[Federal Register Volume 87, Number 139 (Thursday, July 21, 2022)]
[Notices]
[Pages 43579-43581]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-15544]



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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-95298; File No. SR-PEARL-2022-29]


Self-Regulatory Organizations: Notice of Filing and Immediate 
Effectiveness of a Proposed Rule Change by MIAX PEARL, LLC To Amend the 
Route to Primary Auction Routing Option Under Exchange Rule 
2617(b)(5)(B)

July 15, 2022.
    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 July 13, 2022 MIAX PEARL, LLC (``MIAX Pearl'' 
or the ``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 proposed rule change to amend the Route to 
Primary Auction (``PAC'') routing option under Exchange Rule 
2617(b)(5)(B).
    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 PAC routing 
option under Exchange Rule 2617(b)(5)(B) that is available to orders in 
equity securities traded on the Exchange's equity trading platform 
(referred to herein as ``MIAX Pearl Equities''). Specifically, the 
Exchange proposes to amend subparagraph (b)(5)(B)(1)(ii)(b) to provide 
for the routing of Market Orders \3\ entered at or after 3:50 p.m. 
Eastern Time to the primary listing market's closing process in the 
event the primary listing market declared a regulatory halt and is to 
conduct its closing process. The Exchange also proposes to make a 
clarifying change to Exchange Rule 2617(b)(5)(B) to replace two 
references to ``primary listing exchange'' with the term ``primary 
listing market'' to ensure consistent terms are used within the Rule.
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    \3\ See Exchange Rule 2614(a)(2).
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    The Exchange offers its Equity Members \4\ optional routing 
functionality that allows them to use the Exchange to access liquidity 
on other trading centers. The functionality includes routing algorithms 
that determine the destination or pattern of routing. Exchange Rule 
2617(b)(5) sets forth that there is a particular pattern of routing to 
other trading centers, known as the ``System routing table'', as well 
as sets forth the Exchange's available routing options. All routing is 
designed to be conducted in a manner consistent with Regulation NMS.
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    \4\ 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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    The Exchange recently launched the PAC routing option,\5\ which 
enables an Equity Member to designate that their order be routed to the 
primary listing market to participate in the primary listing market's 
opening, re-opening or closing process. In sum, Exchange Rule 
2617(b)(5)(B) describes PAC as a routing option for Market Orders and 
displayed Limit Orders \6\ designated with a time-in-force of Regular 
Hours Only (``RHO'') \7\ that the entering firm wishes to designate for 
participation in the opening, re-opening (following a regulatory halt, 
suspension, or pause), or closing process of a primary listing market 
(BZX, the New York Stock Exchange LLC (``NYSE''), Nasdaq, NYSE American 
LLC (``NYSE American''), or NYSE Arca, Inc. (``NYSE Arca'')) if 
received before the opening, re-opening, or closing process of such 
market.
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    \5\ See Securities Exchange Act Release No. 94301 (February 23, 
2022), 87 FR 11739 (March 2, 2002) (SR-PEARL-2022-06). See also MIAX 
Pearl Equities--Expansion of Functionality Through New Route to 
Primary Auction (PAC) Strategy--Rollout Postponed until June 27, 
2022, dated June 8, 2022, available at https://www.miaxoptions.com/alerts/2022/06/08/miax-pearl-equities-expansion-functionality-through-new-route-primary-auction-pac (last visited June 28, 2022).
    \6\ See Exchange Rule 2614(a)(1).
    \7\ Exchange Rule 2614(b)(2) defines ``Regular Hours Only'' or 
``RHO'' as ``[a]n order that is designated for execution only during 
Regular Trading Hours, which includes the Opening Process for equity 
securities. An order with a time-in-force of RHO entered into the 
System before the opening of business on the Exchange as determined 
pursuant to Exchange Rule 2600 will be accepted but not eligible for 
execution until the start of Regular Trading Hours.''
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Market Orders and Closing Process
    Market Orders coupled with the PAC routing option are currently not 
eligible for routing to the primary listing market's closing process. 
Accordingly, Exchange Rule 2617(b)(5)(B)(1)(ii)(b) provides that a 
Market Order designated as RHO is not eligible to be routed to 
participate in the primary listing market's closing process.\8\ 
Exchange Rule 2617(b)(5)(B)(1)(ii)(b) further provides that a Market 
Order designated as RHO received at or after the time the Exchange 
begins to route existing orders to participate in the primary listing 
market's closing process, but before market close, will be cancelled.
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    \8\ Market Orders coupled with the PAC routing option designated 
as Immediate-or-Cancel (``IOC'') will be cancelled. See Exchange 
Rule 2617(b)(5)(B)(2)(iv).
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    The Exchange initially understood that Equity Members did not plan 
to utilize Market Orders to participate in the primary listing market's 
closing process because they would prefer to enter Limit Orders \9\ for 
purposes of participating in the price discovery process conducted by 
the primary listing market's closing process.\10\ Therefore, the 
Exchange initially proposed to not accept Market Orders for purposes of 
routing them to a primary listing market's closing process. However, 
Equity Members recently expressed interest in having the ability to 
route Market Orders to participate in the primary listing market's 
closing process where the primary listing market declares a regulatory 
halt that extends past 3:50 p.m. Eastern Time. In such case, there is 
no risk that such

