
[Federal Register Volume 88, Number 189 (Monday, October 2, 2023)]
[Notices]
[Pages 67838-67841]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-21618]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-98527; File No. SR-PEARL-2023-46]


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

September 26, 2023.
    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 September 12, 2023, MIAX PEARL, LLC (``MIAX Pearl'' or ``Exchange'') 
filed with the Securities and Exchange Commission (``Commission'') the 
proposed rule change as described in Items I, II, and III, below, which 
Items have been prepared by the Exchange. The Commission is publishing 
this notice to solicit comments on the proposed rule change from 
interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 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 MIAX Pearl Options 
Fee Schedule (``Fee Schedule'').
    The text of the proposed rule change is available on the Exchange's 
website at https://www.miaxglobal.com/markets/

[[Page 67839]]

us-options/pearl-options/rule-filings 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 originally filed this proposal on August 31, 2023 (SR-
PEARL-2023-41). On September 12, 2023, the Exchange withdrew SR-PEARL-
2023-41 and refiled this proposal. The Exchange proposes to amend 
Section 1)a) of the Fee Schedule, Exchange Rebates/Fees--Add/Remove 
Tiered Rebates/Fees, that applies to the MIAX Pearl Market Maker \3\ 
origin, to modify the volume criteria thresholds applicable to Tier 5 
and Tier 6.
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    \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.
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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 \4\ on MIAX Pearl in the relevant, respective 
origin type (not including Excluded Contracts) \5\ (as the numerator) 
expressed as a percentage of (divided by) TCV \6\ (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.\7\ 
Members that place resting liquidity, i.e., orders resting on the book 
of the MIAX Pearl System,\8\ 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 \9\ 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 \10\ (``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.
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    \4\ ``Member'' means an individual or organization that is 
registered with the Exchange pursuant to Chapter II of the 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.
    \5\ ``Excluded Contracts'' means any contracts routed to an away 
market for execution. See the Definitions Section of the Fee 
Schedule.
    \6\ ``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.
    \7\ ``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 process described in the Fee Schedule. See the 
Definitions Section of the Fee Schedule.
    \8\ The term ``System'' means the automated trading system used 
by the Exchange for the trading of securities. See Exchange Rule 
100.
    \9\ ``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.
    \10\ See Securities Exchange Act Release No. 88992 (June 2, 
2020), 85 FR 35142 (June 8, 2020) (SR-PEARL-2020-06).
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Proposal To Amend the Volume Criteria Thresholds in Tier 5 and Tier 6 
for the Market Maker Origin
    The Exchange proposes to amend the Add/Remove Tiered Rebates/Fees 
set forth in Section 1)a) of the Fee Schedule that apply to the MIAX 
Pearl Market Maker origin, to modify the volume criteria thresholds for 
Tiers 5 and 6. The Market Maker origin currently provides certain 
volume criteria thresholds in Tier 5 that is based upon the total 
monthly volume executed in all option classes by a Market Maker on MIAX 
Pearl as a percent of TCV. Pursuant to the Market Maker origin table, 
Market Makers will qualify for the following Maker rebates and Taker 
fees in Tier 5 if the Market Maker executes above 1.25% to at least 
1.50% of TCV: (i) Maker rebates of ($0.48), against origins other than 
Priority Customer in Penny Classes; (ii) Maker rebates of ($0.45), 
against the Priority Customer origin in Penny Classes; (iii) Taker fees 
of $0.50, against origins other than Priority Customer in Penny 
Classes; (iv) Taker fees of $0.50, against the Priority Customer origin 
in Penny Classes; (v) Maker rebates of ($0.70), against all origins in 
Non-Penny Classes; and (vi) Taker fees of $1.08, against all origins in 
Non-Penny Classes.
    The Market Maker origin currently provides certain volume criteria 
thresholds in Tier 6 that is based upon the total monthly volume 
executed in all option classes by a Market Maker on MIAX Pearl as a 
percent of TCV. Pursuant to the Market Maker origin table, Market 
Makers will qualify for the following Maker rebates and Taker fees in 
Tier 6 if the Market Maker executes above 1.50% of TCV: (i) Maker 
rebates of ($0.48), against origins other than Priority Customer in 
Penny Classes; (ii) Maker rebates of ($0.46), against the Priority 
Customer origin in Penny Classes; (iii) Taker fees of $0.50, against 
origins other than Priority Customer in Penny Classes; (iv) Taker fees 
of $0.50, against the Priority Customer origin in Penny Classes; (v) 
Maker rebates of ($0.85), against all origins in Non-Penny

