[Federal Register Volume 87, Number 13 (Thursday, January 20, 2022)]
[Notices]
[Pages 3151-3160]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-01065]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-93979; File No. SR-PEARL-2022-01]


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

January 14, 2022.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby 
given that, on January 4, 2022, MIAX PEARL, LLC (``MIAX Pearl'' or 
``Exchange'') filed with the Securities and Exchange Commission (the 
``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\ 15 U.S.C. 78a.
    \3\ 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 (the 
``Fee Schedule'') applicable to MIAX Pearl Equities, an equities 
trading facility of the Exchange.
    The text of the proposed rule change is available on the Exchange's 
website at http://www.miaxoptions.com/rule-filings/pearl, at MIAX 
Pearl's principal office, and at the Commission's Public Reference 
Room.

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

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

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

1. Purpose
    The purpose of the proposed rule change is to amend the Exchange's 
Fee Schedule to (i) adopt new Add and Remove Volume Tiers for 
executions of orders in securities priced at or above $1.00 that add or 
remove liquidity from the Exchange; (ii) reduce the Adding Liquidity 
Displayed Order rebate; (iii) reduce the Adding Liquidity Non-Displayed 
Order rebate; (iv) increase the Removing Liquidity fee; (v) update 
Liquidity Indicator Codes and Associated Fees table; (vi) adopt new 
definitions in the Definitions section; and (vii) adopt new provisions 
in the General Notes section.
    The Exchange first notes that it 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 incentives to be insufficient. More specifically, the 
Exchange is only one of 16 registered equities exchanges, as well as 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 18% of the total market share of 
executed volume of equities trading.\4\
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    \4\ Market share percentage calculated as of December 22, 2021. 
The Exchange receives and processes data made available through 
consolidated data feeds.
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Add Volume Tiers
    The Exchange is proposing to introduce a tiered pricing structure 
applicable to the rebates applied for volume added to the Exchange. 
Specifically, the Exchange proposes to adopt a new volume-based tier 
structure, referred to as the Add Volume Tiers, in which the Exchange 
will provide an enhanced rebate for executions of Added Displayed 
Volume for Equity Members \5\ (``Members'') that meet the specified 
volume thresholds on the Exchange, as described below.
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    \5\ 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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[[Page 3152]]

    The Exchange proposes to adopt three Add Volume Tiers (Tier 1, Tier 
2, and Tier 3) in which it will provide an enhanced rebate per tier. A 
Member would qualify for an enhanced rebate under Tier 1 by achieving 
an ADAV \6\ of at least 0.07% of the TCV.\7\ Members that qualify for 
Tier 1 would receive an enhanced rebate of $0.0032 per share for 
executions of Added Displayed Volume for executions of orders in 
securities priced at or above $1.00 per share across all Tapes. A 
Member would qualify for an enhanced rebate under Tier 2 by achieving 
an ADAV of at least 0.10% of the TCV. Members that qualify for Tier 2 
would receive an enhanced rebate of $0.0035 per share for executions of 
Added Displayed Volume for executions of orders in securities priced at 
or above $1.00 per share across all Tapes. A Member would qualify for 
an enhanced rebate under Tier 3 by achieving an ADAV of at least 0.20% 
of the TCV. Members that qualify for Tier 3 would receive an enhanced 
rebate of $0.0036 per share for executions of Added Displayed Volume 
for executions of orders in securities priced at or above $1.00 per 
share across all Tapes.
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    \6\ As proposed, the term ``ADAV'' means daily added volume 
[sic] calculated as the number of shares added per day and ``ADV'' 
means average daily volume calculated as the number of shares added 
or removed, combined, per day. ADAV and ADV are calculated on a 
monthly basis. The Exchange excludes from its calculation of ADAV 
and ADV shares added or removed on any day that the Exchange's 
system experiences a disruptions that lasts for more than 60 minutes 
during regular trading hours (``Exchange System Disruption''), on 
any day with a scheduled early market close, and on the ``Russell 
Reconstitution Day'' (typically the last Friday in June). Routed 
shares are not included in the ADAV or ADV calculation.
    \7\ As proposed, the term ``TCV'' means total consolidated 
volume calculated as the volume in shares reported by all exchanges 
and reporting facilities to a consolidated transaction reporting 
plan for the month for which the fees apply. The Exchange excludes 
from its calculation of TCV volume on any given day that the 
Exchange's system experiences a disruption that lasts for more than 
60 minutes during Regular Trading Hours. On [sic] any day with a 
scheduled early market close, and on the ``Russell Reconstitution 
Day'' (typically the last Friday in June).
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    The Exchange believes that basing the qualifications for the Add 
Volume Tiers on an ADAV threshold that is a percentage of the TCV is 
appropriate so that the threshold is variable based on overall volumes 
in the equities industry, which fluctuate month to month.
