[Federal Register Volume 86, Number 140 (Monday, July 26, 2021)]
[Notices]
[Pages 40092-40097]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-15814]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-92452; File No. SR-PEARL-2021-34]


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

July 20, 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 July 12, 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\ to update the Standard Rates table 
and the Liquidity Indicator Codes and Associated Fees table.
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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 purpose of the proposed rule change is to amend the Exchange's 
Fee Schedule to (i) make conforming changes to the rates of certain 
liquidity indicator codes that remove liquidity in the Liquidity 
Indicator Codes and Associated Fees table; (ii) amend the Standard 
Rates table to increase the rebate for Non-Displayed Orders that Add 
Liquidity from $0.0022 to $0.0025; and (iii) adopt four Retail Order 
liquidity indicator codes and associated fees and rebates for each.

[[Page 40093]]

    The Exchange initially filed this proposal on July 1, 2021 (SR-
PEARL-2021-29) and withdrew such filing on July 12, 2021. The Exchange 
proposes to implement the fee change effective July 12, 2021.
Conforming Changes to Liquidity Indicator Codes That Remove Liquidity
    On March 25, 2021, the Exchange filed its proposal to add liquidity 
indicator codes to its Fee Schedule.\4\ Due to the technological 
changes associated with the proposed liquidity indicator codes, the 
Exchange noted that it would issue a trading alert publicly announcing 
the implementation date when the liquidity indicator codes would be 
available and that the Exchange anticipated the implementation date to 
be in either the second or third quarter of 2021.\5\ In Fee Filing No. 
1 the Exchange added new Section (1)(b) to the Fee Schedule, titled 
``Liquidity Indicator Codes and Associated Fees,'' showing the 
liquidity indicator codes, the description of each, and the then 
current applicable fee or rebate. Specifically, in that filing the 
following liquidity indicator codes were described as follows:
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    \4\ See Securities Exchange Act Release No. 91496 (April 7, 
2021), 86 FR 19303 (April 13, 2021) (SR-PEARL-2021-10) (``Fee Filing 
No. 1'').
    \5\ See id.
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     Liquidity indicator code RA would be applied to a 
Displayed order \6\ that removes liquidity in Tape A securities. The 
Liquidity Indicator Code and Associated Fees table would specify that 
orders that yield liquidity indicator code RA would be subject to the 
existing fee of $0.0028 per share in securities priced at or above 
$1.00 and 0.05% of the transaction's dollar value in securities priced 
below $1.00.
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    \6\ The Exchange notes that, unlike orders that add liquidity, 
whether an order that removes liquidity is either Displayed or Non-
Displayed does not impact the applicable rate. The Exchange proposes 
to provide separate liquidity indicator codes based on whether the 
order that removes liquidity was Displayed or Non-Displayed as a 
convenience to Equity Members.
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     Liquidity indicator code RB would be applied to a 
Displayed order that removes liquidity in Tape B securities. The 
Liquidity Indicator Code and Associated Fees table would specify that 
orders that yield liquidity indicator code RB would be subject to the 
existing fee of $0.0027 per share in securities priced at or above 
$1.00 and 0.05% of the transaction's dollar value in securities priced 
below $1.00.
     Liquidity indicator code RC would be applied to a 
Displayed order that removes liquidity in Tape C securities. The 
Liquidity Indicator Code and Associated Fees table would specify that 
orders that yield liquidity indicator code RC would be subject to the 
existing fee of $0.0028 per share in securities priced at or above 
$1.00 and 0.05% of the transaction's dollar value in securities priced 
below $1.00.
     Liquidity indicator code Ra would be applied to a Non-
Displayed order that removes liquidity in Tape A securities. The 
Liquidity Indicator Code and Associated Fees table would specify that 
orders that yield liquidity indicator code Ra would be subject to the 
existing fee of $0.0028 per share in securities priced at or above 
$1.00 and 0.05% of the transaction's dollar value in securities priced 
below $1.00.
