[Federal Register Volume 87, Number 187 (Wednesday, September 28, 2022)]
[Notices]
[Pages 58843-58848]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-20952]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-95886; File No. SR-PEARL-2022-40]


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

September 22, 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 September 14, 2022, MIAX PEARL, LLC (``MIAX 
Pearl'' or ``Exchange'') filed with the Securities and Exchange 
Commission (``Commission'') a proposed rule change as described in 
Items I, II, and III below, which Items have been prepared by the 
Exchange. The Commission is publishing this notice to solicit comments 
on the proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange is filing a proposal to amend the MIAX Pearl Options 
Fee Schedule (the ``Fee Schedule'').
    The text of the proposed rule change is available on the Exchange's 
website at http://www.miaxoptions.com/rule-filings/pearl at MIAX 
Pearl's principal office, and at the Commission's Public Reference 
Room.

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

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

[[Page 58844]]

the most significant aspects of such statements.

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

1. Purpose
    The Exchange proposes to amend the Add/Remove Tiered Rebates/Fees 
set forth in Section 1(a) of the Fee Schedule to: (1) modify the Maker 
rebates (defined below) in all Tiers for transactions in Penny Classes 
(defined below) for MIAX Pearl Market Makers,\3\ Non-Priority 
Customers, Firms, Broker-Dealers and Non-MIAX Pearl Market Makers; and 
(2) provide for additional, separate Maker rebates for Market Makers 
and Electronic Exchange Member (``EEM'') \4\ Professional origins 
(defined below) for certain transactions in Non-Penny Classes (defined 
below). The Exchange originally filed this proposal on September 1, 
2022 (SR-PEARL-2022-38). On September 14, 2022, the Exchange withdrew 
SR-PEARL-2022-38 and resubmitted this proposal.
---------------------------------------------------------------------------

    \3\ ``Market Maker'' means a Member registered with the Exchange 
for the purpose of making markets in options contracts traded on the 
Exchange and that is vested with the rights and responsibilities 
specified in Chapter VI of Exchange Rules. See the Definitions 
Section of the Fee Schedule and Exchange Rule 100.
    \4\ ``Electronic Exchange Member'' or ``EEM'' means the holder 
of a Trading Permit who is a Member representing as agent Public 
Customer Orders or Non-Customer Orders on the Exchange and those 
non-Market Maker Members conducting proprietary trading. Electronic 
Exchange Members are deemed ``members'' under the Exchange Act. See 
the Definitions Section of the Fee Schedule and Exchange Rule 100.
---------------------------------------------------------------------------

Background

    The Exchange currently assesses transaction rebates and fees to all 
market participants which are based upon the total monthly volume 
executed by the Member \5\ on MIAX Pearl in the relevant, respective 
origin type (not including Excluded Contracts) \6\ (as the numerator) 
expressed as a percentage of (divided by) TCV \7\ (as the denominator). 
In addition, the per contract transaction rebates and fees are applied 
retroactively to all eligible volume for that origin type once the 
respective threshold tier (``Tier'') has been reached by the Member. 
The Exchange aggregates the volume of Members and their Affiliates.\8\ 
Members that place resting liquidity, i.e., orders resting on the book 
of the MIAX Pearl System,\9\ are paid the specified ``maker'' rebate 
(each a ``Maker''), and Members that execute against resting liquidity 
are assessed the specified ``taker'' fee (each a ``Taker''). For 
opening transactions and ABBO \10\ uncrossing transactions, per 
contract transaction rebates and fees are waived for all market 
participants. Finally, Members are assessed lower transaction fees and 
receive lower rebates for order executions in standard option classes 
in the Penny Interval Program \11\ (``Penny Classes'') than for order 
executions in standard option classes which are not in the Penny 
Interval Program (``Non-Penny Classes''), where Members are assessed 
higher transaction fees and receive higher rebates.
---------------------------------------------------------------------------