    The proposed Add Volume Tier 1 is designed to encourage Members to 
maintain or increase their orders that add liquidity on the Exchange in 
order to qualify for an enhanced rebate for executions of Added 
Displayed Volume, thereby contributing to a deeper and more liquid 
market to the benefit of all market participants and enhancing the 
attractiveness of the Exchange as a trading venue. Further, the 
proposed new Add Volume Tier 1 would provide Members with a higher 
enhanced rebate ($0.0032) over the new proposed standard rebate of 
($0.0029), as further described below, for satisfying more stringent 
criteria.
    The proposed Add Volume Tier 2 is designed to encourage Members to 
maintain or increase their orders that add liquidity on the Exchange in 
order to qualify for an enhanced rebate for executions of Added 
Displayed Volume, thereby contributing to a deeper and more liquid 
market to the benefit of all market participants and enhancing the 
attractiveness of the Exchange as a trading venue. Further, the 
proposed new Add Volume Tier 2 would provide Members with a higher 
enhanced rebate ($0.0035) over Add Volume Tier 1 ($0.0032), for 
satisfying increasingly more stringent criteria.
    The proposed Add Volume Tier 3 is designed to encourage Members to 
maintain or increase their orders that add liquidity on the Exchange in 
order to qualify for an enhanced rebate for executions of Added 
Displayed Volume, thereby contributing to a deeper and more liquid 
market to the benefit of all market participants and enhancing the 
attractiveness of the Exchange as a trading venue. Further, the 
proposed new Add Volume Tier 3 would provide Members with a higher 
enhanced rebate ($0.0036) over Add Volume Tier 2 ($0.0035), for 
satisfying increasingly more stringent criteria.
    For the purposes of calculating ADAV the Exchange proposes to 
exclude from the calculation: (1) Any Exchange System Disruption Days; 
(2) any day with a scheduled early market close; and (3) the Russell 
Reconstitution day, which typically occurs on the last Friday in June. 
The Exchange believes that the Exchange system disruptions could 
preclude Members from participating on the Exchange to the extent that 
they might have otherwise participated on such days, and thus, the 
Exchange believes it is appropriate to exclude such days when 
determining whether a Member qualifies for an Add Volume Tier to avoid 
penalizing Members that might otherwise have met the applicable volume 
threshold. Additionally, the Exchange believes that scheduled early 
market closes, which typically are the day before, or the day after, a 
holiday, may preclude some Members from submitting orders to the 
Exchange at the same level that they might otherwise. For similar 
reasons, the Exchange believes it is appropriate to exclude the Russell 
Reconstitution Day, as the Exchange believes the change to normal 
trading activity as a result of the Russell Reconstitution may skew the 
calculation of ADAV and TCV. The Exchange also proposes to specify that 
routed shares are not included in the calculation of ADAV.\8\
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    \8\ The Exchange notes that excluding routed shares from the 
calculations of ADAV and ADV is also consistent with the practice of 
other exchanges when calculating ADAV and ADV. See, e.g., the Cboe 
BZX equities trading fee schedule on its public website (available 
at https://markets.cboe.com/us/equities/membership/fee_schedule/bzx/
).
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    The Exchange will continue to provide a rebate of 0.05% of the 
total dollar value of the transaction for executions of orders that add 
liquidity to the Exchange in securities priced below $1.00 per share. 
Thus, as under the Exchange's current pricing, the same rebate would be 
applied to all Members for executions of orders that add liquidity on 
the Exchange in securities priced below $1.00 per share.
    The Exchange notes that the rebates provided for executions of 
Added Displayed Volume under the Add Volume Tiers ($0.0032 in Tier 1; 
$0.0035 in Tier 2; and $0.0036 in Tier 3), are comparable to, and 
competitive with, the rebates for executions of liquidity adding 
displayed orders provided by at least one other exchange under similar 
volume-based tiers.\9\
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    \9\ See MEMX, LLC (``MEMX'') equities trading fee schedule on 
its public website (available at https://info.memxtrading.com/fee-schedule/) which reflects rebates provided under ``Liquidity 
Provision Tiers'' = tiers based on a member achieving certain ADAV 
thresholds ranging from $0.0031 to $0.00335 [sic] per share for 
adding displayed liquidity to the MEMX exchange.
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    The Exchange believes that the proposed tiered pricing structure 
provides an incentive for Members to strive for higher ADAV on the 
Exchange to receive the proposed enhanced rebate for executions of 
Added Displayed Volume. As such, the proposed Add Volume Tiers are 
designed to encourage Members that provide liquidity on the Exchange to 
maintain or increase their order flow, thereby contributing to a deeper 
and more liquid market to the benefit of all market participants and 
enhancing the attractiveness of the Exchange as a trading venue.
Reduced Standard Rebate for Added Displayed Volume
    The Exchange proposes to reduce the standard rebate for executions 
of Added Displayed Volume. Currently, the Exchange provides a standard 
rebate of $0.0032 per share for executions of Added Displayed Volume in 
Tapes A and C, and $0.0035 per share for executions of Added Displayed 
Volume in Tape B. The Exchange now proposes to reduce the standard 
rebate for