     Liquidity indicator code Rb would be applied to a Non-
Displayed order that removes liquidity in Tape B securities. The 
Liquidity Indicator Code and Associated Fees table would specify that 
orders that yield liquidity indicator code Rb would be subject to the 
existing fee of $0.0027 per share in securities priced at or above 
$1.00 and 0.05% of the transaction's dollar value in securities priced 
below $1.00.
     Liquidity indicator code Rc would be applied to a Non-
Displayed order that removes liquidity in Tape C securities. The 
Liquidity Indicator Code and Associated Fees table would specify that 
orders that yield liquidity indicator code Rc would be subject to the 
existing fee of $0.0028 per share in securities priced at or above 
$1.00 and 0.05% of the transaction's dollar value in securities priced 
below $1.00.
    Subsequently, on March 31, 2021, the Exchange filed its proposal to 
universally decrease the fee to remove liquidity in Tapes A, B, and C 
securities priced at or above $1.00 to $0.0025 per share.\7\ However, 
as the liquidity indicator codes had not yet been implemented on the 
Exchange, the Liquidity Indicator Codes and Associated Fees table was 
not updated accordingly. On May 27, 2021, the Exchange issued a Trader 
Alert indicating that new supporting documentation for Liquidity 
Indicator Codes was available and that the new codes were targeted for 
use in production on July 1, 2021.\8\
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    \7\ See Securities Exchange Act Release No. 91497 (April 7, 
2021), 86 FR 19290 (April 13, 2021) (SR-PEARL-2021-15) (``Fee Filing 
No. 2''). The fee for orders that remove liquidity in Tapes A, B, 
and C securities priced below $1.00 were not changed.
    \8\ See Trader Alert, MIAX Pearl Equities--2nd Reminder: 
Mandatory Specification Updates (May 27, 2021) available at https://www.miaxoptions.com/alerts/2021/05/27/miax-pearl-equities-2nd-reminder-mandatory-interface-specification-updates.
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    The Exchange now proposes to amend the Liquidity Indicator Codes 
and Associated Fees table for codes RA, RB, RC, Ra, Rb and Rc to 
reflect the take rate change associated with Fee Filing No. 2, which 
established the current fee of $0.0025 per share for orders in Tapes A, 
B, and C securities that remove liquidity in securities priced at or 
above $1.00.\9\ The purpose of this change is to update the Liquidity 
Indicator Code and Associated Fees table to reflect the rate that is 
currently in effect and to provide greater clarity to Equity Members 
\10\ as to which fee may ultimately be applied to their execution as 
the use of liquidity indicator codes was implemented on the Exchange on 
July 1, 2021.
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    \9\ The rates to remove liquidity in Tapes A, B, and C 
securities priced below $1.00 remained unchanged. Therefore, 
liquidity indicator codes RA, RB, RC, Ra, Rb, and Rc reflect the 
correct rate.
    \10\ The term ``Equity Member'' is a Member authorized by the 
Exchange to transact business on MIAX Pearl Equities. See Exchange 
Rule 1901.
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Amend the Standard Rate Rebate for Non-Displayed Orders That Add 
Liquidity
    The Exchange proposes to amend the Standard Rates table and the 
Liquidity Indicator Codes and Associated Fees table to increase the 
rebate provided for Non-Displayed Orders that Add Liquidity from 
$0.0022 to $0.0025 per share in securities priced at or above $1.00.
     Liquidity indicator code Aa would be applied to a Non-
Displayed Order that adds liquidity in Tape A securities. The Liquidity 
Indicator Code and Associated Fees table would specify that orders that 
yield liquidity indicator code Aa would receive a rebate of $0.0025 per 
share in securities priced at or above $1.00 and 0.05% of the 
transaction's dollar value in securities priced below $1.00.
