[Federal Register Volume 86, Number 199 (Tuesday, October 19, 2021)]
[Notices]
[Pages 57879-57882]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-22684]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-93298; File No. SR-PEARL-2021-44]


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

October 13, 2021.
    Pursuant to the provisions of 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 September 30, 2021, 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 MIAX Pearl Options 
Fee Schedule (the ``Fee Schedule'').
    The text of the proposed rule change is available on the Exchange's 
website at http://www.miaxoptions.com/rule-filings/pearl at MIAX 
Pearl's principal office, and at the Commission's Public Reference 
Room.

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

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
sections A, B, and C below, of the most significant aspects of such 
statements.

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

1. Purpose
    The Exchange proposes to amend the Add/Remove Tiered Rebates/Fees 
set forth in Section 1)a) of the Fee Schedule

[[Page 57880]]

that apply to the Priority Customer \3\ Origin, to reduce the Maker 
rebate in Tier 2 (defined below) for options transactions in Penny 
Classes (defined below) from ($0.40) to ($0.25).
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    \3\ ``Priority Customer'' means a person or entity that (i) is 
not a broker or dealer in securities, and (ii) does not place more 
than 390 orders in listed options per day on average during a 
calendar month for its own beneficial accounts(s). The number of 
orders shall be counted in accordance with Interpretation and Policy 
.01 of Exchange Rule 100. See Exchange Rule 100, including 
Interpretation and Policy .01. See the Definitions Section of the 
Fee Schedule.
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Background
    The Exchange currently assesses transaction rebates and fees to all 
market participants which are based upon the total monthly volume 
executed by the Member \4\ on MIAX Pearl in the relevant, respective 
origin type (not including Excluded Contracts) \5\ (as the numerator) 
expressed as a percentage of (divided by) TCV \6\ (as the denominator). 
In addition, the per contract transaction rebates and fees are applied 
retroactively to all eligible volume for that origin type once the 
respective threshold tier (``Tier'') has been reached by the Member. 
The Exchange aggregates the volume of Members and their Affiliates.\7\ 
Members that place resting liquidity, i.e., orders resting on the book 
of the MIAX Pearl System,\8\ are paid the specified ``maker'' rebate 
(each a ``Maker''), and Members that execute against resting liquidity 
are assessed the specified ``taker'' fee (each a ``Taker''). For 
opening transactions and ABBO \9\ uncrossing transactions, per contract 
transaction rebates and fees are waived for all market participants. 
Finally, Members are assessed lower transaction fees and receive lower 
rebates for order executions in standard option classes in the Penny 
Interval Program \10\ (``Penny Classes'') than for order executions in 
standard option classes which are not in the Penny Interval Program 
(``Non-Penny Classes''), where Members are assessed higher transaction 
fees and receive higher rebates.
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    \4\ ``Member'' means an individual or organization that is 
registered with the Exchange pursuant to Chapter II of the Exchange 
Rules for purposes of trading on the Exchange as an ``Electronic 
Exchange Member'' or ``Market Maker.'' Members are deemed 
``members'' under the Exchange Act. See the Definitions Section of 
the Fee Schedule and Exchange Rule 100.
    \5\ ``Excluded Contracts'' means any contracts routed to an away 
market for execution. See the Definitions Section of the Fee 
Schedule.
    \6\ ``TCV'' means total consolidated volume calculated as the 
total national volume in those classes listed on MIAX Pearl for the 
month for which the fees apply, excluding consolidated volume 
executed during the period time in which the Exchange experiences an 
``Exchange System Disruption'' (solely in the option classes of the 
affected Matching Engine (as defined below)). The term Exchange 
System Disruption, which is defined in the Definitions section of 
the Fee Schedule, means an outage of a Matching Engine or collective 
Matching Engines for a period of two consecutive hours or more, 
during trading hours. The term Matching Engine, which is also 
defined in the Definitions section of the Fee Schedule, is a part of 
the MIAX Pearl electronic system that processes options orders and 
trades on a symbol-by-symbol basis. Some Matching Engines will 
process option classes with multiple root symbols, and other 
Matching Engines may be dedicated to one single option root symbol 
(for example, options on SPY may be processed by one single Matching 
Engine that is dedicated only to SPY). A particular root symbol may 
only be assigned to a single designated Matching Engine. A 
particular root symbol may not be assigned to multiple Matching 