[[Page 3153]]

executions of Added Displayed Volume to $0.0029 per share for all 
Tapes.\10\ The Exchange notes that executions of orders in securities 
priced below $1.00 per share that add displayed liquidity to the 
Exchange will continue to receive the standard rebate applicable to 
such executions (i.e., 0.05% of the total dollar value of the 
transaction).
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    \10\ The standard pricing for executions of Added Displayed 
Volume is referred to by the Exchange on its Fee Schedule in section 
(1)(a) Standard Rates.
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    The purpose of reducing the standard rebate for executions of Added 
Displayed Volume is for business and competitive reasons, as the 
Exchange believes the reduction of such rebate would decrease the 
Exchange's expenditures with respect to transaction pricing and would 
also offset some of the costs associated with the proposed enhanced 
rebates for executions for Members that qualify for an Add Volume Tier, 
in a manner that is still consistent with the Exchange's overall 
pricing philosophy of encouraging added displayed liquidity. The 
Exchange notes that despite the modest reduction proposed herein, the 
proposed standard rebate for execution of Added Displayed Volume (i.e., 
$0.0029 per share) remains higher than, and competitive with, the 
standard rebates provided by other exchanges for executions of orders 
in securities priced at or above $1.00 per share that add displayed 
liquidity.\11\
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    \11\ See e.g., the Nasdaq PSX equities trading fee schedule on 
its public website (available at http://www.nasdaqtrader.com/Trader.aspx?id=PSX_Pricing), which reflects a standard rebate of 
$0.0020 per share to add displayed liquidity in securities priced at 
or above $1.00 per share; see also the NYSE ARCA equities trading 
fee schedule on its public website (available at https://www.nyse.com/publicdocs/nyse/markets/nyse-arca/NYSE_Arca_Marketplace_Fees.pdf), which reflects a standard rebate of 
$0.0020 per share to add displayed liquidity in securities priced at 
or above $1.00 per share.
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    The Exchange proposes to reduce the standard rebate to $0.0021 per 
share for executions of Added Non-Displayed Volume. Currently, the 
Exchange provides a standard rebate of $0.0025 per share for executions 
of non-displayed orders in securities priced at or above $1.00 per 
share that add liquidity to the Exchange. The Exchange notes that 
executions of orders in securities priced below $1.00 per share that 
add non-displayed liquidity to the Exchange will continue to receive 
the standard rebate applicable to such executions (i.e., 0.05% of the 
total dollar value of the transaction).
    The purpose of reducing the standard rebate for executions of Added 
Non-Displayed Volume is for business and competitive reasons, as the 
Exchange believes the reduction of such rebate would decrease the 
Exchange's expenditures with respect to transaction pricing and would 
also offset some of the costs associated with the proposed enhanced 
rebates for executions for Members that qualify for an Add Volume Tier, 
in a manner that is still consistent with the Exchange's overall 
pricing philosophy of encouraging added displayed liquidity. The 
Exchange notes that despite the modest reduction proposed herein, the 
proposed standard rebate for execution of Added Non-Displayed Volume 
(i.e., $0.0021 per share) remains higher than, and competitive with, 
the standard rebates provided by other exchanges for executions of 
orders in securities priced at or above $1.00 per share that add 
displayed liquidity.\12\
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    \12\ See e.g., the Nasdaq PSX equities trading fee schedule on 
its public website (available at http://www.nasdaqtrader.com/Trader.aspx?id=PSX_Pricing), which reflects a standard rebate of 
$0.0015 per share to add non-displayed liquidity in securities 
priced at or above $1.00 per share; see also the Cboe BZX equities 
trading fee schedule on its public website (available at https://www.cboe.com/us/equities/membership/fee_schedule/bzx/), which 
reflects a standard rebate of $0.0010 per share to add non-displayed 
liquidity in securities priced at or above $1.00 per share.
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Remove Volume Tiers
    The Exchange is proposing to introduce a tiered pricing structure 
applicable to the fees charged for executions of Removed Volume on the 
Exchange. Specifically, the Exchange proposes to adopt a new volume-
based tier structure, referred to as the Remove Volume Tiers, in which 
the Exchange will charge a fee that is lower than the standard fee for 
executions of Removed Volume for Members that meet the specified volume 
thresholds on the Exchange, as described below.
    Currently, the Exchange charges a standard fee of $0.0025 per share 
for all executions of Removed Volume, which the Exchange is proposing 
to increase to $0.0029, as further described below. The Exchange now 
proposes to adopt two new Remove Volume Tiers in which it will charge a 
lower fee of $0.0027 per share for executions of Removed Volume for 
Members that qualify for Tier 1 by achieving an ADV \13\ that is equal 
to or greater than 0.10% of TCV; and a lower fee of $0.00265 per share 
for Members that qualify for Tier 2 by achieving an ADV that is equal 
to or greater than 0.15% of TCV. As proposed, the ADV will be 
calculated on a monthly basis, and Members that qualify for the Remove 
Volume Tier discount by achieving one of the thresholds specified above 
in a particular month will be charged the proposed lower fee according 
to the threshold tier achieved instead of the standard fee of $0.0029 
per share, for all executions of Removed Volume in that month.
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    \13\ See supra note 6.
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    The Exchange will continue to charge Members a fee of 0.05% of the 
total dollar value of the transaction for executions of orders that 
remove liquidity from the Exchange in securities priced below $1.00 per 
share. Thus, as under the Exchange's current pricing, the same fee 
would be applied to all Members for executions of orders that remove 
liquidity from the Exchange in securities priced below $1.00 per share.
    For the purposes of calculating ADV the Exchange proposes to 
exclude from the calculation: (1) Any Exchange System Disruption Days; 
(2) any day with a scheduled early market close; and (3) the Russell 
Reconstitution day, which typically occurs on the last Friday in June. 
The Exchange believes that Exchange system disruptions could preclude 
Members from participating on the Exchange to the extent that they 
might have otherwise participated on such days, and thus, the Exchange 
believes it is appropriate to exclude such days when determining 
whether a Members qualifies for a Remove Volume Tier to avoid 
penalizing Members that might otherwise have met the applicable volume 
threshold. For similar reasons, the Exchange believes it is appropriate 
to exclude days with a scheduled early market close, which are 
typically the day before, or the day after, a holiday, as the early 
market close may preclude some Members from submitting orders to the 
Exchange at the same level that they might otherwise. Additionally, the 
Exchange believes excluding the Russell Reconstitution day is 
appropriate as the change to normal trading activity as a result of the 
Russell Reconstitution may skew the calculation of ADV and TCV. The 
Exchange also proposes to specify that routed shares are not included 
in the calculation of ADV.\14\
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    \14\ See supra note 8.
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    The Exchange believes that the proposed Remove Volume Tier provides 
an incentive for Members to strive for higher ADV on the Exchange in 
order to qualify for the proposed lower fee for executions of Removed 
Volume. As such, the proposed Remove Volume Tier is designed to 
encourage Members to maintain or increase their order flow directed to 
the Exchange, thereby contributing to a deeper and more liquid market 
to the benefit of all market participants and enhancing the 
attractiveness of the Exchange as a trading venue. The Exchange notes 
that

[[Page 3154]]