    \5\ ``Member'' means an individual or organization that is 
registered with the Exchange pursuant to Chapter II of Exchange 
Rules for purposes of trading on the Exchange as an ``Electronic 
Exchange Member'' or ``Market Maker.'' Members are deemed 
``members'' under the Exchange Act. See the Definitions Section of 
the Fee Schedule and Exchange Rule 100.
    \6\ ``Excluded Contracts'' means any contracts routed to an away 
market for execution. See the Definitions Section of the Fee 
Schedule.
    \7\ ``TCV'' means total consolidated volume calculated as the 
total national volume in those classes listed on MIAX PEARL for the 
month for which the fees apply, excluding consolidated volume 
executed during the period time in which the Exchange experiences an 
``Exchange System Disruption'' (solely in the option classes of the 
affected Matching Engine (as defined below)). The term Exchange 
System Disruption, which is defined in the Definitions section of 
the Fee Schedule, means an outage of a Matching Engine or collective 
Matching Engines for a period of two consecutive hours or more, 
during trading hours. The term Matching Engine, which is also 
defined in the Definitions section of the Fee Schedule, is a part of 
the MIAX PEARL electronic system that processes options orders and 
trades on a symbol-by-symbol basis. Some Matching Engines will 
process option classes with multiple root symbols, and other 
Matching Engines may be dedicated to one single option root symbol 
(for example, options on SPY may be processed by one single Matching 
Engine that is dedicated only to SPY). A particular root symbol may 
only be assigned to a single designated Matching Engine. A 
particular root symbol may not be assigned to multiple Matching 
Engines. The Exchange believes that it is reasonable and appropriate 
to select two consecutive hours as the amount of time necessary to 
constitute an Exchange System Disruption, as two hours equates to 
approximately 1.4% of available trading time per month. The Exchange 
notes that the term ``Exchange System Disruption'' and its meaning 
have no applicability outside of the Fee Schedule, as it is used 
solely for purposes of calculating volume for the threshold tiers in 
the Fee Schedule. See the Definitions Section of the Fee Schedule.
    \8\ ``Affiliate'' means (i) an affiliate of a Member of at least 
75% common ownership between the firms as reflected on each firm's 
Form BD, Schedule A, or (ii) the Appointed Market Maker of an 
Appointed EEM (or, conversely, the Appointed EEM of an Appointed 
Market Maker). An ``Appointed Market Maker'' is a MIAX PEARL Market 
Maker (who does not otherwise have a corporate affiliation based 
upon common ownership with an EEM) that has been appointed by an EEM 
and an ``Appointed EEM'' is an EEM (who does not otherwise have a 
corporate affiliation based upon common ownership with a MIAX PEARL 
Market Maker) that has been appointed by a MIAX PEARL Market Maker, 
pursuant to the following process. A MIAX PEARL Market Maker 
appoints an EEM and an EEM appoints a MIAX PEARL Market Maker, for 
the purposes of the Fee Schedule, by each completing and sending an 
executed Volume Aggregation Request Form by email to 
[email protected] no later than 2 business days prior to 
the first business day of the month in which the designation is to 
become effective. Transmittal of a validly completed and executed 
form to the Exchange along with the Exchange's acknowledgement of 
the effective designation to each of the Market Maker and EEM will 
be viewed as acceptance of the appointment. The Exchange will only 
recognize one designation per Member. A Member may make a 
designation not more than once every 12 months (from the date of its 
most recent designation), which designation shall remain in effect 
unless or until the Exchange receives written notice submitted 2 
business days prior to the first business day of the month from 
either Member indicating that the appointment has been terminated. 
Designations will become operative on the first business day of the 
effective month and may not be terminated prior to the end of the 
month. Execution data and reports will be provided to both parties. 
See the Definitions Section of the Fee Schedule.
    \9\ The term ``System'' means the automated trading system used 
by the Exchange for the trading of securities. See Exchange Rule 
100.
    \10\ ``ABBO'' means the best bid(s) or offer(s) disseminated by 
other Eligible Exchanges (defined in Exchange Rule 1400(g)) and 
calculated by the Exchange based on market information received by 
the Exchange from OPRA. See the Definitions Section of the Fee 
Schedule and Exchange Rule 100.
    \11\ See Securities Exchange Act Release No. 88992 (June 2, 
2020), 85 FR 35142 (June 8, 2020) (SR-PEARL-2020-06).
---------------------------------------------------------------------------

