[Federal Register Volume 87, Number 169 (Thursday, September 1, 2022)]
[Notices]
[Pages 53813-53818]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-18858]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-95614; File No. SR-PEARL-2022-33]


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

August 26, 2022.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on August 17, 2022, MIAX PEARL, LLC (``MIAX Pearl'' or ``Exchange'') 
filed with the Securities and Exchange Commission (``SEC'' or 
``Commission'') a proposed rule change as described in Items I, II, and 
III below, which Items have been prepared by the Exchange. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange is filing a proposal to amend the 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 a new volume based pricing incentive, 
referred to as the ``Step-Up Added Liquidity Rebate,'' in which a 
qualifying Equity Member \3\ (or ``Member'') will receive a rebate for 
executions of certain orders in securities priced at or above $1.00 per 
share that add displayed liquidity to the Exchange; (ii) increase the 
rebate provided under Tier 2 of the Market Quality Tiers table; and 
(iii) add an additional qualifying requirement to the Remove Volume 
Tiers table. The Exchange originally filed this proposal on August 9, 
2022, (SR-PEARL-2022-32). On August 18, 2022, the Exchange withdrew SR-
PEARL-2022-32 and resubmitted this proposal.
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    \3\ 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 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 16% of the total market share of 
executed volume of equities trading, and the Exchange currently 
represents approximately 1% of the overall market share.\4\
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    \4\ See MIAX's ``The market at a glance, MTD Average'', 
available at https://www.miaxoptions.com/, (last visited July 25, 
2022).
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Adoption of Step-Up Added Liquidity Rebate
    The Exchange currently provides a standard rebate of $0.0029 per 
share for executions of orders in securities priced at or above $1.00 
per share that add displayed liquidity to the Exchange (such orders, 
``Added Displayed Volume''). The Exchange also currently offers various 
volume-based tiers and incentives through which a Member may receive an 
enhanced rebate for executions of Added Displayed Volume by achieving 
the specified criteria that corresponds to a particular tier/incentive.
    The Exchange now proposes to adopt a new volume-based incentive, 
referred to by the Exchange as the Step-Up Added Liquidity Rebate, in 
which the Exchange will provide a rebate of $0.0031 per share for 
executions of certain orders that constitute Added

[[Page 53814]]

