[Federal Register Volume 86, Number 69 (Tuesday, April 13, 2021)]
[Notices]
[Pages 19290-19292]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-07496]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-91497; File No. SR-PEARL-2021-15]


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

April 7, 2021.
    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 March 31, 2021, 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 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 changes will become 
effective on April 1, 2021.
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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.

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

1. Purpose
    The Exchange currently charges different rates for orders in Tapes 
A, B, and C securities priced at or above $1.00 that remove liquidity 
from the MIAX Pearl Equities Book.\4\ For securities priced at or above 
$1.00, the Exchange currently charges a fee of $0.0028 per share for 
orders that remove liquidity in Tapes A and C securities and $0.0027 
per share for orders that remove liquidity in Tape B securities. The 
Exchange now proposes to decrease the fee to remove liquidity in 
securities priced at or above $1.00 to $0.0025 per share for Tapes A, 
B, and C securities.\5\ With the proposed change, the Exchange will 
charge the same $0.0025 per share fee for orders in Tape A, B, and C 
securities priced at or above $1.00 that remove liquidity from the MIAX 
Pearl Equities Book.
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    \4\ See Securities Exchange Act Release No. 90894 (January 11, 
2021), 86 FR 4139 (January 15, 2021) (SR-PEARL-2020-37).
    \5\ The Exchange does not propose to amend the rate for orders 
that remove liquidity in securities priced below $1.00.
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    The Exchange operates in a highly competitive market in which 
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. More specifically, the Exchange 
is only one of several equities venues (including both registered 
exchanges and various alternative trading systems) to which market 
participants may direct their order flow and execute their trades. 
Indeed, equity trading is currently dispersed across 16 exchanges,\6\ 
31 alternative trading systems,\7\ and numerous broker-dealer 
internalizers and wholesalers, all competing for order flow. Based on 
publicly available information, no single registered equities exchange 
currently has more than approximately 20% of total market share.\8\ 
Thus, in such a low-concentrated and highly competitive market, no 
single equities trading venue possesses significant pricing power in 
the execution of trades, and, the Exchange currently represents a very 
small percentage of the overall market.
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    \6\ See Cboe Global Markets, U.S Equities Market Volume Summary, 
available at https://markets.cboe.com/us/equities/market_share/.
    \7\ 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.
    \8\ See supra note 6.
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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 a fee of $0.0028 per share for orders that remove 
liquidity in securities priced at or above $1.00.\9\ The Exchange later 
delineated the fee for orders that remove liquidity in Tapes A and C 
from the fee for orders that remove liquidity in Tape B for securities 
priced at or above $1.00 from the MIAX Pearl Equities Book. With that 
proposal, the Exchange decreased the fee for orders that remove 
liquidity in Tape B securities priced at or above $1.00 from $0.0028 to 
$0.0027 per share. The purpose of this change was to target liquidity 
in Tape B securities as a means to encourage market participants to 
enter liquidity removing orders on the Exchange, thereby increasing the 
execution opportunities for the liquidity adding orders resting on the 
MIAX Pearl Equities Book.\10\ Since those changes

[[Page 19291]]