     Liquidity indicator code Ab would be applied to a Non-
Displayed Order that adds liquidity in Tape B securities. The Liquidity 
Indicator Code and Associated Fees table would specify that orders that 
yield liquidity indicator code Ab would receive a rebate of $0.0025 per 
share in securities priced at or above $1.00 and 0.05% of the 
transaction's dollar value in securities priced below $1.00.
     Liquidity indicator code Ac would be applied to a Non-
Displayed Order that adds liquidity in Tape C securities. The Liquidity 
Indicator Code and Associated Fees table would specify that orders that 
yield liquidity indicator code Ac would receive a rebate of $0.0025 per 
share in securities priced at or above $1.00 and 0.05% of the 
transaction's dollar value in securities priced below $1.00.
    The purpose for this proposed change is for business and 
competitive reasons.

[[Page 40094]]

The Exchange believes that increasing the rebate for Adding Liquidity 
Non-Displayed Orders from $0.0022 to $0.0025 per share for securities 
priced at or above $1.00 will encourage market participants to enter 
Non-Displayed Orders that add liquidity, thereby increasing liquidity 
and execution opportunities on the Exchange.
New Retail Order Liquidity Codes
    Additionally, the Exchange proposes to adopt four Retail Order 
liquidity indicator codes; AR, Ar, RR, and Rr, to the Liquidity 
Indicator Codes and Associated Fees table as described below. The 
purpose of this change is for business and competitive reasons. The 
Exchange notes that the use of liquidity indicator codes is not unique 
to the Exchange and are currently utilized and described in the fee 
schedules of other equity exchanges.\11\ The Exchange believes that 
adoption of these liquidity indicator codes and associated fees and 
rebates will further incentivize Equity Members to submit these types 
of orders to the Exchange, which will result in greater liquidity on 
the Exchange, thereby increasing execution opportunities on the 
Exchange.
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    \11\ The use of liquidity indicator codes is not novel and 
liquidity indicator codes are currently utilized by other equity 
exchanges. For example, see the fee schedules of the Investors 
Exchange LLC (``IEX'') available at https://iextrading.com/trading/fees/; and MEMX LLC (``MEMX'') available at https://info.memxtrading.com/fee-schedule/.
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     Liquidity indicator code AR would be applied to a 
Displayed Retail Order \12\ that adds liquidity in Tape A, B, and C 
securities. The Liquidity Indicator Code and Associated Fees table 
would specify that orders that yield liquidity indicator code AR would 
receive a rebate of $0.0037 per share in securities priced at or above 
$1.00 and 0.05% of the transaction's dollar value in securities priced 
below $1.00.
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    \12\ A ``Retail Order'' is an agency or riskless principal order 
that meets the criteria of FINRA Rule 5320.03 that originates from a 
natural person and is submitted to the Exchange by a Retail Member 
Organization, provided that no change is made to the terms of the 
order with respect to price or side of market and the order does not 
originate from a trading algorithm or any other computerized 
methodology. See Exchange Rule 2626(a)(2).
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    The Exchange notes that the proposed rebate is comparable to, and 
competitive with, the rebate provided by at least one other exchange 
for Retail Orders in securities priced at or above $1.00 per share that 
add liquidity.\13\
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    \13\ See the MEMX LLC, (``MEMX'') Fee Schedule, effective June 
1, 2021, on its public website available at https://info.memxtrading.com/fee-schedule/ which establishes a rebate rate 
of $0.0037 for Retail Orders that add liquidity in Tape A securities 
priced at or above $1.00.
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     Liquidity indicator code Ar would be applied to a Non-
Displayed Retail Order that adds liquidity in Tape A, B, and C 
securities. The Liquidity Indicator Code and Associated Fees table 
would specify that orders that yield liquidity indicator code Ar would 
receive a rebate of $0.0025 per share in securities priced at or above 
$1.00 and 0.05% of the transaction's dollar value in securities priced 
below $1.00.
    The rate of $0.0025 is consistent with the proposed rate change to 
the Standard Rates table for Adding Liquidity Non-Displayed Orders as 
contained in this proposal.