Displayed Volume for a Member that qualifies for the Step-Up Added 
Liquidity Rebate by achieving a Step-Up ADAV \5\ as a % of TCV \6\ of 
at least 0.03% over the baseline month of July 2022.\7\ For example, 
assume a Member has an ADAV as a percent of TCV of 0.01% in July 2022. 
That Member must achieve an ADAV as a percent of TCV \8\ equal to or 
greater than 0.04% in a month in order to qualify for the Step-Up Added 
Liquidity Rebate. As proposed, a Member that qualifies for the Step-Up 
Added Liquidity Rebate will receive a rebate of $0.0031 per share for 
each of such Member's executions of orders that constitute Added 
Displayed Volume. The Exchange notes that the Step-Up Added Liquidity 
Rebate will not apply to executions of orders in securities priced 
below $1.00 per share or executions of orders that constitute added 
non-displayed liquidity.
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    \5\ ADAV means average daily added volume 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 
disruption that lasts for more than 60 minutes during regular 
trading hours, 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. With prior notice to the Exchange, an Equity Member may 
aggregate ADAV or ADV with other Equity Members that control, are 
controlled by, or are under common control with such Equity Member 
(as evidenced on such Equity Member's Form BD). See MIAX Pearl 
Equities Exchange Fee Schedule, Definitions, on its public website 
(available at https://www.miaxoptions.com/fees/pearl-equities).
    \6\ 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 
any day with a scheduled early market close, and on the ``Russell 
Reconstitution Day'' (typically the last Friday in June). See MIAX 
Pearl Equities Exchange Fee Schedule, Definitions, on its public 
website (available at https://www.miaxoptions.com/fees/pearl-equities).
    \7\ The Exchange will use a baseline ADAV of 0.00% of TCV for 
firms that become Members of the Exchange after July 2022 for the 
purpose of the Step-Up Added Liquidity Rebate calculation.
    \8\ The Exchange proposes to define ``Step-Up ADAV as a % of 
TCV'' on its Fee Schedule to mean, ``ADAV as a percent of TCV in the 
relevant baseline month subtracted from the current month's ADAV as 
a percent of TCV.''
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    The Exchange believes that the proposed Step-Up Added Liquidity 
Rebate provides an incremental incentive for Members to strive for 
higher ADAV on the Exchange (above their ADAV in the baseline month of 
July 2022) to receive the proposed rebate for qualifying executions of 
Added Displayed Volume. As such, the proposed Step-Up Added Liquidity 
Rebate is designed to incentivize Members that provide liquidity on the 
Exchange to increase their orders that add liquidity to the Exchange in 
order to qualify for the $0.0031 per share rebate for qualifying 
executions of Added Displayed Volume, which, in turn, the Exchange 
believes would encourage the submission of additional Added Displayed 
Volume to the Exchange, thereby promoting price discovery and 
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 the proposed Step-Up Added 
Liquidity Rebate is comparable to other volume-based incentives and 
discounts, which have been adopted by other exchanges,\9\ including 
pricing incentives that provide an enhanced rebate for firms that 
achieve a specified Step-Up ADAV threshold.\10\
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    \9\ See e.g. the CBOE EDGX Exchange, Inc. (``Cboe EDGX'') 
Equities Fee Schedule, Add/Remove Volume Tiers, on its public 
website (available at https://www.cboe.com/us/equities/membership/fee_schedule/bzx/); and the MEMX LLC, (``MEMX'') Fee Schedule, 
Liquidity Provision Tiers, on its public website (available at 
https://info.memxtrading.com/fee-schedule/).
    \10\ See e.g. the CBOE BZX Exchange, Inc. (``Cboe BZX'') 
Equities Fee Schedule, Step-Up Tiers, on its public website 
(available at https://www.cboe.com/us/equities/membership/fee_schedule/bzx/); and the MEMX LLC, (``MEMX'') Fee Schedule, Step-
Up Additive Rebate, on its public website (available at https://info.memxtrading.com/fee-schedule/).
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Market Quality Tier 2 Rebate Increase
    The Exchange offers a tiered pricing structure, Market Quality 
Tiers, designed to improve market quality on the Exchange in certain 
specific securities, the ``Market Quality Securities'' or ``MQ 
Securities,'' \11\ in the form of an enhanced rebate for executions of 
displayed orders in securities priced at or above $1.00 per share that 
add liquidity to the Exchange for Members that meet certain minimum 
quoting requirements as defined in Tier 1 and Tier 2 of the Market 
Quality Tiers table. The Exchange now proposes to increase the rebate 
provided for executions that meet the Tier 2 criteria from $0.0034 to 
$0.0035 per share (the Tier 1 rebate remains unchanged under this 
proposal). The proposed change is for business and competitive reasons.
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    \11\ A list of the MQ Securities may be found on the Exchange's 
public website (available at https://www.miaxoptions.com/fees/pearl-equities).
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Adopt New Requirement for Remove Volume Tiers
    Currently the Exchange offers a tiered pricing structure, Remove 
Volume Tiers, applicable to fees charged for executions of Removed 
Volume on the Exchange in securities priced at or above $1.00. 
Specifically, the Exchange charges a fee of $0.0028 per share for 
executions of Removed Volume for Members that qualify for Tier 1 by 
achieving an ADV that is equal to or greater than 0.10% of the TCV; and 
a fee of $0.0027 per share for Members that qualify for Tier 2 by 
achieving an ADV that is equal to or greater than 0.15% of the TCV.
    The Exchange now proposes to adopt a new requirement that must be 
satisfied by Members in addition to the aforementioned Tier 1 and Tier 
2 criteria. Specifically, the Exchange proposes to require Members to 
execute at least 1,000 shares of added liquidity during the month to be 
eligible for the lower fees provided for by either Tier 1 or Tier 2 in 
the Remove Volume Tiers table. The proposed change is designed to 
incentivize Members to be active participants on the Exchange by both 
adding and removing liquidity. Additionally, as a result of adopting 
this requirement, the Exchange proposes to change the column heading 
from ``Percentage Threshold'' to ``Required Criteria'' to more 
accurately describe the information contained in that column of the 
Remove Volume Tiers table.
Implementation
    The proposed changes are immediately effective.
2. Statutory Basis
    The Exchange believes that its proposal to amend its Fee Schedule 
is consistent with Section 6(b) of the Act \12\ in general, and 
furthers the objectives of Section 6(b)(4) of the Act \13\ in 
particular, in that it is an equitable allocation of reasonable fees 
and other charges among its Members and issuers and other persons using 
its facilities. The Exchange also believes that the proposed rule 
change is consistent with the objectives of Section 6(b)(5) \14\ 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