Proposal To Modify the Maker Rebates in All Tiers for Transactions in 
Penny Classes for Market Makers and Non-Priority Customer, Firm, BD and 
Non-MIAX Pearl Market Maker Origins
    The Exchange proposes to amend the Fee Schedule for the Exchange's 
options market to modify the Maker rebates in all Tiers for options 
transactions in Penny Classes for Market Makers and Non-Priority 
Customer, Firm, BD and Non-MIAX Pearl Market Maker origins' respective 
rate tables. Currently, the Exchange provides different Maker rebates 
for options transactions in Penny Classes for Market Makers and Non-
Priority Customer, Firm, BD and Non-MIAX Pearl Market Maker origins 
depending on whether the Member is trading against the Priority 
Customer \12\ origin or another origin type. In particular, the 
Exchange provides the following Maker rebates for Market Makers for 
options transactions in Penny Classes when trading against the Priority 
Customer origin: ($0.23) in Tier 1, ($0.38) in Tier 2, ($0.38) in Tier 
3, ($0.45) in Tier 4, ($0.46) in Tier 5, and

[[Page 58845]]

($0.47) in Tier 6. The Exchange provides the following Maker rebates 
for Non-Priority Customer, Firm, BD and Non-MIAX Pearl Market Maker 
origins for options transactions in Penny Classes when trading against 
the Priority Customer origin: ($0.23) in Tier 1, ($0.38) in Tier 2, 
($0.38) in Tier 3, ($0.45) in Tier 4, ($0.46) in Tier 5, and ($0.46) in 
Tier 6.
---------------------------------------------------------------------------

    \12\ The term ``Priority Customer'' means a person or entity 
that (i) is not a broker or dealer in securities, and (ii) does not 
place more than 390 orders in listed options per day on average 
during a calendar month for its own beneficial accounts(s). The 
number of orders shall be counted in accordance with Interpretation 
and Policy .01 of Exchange Rule 100. See the Definitions Section of 
the Fee Schedule and Exchange Rule 100, including Interpretation and 
Policy .01.
---------------------------------------------------------------------------

    The Exchange now proposes to lower the Maker rebates by $0.01 in 
all Tiers for options transactions in Penny Classes for Market Makers 
and Non-Priority Customer, Firm, BD and Non-MIAX Pearl Market Maker 
origins, respectively, when trading against the Priority Customer 
origin. Accordingly, with the proposed changes, the Exchange will 
provide the following Maker rebates for Market Makers for options 
transactions in Penny Classes when trading against the Priority 
Customer origin: ($0.22) in Tier 1, ($0.37) in Tier 2, ($0.37) in Tier 
3, ($0.44) in Tier 4, ($0.45) in Tier 5, and ($0.46) in Tier 6. The 
Exchange will provide the following Maker rebates for Non-Priority 
Customer, Firm, BD and Non-MIAX Pearl Market Maker origins for options 
transactions in Penny Classes when trading against the Priority 
Customer origin: ($0.22) in Tier 1, ($0.37) in Tier 2, ($0.37) in Tier 
3, ($0.44) in Tier 4, ($0.45) in Tier 5, and ($0.45) in Tier 6.
    The purpose of adjusting the specified Maker rebates is for 
business and competitive reasons. In order to attract order flow, the 
Exchange initially set its Maker rebates so that they were higher than 
other options exchanges that operate comparable maker/taker pricing 
models.\13\ The Exchange believes that it is appropriate to adjust 
these specified Maker rebates so that they are more in line with other 
exchanges, but will remain highly competitive such that they should 
enable the Exchange to continue to attract order flow and maintain 
market share.\14\
---------------------------------------------------------------------------

    \13\ See Securities Exchange Act Release Nos. 80061 (February 
17, 2017), 82 FR 11676 (February 24, 2017) (SR-PEARL-2017-10) 
(establishing the Exchange's fee schedule with Market Maker and 
Professional Member Maker Penny Class rebates ranging from ($0.25) 
in Tier 1 to ($0.48) in Tier 4, the highest Tier at that time).
    \14\ See, generally, The Nasdaq Stock Market, Options 7 Pricing 
Schedule, Section 2 (Market Maker and Professional Member rebates 
ranging from $0.20 in Tier 1 to $0.48 in Tier 6); Box Options Fee 
Schedule, Section IV. Electronic Transaction Fees, Section A (Market 
Maker rebate of $0.50 when trading contra to a BOX Public Customer 
for options transactions in Penny Classes); Cboe BZX Options Fee 
Schedule, Standard Rates (Market Maker rebates for Penny Class 
securities ranging from $0.29 to $0.46 for adding liquidity; 
Professional rebates for Penny Class securities ranging from $0.25 
to $0.48 for adding liquidity; and Firm, Broker-Dealer, Joint Back 
Office rebates for Penny Class securities ranging from $0.25 to 
$0.46 for adding liquidity).
---------------------------------------------------------------------------