took effect, the Exchange notes that it has experienced an increase in 
liquidity in Tape B securities overall since it decreased the fee for 
liquidity removing orders.
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    \9\ See Securities Exchange Act Release No. 90102 (October 6, 
2020), 85 FR 64559 (October 13, 2020) (SR-PEARL-2020-17).
    \10\ See Securities Exchange Act Release No. 90894 (January 11, 
2021), 86 FR 4139 (January 15, 2021) (SR-PEARL-2020-37).
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    The Exchange now proposes to decrease the fee to remove liquidity 
to $0.0025 per share for orders in Tapes A, B, and C securities priced 
at or above $1.00. The Exchange believes it is appropriate to further 
decrease the fee to $0.0025 per share for all orders that remove 
liquidity across all Tapes to further encourage market participants to 
enter liquidity removing orders on the Exchange, thereby increasing the 
execution opportunities for the liquidity adding orders resting on the 
MIAX Pearl Equities Book.
    The proposed changes will become effective on April 1, 2021. 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 \11\ in general, and 
furthers the objectives of Section 6(b)(4) of the Act \12\ 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 
amended 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 proposed changes are not unfairly discriminatory 
because they will apply equally to all Equity Members.\13\
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    \11\ 15 U.S.C. 78f(b).
    \12\ 15 U.S.C. 78f(b)(4) and (5).
    \13\ 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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    The Exchange believes its proposal to decrease the fee for orders 
that remove liquidity in all securities priced at or above $1.00 is 
reasonable, equitable and not unfairly discriminatory because it will 
apply to all orders in all Tapes for securities priced at or above 
$1.00. The Exchange believes the proposed decreased fee will encourage 
market participants to additional [sic] liquidity removing orders on 
the Exchange, thereby increasing the execution opportunities for 
liquidity adding orders resting on the MIAX Pearl Equities Book. 
Therefore, the decreased fee should improve liquidity and price 
discovery in all securities priced at or above $1.00 across all Tapes. 
Lastly, the Exchange notes that the proposed decreased fee is also 
comparable to or lower than the standard fee to remove liquidity 
charged by other exchanges.\14\
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    \14\ See MEMX LLC fee schedule, available at https://info.memxtrading.com/fee-schedule/ (providing a standard fee of 
$0.0026 per share for orders that remove liquidity); Cboe EDGX 
Exchange, Inc. (``EDGX'') fee schedule, available at https://www.cboe.com/us/equities/membership/fee_schedule/edgx/ (providing a 
standard fee of $0.0027 per share to orders that remove liquidity). 
See also the New York Stock Exchange LLC (``NYSE'') fee schedule, 
available at https://www.nyse.com/markets/nyse/trading-info/fees 
(providing fees to ``take'' liquidity ranging from $0.0024-$0.00275 
depending on the type of market participant, order, and execution).
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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.'' \15\
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    \15\ 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.'' 
\16\ Indeed, equity trading is currently dispersed across 16 
exchanges,\17\ 31 alternative trading systems,\18\ 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).\19\ 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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    \16\ 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).
    \17\ See supra note 6.
    \18\ See supra note 7.
    \19\ See supra note 6.
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    The Exchange has designed its proposed changes to continue to 
balance the need to attract order flow as a new exchange entrant with 
the desire to continue to provide a simple fee structure to market 
participants. The Exchange believes its proposed changes will enable it 
to continue 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 or decrease use of certain categories of products, in 
response to fee changes. With respect to non-marketable 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 changes represent 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 fee 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.'' \20\
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    \20\ See supra note 15.
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    The Exchange does not believe that the proposed fee change 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 fee change will

[[Page 19292]]

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 decrease 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. The 
proposed decreased fees for securities in all Tapes are intended to 
attract liquidity to the Exchange, much like the way other exchanges 
offer multiple incentives to their participants, including tiered 
pricing that provides higher rebates or discounted executions. These 
other exchanges will be able to modify such incentives 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 changes could impose any burden on 
competition is extremely limited, and does not believe that such 
decreased fee for securities in all Tapes would burden competition 
between 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 decreased fee for 
securities in all Tapes will impose any burden on intramarket 
competition that is not necessary or appropriate in furtherance of the 
purposes of the Act because the proposed changes will apply equally to 
all Equity Members. The proposed decreased fee is intended to encourage 
market participants to send liquidity removing orders to attempt to 
execute against the orders that add liquidity to the MIAX Pearl 
Equities Book. The proposed rates are equally applicable to all market 
participants and, therefore, the Exchange does not believe they will 
impose any inappropriate 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,\21\ and Rule 19b-4(f)(2) \22\ 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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    \21\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \22\ 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-2021-15 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-2021-15. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (http://www.sec.gov/rules/sro.shtml). 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for website viewing and printing in 
the Commission's Public Reference Room, 100 F Street NE, Washington, DC 
20549, on official business days between the hours of 10:00 a.m. and 
3:00 p.m. Copies of the filing also will be available for inspection 
and copying at the principal office of the Exchange. All comments 
received will be posted without change. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-PEARL-2021-15, and should be submitted 
on or before May 4, 2021.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\23\
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    \23\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-07496 Filed 4-12-21; 8:45 am]
BILLING CODE 8011-01-P