     Liquidity indicator code RR would be applied to a 
Displayed Retail Order that removes liquidity in Tape A, B, and C 
securities. The Liquidity Indicator Code and Associated Fees table 
would specify that orders that yield liquidity indicator code RR would 
be subject to the fee of $0.0025 per share in securities priced at or 
above $1.00 and 0.05% of the transaction's dollar value in securities 
priced below $1.00.
    The rate of $0.0025 is the current fee in effect for orders that 
remove liquidity.\14\
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    \14\ See Securities Exchange Act Release No. 91497 (April 7, 
2021), 86 FR 19290 (April 13, 2021) (SR-PEARL-2021-15).
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     Liquidity indicator code Rr would be applied to a Non-
Displayed Retail Order that removes liquidity in Tape A, B, and C 
securities. The Liquidity Indicator Code and Associated Fees table 
would specify that orders that yield liquidity indicator code Rr would 
be subject to the fee of $0.0025 per share in securities priced at or 
above $1.00 and 0.05% of the transaction's dollar value in securities 
priced below $1.00.
    The rate of $0.0025 is the current fee in effect for orders that 
remove liquidity.\15\ The Exchange also proposes to add the above 
Retail Order liquidity indicator codes to the Standard Rates table. 
Specifically, liquidity indicator code AR would be added to the 
``Adding Liquidity Displayed Order'' column and liquidity indicator 
code Ar would be added to the ``Adding Liquidity Non-Displayed Order'' 
column. Liquidity indicator codes RR and Rr would be added to the 
``Removing Liquidity'' column of the Standard Rates table.
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    \15\ See id.
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2. Statutory Basis
    The Exchange believes that its proposal to amend its Fee Schedule 
is consistent with Section 6(b) of the Act \16\ in general, and 
furthers the objectives of Section 6(b)(4) of the Act \17\ in 
particular, in that it is an equitable allocation of reasonable fees 
and other charges among its Equity Members and issuers and other 
persons using its facilities. The Exchange also believes that the 
proposed rule change is consistent with the objectives of Section 
6(b)(5) \18\ requirements that the rules of an exchange be designed to 
prevent fraudulent and manipulative acts and practices, and to promote 
just and equitable principles of trade, to foster cooperation and 
coordination with persons engaged in regulating, clearing, settling, 
processing information with respect to, and facilitating transactions 
in securities, to remove impediments to and perfect the mechanism of a 
free and open market and a national market system, and, in general, to 
protect investors and the public interest, and, particularly, is not 
designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers.
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    \16\ 15 U.S.C. 78f(b).
    \17\ 15 U.S.C. 78f(b)(4).
    \18\ 15 U.S.C. 78f(b)(5).
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    The Exchange operates in a highly fragmented and competitive market 
in which market participants can readily direct their order flow to 
competing venues if they deem fee levels at a particular venue to be 
excessive or incentives to be insufficient. More specifically, the 
Exchange is only one of sixteen registered equities exchanges, and 
there are a number of alternative trading systems and other off-
exchange venues, to which market participants may direct their order 
flow. Based on publicly available information, no single registered 
equities exchange currently has more than approximately 16% of the 
total market share of executed volume of equities trading.\19\ Thus, in 
such a low-concentrated and highly competitive market, no single 
equities exchange possesses significant pricing power in the execution 
of order flow, and the Exchange currently represents less than 1% of 
the overall market share. Accordingly, competitive forces constrain the 
Exchange's transaction fees and rebates generally, including with 
respect to Removing Liquidity and Retail Orders that Add and Remove 
Liquidity. The Exchange believes the proposed rule change to be a 
reasonable and competitive pricing structure designed to incentivize 
market participants to add aggressively priced Retail Orders and direct 
their order flow to the Exchange, which the Exchange believes would 
promote price discovery and price formation, provide more trading 
opportunities and tighter spreads, and deepen liquidity, thereby 
enhancing market quality to the benefit of all Equity Members and 
investors.