[[Page 67840]]

Classes; and (vi) Taker fees of $1.07, against all origins in Non-Penny 
Classes.
    The Exchange proposes to reduce the upper threshold for the volume 
criteria in Tier 5 of the Market Maker origin from 1.50% to 1.40%. 
Accordingly, with the proposed change, Market Makers will qualify for 
the following Maker rebates and Taker fees in Tier 5 if the Market 
Maker executes above 1.25% to at least 1.40% of TCV: (i) Maker rebates 
of ($0.48), against origins other than Priority Customer in Penny 
Classes; (ii) Maker rebates of ($0.45), against the Priority Customer 
origin in Penny Classes; (iii) Taker fees of $0.50,against origins 
other than Priority Customer in Penny Classes; (iv) Taker fees of 
$0.50, against the Priority Customer origin in Penny Classes; (v) Maker 
rebates of ($0.70), against all origins in Non-Penny Classes; and (vi) 
Taker fees of $1.08, against all origins in Non-Penny Classes.
    The Exchange also proposes to modify the volume criteria threshold 
for Tier 6 of the Market Maker origin from above 1.50% to now be above 
1.40% in light of the proposed change to the volume criteria in Tier 5, 
above. Accordingly, with the proposed change to the volume criteria in 
Tier 6, Market Makers will qualify for the following Maker rebates and 
Taker fees in Tier 6 if the Market Maker executes above 1.40% of TCV: 
(i) Maker rebates of ($0.48),against origins other than Priority 
Customer in Penny Classes; (ii) Maker rebates of ($0.46), against the 
Priority Customer origin in Penny Classes; (iii) Taker fees of $0.50, 
against origins other than Priority Customer in Penny Classes; (iv) 
Taker fees of $0.50, against the Priority Customer origin in Penny 
Classes; (v) Maker rebates of ($0.85), against all origins in Non-Penny 
Classes; and (vi) Taker fees of $1.07, against all origins in Non-Penny 
Classes.
    The purpose of this proposed change is for business and competitive 
reasons. With the proposed change, Market Makers should more easily 
qualify for the higher rebates and lower fees associated with obtaining 
the volume criteria in Tier 6. The Exchange believes the proposed 
change would incentivize Market Makers to improve their posted 
liquidity to the benefit of the entire market, which should increase 
order flow sent to the Exchange, benefitting all market participants 
through increased liquidity, tighter markets and order interaction. 
Additionally, as the amount and type of volume that is executed on the 
Exchange has shifted since it first established the volume criteria 
thresholds for Tiers 5 and 6, the Exchange has determined to level-set 
this threshold amount so that it is more reflective of the current type 
and amount of volume executed on the Exchange.
    The Exchange has designated these changes to be 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 \11\ in general, and 
furthers the objectives of Section 6(b)(4) of the Act \12\ in that it 
is an equitable allocation of reasonable dues, fees, and other charges 
among its Exchange members and issuers and other persons using its 
facilities.
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    \11\ 15 U.S.C. 78f(b).
    \12\ 15 U.S.C. 78f(b)(4).
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    The Exchange believes its proposal to modify the volume criteria 
thresholds for Tiers 5 and 6 of the Market Maker origin provides for 
the equitable allocation of reasonable dues and fees and is not 
unfairly discriminatory for the following reasons. The Exchange 
operates in a highly competitive market. 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.'' \13\ 
There are currently 16 registered options exchanges competing for order 
flow. Based on publicly available information, and excluding index-
based options, no single exchange has more than approximately 13-14% of 
the market share of executed volume of multiply listed equity and 
exchange-traded fund (``ETF'') options trades as of August 23, 2023, 
for the month of August 2023.\14\ Therefore, no exchange possesses 
significant pricing power in the execution of multiply-listed equity 
and ETF options order flow. More specifically, as of August 23, 2023, 
the Exchange had a market share of approximately 6.21% of executed 
volume of multiply-listed equity and ETF options for the month of 
August 2023.\15\
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    \13\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496 (June 29, 2005).
    \14\ See the ``Market Share'' section of the Exchange's website, 
available at https://www.miaxglobal.com/ (last visited August 23, 
2023).
    \15\ See id.
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    The Exchange believes that the ever-shifting market shares among 
the exchanges from month to month demonstrates that market participants 
can shift order flow, or discontinue or reduce use of certain 
categories of products, in response to transaction and/or non-
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).\16\ The Exchange experienced a 
decrease in total market share between the months of February and March 
of 2019, after the fees were in effect. Accordingly, the Exchange 
believes that the March 1, 2019 fee change may have contributed to the 
decrease in the Exchange's market share and, as such, the Exchange 
believes competitive forces constrain options exchange transaction fees 
and market participants can shift order flow based on fee changes 
instituted by the exchanges.
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    \16\ See Securities Exchange Act Release No. 85304 (March 13, 
2019), 84 FR 10144 (March 19, 2019) (SR-PEARL-2019-07).
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    The Exchange believes its proposal to modify the volume criteria 
thresholds for Tiers 5 and 6 of the Market Maker origin is reasonable, 
equitable, and not unfairly discriminatory because Market Makers should 
more easily qualify for the higher Maker rebates and lower Taker fees 
associated with those tiers. The Exchange believes the proposed change 
is reasonable because it should incentivize Market Makers to increase 
order flow sent to the Exchange, benefiting all market participants 
through increased liquidity, tighter markets and order interaction. 
Additionally, as the amount and type of volume that is executed on the 
Exchange has shifted since it first established the volume criteria 
thresholds for Tiers 5 and 6 of the Market Maker origin, the Exchange 
has determined to level-set this threshold amount so that it is more 
reflective of the current type and amount of volume executed on the 
Exchange. The Exchange also believes the proposed change is not 
unfairly discriminatory because it is designed to encourage Market 
Makers to increase their order flow to the Exchange in order to qualify 
for the higher Maker rebates and lower Taker fees in Tier 6, which 
should benefit all Members by providing greater execution opportunities 
on the Exchange and contribute to a deeper, more liquid market, to the 
benefit of all investors and market participants.