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order would be executed during continuous trading because continuous 
trading concluded and the primary listing market is to proceed directly 
to conducting its closing process in accordance with its rules.\11\ The 
Exchange understands Equity Members would welcome the flexibility to 
route their Market Orders to participate in the primary listing 
market's closing process in this case.
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    \9\ See Exchange Rule 2614(b).
    \10\ The Exchange previously represented that it would submit a 
proposed rule change to route Market Orders to participate in the 
primary listing market's closing process should Equity Members 
request such a change. See Securities Exchange Act Release No. 94301 
at note 23 (February 23, 2022), 87 FR 11739 (March 2, 2002) (SR-
PEARL-2022-06)
    \11\ See, e.g., NYSE Rule 7.35(d), Openings and Reopenings in 
Last Ten Minutes of Trading; BZX Rule 11.23(d)(2)(c), Incremental 
Quote Period Extensions for Halt Auctions Following a Regulatory 
Halt; and Nasdaq Rules 1420(a)(12)(H), Re-opening of Trading 
Following a Trading Pause, and 4754(b)(6), LULD Closing Cross 
Following Limit-Up-Limit-Down Trading Pause.
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    The Exchange, therefore, proposes to amend Exchange Rule 
2617(b)(5)(B)(1)(ii)(b) to provide that a Market Order designated as 
RHO would continue to not be eligible to be routed to participate in 
the primary listing market's closing process, unless such Market Order 
is: (i) entered at or after 3:50 p.m. Eastern Time, but before market 
close, (ii) the primary listing market has declared a regulatory halt; 
and (iii) the primary listing market is to conduct its closing process 
according to its applicable rules.\12\ Exchange Rule 
2617(b)(5)(B)(1)(ii)(b) would continue to provide that all other Market 
Orders designated as RHO received at or after the time the Exchange 
begins to route existing orders to participate in the primary listing 
market's closing process, but before market close, will be cancelled.
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    \12\ The Exchange notes that any shares that remain unexecuted 
after routing will be cancelled in accordance with the Market 
Order's RHO time-in-force instruction.
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Clarifying Change
    The Exchange notes that Exchange Rule 2617(b)(5)(B) used the term 
``primary listing market'' through most of Exchange Rule 2617(b)(5)(B). 
Exchange Rule 2617(b)(5)(B) only uses the term ``primary listing 
exchange'' in two areas, subparagraphs (b)(5)(B)(1)(ii)(a) and (b). The 
Exchange proposes to make a clarifying change to Exchange Rule 
2617(b)(5)(B) to replace these two references to ``primary listing 
exchange'' with ``primary listing market'' to ensure consistent terms 
are used within the Rule. These change would not amend the meaning of 
Exchange Rule 2617(b)(5)(B)(1)(ii)(a) and (b). They are simply intended 
to ensure consistent terminology is used throughout the description of 
the PAC routing option in Exchange Rule 2617(b)(5)(B) and avoid 
potential confusion.
Implementation
    Due to the technological changes associated with this proposed 
change, the Exchange will issue a trading alert publicly announcing the 
implementation date of this proposed rule change to provide Equity 
Members with adequate time to prepare for the associated technological 
changes. The Exchange anticipates that the implementation date will be 
in either the fourth quarter of 2022 or first quarter of 2023.
2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the 
Act,\13\ in general, and furthers the objectives of Section 
6(b)(5),\14\ in particular, because it is designed to promote just and 
equitable principles of trade, 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. The proposed 
rule change would remove impediments to a free and open market and 
promote just and equitable principles of trade because it would provide 
market participants with the ability to route Market Orders to 
participate directly in the primary listing market's closing process 
opening up another source of liquidity to Market Orders entered on the 
MIAX Pearl Equities. The Exchange only proposes to route Market Orders 
to participate in the primary listing market's closing process that are 
entered at or after 3:50 p.m. Eastern Time, but before market close, 
and the primary listing market declared a regulatory halt and is to 
conduct its closing process according to their applicable rules. The 
Exchange proposes to only route Market Orders in this discrete scenario 
because it is consistent with Equity Members' expectation that such 
Market Orders participate directly in the primary market's closing 
process only and not be subject to market risk because continuous 
trading in the security would be halted.
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    \13\ 15 U.S.C. 78f(b).
    \14\ 15 U.S.C. 78f(b)(5).
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    The proposed change to the PAC routing option would promote just 
and equitable principles of trade and remove impediments to and perfect 
the mechanism of a free and open market and a national market system 
because it would provide Equity Members the option to route their 
Market Orders to an additional source of liquidity, potentially 
benefiting from improved execution prices and a more efficient 
marketplace. Therefore, the Exchange believes the proposed rule change 
would provide Equity Members with greater control and flexibility over 
the routing of their Market Orders, thereby facilitating transactions 
in securities and perfecting the mechanism of the national market 
system. The Exchange also notes that use of the PAC routing option, 
including routing Market Order to participate in the primary listing 
market's closing process, is completely voluntary and no Equity Member 
is required to route orders through the Exchange and may choose other 
methods to access liquidity on other trading centers.
    The proposal would not impede the national market system because it 
is not designed to disrupt the ability of the primary listing market to 
conduct their closing processes. The proposed rule change is similar to 
existing routing options already provided by other equity 
exchanges,\15\ which the Exchange understands have not disrupted the 
primary listing market's ability to conduct their closing process. The 
proposed rule change would simply provide Equity Members with another 
means to route Market Orders to participate in the primary listing 
market's closing process. The primary listing markets are free to 
reject or cancel such orders should they deem them to be inconsistent 
with their applicable rules.
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    \15\ See Cboe BZX Exchange, Inc. (``BZX'') Rule 11.13(b)(3)(N) 
(describing the ROOC routing option and not prohibiting market 
orders from routing to the primary listing market's closing 
process), Cboe EDGX Exchange, Inc. (``EDGX'') Rule 11.11(g)(8) 
(describing the ROOC routing option and not prohibiting market 
orders from routing to the primary listing market's closing 
process), and The Nasdaq Stock Market LLC (``Nasdaq'') Rule 
4758(a)(1)(A)(x) (describing the LIST routing option and not 
prohibiting market orders from routing to the primary listing 
market's closing process).
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    Finally, the proposed clarification to Exchange Rule 2617(b)(5)(B) 
to replace two references to ``primary listing exchange'' with the term 
``primary listing market'' promotes just and equitable principles of 
trade and protects investors and the public interest because it ensures 
consistent terminology is used within the Exchange's Rules, thereby 
avoiding potential investor confusion.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. In fact, the Exchange 
believes that expanding its PAC routing option to route Market Orders 
entered at or after 3:50 p.m.