[[Page 40095]]

The Exchange notes that the use of liquidity indicator codes is not 
unique to the Exchange and are currently utilized and described in the 
fee schedules of other equity exchanges.\20\ Further, the Exchange also 
believes its proposal is not unfairly discriminatory because the 
proposed changes will apply equally to all Equity Members.
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    \19\ Market share percentage calculated as of June 24, 2021. The 
Exchange receives and processes data made available through 
consolidated data feeds.
    \20\ The use of liquidity indicator codes is not novel and 
liquidity indicator codes are currently utilized by other equity 
exchanges. For example, see the fee schedules of the Investors 
Exchange LLC (``IEX'') available at https://iextrading.com/trading/fees/; and MEMX LLC (``MEMX'') available at https://info.memxtrading.com/fee-schedule/.
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Conforming Changes to Liquidity Indicator Codes That Remove Liquidity
    As set forth above, the Exchange filed Fee Filing No. 1 to adopt 
liquidity indicator codes and included the then-current rates. 
Subsequently, in Fee Filing No. 2, the Exchange reduced the fee for 
orders in Tapes A, B, and C securities that remove liquidity in 
securities priced at or above $1.00 to $0.0025 per share. Liquidity 
indicator codes RA, RB, RC, Ra, Rb, and Rc are appended to orders that 
remove liquidity. The Exchange believes its proposal to update the 
Liquidity Indicator Codes and Associated Fees table to reflect the 
current rate of $0.0025 per share for securities priced at or above 
$1.00 with liquidity indicator codes RA, RB, RC, Ra, Rb, or Rc is 
equitable and reasonable because it updates the liquidity indicator 
code table to reflect the established rate that is currently in effect 
and will apply equally to all Equity Members of the Exchange.
Amend the Standard Rate Rebate for Non-Displayed Orders That Add 
Liquidity
    The Exchange's proposal to increase the rebate provided for orders 
that add liquidity in securities priced at or above $1.00 from $0.0022 
to $0.0025 per share is reasonable and equitably allocated among all 
Equity Members of the Exchange. Liquidity indicator codes Aa, Ab, and 
Ac are appended to orders that add liquidity. The Exchange believes 
that the proposed increase to $0.0025 per share is reasonable in that 
it represent [sic] a modest increase ($0.003) [sic] from the current 
rebate for such executions ($0.0022 per share). The Exchange believes 
that this change is a reasonable means by which to incentivize Equity 
Members to submit Non-Displayed Orders that add liquidity to the 
benefit of all market participants. The Exchange believes its proposal 
is equitable and not unfairly discriminatory as it will apply to all 
Equity Members equally. Additionally, the Exchange believes its 
proposed change is reasonable as it is competitive and in line with 
rebates offered for similar orders on at least one other exchange.\21\
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    \21\ See the MEMX LLC, (``MEMX'') Fee Schedule, effective June 
1, 2021, on its public website available at https://info.memxtrading.com/fee-schedule/ which establishes a rebate rate 
of $0.0020 for non-displayed volume that adds liquidity in Tape A 
securities priced at or above $1.00; and a rebate of $0.0025 for 
non-displayed Midpoint Peg Orders that add liquidity in Tape A 
securities priced at or above $1.00.
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New Retail Order Liquidity Codes
    The Exchange's proposal to adopt four new Retail Order liquidity 
indicator codes is reasonable and not unfairly discriminatory as it 
will apply to all Equity Members equally. The Exchange notes that the 
use of liquidity indicator codes is not novel and that liquidity 
indicator codes are used by other equity exchanges.\22\
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    \22\ See supra note 11.
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    The Exchange's [sic] believes its proposal to establish a rebate of 
$0.0037 for a Retail Displayed Order that adds liquidity for securities 
priced at or above $1.00 is reasonable as it is competitive and in line 
with the rebate offered for similar Retail Orders on at least one other 
exchange.\23\
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    \23\ See supra note 13.
