[Federal Register Volume 87, Number 247 (Tuesday, December 27, 2022)]
[Notices]
[Pages 79379-79383]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-28087]



[[Page 79379]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-96553; File No. SR-PEARL-2022-60]


Self-Regulatory Organizations; MIAX PEARL, LLC; Notice of Filing 
and Immediate Effectiveness of a Proposed Rule Change To No Longer 
Operate Its 10 Gigabit Ultra-Low Latency Connectivity on a Single 
Shared Network With Its Affiliate, Miami International Securities 
Exchange, LLC

December 20, 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 December 19, 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 proposal to no longer operate 10 gigabit 
(``Gb'') ultra-low latency (``ULL'') connectivity to the Exchange on a 
single shared network with its affiliate, Miami International 
Securities Exchange, LLC (``MIAX''), due to ever-increasing capacity 
constraints and to accommodate anticipated access needs for Members \3\ 
and other market participants.
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    \3\ The term ``Member'' means an individual or organization that 
is registered with the Exchange pursuant to Chapter II of these 
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 Exchange Rule 100.
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    The text of the proposed rule change is available on the Exchange's 
website at http://www.miaxoptions.com/rule-filings/pearl at MIAX 
Pearl's principal office, and at the Commission's Public Reference 
Room.

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

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

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

1. Purpose
    The Exchange proposes to no longer operate 10Gb ULL connectivity to 
the Exchange on a single shared network with its affiliate, MIAX, due 
to ever-increasing capacity constraints and to accommodate anticipated 
access needs for Members and other market participants. The Exchange 
has shared a single network with MIAX since MIAX Pearl became 
operational on February 6, 2017.\4\ On the contrary, the Exchange and 
its other affiliate, MIAX Emerald, LLC (``MIAX Emerald''), operate on 
separate, unshared 10Gb ULL networks, since the launch of MIAX Emerald 
in March 2019.\5\ The Exchange believes this separated network 
structure is also similar to at least one other national securities 
exchange group with multiple exchanges.\6\ Operating two separate 
national securities exchanges on a single shared network provided 
certain benefits, such as streamlined connectivity to multiple 
exchanges, and simplified exchange infrastructure. However, doing so is 
no longer sustainable due to ever-increasing capacity constraints and 
current System \7\ limitations. The network is not an unlimited 
resource. As described more fully below, the connectivity needs of 
Members and market participants increased every year since the launch 
of the Exchange and the operations of the Exchange and MIAX on a single 
shared 10Gb ULL network is no longer feasible. This requires constant 
System expansion to meet Member demand for additional ports and 10Gb 
ULL connections, which has resulted in limited available System 
headroom (described in detail below). Therefore, the Exchange proposes 
to provide 10Gb ULL connectivity to the Exchange and MIAX on separate 
networks so that the Exchange and MIAX may increase their respective 
System capacities to meet the ongoing and anticipated connectivity 
needs of Members, prospective Members, and other market participants.
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    \4\ See Press Release ``MIAX PEARL Successfully Launches Trading 
Operations'' (February 7, 2017), available at https://www.miaxoptions.com/press-releases?_miax_filter_created%5Bmin%5D=2017-02-01+00%3A00%3A00&_miax_filter_created%5Bmax%5D=2017-02-28+23%3A59%3A59&actions=&_miax_filter_month=2&_miax_filter_year=2017;
 see also Securities Exchange Act Release No. 79543 (December 13, 
2016), 81 FR 92901 (December 20, 2016) (File No. 10-227) (order 
approving application of MIAX PEARL, LLC for registration as a 
national securities exchange).
    \5\ See Securities Exchange Act Release No. 87877 (December 31, 
2019), 85 FR 738 (January 7, 2020) (SR-EMERALD-2019-39) (proposal to 
adopt connectivity fees without providing access to MIAX Emerald's 
affiliates, MIAX and MIAX Pearl, via a single shared connection).
    \6\ See the Physical Connectivity Fees sections of the Cboe BYX 
Exchange, Inc. (``BYX''), Cboe BZX Exchange, Inc. (``BYX''), Cboe 
EDGA Exchange, Inc. (``EDGA''), and Cboe EDGX Exchange, Inc. 
(``EDGX'', collectively with BYX, BZX, and EDGA, the ``Cboe Equity 
Exchanges'') equity fee schedules (not providing that a single port 
provides connectivity to each of Cboe Equity Exchanges).
    \7\ The term ``System'' means the automated trading system used 
by the Exchange for the trading of securities. See Exchange Rule 
100.
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    The Exchange began to operate on a single shared network with MIAX 
when the Exchange commenced operations as a national securities 
exchange on February 7, 2017.\8\ The Exchange and MIAX have operated on 
a single shared network to provide Members with a single convenient set 
of access points for both exchanges. Both the Exchange and MIAX offer 
two methods of connectivity, 1Gb and 10Gb ULL connections. The 1Gb 
connection services are supported by a discrete set of switches 
providing 1Gb access ports to Members. The 10Gb ULL connection services 
are supported by a second and mutually exclusive set of switches 
providing 10Gb ULL access ports to Members. Today, both the 1Gb and 
10Gb ULL shared extranet ports allow Members to use one connection to 
access both exchanges, namely their trading platforms, market data 
systems, test systems, and disaster recovery facilities.
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    \8\ See Securities Exchange Act Release No. 80061 (February 17, 
2017), 82 FR 11676 (February 24, 2017) (establishing MIAX Pearl Fee 
Schedule and establishing that the MENI can also be configured to 
provide network connectivity to the trading platforms, market data 
systems, test systems, and disaster recovery facility of the MIAX 
Pearl's affiliate, MIAX, via a single, shared connection).
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    As stated above, the shared network is not an unlimited resource 
and its expansion is constrained by MIAX Pearl's and MIAX's ability to 
provide fair and equitable access to all market participants of both 
markets. The Exchange and MIAX continue to be able to meet the access 
demands of new subscribers and satisfy the ongoing access demands of 
existing subscribers. However, over time, due to the ever-increasing 
connectivity demands, the Exchange now finds it necessary to bifurcate 
10Gb ULL connectivity to the Exchange's and MIAX's Systems and