the proposed lower fees for executions of Remove Volume applicable to 
Members that qualify for one of the Remove Volume Tiers (i.e., $0.0027 
or $0.00265) is comparable to, and competitive with, the fees charged 
for executions of liquidity-removing orders charged by at least one 
other exchange under similar volume-based tiers.\15\
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    \15\ See the Cboe EDGX equities trading fee schedule on its 
public website (available at https://www.cboe.com/us/equities/membership/fee_schedule/edgx/) which reflects fees charged under 
``Remove Volume Tiers''--tiers based on a member achieving certain 
step-up ADAV and ADV volume thresholds of $0.00275 per share for 
removing volume from the Cboe EDGX exchange.
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Increase Standard Fee for Removed Volume
    In connection with the proposed adoption of the Remove Volume 
Tiers, the Exchange also proposes to increase the standard fee charged 
for executions of Removed Volume. Currently, the Exchange charges a 
standard fee of $0.0025 per share for executions of Removed Volume. The 
Exchange now proposes to increase the standard fee charged for 
executions of Removed Volume to $0.0029 per share.\16\
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    \16\ The proposed pricing is referred to by the Exchange on the 
Fee Schedule under the existing description ``Removing Liquidity'' 
in Section (1)(a) Standard Rates.
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    The purpose of increasing the standard fee for executions of 
Removed Volume is for business and competitive reasons, as the Exchange 
believes that increasing such fee as proposed would generate additional 
revenue to offset some of the costs associated with the Exchange's 
proposed pricing structure, which provides various rebates for 
liquidity-adding orders and discounted fees for liquidity-removing 
orders, and the Exchange's operations generally, in a manner that is 
consistent with the Exchange's overall pricing philosophy of 
encouraging added liquidity. The Exchange notes that despite the modest 
increase proposed herein, the Exchange's proposed standard fee for 
executions of Removed Volume ($0.0029) remains competitive with the 
standard fee to remove liquidity in securities priced at or above $1.00 
per share charged by other equity exchanges.\17\
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    \17\ See e.g., the Cboe BZX equities trading fee schedule on its 
public website (available at https://www.cboe.com/us/equities/membership/fee_schedule/bzx/) which reflects a standard fee of 
$0.0030 per share to remove liquidity in securities priced at or 
above $1.00 per share; and the Cboe EDGX equities trading fee 
schedule on its public website (available at https://www.cboe.com/us/equities/membership/fee_schedule/edgx/) which reflects a standard 
fee of $0.0030 per share to remove liquidity in securities priced at 
or above $1.00.
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Liquidity Indicator Codes and Associated Fees Table Conforming Changes
    In conjunction with the Exchange's proposal to (i) reduce the 
rebate for Displayed Orders that Add Liquidity from $0.0032 for Tapes A 
and C, and $0.0035 for Tape B, to $0.0029 for all tapes; (ii) reduce 
the rebate for Non-Displayed Orders that Add Liquidity from $0.0025 to 
$0.0021; and (iii) increase the fee for Removing Liquidity from $0.0025 
to $0.0029, the Exchange now proposes to update the Liquidity Indicator 
Codes and Associated Fees table to reflect the aforementioned changes. 
The Exchange proposes to update the liquidity indicator codes as 
follows:
     Liquidity indicator code AA, Adds Liquidity, Displayed 
Order (Tape A). The Liquidity Indicator Code and Associated Fees table 
would specify that orders that yield liquidity indicator code AA would 
receive a rebate of $0.0029 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, Adds Liquidity, Displayed 
Order (Tape B). The Liquidity Indicator Code and Associated Fees table 
would specify that orders that yield liquidity indicator code AB would 
receive a rebate of $0.0029 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, Adds Liquidity, Displayed 
Order (Tape C). The Liquidity Indicator Code and Associated Fees table 
would specify that orders that yield liquidity indicator code AC would 
receive a rebate of $0.0029 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 Aa, Adds Liquidity, Non-Displayed 
Order (Tape A). The Liquidity Indicator Code and Associated Fees table 
would specify that orders that yield liquidity indicator code Aa would 
receive a rebate of $0.0021 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, Adds Liquidity, Non-Displayed 
Order (Tape B). The Liquidity Indicator Code and Associated Fees table 
would specify that orders that yield liquidity indicator code Ab would 
receive a rebate of $0.0021 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, Adds Liquidity, Non-Displayed 
Order (Tape C). The Liquidity Indicator Code and Associated Fees table 
would specify that orders that yield liquidity indicator code Ac would 
receive a rebate of $0.0021 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 Ar, Retail Order, Adds Liquidity, 
Non-Displayed Order (All Tapes). The Liquidity Indicator Code and 
Associated Fees table would specify that orders that yield liquidity 
indicator code Ar would receive a rebate of $0.0021 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, Removes Liquidity, Displayed 
Order (Tape A). The Liquidity Indicator Code and Associated Fees table 
would specify that orders that yield liquidity indicator code RA would 
be subject to a fee of $0.0029 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, Removes Liquidity, Displayed 
Order (Tape B). The Liquidity Indicator Code and Associated Fees table 
would specify that orders that yield liquidity indicator code RB would 
be subject to a fee of $0.0029 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, Removes Liquidity, Displayed 
Order (Tape C). The Liquidity Indicator Code and Associated Fees table 
would specify that orders that yield liquidity indicator code RC would 
be subject to a fee of $0.0029 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 RR, Retail Order, Removes 
Liquidity, Displayed Order (All Tapes). The Liquidity Indicator Code 
and Associated Fees table would specify that orders that yield 
liquidity indicator code RR would be subject to a fee of $0.0029 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, Removes Liquidity, Non-
Displayed Order (Tape A). The Liquidity Indicator Code and Associated 
Fees table would specify that orders that yield liquidity indicator 
code Ra would be subject to a fee of $0.0029 per share in securities

[[Page 3155]]

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, Removes Liquidity, Non-
Displayed Order (Tape B). The Liquidity Indicator Code and Associated 
Fees table would specify that orders that yield liquidity indicator 
code Rb would be subject to a fee of $0.0029 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, Removes Liquidity, Non-
Displayed Order (Tape C). The Liquidity Indicator Code and Associated 
Fees table would specify that orders that yield liquidity indicator 
code Rc would be subject to a fee of $0.0029 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 Rr, Retail Order, Removes 
Liquidity, Non-Displayed Order (All Tapes). The Liquidity Indicator 
Code and Associated Fees table would specify that orders that yield 
liquidity indicator code Rr would be subject to a fee of $0.0029 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.
Definitions
    The Exchange proposes to add definitions of the terms ADAV, ADV, 
and TCV which are consistent with the definitions of those terms above 
to the ``Definitions'' section of the Fee Schedule in connection with 
the proposed Add and Remove Volume Tiers. The Exchange notes that the 
proposed definitions of ADAV, ADV, and TCV are substantially similar to 
the definitions of those terms used by at least one other exchange on 
its fee schedule in connection with similar volume-based pricing 
tiers.\18\
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    \18\ See e.g., the Cboe EDGX Exchange, Inc. (``Cboe EDGX'') 
equities trading fee schedule on its public website (available at 
https://www.cboe.com/us/equities/membership/fee_schedule/edgx/).
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Allow Members To Aggregate Volume for Pricing Tiers
    The Exchange proposes to include a provision in its definition of 
ADAV and ADV to allow affiliated Members to aggregate their volume for 
purposes of the Exchange's determination of ADAV and ADV with respect 
to pricing tiers if such Members provide prior notice to the Exchange. 
Specifically, to the extent that two or more affiliated companies 
maintain separate memberships with the Exchange and can demonstrate 
their affiliation by showing they control, are controlled by, or are 
under common control with each other, the Exchange would permit such 
Members to count aggregate volume of such affiliates in calculating 
ADAV and ADV. As proposed, the Exchange will verify such affiliation 
using a Member's Form BD, which lists control affiliates. The purposes 
of this proposed change is to avoid disparate treatment of firms that 
have divided business activities between separate corporate entities as 
compared to firms that operate those business activities within a 
single corporate entity, as allowing affiliated Member firms to count 
their aggregate volume in calculating ADAV and ADV would produce the 
same result for purposes of the Exchange's volume-based tier pricing as 
if such affiliated Member firms were instead organized as a single 
corporate entity. The Exchange notes that this proposed change is 
consistent with the practice of at least one other exchange with 
respect to the aggregation of affiliated member firms' volume for 
purposes of ADAV and ADV calculations with respect to pricing 
tiers.\19\
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    \19\ Id.
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General Notes
    The Exchange proposes to adopt two new provisions to the ``General 
Notes'' section of its fee schedule. The Exchange proposes to add a 
provision that states that, to the extent a Pearl Equity Member does 
not qualify for any tiers contained herein, the rates listed in the 
``Liquidity Indicator Codes and Associated Fees'' table shall apply. 
Additionally, the Exchange proposes to add a provision that states 
that, to the extent a Pearl Equity Member qualifies for higher rebates 
and/or lower fees than those provided by a tier for which such Member 
qualifies, the higher rebates and/or lower fees shall apply. These 
provisions are intended to provide additional clarity regarding the 
operation of the Fee Schedule.
Implementation
    The Exchange proposes to implement the changes to the Fee Schedule 
pursuant to this proposal on January 3, 2022.
2. Statutory Basis
    The Exchange believes that its proposal to amend its Fee Schedule 
is consistent with Section 6(b) of the Act \20\ in general, and 
furthers the objectives of Section 6(b)(4) of the Act \21\ 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) \22\ 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.
---------------------------------------------------------------------------