[[Page 67841]]

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

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act.
Intra-Market Competition
    The Exchange believes its proposal to modify the volume criteria 
thresholds for Tiers 5 and 6 of the Market Maker origin will not impose 
any burden on intra-market competition because the Exchange believes 
that it will not place any category of Exchange market participant at a 
competitive disadvantage because it will apply to all Market Makers 
equally. The proposal to modify the volume criteria thresholds for 
Tiers 5 and 6 of the Market Maker origin is intended to improve market 
quality. The Exchange believes that its proposal will encourage Market 
Makers to improve market quality by making it easier for Market Makers 
to achieve higher tiers, resulting in higher rebates and lower fees, 
which should result in narrower bid-ask spreads and increased depth of 
liquidity. This in turn will attract additional order flow to the 
Exchange, increasing trading opportunities to the benefit of all market 
participants. Accordingly, the Exchange believes that the proposed 
changes will continue to attract order flow to the Exchange, thereby 
encouraging additional volume and liquidity to the benefit of all 
market participants.
Inter-Market Competition
    The Exchange believes its proposal will not impose any burden on 
inter-market competition because, as described above, 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, or rebate opportunities 
available at other venues to be more favorable. In such an environment, 
the Exchange must continually adjust its fees to remain competitive 
with other options exchanges. Because competitors are free to modify 
their own fees in response, and because market participants may readily 
adjust their order routing practices, the Exchange believes that the 
degree to which fee changes in this market may impose any burden on 
competition is extremely limited. The Exchange believes that the 
proposed rule changes reflect this competitive environment because they 
modify 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,\17\ and Rule 19b-4(f)(2) \18\ 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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    \17\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \18\ 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-2023-46 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-2023-46. 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 a.m. and 3 p.m. 
Copies of the filing also will be available for inspection and copying 
at the principal office of the Exchange. Do not include personal 
identifiable information in submissions; you should submit only 
information that you wish to make available publicly. We may redact in 
part or withhold entirely from publication submitted material that is 
obscene or subject to copyright protection. All submissions should 
refer to file number SR-PEARL-2023-46 and should be submitted on or 
before October 23, 2023.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
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    \19\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-21618 Filed 9-29-23; 8:45 am]
BILLING CODE 8011-01-P