[[Page 79380]]

networks to be able to continue to meet ongoing and future 10Gb ULL 
connectivity and access demands. Currently, the Exchange maintains 
sufficient headroom to meet ongoing and future requests for 1Gb 
connectivity. Therefore, the Exchange does not propose to alter 1Gb 
connectivity and will continue to provide 1Gb connectivity over a 
shared network and provide access to both the Exchange and MIAX over a 
single 1Gb connection.
    The Exchange has two categories of Members: Market Makers \9\ and 
Electronic Exchange Members \10\ (``EEMs''). 10Gb ULL connectivity is 
predominantly used by Market Makers, latency sensitive liquidity 
removers, or those that require higher throughput (i.e., greater than 
1Gb). 1Gb connectivity is predominately used by EEMs who are less 
latency sensitive and tend to utilize a limited number of 1Gb 
connections. These EEMs will continue to be able to use that single 1Gb 
connection to access both the Exchange and MIAX. Certain EEMs use 10Gb 
ULL connectivity, primarily where that EEM also acts as a Market Maker 
either on the Exchange and/or MIAX and leverages that 10Gb ULL 
connection to access both exchanges. Service bureaus \11\ also purchase 
10Gb ULL connectivity and resell that connectivity to market 
participants who may not have direct connectivity to the Exchange.
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    \9\ The term ``Market Maker'' or ``MM'' 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 these Rules. 
See Exchange Rule 100.
    \10\ The term ``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 Exchange Rule 100.
    \11\ Service bureaus provide access to market participants to 
submit and execute orders on an exchange. On the Exchange, a Service 
Bureau may be a Member. Some Members utilize a Service Bureau for 
connectivity and that Service Bureau may not be a Member. Some 
market participants utilize a Service Bureau who is a Member to 
submit orders. Only Members may submit orders or quotes through 10Gb 
ULL connectivity.
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    Unlike the switches that provide 1Gb connectivity, the switches 
that provide 10Gb ULL connectivity have experienced a significant 
decrease in the availability for additional 10Gb ULL connections on 
each switch. This is mostly driven by the connectivity demands of 
latency sensitive Members (e.g., Market Makers and liquidity removers) 
that seek to maintain connectivity across multiple 10Gb ULL switches. 
Such Members do not typically use a shared 10Gb ULL connection to reach 
both the Exchange and MIAX due to related latency concerns. Instead, 
those Members maintain dedicated separate 10Gb ULL connections for the 
Exchange and separate dedicated 10Gb ULL connections for MIAX. This 
results in a much higher 10Gb ULL usage per switch by those Members on 
the existing shared 10Gb ULL network than would otherwise be needed if 
the Exchange and MIAX had their own dedicated 10Gb ULL networks, 
similar to that provided by other exchanges, including the Exchange's 
and MIAX's affiliate, MIAX Emerald. Separation of the Exchange and MIAX 
10Gb ULL networks would naturally lend itself to reduced 10Gb ULL port 
consumption on each switch and, therefore, increased 10Gb ULL port 
availability for current Members and new Members.
    To date, the Exchange and MIAX have continued to add switches to 
meet ongoing demand for 10Gb ULL connectivity. Unfortunately, that is 
no longer sustainable because simply adding additional switches to 
expand the current shared 10Gb ULL network would not continue to 
alleviate the issue of limited available port connectivity. While it 
would result in a gain in overall port availability, the existing 
switches in use would continue to suffer from lack of port headroom 
given many latency sensitive Members' needs for a presence on each 
switch to reach both the Exchange and MIAX. This is because those 
latency sensitive Members seek to have a presence on each switch to 
maximize the probability of experiencing the best network performance. 
Those Members routinely decide to rebalance the amount of orders and/or 
messages over its various connections to ensure each connection is 
operating with maximum efficiency. Simply adding switches to the 
extranet is ineffective at resolving the port availability concerns on 
the existing extranet since many of the latency sensitive Members are 
unwilling to relocate their connections to a new switch due to the 
potential detrimental performance impact. As such, the impact of adding 
new switches and rebalancing ports is not effective. The Exchange has, 
therefore, found that ongoing and continued rebalancing once additional 
switches are added has had, and will continue to have, a diminishing 
return on increasing available 10Gb ULL connectivity.
    The below example illustrates how the bifurcation of the 10Gb ULL 
network would lead to expanded access. This example is for illustrative 
purposes only. Assume the shared network includes ten (10) switches and 
each switch provides access via 24 10Gb ULL connections. For each 
switch, the numerator represents the number of consumed 10Gb ULL 
connections while the denominator represents the number of available 
10Gb ULL connections. The ``Shared Network'' row illustrates the number 
of consumed and available 10Gb ULL connections on each switch. The 
usage of the ports on the shared network are roughly distributed 50% to 
MIAX Options and 50% to MIAX Pearl Options. The ``Single MIAX Network'' 
and ``Single Pearl Network'' rows illustrate how the Exchange may 
double its available 10Gb ULL connections simply by bifurcating the 
Shared 10Gb ULL network.