    \20\ 15 U.S.C. 78f(b).
    \21\ 15 U.S.C. 78f(b)(4).
    \22\ 15 U.S.C 78f(b)(5).
---------------------------------------------------------------------------

    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 18% of the 
total market share of executed volume of equities trading.\23\ 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. 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, 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.'' \24\
---------------------------------------------------------------------------

    \23\ See supra note 4.
    \24\ Securities Exchange Act Release No. 51808 (June 9, 2005), 
70 FR 37499 (June 29, 2005).
---------------------------------------------------------------------------

    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

[[Page 3156]]

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. The Exchange believes the proposal reflects a 
reasonable and competitive pricing structure designed to incentivize 
market participants to direct their order flow to the Exchange, which 
the Exchange believes would enhance liquidity and market quality to the 
benefit of all Members and market participants.
Add Volume Tier
    The Exchange believes that the proposed Add Volume Tier is 
reasonable because it would provide Members with an additional 
incentive to achieve certain volume thresholds on the Exchange. The 
Exchange notes that volume-based incentives and discounts have been 
widely adopted by exchanges,\25\ and are reasonable, equitable, and not 
unfairly discriminatory because they are open to all Members on an 
equal basis and provide additional benefits or discounts that are 
reasonably related to the value to an exchange's market quality 
associated with higher levels of market activity, such as higher levels 
of liquidity provision and the introduction of higher volumes of orders 
into the price and volume discovery processes. The Exchange believes 
the proposed Add Volume Tiers are equitable and not unfairly 
discriminatory for these same reasons, as they are available to all 
Members and are designed to encourage Members to maintain or increase 
their orders that add liquidity on the Exchange, thereby contributing 
to a deeper and more liquid market to the benefit of all market 
participants and enhancing the attractiveness of the Exchange as a 
trading venue. Moreover, the Exchange believes the proposed Add Volume 
Tiers are a reasonable means to incentivize such increased activity, as 
it provides Members with additional opportunities to qualify for an 
enhanced rebate for executions of Added Displayed Volume.
---------------------------------------------------------------------------

    \25\ See Cboe EDGX equities trading fee schedule on its public 
website (available at https://www.cboe.com/us/equities/membership/fee_schedule/edgx/); Cboe BZX equities trading fee schedule on its 
public website (available at https://www.cboe.com/us/equities/membership/fee_schedule/bzx/); and MEMX equities trading fee 
schedule on its public website (available at https://info.memxtrading.com/fee-schedule/).
---------------------------------------------------------------------------

    Additionally, the Exchange believes that the proposed enhanced 
rebate for executions of Added Displayed Volume under Add Volume Tier 1 
(i.e., $0.0032 per share) is reasonable, in that it represents only a 
modest increase from the proposed standard rebate for such executions 
(i.e., of $0.0029 per share). Thus, the Exchange believes that it is 
reasonable, consistent with an equitable allocation of fees, and not 
unfairly discriminatory to provide an enhanced rebate for executions of 
Added Displayed Volume to Members that qualify for Tier 1 in comparison 
with the standard rebate for such executions in recognition of the 
benefits that such Members provide to the Exchange and market 
participants, as described above, particularly as the magnitude of the 
enhanced rebate is not unreasonably high and is, instead, reasonably 
related to the enhanced market quality it is designed to achieve.
    The Exchange believes the proposed change for the required criteria 
for Add Volume Tier 1 as an ADAV of at least 0.07% of TCV is reasonable 
because, as noted above, the Exchange believes that basing 
qualification for the Add Volume Tiers on an ADAV threshold that is a 
percentage of the TCV, rather than an ADAV threshold that is a 
specified number of shares, is appropriate so that the threshold is 
variable based on overall volumes in the equities industry, which 
fluctuate from month to month.
    The Exchange believes the proposed change for the required criteria 
for Add Volume Tier 2 as an ADAV of at least 0.10% of TCV is reasonable 
because, as noted above, the Exchange believes that basing 
qualification for the Add Volume Tiers on an ADAV threshold that is a 
percentage of the TCV, rather than an ADAV threshold that is a 
specified number of shares, is appropriate so that the threshold is 
variable based on overall volumes in the equities industry, which 
fluctuate from month to month.
    The Exchange believes the proposed change for the required criteria 
for Add Volume Tier 3 as an ADAV of at least 0.20% of TCV is reasonable 
because, as noted above, the Exchange believes that basing 
qualification for the Add Volume Tiers on an ADAV threshold that is a 
percentage of the TCV, rather than an ADAV threshold that is a 
specified number of shares, is appropriate so that the threshold is 
variable based on overall volumes in the equities industry, which 
fluctuate from month to month.
    The Exchange further believes the proposed new criteria is 
equitable and non-discriminatory because all Members will continue to 
be eligible to qualify for Add Volume Tier 3 and have the opportunity 
to receive the corresponding enhanced rebate if such criteria is 
achieved. The Exchange notes that should a Member not meet the proposed 
new criteria for Add Volume Tier 3, such member would merely not 
receive that corresponding enhanced rebate, and such Member would still 
have an opportunity to qualify for an enhanced rebate, although 
slightly lower than Tier 3, for executions of Added Volume under the 
proposed Add Volume Tier 2, which has slightly less stringent criteria 
than Add Volume Tier 3, as described above. Members that do not meet 
the proposed new criteria for Add Volume 2 would still have an 
opportunity to qualify for an enhanced rebate, although slightly lower 
than Add Volume Tier 2, for executions of Added Volume under the 
proposed Add Volume Tier 1, which has slightly less stringent criteria 
than Add Volume Tier 2, as described above.
    The Exchange further believes that the proposed new criteria for 
Add Volume Tier 1, Add Volume Tier 2, and Add Volume Tier 3, are 
reasonable, in that the proposed new criteria for Add Volume Tier 2 is 
incrementally more difficult to achieve than that of Add Volume Tier 1, 
and the proposed new criteria for Add Volume Tier 3 is incrementally 
more difficult to achieve than Add Volume Tier 2 thus, Add Volume Tier 
3 appropriately offers the highest rebate commensurate with the 
corresponding highest volume threshold. Similarly, the Exchange 
believes that the proposed new criteria for Add Volume Tier 2 is 
incrementally more difficult to achieve than that for Add Volume Tier 
1, and thus Add Volume Tier 2 appropriately offers a higher rebate 
commensurate with the higher volume threshold. Therefore, the Exchange 
believes the Add Volume Tiers, as proposed, are consistent with an 
equitable allocation of fees and rebates, as the more stringent 
criteria correlates with the corresponding tier's higher rebate. The 
Exchange further believes that the rebates provided under the Add 
Volume Tiers, as proposed, (i.e., $0.0032 for Tier 1; $0.0035 for Tier 
2; and $0.0036 for Tier 3) are reasonable, consistent with an equitable 
allocation of fees, and not unfairly discriminatory to pay such higher 
rebates for executions of Added Displayed Volume to Members that 
qualify for an Add Volume Tier in comparison with the standard rebate 
in recognition of the benefits to the Exchange and market participants 
described above, particularly as the magnitude of the enhanced rebate 
is not unreasonably high and is, instead, reasonably related to the 
enhanced