Engines. The Exchange believes that it is reasonable and appropriate 
to select two consecutive hours as the amount of time necessary to 
constitute an Exchange System Disruption, as two hours equates to 
approximately 1.4% of available trading time per month. The Exchange 
notes that the term ``Exchange System Disruption'' and its meaning 
have no applicability outside of the Fee Schedule, as it is used 
solely for purposes of calculating volume for the threshold tiers in 
the Fee Schedule. See the Definitions Section of the Fee Schedule.
    \7\ ``Affiliate'' means (i) an affiliate of a Member of at least 
75% common ownership between the firms as reflected on each firm's 
Form BD, Schedule A, or (ii) the Appointed Market Maker of an 
Appointed EEM (or, conversely, the Appointed EEM of an Appointed 
Market Maker). An ``Appointed Market Maker'' is a MIAX Pearl Market 
Maker (who does not otherwise have a corporate affiliation based 
upon common ownership with an EEM) that has been appointed by an EEM 
and an ``Appointed EEM'' is an EEM (who does not otherwise have a 
corporate affiliation based upon common ownership with a MIAX Pearl 
Market Maker) that has been appointed by a MIAX Pearl Market Maker, 
pursuant to the process described in the Fee Schedule. See the 
Definitions Section of the Fee Schedule.
    \8\ The term ``System'' means the automated trading system used 
by the Exchange for the trading of securities. See Exchange Rule 
100.
    \9\ ``ABBO'' means the best bid(s) or offer(s) disseminated by 
other Eligible Exchanges (defined in Exchange Rule 1400(g) and 
calculated by the Exchange based on market information received by 
the Exchange from OPRA. See the Definitions Section of the Fee 
Schedule and Exchange Rule 100.
    \10\ See Securities Exchange Act Release No. 88992 (June 2, 
2020), 85 FR 35142 (June 8, 2020) (SR-PEARL-2020-06).
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Proposal
    The Exchange proposes to amend the Maker rebate in Tier 2 for 
options transactions in Penny Classes for the Priority Customer Origin. 
Currently, the Exchange offers a Maker rebate of ($0.40) in Tier 2 for 
options transactions in Penny Classes for the Priority Customer Origin. 
The Exchange now proposes to decrease the Maker rebate in Tier 2 for 
options transactions in Penny Classes for the Priority Customer Origin 
from ($0.40) to ($0.25).
    The purpose of this proposed change is for business and competitive 
reasons. In order to attract order flow to the Exchange, the Exchange 
initially set its Maker rebates and Takes fees so that they were 
meaningfully higher/lower than other option exchanges that operate 
comparable maker/taker price models. The Exchange believes that it is 
appropriate to further adjust the specified Marker rebate so that it is 
more in line with other exchanges,\11\ but will still remain 
competitive such that it should enable the Exchange to continue to 
attract order flow and maintain market share.
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    \11\ The Exchange notes that NYSE Arca Options provides a rebate 
of $0.27 for similar transactions. See NYSE Arca Options Fee 
Schedule for 9-1-21, CUSTOMER PENNY POSTING CREDIT TIERS at https://www.nyse.com/publicdocs/nyse/markets/arca-options/NYSE_Arca_Options_Fee_Schedule.pdf. The Exchange also notes that the 
Nasdaq Options Market provides a rebate of $0.25 for similar 
transactions. See The Nasdaq Stock Market Fee Schedule, Options 7, 
Section 2, Rebates to Add Liquidity in Penny Symbols, at https://listingcenter.nasdaq.com/rulebook/nasdaq/rules/Nasdaq%20Options%207.
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    The Exchange has designated this change to be operative on October 
1, 2021.
2. Statutory Basis
    The Exchange believes that its proposal to amend its Fee Schedule 
is consistent with Section 6(b) of the Act \12\ in general, and 
furthers the objectives of Section 6(b)(4) of the Act,\13\ in that it 
is an equitable allocation of reasonable dues, fees and other charges 
among Exchange Members and issuers and other persons using its 
facilities, and 6(b)(5) of the Act,\14\ in that it is designed to 
prevent fraudulent and manipulative acts and practices, promote just 
and equitable principles of trade, foster cooperation and coordination 
with persons engaged in facilitating transactions in securities, remove 
impediments to and perfect the mechanisms of a free and open market and 
a national market system and, in general, protect investors and the 
public interest.
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    \12\ 15 U.S.C. 78f(b).
    \13\ 15 U.S.C. 78f(b)(4).
    \14\ 15 U.S.C. 78f(b)(1) and (b)(5).
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    The Exchange believes that its proposal provides for the equitable 
allocation of reasonable dues and fees and is not unfairly 
discriminatory for the following reasons. The Exchange operates in a 
highly competitive market. The Commission has repeatedly expressed its 
preference for competition over regulatory intervention in determining 
prices, products, and services in the securities markets. 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