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                            Switch                                 1        2        3        4        5        6        7        8        9        10
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Shared Network................................................     18/6     19/5     16/8     17/7     20/4     16/8     15/9     17/7    13/11    14/10
Single MIAX Network...........................................     9/15     9/15     8/16     8/16    10/14     8/16     7/17     8/16     6/18     7/17
Single Pearl Network..........................................     9/15    10/14     8/16     9/15    10/14     8/16     8/16     9/15     7/17     7/17
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    Based on its experience and expertise, the Exchange finds the most 
practical way to increase connectivity availability on its switches is 
to bifurcate the existing 10Gb ULL networks for the Exchange and MIAX 
by migrating the exchange's connections from the shared network onto 
their own set of switches. If a number of new Members seek to 
participate in high frequency activity and require a port on each 
switch, they could quickly consume the available ports on the shared 
extranet. Further, if an existing Member seeks to temporarily double 
their port connections while they transition to new network and/or 
server infrastructure, they could consume the remaining available ports 
on the shared extranet. The Exchange, therefore, believes it is 
necessary and most efficient to bifurcate the Exchange

[[Page 79381]]

and MIAX 10Gb ULL networks so that both exchanges can continue to 
satisfy ongoing and anticipated future requests for additional 
connectivity allowing it to provide meaningful and fair access to each 
market.
    Bifurcating the Exchange and MIAX 10Gb ULL networks provides 
benefits beyond the ability to continue to meet ongoing and anticipated 
connectivity demands. For example, today if there is a problem on the 
shared network, it could impact the operation of both the Exchange and 
MIAX. As national securities exchanges, the Exchange and MIAX are 
subject to Regulation Systems Compliance and Integrity (``Reg. 
SCI'').\12\ Reg. SCI Rule 1001(a) requires that the Exchange and MIAX 
establish, maintain, and enforce written policies and procedures 
reasonably designed to ensure (among other things) that their Reg. SCI 
systems have levels of capacity adequate to maintain the Exchange's and 
MIAX's operational capabilities and promote the maintenance of fair and 
orderly markets.\13\ By separating the 10Gb ULL networks, any potential 
system issue would be limited to one exchange, narrowing the impact and 
preventing unnecessary systems disruptions on the other exchange. 
Bifurcating the networks supports the Reg. SCI obligations for MIAX 
Pearl and MIAX in this regard by limiting any potential future risk of 
a systems issue to one exchange and not impacting the operations or 
market participants of the other exchange. Bifurcating the networks 
also allows each exchange to evolve separately, potentially by using 
different technology to cater to the unique demands of each exchange 
and their market participants to meet future needs.
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    \12\ 17 CFR 242.1000-1007.
    \13\ 17 CFR 242.1001(a).
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    The Exchange again notes that operating affiliated exchanges' over 
separate networks is not new or novel. For example, the Exchange's 
affiliate, MIAX Emerald, currently operates on a separate network.\14\ 
The Exchange notes that at least one other group of affiliated 
exchanges operate on separate networks.\15\
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    \14\ See supra note 5.
    \15\ See supra note 6.
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    The Exchange will file a separate proposal with the Commission 
pursuant to Section 19(b)(3)(A)(ii) of the Act \16\ to: (i) Set forth 
the applicable fees for the bifurcated 10Gb ULL network; (ii) remove 
provisions in the Exchange fee schedule that provides for a shared 10Gb 
ULL network; and (iii) specify that only the 1Gb network connection 
will continue to be shared by both the Exchange and MIAX. The Exchange 
will not bifurcate the 10Gb ULL network until it files a proposal to 
set forth the applicable fees for immediate effectiveness pursuant to 
Section 19(b)(3)(A)(ii) of the Act.\17\
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    \16\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \17\ Id.
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Implementation
    Due to the technological changes associated with this proposed 
change, the Exchange expects to bifurcate the Exchange and MIAX 
networks in the first quarter of 2023, currently anticipated to be 
January 23, 2023. The Exchange issued a Trading Alert on August 12, 