[[Page 53815]]

mechanism of a free and open market and a national market system, and, 
in general, to protect investors and the public interest, and, 
particularly, is not designed to permit unfair discrimination between 
customers, issuers, brokers, or dealers.
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    \12\ 15 U.S.C. 78f(b).
    \13\ 15 U.S.C. 78f(b)(4).
    \14\ 15 U.S.C. 78f(b)(5).
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    The Exchange operates in a highly fragmented and competitive market 
in which market participants can readily direct their order flow to 
competing venues if they deem fee levels at a particular venue to be 
excessive or incentives to be insufficient. More specifically, the 
Exchange is only one of sixteen registered equities exchanges, and 
there are a number of alternative trading systems and other off-
exchange venues, to which market participants may direct their order 
flow. Based on publicly available information, no single registered 
equities exchange currently has more than approximately 16% of the 
total market share of executed volume of equities trading.\15\ 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.'' \16\
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    \15\ See supra note 4.
    \16\ Securities Exchange Act Release No. 51808 (June 9, 2005), 
70 FR 37499 (June 29, 2005).
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    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 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 additional orders 
that add liquidity to the Exchange, which the Exchange believes would 
deepen liquidity and promote market quality on the Exchange to the 
benefit of all market participants.
Step-Up Added Liquidity Rebate
    As noted above, volume based incentives and discounts have been 
widely adopted by exchanges (including the Exchange),\17\ and are 
reasonable, equitable and not unfairly discriminatory because they are 
open to all Members on an equal basis and provide additional benefits 
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 process. The 
Exchange believes that the proposed Step-Up Added Liquidity Rebate is 
comparable to other incentives currently offered by other 
exchanges,\18\ and is reasonable, equitable and not unfairly 
discriminatory for these same reasons, as it provides Members with an 
additional incentive to achieve a certain volume threshold on the 
Exchange, is available to all Members and, as noted above, is designed 
to encourage Members to increase their orders that add liquidity on the 
Exchange in order to qualify for an enhanced rebate for qualifying 
executions of Added Displayed Volume, which, in turn, the Exchange 
believes would encourage the submission of additional Added Displayed 
Volume to the Exchange, thereby promoting price discovery and 
contributing to a deeper and more liquid market to the benefit of all 
market participants.
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    \17\ See supra note 10.
    \18\ See MEMX LLC, (``MEMX'') Fee Schedule on its public website 
(available at https://info.memxtrading.com/fee-schedule/) which 
reflects an additive per share rebate of $0.0002 for executions of 
added displayed volume for firms that qualify for the Step-Up 
Additive Rebate'' by achieving certain specified volume thresholds 
based upon Step-Up ADAV; see also Cboe BZX Exchange, Inc. (``Cboe 
BZX'') Equities Fee Schedule on its public website (available at 
https://www.cboe.com/us/equities/membership/fee_schedule/bzx/) which 
reflects enhanced rebates for executions of added displayed volume 
for firms that qualify for the ``Step-Up Tiers'' by achieving 
certain specified volume thresholds, including thresholds based upon 
