\ in general, and furthers 
the objectives of Section 6(b)(4) of the Act \7\ in particular, in that 
it is an equitable allocation of reasonable fees and other charges 
among its members and issuers and other persons using its facilities. 
As discussed above, the Exchange operates in a highly fragmented and 
competitive market. The Commission has repeatedly expressed its 
preference for competition over regulatory intervention in determining 
prices, products, and services in the securities markets. Market 
participants can readily direct order flow to competing venues if they 
deem fee levels at a particular venue to be excessive or rebates/
incentives to be insufficient. The Exchange believes that the Fee 
Schedule reflects a simple and competitive pricing structure, which is 
designed to incentivize market participants to add aggressively priced 
displayed liquidity and direct their order flow to the Exchange. The 
Exchange believes the proposed increased rebate for displayed orders 
that add liquidity in securities priced at or above $1.00 will continue 
to promote price discovery and price formation and deepen liquidity 
that is subject to the Exchange's transparency, regulation, and 
oversight as an exchange, thereby enhancing market quality to the 
benefit of all Equity Members \8\ and investors.
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    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(4) and (5).
    \8\ The term ``Equity Member'' means a Member authorized by the 
Exchange to transact business on MIAX PEARL Equities. See Exchange 
Rule 1901.
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    In particular, the Exchange believes the proposed increase to the 
rebate for displayed orders in securities priced above $1.00 from 
$0.0028 to $0.0032 per share is reasonable because it would uniformly 
provide a rebate of $0.0032 per share to displayed orders in all equity 
securities priced at or above $1.00 traded on the Exchange. Further, 
the Exchange believes the proposed increased rebate will encourage 
additional order flow on the Exchange, which may result in greater 
liquidity to the benefit of all market participants on the Exchange by 
providing more trading opportunities. The Exchange also believes that 
it is reasonable, equitable and not unfairly discriminatory to provide 
a higher rebate to displayed orders that add liquidity than to non-
displayed orders as this rebate structure is designed to incentivize 
Equity Members to send the Exchange displayed orders, thereby 
contributing to price discovery and price formation, consistent with 
the overall goal of enhancing market quality. The Exchange further 
believes that it is appropriate and reasonable to provide a standard 
rebate of $0.0032 per share for displayed orders that add liquidity in 
securities priced at or above $1.00 because this rebate is consistent 
with similar rebates provided by other exchanges.\9\ The proposed 
increased rebate is not unfairly discriminatory because it will apply 
equally to all Equity Members.
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    \9\ For example, the New York Stock Exchange, Inc. (``NYSE'') 
fee schedule sets forth various tiers that provide the ability of 
their Designated Market Makers to receive a rebate as high as 
$0.0045 per share. See https://www.nyse.com/markets/nyse/trading-info/fees. Nasdaq Stock Market LLC (``Nasdaq'') fee schedule set 
forth various tiers that provide the ability of a firm to receive a 
rebate as high as $0.0033 per share. See http://nasdaqtrader.com/Trader.aspx?id=PriceListTrading2. The Cboe BZX Exchange, Inc. 
(``BZX'') sets forth various tiers that provide the ability of a 
firm to receive a rebate as high as $0.0033 per share or higher. See 
the Tier 1 of the Total Volume Tier and Tier 2 of the Step Up Tier 
available at https://markets.cboe.com/us/equities/membership/fee_schedule/bzx/.
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    Further, the Commission and the courts have repeatedly expressed 
their preference for competition over regulatory intervention in 
determining prices, products, and services in the securities markets. 
In Regulation NMS, while adopting a series of steps to improve the 
current market model, the Commission highlighted the importance of 
market forces in determining prices and SRO revenues and, also, 
recognized that current regulation of the market system ``has been 
remarkably successful in promoting market competition in its broader 
forms that are most important to investors and listed companies.'' \10\
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    \10\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496 (June 29, 2005) (File No. S7-10-04) (``Regulation 
NMS'').
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    As the Commission itself recognized, the market for trading 
services in NMS stocks has become ``more fragmented and competitive.'' 
\11\ Indeed, equity trading is currently dispersed across 16 
exchanges,\12\ 31 alternative trading systems,\13\ and numerous broker-
dealer internalizers and wholesalers, all competing for order flow. 
Based on publicly-available information, no single exchange currently 
has more than 20% market share (whether including or excluding auction 
volume).\14\ Therefore, no exchange possesses significant pricing power 
in the execution of equity order flow. More specifically, the Exchange 
only recently launched trading operations on September 25, 2020, and 
thus has a market share of approximately less than 1% of executed 
volume of equities trading.
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    \11\ See Securities Exchange Act Release No. 82873 (March 14, 
2018), 83 FR 13008 (March 26, 2018) (File No. S7-05-18) (Transaction 
Fee Pilot for NMS Stocks).
    \12\ See Cboe Global Markets, U.S Equities Market Volume 
Summary, available at https://markets.cboe.com/us/equities/market_share/.
    \13\ See FINRA ATS Transparency Data, available at https://otctransparency.finra.org/otctransparency/AtsIssueData. A list of 
alternative trading systems registered with the Commission is 
available at https://www.sec.gov/foia/docs/atslist.htm.
    \14\ See supra note 12.
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    The Exchange has designed its proposed increased rebate to balance 
the need to attract order flow as a new