[[Page 57881]]

broader forms that are most important to investors and listed 
companies.'' \15\ There are currently 16 registered options exchanges 
competing for order flow. Based on publicly-available information, and 
excluding index-based options, for the month of September 2021, no 
single exchange has more than approximately 11-12% of the market share 
of executed volume of multiply-listed equity and exchange-traded fund 
(``ETF'') options trades as of September 20, 2021.\16\ Therefore, no 
exchange possesses significant pricing power in the execution of 
multiply-listed equity and ETF options order flow. More specifically, 
as of September 20, 2021, the Exchange had a market share of 
approximately 3.55% of executed volume of multiply-listed equity and 
ETF options for the month of September 2021.\17\
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    \15\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496 (June 29, 2005).
    \16\ See MIAX's ``The Market at a Glance'', available at https://www.miaxoptions.com/ (last visited September 20, 2021).
    \17\ See id.
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    The Exchange believes that the ever-shifting market shares among 
the exchanges from month to month demonstrates that market participants 
can shift order flow, or discontinue or reduce use of certain 
categories of products, in response to transaction and/or non-
transaction fee changes. For example, on February 28, 2019, the 
Exchange filed with the Commission a proposal to increase Taker fees in 
certain Tiers for options transactions in certain Penny classes for 
Priority Customers and decrease Maker rebates in certain Tiers for 
options transactions in Penny classes for Priority Customers (which fee 
was to be effective March 1, 2019).\18\ The Exchange experienced a 
decrease in total market share between the months of February and March 
of 2019, after the fees were in effect. Accordingly, the Exchange 
believes that the March 1, 2019 fee change may have contributed to the 
decrease in the Exchange's market share and, as such, the Exchange 
believes competitive forces constrain options exchange transaction fees 
and market participants can shift order flow based on fee changes 
instituted by the exchanges.
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    \18\ See Securities Exchange Act Release No. 85304 (March 13, 
2019), 84 FR 10144 (March 19, 2019) (SR-PEARL-2019-07).
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    The Exchange believes its proposal to decrease the Maker rebate in 
Tier 2 for options transactions in Penny Classes for Priority Customers 
is reasonable, equitable and not unfairly discriminatory because all 
similarly situated market participants in the same Origin type are 
subject to the same tiered Maker rebates and Taker fees and access to 
the Exchange is offered on terms that are not unfairly discriminatory. 
The Exchange believes it is equitable and not unfairly discriminatory 
to reduce the Maker rebate to Priority Customer orders in Penny Classes 
for business and competitive reasons because the Exchange initially set 
its Maker rebates for such orders higher than certain other option 
exchanges that operate comparable maker/taker pricing models. The 
Exchange now believes that it is appropriate to further decrease the 
specified Maker rebate so that it is more in line with other 
exchanges,\19\ and will still remain competitive such that it should 
enable the Exchange to continue to attract order flow and maintain 
market share.
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    \19\ 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 rule changes will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act.
    The Exchange believes its proposal will not impose any burden on 
intra-market competition because the Exchange believes that its 
proposal will not place any category of Exchange market participant at 
a competitive disadvantage. The Exchange believes that its proposal 
will continue to encourage Priority Customer volume to be executed on 
the Exchange, which will attract further liquidity to the Exchange and 
benefit all market participants. Accordingly, the Exchange believes 
that the proposed changes will continue to attract order flow to the 
Exchange, thereby encouraging additional volume and liquidity to the 
benefit of all market participants.
    The Exchange believes its proposal will not impose any burden on 
inter-market competition because the Exchange notes that it operates in 
a highly competitive market in which market participants can readily 
favor competing venues if they deem fee levels at a particular venue to 
be excessive, or rebate opportunities available at other venues to be 
more favorable. In such an environment, the Exchange must continually 
adjust its fees to remain competitive with other options exchanges. 
Because competitors are free to modify their own fees in response, and 
because market participants may readily adjust their order routing 
practices, the Exchange believes that the degree to which fee changes 
in this market may impose any burden on competition is extremely 
limited. The Exchange believes that the proposed rule changes reflect 
this competitive environment because they modify the Exchange's fees in 
a manner that encourages market participants to continue to provide 
liquidity and to send order flow to the Exchange.

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,\20\ and Rule 19b-4(f)(2) \21\ 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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    \20\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \21\ 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 [email protected]. Please include 
File Number SR-PEARL-2021-44 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-2021-44. 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

[[Page 57882]]

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-2021-44, and should be submitted on or before November 9, 2021.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\22\
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    \22\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.''
[FR Doc. 2021-22684 Filed 10-18-21; 8:45 am]
BILLING CODE 8011-01-P