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    The Exchange's proposal to establish a rebate of $0.0025 for orders 
with a liquidity indicator code of Ar, Retail Non-Displayed Orders that 
add liquidity, is reasonable as this rate is consistent with the 
proposed rate change contained herein for Liquidity Adding Non-
Displayed Orders. The Exchange believes its proposed change is 
reasonable as it is competitive and in line with rebates offered for 
similar orders on at least one other exchange.\24\
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    \24\ See the MEMX LLC, (``MEMX'') Fee Schedule, effective June 
1, 2021, on its public website available at https://info.memxtrading.com/fee-schedule/ which establishes a fee of 
$0.00265 for orders that remove volume from the exchange.
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    The Exchange believes its proposal to adopt liquidity indicator 
codes for Retail Displayed Orders that remove liquidity (RR) and for 
Retail Non-Displayed Orders that remove liquidity (Rr) is reasonable 
and not unfairly discriminatory as the use of liquidity indicator codes 
is used on other equity exchanges.\25\
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    \25\ See supra note 11.
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    The Exchange believes its proposal to establish a fee of $0.0025 
for Retail Displayed Orders that remove liquidity (RR) and for Retail 
Non-Displayed Orders that remove liquidity (Rr) is reasonable and not 
unfairly discriminatory as it applies equally to all Equity Members of 
the Exchange. Additionally, the rate of $0.0025 for orders that remove 
liquidity in securities priced at or above $1.00 was established by the 
Exchange in a previous filing \26\ and adopting a fee in the same 
amount for similar orders is reasonable and not unfairly discriminatory 
and promotes consistency and uniformity in the Exchange's Fee Schedule.
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    \26\ See supra note 7.
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    The Exchange believes its proposal provides for the equitable 
allocation of reasonable dues and fees and is not unfairly 
discriminatory. For the reasons discussed above, the Exchange submits 
that the proposal satisfies the requirements of Sections 6(b)(4) and 
6(b)(5) of the Act in that it provides for the equitable allocation of 
reasonable dues, fees and other charges among its Members and other 
persons using its facilities and is not designed to unfairly 
discriminate between customers, issuers, brokers, or dealers. As 
described more fully below in the Exchange's statement regarding the 
burden on competition, the Exchange believes that its transaction 
pricing is subject to significant competitive forces, and that the 
proposed fees and rebates described herein are appropriate to address 
such forces.
    The Exchange believes the Liquidity Indicator Codes and Associated 
Fees table will make the Fee Schedule clearer and eliminate the 
potential for confusion in regard to fees charged and rebates earned, 
thereby removing impediments to, and perfecting the mechanism of a free 
and open market and a national market system, and, in general, 
protecting investors and the public interest. Further, as noted above, 
this practice is consistent with the pricing practices of other 
exchanges.\27\
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    \27\ See supra note 11.
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed change will impose 
any burden on competition not necessary or appropriate in furtherance 
of the purposes of the Act. The Exchange believes the proposed change 
would encourage the submission of additional order flow to the 
Exchange, thereby promoting market depth, enhanced execution 
opportunities, as well as price discovery and transparency for all 
Equity Members. Furthermore, the Exchange believes that the proposed 
changes would allow the Exchange to continue to compete with other 
routing and execution venues by providing competitive pricing for 
transactions in Adding Liquidity Non-Displayed Orders

[[Page 40096]]

and also Retail Orders, thereby making it a desirable destination. As a 
result, the Exchange believes that the proposed change furthers the 
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.'' \28\
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    \28\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 47396 (June 29, 2005).
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Intramarket Competition
    The Exchange believes that the proposed changes would incentivize 
market participants to direct order flow to the Exchange. Greater 
liquidity benefits all Equity Members by providing more trading 
opportunities and encourages Equity Members to send orders to the 
Exchange, thereby contributing to robust levels of liquidity, which 
benefits all Equity Members. The proposed fees and rebates for Retail 
Orders and the proposed rebate for Adding Liquidity Non-Displayed 
Orders would be available to all similarly situated market 
participants, and, as such, the proposed change would not impose a 
disparate burden on competition among market participants on the 
Exchange.