2022 publicly announcing the planned network change and implementation 
plan and dates to provide market participants adequate time to 
prepare.\18\ Any changes to the January 23, 2023 implementation date 
would be announced in a separate alert.
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    \18\ See MIAX Options and MIAX Pearl Options--Announce planned 
network changes related to shared 10G ULL extranet, issued August 
12, 2022, available at https://www.miaxoptions.com/alerts/2022/08/12/miax-options-and-miax-pearl-options-announce-planned-network-changes-related-0 (last visited November 17, 2022).
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2. Statutory Basis
    The Exchange believes that its proposal to bifurcate 10Gb ULL 
connectivity in the System networks for the Exchange and MIAX are 
consistent with Section 6(b) of the Act \19\ in general, and furthers 
the objectives of Section 6(b)(5) of the Act in that it is designed to 
promote just and equitable principles of trade, to remove impediments 
to and perfect the mechanism of a free and open market and a national 
market system, and, in general to protect investors and the public 
interest and is not designed to permit unfair discrimination between 
customers, issuers, brokers and dealers.
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    \19\ 15 U.S.C. 78f(b).
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    The Exchange believes that its proposal is consistent with the 
requirements under Section 6(b)(5) \20\ of the Act that the Exchange's 
proposed changes remove impediments to and perfect the mechanism of a 
free and open market and a national market system. Operating affiliated 
exchanges on their own dedicated, separate networks is not new or 
novel. The Exchange notes that it and its affiliate, MIAX Emerald, 
currently operate on separate networks.\21\ The Exchange is also aware 
of at least on other group of affiliated exchanges also operate on 
separate networks.\22\
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    \20\ Id.
    \21\ See supra note 5.
    \22\ See supra note 6.
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    The Exchange began to operate on a single shared network with MIAX 
when MIAX Pearl commenced operations as a national securities exchange 
on February 7, 2017.\23\ This shared network is not an unlimited 
resource and its expansion is constrained by its ability to provide 
fair and equitable access to all market participants. Due to the ever-
increasing connectivity demands, the Exchange finds it necessary to 
bifurcate 10Gb ULL connectivity to the Exchange's and MIAX's Systems 
and networks to be able to continue to meet ongoing and future 10Gb ULL 
connectivity and access demands. Unlike switches for 1Gb connectivity, 
switches dedicated to 10Gb ULL connectivity have experienced a 
significant decrease in port headroom mostly driven by connectivity 
demands of latency sensitive Members that seek to maintain connectivity 
across multiple 10Gb ULL switches. Separation of the 10Gb ULL networks 
of the Exchange and MIAX would naturally lend itself to reduced port 
consumption and, therefore, increased port availability, allowing the 
Exchange to continue to meet ongoing and anticipated requests for 10Gb 
ULL connectivity. Therefore, the Exchange believes this proposal 
removes impediments to and perfects the mechanism of a free and open 
market and a national market system.
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    \23\ See Securities Exchange Act Release No. 80061 (February 17, 
2017), 82 FR 11676 (February 24, 2017) (establishing MIAX Pearl Fee 
Schedule and establishing that the MENI can also be configured to 
provide network connectivity to the trading platforms, market data 
systems, test systems, and disaster recovery facility of the MIAX 
Pearl's affiliate, MIAX, via a single, shared connection).
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    Further, the proposed changes will allow the Exchange and MIAX to 
adjust the connectivity and access to their Systems in order to ensure 
that both markets are able to provide consistent and fair access to 
their Members on non-discriminatory terms and ensure sufficient 
capacity and headroom in their Systems. The Exchange and MIAX 
constantly monitor their Systems' performance based on market 
conditions and the potential need to make adjustments based on customer 
demand. Accordingly, the Exchange's obligations under Section 6(b)(5) 
of the Act,\24\ market participant demand, and market conditions are 
key drivers of the System's architecture and expansion and, thus, the 
Exchange believes simply adding more switches and not bifurcating the 
10Gb ULL networks is not an appropriate mechanism to provide fair and 
open access to the Exchange and MIAX.
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    \24\ See 15 U.S.C. 78f(b).