Proposal To Adopt Additional, Separate Maker Rebates for Market Makers 
and Non-Priority Customer, Firm, BD and Non-MIAX Pearl Market Maker 
Origins for Certain Transactions in Non-Penny Classes
    The Exchange proposes to amend the Fee Schedule for the Exchange's 
options market to adopt additional separate Maker rebates for Market 
Makers and Non-Priority Customer, Firm, BD and Non-MIAX Pearl Market 
Maker origins for options transactions in Non-Penny Classes in Tiers 1 
through 4. Currently, the Exchange provides the following Maker rebates 
for Market Makers and Non-Priority Customer, Firm, BD and Non-MIAX 
Pearl Market Maker origins for options transactions in Non-Penny 
Classes: ($0.30) in Tier 1, ($0.30) in Tier 2, ($0.60) in Tier 3, 
($0.65) in Tier 4, ($0.70) in Tier 5, and ($0.85) in Tier 6.\15\
---------------------------------------------------------------------------

    \15\ The Exchange notes that the current Maker rebates for 
Market Makers and Non-Priority Customer, Firm, BD and Non-MIAX Pearl 
Market Maker origins for options transactions in Non-Penny Classes 
are similar to non-penny class maker rebates for similar origins at 
competing options exchanges. See, e.g., NYSE Arca Options Fee 
Schedule, Non-Customer, Non-Penny Posting Credit Tiers, Page 8 
(providing base non-customer, non-penny maker rebates ranging from 
($0.32) to ($0.82)); Cboe BZX Options Fee Schedule, Standard Rates 
(providing firm, broker dealer and joint back office non-penny 
program securities maker rebates ranging from ($0.30) to ($0.82) and 
market maker non-penny program securities maker rebates ranging from 
($0.40) to ($0.88)).
---------------------------------------------------------------------------

    The Exchange now proposes to adopt additional, separate Maker 
rebates for Market Makers for options transactions in Non-Penny Classes 
in Tiers 1 through 4. In particular, the Exchange proposes that Market 
Makers may qualify for additional, separate rebates for options 
transactions in Non-Penny classes in Tiers 1 through 4 if the Market 
Maker increases their Non-Penny Class Maker TCV by 100% or more as 
compared to that Market Maker's Non-Penny Class TCV for the month of 
July 2022,\16\ which will be the Market Maker's baseline Non-Penny 
Class Maker TCV. Market Makers that qualify for the additional Non-
Penny Class Maker rebate will receive the following additional, 
separate rebates: ($0.40) in Tier 1; ($0.40) in Tier 2; ($0.10) in Tier 
3; and ($0.05) in Tier 4. Market Makers with no volume in the Non-Penny 
Class Maker segment for the month of July 2022 will have any new volume 
considered as added volume. Stated another way, the Exchange proposes 
that Market Makers who did not have any volume in the Non-Penny Class 
Maker segment for the month of July 2022, will receive the proposed 
additional separate Maker rebates for any new Non-Penny Class Maker 
volume in each subsequent month. The Exchange proposes to denote the 
additional Maker rebates in Non-Penny Classes for Market Makers by 
adopting new footnote ``[squf]'' following the tables of fees and 
rebates in Section 1)a) of the Fee Schedule. For example, if a Market 
Maker has specific Non-Penny Class Maker volume of 0.050% TCV for the 
month of July 2022, then that Market Maker would need Non-Penny Class 
Maker volume equal to or greater than 0.100% TCV in the relevant month 
to receive the additional proposed rebates. The purpose of this change 
is for business and competitive reasons in order to attract additional 
Non-Penny Class volume from Market Makers, which should benefit all 
Exchange participants by providing more trading opportunities and 
tighter spreads.\17\
---------------------------------------------------------------------------