[[Page 3157]]

market quality it is designed to achieve. Additionally, the Exchange 
believes the proposed rebates are reasonable as such rebates are 
comparable to, and competitive with, the rebates for executions of 
liquidity-adding displayed orders provided by at least one other 
exchange under similar volume-based tiers.\26\
---------------------------------------------------------------------------

    \26\ See the Cboe BZX Exchange, Inc. (``Cboe BZX'') equities 
trading fee schedule on its public website (available at https://www.cboe.com/us/equities/membership/fee_schedule/bzx/) which 
reflects rebates provided under ``Add Volume Tiers''--tiers based on 
a member achieving certain ADAV thresholds--ranging from $0.0020 to 
$0.0031 per share for adding displayed liquidity to the Cboe BZX 
exchange.
---------------------------------------------------------------------------

    Additionally, the Exchange believes that excluding Exchange System 
Disruption Days, any day with a scheduled early market close, and the 
Russell Reconstitution Day when determining whether a Member qualifies 
for the proposed Add Volume Tier during a month is reasonable, 
equitable, and non-discriminatory because, as explained above, the 
Exchange believes doing so would help to avoid penalizing Members that 
might otherwise have met the requirements to qualify for the proposed 
Add Volume Tier due to Exchange system disruptions, reduced trading 
hours, and/or abnormal market conditions. The Exchange notes that the 
exclusion of the Exchange System Disruption Days, any day with a 
scheduled early market close, and the Russell Reconstitution Day is 
consistent with the methodology used by at least one other exchange 
when calculating certain member trading and other volume metrics for 
purposes of determining whether members qualify for certain pricing 
incentives, including calculations of ADAV for Volume Tiers 
specifically.\27\
---------------------------------------------------------------------------

    \27\ See e.g., Cboe BZX equities trading fee schedule on its 
public website available at https://www.cboe.com/us/equities/membership/fee_schedule/bzx/).
---------------------------------------------------------------------------

Reduce Standard Rebate for Added Displayed and Non-Displayed Volume
    The Exchange believes that the proposed reduced standard rebate for 
executions of Added Displayed Volume ($0.0029 per share) and Added Non-
Displayed Volume ($0.0021 per share) is reasonable and appropriate 
because it represents a modest decrease from the current standard 
rebate for executions of Added Displayed Volume and Added Non-Displayed 
Volume, and remains competitive with the standard rebates provided by 
at least one other exchange for orders in securities priced at or above 
$1.00 per share that add liquidity.\28\ The Exchange further believes 
that the proposed reduced standard rebate for executions of Added 
Displayed Volume and Added Non-Displayed Volume are equitably allocated 
and not unfairly discriminatory because each will apply equally to all 
Members.
---------------------------------------------------------------------------

    \28\ See MEMX Exchange equities trading fee schedule on its 
public website (available at https://info.memxtrading.com/fee-schedule/) which reflects a rebate of $0.0028 for Added Displayed 
Volume and a rebate of $0.0020 for Added Non Displayed Volume.
---------------------------------------------------------------------------

Remove Volume Tier
    The Exchange believes that the proposed Remove Volume Tier is 
reasonable because it would provide Members with an additional 
incentive to achieve certain volume thresholds on the Exchange. Volume-
based incentives and discounts have been widely adopted by 
exchanges,\29\ and are reasonable, equitable, and not unfairly 
discriminatory because they are open to all Members on an equal basis 
and provide additional benefits or discounts that are reasonably 
related to the value to an exchange's market quality associated with 
higher levels of market activity, such as higher levels of liquidity 
provision and the introduction of higher volumes of orders into the 
price and volume discovery processes. The Exchange believes the 
proposed Remove Volume Tier is equitable and not unfairly 
discriminatory for these same reasons, as it is open to all Members and 
is designed to encourage Members to maintain or increase their order 
flow directed to the Exchange, thereby contributing to a deeper and 
more liquid market to the benefit of all market participants and 
enhancing the attractiveness of the Exchange as a trading venue. 
Moreover, the Exchange believes the proposed Remove Volume Tier is a 
reasonable means to incentivize such increased activity, as it provides 
two different thresholds that a Member may achieve by increasing their 
ADV to an amount equal to or greater than the specified TCV threshold.
---------------------------------------------------------------------------

    \29\ See supra note 25.
---------------------------------------------------------------------------