    The Exchange does not believe its adoption of new liquidity 
indicator codes for Retail Orders will impose any burden on intramarket 
competition. The use of liquidity indicator codes is not new or novel 
as liquidity indicator codes are used on other equity exchanges.\29\ 
Additionally, the use of liquidity indicator codes is applied equally 
to all Equity Members and provides additional specificity to the fee 
schedule so that Equity Members may connect an execution to the 
applicable fee or rebate.
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    \29\ See supra note 11.
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    As such, the Exchange believes the proposed changes would not 
impose any burden on intramarket competition that is not necessary or 
appropriate in furtherance of the purposes of the Act.
Intermarket Competition
    The Exchange believes its proposal will benefit competition as the 
Exchange operates in a highly competitive market. Equity Members have 
numerous alternative venues that they may participate on and direct 
their order flow to, including fifteen other equities exchanges and 
numerous alternative trading systems and other off-exchange venues. As 
noted above, no single registered equities exchange currently has more 
than 16% of the total market share of executed volume of equities 
trading. Thus, in such a low-concentrated and highly competitive 
market, no single equities exchange possesses significant pricing power 
in the execution of order flow. Moreover, the Exchange believes that 
the ever-shifting market share among the exchanges from month to month 
demonstrates that market participants can shift order flow in response 
to new or different pricing structures being introduced to the market. 
Accordingly, competitive forces constrain the Exchange's transaction 
fees and rebates generally, including with respect to Retail Orders and 
Adding Liquidity Non-Displayed Orders, as market participants can 
readily choose to send their orders to other exchanges and off-exchange 
venues if they deem fee levels at those other venues to be more 
favorable. As described above, the proposed changes are competitive 
proposals through which the Exchange is seeking to encourage certain 
order flow to the Exchange and to promote market quality through 
pricing incentives that are similar in structure and purpose to pricing 
programs at other Exchanges.\30\ Accordingly, the Exchange believes the 
proposal would not burden, but rather promote, intermarket competition 
by enabling it to better compete with other exchanges that offer 
similar incentives to market participants that enhance market quality.
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    \30\ See supra notes 21, 23, and 24.
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    Additionally, the Commission has repeatedly expressed its 
preference for competition over regulatory intervention in determining 
prices, products, and services in the securities markets. Specifically, 
in Regulation NMS, 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.'' \31\ The fact 
that this market is competitive has also long been recognized by the 
courts. In NetCoalition v. Securities and Exchange Commission, the D.C. 
circuit stated: ``[n]o one disputes that competition for order flow is 
`fierce.' . . . As the SEC explained, `[i]n the U.S. national market 
system, buyers and sellers of securities, and the broker-dealers that 
act as their routing agents, have a wide range of choices of where to 
route orders for execution'; [and] `no exchange can afford to take its 
market share percentages for granted' because `no exchange possess a 
monopoly, regulatory or otherwise, in the execution of order flow from 
broker dealers' . . .''.\32\ Accordingly, the Exchange does not believe 
its proposed pricing changes impose any burden on competition that is 
not necessary or appropriate in furtherance of the purposes of the Act.
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    \31\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005).
    \32\ NetCoalition v. SEC, 615 F.3d 525, 539 (D.C. Cir. 2010) 
(quoting Securities Exchange Act Release No. 59039 (December 2, 
2008), 73 FR 74770, 74782-83 (December 9, 2008) (SR-NYSE-2006-21)).
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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,\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.
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    \33\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \34\ 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-2021-34 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-2021-34. This file 
number should be included on the subject line if email is used. To help 
the

[[Page 40097]]

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-2021-34, and should be submitted 
on or before August 16, 2021.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\35\
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    \35\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-15814 Filed 7-23-21; 8:45 am]
BILLING CODE 8011-01-P