Step-Up ADAV.
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    Cboe BZX provides a comparable volume based incentive, referred to 
as Step-Up Tiers, where the exchange will provide a rebate of $0.0032 
for displayed orders that add liquidity provided the required criteria 
for the Tier is satisfied.\19\ Tier 1 criteria requires (1) MPID has a 
Step-Up Add TCV \20\ from May 2019 >= 0.10% and (2) MPID has an ADV >= 
0.50% of the TCV; Tier 2 criteria requires (1) Member has a Step-Up 
ADAV from January 2022 >= 10,000,000 or Member has a Step-Up Add TCV 
from January 2022 >= 0.10%; and (2) Member has an ADV >= 0.30% of the 
TCV or Member has an ADV >= 35,000,000; and Tier 3 criteria requires 
(1) MPID has a Step-Up ADAV \21\ from May 2021 >= 30,000,000 or MPID 
has a Step-up Add TCV from May 2021 >= 0.30%; and (2) MPID has an ADV 
>= 0.30% of the TCV or MPID has an ADV >= 35,000,000.
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    \19\ See Cboe BZX Fee Schedule, Step-Up Tiers, on its public 
website (available at https://www.cboe.com/us/equities/membership/fee_schedule/bzx/).
    \20\ ``Step-Up Add TCV'' means ADAV as a percentage of TCV in 
the relevant baseline month subtracted from current ADAV as a 
percentage of TCV. See Cboe BZX Fee Schedule, Definitions, on its 
public website (available at https://www.cboe.com/us/equities/membership/fee_schedule/bzx/).
    \21\ ``Step-Up ADAV'' means ADAV in the relevant baseline month 
subtracted from current ADAV. See Cboe BZX Fee Schedule, 
Definitions, on its public website (available at https://www.cboe.com/us/equities/membership/fee_schedule/bzx/).
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    The MEMX Exchange offers a similar volume-based incentive, referred 
to as the Step-Up Additive Rebate, in which a qualifying Member will 
receive an additive rebate for executions of certain orders in 
securities priced at or above $1.00 per share that add displayed 
liquidity to the Exchange. To qualify for the incentive MEMX members 
must have (1) a Step-Up ADAV \22\ (excluding Retail Orders) from April 
2022 >= 0.07% of the TCV; \23\ or (2) a Step-Up ADAV from July 2022 >= 
0.05% of the TCV and an ADAV >= 0.30% of the TCV. \24\
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    \22\ MEMX defines Step-UP ADAV as the ADAV in the relevant 
baseline month subtracted from the current ADAV. ADAV is defined as 
the average daily added volume calculated as the number of shares 
added per day. ADAV is calculated on a monthly basis. See MEMX Fee 
Schedule, Definitions, available on its public website, (available 
at https://info.memxtrading.com/fee-schedule/).
    \23\ MEMX defines TCV as the total consolidated volume reported 
by all exchanges and trade reporting facilities to a consolidated 
transaction reporting plan for the month for which the fees apply. 
See MEMX Fee Schedule, Definitions, available on its public website, 
(available at https://info.memxtrading.com/fee-schedule/).
    \24\ See MEMX LLC, (``MEMX'') Fee Schedule on its public website 
(available at https://info.memxtrading.com/fee-schedule/); see also 
Cboe BZX Exchange, Inc. (``Cboe BZX'') Equities Fee Schedule on its 
public website (available at https://www.cboe.com/us/equities/membership/fee_schedule/bzx/) which reflects enhanced rebates for 
executions of added displayed volume for firms that qualify for the 
``Step-Up Tiers'' by achieving certain specified volume thresholds, 
including thresholds based upon Step-Up ADAV.
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    The Exchange proposes to adopt a single Tier under its Step-Up 
Added Liquidity Rebate table where Members that satisfy the required 
criteria of