    Additionally, the Exchange believes the proposed lower fee for 
executions of Removed Volume for a qualifying Member (i.e., $0.0027 and 
$0.00265 dependent upon the Tier) is reasonable, in that it represents 
only a modest decrease from the proposed standard fee for such 
executions (i.e., $0.0029 per share). The Exchange believes that it is 
reasonable, consistent with an equitable allocation of fees, and not 
unfairly discriminatory to charge such lower fees for executions of 
Removed Volume to Members that qualify for the Remove Volume Tier in 
comparison with the standard fee in recognition of the benefits that 
such Members provide to the Exchange and market participants, as 
described above, particularly as the magnitude of the lower fee is not 
unreasonably high and is, instead, reasonably related to the enhanced 
market quality it is designed to achieve. Further, as noted above, 
competing exchanges offer tiered pricing structures similar to the 
proposed Remove Volume Tier, including schedules of rebates and fees 
that apply based upon Members achieving certain volume thresholds, and 
the Exchange believes the proposed Remove Volume Tier's criteria are 
reasonable when compared to such tiers provided for by other exchanges. 
For example, Cboe EDGX charges lower fees for removing volume from the 
Cboe EDGX exchange under its ``Remove Volume Tiers'' at $0.00275 per 
share, compared to its standard fee of $0.0030 per share, but requires 
different, but similar, criteria than the Exchange's proposed Remove 
Volume Tier, which are also based upon a Member's volume.\30\
---------------------------------------------------------------------------

    \30\ See Cboe EDGX equities trading fee schedule on its public 
website (available at https://www.cboe.com/us/equities/membership/fee_schedule/edgx/).
---------------------------------------------------------------------------

    The Exchange further believes the proposed Remove Volume Tier is 
fair, equitable and not unfairly discriminatory because it is available 
to all Members. Further, the proposed Remove Volume Tier is comparable 
to the fees charged for executions of liquidity-removing orders charged 
by Cboe EDGX under similar volume based tiers.\31\
---------------------------------------------------------------------------

    \31\ Id.
---------------------------------------------------------------------------

    The Exchange believes that adding the proposed definitions for the 
terms, ADAV, ADV, and TCV, is reasonable, equitable, and non-
discriminatory because such definitions are substantially similar to 
the definitions of such terms used by other exchanges in connection 
with similar volume-based pricing tiers, as described above,\32\ and 
their placement on the Fee Schedule is designed to ensure that the Fee 
Schedule is as clear and understandable as possible with respect to 
applicable pricing. Similarly, the Exchange believes that specifying 
that routed shares are not included in the calculation of ADAV or ADV 
and that Exchange System Disruptions, any day with a scheduled early 
market close, and the Russell Reconstitution Day are excluded from the 
calculation of ADAV, ADV, and TCV is reasonable, equitable, and non-
discriminatory as this further clarifies the Exchange's calculation 
practices with respect to its volume-based pricing tiers, and such 
practices

[[Page 3158]]

are consistent with those of at least one other exchange in this 
regard.\33\
---------------------------------------------------------------------------

    \32\ Id.
    \33\ See Cboe EDGX equities trading fee schedule on its public 
website (available at https://www.cboe.com/us/equities/membership/fee_schedule/edgx/).
---------------------------------------------------------------------------

Increased Standard Fee for Removed Volume
    The Exchange believes that the proposed change to increase the 
standard fee for executions of Removed Volume is reasonable, equitable, 
and consistent with the Act because such a change is designed to 
generate additional revenue and decrease the Exchange's expenditures 
with respect to transaction pricing in order to offset some of the 
costs associated with the various rebates provided by the Exchange for 
liquidity-adding orders and the Exchange's operations generally, in a 
manner that is consistent with the Exchange's overall pricing 
philosophy of encouraging added liquidity, as described above. The 
Exchange also believes the proposed increased standard fee for 
executions of Removed Volume is reasonable and appropriate because it 
represents a modest increase from the current standard fee and, as 
noted above, remains lower than, and competitive with, the standard fee 
charged by several other exchanges to remove liquidity in securities 
priced at or above $1.00 per share.\34\ The Exchange further believes 
that the proposed increased standard fee for executions of Removed 
Volume is equitably allocated and not unfairly discriminatory because 
it will apply to all Members.
---------------------------------------------------------------------------

    \34\ See the MEMX equities trading fee schedule on its public 
website (available at https://info.memxtrading.com/fee-schedule/) 
which reflects a standard fee of $0.0029; Cboe EDGX equities trading 
fee schedule on it its public website (available at https://www.cboe.com/us/equities/membership/fee_schedule/edgx/) which 
reflects a standard fee of $0.0030; and Cboe BZX equities trading 
fee schedule on its public website (available at https://www.cboe.com/us/equities/membership/fee_schedule/bzx/) which 
reflects a standard fee of $0.0030.
---------------------------------------------------------------------------

Allow Members To Aggregate Volume for Pricing Tiers
    As noted above, the proposed language permitting aggregation of 
volume amongst affiliated Members for purposes of the ADAV and ADV 
calculations is intended to avoid disparate treatment of firms that 
divided their various business activities between separate corporate 
entities as compared to firms that operate those business activities 
within a single corporate entity, as allowing affiliated Member firms 
to count their aggregate volume in calculating ADAV and ADV would 
produce the same result for purposes of the Exchange's volume-based 
tier pricing as if such affiliated Member firms were instead organized 
as a single corporate entity. By way of example, subject to appropriate 
information barriers, many firms that are Members of the Exchange 
operate both a market making desk and a public customer business within 
the same corporate entity. In contrast, other firms may be part of a 
corporate structure that separates those business lines into different 
corporate affiliates, either for business, compliance or historical 
reasons. Those corporate affiliates, in turn, are required to maintain 
separate memberships with the Exchange. Absent the proposed policy, 
such corporate affiliates would not receive the same treatment as firms 
operating similar business lines within a single entity that is a 
Member of the Exchange. Accordingly, the Exchange believes that its 
proposed policy is fair and equitable, and not unreasonably 
discriminatory. In addition to ensuring fair and equal treatment of its 
Members, the Exchange does not want to create incentives for its 
Members to restructure their business operations or compliance 
functions simply due to the Exchange's pricing structure. Moreover, as 
noted above, this proposed policy is consistent with the practice of 
other exchanges with respect to the aggregation of affiliated Members' 
volume for purposes of determining ADAV and ADV with respect to pricing 
tiers.\35\
---------------------------------------------------------------------------