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Eastern Time to participate in the primary listing market's closing 
process where a regulatory halt is declared may have a positive effect 
on competition because it would allow the Exchange to offer 
functionality similar to that offered by BZX, EDGX, and Nasdaq.\16\ The 
Exchange believes that its proposal promotes competition because it is 
designed to attract liquidity to the Exchange by providing market 
participants with additional routing functionality.
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    \16\ Id.
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    The Exchange believes that the proposal will not impose any burden 
on inter-market competition, but rather promote competition by 
enhancing the value of the Exchange's PAC routing option. However, 
since the use of the Exchange's PAC routing option is voluntary and 
Equity Members have numerous alternative mechanisms for order routing, 
the changes will not impair the ability of Equity Members to use other 
means to access the primary listing market's closing process. The 
proposed rule change would improve inter-market competition because it 
allows the Exchange to provide another means by which market 
participants would be able route Market Orders to participate in the 
primary listing market's closing processes that the Exchange believes 
is similar to that currently provided by other exchanges.\17\
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    \17\ Id.
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    The Exchange also believes that the proposal will not impose any 
burden on intra-market competition because it would be available to all 
Equity Members. Any Equity Member that seeks to have their Market Order 
routed to participate in the primary listing market's closing process 
in the above proposed scenario is free to select the PAC routing option 
or seek to access those markets through other means.
    Finally, the proposed clarification to Exchange Rule 2617(b)(5(B) 
will not impose any burden on competition that is not necessary or 
appropriate in furtherance of the purposes of the Act because it also 
does not enhance the Exchange's competitive position. Rather, it is 
simply intended to ensure consistent terminology is used in the 
Exchange's Rules.

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

    Because the foregoing proposed rule change does not: (i) 
Significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days after the date of the filing, or such 
shorter time as the Commission may designate, it has become effective 
pursuant to 19(b)(3)(A) of the Act \18\ and Rule 19-b4(f)(6) \19\ 
thereunder.
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    \18\ 15 U.S.C. 78s(b)(3)(A).
    \19\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file the proposed rule change at 
least five business days prior to the date of filing of the proposed 
rule change, or such shorter time as designated by the Commission. 
The Exchange has satisfied this requirement.
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    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.

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-2022-29 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-2022-29. 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-2022-29 
and should be submitted on or before August 11, 2022.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\20\
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    \20\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-15544 Filed 7-20-22; 8:45 am]
BILLING CODE 8011-01-P