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[[Page 79382]]

    The Exchange and MIAX anticipate that they will continue to expand 
their Systems and provide Members and other market participants with 
additional access based on customer demand and in response to changing 
market conditions. The Exchange represents that any expansion or 
adjustments in the number of available switches for network access will 
be conducted in a similar manner that ensures fair access to its 
System. The Exchange will also continuously assess its connectivity 
options and availability to ensure that they meet the needs of all 
market participants seeking to access the Exchange and MIAX.
    The Exchange believes that its proposal is consistent with the 
requirements under Section 6(b)(5) of the Exchange Act that the 
Exchange provide access on terms that are not unfairly discriminatory 
and that the rules of an Exchange promote just and equitable principles 
of trade.\25\ The Exchange believes the proposed changes promote just 
and equitable principles of trade because the proposal to split the 
Exchange's and MIAX's shared 10Gb ULL network connectivity will apply 
equally to all market participants and Members of both exchanges. The 
proposed bifurcation of the Exchange and MIAX 10Gb ULL network 
connectivity will promote just and equitable principles of trade 
because it will allow the Exchange and MIAX to be able to continue to 
offer access to their Systems on terms that are not unfairly 
discriminatory by continuing to meeting ongoing and anticipated 
connectivity demands of all Members. The shared 10Gb ULL network is not 
an unlimited resource of either MIAX Pearl or MIAX and its expansion is 
constrained by its ability to provide fair and equitable access to all 
market participants. The Exchange believes this proposal will allow the 
Exchange and MIAX to continue to be able to meet the access demands of 
new 10Gb ULL network connectivity subscribers and satisfy the ongoing 
10Gb ULL connectivity access demands of existing subscribers.
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    \25\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes its proposal to bifurcate the 10Gb ULL 
networks of the Exchange and MIAX is not designed to permit unfair 
discrimination between customers, issuers, brokers and dealers because 
the Exchange believes that bifurcating 10Gb ULL connectivity between 
the Exchange and MIAX is the most practical way to increase 
connectivity availability on existing switches, providing fair and 
consistent access to all Members and potential Members that require 
10Gb ULL connectivity access. The proposed change would increase 
available 10Gb ULL connectivity to all market participants, including 
Market Makers, EEMs, and Service Bureaus, enabling the Exchange to 
continue to meet market participants' current and anticipated 
connectivity needs. The Exchange also notes that certain market 
participants may choose to not purchase a 10Gb ULL connection to both 
the Exchange and MIAX if they determine that purchasing connections to 
both exchanges is not in their business interests or financially 
beneficial. Similarly, Service Bureaus may also choose to not purchase 
a 10Gb ULL connection to both the Exchange and MIAX if they determine 
that there is not sufficient demand from their customers to connect to 
one or both exchanges. Other Members, particularly EEMs, may choose to 
purchase 1Gb connectivity instead and use that single connection to 
access both the Exchange and MIAX.
    As described in the above example, if new or existing Members deem 
it necessary for them to utilize additional ports on each switch, those 
Members will quickly consume the remaining available ports, leaving 
very little or no additional ports open for other Members or new 
Members to gain access. Further, if an existing Member seeks to 
temporarily increase their 10Gb ULL ports connections while they 
transition to a new network and/or server infrastructure, they could 
consume the remaining available ports. In the Exchange's experience, 
these types of scenarios have become more frequent, leading to the 
Exchange's proposal to bifurcate the 10Gb ULL networks of the Exchange 
and MIAX to be able to continue to provide fair access to all market 
participants of both exchanges. The Exchange, therefore, believes its 