[[Page 53816]]

having a Step-Up ADAV as percentage of TCV from July 2022 >= 0.03% of 
the TCV qualify for an enhanced rebate for of $0.0031 for Added 
Displayed Volume in securities priced at or above $1.00. As such, the 
Exchange believes the proposed rebate for qualifying executions of 
Added Displayed Volume provided under the Step-Up Added Liquidity 
Rebate for qualifying Members is comparable to other exchanges \25\ and 
is reasonably related to the market quality benefits that such 
incentive is designed to promote.
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    \25\ See supra note 18.
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    The Exchange notes that the proposed Step-Up Added Liquidity Rebate 
will not adversely impact any Member's ability to qualify for reduced 
fees or enhanced rebates offered under other pricing tiers/incentives 
on the Exchange. Should a Member not meet the required criteria, the 
Member will merely not receive the corresponding rebate.
Market Quality Tier 2 Rebate Increase
    The Exchange believes the proposed increased rebate for executions 
of displayed orders in securities priced at or above $1.00 per share 
that add liquidity to the Exchange for Members that meet the Tier 2 
criteria of the Market Quality Tiers table is reasonable, equitable, 
and consistent with the Act because it is designed to incentivize 
Members to improve the market quality by quoting at the NBBO for a 
significant portion of each day in a large number of securities 
generally, and in a targeted group of securities specifically (the MQ 
Securities), thereby benefitting the Exchange and other investors by 
providing improved trading conditions for all market participants 
through narrower bid-ask spreads and increasing the depth of liquidity 
available the NBBO in a broad base of securities, including the MQ 
Securities. The Exchange further believes the proposed increased rebate 
is reasonable and appropriate because it is comparable to, and 
competitive with, the rebate provided by at least one other exchange 
with a similar incentive program.\26\ The Exchange further believes 
that this fee is equitably allocated and not unfairly discriminatory 
because it applies equally to all Members and is designed to facilitate 
increased activity on the Exchange to the benefit of all Members by 
providing more trading opportunities and promoting price discovery.
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    \26\ See e.g., MEMX Fee Schedule on its public website, 
(available at https://info.memxtrading.com/fee-schedule/), which 
provides for a rebate of $0.0033 per share in Tier 1 under MEMX's 
Displayed Liquidity Incentive (DLI) Tiers for executions of 
liquidity providing displayed orders in securities priced at or 
above $1.00 per share for members that have an NBBO Time of at least 
25% in an average of at least 1,000 securities per trading day 
during the month, and a rebate of $0.0029 per share in Tier 2 for 
executions of liquidity providing displayed orders in securities 
priced at or above $1.00 per share for members that have an NBBO 
Time of at least 25% in an average of at least 400 securities per 
trading day during the month.
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    Accordingly, the Exchange believes that it is consistent with an 
equitable allocation of fees and is not unfairly discriminatory to 
increase the rebate provided under Tier 2 of the Market Quality Tiers 
table for executions of displayed liquidity in recognition of the 
benefits to the Exchange and market participants, particularly as the 
magnitude of the increase is not unreasonably high, and is reasonably 
related to enhanced market quality.
Adopt New Requirement for Remove Volume
    The Exchange believes its proposal to adopt an additional 
requirement for Members to qualify for either Tier 1 or Tier 2 pricing 
under the Remove Volume Tiers is reasonable, equitable and not unfairly 
discriminatory because it is equally applicable to all Members. The 
Exchange believes its proposed requirement is comparable to incentives 
offered by at least one other exchange, and is reasonable, equitable 
and not unfairly discriminatory as it provides Members with an 
additional incentive to submit orders to the Exchange that add 
liquidity in order to qualify for the pricing provided for in Tier 1 
and Tier 2 of the Remove Volume Tiers table. MEMX charges a fee of 
$0.0030 for removed volume from the MEMX Book.\27\ However, MEMX 
members may qualify for a discounted fee of $0.0029 if the member has 
(1) an ADV >= 0.45% of the TCV and an ADAV >= 0.20% of the TCV; or (2) 
an ADV >= 1.00% of the TCV.\28\
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    \27\ See MEMX Fee Schedule, Transaction Fees, on its public 
website (available at https://info.memxtrading.com/fee-schedule/).
    \28\ See MEMX Fee Schedule, Liquidity Removal Tier, on its 
public website, (available at https://info.memxtrading.com/fee-schedule/).
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    The Exchange believes that the additional liquidity requirement is 
reasonably related to the market quality benefits that such incentive 
is designed to promote and that its Remove Volume Tiers incentive is 
comparable to that of at least one other exchange.\29\ The proposed 
change is designed to incentivize Members to be active participants on 
the Exchange by both adding and removing liquidity.
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    \29\ See id.
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    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 \30\ 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.
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    \30\ 15 U.S.C. 78f(b)(4) and (5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed change will impose 
any burden on competition not necessary or appropriate in furtherance 
of the purposes of the Act. The proposal is intended to incentivize 
market participants to direct additional orders that add liquidity to 
the Exchange, thereby deepening liquidity and promoting market quality 
on the Exchange to the benefit of all market participants. 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. Additionally, the 
Exchange's proposal to amend the column heading on the Remove Volume 
Tiers is non-substantive and is intended to accurately describe the 
information contained in that specific column.
Intramarket Competition
    The Exchange does not believe that the proposal will impose any 
burden on intramarket competition not necessary or appropriate in 
furtherance of the purposes of the Act. The Exchange believes its 
proposal would incentivize Members to submit additional orders that add 
liquidity to the Exchange, thereby contributing to a deeper and more 
liquid market and promoting price discovery and market quality on the 
Exchange 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 additional orders to the Exchange, thereby 
contributing to robust levels of liquidity, which benefits all market