[[Page 73552]]

exchange entrant with the desire to continue to provide a simple fee 
structure to market participants. The Exchange believes its proposed 
increased rebate structure enables the Exchange to compete for order 
flow. The Exchange believes that the ever-shifting market share among 
the exchanges from month to month demonstrates that market participants 
can shift order flow, or discontinue to reduce use of certain 
categories of products, in response to fee changes. With respect to 
nonmarketable orders which provide liquidity on an exchange, Equity 
Members can choose from any one of the 16 currently operating 
registered exchanges to route such order flow. Accordingly, competitive 
forces reasonably constrain exchange transaction fees that relate to 
orders that would provide displayed liquidity on an exchange. Stated 
otherwise, changes to exchange transaction fees can have a direct 
effect on the ability of an exchange to compete for order flow. Given 
this competitive environment, the Exchange's proposed increased rebate 
represents a reasonable attempt to attract order flow to a new exchange 
entrant.

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. Rather, the Exchange believes 
that the proposed change would encourage the submission of additional 
order flow to a public exchange, thereby promoting market depth, 
execution incentives and enhanced execution opportunities, as well as 
price discovery and transparency for all Equity Members and non-Equity 
Members. As a result, the Exchange believes that the proposed change 
furthers the Commission's goal in adopting Regulation NMS of fostering 
competition among orders, which promotes ``more efficient pricing of 
individual stocks for all types of orders, large and small.'' \15\
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    \15\ See supra note 10.
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    The Exchange does not believe that the proposed increased rebate 
will impose any burden on intermarket competition that is not necessary 
or appropriate in furtherance of the purposes of the Act. To the 
contrary, the Exchange believes that the proposed increased rebate will 
increase competition and is intended to draw volume to the Exchange. 
The Exchange believes that the ever-shifting market share among the 
exchanges from month to month demonstrates that market participants can 
shift order flow or discontinue to reduce use of certain categories of 
products, in response to new or different pricing structures being 
introduced into the market. Accordingly, competitive forces constrain 
the Exchange's transaction fees and rebates, and market participants 
can readily trade on competing venues if they deem pricing levels at 
those other venues to be more favorable. As a new exchange, the 
Exchange faces intense competition from existing exchanges and other 
non-exchange venues that provide markets for equities trading. Although 
this increased rebate is intended to attract liquidity to the Exchange, 
most other exchanges in operation today already offer multiple 
incentives to their participants, including tiered pricing that 
provides higher rebates or discounted executions, and other exchanges 
will be able to modify such incentives in order to compete with the 
Exchange.
    Further, while pricing incentives do cause shifts of liquidity 
between trading centers, market participants make determinations on 
where to provide liquidity or route orders to take liquidity based on 
factors other than pricing, including technology, functionality, and 
other considerations. Consequently, the Exchange believes that the 
degree to which its proposed increased rebate could impose any burden 
on competition is extremely limited, and does not believe that such 
increased rebate would burden competition of Equity Members or 
competing venues in a manner that is not necessary or appropriate in 
furtherance of the purposes of the Act.
    The Exchange does not believe that the proposed increased rebate 
will impose any burden on intramarket competition that is not necessary 
or appropriate in furtherance of the purposes of the Act because the 
proposed increased rebate will apply equally to all Equity Members. The 
proposed increased rebate is intended to encourage market participants 
to add liquidity to the Exchange by providing a rebate that is 
comparable to those offered by other exchanges, which the Exchange 
believes will help to encourage Equity Members to send orders to the 
Exchange to the benefit of all Exchange participants. As the proposed 
rates are equally applicable to all market participants, the Exchange 
does not believe there is any burden on intramarket competition.

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,\16\ and Rule 19b-4(f)(2) \17\ 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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    \16\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \17\ 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-2020-24 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-2020-24. 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

[[Page 73553]]

proposed rule change between the Commission and any person, other than 
those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for website viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE, 
Washington, DC 20549, on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available 
for inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change. Persons submitting 
comments are cautioned that we do not redact or edit personal 
identifying information from comment submissions. You should submit 
only information that you wish to make available publicly. All 
submissions should refer to File Number SR-PEARL-2020-24 and should be 
submitted on or before December 9, 2020.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
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    \18\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-25382 Filed 11-17-20; 8:45 am]
BILLING CODE 8011-01-P