    \35\ See Cboe EDGX equities trading fee schedule on its public 
website (available at https://www.cboe.com/us/equities/membership/fee_schedule/edgx/).
---------------------------------------------------------------------------

Conforming Changes to Liquidity Indicator Codes
    The Exchange believes its proposal to decrease the rebate provided 
for Displayed Orders that add liquidity in securities priced at or 
above $1.00 from $0.0032 in Tapes A and C, and $0.0035 in Tape B, to 
$0.0029 per share is reasonable and equitably allocated among all 
Members of the Exchange. Liquidity indicator codes AA, AB, and AC are 
appended to orders that add displayed non-retail liquidity. The 
Exchange believes that the proposed decrease to $0.0029 per share is 
reasonable in that it represents a modest decrease from the current 
rebate for such executions.
    Additionally, the Exchange believes its proposal to decrease the 
rebate provided for Non-Displayed Orders that add liquidity in 
securities priced at or above $1.00 from $0.0025 to $0.0021 per share 
is reasonable and equitably allocated among all Members of the 
Exchange. Liquidity indicator codes Aa, Ab, Ac, and Ar are appended to 
orders that add non-displayed liquidity. The Exchange believes its 
proposal is equitable and not unfairly discriminatory as it will apply 
to all Members equally. Additionally, the Exchange believes its 
proposed change is reasonable as the Exchange is also proposing new Add 
Volume Tiers by which a Member can achieve rebates of $0.0032, $0.0035, 
and $0.0036 per share for securities priced at or above $1.00 upon 
satisfying certain criteria.
    The Exchange believes its proposal to increase the fee applied for 
orders that remove liquidity in securities priced at or above $1.00 per 
share is reasonable and equitably allocated among all Members of the 
Exchange. The Exchange believes its proposal to update the Liquidity 
Indicator Codes and Associated Fees table to reflect the new rate of 
$0.0029 per share for securities priced at or above $1.00 with 
liquidity indicator codes RA, RB, RC, RR, Ra, Rb, Rc, and Rr is 
equitable and reasonable because it will apply equally to all Members 
of the Exchange. Additionally, the Exchange believes its proposed 
change is reasonable as the Exchange is also proposing new Remove 
Volume Tiers by which a Member can achieve reduced fees of $0.0027 or 
$00.0265 per share for securities priced at or above $1.00 upon 
satisfying certain criteria.
    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.

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 Members to maintain or increase their order flow to the 
Exchange, thereby contributing to a deeper and more liquid market to 
the benefit of all market participants and enhancing the attractiveness 
of the

[[Page 3159]]

Exchange as a trading venue. As a result, the Exchange believes the 
proposal would enhance its competitiveness as a market that attracts 
actionable orders, thereby making it a more desirable destination venue 
for its customers. For these reasons, the Exchange believes that the 
proposal 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.'' \36\
---------------------------------------------------------------------------

    \36\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 47396 (June 29, 2005).
---------------------------------------------------------------------------

Intramarket Competition
    The Exchange believes that the proposed changes would incentivize 
market participants to direct order flow to the Exchange, thereby 
contributing to a deeper and more liquid market to the benefit of all 
market participants and enhancing the attractiveness of the Exchange as 
a trading venue, which the Exchange believes, in turn, would continue 
to encourage market participants to direct additional order flow to the 
Exchange. Greater liquidity benefits all Members by providing more 
trading opportunities and encourages Members to send orders to the 
Exchange, thereby contributing to robust levels of liquidity, which 
benefits all Members. The opportunity to qualify for the Add Volume 
Tiers and thus receive the corresponding enhanced rebate for executions 
of Added Displayed Volume would be available to all Members that meet 
the associated requirements in any month. Further, as noted above, the 
Exchange believes that the proposed criteria for the Add Volume Tiers 
are reasonably related to the enhanced market quality that such tiers 
are designed to promote.
    The opportunity to qualify for the Remove Volume Tier, and thus 
receive the proposed lower fee for executions of Removed Volume, would 
be available to all Members that meet the associated volume requirement 
in any month. The Exchange believes that meeting the volume requirement 
of the Remove Volume Tier is attainable for market participants, as the 
Exchange believes the thresholds are relatively low and reasonably 
related to the enhanced liquidity and market quality that the Remove 
Volume Tier is designed to promote. Similarly, the proposed increased 
standard fee for executions of Removed Volume and the ability for 
Members to aggregate volume amongst affiliated Member firms for 
purposes of the Exchange's determination of ADAV and ADV with respect 
to pricing tiers would apply equally to all Members. 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. Members have numerous 
alternative venues 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 18% 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 executions of 
Removed Volume, and 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 additional order 
flow to the Exchange and to generate additional revenue to offset some 
of the costs associated with the Exchange's current pricing structure 
and its operations generally, and such proposed rates applicable to 
executions of Added and Removed Volume are comparable to, and 
competitive with, rates charged by other exchanges.\37\
---------------------------------------------------------------------------

    \37\ See supra notes 9, 11, 12, 15, 17, 26, 28, and 34.
---------------------------------------------------------------------------

    Additionally, the proposed change to allow affiliated Members to 
aggregate their volume for purposes of the Exchange's determination of 
ADAV and ADV with respect to pricing tiers is designed to avoid 
disparate treatment of firms that have divided their various business 
activities between separate corporate entities as compared to firms 
that operate those business activities within a single corporate 
entity, which is consistent with the practice of other exchanges, as 
discussed above.\38\ 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 
volume-based incentives and pricing with respect to executions of 
Removed Volume and volume aggregation amongst affiliates with respect 
to pricing tiers.
---------------------------------------------------------------------------

    \38\ See supra note 18.
---------------------------------------------------------------------------

    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.'' \39\ 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' . . .''.\40\ 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.
---------------------------------------------------------------------------

    \39\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005).
    \40\ 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)).
---------------------------------------------------------------------------

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

[[Page 3160]]

19(b)(3)(A)(ii) of the Act,\41\ and Rule 19b-4(f)(2) \42\ 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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    \41\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \42\ 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-2022-01 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-2022-01. 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-2022-01, and should be submitted 
on or before February 10, 2022.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\43\
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    \43\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-01065 Filed 1-19-22; 8:45 am]
BILLING CODE 8011-01-P