[[Page 53817]]

participants. As described above, the opportunity to qualify for the 
proposed new Step-Up Added Liquidity Rebate, and thus receive the 
proposed rebate for qualifying executions of Added Displayed Volume, 
would be available to all Members that meet the associated volume 
requirement, and the Exchange believes the proposed rebate provided 
under such incentive is reasonably related to the enhanced market 
quality that it is designed to promote. The Exchange's proposal to 
increase the Tier 2 incentive provided under the Market Quality Tiers 
table and its proposal to add an additional requirement to the Remove 
Volume Tiers both serve to incentivize Members to provide additional 
liquidity to the Exchange, thereby contributing to a deeper and more 
liquid market and promoting price discovery and market quality on the 
Exchange to the benefit of all market participants. As such the 
Exchange does not believe the proposed changes would impose any burden 
on intramarket competition that is not necessary or appropriate in 
furtherance of the purpose of the Act.
Intermarket Competition
    The Exchange believes its proposal will benefit competition, and 
the Exchange notes that it 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 16% of the total market share of executed volume of equities 
trading.\31\ 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.
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    \31\ See supra note 4.
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    As described above, the proposed changes represent a competitive 
proposal through which the Exchange is seeking to encourage additional 
order flow to the Exchange through a volume-based incentive that is 
comparable to volume-based incentives adopted by other exchanges.\32\ 
The proposed change to increase the rebate provided for in Tier 2 of 
the Market Quality Tiers also serves to encourage additional order flow 
to the Exchange.
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    \32\ See supra note 18.
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    Accordingly, the Exchange believes that its proposal would not 
burden, but rather promote, intermarket competition by enabling it to 
better compete with other exchanges that offer similar pricing 
incentives to market participants that achieve certain volume criteria 
and thresholds.
    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.'' \33\ 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' . . .''.\34\ Accordingly, the Exchange does not believe 
its proposed pricing changes impose any burden on competition that is 
not necessary or appropriate in furtherance of the purposes of the Act.
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    \33\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005).
    \34\ NetCoalition v. SEC, 615 F.3d 525, 539 (D.C. Cir. 2010) 
(quoting Securities Exchange Act Release No. 59039 (December 2, 
2008), 73 FR 74770, 74782-83 (December 9, 2008) (SR-NYSE-2006-21)).
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C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    Written comments were neither solicited nor received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A)(ii) of the Act,\35\ and Rule 19b-4(f)(2) \36\ 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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    \35\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \36\ 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-2022-33 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-2022-33. 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

[[Page 53818]]

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-2022-33 and should be submitted on or before September 22, 2022.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\37\
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    \37\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022-18858 Filed 8-31-22; 8:45 am]
BILLING CODE 8011-01-P