proposal promotes just and equitable principles of trade, removes 
impediments to and perfects the mechanism of a free and open market and 
a national market system, and, in general protects investors and the 
public interest because it will allow MIAX Pearl and MIAX to continue 
to satisfy ongoing and anticipated future requests for additional 10Gb 
ULL connectivity access to each market.
    Lastly, the Exchange believes that its proposal is consistent with 
the Exchange's capacity obligations pursuant Regulation SCI.\26\ 
Regulation SCI Rule 1001(a) requires that the Exchange and MIAX 
establish, maintain, and enforce written policies and procedures 
reasonably designed to ensure (among other things) that their 
Regulation SCI systems have levels of capacity adequate to maintain the 
Exchange's and MIAX's operational capabilities and promote the 
maintenance of fair and orderly markets.\27\ The Exchange's proposal to 
separate the 10Gb ULL networks of the Exchange and MIAX would mean that 
any future potential System issue would be limited to only one 
exchange, narrowing the impact and preventing unnecessary Systems 
disruptions on the other exchange. This protects investors and the 
public interest by potentially reducing market disruptions to either 
MIAX Pearl or MIAX, depending on the issue, as opposed to disrupting 
both markets from a single event on the shared network. The Exchange 
believes this proposal supports the Regulation SCI obligations for the 
Exchange and MIAX in by limiting any potential future risk of a systems 
issue to one exchange and not impacting the operations or market 
participants of the other exchange. Bifurcating the networks also 
allows each exchange to evolve separately, potentially by using 
different technology to cater to the unique demands of each exchange 
and their market participants to meet future needs.
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    \26\ 17 CFR 242.1000-1007.
    \27\ 17 CFR 242.1001(a).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule changes will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act. Specifically, the Exchange 
believes the proposed changes will not impose any burden on intra-
market competition because the bifurcation of the Exchange and MIAX 
10Gb ULL networks would affect all Members equally and ensure that the 
Exchange continues to be able to satisfy all connectivity requests from 
all Members as requested. The Exchange believes the proposed rule 
changes will not impose any burden on inter-market competition. In 
fact, the Exchange believes that not bifurcating the Exchange and MIAX 
networks could have an adverse impact on inter-market competition 
because not doing so could hamper the Exchange's ability to expand its 
network to meet ongoing and future connectivity demand, which could, in 
turn, limit its ability to compete for Memberships and order flow. 
Separating its 10Gb ULL network from MIAX would enable the Exchange to 
better compete with other exchanges by ensuring it can provide adequate 
connectivity to existing and new Members, which may increase in ability

[[Page 79383]]

to compete for order flow and deepen its liquidity pool, improving the 
overall quality of its market. Lastly, the Exchange believes its 
proposal will not impose any burden on inter-market competition because 
it would allow the Exchange to operate on a dedicated network in the 
same manner as other affiliated exchanges who operate on dedicated 
networks separate from their affiliates.\28\
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    \28\ See supra notes 5 and 6.
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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

    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 \29\ and Rule 19b-4(f)(6) \30\ 
thereunder.
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    \29\ 15 U.S.C. 78s(b)(3)(A).
    \30\ 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-2022-60 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-2022-60. 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-2022-60 and should be submitted on 
or before January 17, 2023.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\31\
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    \31\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2022-28087 Filed 12-23-22; 8:45 am]
BILLING CODE P