    \16\ The Exchange determined to use the month of July 2022 as 
the baseline month because, at the time of the original filing (SR-
PEARL-2022-38), July was the most recent previous full month of 
trading. For purposes of consistency with the original filing, the 
Exchange proposes to continue to use the month of July 2022 as the 
baseline month.
    \17\ See supra note 15. The Exchange notes that NYSE American, 
LLC has a similar ``step-up'' incentive for its Professional 
Customer, Broker Dealer, Non-NYSE American Options Market Maker and 
Firm ranges, whereby those market participants are able to decrease 
their fees for transactions in non-penny classes by increasing their 
volume by specified percentages of TCADV over their August 2019 
volume. See NYSE American Options Fee Schedule, Section I.A. and 
Section I.H. (charging an $0.85 fee to Professional Customer, Broker 
Dealer, Non-NYSE American Options Market Maker and Firm ranges for 
transactions in non-penny classes and decreased fees of either $0.65 
or $0.55 for transactions in on-penny classes depending on the 
amount of increased volume by specified percentages of TCADV over 
their August 2019 volume). See id., Key Terms and Definitions 
Section for definitions of Professional Customer, Broker Dealer, 
Non-NYSE American Options Market Maker, Firm and TCADV.
---------------------------------------------------------------------------

    The Exchange also proposes to adopt an additional, separate Maker 
rebate for EEM Professional origins (which includes, collectively, Non-
Priority Customer, Firm, BD and Non-MIAX Pearl Market Maker origins), 
for options transactions in Non-Penny Classes in Tiers 1 through 4. In 
particular, the Exchange proposes that EEMs may qualify for additional 
separate rebates for options transactions in Non-Penny classes in Tiers 
1 through 4 if the EEM increases their Professional origin Non-Penny 
Class Maker TCV by 100% or more as compared to that EEM's Professional 
origin Non-Penny Class TCV for the month of July 2022,\18\ which will 
be EEM's Professional origin baseline Non-Penny Class Maker TCV. EEMs 
that qualify for the additional Non-Penny Class Maker rebate will

[[Page 58846]]

receive the following additional, separate rebates: ($0.40) in Tier 1; 
($0.40) in Tier 2; ($0.10) in Tier 3; and ($0.05) in Tier 4.\19\ EEMs 
with no Professional origin volume in the Non-Penny Class Maker segment 
for the month of July 2022 will have any new volume considered as added 
volume. Stated another way, the Exchange proposes that EEM Professional 
origins that did not have any volume in the Non-Penny Class Maker 
segment for the month of July 2022, will receive the proposed 
additional separate Maker rebates for any new Non-Penny Class Maker 
volume in each subsequent month. The Exchange proposes to denote the 
additional Maker rebates in Non-Penny Classes for EEMs by adopting new 
footnote ``[square]'' following the tables of fees and rebates in 
Section 1)a) of the Fee Schedule. For example, if an EEM has specific 
Professional origin Non-Penny Class Maker volume of 0.050% TCV for the 
month of July 2022, then that EEM would need Professional origin Non-
Penny Class Maker volume equal to or greater than 0.100% TCV in the 
relevant month to receive the additional proposed rebates. The purpose 
of this change is for business and competitive reasons in order to 
attract additional Non-Penny Class volume from EEMs, which should 
benefit all Exchange participants by providing more trading 
opportunities and tighter spreads.\20\
---------------------------------------------------------------------------

    \18\ See supra note 16.
    \19\ With the proposed additional rebates, the Exchange's Non-
Penny Class Maker rebates in Tiers 1 through 4 for Market Makers and 
EEM Professional origins will be in line with, or higher than (for 
lower tiers), similar rebates from competing options exchanges 
depending on the tier achieved by the particular member. See supra 
note 15.
    \20\ See supra notes 15 and 17.
---------------------------------------------------------------------------

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 \21\ in general, and 
furthers the objectives of Section 6(b)(4) of the Act,\22\ in that it 
is an equitable allocation of reasonable dues, fees and other charges 
among Exchange members and issuers and other persons using its 
facilities, and 6(b)(5) of the Act,\23\ in that it is designed to 
prevent fraudulent and manipulative acts and practices, to promote just 
and equitable principles of trade, to foster cooperation and 
coordination with persons engaged in facilitating transactions in 
securities, to remove impediments to and perfect the mechanisms of a 
free and open market and a national market system and, in general, to 
protect investors and the public interest.
---------------------------------------------------------------------------

    \21\ 15 U.S.C. 78f(b).
    \22\ 15 U.S.C. 78f(b)(4).
    \23\ 15 U.S.C. 78f(b)(1) and (b)(5).
---------------------------------------------------------------------------

    The Commission has repeatedly expressed its preference for 
competition over regulatory intervention in determining prices, 
products, and services in the securities markets. In Regulation NMS, 
the Commission highlighted the importance of market forces in 
determining prices and SRO revenues and, also, recognized that current 
regulation of the market system ``has been remarkably successful in 
promoting market competition in its broader forms that are most 
important to investors and listed companies.'' \24\
---------------------------------------------------------------------------

    \24\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496 (June 29, 2005).
---------------------------------------------------------------------------

    There are currently 16 registered options exchanges competing for 
order flow. Based on publicly-available information, and excluding 
index-based options, as of September 13, 2022, no single exchange has 
more than approximately 11-13% equity options market share for the 
month of September 2022.\25\ Therefore, no exchange possesses 
significant pricing power. More specifically, as of September 13, 2022, 
the Exchange has a market share of approximately 4.34% of executed 
volume of multiply-listed equity options for the month of September 
2022.\26\
---------------------------------------------------------------------------

    \25\ See ``The market at a glance,'' (last visited September 13, 
2022), available at https://www.miaxoptions.com/.
    \26\ See id.
---------------------------------------------------------------------------

    The Exchange believes that the ever-shifting market share among the 
exchanges from month to month demonstrates that market participants can 
discontinue or reduce use of certain categories of products and 
services, terminate an existing membership or determine to not become a 
new member, and/or shift order flow, in response to transaction fee 
changes. For example, on February 28, 2019, the Exchange filed with the 
Commission a proposal to increase Taker fees in certain Tiers for 
options transactions in certain Penny classes for Priority Customers 
and decrease Maker rebates in certain Tiers for options transactions in 
Penny classes for Priority Customers (which fee was to be effective 
March 1, 2019).\27\ The Exchange experienced a decrease in total market 
share for the month of March 2019, after the proposal went into effect. 
Accordingly, the Exchange believes that its March 1, 2019, fee change, 
to increase certain transaction fees and decrease certain transaction 
rebates, may have contributed to the decrease in MIAX Pearl's market 
share and, as such, the Exchange believes competitive forces constrain 
the Exchange's, and other options exchanges, ability to set transaction 
fees and market participants can shift order flow based on fee changes 
instituted by the exchanges.
---------------------------------------------------------------------------

    \27\ See Securities Exchange Act Release No. 85304 (March 13, 
2019), 84 FR 10144 (March 19, 2019) (SR-PEARL-2019-07).
---------------------------------------------------------------------------

    The Exchange believes its proposal to modify the Maker rebates in 
all Tiers for options transactions in Penny classes for Market Makers 
and Non-Priority Customer, Firm, BD and Non-MIAX Pearl Market Maker 
origins when trading against Priority Customer origin is reasonable, 
equitable and not unfairly discriminatory because all similarly 
situated market participants in the same origin type are subject to the 
same tiered Maker rebates and access to the Exchange is offered on 
terms that are not unfairly discriminatory. For competitive and 
business reasons, the Exchange initially set its Maker rebates for such 
orders generally higher than certain other options exchanges that 
operate comparable maker/taker pricing models. The Exchange now 
believes that it is appropriate to modify those specified Maker rebates 
so that they are more in line with other exchanges, and will remain 
highly competitive such that they should enable the Exchange to 
continue to attract order flow and maintain market share.\28\
---------------------------------------------------------------------------

    \28\ See supra note 14.
---------------------------------------------------------------------------

    The Exchange believes its proposal is not unfairly discriminatory 
because, with the proposed changes, the Maker rebates for Market Makers 
and Non-Priority Customer, Firm, BD and Non-MIAX Pearl Market Maker 
origins will be nearly the same as the Maker rebates for all other 
origin types except for Priority Customer origin orders. The Exchange 
believes that it is equitable and not unfairly discriminatory to assess 
lower Maker rebates to Market Makers and EEM Professional origins than 
to Priority Customer origin orders. A Priority Customer is by 
definition not a broker or dealer in securities, and does not place 
more than 390 orders in listed options per day on average during a 
calendar month for its own beneficial account(s).\29\ This limitation 
does not apply to participants on the Exchange whose behavior is 
substantially similar to that of market professionals, including non-
Priority Customers, Non-MIAX Pearl Market Makers, Firms, and Broker-
Dealers, who will generally submit a higher number of orders (many

[[Page 58847]]

of which do not result in executions) than Priority Customers.
---------------------------------------------------------------------------

    \29\ See supra note 12.
---------------------------------------------------------------------------

    The Exchange believes its proposal to adopt additional, separate 
Maker rebates for options transactions in Non-Penny Classes in Tiers 1 
through 4 for Market Makers and EEM Professional origins is reasonable, 
equitable and not unfairly discriminatory because all similarly 
situated market participants in the same origin type are subject to the 
same tiered Maker rebates and access to the Exchange is offered on 
terms that are not unfairly discriminatory. The Exchange believes its 
proposal to offer an additional Non-Penny Class Maker rebates in Tiers 
1 through 4 for Market Makers and EEM Professional origins will 
incentivize Market Makers and EEMs to improve their posted liquidity to 
the benefit of the entire market, which will increase order flow sent 
to the Exchange, benefiting all market participants through increased 
liquidity, tighter markets and order interaction. The Exchange believes 
it is reasonable and not unfairly discriminatory to offer higher 
additional Non-Penny Class Maker rebates for Tiers 1 and 2, as compared 
to Tiers 3 and 4, because the Exchange believes that the prospect of 
obtaining the higher rebates for Tiers 1 and 2 will attract Non-Penny 
Class Maker volume from new market participants. This anticipated new 
Non-Penny Class Maker volume should benefit all Exchange participants 
by providing more trading opportunities and tighter spreads. Further, 
with the proposed additional rebates, the Exchange's Non-Penny Class 
Maker rebates in Tiers 1 through 4 for Market Makers and EEM 
Professional origins will be in line with, or higher than (for Tiers 1 
and 2) similar rebates from competing options exchanges.\30\
---------------------------------------------------------------------------

    \30\ See supra note 15.
---------------------------------------------------------------------------

    The Exchange believes it is reasonable, equitable and not unfairly 
discriminatory to consider any new Non-Penny Class Maker volume as 
added volume for Market Makers with no volume in the Non-Penny Class 
Maker segment for the month of July 2022 in order for those Market 
Makers to receive the proposed additional rebate because this should 
attract additional Non-Penny Class Maker volume from Market Makers. In 
turn, this additional volume should benefit all Exchange participants 
by providing more trading opportunities and tighter spreads. Similarly, 
the Exchange believes it is reasonable, equitable and not unfairly 
discriminatory to consider any new Non-Penny Class Maker volume as 
added volume for EEMs with no Professional origin volume in the Non-
Penny Class Maker segment for the month of July 2022 in order for those 
EEMs to receive the proposed additional rebate because this should 
attract additional Non-Penny Class volume from EEMs, which should 
benefit all Exchange participants by providing more trading 
opportunities and tighter spreads.

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

    The Exchange does not believe that the proposed rule changes will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act. The Exchange believes that the 
proposed changes in the Maker rebates for the applicable market 
participants should continue to encourage the provision of liquidity 
that enhances the quality of the Exchange's market and increases the 
number of trading opportunities on the Exchange for all participants 
who will be able to compete for such opportunities. The proposed rule 
changes should enable the Exchange to continue to attract and compete 
for order flow with other exchanges. However, this competition does not 
create an undue burden on competition but rather offers all market 
participants the opportunity to receive the benefit of competitive 
pricing.
    The proposed Maker rebate adjustments are intended to keep the 
Exchange's rebates highly competitive with those of other exchanges, 
and to encourage liquidity and should enable the Exchange to continue 
to attract and compete for order flow with other exchanges. The 
Exchange notes that it operates in a highly competitive market in which 
market participants can readily favor competing venues if they deem fee 
levels at a particular venue to be excessive. In such an environment, 
the Exchange must continually adjust its rebates and fees to remain 
competitive with other exchanges and to attract order flow. The 
Exchange believes that the proposed rule changes reflect this 
competitive environment because the proposal modifies the Exchange's 
fees in a manner that encourages market participants to continue to 
provide liquidity and to send order flow to the Exchange.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    Written comments were neither solicited nor received.

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

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A)(ii) of the Act,\31\ and Rule 19b-4(f)(2) \32\ 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.
---------------------------------------------------------------------------

    \31\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \32\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------

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 SR-PEARL-2022-40 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-2022-40. 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 58848]]

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 
such 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-2022-40 and should be submitted on or before October 19, 2022.
---------------------------------------------------------------------------

    \33\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\33\
J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022-20952 Filed 9-27-22; 8:45 am]
BILLING CODE 8011-01-P


